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
Page 128 U. S. 196
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."
Section 7.
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
Page 128 U. S. 197
as follows:
"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
Page 128 U. S. 198
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.
Page 128 U. S. 199
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,
Page 128 U. S. 200
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.
Page 128 U. S. 201
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
Page 128 U. S. 202
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.
Page 128 U. S. 203
MR. CHIEF JUSTICE FULLER, after stating the facts as above,
delivered the opinion of the Court.
No appeal was prosecuted from the decree of January 4, 1883,
directing the amount due upon the policy issued by the Life
Insurance Company of Virginia to be paid over to Mrs. Hume for her
own benefit and as guardian of her children, nor is any error now
assigned to the action of the court in that regard. Indeed, it is
conceded by counsel for the complainants that this contract was
perfectly valid as against the world, but it is insisted that,
assuming the proof to establish the insolvency of Hume in 1874 and
thenceforward, the premiums paid in that and the subsequent years
on this policy belonged in equity to the creditors, and that they
were entitled to a decree therefor, as well as for the amount of
the Maryland and Connecticut policies and the premiums paid
thereon.
It is not denied that the contract of the Maryland Insurance
Company was directly between that company and Mrs. Hume, and this
is, in our judgment, true of that of the Connecticut Mutual, while
the Hartford company's certificates were payable to her, if
living.
Mr. Hume having been insolvent at the time the insurance was
effected and having paid the premiums himself, it is argued that
these policies were within the provisions of 13 Eliz. c. 5, and
inure to the benefit of his creditors as equivalent to transfers of
property with intent to hinder, delay, and defraud. The object of
the statute of Elizabeth was to prevent debtors from dealing with
their property in any way to the prejudice of their creditors; but
dealing with that
Page 128 U. S. 204
which creditors, irrespective of such dealing, could not have
touched is within neither the letter nor the spirit of the statute.
In the view of the law, credit is extended in reliance upon the
evidence of the ability of the debtor to pay and in confidence that
his possessions will not be diminished to the prejudice of those
who trust him. This reliance is disappointed and this confidence
abused if he divests himself of his property by giving it away
after he has obtained credit. And where a person has taken out
policies of insurance upon his life for the benefit or his estate,
it has been frequently held that as against creditors, his
assignment when insolvent of such policies to or for the benefit of
wife and children or either constitutes a fraudulent transfer of
assets within the statute, and this even though the debtor may have
had no deliberate intention of depriving his creditors of a fund to
which they were entitled, because his act has in point of fact
withdrawn such a fund from them and dealt with it by way of bounty.
Freeman v. Pope, L.R. 9 Eq. 206, L.R. 5 Ch. 538. The rule
stands upon precisely the same ground as any other disposition of
his property by the debtor. The defect of the disposition is that
it removes the property of the debtor out of the reach of his
creditors.
Cornish v. Clark, L.R. 14 Eq. 189.
But the rule applies only to that which the debtor could have
made available for payment of his debts. For instance, the exercise
of a general power of appointment might be fraudulent and void
under the statute, but not the exercise of a limited or exclusive
power, because in the latter case, the debtor never had any
interest in the property himself which could have been available to
a creditor or by which he could have obtained credit. May on
Fraudulent Conveyances 33. It is true that creditors can obtain
relief in respect to a fraudulent conveyance where the grantor
cannot, but that relief only restores the subjection of the
debtor's property to the payment of his indebtedness as it existed
prior to the conveyance.
A person has an insurable interest in his own life for the
benefit of his estate. The contract affords no compensation to him,
but to his representatives. So the creditor has an insurable
Page 128 U. S. 205
interest in the debtor's life, and can protect himself
accordingly if he so chooses. Marine and fire insurance is
considered as strictly an indemnity, but while this is not so as to
life insurance, which is simply a contract, so far as the company
is concerned, to pay a certain sum of money upon the occurrence of
an event which is sure at some time to happen in consideration of
the payment of the premiums as stipulated, nevertheless the
contract is also a contract of indemnity. If the creditor insures
the life of his debtor, he is thereby indemnified against the loss
of his debt by the death of the debtor before payment, yet if the
creditor keeps up the premiums, and his debt is paid before the
debtor's death, he may still recover upon the contract, which was
valid when made and which the insurance company is bound to pay
according to its terms; but if the debtor obtains the insurance on
the insurable interest of the creditor and pays the premiums
himself, and the debt is extinguished before the insurance falls
in, then the proceeds would go to the estate of the debtor.
