Stokes v. Coffey

• Decision Date: 23 January 1871
• Citation: 71 Ky. 533
• Parties: Stokes & Son, & c. v. Coffey, & c.
• Court: Kentucky Court of Appeals

71 Ky. 533

Stokes & Son, & c. v. Coffey, & c.

Court of Appeals of Kentucky.

January 23, 1871

APPEAL FROM MARION CIRCUIT COURT.

ROUNTREE & FOGLE, For Appellants,

CITED

5 J. J Marsh. 550, Lyne, & c. v. Bank of Ky.

3 Monroe, 158, Crozier v. Young.

4 Monroe, 581, Halbert v. Grant.

1 Dana 532,Doyle v. Sleeper, & c.

Revised Statutes, 1 Stanton, 546.

HARRISON RUSSELL & AVRITT, For Appellees,

CITED

15 B Mon. 80, Robinson v. Huffman and wife.

Act of 1868, sec. 7, 2 Session Acts, 1867-68.

OPINION

LINDSAY JUDGE:

B. S. Coffey, a few months before his death, insured his life for the sum of ten thousand dollars in the Kentucky Southern Mutual Life Insurance Company; also for the further sum of five thousand dollars in the St. Louis Mutual Life Insurance Company. The policies were made payable to his wife, Mrs. Elizabeth Coffey. He had previously taken out a life-policy for ten thousand dollars in the latter company, payable to his representatives. This policy he procured to be canceled, and another issued in its stead, payable to his wife. About the same time he procured another life-policy for the further sum of ten thousand dollars, which he caused to be made payable to his brother, Joseph Coffey. At the time this insurance was procured and the premiums thereon paid Coffey was greatly indebted, in fact was upon the verge of bankruptcy.

After his death his wife and brother compromised with the insurance companies, Mrs. Coffey receiving one half of the amounts of the policies made payable to her, and Joseph three thousand dollars on the policy payable to him.

Coffey's administrator instituted this suit to settle his estate in insolvency. The appellants, who were creditors of the intestate, made their joint answer a cross-petition against the widow and brother in whose favor his life had been insured, and asked to subject the amount received by them on account of such insurance to the payment of their claims. They alleged that the premiums were paid by Coffey out of his own means; that the provision attempted to be made for his wife was unreasonable in view of his insolvency and indebtedness; that the policy made payable to the brother was a mere gratuity; and that the application of funds which ought to have been paid upon their debts to such purposes was fraudulent as to them, they being antecedent creditors.

The appellees do not controvert the insolvency of Coffey at the time he procured the insurance, but deny all fraud in the transaction. Joseph claims that the policy in his favor was intended to secure the payment to him of certain indebtedness due from his brother, and to indemnify him as surety on debts due to certain of his other creditors. Mrs. Coffey denies, in general terms, that the premium on the ten thousand dollar policy in the Kentucky Southern Mutual Company was paid by her husband out of his means, but she offers no rational explanation as to the source from which it was paid.

The circuit court upon hearing this branch of the cause adjudged that Mrs. Coffey should account for the amount of the premiums paid on the policies in her favor, and should be allowed to retain the money collected from the insurance companies as her own; that the debts due to Joseph, and the debts upon which he was surety, should be satisfied out of the money collected by him, and the balance treated as assets of his brother's estate. From this judgment the creditors have appealed, and Mrs. Coffey and Joseph prosecute a cross-appeal.

From the pleadings and evidence it may safely be assumed that the premiums upon all the policies (except that taken out in the Kentucky Southern Mutual Company) were paid by the intestate out of his own means; and that the amount secured by these policies to Mrs. Coffey was intended to be, and was in law, a voluntary post-nuptial settlement. The change of the policy originally made payable to the husband's representatives, so as to vest the title thereto in the wife, was a voluntary gift or assignment of a portion of the husand's estate, and was void as to his antecedent creditors. (Revised Statutes, section 2, chapter 40; appeal of Elliott's executors, 50 Penn. 75; 1 Bigelow's Insurance Reports, page 672.) In failing so to adjudge the circuit court clearly erred.

The rights of Mrs. Coffey under the two policies originally made payable to her can not so easily be determined. The insurance was had and the intestate Coffey died in 1868, nearly two years before the passage of the act for the incorporation and regulation of life-insurance companies, approved March 12, 1870; hence the rights of the parties to this litigation are not affected by the provisions of that act.

These two policies were never held or owned by the husband. The wife did not receive them from him by conveyance, assignment, or transfer. The husband's creditors therefore can not reach the amounts realized on them, under the provisions of our statute declaring voluntary assignments, etc., void as to antecedent creditors, nor indeed under any statutory enactment. One of these policies was, however, purchased by the debtor with his own means, and to the extent of the amount paid for it his estate was disabled from paying his debts, and his creditors were injured.

In the case of Partridge v. Gopp it was held " that no man has such a power over his property as that he can dispose of it so as to defeat his creditors, unless for consideration." (Kent.) This doctrine is perhaps broader and more comprehensive than is warranted by any adjudication ever made by this court. Yet voluntary dispositions by a debtor of his estate, whether it is such as can be reached by execution or other legal process or not, is by the common law fraudulent as to existing creditors, unless such dispositions be in the way of reasonable and proper advancements to his children, or a settlement upon his wife which a clear sense of moral duty requires him to make. Such advancements or settlements, to be upheld against antecedent creditors, must be characterized by the utmost good faith. The motives of the father or husband must be pure, and in carrying out a design tolerated by the liberality of the law rather than justified by strict morality he must carefully abstain from any act tending to show a want of due...