Central Bank of Washington v. Hume - 128 U.S. 195 (1888)
U.S. Supreme Court
Central Bank of Washington v. Hume, 128 U.S. 195 (1888)
Central Bank of Washington v. Hume
Nos. 20, 30
Argued October l7-18, 1888
Decided November 12, 1888
128 U.S. 195
It is a general rule that a life insurance policy, and the money to become due under it, belong the moment it is issued to the person named in it as beneficiary, and that there is no power in the person procuring the insurance, by any act of his by deed or will, to transfer to any other person the interest of the person named.
A married man may rightfully devote a moderate portion of his earnings to insure his life, and thus make reasonable provision for his family after his decease, without being thereby held to intend to hinder, delay, or defraud his creditors, provided no such fraudulent intent is shown to exist or must be necessarily inferred from the surrounding circumstances.
The payment of premiums to a life insurance company by a married man residing in the District of Columbia who is insolvent at the times of the payments, in order to effect and keep alive a policy of insurance upon his own life, made by his wife for the benefit of herself and their children, is not necessarily a fraudulent transfer of his property with intent to hinder, delay and defraud creditors within the meaning of 18 Eliz, c. 5, and in the absence of specific circumstances showing a fraudulent intent, his creditors, after his decease, will have no interest in the policy.
In order to maintain an action on behalf of creditors of a deceased person against a life insurance company to recover back premiums alleged to have been fraudulently paid by the decedent while insolvent to the company in order to make provision for his wife and children, it must be alleged and proved that the company participated in the fraud.
On the 23d of April, 1872, in consideration of an annual premium of $230.89, the Life Insurance Company of Virginia issued at Petersburgh in that commonwealth a policy of insurance on the life of Thomas L. Hume, of Washington, D.C., for the term of his natural life in the sum of $10,000, for the sole use and benefit of his wife, Annie Graham Hume, and his children, payment to be made to them, their heirs, executors, or assigns at Petersburgh, Virginia. The charter of the company provided as follows:
"Any policy of insurance issued by the Life Insurance Company of Virginia on the life of any person, expressed to be for the benefit of any married woman, whether the same be effected
originally by herself or her husband or by any other person, or whether the premiums thereafter be paid by herself or her husband or any other person as aforesaid, shall inure for her sole and separate use and benefit, and that of her or husband's children, if any, as may be expressed in said policy, and shall be held by her free from the control or claim of her husband or his creditors or of the person effecting the same and his creditors."
The application for this policy was made on behalf of the wife and children by Thomas L. Hume, who signed the same for them.
The premium of $230.89 was reduced by annual dividends of $34.71 to $196.18, which sum was regularly paid on the 23d of April, 1872, and each year thereafter, up to and including the 23d of April, 1881.
On the 28th of March, 1880, the Hartford Life and Annuity Company of Hartford, Connecticut, issued five certificates of insurance upon he life of Thomas L. Hume, of $1,000 each, payable at Hartford, to his wife, Annie G. Hume, if living, but otherwise to his legal representatives. Upon each of these certificates a premium of $10 was paid upon their issuance, amounting in all to $50, and thereafter certain other sums, amounting at the time of the death of Hume to $41.25.
On the 17th of February, 1881, the Maryland Life Insurance Company of Baltimore issued at Baltimore a policy of insurance upon the life of Thomas L. Hume in the sum of $10,000 for the term of his natural life, payable in the City of Baltimore to "the said insured, Annie G. Hume, for her sole use, her executors, administrators, or assigns," the said policy being issued, as it recites on its face, in consideration of the sum of $337.20 to them duly paid by said Annie G. Hume, and of an annual premium of the same amount to be paid each year during the continuance of the policy. The application for this policy was signed "Annie G. Hume, by Thomas L. Hume," as is a recognized usage in such applications and in accordance with instructions to that effect printed upon the policy.
The charter of the Maryland Life Insurance Company provides
"Section 17. That it shall be lawful for any married woman, by herself or in her name or in the name of any third person with his consent, as her trustee, to be caused to be insured in said company, for her sole use, the life of her husband, for any definite period, or for the term of his natural life, and in case of her surviving her husband, the sum or net amount of the insurance becoming due and payable by the terms of the insurance shall be payable to her to and for her own use, free from the claims of the representatives of her husband or of any of his creditors. In case of the death of the wife before the decease of the husband, the amount of the insurance may be made payable, after the death of the husband, to her children, or, if under age, to their guardian, for their use. In the event of there being no children, she may have power to devise, and, if dying intestate, then to go [to] the next of kin."