Knox v. Turner, L.R. 9 Eq. 155.
The wife and children have an insurable interest in the life of
the husband and father, and if insurance thereon be taken out by
him, and he pays the premiums and survives them, it might be
reasonably claimed in the absence of a statutory provision to the
contrary that the policy would inure to his estate.
In
Continental Ins. Co. v. Palmer, 42 Conn. 60, the
wife insured the life of the husband, the amount insured to be
payable to her if she survived him, if not, to her children. The
wife and one son died prior to the husband, the son leaving a son
surviving. The court held that under the provisions of the statute
of that state, the policy being made payable to the wife and
children, the children immediately took such a vested interest in
the policy that the grandson was entitled to his father's share,
the wife having died before the husband, but that in the absence of
the statute, "it would have been a fund in the hands of his
representatives for the benefit of the creditors, provided the
premiums had been paid by him." So in the case of
Anderson's
Estate Hay's and Kerr's Appeal, 85 Penn.St. 202, A. insured
his life in favor of his wife, who
Page 128 U. S. 206
died intestate in his lifetime, leaving an only child. A. died
intestate and insolvent, the child surviving, and the court held
that the proceeds of the policy belonged to the wife's estate, and,
under the intestate laws, was to be distributed share and share
alike between her child and her husband's estate, notwithstanding,
under a prior statute, life insurance taken out for the wife vested
in her free from the claims of the husband's creditors. But if the
wife had survived, she would have taken the entire proceeds.
We think it cannot be doubted that in the instance of contracts
of insurance with a wife or children, or both, upon their insurable
interest in the life of the husband or father, the latter, while
they are living, can exercise no power of disposition over the same
without their consent, nor has he any interest therein of which he
can avail himself, nor upon his death have his personal
representatives or his creditors any interest in the proceeds of
such contracts, which belong to the beneficiaries, to whom they are
payable.
It is indeed the general rule that a policy, and the money to
become due under it, belong, the moment it is issued, to the person
or persons named in it as the beneficiary or beneficiaries, and
that there is no power in the person procuring the insurance, by
any act of his, by deed or by will, to transfer to any other person
the interest of the person named. Bliss on Life Insurance, 2d ed.,
p. 517;
Glanz v. Gloeckler, 10 Appellate Court Illinois
484, per McAllister, J.; 104 Ill. 573;
Wilburn v. Wilburn,
83 Ind. 55;
Ricker v. Charter Oak Ins. Co., 27 Minn. 193;
Charter Oak Life Ins. Co. v. Brant, 47 Mo. 419;
Gould
v. Emerson, 99 Mass. 154;
Knickerbocker Life Ins. Co. v.
Weitz, 99 Mass. 157.
This must ordinarily be so where the contract is directly with
the beneficiary; in respect to policies running to the person
insured, but payable to another having a direct pecuniary interest
in the life insured, and where the proceeds are made to inure by
positive statutory provisions. Mrs. Hume was confessedly a
contracting party to the Maryland policy, and, as to the
Connecticut contracts, the statute of the state where they were
made and to be performed
Page 128 U. S. 207
explicitly provided that a policy for the benefit of a married
woman shall inure to her separate use or that of her children; but
if the annual premium exceed $300, the amount of such excess shall
inure to the benefit of the creditors of the person paying the
premiums.
The rights and benefits given by the laws of Connecticut in this
regard are as much part of these contracts as if incorporated
therein, not only because they are to be taken as if entered into
there, but because there was the place of performance, and the
stipulation of the parties was made with reference to the laws of
that place.
And if this be so as between Hume and the Connecticut companies,
then he could not have at any time disposed of these policies
without the consent of the beneficiary; nor is there anything to
the contrary in the statutes or general public policy of the
District of Columbia.
It may very well be that a transfer by an insolvent of a
Connecticut policy, payable to himself or his personal
representatives, would be held invalid in that district, even
though valid under the laws of Connecticut, if the laws of the
district were opposed to the latter, because the positive laws of
the domicile and the forum must prevail; but there is no such
conflict of laws in this case in respect to the power of
disposition by a person procuring insurance payable to another.
