Duffy v. Insurance Co.

The opinion of the Court was delivered by Kennedy, J. The evidence mentioned in the several bills of exception which was rejected by the court, could have had no weight in the determination of the cause by the jury, if it had been received, and therefore may well be regarded as wholly immaterial and insufficient to produce a reversal of the judgment. Several points were made and discussed on the trial of the cause in the court below, but all may be included and considered in the question whether the arrangement made by Potter and his wife first with the Girard Life Insurance Annuity and Trust Company of Philadelphia, and afterwards with the Mechanics’ and Tradesmen’s Insurance Company of Philadelphia as a third party, was binding upon the parties and valid against the creditors of Mr Potter. By this arrangement a certain portion of the real estate which Potter became possessed of in right of his wife after marriage, was settled upon her for her separate use. It is objected by the creditors of Potter that according to the rules of the common law he could not make such an arrangement with his wife after marriage; and even if he could, it was made without consideration, and therefore void as against them. It is doubtless true that there must be always two parties at least to a contract, and hence a man cannot make a contract with himself, or in other words with his wife, as she is generally considered the same as himself, or both as but one person in law. Her being or legal existence as a distinct person is suspended during the marriage, or at least is incorporated and consolidated with that of her husband. And upon this principle of the union of person in husband and wife, depend all the legal rights, duties and disabilities, which either of them acquires by or during the marriage. For this reason it may be said a man cannot grant anything to his wife or enter into a covenant with her; for the grant would be to suppose her to possess a separate and distinct existence. And therefore it is also generally true that contracts made between husband and wife when single are avoided by the intermarriage. Story’s Equity pl. 1367. But in courts of equity, although husband and wife are regarded as one person in proper cases, yet they are not considered so in every case. On the contrary, courts of equity in England, and here in Pennsylvania, where we have no courts of equity [433] regularly organized as such, courts of law, for many purposes, treat the husband and wife, as the civil law treats them, as distinct persons, capable, in a limited sense, of contracting with each other, of suing each other, and of having separate estates, debts and interests. Arundell v. Phipps, (10 Vez. 144, 149); Story’s Equity pl. 1368. Accordingly it was ruled by this court that a wife might acquire a separate property in equity by an agreement with her husband, even without the intervention of trustees M’Kennan v. Phillips, (6 Whart. 571). And for want of a court of chancery in Pennsylvania to compel a husband to convey to a trustee for the separate use and benefit of his wife, where a court of equity would interpose for that purpose, the courts of law will consider him a trustee, so that the wife shall have all the benefit she would be entitled to claim and receive, the same as if the property were vested in a trustee for her separate use. Jamison v. Brady, (6 Serg. & Rawle 467). Hence a bequest to the wife for her separate use cannot be set-off by the husband, I take it, without her consent, against a debt due by him to the testator’s estate; and it was held that in an action by the husband and wife for the recovery of the legacy, the debt owing by the husband to the estate of the testator could not be set-off so as to defeat the payment of the legacy for the separate use of the wife. Jamison v. Brady, (6 Serg. & Rawle 467). So post-nuptial contracts between husband and wife, though declared void at law, have been held good and carried into effect by a court of equity. For example, where a wife having a separate estate, entered into a contract with her husband to make him a certain allowance out of the income of such separate estate for a reasonable consideration, the contract, although void at law, was held obligatory and was enforced in equity. More v. Freeman, (Bunb. 205). So if the husband shall after marriage for good reasons contract with his wife that she shall separately possess and enjoy property bequeathed to her, the contract will be upheld in a court of equity. See Harvey v. Harvey, (1 P. Wms. 125-6); S. C. (2 Vern. 659, 660), and Mr Raithby’s note. So a wife may become a creditor of her husband by acts and contracts during marriage; and her rights as such will be enforced against him and his representatives. As for instance, if a wife unite with her husband to pledge her estate or otherwise to raise money out of it to pay his debts or meet any other occasion for his accommodation, whatever may be the mode or form adopted to carry such purpose into effect, the transaction will in equity be treated according to the true intent of the parties. See Tate v. Austin, (1 P. Wms. 264), Mr Cox’s note thereto; S. C. (2 Vern. 689), and Mr Raithby’s note: also Pawlet v. Delaval, (2 Vez., Sen., 663, 669); from which it appears that this doctrine is settled and clearly established; and likewise recognised as being so by Mr Justice Stoky in his Equity Jurisprudence, pl. 1373. The [434] principle contained in it most clearly embraces the case under consideration, and the only objection made to the application of the principle, if it does exist, is that the husband’s indebtedness at the time he made the arrangement here with his wife, put it out of his power to make it available against his creditors, unless he had received a full and adequate consideration for doing so. But it is said that the provision