
    Lytle et al. v. Baldinger et al.
    
      Petitiqn to set aside fraudulent sale■ — Does not constitute cause of action — Unless averring transferee knew of the fraudulent intent, when — Transfer by insolvent husband — To wife of insurance policy — Not in fratid of creditors, when — Section 6343, Revised Statutes — Creditor’s remedy in Section 3628, Revised Statutes.
    
    1. A petition to set aside a fraudulent sale or transfer made .in vio- - lation of the provisions of Section 6343, Revised Statutes, which does not aver ‘that the person to whom the sale, conveyance, transfer, mortgage or assignment is made knew at the time of the transaction of the fraudulent intent on the part of the debtor does not state facts sufficient to constitute a cause of action.
    2. A transfer by an insolvent husband to his wife of a policy of insurance then in force on the life of the husband is not an assignment of property in fraud of creditors or to hinder or delay creditors within the contemplation of Section 6343, Revised Statutes.
    3. In such case the only remedy of the creditor is found in the provisions of Section 3628, Revised Statutes.
    (No. 11713
    Decided March 28, 1911.)
    Error to the Circuit Court of Cuyahoga county.
    This action was brought in the court. of common pleas by the persons now plaintiffs in error, against the Equitable Life Insurance Company of Iowa, Emma C. Baldinger and Frederick D. Bal* dinger, a minor. The object of the action was to have the court declare fraudulent as. against creditors of A. F. Baldinger, deceased, certain assignments made by him of . policies of life insurance issued on his life by defendant life insurance company and assigned by him to his wife, Emma C. Baldinger,’and his minor son, Frederick D. Baldinger, and to secure the application of the proceeds of said policy to the payment of a debt due the plaintiffs, apd to .the debts of the other creditors of said Báldinger, deceased.
    The petition averred the indebtedness of A. F, Baldinger to Rebecca J. Price, which indebtedness was evidenced by a promissory note dated July 23, 1896, calling for three thousand dollars with interest, and signed by A- F. Baldinger.
    • It further averred the death of Rebecca J. Price and the terms of her will, by' which the plaintiffs iñ' .error were made sole beneficiaries, and the assignment by her executor of this note to these plaintiffs in error as a distribution to them in kind of pkrt of the estate of said Rebecca’J. Price.
    
      It further avers the issuing of the policies to A. F. Baldinger, and that while he was still in-' debted upon this note, and no part thereof having been paid, he assigned said policies to Emma C. Baldinger and Frederick D. Baldinger, a minor, under the age of.fourteen years; that at the date of said assignments of said policies that A. F. Baldinger was wholly insolvent and had not sufficient property aside fro'm these policies to pay and discharge his indebtedness, and at the date of his death said Baldinger had no property or estate whatever aside from said policies and said assignment of said policies was wholly without consideration and in fraud of the rights of the plaintiffs and other creditors of said A. F. Baldinger, and prayed that said assignment of said' policy may be held and decreed to be fraudulent and the same set aside and held for naught, and for such other and further relief to which they might be found to be entitled.
    The Equitable Life Insurance Compaq paid into court the sum of ten thousand dollars, being the sum of the three policies issued by it on the life of A. F. Baldinger and was dismissed from the action. Emma *C. Baldinger was appointed administratrix of the estate of A. F. Baldinger and made a party defendant in her representative capacity.
    Emma C. Baldinger filed a general demurrer to the plaintiffs’ petition, which demurrer was overruled by the common pleas court, and she thereupon filed an answer, and also answered in her representative capacity as the administratrix of the estate of A. F. Baldinger. Upon the issues joined between the plaintiffs and Emma C. Baldinger a decree was rendered by the common pleas court in favor of plaintiffs as to part of said policies and in favor of Emma C. Baldinger as to others. The- plaintiffs, and Emma C. Baldinger both appealed from this judgment of the common pleas court. The two appeals were consolidated in the circuit court and that court sustained the general demurrer of Emma C. Baldinger to the plaintiffs’ petition, and the plaintiffs not desiring to amend or further plead, the petition was dismissed and judgment rendered against the plaintiffs for costs.
    It was suggested upon oral argument of this cause that this transfer was made to Emma C. Baldinger, wife of A. F. Baldinger, and now his widow, and that Frederick D. Baldinger was not one of the assignees and that this petition should be considered the same as if his name did not appear therein.
    
