Parks v. Parks' Ex'rs

• Decision Date: 07 October 1941
• Citation: 288 Ky. 350,156 S.W.2d 90
• Parties: PARKS et al. v. PARKS' EX'RS.
• Court: Kentucky Court of Appeals

156 S.W.2d 90

288 Ky. 350

PARKS et al. v. PARKS' EX'RS.

Court of Appeals of Kentucky

October 7, 1941

Rehearing Denied Dec. 16, 1941.

Appeal from Circuit Court, Boyle County; K. S. Alcorn, Judge.

Action by J. T. Parks' executors against Gertrude N. Parks, and others, to recover an amount equal to sum total of premiums paid in cash by deceased on life policies. From a judgment for the plaintiff, named defendant and another appeal.

Reversed.

Nelson D. Rodes and Henry Jackson, both of Danville, for appellants.

Chenault Huguely, C. C. Bagby, and E. C. Newlin, Jr., all of Danville for appellees.

STANLEY Commissioner.

The appeal is by the widow and a daughter of the late J. T. Parks from a judgment for the benefit of his creditors of an amount equal to the sum total of premiums paid in cash or by the use of cash surrender values of policies of insurance on his life. The amount, with simple interest from the dates of payment, is about $9,000. The judgment covers premiums paid during ten years next preceding the filing of an amended petition of the executors seeking such recover in a suit to settle the decedent's estate. The sole contention of the appellants is that the judgment should have covered only five years. It is rested upon the proposition that the right to recover is the converse of "a liability created by statute" and within Section 2515, Kentucky Statutes which stipulates five years as the period of limitations for such an action where no other time is fixed by the statue creating the liability. The appellees contend the cause of action did not arise until the death of their testator; also that the action is for relief for fraud and within the terms of Section 2519, Kentucky Statutes, providing that no action for fraud can be maintained after the lapse of five years from the date of its discovery and in no event after the lapse of ten years from the perpetration of the fraud. The chancellor found the creditors had not discovered, actually or constructively, that their debtor was carrying insurance in which his wife and child were beneficiaries until his death.

Section 654 of the statutes declares that a life insurance policy for the benefit of or payable to a married woman "shall inure to her separate use and benefit, and that of her children, independently of her husband or his creditors." However, this provision is added: "But if the premium on any policy in this section mentioned is paid by any person with intent to defraud his creditors, an amount equal to the premium so paid, with interest thereon shall inure to the benefit of said creditors, subject, however, to the statute of limitations."

Section 655 has the same provisions of exemption of proceeds when the policy is in favor of some person other than himself who has an insurable interest in his life subject to this condition: "Provided, That, subject to the statute of limitations, the amount of any premiums for said insurance paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy."

