
    Weber Loper & Co. v. Paxton et al.
    
      Life Insurance — Ey married woman on the life of her husband — Policy— Premiums — Sections 3628 and 3629, Revised Statutes, construed — Creditors of deceased husband — What rights, toproceeds of policy, may have.
    
    1. A policy of insurance purporting on its face to have been effected by a married woman, on the life of her husband, wherein the company, in ■ consideration of an annual premium duly paid by the wife and of like annual premiums to be paid by her during the continuance of the policy, or until ten full premiums have been paid, agrees to insure the life of the husband for the sole use of the wife, to be paid her at his decease, and if not living then to her children for their use, is prima facie, the sole property of the wife, and as such is not affected by section 3628 of the Revised Statutes.
    2. The fact that the premiums have been paid by the husband is not sufficient, of itself, to overcome the legal effect of the terms of the contract.
    3. Where creditors of the husband seek to obtain satisfaction of their claims from the proceeds of such policy, they must establish, not only that the husband was insolvent at the time of his decease, but that such payments, or some of them, were made in fraud of the rights of existing creditors. Such fraud will not be presumed from the fact that, during the time of the payment of premiums the insured made an assignment for the benefit of creditors, it appearing further, that he thereafter settled with all his creditors and continued business until his decease twelve years after the assignment and seven years after the payment of the last premium, and that existing debts were all incurred a few weeks before his decease.
    (Decided March 31, 1891.)
    Error to the Superior Court of Cincinnati.
    The defendants in error, Paxton & Warrington, holding part of the proceeds of a policy of insurance on the life of Ferdinand Brown, deceased, brought the same into court, and required his executrix, his creditors, and his children by a deceased wife (Sophia), to interplead. The money was claimed by the plaintiffs in error and others, who were creditors. The executrix (the widow) made default. Answer was filed by the children making claim to the money under the terms of the policy, and setting up the statute of limitations against the claims of creditors. The superior court awarded the fund to the children.
    It is shown by the bill of exceptions that the policy was issued to Sophia Brown (the wife), the premiums to be paid by her, for the sole use of said Sophia, and in case she should not be living at the time of the husband’s decease, then to her children, for their use. The policy was on the ten annual premium plan.. It was dated November 20, 1868, was in amount $10,000, the annual premium being $712.50. The premiums were all paid by the husband.
    Sophia Brown died in the year 1878. Ferdinand Brown died in 1885.
    In the year 1872, or in 1878, Brown made an assignment. He then compromised and settled with all his creditors, and then went on in business as a member of a solvent firm, and alone thereafter until his death. His estate is insolvent. The existing debts were all incurred a few weeks before his death.
    
      John M. Fitzgerald, for plaintiff in error.
    Section 3628 seems to be perfectly plain. It is difficult to conceive how language could be less ambiguous. It says nothing about insolvency or debts or creditors; it lays down a law of descent; it says just how much a man may secure, by way of life insurance, to his widow and children, to the exclusion of creditors and others, just as it fixes dower, allows for a year’s residence in the homestead, provides for a year’s support, and grants certain other rights and privileges.
    The court below said that the reason and history of this law precluded the interpretation which we contend for.
    Now this is a law of prohibition. What did it intend to provide against? Why, it was intended to prevent just what has been attempted in this case and in part accomplished.
    I will state the facts, part of which are of record and part of which are not, but I state this as an illustration of what is possible under any other interpretation of the law.
    
      Here was a man in such circumstances that, as the record shows, he was compelled to make an assignment for the benefit of his creditors during the time these premiums were being paid — about the middle of the term of ten years. He makes some arrangement with his creditors, and goes into business with his son. He continues to borrow from Peter to pay Paul, and pays to the insurance company the whole $7,125, the last payment being made in 1877. In the meantime the wife died, and he married another. (This is not in the record.) He insures his life in 1879 for $10,000 more for her benefit, and pays $715 per year in premium on that policy; he also goes into two mutual associations, and pays dues to them. In 1885, the last of March or first of April, he dies suddenly, leaving to his family life insurance to the amount of $24,000, which cost $13,000 or $14,000 by way of premiums, and his estate, after the payment of $2,500 to the widow as a year’s allowance, amounts to $5,700 with which to pay costs of administration, and about $9,000 of other debts.
    These are facts which illustrate what the general assembly intended to provide against. And hence section 3628 was not limited or restricted to any particular state of case, but was made to apply generally as a law of descent and of distribution. Shall the court change it by enlargement or limitation to make it conform to what it thinks the legislature ought to have done ? This is what the court below did, and 1 repeat, this is judicial legislation, in which the court is not justified in indulging.
    We feel greatly relieved in this discussion by the recently published decision of this court in the case of Cross v. Armstrong, 44 Ohio St. 613, which states our case much better than we could hope to do.
    We claim that this is not a question of solvency or insolvency, and that were there no creditors, the personal representative of the deceased would be entitled to the fund.
    
