Davis, State Bank Commissioner v. Cramer

• Decision Date: 25 March 1918
• Docket Number: 243
• Citation: 202 S.W. 239,133 Ark. 224
• Parties: DAVIS, STATE BANK COMMISSIONER, v. CRAMER
• Court: Arkansas Supreme Court

202 S.W. 239

133 Ark. 224

DAVIS, STATE BANK COMMISSIONER, v. CRAMER

No. 243

Supreme Court of Arkansas

March 25, 1918

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor reversed in part and affirmed in part.

Decree modified in part and affirmed in part. Complaint of Bank Commissioner dismissed. Case remanded.

Sam T. and Tom Poe, Harnwell & Young and Moore, Smith, Moore & Trieber, for appellants.

1. The fraudulent conveyance should have been set aside to the extent of appellants claim, and not merely to the extent of the cash surrender value of the policy. 84 Mich. 625; 48 N.W 159; 82 N.Y.S. 302; 83 A.D. 419; 74 N.E. 1116; 80 Ala. 555; 2 So. 114; 124 Ala. 213; 12 R. C. L. par. 149; 100 Ark. 573; 33 Id. 575; Ann. Cases, 1912 B. 896; 1 Remington on Bankruptcy, 16. See also, 53 N.J.Eq. 282; 31 A. 272; Kirby's Digest, § 5212; 12 R. C. L. 510; 124 A. 213.

2. There was no consideration for the transfer. 49 Ark. 20; 73 Id. 174; 76 Id. 252; 108 Id. 164; 79 Id. 215.

3. The policy was valuable and given away. It was not part of Jones' personal property exemptions. 52 Ark. 547.

4. The child Gus K. Jr. is not protected by § 5212 Kirby's Digest.

5. The Bankruptcy Act is not operative unless bankruptcy proceedings intervene.

6. The bank commissioner's cause of action is not barred by non-claim, 77 Ark. 60; 23 Id. 163-5; 105 Id. 494; 18 Cyc 464, note 27; 30 Iowa 371; 15 P. 28.

Rose Hemingway, Cantrell & Loughborough, for appellee, Union Trust Co. and Katharine House, curator.

1. The vendible or surrender value of the policy at the time the transfer was made, is the only thing involved. Kirby's Digest, § 3228; 68 Ark. 398; 15 F. 535, 538; 77 Ark. 60; 98 Id. 343; 116 Id. 535. No fraud or bad faith in the transfer was shown. 16 Ind.App. 677; 99 Pa.St 133, 51 S.W. 5; 23 A. 154; 25 N.E. 706; 45 Id. 1116; 46 Am. Rep. 1; 75 N.W. 877.

The title of the trustee in bankruptcy relates back to the time the proceedings were instituted. 228 U.S. 474, 479, 459.

The only thing put beyond the reach of creditors by a fraudulent transfer is the surrender value. Cases supra.

2. The surrender value was trifling. 61 Conn. 240; 23 A. 154-6; 51 S.W. 5; 64 S.W. 642; 58 Id. 473; 90 N.W. 387, 390; 94 Id. 677; 98 Id. 303; 21 So. 48; 3 S.W 203; 32 P. 1055; 41 W.Va. 140; 67 Me. 186; 15 Gray (Mass.) 590; 28 Minn. 544. If no fraud is intended the assignment is valid. 99 Pa.St. 133; 46 Am. Rep. 1; 26 N.E. 1051; 128 U.S. 195, 211. See also, 2 Bland. 33; 69 Ill. 541, 79 Ark. 399; 31 Id. 652-7; 68 Id. 102; 79 Id. 399.

3. There was adequate consideration for the transfer and it was not fraudulent. 80 Ala. 555; 13 Col. App. 15; 52 A. 34; 203 Pa.St. 82; 56 P. 209; 2 So. 114.

4. The claim of the bank commissioner is barred by non-claim. 18 Ark. 334; 80 Id. 103; Ib. 523; 94 Id. 30; 97 Id. 492, 546; 51 Ala. 543; 3 Tex. 192; 49 Am. Dec. 738; 5 La.Ann. 487; 31 Miss. 660; 20 Ore. 78; 25 P. 140; 20 Cyc. 428; 67 Ark. 325. See also, 28 Ark. 267; 29 Id. 74; 41 Id. 523; 43 Id. 464; 61 Id. 527.

5. As to the minor child the insurance was exempt. Kirby's Digest, § 5212; 31 Ark. 652; 68 Id. 102; 79 Id. 399; 15 Mo. 166; 95 Tenn. 505; 64 Md. 316; 98 Ill. 58. This cause should be reversed on the cross-appeal and the entire fund with interest paid to appellees.

J. W. & J. W. House, Jr., for Lottie V. Cramer.

1. Jones was not insolvent and had ample property to pay his debts at the time of the assignment. 26 Ark. 20; 12 Id. 146; 9 Id. 482; 18 Id. 124; 58 A. 745; 83 S.W. 771.

2. If he was, there was no fraud as he was entitled to his personal exemptions. 79 N.E. 895; 54 Ind. 501; 95 Id. 347; 55 Am. Rep. 724. A disposal of exempt property is not fraudulent. 39 Ark. 571; 33 Id. 762; 52 Id. 101; 44 Id. 180; 43 Id. 429; 57 Id. 242; 31 Id. 554; 52 Id. 547; 57 Id. 331. See also, 99 Id. 45; 49 Id. 301; 79 Id. 399. If the transfer is set aside for fraud the exemption rights revive. 33 Ark. 454; 44 Id. 181; 49 Id. 299; 79 Id. 399. The rights would inure to Mrs. Cramer and Gus K. Jones, Jr. 58 S.C. 280.