The obvious distinction between the transfer of a policy taken
out by a person upon his insurable interest in his own life, and
payable to himself or his legal representatives, and the obtaining
of a policy by a person upon the insurable interest of his wife and
children, and payable to them, has been repeatedly recognized by
the courts.
Thus, in
Elliott's Appeal, 50 Penn.St. 75, where the
policies were issued in the name of the husband and payable to
himself or his personal representatives, and while he was insolvent
were by him transferred to trustees for his wife's benefit, the
Supreme Court of Pennsylvania, while holding such transfers void as
against creditors, said:
"We are to be understood in thus deciding this case that we do
not mean to extend it to policies effected without fraud,
Page 128 U. S. 208
directly and on their face for the benefit of the wife and
payable to her; such policies are not fraudulent as to creditors,
and are not touched by this decision."
In the use of the words "without fraud," the court evidently
means actual fraud participated in by all parties, and not fraud
inferred from the mere fact of insolvency, and at all events, in
McCutcheon's Appeal, 99 Penn.St. 137, the court said,
referring to
Elliott's Appeal:
"The policies in that case were effected in the name of the
husband, and by him transferred to a trustee for his wife at a time
when he was totally insolvent. They were held to be valuable choses
in action, the property of the assured, liable to the payment of
his debts, and hence their voluntary assignment operated in fraud
of creditors, and was void as against them under the statute of 13
Eliz. Here, however, the policy was effected in the name of the
wife, and in point of fact was given under an agreement for the
surrender of a previous policy for the same amount, also issued in
the wife's name. . . . The question of good faith or fraud only
arises in the latter case; that is, when the title of the
beneficiary arises by assignment. When it exists by force of an
original issue in the name or for the benefit of the beneficiary,
the title is good notwithstanding the claims of creditors. . . .
There is no anomaly in this, nor any conflict with the letter or
spirit of the statute of Elizabeth, because in such cases the
policy would be at no time the property of the assured, and hence
no question of fraud in its transfer could arise as to his
creditors. It is only in the case of the assignment of a policy
that once belonged to the assured that the question of fraud can
arise under this act."
And see Aetna National Bank v. United States Life Ins.
Co., 24 F. 770;
Pence v. Makepeace, 65 Ind. 347;
Succession of Hearing, 26 La.Ann. 326;
Stigler's Ex'r
v. Stigler, 77 Va. 163;
Thompson v. Cundiff, 11 Bush
567.
Conceding, then, in the case in hand that Hume paid the premiums
out of his own money, when insolvent, yet, as Mrs. Hume and the
children survived him and the contracts covered
Page 128 U. S. 209
their insurable interest, it is difficult to see upon what
ground the creditors, or the administrators as representing them,
can take away from these dependent ones that which was expressly
secured to them in the event of the death of their natural
supporter. The interest insured was neither the debtor's nor his
creditors'. The contracts were not payable to the debtor or his
representatives or his creditors. No fraud on the part of the wife
or the children or the insurance company is pretended. In no sense
was there any gift or transfer of the debtor's property, unless the
amounts paid as premiums are to be held to constitute such gift or
transfer. This seems to have been the view of the court below, for
the decree awarded to the complainants the premiums paid to the
Virginia Company from 1874 to 1881 inclusive, and to the other
companies from the date of the respective policies, amounting, with
interest, to January 4, 1883, to the sum of $2,696.10, which sum
was directed to be paid to Hume's administrators out of the money
which had been paid into court by the Maryland and Connecticut
Mutual Companies.
But even though Hume paid this money out of his own funds when
insolvent, and if such payment were within the statute of
Elizabeth, this would not give the creditors any interest in the
proceeds of the policies, which belonged to the beneficiaries for
the reasons already stated.
Were the creditors, then, entitled to recover the premiums?
These premiums were paid by Hume to the insurance companies, and
to recover from them would require proof that the latter
participated in the alleged fraudulent intent, which is not
claimed. Cases might be imagined of the payment of large premiums,
out of all reasonable proportion to the known or reputed financial
condition of the person paying and under circumstances of grave
suspicion, which might justify the inference of fraud on creditors
in the withdrawal of such an amount from the debtor's resources;
but no element of that sort exists here.
The premiums form no part of the proceeds of the policies, and
cannot be deducted therefrom on that ground.
