Johnson v. Bacon

• Decision Date: 03 February 1908
• Docket Number: 13,107
• Court: Mississippi Supreme Court
• Parties: WILLIAM T. JOHNSON v. JESSIE L. BACON ET AL

45 So. 858

92 Miss. 156

WILLIAM T. JOHNSON v. JESSIE L. BACON ET AL

No. 13,107

Supreme Court of Mississippi

February 3, 1908

FROM the chancery court of Leflore county, HON. PERCY BELL Chancellor.

Johnson appellant, was complainant in the court below; Mrs. Bacon and others, appellees, were defendants there. From a decree on a demurrer to the bill in favor of, but not satisfactory to complainant, he appealed to the supreme court.

The appellant, Johnson, began this suit in chancery against appellees, Mrs. Bacon and her children and two life insurance companies, charging that W. O. Bacon, the husband of appellee Mrs. Bacon, died, leaving insurance in force to the amount of $ 25,000; that of this amount $ 18,500 was payable to his wife as beneficiary, and $ 4,000 to his children as beneficiaries, and $ 2,500 to his estate; that during the latter part of the life of deceased both he and his wife were totally insolvent, and a large part of the insurance was taken out during the last year of his life, and that the premiums on all of his insurance had been paid during the latter part of his life with money advanced by the complainant, Johnson, for the purpose; that complainant had also become indorser for W. O. Bacon to the amount of several thousand dollars during the last few years of his life, and had been forced to pay the debts for which he become indorser; that there was an understanding between Bacon and complainant that complainant would be protected by the insurance policies on the life of Bacon; and that Mrs. Bacon knew of the advances made to her husband by complainant and of the understanding between them as to the insurance. The bill prayed that commissioners be appointed to ascertain the amount of the indebtedness due by Bacon to complainant, that the insurance companies be required to pay the proceeds of the policies into court, and that, after setting aside $ 10,000 of the insurance exempted by law to the beneficiaries a decree be entered for the sum so found to be due complainant; such amount to be paid out of proceeds of the insurance policies in excess of $ 10,000. On the trial of the case the court below sustained a demurrer to and dismissed the bill, except as to the amount of premiums paid on the insurance policies by complainant, and allowed answer as to this part of the bill.

Affirmed.

McClurg, Gardner & Whittington, for appellant.

In Colley's Brief on Insurance, Vol. IV, page 3795, we find the rule announced this way:

"All the statutes bearing on the exemption of life policies or their proceeds seem based on the theory that, in the absence of an expressed contrary intent, the object of an ordinary life insurance policy should be considered as a protection of the assured's family after his death, and that this object and desire is laudable, and in accordance with public policy. They provide, in substance, that the proceeds of life insurance policies taken out for the benefit of certain classes of beneficiaries shall be free from the claim of creditors; but in some states insurance in excess of certain specified amounts, or procured while the insured was insolvent, is declared not exempt."

Under the text above quoted, the attention of the court is called to two points especially, to-wit: that in this case there was no "absence of an expressed contrary intent," but a specified agreement which the insured had with the benefactor, and that our statute, above quoted, limits the exception of charity to $ 10,000. The principle works itself out. The family of an insolvent is provided for amply, and there is something left to confiding and deceived creditors--a very just and equitable construction. The demurrer confesses the allegations of the bill, and of the amended bill, that Bacon secured Johnson's credit, and money, upon assurances that his life policies protected him. And, more, the demurrer admits that Mrs. Bacon, also wholly insolvent, knew and consented to the fact that her husband was sustaining the family upon Johnson's faith in their assurances. In Fearn v. Ward, 2 So. 114, the supreme court of Alabama, upon a case like this held that: "A court of equity will intervene at the instance of a creditor, on averment and proof of a deficiency of legal assets, to subject to the satisfaction of his debt property fraudulently conveyed by a deceased debtor in his lifetime. Battle v. Reid, 68 Ala. 149; Sharp v. Sharp, 76 Ala. 312." And also:

"The procurement of the policy of insurance by Robert Fearn in favor of his child, and the payment of premiums with the funds, constituted a gift to her--a voluntary conveyance based on parental affection--which is void as to his existing creditors, though no fraud may have been intended. It is a voluntary provision, effected by converting to her benefit money which in equity and good conscience should have been paid to his creditors. Though the law regards the parental duty of maintenance, and the consequent duty of making provision for the future, when the father may no longer exercise protecting care, it subordinates the discharge of these duties to obligations to his creditors; and declares void, as to them, any voluntary appropriation of property not authorized by legally expressed exemptions or privileges generally allowed in considerations of public policy. The bond on which complainant's intestate was security had pre-existed, and was existing at the time of the creation and issue of the policy. The subsequent payment of the debt relates to the date of the suretyship, and constitutes the paying surety a creditor, who may avoid a fraudulent conveyance, though made during the period his claim was contingent. Jenkins v. Lockard, 66 Ala. 377; Keel v. Larkin, 72 Ala. 493. Whether complainant be regarded as a simple contract creditor, or his rights arise from the provisions of the statute by authority of which the judgment was assigned to him, he is entitled to avoid, as offending his rights, the policy of insurance, unless some superior or equal equity of the beneficiary supervenes."

We will not quote further, but respectfully invite a careful consideration of the case by this honorable court, especially at the botton of page 119, where the court said that the excess of insurance above the statutory exemption must be devoted to the payment of debts, on the ground that the statute fixed a limit beyond which the husband cannot pass.

We press upon the consideration of the court the point that this is not a claim for all of the insurance, but only for that part above the ten thousand dollars which our statute, in its charity, leaves to the widow and children. We cannot believe that a court of equity, under the hard circumstances of this case will allow the benefactor to be robbed, because he had a tender heart for his kinsfolk. This is not a case against the insurance companies. They have confessed liability and paid the amount of the several policies into court. It is a contest by the man who paid the premiums, believing that he was protected, and upon the faith of which he lent and paid large sums of money and a suit against the beneficiaries who knew the facts. The allegations confessed by the several demurrers are: That Bacon, and his wife had no property, that he and his family lived in a rented house, and that it was a struggle for him to maintain his family, that he and his wife were without credit, and Johnson, who married Bacon's sister, was a man of means, and by reason of the intimate relations of the two families, Johnson gave Bacon credit to the amount of fifteen thousand dollars, upon Bacon's solemn promises that he was safe in his life policies, of which Mrs. Bacon knew. It is alleged, and confessed by the demurrer, that Mrs. Bacon, defendant here, "thoroughly understood" the business relations between her husband and his brother-in-law; that she understood firmly that Johnson was to be protected by the life policies and "would run no risk of the loss of a dollar advanced to him, or upon his credit." She knew that Johnson placed full faith in her husband's statements.

It was an equitable assignment of, at least, all beyond the ten thousand dollars exempted by the statute.

Pollard & Hamner, for appellees.

The wife and children had a vested right upon the issuance of the policies. In ordinary life insurance where no power of divestiture is reserved, the general doctrine prevails that the issuance of the policy conferred immediately a vested right upon, and raises an irrevocable trust in favor of, the party named as beneficiary, a right which no act of the insured can impair without the beneficiary's consent. 3 Am. & Eng. Enc. L., 980, and...