1. A life insurance policy payable to the executors,
administrators, or assigns of the insured is his property and
subject to the claims of his creditors. P.
256 U. S.
128.
2. A state law exempting policies so payable and their avails
from the debts of the insured is invalid under Art. I, § 10, of the
Constitution, as applied to his debt under a promissory note
antedating the law and to policies also antedating it though later
than the note. P.
256 U. S. 129.
Sturges v.
Crowninshield, 4 Wheat. 122.
146 La. 385 reversed.
Page 256 U. S. 127
The case is stated in the opinion.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
By Act No. 189 of 1914, the Louisiana Legislature undertook to
exempt from debts of the assured the avails of insurance upon his
life when payable to his estate.
Before passage of that act and while indebted to plaintiffs in
error banks by notes which were renewed from time to time until his
death, O. P. Clements took out two policies upon his life with loss
payable to his executors, administrators, or assigns. He died in
1917, and his administratrix collected the stipulated sums
amounting to $4,433.33. The succession was insolvent, and the banks
sought to subject the insurance money to their claims, maintaining
that, if construed and applied so as to exempt such funds, the Act
of 1914 would impair the obligations of their contracts and violate
§ 10, Art. I, federal Constitution. The supreme court of the state
held that acceptance of the renewal notes did not operate as
novations, but that the statute protected the insurance money
without violating the federal Constitution, since the exemption
"impaired the obligation of the preexisting contract very slightly
and remotely." 146 La. 385.
Section 10, Art. I, of the Constitution -- "No state shall . . .
pass any . . . law impairing the obligation of contracts" -- has
been much considered by this Court and often applied to preserve
the integrity of contractual obligations.
Page 256 U. S. 128
When the deceased took out the policies of insurance upon his
life, they became his property, subject to claims of his creditors.
N.Y. Mutual Life Ins. Co. v. Armstrong, 117 U.
S. 591,
117 U. S. 597;
Central National Bank v. Hume, 128 U.
S. 195,
128 U. S. 204;
Burlingham v. Crouse, 228 U. S. 459,
228 U. S.
471-472;
In re Coleman, 136 F. 818;
In re
Bonvillain, 232 F. 372;
Blinn v. Dame, 207 Mass. 159;
In re Heilbron's Estate, 14 Wash. 536;
Rice v.
Smith, 72 Miss. 42,;
Skinner v. Holt, 9 S.D. 427;
Joyce on Insurance, § 2341.
In
Sturges v.
Crowninshield, 4 Wheat.197,
17 U. S. 198,
opinion by Mr. Chief Justice Marshall, it was said:
"What is the obligation of a contract, and what will impair it?
It would seem difficult to substitute words which are more
intelligible, or less liable to misconstruction, than those which
are to be explained. A contract is an agreement in which a party
undertakes to do, or not to do, a particular thing. The law binds
him to perform his undertaking, and this is, of course, the
obligation of his contract. . . . Any law which releases a part of
this obligation must, in the literal sense of the word, impair it.
. . . But it is not true that the parties have in view only the
property in possession when the contract is formed, or that its
obligation does not extend to future acquisitions. Industry,
talents, and integrity constitute a fund which is as confidently
trusted as property itself. Future acquisitions are therefore
liable for contracts, and to release them from this liability
impairs their obligation."
And in
Planters' Bank v.
Sharp, 6 How. 327, opinion by Mr. Justice
Woodbury:
"One of the tests that a contract has been impaired is that its
value has by legislation been diminished. It is not, by the
Constitution, to be impaired at all. This is not a question of
degree or manner or cause, but of encroaching in any respect on its
obligation, dispensing with any part of its force."
Ogden v.
Saunders, 12 Wheat. 213,
25 U. S.
257;
Page 256 U. S. 129
McCracken v.
Hayward, 2 How. 608,
43 U. S. 612;
Edwards v. Kearzey, 96 U. S. 594,
96 U. S.
600.
So far as the statute of 1914 undertook to exempt the policies
and their proceeds from antecedent debts, it came into conflict
with the federal Constitution.
See Lessley v. Phipps, 49
Miss. 790;
Johnson v. Fletcher, 54 Miss. 628;
Rice v.
Smith, 72 Miss. 42;
In re Heilbron's Estate, 14 Wash.
536;
Skinner v. Holt, 9 S.D. 427;
Homestead
Cases, 22 Grattan 266.
The judgment of the court below must be reversed, and the cause
remanded for further proceedings not inconsistent with this
opinion.
Reversed.
MR. JUSTICE CLARKE dissents.