The directions printed on the margin of the policy called especial attention to the provisions of the charter upon this subject, an extract from which was printed on the fourth page of the application. The amount of premium paid on this policy was $242.26, a loan having been deducted from the full premium of $337.20.
On the 13th of June, 1881, the Connecticut Mutual Life Insurance Company of Hartford, in consideration of an annual premium of $350.30, to be paid before the day of its date, issued a policy of insurance upon the life of Thomas L. Hume in the sum of $10,000 for the term of his natural life, payable at Hartford to Annie G. Hume and her children by him, or their legal representatives. The application for this policy was signed "Annie G. Hume, by Thomas L. Hume." It was expressly provided as part of the contract that the policy was issued and delivered at Hartford, in the State of Connecticut, and was "to be in all respects construed and determined in accordance with the laws of that state."
The statute of Connecticut respecting policies of insurance issued "for the benefit of married women" was printed upon the policy under that heading, and is as follows:
"Any policy of life insurance expressed to be for the benefit of a married
woman, or assigned to her or in trust for her, shall inure to her separate use or, in case of her decease before payment, to the use of her children or of her husband's children, as may be provided in such policy, provided that if the annual premium on such policy shall exceed three hundred dollars, the amount of such excess, with interest, shall inure to the benefit of the creditors of the person paying the premiums; but if she shall die before the person insured, leaving no children of herself or husband, the policy shall become the property of the person who has paid the premiums unless otherwise provided in such policy,"
and this extract from the statute was printed upon the policy, and attention directed thereto. From the $350.30 premium the sum of $105 was deducted, to be charged against the policy in accordance with its terms, with interest, and $245.30 was therefore the sum paid.
The American Life Insurance and Trust Company of Philadelphia had also issued a policy in the sum of $5,000 on the life of Hume, payable to himself or his personal representatives, and this was collected by his administrators.
Thomas L. Hume died at Washington on the 23d of October, 1881, insolvent, his widow, Annie G. Hume, and six minor children, surviving him.
November 2, 1881, the Central National Bank of Washington, as the holder of certain promissory notes of Thomas L. Hume amounting to several thousand dollars, filed a bill in the Supreme Court of the District of Columbia against Mrs. Hume and the Maryland Life Insurance Company, the case being numbered 7,906, alleging that the policy issued by the latter was procured while Hume was insolvent; that Hume paid the premium of $242.26 without complainant's knowledge or consent, and for the purpose of hindering, delaying, and defrauding the complainant and his other creditors, and praying for a restraining order on the insurance company from paying to, and Mrs. Hume from receiving, either for herself or children, the amount due pending the suit, and
"that the amount of the said insurance policy may be decreed to be assets of said Thomas L. Hume applicable to the payment of debts owing by him at his death,"
etc. The temporary injunction was granted.
On the 12th of November, the insurance company filed its answer to the effect that Mrs. Hume obtained the insurance in her own name, and was entitled under the policy to the amount thereof, and setting up and relying upon the seventeenth section of its charter, quoted above. Mrs. Hume answered November 16th, declaring that she applied for and procured the policy in question and that it was not procured with fraudulent intent, that the estate of her father, A. H. Pickrell, who died in 1879, was the largest creditor of Hume's estate; that she is her father's residuary legatee; that the amount of the policy was intended not only to provide for her, but also to secure her against loss; that her mother had furnished Hume with about a thousand dollars annually, to be used for her best interest, and that of his wife and children, and that the premium paid on the policy in question, and those paid on other policies, was and were paid out of money belonging to her father's estate or out of the money of her mother, applied as directed and requested by the latter.
Benjamin U. Keyser, receiver, holding unpaid notes of Hume, was allowed, by order of court, November 16, 1881, to intervene as co-complainant in the cause.
R. Ross Perry and Reginald Fendall were appointed, November 26, 1881, Hume's administrators.
On January 23, 1882, the administrators filed three bills (and obtained injunctions) against Mrs. Hume and each of the other insurance companies, being cases numbered 8,011, 8,012, and 8,013, attacking each of the policies (except the American) as a fraudulent transfer by an insolvent of assets belonging to his creditors.
