In re Thompson

• Decision Date: 13 February 1906
• Citation: 76 N.E. 870,184 N.Y. 36
• Parties: In re THOMPSON.
• Court: New York Court of Appeals Court of Appeals

184 N.Y. 36

76 N.E. 870

In re THOMPSON.

Court of Appeals of New York.

Feb. 13, 1906.

Appeal from Supreme Court, Appellate Division, Second Department.

Judicial settlement of the accounts of Ella S. Thompson, as executrix of Francis A. Thompson, deceased. From an order of the Appellate Division (92 N. Y. Supp. 1147,102 App. Div. 617), affirming a decree of the Surrogate's Court surcharging the accounts of the executrix, upon objections filed by Charles A. Bryan, the executrix appeals. Reversed.

Henry Hall Pierce, for appellant.

Edward W. S. Johnston, for respondent.

VANN, J.

This proceeding was commenced before the surrogate of Kings county by Charles A. Bryan, a creditor of Francis A. Thompson, deceased, to compel Ella S. Thompson, his executrix, to make and file an account of her proceedings. An order was made accordingly, and thereupon she filed an account in which she stated that all the property received by her as executrix was worth but $10, and that she had paid out for funeral expenses the sum of $188, thus leaving a deficit. The creditor filed objections to the account and alleged that the executrix had omitted to state the collection by her of about $13,000; ‘said sum being the proportionate amount of a certain policy of life insurance, issued on the life of the above-named decedent by the Equitable Life Assurance Society of the United States on or about the 27th of February, 1895, for the sum of $34,000, upon which the annual premium paid by the decedent in his lifetime was $806.14, and three-eighths of said sum of $34,000 formed a part of the estate of said decedent.’ The issue was tried before the surrogate against the objection of the executrix promptly made at the beginning of the trial, and many times renewed during its progress, that he had no jurisdiction to try the question whether said sum of $13,000 belonged to the wife, the beneficiary named in the policy, or to the estate of the decedent, or to his creditors. The objections were overruled, and the executrix accepted.

Upon the trial it appeared that one John Mortimer died on the 28th of September, 1875, leaving a daughter, Ann E. Thompson, who died in January, 1901, leaving a son, the decedent Francis A. Thompson, who died in March, 1901, leaving Ella S. Thompson, his widow and executrix. By the will of John Mortimer a trust fund amounting to $68,850 was created, and the trustees were directed to pay the income therefrom to said Ann E. Thompson during her life, and after her death to divide the corpus among her lawful issue. The decedent, as one of her two children, thus became entitled in remainder to one-half of the fund in case he survived his mother. In March, 1895, he transferred his interest in the fund to one Cohen, in consideration of $17,000, of which $5,000 was to be retained by Cohen and applied by him in payment of the annual premiums upon a policy of insurance issued at about the same time by the Equitable Life Assurance Society upon the life of the decedent for the sum of $34,000 in favor of his wife. By a tripartite agreement entered into between the decedent, his wife, and said Cohen, it was provided that, if the entire amount of the sum thus appropriated to pay the premiums was not required, the remainder was to be paid by Cohen to the decedent, his wife, or the survivor. As a part of the arrangement Mrs. Thompson assigned the policy to Cohen to protect him against the contingency of the death of the decedent before his mother, but in case he survived his mother it was agreed that the policy, together with all rights and interests accruing thereunder, should be reassigned to Mrs. Thompson. Cohen also agreed to pay the premiums on the policy until said sum of $5,000 devoted to that purpose should be exhausted, while the decedent and his wife agreed that they would then deposit annually with Cohen an amount sufficient to pay the current premium. Seven annual premiums of $806.14 each were paid on said policy, of which five were paid by Cohen out of the fund of $5,000, while the other two were not paid by the decedent, or out of his property. The decedent survived his mother for a few months, and died in March, 1901. In the month of April, following, the insurance company paid $34,000, the amount called for by the policy, to Cohen, and in January, 1902, Cohen paid the same to Mrs. Thompson, after deducting the sum of $1,250, allowed for the expenses of certain litigation that had sprung up, and took a release from her individually and as executrix. The surrogate found these facts, among others, and adjudged that the account of the executrix should be surcharged with the sum of $12,911.88 for the benefit of the creditors of the decedent. The Appellate Division affirmed, and Mrs. Thompson, both individually and as executrix, appealed to this court.

Section 22 of the domestic relations law (Laws 1896, p. 220, c. 272), so far as now material, is as follows: ‘A married woman may, in her own name, or in the name of a third person, with his consent, as her trustee, cause the life of her husband to be insured for a definite period, or for the term of his natural life. Where a married woman survives such period or term she is entitled to receive the insurance money, payable by the terms of the policy, as her separate property, and free from any claim of a creditor or representative of her husband, except that where the premium actually paid annually out of the husband's property exceeds five hundred dollars, that portion of the insurance money which is purchased by excess of premium above five hundred dollars, is primarily liable for the husband's debts. * * * A policy of insurance on the life of any person for the benefit of a married woman, is also assignable and may be surrendered to the company issuing the same, by her, or her legal representative, with the written consent of the assured.’ Construing this statute, we have held that the wife's right to the insurance fund created by the husband's annual appropriation or investment of his moneys in premiums for insurance upon his life for the benefit of his wife does not rest upon contract, but upon legislative grant, exempting the fund from the claims of creditors; that the statute is an enabling act and relates to the remedy; that the state has the right to change the exemption before the fund reaches the wife, and therefore the proceeds of policies issued before the enactment of the statute are subject to its provisions. Kittel v. Domeyer, 175 N. Y. 205, 67 N. E. 433. We further held in that case that the statute does not authorize an immediate proceeding by a creditor of the husband against the insurance fund without regard to the condition of the estate generally, and that the wife should not be deprived of any portion of the insurance moneys until it is ascertained by administration upon the estate that the other assets will not suffice to satisfy the claims of creditors. We also declared that until such claims are discharged they are a lien upon so much of the insurance money as was purchased by the excess of the annual premium above $500; that the amount thus purchased is, as to the wife, a fund for all the creditors of the deceased, and liable primarily for the payment of the husband's debts in preference to the rights of the wife, which are thus postponed as to that part of the insurance to the rights of creditors.

Although the burden was upon the creditors of showing what proportion of the insurance moneys received by Mrs. Thompson was purchased by the excess of the annual premium above $500, ‘actually paid annually out of’ her ‘husband's property,’ they failed to show this as to two out of the seven premiums. Still the surrogate, for some reason that we cannot discover, held that the portion of such moneys purchased by the excess of each of the two premiums not paid by the husband or out of his property was liable for his debts the same as the portion of the excess actually paid for out of his property.

As the jurisdiction of the surrogate to try the issue is challenged, that question should be first determined. The surrogate, meaning literally a substitute, or one who acts for another, from the earliest times, has been an officer of limited jurisdiction. Originally, in England, he was the bishop's chancellor, and presided for him in the diocesan court. In colonial times he was the delegate or substitute of the Governor, and acting for him admitted wills to probate. Shortly after the Revolution statutes were passed which cautiously extended his powers by bringing other subjects within his jurisdiction. 2 Laws of New York (Jones & Varick's Edition) [184 N.Y. 42]71; 1 Greenl. Laws, 238; 3 Greenl. Laws, 391; Laws 1799, p. 724; 1 Webster's Laws, pp. 317, 325; 3 Webster's Laws, 158, 316; 5 Webster's Laws, 138; Laws 1813, p....