Swayne v. Chase

• Decision Date: 06 May 1895
• Citation: 30 S.W. 1049
• Parties: SWAYNE v. CHASE et al.
• Court: Texas Supreme Court

30 S.W. 1049

SWAYNE v. CHASE et al.

Supreme Court of Texas.

May 6, 1895.

Error to court of civil appeals, Second supreme judicial district.

Upon a judgment in an action by John F. Swayne against E. E. Chase and others, plaintiff summoned as garnishee the Phoenix Insurance Company, and defendants in the action became interveners in the garnishment proceedings. From a judgment of the court of civil appeals (29 S. W. 418) reversing a judgment in their favor, the interveners bring error. Reversed.

John W. Wray, for plaintiffs in error. Samuels & Hendricks and Morgan & Thompson, for defendant in error.

BROWN, J.

Plaintiffs in error were husband and wife, and occupied and owned a homestead in the city of Ft. Worth, upon which was their residence, and which they insured in various insurance companies to the amount of $60,000. The property was destroyed by fire. One of the policies on Chase's house was issued by the Phoenix Insurance Company. Chase was indebted to John F. Swayne in the sum of $22,000, upon which judgment had been rendered. Swayne sued out a writ of garnishment against the Phoenix Insurance Company, which answered, setting up the facts, admitting the indebtedness to Chase upon the policy, and stating that it was for insurance upon his homestead. Chase and wife intervened, claiming that the money due upon the policy was exempt, because it was the proceeds of a policy of insurance upon their homestead. Swayne replied to the plea of intervention that Chase, being indebted in the sum of $300,000, and being insolvent and in contemplation of his insolvency, with the intent to defraud his creditors, and especially the plaintiff, invested in the improvements upon his homestead (that which was insured, and for which the money was claimed from the insurance company) the sum of $125,000, with the purpose of withdrawing and abstracting from his assets an unnecessary and unreasonable amount, thereby placing the same beyond the reach of his creditors, especially the plaintiff; that Chase had procured policies of insurance upon his residence from various insurance companies to the aggregate amount of $60,000; and that, after paying plaintiff's debt, there would remain $35,000 or $40,000, — a sum more than sufficient to erect a dwelling in the place of the one destroyed, the sum of $5,000 being alleged to be a reasonable amount for that purpose. To this supplemental petition the district court sustained a demurrer, and upon trial gave judgment for the interveners. The court of civil appeals reversed the judgment of the district court, holding that all of the insurance money over and above a reasonable sum for rebuilding the residence should be subjected to the payment of the debts of the interveners.

The following questions arise upon the presentation of this case: (1) Was the investment made in the house for which the insurance is claimed, deprived of the exemption under the constitution by the alleged fraud of the plaintiff in error E. E. Chase? (2) If the property itself was exempt from forced sale under the constitution, is the insurance money derived from the policy thereon likewise exempt under the constitution? (3) Can the court limit the amount of the insurance money to which the plaintiffs in error are entitled as being exempt to what may be considered a reasonable sum to be invested in another residence?

The first question is definitely settled against the contention of the defendant in error by the case of North v. Shearn, 15 Tex. 175, wherein the plaintiff sought to subject the homestead of the defendant, upon the ground that, when he contracted the debt, he was a single man, and set about erecting the homestead improvement with the material for which he contracted the debt, with a knowledge of his inability to pay the debt, and that he married and acquired his homestead in fraud of his creditors. The court held in that case that the evidence was not admissible. That case was stronger in favor of the creditor than the present case, in this: the debt was contracted for the material with which the improvements were made, and, when sold to defendant, he was a single man. In this case it is not claimed that the money invested by Chase was acquired from plaintiff, or that it was acquired from any one in such manner as to show that it was the intent at the time to put it beyond the reach of creditors. Chase was at the time a married man, and all parties who dealt with him must take notice of the law upon the subject of exemptions. Meigs v. Dibble, 73 Mich. 101, 40 N. W. 935. The allegations of the supplemental petition amount, in substance, to a charge that Chase, being largely indebted, insolvent, and the head of a family, invested in his homestead improvements a large amount of his funds, with the intent to defraud his creditors by placing the same beyond the reach of the law. The proposition in effect is that an insolvent debtor cannot invest his money or property in a homestead by which it will be protected from the payment of his debts. The object of the constitutional provision is to protect the homes of insolvent debtors from forced sale, and, if the contention of plaintiff be correct, only such as become insolvent after the investment is made can be protected. While it is true that the amount alleged to have been invested in the homestead by Chase is large, the constitution places no limit on the value of such improvements which are permitted to be made. The amount invested does not change the principle involved, for, if it be a fraud to invest a large amount for such purposes and under such circumstances, it is equally a fraud to so invest for like purposes a smaller amount. There might be a state of facts under which such investment would not be protected, as in the case of Shepherd v. White, 11 Tex. 346, where the property purchased as a homestead was paid for by another, so that a resulting trust existed, or if the property invested had been acquired by fraud, so that the title thereto did not pass by the sale. But the allegations in the supplemental petition present no such case. The demurrer was properly sustained to the supplemental petition.