The answers of Mrs. Hume were substantially the same, mutatis mutandis, as above given, and so were the answers of the Connecticut Mutual and the Virginia Life, the former pleading the statute of Connecticut as part of its policy and the latter the seventh section of its charter.
The Hartford Life and Annuity Company did not answer, and the bill to which it was a party defendant was taken pro confesso. The administrators were, by order of court, January 2, 1882,
admitted parties defendant to said first case numbered 7,906, and cases numbered 8,011, 8,012, and 8,013 were consolidated with that case.
January 4, 1883, the court entered a decretal order dissolving the restraining order in original cause numbered 8,012 and directing the Virginia Insurance Company to pay the amount due upon its policy into court, and the clerk of the court to pay the same over to Mrs. Hume for her own benefit and as guardian of her children (which was done accordingly), and continuing the injunctions in original causes 8,011, 8,013, and 7,906, but ordering the other insurance companies to pay the amounts due into the registry of the court.
By order of court January 30, 1883, the Farmers' and Mechanics' National Bank of Georgetown, which had proved up a large claim against Hume's estate, was allowed to intervene in original cause No. 7,906 as a co-complainant, and March 19, 1883, George W. Cochran, a creditor, was by like order allowed to intervene as co-complainant in the consolidated cases.
Replications were filed and testimony taken on both sides.
The evidence tends to show that Hume's financial condition, as early as 1874, was such that if called upon to respond on the instant, he could not have met his liabilities, and that this condition grew gradually worse until it culminated in irretrievable ruin in the fall of 1881; but it also indicates that for several years, and up to October 21, 1881, two days before his death, he was a partner in a going concern apparently of capital and credit; that he had a considerable amount of real estate, though most of it was heavily encumbered; that he was an active businessman, not personally extravagant, and that he was, for two years prior to October, in receipt of moneys from his wife's mother, who had an income from her separate property.
He seems to have received from Mrs. Pickrell, or the estate of Pickrell, his wife's father, of which Mrs. Hume was the residuary legatee, over $6,000 in 1879, over $3,000 in 1880, and over $1,700 in 1881.
Mrs. Pickrell's fixed income was $1,000 a year from rents of her own property, which, after the death of her husband in May, 1879, was regularly paid over to Mr. Hume. She testifies that she told Hume that "he could use all that I [she] had for his own and his family's benefit, and that he could use it for anything he thought best;" that she had out of it herself from $200 to $250 a year from the death of Pickrell, in May, 1879, to that of Hume, in October, 1881, and that before his death, Mr. Hume informed his wife and herself that he had insured his life for Mrs. Hume's benefit, but did not state where the premium money came from.
Blackford, agent for the Maryland company, testified under objection that Hume told him in February, 1881, that certain means had been placed in his hands to be invested for his wife and children, and he had concluded to take $10,000 in Blackford's agency, and should, some months later, take $10,000 in the Connecticut Mutual. He accordingly took the $10,000 in the Maryland, and subsequently, during the summer, informed Blackford that he had obtained the insurance in the Connecticut Mutual.
Evidence was also adduced that Mr. Hume was largely indebted to Pickrell's estate by reason of endorsements of his paper by Pickrell and the use by him in raising money of securities belonging to the latter, and that said estate is involved in litigation, and its ultimate value problematical.
The causes were ordered to be heard in the first instance at a general term of the Supreme Court of the District of Columbia, which court, after argument, on the 5th day of January, 1885, decreed that the administrators should recover all sums paid by Thomas L. Hume as premiums on all said policies, including those on the Virginia policy from 1874, and that, after deducting said premiums, the residue of the money paid into court (being that received from the Maryland and the Connecticut Mutual) be paid to Mrs. Hume individually, or as guardian for herself and children, and that the Hartford Life and Annuity Company pay over to her the amount due on the certificates issued by it.
From this decree the said Central National Bank, Benjamin
U. Keyser, the Farmers' add Mechanics' National Bank of Georgetown, George W. Cochran, and the administrators, as well as Mrs. Hume, appealed to this Court, and the cause came on to be heard here upon these cross-appeals.