
    The Travelers’ Insurance Company, Respondent, v. Ann Healey and Others, Appellants.
    
      Life iiisurance—policy payable to the insured’s wife or children, with the right reserved to the insured to convert it into cash chapter 248 of 1879 does not apply to an assignment of the husband’s interest — such an assignment is valid although not in writing nor made with the consent of the insured’s wife or children — action of interpleader.
    
    Where a policy of life insurance, payable at the death of the insured to his wife, or, in'case she is then dead, to their children, and if neither wife nor children survive the insured, then to the insured’s executors, administrators or assigns, provides that, after the payment of ten annual premiums, the policy may be converted into cash “at the option of the holder, at any time after the expiration of' fifteen years from the date hereof, for the amount indorsed upon the back of this policy,” the contingent interests of the wife and children of the insured, under the policy,.are subject to the insured’s right to exercise his option to convert the policy into cash, and thus become the sole beneficiary thereunder.
    The provisions of chapter 248 of the Laws of 1879, providing that policies of life insurance issued “upon the lives of husbands for the benefit and use of their wives ” shall be “assignable by said wife, with the written consent of the husband,” do not require the written consent of the wife to a transfer by the husband of his interest, arising out of his option to convert the policy into cash. '
    An assignment by the husband — certainly if it be a pledge thereof to secure a debt — need not be in writing, although the policy provides that “no assignment of this policy shall be valid unless made in writing indorsed hereon; ” and if made without the consent of the insured’s wife or children it is valid, and confers upon the assignee, who takes it as collateral security, the right to exercise the option given to the insured.
    Whether the transfer by the husband be by absolute sale or pledge is immaterial, as between the transferee and the wife and children of the husband-—in a case in which the claim of the transferee is in excess Of the endowment value of the policy.
    The insurance company may, during the lifetime of the insured and his wife and certain of their children, and after a time has arrived at which the option to convert the policy into cash can' be exercised, maintain an action of interpleader, making parties defendant the assignee of the husband, and subsequent assignees of the wife, with the written consent of the husband, and the children of the insured and his wife, to determine their interests under the policy.
    Appeal by the defendants, Ann Healey and others, from, a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the comity of Rensselaer on the 17th day of August, 1897, upon thé decision of the court rendered after a trial at the Rensselaer Special Term.
    The parties, defendant in this action were Ann Healey, to whom the insured delivered the policy in question as collateral security for a debt, Samuel • A. Peterson and G-eorge A. Packer, to whom the ■wife of the insured, with the consent of the insured, subsequently assigned her interest in the policy, and Starks A. Doty and Carrie E. Doty, who are children of the insured and his wife.
    The facts in this case are stated in Judge Chester’s opinion and also in the former report of.the case (86 Hun, 521).
    
      
      William L. Learned, for the infant appellants.
    
      George R. Donnan, for Peterson & Packer, appellants.
    
      George H. Mallory, for Ann Healey, appellant..
    Patterson, Bulkeley & Van Kirk, for the respondent.
    
      
       The following is the opinion referred to :
      Chester, J. :
      This action has been tried once before and resulted in a judgment that the action was properly brought; that the defendants, Ann Healey, Starks A. Doty and Carrie E. Doty, had no interest in. the policy sued upon ; that the firm of Peterson & Packer were the holders of the policy and entitled to the moneys, payable thereunder "whenever they should elect to exercise the option thereby given to the holder to convert the policy into cash under the terms thereof. (Travelers’ Ins, Gó. v. Healey, 28 N. Y. Supp. 478.)
      An appeal was taken from this judgment tó the General Term, which resulted in a reversal and the granting of a new trial. (Ibid., 86-Hun, 524.)
      The action is one of interpleader and to determine conflicting claims to the policy and the' moneys payable thereunder.
      If the question of the right to maintain the action was presented as a new proposition I should be inclined to say that the complaint should be dismissed on the grounds that these defendants are not here claiming the same thing, and that it is. not now possible to determine the rights of the parties because the future cannot be foretold, and the court should not be called upon to adjudicate upon rights and interests which will depend upon the order in which the deaths of the several beneficiaries under the policy may occur, or upon the question of survivorship among them.
      There has been some controversy on this trial as to how this question was decided upon the appeal.
      One of the. learned justices at the General Term, in his opinion (ibid. 535), reasoned that, so long as the rights of the conflicting claimants were inchoate, that an action' of interpleader would not lie, Another concurred with the learned trial j ustice upon the first trial — that-the action was properly brought (ibid. 537). The third justice dissented without writing an opinion. This dissentiamounts to a concurrence with the learned trial justice on the former trial — that the action was properly brought. I think, therefore, that question is removed from consideration upon the new trial.
      This appears to devolve the duty upon me in the first instance to attempt to-determine the rights and interests of the conflicting claimants under the policy, some, if not all, of which are subject to contingencies which may of may not happen.
      The policy was issued May 23, 1874, and by its terms the plaintiff agreed to insure the life of Alonzo H. Doty (the insured) in the sum of §2,000, for the term of his natural life, said sum to be paid to Josephine Doty (the assured), wife of said insured, within ninety days after notice of the death of the insured, “and in case of the death of the said assured before the decease of the said insured, the said insurance shall be paid when due to their children, if any then living, or to their guardian in trust if they be minors, but if neither said assured; nor any such child, shall survive said insured, then said insurance shall be paid to his executors, administrators or assigns."
      The policy also contained these conditions or clauses:
      
