Atl. Life Ins. Co v. Ring

• Decision Date: 11 September 1936
• Court: Virginia Supreme Court
• Parties: ATLANTIC LIFE INS. CO. v. RING.

187 S.E. 449

ATLANTIC LIFE INS. CO.

v.RING.

Supreme Court of Appeals of Virginia.

Sept. 11, 1936.

Appeal from Court of Law and Chancery of City of Roanoke.

Bill by the Atlantic Life Insurance Company against Joshua Wright Ring. From an adverse decree, plaintiff appeals.

Affirmed.

Argued before CAMPBELL, C. J., and HUDGINS, GREGORY, and EGGLESTON, JJ.

Cocke, Hazlegrove & Shackelford, of Roanoke, and A. B. Scott, of Richmond, for appellant.

Woods, Chitwood, Coxe & Rogers and Leonard G. Muse, all of Roanoke, for appellee.

GREGORY, Justice.

This cause was submitted upon bill and answer. A decree was entered denying the complainant insurance company theright to set off against its obligation due the defendant a debt of some $9,000, due by the defendant to the complainant.

In 1920 the insurance company issued to Ring a $25,000 life insurance policy, to which was attached a supplemental agreement whereby the insurance company agreed that if Ring shall furnish satisfactory proof that he has become totally and permanently disabled, then it shall continue the contract by waiving subsequent premiums during the continuance of his disability and pay immediately to him $250, each and every month during the life and continued disability of Ring.

In 1932 Ring claimed to be totally disabled and entitled to the benefits of the disability provisions of the policy. The insurance company denied that he was entitled to such benefits, and in November, 1933, he entered his action at law against the insurance company for $5,303.75, with interest, which represented seventeen monthly installments of $250 each and the residue of said amount representing the 1933 premium, which had been paid by Ring, who claimed that it had been wrongfully required of him.

The trial of the case was had in April, 1934, and resulted in a judgment in favor of Ring for $3,803.75; the jury having fixed the date of the inception of the disability benefits as of January 21, 1933, instead of April 19, 1932, as claimed by Ring.

Some time prior to the trial, Ring had become indebted to the insurance company in the sum of some $9,000, with interest. This indebtedness was due and secured by a deed of trust on real estate in Johnson City, Tenn. Ring's indebtedness grew out of his assumption and agreement of May 6, 1929, to pay a debt secured upon said property due the insurance company.

On August 30, 1933, Ring was duly adjudicated a bankrupt and received his discharge in bankruptcy on January 20, 1934. In his schedule of assets he listed as a part thereof his claim for disability benefits under the said contract of insurance aggregating some $4,000 in all, and at the same time he claimed these assets as exempt in bankruptcy from the claims of creditors under section 4219 of the Code of Virginia. Subsequently, in accordance with the report of the trustee in bankruptcy, the referee by order entered on October 2, 1933, granted said exemption and set apart the disability benefits to Ring. The indebtedness of Ring to the insurance company was scheduled in the bankruptcy proceedings.

The correct determination of his case depends upon whether or not the exemption contained in section 4219 of the Code may be applied. If it may be applied to the facts in this case, then the decree is right and should be affirmed. If, on the other hand, it should not be applied, then the decree must be reversed.

The lower court held that the exemption statute applied and that the disability payments were exempt from the claims of creditors, and also that the obligation of Ring to the insurance company could not be set off against them.

The language of the statute, section 4219, is as follows: "The payments in weekly or monthly instalments to the holder of any policy of insurance in any accident company, sick benefit company, or any company of like kind, shall not be subject to the lien of any attachment, garnishment proceedings, writ of fieri facias, or to levy or distress in any manner, for any debt due by the holder of such policy."

The court in the decree allowed the premium of $1,053.75, which was paid by Ring to the insurance company, to be set off against Ring's indebtedness due the insurance company. The correctness of this ruling is conceded by counsel for Ring in their brief, and we give no further consideration to that item.

The position of the insurance company is that it has the right to the set-off unaffected by the subsequent bankruptcy of Ring and unaffected by Code, § 4219; that to permit Ring to enforce the collection of disability benefits against it during his lifetime irrespective of and without regard to his indebtedness to the insurance company "will forever prevent your petitioner from exercising rights to which it is justly entitled, do your petitioner irreparable and permanent injury, cause it irredeemable loss, and prevent the exercise of rights having abundantly their foundation in equity and good conscience."

The position of Ring may be summarized thus: That the disability payments accruing under the policy cannot be set off by the insurance company against his indebtedness to it because they are exempt under Code, § 4219, from the claims of creditors, and also because the final order of the bankruptcy court from which no appeal was sought set them aside as exempt, and that order is res adjudicata as to the insurance company.

The insurance company in reply contends that the statute (Code, § 4219) has no application here because it is not "any accident company, sick benefit company, or any company of like kind, " but that it is an ordinary old line life insurance company, and that the policy here involved is simply an old line life insurance contract, and further that it is not seeking to subject the disability benefit payments "to the lien of any attachment, garnishment proceedings, writ of fieri facias, or to levy or distress in any manner, for any debt due by the holder of such policy, " but it is simply seeking to set off Ring's indebtedness to it against these payments; that the statute in express terms does not deny to it the right of set-off under such circumstances, and not having expressly forbidden the set-off, the statute should not be applied and the set-off should be allowed.

From our view of the case, the determinative point is the applicability of Code, § 4219. The determination of the effect of Ring's bankruptcy and whether the referee's order is res adjudicata is not necessary, inasmuch as we place our decision upon the application of the statute. This statute (section 4219) has never been before us for construction until now.

The language of the statute, "payments in weekly or monthly instalments to the holder of any policy of insurance in any accident company, sick benefit company, or any company of like kind, " means any insurance company which pays accident or sick benefits. Any insurance company which pays such benefits is certainly within the terms "company of like kind, " although it may be an ordinary life company. The object and purpose of the contracts are the same whether the benefits are provided by a supplementary contract in conjunction with a life insurance policy, or a sick benefit or accident policy. Any attempt to draw a distinction in the application of the statute between such contracts merely results in confusion and contradiction. The exemption statute applies to each with equal force.

We are told that the statute in question was enacted in 1906 and that the insurance companies did not begin writing the supplemental agreements providing payments for the total and permanent disability of the policy holder until 1920, and therefore the Legislature in enacting the statute could not have intended that the statute would apply to such a provision. We think counsel for Ring sufficiently answer this argument when they say in their brief that the company may not have written this type of contract when the statute was enacted yet when, by later changes in its life contracts, it launched into this new field and added the provision for accident and sick benefits, it thereby brought itself under the statute and to that extent, at least, it became a health and accident company or a "company of like kind."

The insurance company asserts that it is not seeking to subject the payments "to the lien of any judgment, garnishment proceedings, writ of fieri facias, or to levy or distress in any manner, " and for this reason the statute has no application. In other words, the statute does not prohibit in express terms the application of a set-off to such payments.

We are of opinion that the legislative intent was to exempt such payments or benefits to one entitled thereto from all claims of creditors. The legislative purpose of this statute was to protect from the claims of creditors such a policyholder who might be overtaken by accident or sickness and who has become entitled to benefit payments and thus likely prevent him and his family from becoming an object of public charity. While the statute does not in express terms mention "setoff" along with "the lien of a judgment, " etc., yet it must be' remembered that, such statutes being remedial, they should have a liberal construction in order that the legislative intent and purpose may be...