Opinion
01-19-1891
BACON v. KIENZEI, et al.
C. H. Sinnickson, for complainant. John S. Mitchell and J. L. Van Syckel, for defendants.
C. H. Sinnickson, for complainant.
John S. Mitchell and J. L. Van Syckel, for defendants.
BIRD, V. C. This bill is filed by the complainant, the administrator with the will annexed of Joseph T. Brown, deceased, to recover a portion of the amount which was due upon, two certain policies of insurance which were issued to the said Brown in his life-time, and afterwards assigned by him to the defendants in this cause in payment of, or as collateral security for, the amount due to them upon two judgments which they had obtained against him in his life-time. The complainant alleges that there was a surplus after the payment of such judgments which he, as administrator of the said Brown, is entitled to, the contrary of which is insisted upon by the defendants; their contention being that the assignment to them was an absolute and unqualified sale as distinguished from a security. On the 15th day of March, 1868, Brown procured to be issued from the Mutual Benefit Life Insurance Company of Newark, N. J., a policy upon his life for $5,000. On the 28th day of the same month he procured another policy of a like amount to be issued by the same company upon his life. At this time or soon thereafter he became indebted to the defendants and to others and while so indebted, and on October 9, 1870, he left the state of New Jersey and went to Little Rock, Ark. On the 23d day of May, 1876.the defendant Kienzel recovered a judgment against the said Brown in Arkansas for the sum of $1,300.85, and $11 costs; and the said Holmes, one of the defendants, on the same day, recovered a judgment in Arkansas for the sum of $1,300.85, and $8 costs. So far as it appears, none of the other creditors recovered judgments. In March, 1883, the said Brown, being an officer in the civil service of the United States, was charged with a criminal offense and arrested. On the 26th day of March, 1883, Kienzel called upon the said Brown at his office in Little Rock, Ark., and from thence went to the office of George W. Caruth, the attorney of the said Kienzel and Holmes, where he learned that the said Brown had made an assignment to Caruth of a number of securities which was in the interest and for the benefit of Kienzel and Holmes. Among the securities so held by Caruth were the said policies, the assignment of which is in these words: "For value received I hereby transfer, sell, assign, and set over to Geo. Wm. Caruth my two policies in the Mutual Benefit Life Insurance Co. of Newark, New Jersey, being numbered 49,937 and 51,538 respectively, with full power in the said Caruth to sell and dispose of the same when and how he deems best. * * * Witness my band on this 20th day of March, 1883. J. T. Brown, Jr." Soon after, as will be perceived from the dates, the premium became due upon one of these policies. It was understood that this premium should be paid in the first instance by Kienzel and Holmes, and they paid it: and that, if Brown afterwards advanced the money to the company, the company should refund the amount of the said premium to Kienzel and Holmes. Brown afterwards paid the premium, and the company returned the money which Kienzel and Holmes had paid in the first instance. After this the premiums were all paid by Kienzel and Holmes on one of the policies until the death of Brown. In 1884 the other policy lapsed because of the non-payment of premiums; but, subsequently, by virtue of a rule adopted by the company, the said policy was extended for five years. In 1885, Caruth made an assignment of the polices to Kienzel and Holmes in these words: "Assignment of policies Nos. 49,937 and 51,538 in the Mutual Benefit Life Insurance Company. Life of Joseph T. Brown, Jr. For value received I do hereby assign, transfer, and set over unto Jacob Kienzel and John S. Holmes of Bridgeton, N. J., the above-named policies of insurance, and all sum or sums of money, interest, benefit, and advantage whatsoever, now due or hereafter to arise, to be had or made by virtue thereof, to have and to hold unto the said Jacob Kienzel and John S. Holmes, their executors, administrators, and assigns, the said assignees thereby agreeing that the premium loan now due or hereafter to grow due shall be a valid lien according to the terms of the policy." In 1883, when Kienzel returned from Arkansas to New Jersey, he was met by James R. Hoagland, a counselor at law, who was interested for a creditor of Brown, and, upon being inquired of respecting his success in his attempt to collect or secure his claim against Brown, he (Kienzel) said that he had procured a large number of securities for his protection, clearly representing them in such a light as to give the witness to understand that he was abundantly satisfied. This is the language of the witness: "He said Brown had assigned to them quite a large number of securities, which his attorney there thought were amply sufficient to cover his claim."