        “Eighth. That this policy may be converted into cash at the option of the holder at any time after the expiration of fifteen years from the date hereof for the amount indorsed upon the back of this policy corresponding to the age (nearest birthday) of the insured at the time of such conversion, provided that this policy shall have been first paid up by the payment of ten full annual premiums, as herein stipulated.
      “ Ninth. That no assignment of this policy shall be valid unless made in writing indorsed .hereon, and unless a copy of such assignment shall be given to this company within thirty days after its execution, and any claim against this company, arising under this policy, made by any assignee, shall be subject to proof of interest."
      Doty and his wife are still living. They have two children, the defendants Starks A. and Carrie E. Doty, who were both infants at the time this action was commenced. Starks A. has since arrived at the age of twenty-one years. Alonzo H. paid the annual premiums upon the policy for ten years, and the stipulated period of fifteen years named in the 8th condition of the policy expired on the 23d day of May, 1889. He became forty-seven years of age on the 9tli day of September, 1891, and’ the value of the policy under the option clause was §740 at that time and at the time of the commencement of the action. His present age is fifty-two, and the value under that clause is now §840.
      
        On the 13th day of April, 1884, Alonzo H. borrowed the sum of §600 of the defendant Healey, for which he and his wife, Josephine, gave their joint and several note to Healey, and delivered to her the policy in question as collateral' security for the note, and the same has ever since remained in her possession. There was no written assignment of the policy at the time it was delivered to her. Judgment ivas perfected in her favor against Doty and his- wife under the note for $600,-above mentioned, August 6, 1890, and no part of the judgment has been paid.
      On August 6, 1890, Doty and his wife executed and delivered to Healey a written assignment “of all their right, title,'claim, interest and benefit ” in and to the said policy, and the plaintiff received a copy of such assignment on the 7th day of April, 1890.
      In October, 1891, Ann Healey brought an action against the plaintiff, in which she claimed to be the holder of the policy, and “elected that the same be converted into cash,” and asked judgment' against the plaintiff for $740, the then value of the policy under the option clause. Proceedings in that ^action have been stayed until the determination of this action.
      On the 39th day of October, 1886, Josephine Doty, with the consent of her husband (who united with her in the instrument), executed an assignment, in which she recited an indebtedness to Peterson & Packer of the sum of $1,130.65, and by which she assigned and transferred the said policy, and “ all her right, title and interest ” therein, to Peterson So Packer. On the same day the debt referred to in' the assignment .was put into judgment against Josephine and Alonzo, no part of "which has ever been paid; arid on the 1st day of November, 1886,. Peterson & Packer sent to, "and the plaintiff received, a copy of the assignment. Since the former trial the defendant Packer has died, and the action has been continued in the name of the defendant Peterson, as surviving partner of Peterson So Packer.
      The General Term decision, as I understand it, holds also that the assignment of the policy by Josephine would in no Way affect the rights of the children, and that they had contingent interests in the policy which would become vested in them if Mrs. Doty died before the maturity of the policy; and also that, under the provisions of the 8th clause, the policy must be deemed to be held by all the parties to whom it is payable, and the option contained in such clause can only be exercised by all the owners thereof. This must be regarded as the law of the case for the purposes of this trial, and these questions are, therefore, removed from consideration here.
      The first questiori to be determined here, then, is as to the effect of the delivery of the policy to the defendant Healey.
      There has been a good deal of conflict in the evidence upon the question as to whether or not, at the time Peterson & Packer received the assignment of the policy, they knew of the claim of Healey with reference to it. A careful examination of the conflicting testimony leads me to the conclusion that the preponderance of testimony is in favor of Healey’s contention, and that at the time they received their assignment they knew that the policy had been pledged to her as collateral security for her loan to the Dotys.
      I do not think, however, that the delivery of the policy to Healey amounted to an assignment of it, as she claims; but in my opinion it constituted a valid pledge of the policy and created an equitable lien thereon for the amount of her note to the extent of the interests of Josephine and Alonzo in the policy.
      A contract of pledge need not be in writing. It depends for its validity on delivery and possession of the subject-matter, and only a special property, not the title, passes. (18 Am. & Eng. Ency. of Law, 590, and cases cited.)
      Non-negotiable choses in action are proper subjects of pledge. (Wilson v. Little, 2 N. Y. 443.) A life insurance policy may be effectually pledged by delivery,, with or without a written assignment. (Jones on Pledge, §§ 145, 147; 18 Am. & Eng. Ency. of Law, 651; Bliss Life Ins. §§ 325,'328; Ang. Ins. § 327; Merrill v. Lf. B. Mut. L. L Go., 103 Mass. 245.)
      The clause in the policy which prohibits the transfer of it without the consent in writing of the insurers does not apply to a deposit of it by way of pledge. (Jones on Pledge, § 147;. Diem® v. N. B. Mut. L. L Go., supra; Leinkauf v. Gabnan, 110 N. Y. 50.)
      