Mrs. Hume is not shown to have known of or suspected her
Page 128 U. S. 210
husband's insolvency, and if the payments were made at her
instance or with her knowledge and assent, or if, without her
knowledge, she afterwards ratified the act and claimed the benefit,
as she might rightfully do,
Thompson v. Amer. Ins. Co., 46
N.Y. 675, and as she does (and the same remarks apply to the
children), then has she thereby received money which
ex aequo
et bono she ought to return to her husband's creditors, and
can the decree against her be sustained on that ground?
If in some cases payments of premiums might be treated as gifts
inhibited by the statute of Elizabeth, can they be so treated
here?
It is assumed by complainants that the money paid was derived
from Hume himself, and it is therefore argued that to that extent,
his means for payment of debts were impaired. That the payments
contributed in any appreciable way to Hume's insolvency is not
contended. So far as premiums were paid in 1880 and 1881 (the
payments prior to those years having been the annual sum of $196.18
on the Virginia policy) we are satisfied from the evidence that
Hume received from Mrs. Pickrell, his wife's mother, for the
benefit of Mrs. Hume and her family, an amount of money largely in
excess of these payments, after deducting what was returned to Mrs.
Pickrell, and that, in paying the premiums upon procuring the
policies in the Maryland and the Connecticut Mutual, Hume was
appropriating to that purpose a part of the money which he
considered he thus held in trust, and we think that as between
Hume's creditors and Mrs. Hume, the money placed in Hume's hands
for his wife's benefit is, under the evidence, equitably as much to
be accounted for to her by Hume, and so by them, as is the money
paid on her account to be accounted for by her to him or them.
We do not, however, dwell particularly upon this, nor pause to
discuss the bearing of the laws of the states of the insurance
companies upon this matter of the payment of premiums by the debtor
himself so far as they may differ from the rule which may prevail
in the District of Columbia in the absence of specific statutory
enactment upon that subject, because we prefer to place our
decision upon broader grounds.
Page 128 U. S. 211
In all purely voluntary conveyances, it is the fraudulent intent
of the donor which vitiates. If actually insolvent, he is held to
knowledge of his condition, and if the necessary consequence of his
act is to hinder, delay, or defraud his creditors, within the
statute, the presumption of the fraudulent intent is irrebuttable
and conclusive, and inquiry into his motives is inadmissible.
But the circumstances of each particular case should be
considered, as in
Partridge v. Gopp, 1 Eden 163, 168;
Ambler 596, 599, where the Lord Keeper, while holding that debts
must be paid before gifts are made, and debtors must be just before
they are generous, admitted that "the fraudulent intent might be
collected from the magnitude and value of the gift."
Where fraud is to be imputed or the imputation of fraud repelled
by an examination into the circumstances under which a gift is made
to those toward whom the donor is under natural obligation, the
test is said, in
Kipp v. Hanna, 2 Bland 33, to be the
pecuniary ability of the donor at that time to withdraw the amount
of the donation from his estate without the least hazard to his
creditors or in any material degree lessening their then prospects
of payment, and, in considering the sufficiency of the debtor's
property for the payment of debts, the probable, immediate,
unavoidable, and reasonable demands for the support of the family
of the donor should be taken into the account and deducted, having
in mind also the nature of his business and his necessary expenses.
Emerson v. Bemis, 69 Ill. 541.
This argument in the interest of creditors concedes that the
debtor may rightfully preserve his family from suffering and want.
It seems to us that the same public policy which justifies this and
recognizes the support of wife and children as a positive
obligation in law as well as morals should be extended to protect
them from destitution after the debtor's death by permitting him
not to accumulate a fund as a permanent provision, but to devote a
moderate portion of his earnings to keep on foot a security for
support already, or which could thereby be, lawfully obtained at
least to the extent of requiring
Page 128 U. S. 212
that under such circumstances, the fraudulent intent of both
parties to the transaction should be made out.
And inasmuch as there is no evidence from which such intent on
the part of Mrs. Hume or the insurance companies could be inferred,
in our judgment none of these premiums can be recovered.
The decree is affirmed except so far as it directs the
payment to the administrators of the premiums in question and
interest, and, as to that, is reversed, and the cause remanded to
the court below with directions to proceed in conformity with this
opinion.
