Exchange State Bank v. Poindexter
Decision Date | 11 March 1933 |
Docket Number | 30939. |
Parties | EXCHANGE STATE BANK v. POINDEXTER. [*] |
Court | Kansas Supreme Court |
Syllabus by the Court.
Where wife, named as beneficiary of life policies of husband who paid premiums from funds fraudulently procured, had notice that funds so used were not ordinary income, wife held party to fraud sufficient to impress proceeds of policies with trust for benefit of defrauded party, notwithstanding insurance exemption statute (Rev. St. Supp. 1931, 40--414).
Life insurance exemption statute should be liberally construed (Rev. St. Supp. 1931, 40--414).
1. Where the husband, having had for several years life insurance policies in which his wife was named as the beneficiary, fraudulently procured funds from a bank and used part of them for the payment of premiums falling due thereon thus avoiding the complete lapse thereof for the nonpayment of premiums, and the wife having had knowledge and notice that the funds used for the payment of premiums and for living expenses were obtained in some manner other than through their ordinary sources of income, she became to a limited extent a party to the fraud, and the proceeds of the policies became impressed with a trust in her hands as trustee for the benefit of the party defrauded.
2. The life insurance exemption statute, R. S. 1931 Supp. 40--414 like the homestead exemption statute, should be liberally construed, but it was not designed to encourage fraud, nor was it intended thereby to give the proceeds of policies as a gift to the wife as beneficiary when the policies were saved from complete lapse by the payments of premiums from funds fraudulently procured by the husband as insured, and when the wife had knowledge and notice that the funds used for the payment of recent premiums on the policies and for living expenses were obtained in some manner other than through their ordinary sources of income, she thus becoming in a limited sense a party to the fraud.
Appeal from District Court, Wyandotte County, Division No. 4; C. A Miller, Judge.
Action by the Exchange State Bank against Frances Poindexter and another. From an adverse judgment, the named defendant appeals.
H. M Funston and Wilbur S. Jenks, both of Ottawa, for appellant.
David F. Carson and William Drennan, both of Kansas City, for appellee.
This is an action in equity to have a trust declared and impressed upon the proceeds of three life insurance policies upon the life of James Poindexter, payable to his wife, becaused the funds used by the insured to keep the insurance in force were fraudulently obtained from the plaintiff bank.
The action was brought against Frances Poindexter, the wife of the insured, and the insurance company. The petition alleged that she conspired with her husband in his obtaining two loans from the bank, one on October 3, 1929, for $2,123, and the other on April 10, 1930, for $1,019.67, representing at the time that he was the owner of 150 head of cattle and the money was to be used for feeding and caring for them, while he in fact owned no cattle at that time, but used the funds borrowed to pay premiums on his insurance policies in favor of his wife, and that he was at that time insolvent.
The answer of Frances Poindexter denied that she conspired with her husband to borrow the money from the plaintiff bank and alleged that she had no knowledge or notice that he had borrowed money from the bank on October 3, 1929, until March, 1930, and denied that she had anything to do with the spending of the money borrowed or paying any of it for insurance premiums, and alleged that her husband had taken out these policies in 1897 and had regularly paid the premiums on them since that time; that the proceeds of the policies were exempt to her under the insurance laws of the state of Kansas.
The insurance company did not answer, but by leave of court paid into court the full value of the three policies in the sum of $6,018.
The trial court found in favor of the plaintiff, and the defendant appeals.
The following stipulation was filed before any evidence was introduced:
"That James Poindexter was insolvent at the time of his death; that insurance with The Bankers Life Company as claimed, has been paid into this court and $2,500 of this amount has subsequently by agreement been paid to Mrs. Poindexter; that James Poindexter died on the 21st day of July, 1930; James Poindexter on November 2, 1897, secured three policies of insurance with The Bankers Life Company of Des Moines; Iowa; these were life policies--whole life policies, subject to assessments, payable at death; that premiums were not of a fixed amount but were variable depending upon deaths; the premiums were payable quarterly and if the premiums were not paid when due or within thirty days thereafter, subject to statutory notice, the policies would lapse; the policies were originally made payable to Lilie J. Poindexter, wife of James Poindexter, and she died shortly thereafter; in 1904 James Poindexter was married to the defendant, Frances Poindexter, and thereafter in 1926, with the consent of the Insurance Company, Frances E. Poindexter was named as the beneficiary in the policies; these policies were for the sum of $2,000 each; and at the time of the death of James Poindexter on July 21, 1930, there was due on the policies the sum of $6,018, which amount has been paid into court; that $2,500 of the amount, under order of the court, has been paid to the defendant Frances E. Poindexter; that during the life of James Poindexter, for the purpose of keeping these policies in effect, there had been paid the sum of $3,208.80; they were caused to be paid by James Poindexter but the last two premiums were paid by money obtained from the bank; that the last two assessments, one of $96 on January 3, 1930, and one of $90 on April 3, 1930, were paid out of the funds secured by a loan from the plaintiff and deposited with the State Bank of Ottawa, checks being drawn by James Poindexter upon his account in State Bank of Ottawa; the money that was borrowed at the bank was deposited in his account in the bank in Ottawa, and then from that fund so deposited, these two last payments were made."
The trial court included the following findings in the journal entry of judgment as a part thereof:
"Two major questions are involved, first, whether or not a resulting trust is shown by the evidence and findings; and, second, were the proceeds of the policies exempt under R. S. 1931 Supp. 40--414?
It may at once be conceded that generally under the statute above cited the proceeds of a life insurance policy are exempt to a wife of the insured as one having an insurable interest in the life of her husband as against the claims of creditors of the insured, and they shall inure to the sole and separate benefit of the beneficiary named in the policy, and this statute has been applied and upheld in many decisions of this state, among which is Emmert v. Schmidt, 65 Kan. 31, 68 P. 1072, cited by the appellant.
The acquiring or setting aside of a homestead in fraud of creditors has always been condemned in Kansas, notwithstanding the exemption law in relation thereto. In the case of Kline v. Cowan, 84 Kan. 772, 115 P. 587, it was said:
"To impress land with a homestead character, some real interest or ownership must exist, and a mere gratuitous grantee of one who conveys to defraud his creditors...
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