York v. Flaherty

Sheldon, J. 1. It is not disputed that Mrs. Flaherty is entitled to hold the net proceeds of the $10,000 policy on the life of her late husband, or that subject to the statute of limitations she is liable to account to the plaintiff for the premiums which were paid thereon by her husband. R. L. c. 118,- § 73. St. 1907, c. 576, § 73. Bailey v. Wood, 202 Mass. 549. Bailey v. Wood, 202 Mass. 562. The master ruled that this liability was for the premiums paid within six years before the bringing of the suit; the plaintiff contends that his cause of action did not accrue until the death of Mr. Flaherty, and includes the premiums paid within six years before that event, being all the premiums which were found to have been paid in fraud of creditors. In our opinion, this contention is correct. These premiums by the terms of the statute are to inure to the benefit of the creditors “ from the proceeds of the policy,” and in no other way. The right to recover their amount cannot accrue until the maturity of the policy, which was to be upon Mr. Flaherty’s death. The stipulation for surrender values does not affect this, for that was conditional upon a surrender by the beneficiary, which never was made or required to be made. Blinn v. Dame, 207 Mass. 159. Wilde v. Wilde, 209 Mass. 205. But the statute of limitations begins to run only after the cause of action has accrued. R. L. c. 202. Accordingly it has been held in Alabama that a cause of action like this arises and becomes fixed upon the death of the person insured. Lehman v. Gunn, 124 Ala. 213. No action could have been maintained by a creditor of Mr. Flaherty at the time of the payment of any premium, either against the company (Central Bank of Washington v. Hume, 128 U. S. 195) or any one else, for there could be then no proceeds of the policy. There is nothing to the contrary of this in Troy v. Sargent, 132 Mass. 408. [41] There was, if there could have been, no fraudulent concealment in the meantime of the cause of action. E. L. c. 202, § 11. The master has not found such a concealment by any one; upon the facts reported, we cannot make such a finding, even as to Mr. Flaherty, under the rule stated in Knowles v. Knowles, 205 Mass. 290, 294. We need not consider whether the rights of Mrs. Flaherty would have been affected by such conduct on the part of her husband. 2. We need not determine whether the loan made to Mr. Flaherty by the insurance company should be treated as merely a loan to him secured by a pledge of the property of his wife, or as an advance payment of a part of the amount to become due under the policy and operating to reduce that amount pro tanto, and so as made in legal effect to the wife, to whom the policy was payable and who joined in signing the note. However this may be, full premiums, lessened only by the right to share- in the surplus funds of the company, were in fact paid both before and after the loan was made; and the statute is express that these payments shall inure to the benefit of the husband’s creditors. It is immaterial whether Mrs. Flaherty, having paid the loan out of the proceeds of the policy after her husband’s death, has a claim for indemnity against his insolvent estate, under the rule of Brown v. Bixby, 190 Mass. 69, and cases there cited. She has chosen to claim the benefit of the statute which gives to her the proceeds of the policy at the expense of his creditors; she must bear the burden which the same statute puts upon her by accounting to them for the amount of the premiums which were paid in fraud of their rights. As was said by the plaintiff in his brief, it would frustrate the purpose of the statute to allow her to diminish this amount by deducting therefrom the amount of this loan, or even by reducing it in proportion to the amount of the loan as compared with the total amount of the policy. It follows that as to this part of the case the plaintiff is entitled to recover from Mrs. Flaherty the sum of $1,513.10, instead of the smaller sum of $1,255.10, with interest. 3. There was a sufficient transfer of the $5,000 policy to Mr. Flaherty’s second wife and son, although it was not known to them until after his death. This transaction was not in form an assignment, although its effect was the same and in its legal [42] operation it was tantamount to an assignment. Bailey v. Wood, 202 Mass. 562, 573. It was effected by an amendment or alteration of the terms of the policy made by the insurance company at the request of the person insured, these being then the only parties in any way interested in the contract of insurance. This made the terms of the policy such that $4,000 were to be paid on the death of the insured to his second wife, and $1,000 to his son. It thus stood as if the policy originally had been made payable to them. No consent on their part was required. The validity of a policy of life insurance made payable to the wife or child of the insured does not depend upon their consent to the provision when originally made. Derome v. Vose, 140 Mass. 575. Johnson v. Alexander, 125 Ind. 575. No such requirement was made in the statute. R. L. c. 118, § 73. The case is not within the decisions in which it has been held that a gift is incomplete and invalid unless there has been something equivalent to a delivery and acceptance. We need not consider whether it is open to the plaintiff upon the pleadings to contend that the gift of the policy was incomplete and ineffectual; for such a contention could not be sustained. 4. It remains true, however, that this policy was not originally effected in-favor of either of these beneficiaries, but has only since been made payable to them by a transaction which was in fraud of Mr. Flaherty’s creditors. Matthews v. Thompson, 186 Mass. 14. Such a transfer made to a wife cannot itself be avoided by creditors; made to a son, it can be. Bailey v. Wood, 202 Mass. 562. And it seems plain that the transfer to the wife of a stated part of the amount of the policy cannot be avoided by creditors any more than could have been done if the whole amount had been payable to her. But the plaintiff, being entitled to avoid the transfer to the son, can hold the $1,000 made payable to him. As the insurance company has retained this sum, the plaintiff is entitled to a decree therefor against the company. 5. The master has charged the insurance company with interest on this sum. If the company had retained the money merely in consequence of the demand of the creditors in this suit and of these proceedings by them or in their behalf, and was not shown to have realized any interest thereon, it ought not to have [43] been charged with such interest. Norris v. Massachusetts Mutual Life Ins. Co. 131 Mass. 294, 296. But no such facts have been found, nor have findings as to these questions been asked for by the company. It has made no objection to this charge of interest ; and of course no other defendant can raise the question. We must as to this follow the master’s report. 6. The transfer to the wife cannot be avoided by reason of the representations and assurances made by Mr. Flaherty to some of his creditors. The master has found that there was no assignment legal or equitable of any insurance as security and no trust created for the benefit of these creditors or of his creditors generally'. For that reason such cases as Clark v. Flint, 22 Pick. 231, are inapplicable. 7. No premiums were paid on the $5,000 policy after its transfer, and we do not think that it can be said that any premiums paid before that time were paid in fraud of the creditors of the insured. When these were paid, after the death of his first wife, he alone had the beneficial interest in the policy, and the creditors suffered no prejudice. It was not found, and we do not see that it ought to have been found, that he made any of these payments with the intention of transferring afterwards to his second wife, or to any one else, the fund which should be created or increased by these payments. If this had been the case, a different question would be presented. The fund itself, but for the provisions of the statute, could have been appropriated by the creditors; so far as it was made payable to the son of the insured it is now to be given to them. We cannot give them also the premiums which were not paid in fraud of their rights ; and we need not discuss the questions which have been argued as to any apportionment of these premiums. 8. The estate of Mr. Flaherty having been found to be insolvent, the plaintiff is the proper person to bring and maintain this bill. Wall v. Provident Institution for Savings, 6 Allen, 320. Parker v. Magg, 127 Mass. 28. Putney v. Fletcher, 148 Mass. 247. The plaintiff is to have a decree against the defendant insurance company for $1,000 with interest as found by the master and with further interest until the entry of the final decree, and against the defendant Mabel E. Flaherty for $1,513.10 with [44] interest of $360.61 to July 25, 1907, the date of bringing suit, and with further interest to the date of the final decree. He should have costs against all the defendants. So ordered.