      Messrs. Blandin, Rice & Ginn; Messrs. Hidy, Klein & Harris and Mr. Charles G. Reynolds, for plaintiffs in error.
    The act of February 12, 1893, amending Section 17 of the “act regulating the mode of administering assignments in trust for the benefit of creditors,” (now Section 6343, Revised Statutes), applies to conveyances constructively as well as those actually fraudulent as against creditors. Jamison v. McNally, 21 Ohio St., 295; Laudenback v. Foster, 39 Ohio St., 206; Bank v. Miller, 9 C. C., 111.
    
      Both the amendment of 1898 and that of 1902 to Section 6343, Revised Statutes, came under consideration by the supreme court in the case of Bobilya v. Priddy, 68 Ohio St., 373.
    The supreme court held the section thus amended to be 'constitutional; construing it to have no application to purchases in good faith and for fair value from an insolvent debtor. The court pointed out that the language in said amended Section 6343 is not stronger than that employed in the Statute of Frauds (Section 4196, Revised Statutes), and that the latter section had been held since the decision of Burgett v. Burgett, 1 Ohio, 469, to have no application to sales made to innocent purchasers for value.
    ' The relief sought, and to which plaintiffs are entitled, if entitled to any relief, was not the surrender value of the policies at the time of the fraudulent conveyance, but their value at the time suit was brought. These life insurance policies were simply securities for money, dioses in action, and subject to every rule of-property known to the law. Ah assignment, fraudulent as to creditors, passed no title as against them. The policies always remained the property of Baldinger for the purpose of satisfying his pre-existing debts: whether the plaintiffs shall have relief depends not on the value at the time of the conveyance, but on whether the amount they show themselves entitled to recover in the action merits to be dignified by judicial consideration. Savings Bank v. McLean, 84 Mich., 625; Appeal of Elliott’s Exrs., 50 Pa. St., 75; Burton v. Farinholt, 86 N. Car., 260.
    
      Laws similar to Sections 3628 and 3629, Revised Statutes, have quite generally been adopted by the various states, and we think the construction contended for has not generally been put upon them by the courts. 2 May on Insurance, Sec. 459e; Friedman Bros. v. Fennell, 94 Ala., 570; Burton v. Farinholt, 86 N. Car., 270; Bank v. McLean, 84 Mich., 625.
    
      Mr. William Howell and Mr. T. J. Ross, for • defendants in error.
    The petition is insufficient in that it contains no allegations of any fact or facts showing that the plaintiffs or other creditors of Baldinger were in any way injured or delayed by the assignment of these policies.
    That property is of no value, or of mere trifling value, cannot be the, subject of a fraudulent conveyance, is well established; the whole theory of the law on this subject being that the debtor has parted with something of value which the creditors might have subjected to their claims. Waite on Fraudulent Conveyances, Sec. 23; 1 Moore on Fraudulent Conveyances, Sec. 4.
    Under the bankrupt íaw, the adjudication in bankruptcy transfers to the trustee all property of the bankrupt in any manner transferable by him; but in the application of this law, the courts hold that insurance policies do not pass to the trustee unless they have vendible value. If they have no cash value, they remain the property of the bankrupt. Creditors cannot continue them in force, and thus gamble on the life of the debtor. 1 Remington on Bankruptcy, Sec. 1012; 2 Moore on Fraudulent Conveyances, 1190.
    The petition shows on its face that the proceeds of the policies are exempt from the claims of creditors.
    The courts generally hold that statutes exempting life insurance are of the same nature as exemption laws generally, and are to be liberally construed, and we submit that under a liberal construction of these statutes, the assignment of a policy of insurance by the husband to his wife is “effecting an insurance on his life” within the meaning of these statutes. If the deceased had surrendered his policies and had obtained new ones, making the wife the beneficiary, there could be no doubt that she would have been entitled to the insurance under Section 3628; and we can see no reason tvhy such a proceeding would be necessary in order to give the wife the benefit of the insurance; and it has been held that the assignment of a policy under the circumstances shown in this petition, is effecting insurance for the benefit of the wife, within the .meaning of exemption laws similar to ours. Cole v. Marple, 98 Ill., 58; Rose v. Wortham, 95 Tenn., 505; Morehead’s Admr. v. Mayfield, 109 Ky., 51, 58 S. W. Rep., 473; Tuthill v. Goss, 35 N. Y. Supp., 136, 89 Hun, 609.
    See construction of Section 3629 in Reakirt v. Besuden, 3 N. P., N. S., 646, 16 O. D., N. P., 697, 73 Ohio St., 383.
    Section 3629 was considered by this court in Webber Loper & Co. v. Paxton, 48 Ohio St., 266.
    