There are similar statutes in many of the states. Some of them, as in Massachusetts, New Jersey and Illinois are practically identical with the Kentucky statute. 2 Couch on Insurance, Section 330, et seq. The first enactment of this kind seems to have been in Massachusetts in 1844. Bailey v. Wood, 202 Mass. 549, 89 N.E. 147, 25 L.R.A., N.S., 722. Other states quickly followed with statutes modeled after it, for there was much confusion and an irreconcilable conflict in the decisions as to the respective rights in the proceeds of a life insurance policy as between a man's family whom he had provided for and those whom he owed. The legislatures were influenced by the thought that a man's life is no part of his assets; that his wife and little children have moral and legal claims as much entitled to the law's respect and consideration as those of his creditors; that in making provision for the support of his family when his labors shall have ended, the only money he had diverted from his estate which might otherwise have been applied to the immediate payment of his debts is the amount of the premiums. This was another step in the progress away from the shocking practice of placing a man in jail or not paying his debts and casting his family into the street. This court observed years ago that a debtor had higher obligations upon him to support his sister and brothers of tenders years and of a widowed, indigent mother than to provide for the wants of his creditors, however just their demands. Wade v. Lyman & Bronston, 7 Ky.Opin. 427; McMurray v. Shuck, 69 Ky. 111, 6 Bush. 111, 99 Am.Dec. 662. The right of creditors under Sections 654 and 655 of our statutes becomes superior only where there was a fraudulent intent on the part of the insured to prefer his family at the expense of his creditors, and the right is limited to the amount diverted for that purpose. Townsend's Assignee v. Townsend, 127 Ky. 230, 105 S.W. 937, 16 L.R.A., N.S., 316; Bailey v. Wood, 202 Mass. 562, 89 N.E. 149. The statutes are in the nature of an exemption law, which is always liberally construed for the benefit of a man's family. Wallins Nat. Bank v. Turner, 221 Ky. 562, 299 S.W. 194. Therefore, whatever may be the particular application or condition requiring its construction, the statute should be viewed with liberality for the widow and children. Cole v. Marple, 98 Ill. 58, 38 Am.Rep. 83; Harriman Nat. Bank v. Huiet, 249 F. 856, 859, applying the principle enunciated in Central Nat. Bank of Washington v. Hume, 128 U.S. 195, 9 S.Ct. 41, 32 L.Ed. 370; Penn Mutual Life Ins. Company v. Meguire, D. C., 13 F.Supp. 967. Thus, the weight of authority is that a husband may devote a moderate portion of his earnings to insuring his life in favor of his wife and make reasonable provision for her future without thereby being held to have intended to defraud his creditors, even though he was insolvent when he effected the insurance or paid the premiums. Thompson v. Cundiff, 74 Ky. 567, 11 Bush 567; Goodpaster v. Connor & Kimbrough, 13 Ky.Law.Rep. 138; Hise v. Hartford Life Ins. Company, 90 Ky. 101, 13 S.W. 367, 29 Am.St.Rep. 358; 2 Couch on Insurance, Section 330, p. 940; Note 31 A.L.R. 52; Cf., however, Morehead's Adm'r v. Mayfield, 109 Ky. 51, 58 S.W. 473; Levy's Adm'r v. Globe Bank & Trust Company, 143 Ky. 690, 137 S.W. 215.

The genesis of our current statutes is an act entitled "An Act for the incorporation and regulation of life insurance companies," approved March 12, 1870. Acts of 1869-70, page 61. See Conn v. White, 189 Ky. 185, 224 S.W. 764. Section 30 of that Act is in substance and effect the same as Section 117 of an Act of 1893, which is Section 654 of the current statutes, except that it was confined to policies of insurance originally taken out for the benefit of a married woman. Section 31 of the Act of 1870 related to the assignment or transfer of a policy as well as one "made payable to any married woman or to any person in trust for her or for her benefit." The provisions of that section, it will be noted, are also embraced in Section 654 of the statutes, while Section 655 extends the exemption of proceeds from the payment of the insurer's debts to a policy "effected" in favor of any person having an insurable interest in his life. The difference in the condition of the two sections which permit recovery of premiums is that in Section 654 the premium must have been paid "with intent to defraud," while in Section 655 it must have been paid "in fraud"; and Section 654 simply says the payment shall insure to the benefit of the creditors, while Section 655 provides that the amount so paid shall inure to the benefit of the creditors "from the proceeds of the policy." The differences do not appear to be material.

The appellees submit that their cause of action accrued not when the premiums were paid but when the proceeds of the insurance became payable at the death of the insured, since there could not have been any recovery until then, and that the judgment may be affirmed upon this ground. At first impression it would seem, the point is well made. But both analysis and authority compel a different ruling. The word "inure" in this connection is a prospective word having the meaning of "to be or become operative; to serve to the use or benefit." Webster's New International Dictionary. Significance must be given the specific condition that the right is subject to the statute of limitations. If nothing had been said the appropriate statute would have automatically applied to a cause of action arising when the proceeds were payable. It is an unusual declaration. The specification of the right being subject to the statute of limitations used in connection with the word "inure," we apprehend, was intended to have limitations begin as of the date ...