The second question has likewise been decided in favor of the plaintiffs in error in the case of Cameron v. Fay, 55 Tex. 58, in which it was held that the money due from an insurance company upon a policy of insurance issued upon the homestead is not subject to garnishment at the suit of a creditor. That decision is vigorously attacked and severely criticised, but, whatever may be said of it, an examination of the authorities will show that it is abundantly supported by the decisions of the ablest courts in the Union, and opposed by but few. The following cases support the doctrine of this court upon the question at issue: Bernheim v. Davitt (Ky.) 5 S. W. 193; Mulliken v. Winter, 2 Duv. 257; Reynolds v. Haines (Iowa) 49 N. W. 851; Houghton v. Lee, 50 Cal. 101; Cooney v Cooney, 65 Barb. 524; Tillotson v. Wolcott, 48 N. Y. 188; Wyman v. Wyman, 26 N. Y. 253; Leavitt v. Metcalf, 2 Vt. 342; Stebbins v. Peeler, 29 Vt. 289; Culbertson v. Cox, 29 Minn. 309, 13 N. W. 177; Probst v. Scott, 31 Ark. 652; Mudge v. Lanning, 68 Iowa, 641, 27 N. W. 793; Kaiser v. Seaton, 62 Iowa, 463, 17 N. W. 664. We have been able to find no case holding the contrary doctrine except those cited by the court of civil appeals and counsel for the defendant in error, which are Monniea v. Insurance Co. 12 Ill. App. 240 (decided by the appellate court of Illinois upon a statute which in terms excluded from exemption debts due from corporations), Wooster v. Page, 54 N. H. 125, and Smith v. Ratcliff, 66 Miss. 683, 6 South. 460. The last two are in point, and directly opposed to the majority of the courts upon the question. There is in the case of Cameron v. Fay an apparent inconsistency in holding that Cameron, who had a material man's lien upon the buildings insured and the lots on which they stood, had no right to have the proceeds of the insurance policy upon those buildings applied to the discharge of his lien, and at the same time holding that the proceeds of the policy was so far impressed with the character of the property insured as to exempt the money due thereon from the payment of the debts of the policy holder, because the property insured was exempt. This inconsistency upon the same questions exists in the decisions of many other states, but it is the more obvious in that case because both questions were decided in the same cause. In disposing of the rights of the lienholder in Cameron v. Fay, the court said: "The policy is strictly a personal contract. It does not attach to the mortgage or the realty." This is a quotation from Jones on Mortgages, and is a succinct statement of the reasoning of the cases upon that question. We do not intend to enter upon a discussion of that proposition, for it is not involved in this case. It does not necessarily follow, however, that, because a court adopt a rule established by a line of decisions upon a given question, it must therefore carry that rule to its logical results by applying it to all cases upon the same character of contracts, where the parties occupy different relations to the subject and to each other. An instance of this occurs in the adjudications of the courts upon insurance policies, where the question involved is whether the heir or administrator is entitled to the proceeds of a policy upon a house. In those states in which the administrator takes the personal property and the heir takes the land of the intestate, the courts hold that, upon the death of the holder of a policy of insurance on a house situate on land belonging to him, if, by the policy, the right to the money passes to the heir or administrator upon such debt, the person to whom the land descends or is devised takes the policy of insurance. In other words, the policy passes with the land to whomsoever the title to the land passes. Culberson v. Cox...