Soon after the assignment of Brown to Caruth, in 1883, Brown was sentenced and commenced serving a term of imprisonment for which he was not released until in 1887. He died in February, 1888. On December 27, 1887, Kienzel wrote a letter to Brown respecting these matters between them. The letter is not produced. It does not appear by direct testimony that Brown received it. The letter was never answered. It appears to have been directed to Brown's place of residence, which being the fact, the presumption is that he received it, the contrary not being shown. A copy, however, is produced. After speaking of a settlement of their differences, the letter contains this statement and inquiry: "You are no doubt aware that we got both of your life insurance policies, and keep them paid up. Would you not be willing to buy them back of us, or what can you propose towards a settlement?" In due course Kienzel and Holmes made due proof of death, and the insurance company paid to them the amount which was then due upon the two policies, in all the sum of $9,322.19. Mr. Dobbins, the secretary of the company, explains how it came to pass that there was $9,322.19 due upon the policies when one or them had lapsed in 1884 because of non-payment of the premium, in these words: "On the other policy (51,538) there were three premiums deducted. That policy lapsed in 1884, and was extended by its terms. It was entirely gone and forfeited; but, by a rule that the company had since adopted, it became extended for a certain number of years, with the provision that, if the party should die any time before the end of three years, we would deduct the premiums that had come due in the mean time. If he should die after the three years, no deduction should be made at all, but the whole face of the policy be paid. This party died within the three years, and we deducted three premiums, 1885, 1886, and 1887,—$99 each." On the 22d day of March, 1888, J. Boyd Nixon, a counselor at law, presented the will of the said Brown to the surrogate of the county of Cumberland, in this state, and afterwards had issued to him by the said surrogate letters of administration, with the will annexed, upon the estate of the said Brown. On the 26th day of May nextensuing, the said Nixon made application to the orphans' court of the said county to be discharged from the performance of the duties of said trust, upon which application an order was made by the court accordingly. His reason for asking to be discharged as such administrator was because Kienzel and Holmes, as it appeared to Nixon, then began to insist that the assignment of the said insurance policieswere absolute and unconditional, and not simply as collateral security for the payment of their claims; he having understood from them at all times previously that they only held the said policies as collateral security. It should be noted that at this time Mr. Nixon and his partner in the law held the claims of other creditors who had no security for collection. This being so, and Mr. Nixon seeing that some conflict would almost inevitably arise between the different creditors, since there was no other estate of Brown's than the amount due upon these policies of insurance, it appeared to him that there was but one course left for him to pursue, which was to procure a discharge from the further administration of his trust. At the time in March, 1883, when these policies were assigned to Caruth by Brown in the manner above stated, their cash value was small indeed, it being only $169.06 each, and in May, 1885, when Caruth made the assignment as above stated, their cash value was less than $300. Are these facts of such a character as to justify the finding that the assignment or transfer of these policies was absolute or unconditional, or only as collateral security?
There is one view of this case which settles it against the contention of the defendants. It does not appear that there was any value placed upon these policies of insurance either by Brown and the defendants or by Caruth and the defendants; and what is true as to the policies of insurance, in his respect, is also true of all the other securities which Caruth held for the defendants. The amount due upon the judgments was in no wise reduced. Brown, the defendant, remained liable upon those judgments for every penny that appeared to be due upon their face. The relation of debtor and creditor was still maintained to the same extent and for the same amount as before the assignment. There is nothing in the case to show that the plaintiffs in those judgments could not have issued executions and made sale of any property of the defendant Brown for the whole amount of principal and interest, irrespective of any of the securities, including the policies of insurance held by them, so long as they had not realized anything from said securities; for it does not admit of debate that Kienzel and Holmes had not put themselves in a position under which they could be compelled to give Brown credit for anything upon the judgments against him. It is not to be overlooked that the defendants, in undertaking to preserve the life of these policies, ran the risk of soon exhausting the amount due upon their judgments. But this, however important or significant, cannot in any wise depreciate the importance of the consideration last above ad verted to. It is difficult to believe that Caruth, who was an attorney of ability and experience, acting for Brown as he did in making the assigment, would have made an absolute sale except for the full value of the policies, and which he would have credited upon the judgments in some visible and tangible form. Each policy was then worth $169.06 at least, and probably nearly $300. Brown was entitled to a credit for this amount, had there been a sale, as much so as he would have been had there been a transfer of a horse or any other chattel absolutely. I think the rule is most reasonable which holds that when property is transferred by a debtor to his creditor in consideration of an existing indebtedness, and the indebtedness continues to exist, such transfer cannot be regarded as a sale. Judge v. Reese, 24 N. J. Eq. 397; Harness Co. v. Schoelkopf, 71 Tex. 418, 9 S. W. Rep. 336. The fact that the assignment is absolute upon its face is not controlling. The court may nevertheless consider all the circumstances which the evidence shows attended the transaction, whether they be of an affirmative or of a negative character. If these circumstances show that the transfer was only designed to secure an existing indebtedness, it is the duty of the court so to declare. Phillips v. Hulsizer, 20 N. J. Eq. 314; Crane v. Bonnell, 2 N. J. Eq. 264; Melick v. Creamer, 25 N. J. Eq. 429; Clark v. Condit, 18 N. J. Eq. 358; De Camp v. Crane, 19 N. J. Eq. 166. I am persuaded that this was held as a security only, and that Brown could at any time have redeemed. Flagg v. Mann, 2 Sum. 486-533; Gassert v. Bogk, (Mont.) 19 Pac. Rep. 281; Pearson v. Seay, 38 Ala. 643; McKinstry v. Conly, 12 Ala. 678; Sutphen v. Cushman, 35 Ill. 186; Carr v. Carr, 52 N. Y. 251; Murray v. Walker, 31 N. Y. 399.
Upon the argument, counsel for defendants insisted that because Brown did not answer the letter of December 27, 1887, mailed to him by the defendants, it was an admission of their claim, as expressed therein, to the absolute property of the policies. I cannot think any force should be ascribed to this view. If so, it would be a very easy way for a mortgagee to perfect his title and secure the fee. Since the rights of these parties have been fixed long before, Brown was not obliged to pay any attention to the naked declarations of his creditor; and this is especially so when the rights of the parties have in no sense been changed, nor the rights of third parties at all imperiled. But if, in such case, acquiescence may be regarded as an admission, the court will always consider the circumstances in which the parties are placed before holding that one has surrendered the title to his property by his silence. While in this case it is fair to presume that Brown received the letter in due course, the facts that he had just been released from a long imprsonment, and that he departed this life in about six weeks after the receipt of such letter, will not be disregarded. The defendants are entitled to the amount of principal and costs due upon their judgments, with interest to the time when they received the money from the insurance company. It appears that the defendants have realized $640 from the other securities which they held. This, of course, they will be charged w, th, and also with any other moneys which they may have received. The balance of the said money received by the defendants upon the said policies they will be required to pay to the complainant, with interest from the time they received it. Unless counselagree with respect to the balance due from the defendants, there will be a reference to a master. I will advise a decree in accordance with these views, but without costs.