Kimball v. Cunningham Hardware Co.

• Decision Date: 22 April 1915
• Docket Number: 841
• Citation: 192 Ala. 223,68 So. 309
• Parties: KIMBALL et al. v. CUNNINGHAM HARDWARE CO. et al.
• Court: Alabama Supreme Court

68 So. 309

192 Ala. 223

KIMBALL et al. v. CUNNINGHAM HARDWARE CO. et al.

No. 841

Supreme Court of Alabama

April 22, 1915

Appeal from Chancery Court, Mobile County; Thomas H. Smith Chancellor.

Bill by the Cunningham Hardware Company and others against Mary E Kimball and others. Decree for complainants, and respondents appeal. Reversed and rendered.

McClellan Somerville, and Thomas, JJ., dissenting in part.

The complainants are alleged to be creditors of Lee R. Kimball deceased, and they seek by this bill to subject to their claims the proceeds of certain life insurance policies, $55,000 in amount, which had been collected by the widow in her own right as the beneficiary named in the policies. With reference to the dates of the claims asserted, it is alleged simply that said Kimball was indebted to complainant at or before the date of his death, and it is shown that the claims filed against his estate aggregate $27,000, while the assets reported by the administrator amount to less than $10,000. The allegation is that the said Kimball was insolvent at the time of his death, and had been so for some time prior thereto, and that his estate is now wholly insolvent. It appears that of the three policies in question two were what is known as "20 payment life" and one as "19 payment life," and that each of said policies contained a stipulation whereby each of said insurance companies undertook and bound itself to pay to said Lee R. Kimball personally certain amounts upon the expiration of a given number of years after the issuance of said policies; the said Lee R. Kimball reserving unto himself a benefit in said policy. It is alleged also that said Kimball paid the premiums on all of said policies during his lifetime, but the date of the policies is not shown other than by the allegation that they were taken out prior to his death. The bill charges on information and belief that L.R. Kimball, who is the administrator, and who is made a respondent in his representative capacity, has the charge and management of said insurance proceeds, and has bought a large amount of real estate with a portion of it, and taken a title in his own name.

Frederick G. Bromberg, of Mobile, for appellants.

Shelton Sims and Francis J. Inge, both of Mobile, for appellees.

SOMERVILLE, J.

The theory upon which complainants seek to destroy Mrs. Kimball's right to the proceeds of the three insurance policies is founded solely upon the allegation of the bill that her husband, the assured, was entitled by the terms of the policies to personally receive some sort of pecuniary benefit at stated times. The theory is that the reservation of any benefit in favor of the husband in a life insurance policy taken out and kept up by him for the benefit of his wife and children, who are named as beneficiary therein, reserves the policy from the protection of section 4502 of the Code, and renders its proceeds subject to the liabilities of the husband, whether the annual premiums paid be more of less than $750, the amount which the statute allows to be appropriated by the husband. The authority cited and relied upon by complainants in support of this proposition is the case of Tompkins v. Levy, 87 Ala. 263, 6 So. 346, 13 Am.St.Rep. 31, in connection with section 4287 of the Code.

In Tompkins v. Levy the policy was payable to the wife of the assured, "her heirs, executors or assigns," and it was held that her interest terminated with her death before her husband's, and that their joint children could not claim the insurance money, as against the father's conditions, because they were not named as the alternative beneficiaries in the policy, though they might under the statute (sections 2733, 2734, Code 1876) have been so named. The court, however, went further, and said:

"There is another feature about this policy which stamps it as fraudulent against creditors, and takes it out of the protection of the statute. It is the interest which Milton Brasfield reserved to himself, in the event of his surviving for 15 years after its issue. It is expressly provided that after the expiration of this number of years, on surrender of the policy, none of its conditions having been violated, the company would pay to Brasfield himself, 'his heirs, executors, or assigns,' the equitable value of the policy, 'As an endowment in cash.' It is obvious that the interest of Mrs. Brasfield in this policy was contingent upon her husband's dying before the expiration of 15 years from date, and, had he survived for this length of time, the cash value of the policy could have been claimed by him free from any trust in favor of the wife. Levy v. Van Hagen, 69 Ala. 17. That a reservation of this kind would be such a locking up of the

debtor's property from creditors for his own beneficial use as to evince an intent to hinder, delay, or defraud creditors has never been doubted since the doctrine settled in Tyne's Case, decided near three centuries ago."