        The reason is, that a pledge is not a transfer of the title nor an assignment of the policy. The legal title remains in the pledgor. The pledgee ■ lias the possession and a special property which he holds to protect his equitable lieu.
      I thiak the pledge of this policy to Healey should be made effectual and her lien enforced in equity unless the statute stands in the way. Prom the time of the act of 1840 (Chap. 80) to that of 1879 (Chap.. 248), which is the last enactment on the subject, the constant tendency in legislation in this State has been in the direction of enlarging the right of wives to the use of policies on the lives, of husbands for their benefit, so that the only restriction on alienation now existing is that retained in ■ the act of 1879, requiring the 'written consent of the husband to an assignment by the wife of such a policy.
      But it is claimed that the'act of 1879 stands in the way of permitting a wife to create even a special property in such a policy without the written consent of her husband. The language of that act) however, simply prevents the assignment of such policies without the written consent of the husband. So that while the policy was not assignable and the legal title not transferable, except by the formality provided in the statute, yet there was nothing in the statute to prevent a valid pledge, and, therefore, the rule referred to in the authorities above cited, that noil-negotiable choses in action, including life insurance policies, can be pledged by delivery only, applied;
      It should be .added that neither the- insurance company nor Alonzo and Josephine Doty are here questioning the rights of the defendant Healey. . The company is neutral as between the parties. Doty and his wife are not parties to the action, hut in their evidence, given upon the trial, they support the contention of the defendant Healey. And more than that, on August 6, 1890, they both executed a written assignment, to her of all their right, title, claim, interest and benefit in the policy. While this was not a good transfer of the legal title as against the earlier assignment by Josephine to Peterson & Packer, yet for the purpose of a written ratification and assent by the husband to the pledge to Healey I think it was good, and that if I am wrong in my conclusion that a written consent by the husband to the pledge was unnecessary, The assignment to. -Healey may,, for the purpose of such consent, fairly be said to relate ■ back to the time when that pledge was originally given, especially in view of the fact that Peterson & Packer had knowledge of the lien of Healey when they took their assignment. Nor do I think Peterson, as survivor of Peterson & Packer, is in a position to question the validity of Healey’s lien. The knowledge of her lien by his firm at the time of the assignment to them should serve in good conscience and equity as an estoppel. It has been held that a creditor of a wife cannot attack an assignment by her of a policy of life insurance on the ground that it was unassignable, or improperly assigned, and that that could only be done by her or her representatives. (Smillie v. Quinn, 90 N. Y. 497; Gonn. Mut. L. I Soc. v. Van Campen, 33 N. Y. St. Repr. 1135; S. 0., 11 N. Y. Supp. 103.)
      The principle of these cases may not go far enough to prevent a creditor who is also an earlier assignee from attacking the validity of a subsequent assignment, but I think it may well be applied to prevent an attack upon the validity of the pledge and equitable lien of Healey, with knowledge of which, I think, Peterson & Packer took their earlier assignment.
      The next question to be considered is as to the interests of the respective parties. The policy is payable when due to Josephine in case she survives her husband, and in case of her death before his decease it is payable to their children, if any, then living, or to their guardian in trust if they be minors, and if neither the wife nor any child survive the husband, then the insurance is payable to his executors, administrators or assigns.
      The interest, therefore, which Josephine had in the policy was the right to receive the insurance in case she survived her husband, and it is this interest to which the equitable lien of Ann Healey attached. Josephine is entitled, if she survives her husband, to the surplus, if any, after paying the claims of Healey and of Peterson, as survivor.
      The only interest of Alonzo is the right to join with the others having interests in exercising the option contained in the 8th clause, unless it be to have the insurance paid to his executors, administrators or assigns in case neither his wife nor any of his children survive him, and this interest is covered by the pledge to Healey and. has heen assigned by him to her under the assignment dated April 4, 1890, the prior assignment of the policy to Peterson & Packer having been of the wife’s interest in the policy by his consent, and not of his interest.
      The interest of Peterson as surviving partner of the firm of Peterson & Packer arises under the assignment to that firm by Josephine Doty, with her husband’s consent, dated October 29, 1886. This was a valid assignment of the wife’s interest subject to the prior equitable lien of the defendant Healey thereon, but the assignment was as collateral security to the payment of the debt due to Peterson •& Packer mentioned in the assignment, and any ^surplus would belong to Josephine if she survived her husband. .
      The interest of the children, the defendants Starks A. and Carrie E. Doty, is a contingent one and if they survive their father, and their mother does not survive, they will be entitled to the entire avails of the policy free of all claims of the other defendants because their interest has not been pledged. In the event of Alonzo and Josephine having other children, and such other children survive their father, and the mother does not survive, such other children would have an ■equal interest in the policy with Starks and Carrie. (Walsh v, Mut. Life Ins. Go., 133 H. Y: 408.) ■ .
      The several beneficiaries or their respective assignees or pledgees each have in addition to the interests above mentioned the right to. join with all the other • owners in exercising the option contained in the 8th clause, of converting the the policy into cash, but, as decided by the General Term in this case, no one of these can alone exercise'it.
      While the plaintiff has offered to abide by any judgment that may be rendered ¡ concerning the rights of the parties herein, there is no fund now in court to be distributed in this action, as that option has only been exercised by the defendant Healey. There is, therefore, no money now payable under the policy, and will be none until that option is lawfully exercised or until the death of Alonzo.
      Findings and a decree in harmony with this opinion may be prepared by the plaintiff’s attorney, and the decree may be settled before me upon two days’ notice, at which time I will hear counsel as to the question of costs.
    