      (Counsel on both sides cited and commented upon Child v. Graham, 8 Dec. R., 294. — Reporter. )
   Donahue, J.

The general demurrer of Emma C. Baldinger to the plaintiffs' petition presents two questions.

Is it necessary to aver in a petition filed for the purpose of setting aside a sale or transfer claimed to be in fraud of creditors that the person or persons to whom the sale, conveyance, transfer, mortgage or assignment is made in violation of the provisions of Section 6343, Revised Statutes, as amended, 1902, knew of the fraudulent intent on the part of the debtor or debtors?

Do the provisions of Sections 3628 and 3629, Revised Statutes of Ohio, permit a transfer to a wife of a policy of insurance then in force on the life of the husband, the husband at the time of making the transfer being insolvent.

It would appear that Section 6343 as amended May 12, 1902, is sufficient answer to the first proposition. The presumption is, that every amendment of a statute is made to effect some purpose. That purpose may be either to add new provisions and conditions to the section as it then stands, or for the purpose of making plain the meaning and intent thereof. Whether this amendment changes the construction of the statute or simply makes its construction plain, is of little importance, the result must be the same, and every person seeking ■ to avail himself of the provisions of this section mtist by his- pleading and proof bring himself within the provisions of this statute, including, as a matter of course, the amendment of May 12, 1902, which is as follows: “Provided,however, that the provisions of this section shall, not apply unless the person or persons to whom such sale, conveyance, transfer, mortgage or assignment be made knew of such fraudulent intent on the part of such debtor or debtors.”

This provision of the section as it now stands would require an averment in the petition that the person making such purchase, or receiving such conveyance, transfer, mortgage or assignment knew of such fraudulent intent on the part of such debtor or debtors at the time of the transaction complained of.

It would also appear that Section 3628 and Section 3629, Revised Statutes, construed together sufficiently answer the second question presented; by the demurrer. It would seem to be the policy of the law, not only to permit, but to encourage-every husband to provide by insurance upon his life for the maintenance and support of his widow and children after his death. At the same time the law protects his creditors to the extent of the funds actually diverted from his estate by reason of the procuring and keeping in effect such insurance. It would not appear that the creditor ' could be injured, delayed or defrauded beyond the amount of money actually expended in the purchase of this insurance. A debtor is under no legal obligation to insure his life for the benefit of his creditors. All that the law requires of him is that the property and means of which he is possessed, saving and excepting certain property-exempt by law from execution, shall be honestly applied to the payment of his debts, and he is not permitted to give £¡,way that which in justice belongs to his creditors. So that when the law provides for the return to his estate of the money used in the purchase of this insurance, it gives to the creditor everything he is entitled to have, or could have reached by any process of law.

The same reasoning equally applies to the assignment to the wife of a policy then in forpe, for there is no provision requiring the debtor to keep that policy in force or to pay any further premiums thereon. The creditor cannot reach the policy by any process of law. It would only become available to his estate upon the death of the insured, then of course it would be applicable to the payment of his debts. But the possibilities of it ever becoming assets of his estate are so remote and so dependent entirely upon the will and the pleasure of the debtor, and not upon any legal obligation that he owes to his creditors to keep the insurance in force until his death, that the assignment of the same to his wife cannot be held to be an assignment in fraud of creditors nor could such assignment in any way, manner or form hinder or delay his creditors in the collection of their debt for there is no process known to the law that could reach the proceeds of this policy until by the terms of the policy itself it becomes an absolute obligation on the part of the insurance company to pay. The proposition that the failure of the insured to keep this policy of insurance in force by the annual payment of dues would be in fraud of creditors, and hinder and delay creditors, is just as tenable as the proposition that they have been defrauded, hindered and delayed by the assignment of the same to his wife.

The statute under consideration is even broader than above stated, for it also provides that if any person, other than the husband, either effects or transfers insurance upon his life to a married woman, that such insurance cannot be reached either by the person effecting the insurance on his own life in her behalf, or transferring the same to her after it has been effected, nor can it be reached by his creditors. From these statutes it would clearly appear that the only relief the creditor could have, is that provided in Section 3628, Revised Statutes of Ohio.

Judgment affirmed.

Spear, C. J., Davis, Si-iauck, Price and Johnson, JJ., concur.  