United States Mortg. & Trust Co. v. Ruggles

Decision Date05 January 1932
Citation258 N.Y. 32,179 N.E. 250
CourtNew York Court of Appeals Court of Appeals


Action by the United States Mortgage & Trust Company, as administrator with the will annexed of Edwin D. Ruggles, deceased, against Mary B. Ruggles and another. Judgment of Special Term in favor of plaintiff (137 Misc. Rep. 895, 244 N. Y. S. 56) was reversed as a matter of law by the Appellate Division (232 App. Div. 9, 248 N. Y. S. 525), and the complaint dismissed, and plaintiff appeals.


See, also, 224 App. Div. 504, 231 N. Y. S. 100.Appeal from Supreme Court, Appellate Division, First department.

Carroll G. Walter and Edward J. Patterson, both of New York City, for appellant.

Hiram Thomas and Edward A. Craighill, Jr., both of New York City, for respondent Mary B. Ruggles.

Edwin F. Valentine, of New York City, for respondent Northwestern Mut. Life Ins. Co.

Charles A. Riegelman and Harry F. Mela, both of New York City, for Fidelity & Deposit Co. of Maryland, amicus curiae.


Plaintiff, as administrator of the will annexed of Edwin D. Ruggles, deceased, sues the widow of decedent and the defendant insurance company, pursuant to section 52 of the Domestic Relations Law (Consol. Laws, c. 14), to recover for the benefit of the creditors of decedent such portion of the proceeds of insurance policies on the life of the husband, payable to the wife, as was purchased by annual premiums paid out by the husband in excess of $500 per annum. The amount demanded is upwards of $60,000.

The policies are in two groups, one issued by the Northwestern Mutual Life Insurance Company; the other by AEtna Life Insurance Company. The policies issued by the Northwestern Mutual Life Insurance Company were obtained in Ohio, where insured and his wife then resided, and the first premiums were paid there. They were payable at the company's home office in Wisconsin. The AEtna policies were also issued in Ohio, and were payable at the company's home office in Connecticut. Under the laws of Ohio, premium payments, not actually in fraud of creditors, are wholly beyond the reach of creditors.

Ruggles and his wife later changed their residence from Ohio to New York, where they remained until he died. Five $10,000 AEtna policies were, after they came to New York, split up for convenience into ten $5,000 policies, not by novation nor by a change in the original contract, but by a mere division of the original insurance into smaller policies. The same is true of the Northwestern policies. A change of beneficiary was made, as the policies permitted, but no new contract of insurance was made. The place of contracting was where the policies were delivered to assured. Northwestern Mut. Life Ins. Co. v. McCue, 223 U. S. 234, 32 S. Ct. 220, 56 L. Ed. 419,38 L. R. A. (N. S.) 57. The contracts of insurance were made in the state of Ohio, and are, therefore, Ohio contracts (Dannhauser v. Wallenstein, 169 N. Y. 199, 62 N. E. 160;AEtna Life Ins. Co. v. Dunken, 266 U. S. 389, 45 S. Ct. 129, 69 L. Ed. 342), and not new contracts as in Gans v. AEtna Life Ins. Co. of Hartford, Conn., 214 N. Y. 326, 108 N. E. 443, L. R. A. 1915F, 703. The laws of Ohio govern the rights created by the policies (Central Nat. Bank of Washington v. Hume, 128 U. S. 195, 9 S. Ct. 41, 32 L. Ed. 370) in matters bearing upon the capacity of the parties to contract and upon the execution, the interpretation and the validity thereof. (Scudder v. Union Nat. Bank, 91 U. S. 406, 23 L. Ed. 245.)

Section 52 of the Domestic Relations Law provides: Insurance of Husband's Life.-A married woman may, in her own name, or in the name of a third person, with his consent, as her trustee, cause the life of her husband to be insured for a definite period, or for the term of his natural life. Where a married woman survives such period or term she is entitled to receive the insurance money, payable by the terms of the policy, as her separate property, and free from any claim of a creditor or representative of her husband, except, that where the premium actually paid annually out of the husband's property exceeds five hundred dollars, that portion of the insurance money which is purchased by excess of premium above five hundred dollars, is primarily liable for the husband's debts.’

The exception in this section was repealed by implication by section 55-a of the Insurance Law (Laws of 1927, c. 468, in effect March 31, 1927; Consol. Laws, c. 28). The rights of creditors in the proceeds of such policies are now confined to the amount of the premiums which may have been paid by the insured in fraud of his creditors. Chatham Phenix Nat. Bank & Trust Co. v. Crosney, 251 N. Y. 189, 167 N. E. 217. Insured died March 13, 1926, prior to the enactment of section 55-a. The rights of the plaintiff were not affected by the repeal, as nothing indicates that it was the intention of the Legislature to prejudice the rights of creditors in the proceeds of policies due or paid prior to the new enactment (Hollenbach v. Born, 238 N. Y. 34, 143 N. E. 782), and, if such was the intention, the Constitution would frustrate it (Bank of Minden v. Clement, 256 U. S. 126, 41 S. Ct. 408, 65 L. Ed. 857).

Judge Lehman in the Crosney Case has indicated how the statute, which had its origin in Laws of 1840, c. 80, prior to the Married Women's Acts of 1848, ‘intended to create rights in a wife, under changed conditions, resulted in creditors having rights against a wife which they would not otherwise possess.’ Chatham Phenix Nat. Bank & Trust Co. v. Crosney, supra, page 194 of 251 N. Y., 167 N. E. 217, 218. Once an extension of the right to contract, it became a limitation thereon. The common law saw difficulties in the way of procuring insurance on the life of the husband. The statute granted that right for the benefit of the wife, with regard, however, to the conflicting rights of wife and creditors. Without the statute, the insurance money payable to the wife might not, in the year 1840, have been kept from the creditors. At least it would seem that on some such theory the remedial statute was passed. Barry v. Equitable Life Assur. Soc. of United States, 59 N. Y. 587, 593.

The Legislature has at length remedied this anomalous survival of the common law of married women by giving the wife the same rights to enforce contracts with insurancecompanies for insurance on her husband's life as she has to enforce her contracts generally. Domestic Relations Law, § 51. No policy of the forum is offended which might subject the proceeds of foreign policies to the state law or regulate the enforcement of rights against the proceeds of policies in the hands of the beneficiary. Straus & Co. v. Canadian Pac. Ry. Co., 254 N. Y. 407, 414, 173 N. E. 564;Bond v. Hume, 243 U. S. 15, 21, 22, 37 S. Ct. 366, 61 L. Ed. 565;Bothwell v. Buckbee, Mears & Co., 275 U. S. 274, 48 S. Ct. 124, 72 L. Ed. 277. Comity and good morals alike permit the widow to enforce and maintain in New York her contractual rights, valid where created, as freely as if she were single. She comes under the rule which provides that, in the absence of fraud or a statutory provision to the contrary affecting the contract, any life insurance effected in favor of...

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