      Judson Harmon, for defendants in error.
    I. Even if Brown had insured his own life, making the policy payable to his wife or children, so as to bring the case within the Revised Statutes, section 8628, the judgment should be affirmed for the following reasons:
    1. The amount of such insurance which creditors may not reach is expressly measured by annual premiums. “ The amount of premiums annually paid on such policy shall not exceed the sum of one hundred and fifty dollars. In case of payment in excess, the amount to be paid the beneficiaries is such portion of the insurance as $ 150 ‘ will bear to the whole premium.’ It is manifest that the measure so fixed is ordinary annual premiums. Any other might work gross injustice.”
    It is well settled that this action is in the nature of an exemption law, and therefore entitled to a liberal construction. Cole v. Marple, 98 Ill. 58; Fearn v. Wood, 65 Ala. 35; which cases both arose under statutes almost identical with ours.
    2. The creditors have no right as such to reach the fund under section 3628. On the contrary it is expressly provided that the excess, if any, shall be paid “ to the representatives of the deceased,” of course for ordinary distribution after payment of expenses, widows’ allowance. I know of no law or principle which authorizes a creditor to sue for an asset of the estate, even in a representative suit, which this is not and does not profess to be. A creditor could require the administrator ■ to proceed and remove her, and hold her liable on her bond if she should fail or refuse.
    3. But section 3628 was not intended to and does not apply to a case like this where the premiums were all paid years before the death of the insured, while he was entirely solvent, as we should be bound to presume in the absence of evidence, even if it were not shown as it is here indirectly but clearly, and long before any of the debts existing at his death were incurred, without any suggestion of intent to defraud future creditors. Pollis v. Robinson, 73 Mo. 201; Baron v. Brummer, 100 N. Y. 372.
    II. But this policy comes under the provisions of section 3629, not under those of section 3628. The first part of the former and the latter were originally parts of the same act. For a discussion of the history and effect of this legislation see U. C. Life Ins. Co. v. Eckert, 6 Am. Law Rec. 452.
    It is well settled that there is a wide difference between cases where the husband contracts with an insurance company for insurance on his own life in consideration of premiums to be paid by himself, making the proceeds, however, payable to his wife, and cases where the wife insures her interest in her husband’s life for premiums to be paid by her. In the former case the husband creates a right in the nature of a chose in action, which belongs to him, and which, beyond the limit fixed, he may not dispose of to the prejudice of his creditors. In the latter case the wife creates the right, and it belongs to her. The husband’s creditors have no claim whatever upon it, unless the husband, to their prejudice, diverts his money into it in the way of premiums. Manhattan Life Insurance Co. v. Smith, 44 Ohio St. 156; Washington Central Bk. v. Hume, 128 U. S. 195.
    The right of creditors beinglimited by section 3629 to “an amount equal to the premiums paid thereon with interest, subject however to the statute of limitations,” the statute having been expressly pleaded, and the right being clearly barred, the judgment should be affirmed. This act was copied from that of Massachusetts, and this is the ruling there. Ingalls v. N. E. Mutual Life Insurance Co., 27 Fed Rep. 249.
    It has always been the policy of Ohio to uphold gifts to and provisions for wives by husbands where they were made during his solvency and without any intention to defraud present or future creditors. Creed v. Lancaster Bk., 1 Ohio St. 1; Eckel v. Renner, 41 Ohio St. 232; Child v. Graham, 7 W. L. B. 43.
    The questions above discussed have never been decided by this court. In fact this law appears to have been involved in only two cases. Fraternity Mutual Insurance Co. v. Applegate, 7 Ohio St. 292; and Cross v. Armstrong, 44 Ohio St. 613.
   Spear, J.

Do the facts bring the case within section 3628 or within section 3629, of the Revised Statutes? If within the latter section, is a case made which entitles the creditors to relief ?

We think the first question is answered by a reference to the face of the policy itself. Section 3628 applies where the insurance is effected by the person whose life is insured, for the benefit of his widow and children, or either. This policy, upon its face, appears to have been procured, not by the husband, but by the wife. The fact that the husband paid the premiums tends to indicate that the insurance was procured by him, but, standing alone, does not overcome the legal effect of the terms of the contract itself. There is an essential difference between a case where a husband contracts with an insurance company for insurance on his own life in consideration of premiums to be paid by himself, the loss to be payable to the wife, as in Cross v. Armstrong, 44 Ohio St. 613, and a case where the wife insures her interest in her husband’s life, the premiums to be paid by her, as in Manhattan Life Ins. Co. v. Smith, same volume, 156. In the one case the policy is a chose in action which belongs to the husband, and which, beyond the limit fixed by section 3628, he may not dispose of to the prejudice of creditors and those entitled to share in his personal estate on distribution. In the other, although the premiums may have been paid by the husband, the contract is the wife’s separate property, upon which the husband’s creditors have no claim, unless it appear that the payment of premiums by him has had the effect to withdraw funds to which the creditors were entitled. As to creditors whose claims existed when such payments were made fraud might be presumed; as to subsequent creditors it would be necessary to show that there was fraudulent intent. Washington Central Bank v. Hume, 128 U. S. 195.

Section 3629 provides a rule for the second class of cases. Under that section a wife may, in her own name, cause to be insured the life of her husband, for her sole use and that of her children, and if she survive him the amount of the insurance shall be payable to her, if not then to the children for her or their sole use, free from the claim of the representatives of the husband, or any of his creditors ; but if a policy be procured by any person with intent to defraud his creditors, an amount equal to the premiums paid, with interest, shall inure to the benefit of his creditors, subject to the statute of limitations.

To enable creditors to maintain a claim to any portion of the proceeds of such a policy it must be shown not only that the premiums were paid by the husband, and that he was insolvent at the túne of his decease, but that such payments, or some of them, were in fraud of the rights of creditors. If this is established the creditors, if they move in time, may recover the amount so fraudulently paid, with interest. Union Central Life Ins. Co. v. Eckert, 6 Am. Law Rec. 452.

The assignment for benefit of creditors made by Brown in 1872 or 1878 would show an embarrassed, possibly an insolvent, condition at that time. But he settled with all his then creditors, and for all that appears to the contrary, may havé paid all in full. None of that class is here complaining. It is not shown that the payments, or any of them, were made with the intent to defraud creditors, or that, in fact, they had that effect. If they were not so fraudulent then1 it was his right to bestow his entire bounty upon the wife and children, and it is now their right, or the right of the survivors, to enjoy the proceeds of it.

A decision of the question of the statute of limitations is not necessary to a disposition of the case, and we do not consider that question.

Judgment affirmed.  