Kaufman v. New York Life Insurance , 32 A.D.2d 79 ( 1969 )

Per Curiam.

This is an appeal from a judgment, denominated an order, entered April 5, 1968, which denied a motion of the petitioner-appellant brought in a special proceeding to compel the intervenors-respondents to surrender certain life insurance policies to the third-party respondents for their cash value and to turn over such value to the petitioner-appellant.

Sometime prior to the death of Sara Kaplan, aunt of David Tuckerman, one of the judgment-debtor-intervenor-respondents, she made a loan to David for which he executed a promissory note in the sum of $16,558.62. This note remained unpaid at the time of her death. Petitioner-appellant as executor of the estate of Sara Kaplan brought suit on the note and on August 1, 1967 obtained a judgment in the sum of $20,323.80 against the judgment debtors. The judgment was not paid and appellant instituted this proceeding seeking to satisfy the judgment in part by realizing upon the cash surrender value of four insurance policies (OPLE 5225, subd. [b]). The court is in complete agreement with the disposition at Special Term with respect to the policy taken out by the judgment debtor Sylvia Tuckerman on the life of David of which she was the beneficiary (Insurance Law, § 166, subd. 1). A difference of opinion exists, however, as to the remaining three life insurance policies 'taken out by judgment debtor David Tuckerman, her husband, between 1944 and 1957. On two of these policies Sylvia is the named beneficiary and on the third the parties’ son Elliot is the beneficiary. In August, 1960 for reasons of estate planning, and prior to experiencing financial difficulties which prevented payment of the promissory note, David assigned and transferred ownership of the three policies to Sylvia. The aggregate cash surrender value of the policies is estimated to be slightly in excess of $7,000.

The question to be determined is whether the proceeds and avails of such policies are exempt from attachment by appellant, a judgment creditor, by reason of the provisions of section 166 of the Insurance Law.

As to two of the policies Sylvia Tuckerman is both beneficiary and, by reason of the assignment, owner. She has an option to obtain the cash surrender value of such policies (Insurance Law, § 155, subd. 1 par. [f]). But for the assignment of such policies, the proceeds thereof clearly would have been exempt from attachment as to the debtor Sylvia Tuckerman since she would only have had the interest of a beneficiary (Insurance Law, § 166, subd. 1). Since that section does not in express language provide an exemption in the case of the two assigned policies of which she is now both beneficiary and owner, we look to the aim and purpose of the statute to determine if such policies could reasonably be construed to fall within its protection.

As the wife of the co-judgment debtor, Sylvia had an insurable interest in his life. The contract of insurance when issued was taken out in good faith and was valid. Sylvia’s interest was not terminated when the policies were assigned to her. It is not disputed that the assignments were not in furtherance of any fraudulent scheme or to evade any existing obligation. The policy constituted a contract to pay a certain amount of money to Sylvia on the death of David, the assured, it being David’s intention, as expressed by the act of policy procurement, to provide for Sylvia in the event of his death. The act of assignment was only in furtherance of that objective.

Under subdivision 1 of section 166 of the Insurance Law, prior to transfer the proceeds of the policies as to which Sylvia was the beneficiary would be exempt from creditors of both David and Sylvia. The section states further ‘ ‘ if the person effecting such insurance shall be the wife of the insured, she shall be entitled to the proceeds and avails of such policy as against her own creditors, trustees in bankruptcy and receivers in state and federal courts. ’ ’ Under the language quoted Sylvia could be both owner and beneficiary if she effected the policy. Save for one factor that is precisely the situation which presently exists as to the two policies of which she is now both owner and beneficiary. The single difference and point of separation between the statutory provision quoted, where title is created by virtue of an affirmative act of the wife, and our case is that title here was vested in Sylvia by reason of the act of another, her husband. Section 166 of the Insurance Law is substantially a re-enactment of section 55-a of the Insurance Law of 1909, which section 55-a took effect in 1927. It is an exemption statute (cf. Schwartz v. Seldon, 153 F. 2d 334; Matter of Messenger, 29 F. 2d 158, cert. den. sub nom. Riley v. Messinger, 279 U. S. 855) designed to aid in preserving the home and preventing pauperism. The several policies, including that on which Elliot was the named beneficiary, were taken out by David in recognition of his legal and moral duty to his family. The single act of assignment, having been in good faith, should not be allowed to defeat that purpose. The statute should be given a liberal construction to achieve the end of protecting dependents of the insured. Nor should the fact that there is a reservation of right to change the beneficiary on the policy in which Elliot is named, dictate a contrary result as to such policy. Sylvia cannot be compelled to change the beneficiary, and if perchance she named herself the general objective of .protection of dependents would not be negatived.

There have been intimations of a theory of agency in that the wife £ ‘ causes ’ ’ the life of her husband to be insured through her husband as agent. The court stated in that connection “ in creating the insurance fund as a provision for the benefit of his wife, the husband acts as the agent of the wife only in the sense that he enables the wife to obtain the benefit of the fund ” (Chatham Phenix Nat. Bank v. Crosney, 251 N. Y. 189, 198). The court there dealt with the sufficiency of a complaint alleging the wife of an insolvent insured deceased caused his life to be insured. Giving the language its natural significance the court concluded that it embraced policies ‘£ effected ’ ’ by a husband in favor of his wife, as well as where the wife 11 caused ’ ’ insurance to be effected. In discussing the language of the earlier statute where a wife ££ causes ” her husband to be insured, and the later language with reference to a policy being ££ effected ” by a person on his own life or that of another, the court felt the Legislature intended to include all cases where a person properly utilizes his own moneys in paying premiums to create a beneficiary fund for another. In dicta, the court said: £ ‘ there is no reasonable basis here for a construction which would create distinctions between policies where the contract of insurance is made by the insurance company with the beneficiary,' and policies where the contract is made with the person whose life is insured, or between policies where the beneficiary is a stranger to the person whose life is insured and policies where the beneficiary is his wife ” (p. 197). Under the circumstances here present the mere fact that the beneficial interest and the title merged, it should not defeat the intent of the statute.

In light of the statutory scheme and the purpose as we discern it the judgment (denominated an order) appealed from should be affirmed, with costs and disbursements (cf. Schwartz v. Holzman, 69 F. 2d 814, cert. den. 293 U. S. 565; Schwarz v. Seldon, 153 F. 2d 334 ;Dellefield v. Block, 40 F. Supp. 616).