
    Maria H. N. Bartlett, as Executrix, Plaintiff, v. William W. Goodrich, as Assignee, et al., Defendants.
    (Supreme Court— New York Special Term,
    March, 1895.)
    The mere payment by a partner of insurance premiums out of the apparent assets of the firm does not constitute him a trustee for the firm, where the payments were upon policies on his own life and the accounts between him and his partners show his right to withdraw the amount of the premiums from the firm assets.
    A partner who had furnished the entire capital of the firm procured insurance to a large amount on his life and assigned the policies to his partners. Thereafter, and while the firm continued solvent, the partners reassigned the .policies to him and he took out another, payable to his executors. The premiums on all the policies were paid out of the apparent assets of the firm and charged to a special insurance account, but the firm accounts showed that at all times there was a much larger balance to such partner’s credit than the sums so withdrawn. The firm thereafter became insolvent. Held, that as between the creditors of the firm and the individual creditors of such partner, the latter Were entitled to the benefit of the policies.
    Action to recover the proceeds of certain policies of insurance upon the life of the plaintiff’s testator.
    
      
      Frederic A. Wan'd, George W. Wingate and Nichols & Bacon, for plaintiff.
    
      William G. Choate and John A. Beady, for defendant Goodrich, assignee.
   Russell, J.

The question to be solved in this case is whether the individual creditors of Edward B. Bartlett, deceased, or the copartnership creditors of his firm, shall receive the proceeds of insurances upon Bartlett’s life to the amount of about $80,000, or whether those insurances shall be paid to the partnership creditors of the firm composed of the deceased, Henry E. Ritchie and Albert C. Woodruff. These insurance moneys were collected by the plaintiff, as executrix of the deceased, but are now held by the defendant Goodrich, as assignee of the firm and the individual partners, paid over by the widow to the assignee upon his advice, he standing in the relation of counsel to her, having been also counsel for her deceased husband. The advice of Mr. Goodrich to the executrix was, beyond doubt, honestly given, that the money belonged to the trustee of the firm, instead of to the trustee of. the deceased partner,, and all technical objections as to the right of recovery upon the merits are. waived, if in fact and in law the widow should have retained the money to pay out to the creditors of her deceased husband in the due course of the execution of her trust as executrix.

1 This sum of $80,000 is the balance remaining from insurance moneys collected by the executrix to the amount of $100,000, . after deducting the premiums paid out of the apparent assets of the firm during the life of the deceased, and which premiums were repaid to the assignee -Goodrich by Mrs. Bartlett after she received the insurance moneys of $100,000, the assignee at that time advising the return of the premiums, and not claiming the insurance fund.

The .firm of E. B. Bartlett & Co., composed of Bartlett, Woodruff and Ritchie, was formed oh the 1st day of May, 1885, by a written agreement to carry on the business in Brooklyn of warehousing and storage, by which Bartlett was to receive fifty-eight, Woodruff twenty-eight and Ritchie fourteen per cent of the profits. All of the capital was contributed by Bartlett; Woodruff and Ritchie furnishing no capital whatever during the course of the partnership. This partnership was continued in various ways until the death of Bartlett, which took place on the 24th day of May, 1894, and shortly afterwards, on the 7th of June, 1894, Woodruff and Ritchie made a general assignment for the benefit of creditors, as surviving partners, and also individually, to the defendant Goodrich.

March 1, 1887, Bartlett took out three life policies in the Equitable Company for $25,000 each, one in the State Mutual for $10,000 and one in the Berkshire Life Company for $15,000. On the 7th of March, 1887, he executed five assignments covering the policies to Woodruff and Ritchie, in equal shares to each, if the partnership should be in existence when the policy became a claim, and the share of either not then surviving to revert to the legal representatives of the insured, and in case of the dissolution of the copartnership the whole became payable to the legal representatives of the insured.

On the 15th day of July, 1890, Ritchie and Woodruff reassigned to Bartlett these insurance policies, except one of the $25,000 policies in the Equitable Company, which had been surrendered and a paid-up policy taken for $3,750, payable to Woodruff and Ritchie, which policy was collected by them after Bartlett’s death.

On the 1st of March, 1890, Bartlett took out another policy in the Equitable for $25,000, which was never assigned by him to any one, and which was payable to his executors, administrators or assigns.