   Landon, J.:

A majority of the court are of opinion that this action is maintainable for the reasons stated by Mr. Justice Putnam upon the former appeal (86 Hun, 534). That conclusion having been reached, a majority of the court concur in tlie following opinion, and in the' judgment directed.

If this action is maintainable, then I advise that the $740 be awarded to the defendant Ann Healey. The policy, at the option of the holder, was convertible under the terms of the 8th clause into an endowment policy for his benefit. Alonzo IT. Doty in May, T874, took out the policy and paid the premiums for the ten years thereafter as required by its terms. He thus became the holder and owner of the policy. (Garner v. Germania Life Ins. Co., 17 Abb. [N. C.] 7.) In common phrase he who takes out the policy and pays the premiums is the policyholder. (People v. Security Life Ins. Co., 78 N. Y. 114; People v. Empire Mutual Life, 92 id. 105.) But, of course, by proper transfer the transferee may become the holder. By its terms Alonzo H. Doty’s life was insured for $2,000, payable upon his death to his wife Josephine if she should survive him; if she should not survive him, then to their children surviving him ; and, if neither wife nor child should survive him, then to his executors, administrators or assigns, subject, however, to the 8th cla'use of the policy, which provided, “ That this policy may be converted into cash at the option of the holder at any time after the expiration of -fifteen years from the date hereof for the amount indorsed upon the back of this policy.” Thus, if the holder should exercise the option he would become the beneficiary in the lifetime of Alonzo H. Doty, and the wife Josephine and the Doty children would cease to lie beneficiaries, or, rather, never would become beneficiaries at all. The plaintiff by the terms of the policy held out to Alonzo H. Doty two inducements, one, the provision for his wife or children, if lie could get along without himself resorting to the policy in his lifetime ; the other, that if he could not get along, if poverty or misfortune constrained him, he could himself after fifteen years pass, realize its cash value.

