Pearsall v. . Bloodworth

BrogdeN, J. Is the change of beneficiary from his estate to his wife, made by an insolvent husband, in an ordinary policy of life insurance providing for a change of beneficiary at the option of the insured, valid and effectual against creditors of such insolvent? The question of the validity of the assignment of a policy of life insurance when the insured is insolvent was considered by this Court in Burton v. Farinholt, 86 N. C., 260. The Court held that a life insurance policy was a chose in action and became an integral part of the estate of the insolvent immediately upon the delivery of the policy, and therefore a voluntary assignment of the same was void as against creditors. The principle is thus expressed in the opinion: “Being indebted to a state of clear insolvency at the time of its voluntary assignment to his daughters, his act was fraudulent as to his creditors and void in law, whether made with an intent actually fraudulent or not. From the fact that he was at the time insolvent, and that his transfer to his daughters was without a valuable consideration, it results, as a conclusion of law, that the assignment was void as to his creditors. ... If taken directly in their names and for their benefit, it would have been, ab initio, their property, and would never have constituted a part of their father’s estate, upon the faith of which he could, and perhaps did, obtain credit, and that is the test.” There is a well recognized distinction in law between the assignment of a policy and a change of beneficiary, certainly where the policy itself delegates the power to change the beneficiary at the option of the insured. Thus in Joyce on the Law of Insurance, 2 ed., Vol. 4, sec. 2327a, the author says: “A distinction is made between an assignment and a change of beneficiary in that an assignment is the transfer by one of his rights or interest in the property, rests upon contract and gener *632 ally requires the delivery of the thing assigned, while the right to change the beneficiary is the power to appoint which must be exercised in the manner specified in the contract.” Mutual Benefit Life Ins. Co. v. Swett, 222 Fed., p. 200, Ann. Gas., 1917 B, 298. The Supreme Judicial Court of Massachusetts considered the question in Bailey v. Wood, 202 Mass., 562. The Court declared that: “In the absence of any statute we think the prevailing opinion in the States is that where a policy of insurance is originally taken out in the husband’s name and payable to his estate, a voluntary assignment, when insolvent, by him to his wife is void as to his creditors.” A number of authorities are cited in support of this utterance, including Burton v. Farinholt, supra. If the test is the right of a creditor to rely upon the policy as a basis of credit as suggested in the Burton case, then there might be a practical difference between an assignment and a change of beneficiary, because if a policy of insurance contains a provision permitting the insured to change the beneficiary at his option, it would seem clear that a creditor could not rely upon such a contract as a basis of credit. As'to whether there is any difference between an assignment and change of beneficiary we do not decide, because, in our opinion, it is unnecessary to do so in the present case. There is a statute in this State which determines the rights of the parties to this controversy. C. S., 6464, provides in part: “Every policy of life insurance made payable to or for the benefit of a married woman, or after its issue assigned, transferred, or in any way made payable to a married woman, or to any person in trust for her or for her benefit, whether procured by herself, her husband, or by any other person, and whether the assignment or transfer is made by her husband or by any other person, inures to her separate use and benefit and to that of her children, if she dies in his lifetime.” Under the plain provision of this statute it is entirely immaterial whether the wife becomes entitled to the «.proceeds through assignment or by mere change of beneficiary. The words of the statute “or in any way made payable to a married woman” are broad and comprehensive, and necessarily cover both methods of vesting in her the title to the proceeds of the insurance. C. S., 6464 was originally chapter 54, section 59, Public Laws 1899. The statute was passed several years after the decision in the Burton case and is controlling upon the question presented in the case at bar. The construction which we have placed upon the statute is in accordance with the principle announced in Bailey v. Wood, supra. The statute under consideration in Bailey v. Wood is very similar to our own. The Massachusetts Court, in holding that the wife would be entitled to the proceeds of insurance assigned by an insolvent, husband, *633 states its conclusion thus: “There is a marked distinction, therefore, as to the right of a wife under this statute and the right of any other beneficiary. The right of the wife extends not only to policies expressed for her benefit when issued, but also to those which, after issue, are assigned or in any way made payable to her for her benefit, while the right of any other beneficiary is confined to policies expressed at the time of'their issue to be for his benefit.” The case of Bailey v. Wood has been cited with approval in many later cases, some of them being Eldredge v. Ins. Co., 105 N. E., 361; Tyler v. Treasurer and Receiver General, 115 N. E., 300; In re Simmons v. Griffin, 255 Fed., 521. We, therefore, hold, upon the facts presented, that the judgment pronounced in this case was erroneous, and the same is Beversed.