It has been previously held by this court that the procurement of insurance by the assured in favor of another is a gift and conveyance of property (Fearn v. Ward, 80 Ala. 555, 560, 2 So. 114); and we have here, it seems, an application of section 4287 of the Code to investment life insurance. That section is:

"All deeds of gift, all conveyances, transfers, and assignments, verbal or written, of goods, chattels, or things in action, made in trust for the use of the person making the same, are void against creditors existing or subsequent, of such person."

We think, however, that the bill of complaint in the instant case does not bring it within the principle declared in Tompkins v. Levy, nor within the purview of the statute quoted. Construing its allegations more strongly against the pleader, it shows only that the insurance companies were to pay to Kimball certain sums of money directly, and at all events, not in commutation of the insurance contract in favor of his wife, but in addition thereto. This was not the locking up of money under the color of a gift or transfer to another, and was in no sense or degree a fraud upon creditors; nor was the interest of Mrs. Kimball contingent upon the death of the assured within any particular period.

We cannot surmise what may be the actual provisions of the policies in this regard, but the bill does not show enough to defeat the claim of Mrs. Kimball as the beneficiary named therein; and, in the absence of any allegation that the annual premiums paid by the debtor, Kimball, were in excess of $750, as allowed by the statute, the bill is subject to the grounds of demurrer which point out these respective omissions. Felrath v. Schonfield, 76 Ala. 199, 204, 52 Am.Rep. 319. This is not a matter of claiming exemptions, as in the case of Kinney v. Reeves, 142 Ala. 604, 39 So. 29; on the contrary, the complainants are seeking to subject to their debts money to which Mrs. Kimball has a clear legal title, and prima facie a clear legal right. Hence their bill must affirmatively show that the money is liable to their debts. So far as the question of jurisdiction is concerned, the bill is properly filed; and the relief prayed may be properly granted upon an amended bill, supported by the necessary proof.

If by fuller allegations and appropriate proof the case is brought within the principle of Tompkins v. Levy, supra, it is, in the opinion of the writer, immaterial what was the amount of annual premium paid on the policies. Of this opinion also are Justices McCLELLAN and THOMAS. A majority of the court, however, deny the validity and the controlling influence of Tompkins v. Levy, and the judgment of the court on this proposition is shown by the separate opinion of Justice MAYFIELD.

It results that the decree of the chancery court overruling the demurrer to the bill was erroneous, and a decree will be here entered sustaining the demurrer upon the grounds noted above.

Reversed and rendered. All concur in the conclusion.

McCLELLAN, SOMERVILLE, and THOMAS, JJ., dissent in part.

MAYFIELD J.

The opinion of Justice SOMERVILLE contains a sufficient statement of facts necessary to an easy comprehension of the questions decided. All the Justices concur in the conclusion that the decree appealed from must be reversed, but the majority do not concur in what is said in Brother SOMERVILLE'S opinion, which anticipates what would be the ruling in the event the bill is so amended as to bring it within the rule announced in the case of Tompkins v. Levy et al., 87 Ala. 263, 6 So. 346, 13 Am.St.Rep. 31, which rule is quoted in the minority opinion.

That part of the opinion quoted from Tompkins v. Levy, supra, is we think, wholly dictum, for the reason that the court did not then have a case before it to which the statute (section 4502, present Code; section 2356. Code of 1886) was applicable. The court there correctly decided that the case before it did not fall within the protection of the insurance or exemption statute above referred to; and hence what was thereafter said as to what would be the effect of the attempted reservation of a benefit by the insured if the case was otherwise within the protection of the statute was wholly gratuitous, and not binding on the court or the parties, or on other persons. Moreover, if not dictum, we are unwilling to follow it. Justice SOMERVILLE seems to think--in fact, he says--that the result foreshadowed in the Tompkins-Levy Case, is rendered inevitable by virtue of our statute (section 4287), intimating that such dire result might not follow but for this statute. In this the minority we think are in error. The Tompkins-Levy Case was not based upon the statute, but was expressly placed on "Twyne's Case, decided near three centuries ago." As to what effect this statute had on...