One may give away exempt property and when the title has passed to the donee the property is not subject to execution on attachment, without regard to the donor's motives. 55 Wisc. 340; 44 Iowa 613; 86 Ind. 543; 56 Wisc. 178. See also, 100 Va. 207; 53 L. R. A. 438, 441.

3. The policy was exempt under the Federal statute. 205 U.S. 202; 228 Id. 459, 474, 479; 142 F. 447; 118 Id. 632; 182 Id. 718; 188 Id. 702; 192 Id. 1005; 209 Id. 766; 221 Id. 56; 227 Id. 1011; 228 U.S. 459, 473-4, 479; 77 Va. 168. The withdrawal value is all the creditor is entitled to. 132 F. 927; 103 Id. 783; 65 Ind. 347; 98 Id. 78; 104 Id. 968; 171 Id. 268, 570-1.

4. The transfer or change of beneficiary was not fraudulent. 45 S.W. 673-5; 128 U.S. 195; 84 Oh. St. 1; 53 L. R. A. 438; 29 Am. St. 358-9, 364-5, 335-345.

5. 79 Ark. 509 has not been overlooked. It is not in point. 128 U.S. 195; 29 Am. St. 360-4.

6. The change of beneficiaries was for a valuable and adequate consideration. 75 Ark. 191; 26 Id. 360; 1 Beach Mod. Law of Cont., § 642.

7. The claim is barred by non-claim. 97 Ark. 554; 66 Id. 327; 49 Id. 75; 48 Id. 304; 105 Id. 95.

8. Review appellants authorities and contend that the cause should be reversed on cross-appeal and that the entire fund be paid to appellees.

STATEMENT OF FACTS.

On May 19, 1915, John M. Davis, State bank commissioner recovered judgment against Gus K. Jones in the sum of $ 2,219.45; on June 10, 1915, Davis obtained judgment against Jones in the sum of $ 1,094.98. Jones carried an insurance policy in the Union Central Life Insurance Company for the sum of $ 10,000, originally payable to his estate. The policy among other things provided, "the assurer shall have the option at any time to change the beneficiaries. Said change to take effect and by endorsement on the policy by the assurer and the Company."

On May 5, 1914, Jones transferred the insurance to his sister Mrs. Lottie V. Cramer and to his son Gus K. Jones, making them the beneficiaries by proper endorsement of the policy.

Jones died October 8, 1915. At that time nothing had been paid on the judgments in favor of Davis, the bank commissioner. After the death of Jones, Davis having learned of the transfer by Jones of his insurance policy, instituted this suit to set same aside. He alleged that such transfer was made while Jones was insolvent and with the intent on his part to hinder, delay, and defraud his creditors; that the transfer was voluntary and without consideration. The complaint was filed October 26, 1915.

The defendants in the suit were the Union Central Life Insurance Company, Mrs. Lottie V. Cramer, Union Trust Company and Mrs. Katherine House as curators of Gus K. Jones, Jr.

Jones had borrowed on the policy and the amount less the sum due on the policy, towit, the sum of $ 8,485.00 was deposited in the registry of the court by the insurance company, and the insurance company was discharged.

One W. H. Giles, a creditor of Jones, intervened setting up that Jones was indebted to him for the sum of $ 681.00 with interest from December 17, 1913, at ten per cent per annum. He alleged that the transfer of the policy was a fraud as to him and asked that it be so declared and set aside.

The defendants Mrs. Lottie V. Cramer and the curators of Gus K. Jones, Jr. filed separate answers in which they denied the allegations of the complaint. Mrs. Cramer alleged that there was a consideration for the transfer of the policy to her; averred that the cash surrender value of the policy at the date of the transfer was $ 250.00; that this sum together with the other personal property owned by Jones at the time of his death was less than the amount of exemption allowed by law. She pleaded section 70 A of the National Bankruptcy Act--relating to the redemption by the bankrupt from the trustee in bankruptcy of the bankrupt's insurance policies at their cash surrender value, and pleaded also that plaintiff had not complied with the statute of nonclaim.

The curators of Gus K. Jones, Jr., adopted the answer of Mrs. Cramer and in addition pleaded that no process of revivor had been issued on the judgments held by the bank commissioner; that the annual premium on the insurance policy in question did not exceed the sum of $ 300, and they pleaded that the proceeds of said policy were therefore exempt.

On the evidence adduced at the hearing the chancellor found that Jones was insolvent; that he had no actual intent to defraud creditors but that the transfer of the policy constituted a fraud upon the rights of the creditors and set the same aside. The court held that the amount available to the creditors under the policy was its cash surrender value at the date of the transfer, which amounted to $ 250.00.

The court entered decree giving the bank commissioner the preferential right in the sum of $ 250 directing that this sum be paid towards the satisfaction of his claim and that the balance of the fund in the registry of the court, after deducting the cost of the suit be divided equally and paid to Mrs. Cramer and the curators of Gus K. Jones, Jr.

Davis and Giles have duly prosecuted an appeal to this court and appellees have been granted, by this court, a cross-appeal.

OPINION

WOOD, J., (after stating the facts).

It can serve no useful purpose to set out and discuss the evidence relating to the issue of insolvency. A preponderance of the evidence shows that at the time of the change of the beneficiaries and the transfer of the policy by Jones to Mrs Cramer and his son, Gus K. Jones, Jr., that Jones, the insured, was insolvent. We have reached the conclusion also that the preponderance of the evidence shows that the transfer by Jones of the policy in controversy to his sister and son was...