On the death of Edward B. Bartlett the legal title to the funds arising from the $100,000 of life insurance policies confessedly appeared to be in the executrix. Is there in tl as case sufficient evidence that the real title, or the equitable. title, was in the copartnership, so that the copartnership creditors, may claim the benefit to the exclusion of- the individual creditors of Bartlett, both estates being beyond doubt insolvent? '

The defendant Goodrich relies upon the fact of the 'original assignment of four of 'the policies to Woodruff and Ritchie, upon the fact of the premiums being paid out of the assets of the firm and credited to a special insurance account, and upon various, declarations of Bartlett made mainly prior to the reassignments to him as evidence that Bartlett held the policies even after the reassignment to him, and the new policy taken from the Equitable, as trustee for the benefit of the-firm. The claim is an equitable one, to be judged of by equitable considerations.

In July, 1890, it does not appear that the firm was insolvent, and it may be presumed that the disastrous panic of. 1893 brought about the insolvency which existed at the time of the death of Edward B. Bartlett. Therefore, when the reassignment was made, there was no equity whatever on the part of the copartnership creditors which prevented the valid transfer of those policies back to the insured himself, and < the facts disclose ample reason on his part for desiring the title to be solely in himself. - -

He contributed all the capital which the firm had, and from a period soon after the date of taking out the policies his credit balance on the books of the firm ranged from $174,695,86, iii 1888, to $127,955 at the date of his death, in 1894, The balance struck after the reassignments, On the books of the coinpany, showed his credit balance to be $172,900, and at that date Woodruff’s debit balance was $49,000, and Ritchie’s $4,122. Woodruff’s debit balance ranged during the period mentioned, from 1887 to 1894, from $33,500 to $58,000, and Ritchie’s from $10,500 to $4,825,

Had Bartlett died at the date of the reassignments, and Ms estate been charged with $100,000 collected, and all óf the pre^ miums paid, a large balance would still have been left in- his favor, and the other partners would still be largely indebted to the firm. The same result would have been attained had such charges been made at the time Bartlett died on the 24th day of May, 1894. There never was, then, a time during the existence of the policies that the deceased was not entitled to demand the amount they called for over and above the amount of premiums, so far as any equities existed between him and the surviving partners. Nor does the continued payment of the premiums out of the apparent assets of the firm change this result as between these three individuals. He was entitled to draw the amount of those premiums according to his accounts with the firm, and the fact that they were not charged to him, but kept in a special insurance account, does not overthrow the equities arising, for a matter of mere bookkeeping cannot destroy the substance of a transaction.

Does the insolvency of the firm alter the equities so that a claim which could not he successfully maintained by the partners, if solvent, to the proceeds of the insurance policies, would be changed in its equitable force by insolvency of the firm ? How can the copartnership creditors derive a superior equity as against other innocent losers who stand as creditors of the individual whose death created a loss to them of a, personal capacity on the part of the debtor to continue his power to accumulate property, and by which loss the fund springs into being now contended for %

It is also urged by the counsel for the assignee that various declarations of Bartlett show an intent on his part that the insurance fund should be for the benefit of the partnership, and that the drawing of the premiums from the nominal assets of the firm after the assignments partially shows a continued evidence of such intent. But the matter of intent is not determinative except so far as it is consummated by action where contract rights are affected. The continued payment of the premiums in the manner stated does not of itself constitute the insured a trustee for the firm where the payments were upon policies on his own life, and where the continued status of the accounts between him and the other partners showed his right to draw the amount of the premiums from the assets of the firm. Especially is this the case where four of the policies, originally payable under certain circumstances to the two other partners, had been reassigned absolutely to iimself, and in the other policy the other partners never had any legal interest.

I am of the opinion that -the various circumstances attending the carrying of the policies of life insurance referred to do not change the ownership apparently existing in .the executrix at the time of the death of Edward B. Bartlett. It' is 'unnecessary for me to consider the question of the right of the executrix to the premiums paid over to the assignee, for no claim is here made for those premiums. The surviving partners could not have claimed the estate should pay, had the copartnership remained solvent, in adjusting the equities between the three members of the firm, but I understand the counsel for the executrix do not ask their repayment.

Judgment, therefore, is directed for the plaintiff for the repayment of the amount of the insurance moneys, less the prémiums, with costs to the plaintiff and the defendant Goodrich payable out of the fund.

Ordered accordingly.  