made for his wife by it was voluntary and without consideration, and therefore must be deemed fraudulent in law as against his creditors. If this were true, that is, that it was made without a valuable consideration, the conclusion might be correct; but it is perfectly manifest that a most valuable consideration was received by the husband from his wife for all that was given by him in trust for her separate use and benefit; but this is not all: for what would seem to render the arrangement still more firmly binding if possible, upon the creditors is that the whole of the consideration so far as received by Mr Potter the husband on the credit of his wife’s estate, amounting to $12,000 received by her consent, without which he could not possibly have received it, was, with the exception of about $700 or $800, actually applied to the payment of his debts and received by his creditors towards liquidating their claims against him; and the further sum of $5509.25, the residue of the consideration, to be raised by the trustees out of the same estate with interest thereon from the date of the deed, was also to be applied to the payment of other debts therein specifically mentioned. Mr Potter, the husband, had but a life-estate, at most, in the property out of which the $17,500 were to be raised with interest thereon, upon which, for aught that appears to the contrary, he could not, at most, probably have raised $1000. His wife, however, had the fee-simple therein, and the property being in an unproductive state, of but little annual value, and such as money to any considerable amount could only be raised from by disposing of the fee-simple estate therein, it became necessary, if his creditors or any portion of them were to be paid at all, that he should get by some means or other his wife to join him in disposing of her right to some part of the estate in addition to all his own right therein. With a view to raise money for this purpose, which was certainly a most laudable one, Mrs Potter joined with her husband in giving up her right to the fee-simple in the whole of the estate to raise out of the same the $17,509.25 with interest thereon, in consideration that the residue of the proceeds of the whole estate which was to be sold and disposed of, after defraying all the expenses and charges attending the execution of the trust, should be held by the trustees for her immediate and separate use and benefit as therein directed. Here there was a giving up by the wife of her right to the fee-simple in part of the estate which she alone had the right to dispose of as the owner thereof, in consideration of [435] which the husband granted his right to the immediate possession of the residue thereof to trustees for the separate use and benefit of his wife. The right to the fee-simple in the estate may well be regarded as the separate estate of the wife in a limited or qualified point of view; for without her consent and act it could not be disposed of or even encumbered by her husband or any other person. , This being the case, why then was it not competent for her to purchase with her interest in a part of the estate the interest of her husband in the whole of it, her interest being greatly more valuable than his 1 The reasoning of the Lord Chancellor and all that he says on the subject in Lady Arundell v. Phipps & Taunton, (10 Vez. 149), is in support of the proposition that a wife with her separate estate may purchase from her husband, and the purchased interest will be protected even against creditors, if the transaction between the husband and wife be bond fide. And the conclusion to which Mr Roper comes from á view of the cases on this subject in his treatise on the law of property arising from the relation between husband and wife, vol. 1, page 324, is, that “ the giving up of any valuable interest by her in consideration of the settlement after marriage, will support it against creditors and subsequent purchasers, because such a settlement does not class among those that are voluntary, but among such as are made for a valuable consideration; in fact the wife herself becomes a purchaser for herself and family.” That the wife gave up a valuable interest in the present case over which her husband had no control, cannot be questioned. And it must be presumed too that it was of sufficient value, at least, to prevent all presumption of collusion or fraud being raised from its inadequacy to the value of what was settled upon her by the husband; for no evidence was offered by the plaintiff on the trial, as it would appear, to prove the contrary. Neither does it appear that collusion or fraud in fact was alleged or even pretended to have been intended by the parties in the transaction against the creditors of the husband. The consideration given by the wife for all that was settled upon her by the husband, which could with the least propriety be said to belong to him exclusively, must therefore be taken to be amply sufficient to support the provision in favour of the wife. And indeed the consideration in such cases will never be weighed in very nice scales, if the transaction otherwise appears to be honest. Middlecome v. Marlow, (2 Atk. 520); Nunn v. Wilsmore, (8 T. R. 529); or unless it be proved that the settlement vastly exceeded the consideration, so that from the inadequacy a collusion or fraud may be fairly inferred to have been intended on the creditors. Per Lord Hardwicke in Ward v. Shallet, (2 Vez., Sen., 18). From the view thus taken of this case it will be seen that a different decision of the court below in regard to the admissipn or rejection of the evidence mentioned in the several bills of excep [436] tion, would not have varied materially the true character of the case, and that the ultimate decision of it ought still to have been the same. The judgment is therefore affirmed. Judgment affirmed.