Alonzo PI. Doty thus had the right to become sole beneficiary of the policy; it was a property right and lie could dispose of it without consulting either his wife or his children, since whatever interests they had were subject to the contingency that lie by exercising the option could make liis .own right superior - and absolute, and thereby cut off their contingent interests. Chapter 248, Laws of 1879, as it seems to me, does not impair this right. It provides that “ All policies of insurance heretofore or hereafter issued within the State of New York upon the lives of husbands for the benefit and use of their wives, in pursuance of the laws of the State, shall be from and after the passage of this act assignable by said wife with the written consent of her husband.” To the extent that this policy was for the benefit and use of the wife, the written consent of the husband was necessary to her assignment of it, but to the extent that it was for the benefit and use of the husband it was not; her written consent or assignment was not necessary ; nor need the husband’s assignment be in writing, since at common law he could insure his own life for his own use,.and of course dispose of his interest in the policy to his own advantage without asking leave of his wife or children. (Valton v. National Fund Life Co., 20 N. Y. 32.) In Whitehead v. N. Y. Life Ins. Co. (102 N. Y. 152) it is held that the interest of the wife and children in the policy becomes vested at the moment of its execution, but that is said' with' reference to a policy taken out by the wife upon the' life of her husband for her benefit, or, in case of her death before his, of their children, with no privilege in it for the husband to take the benefit to himself. This fact is emphasized in the opinion. The contract is said to be about the husband,'not with him. (See Walsh v. Mutual Life Ins. Co., 133 N. Y. 408.)

Cases arising after the death of the husband upon policies insuring his life for the benefit of his wife or children, with no optional cash converting provision in his favor in his lifetime, or, if so, with the option unexercised, are foreign to the case presented by this policy.

Here the claim of Ann Healey does not rest upon the wife’s assignment, but upon the husband’s assignment to her of his endowment interest therein, "which cuts off every other interest. The policy is either an endowment policy or a life policy, at the option of the holder. If the policy had said that at the expiration of fifteen years $740 should be paid to Alonzo H. Doty or to the holder in full for the insurance, the interest of the wife and children would then have ceased. (Miller v. Campbell, 140 N. Y. 457.) It can make no difference that, instead of fixing the exact period when the endowment shall .mature, the policy gives the holder the option to fix it at any time after fifteen years. That is certain which can be made so, and, as in this case, has been made so. What was said in Brummer v. Cohn (86 N. Y. 11), about the non-assignability by the wife of an endowment policy, had reference to a policy payable to herself in the event of her surviving her.husband, or surviving the term, of the insurance, and none whatever to a husband’s assignment of his own separate and superior interest in an endowment policy, the endowment being payable to him if he survived the term of the insurance. By the transfer to Ann Healey she became the owner and holder of the policy. (Marcus v. St. Louis Mutual Life Ins. Co., 68 N. Y. 625 ; St. John v. Am. Mut. Life Ins. Co., 13 id. 31.)

Every person holding collateral security has the right to use it in whatever lawful way he can make it most effectual as security, and the only lawful way open to Ann Healey to make it most effectual was to exercise the option to convert the policy into cash. That right of convertibility was the only feature which gave the policy any value to her, and of course it passed to her with the transfer by the husband of the policy, expressed and inhering in it.

Whether the delivery of the policy to Ann Healey was an assignment or a pledge is immaterial. The amount of her lien upon it is greater than $740, its endowment value at the time she exercised her option. The plaintiff admits in this action that if she is entitled to recover, she is entitled to recover $740, and that being so, there is no residue for the other claimants. If the transfer was a pledge, the pledgor, Alonzo IT. Doty, is the only person who had a pledgor’s rights to redeem or to insist upon a sale of the policy, and these Ann Healey offered to show that he had waived by a subsequent assignment to her in which his wife united. It is' enough that they concern no other party to the action.

Judgment modified by directing judgment for defendant Ann Healey for the fund brought into court, with costs against the plaintiff in the several courts, and enjoining the prosecution of her separate action against the plaintiff, and with judgment in favor of the plaintiff against the other defendants, declaring that they have no interest in the policy, with costs in favor of the plaintiff against the defendants Peterson & Packer, and in favor of the infant defendants against the plaintiff for the costs as awarded below with the disbursements upon this appeal.

Judgment modified and directed as stated in opinion.  