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Amick t'. Butler, Administrator.
his own life, at his own expense, merely pledges the policy r.s a security for an existing debt, the holder, whether by assignment or otherwise, who receives the entire proceeds, will I e regarded as a trustee of the representatives of the insured
or the amount received, less the amount of his debt, or the sum advanced on the policy. American Life, etc., Co. v.
Robertshaw, 26 Pa. St. 189; Matthews v. Sheehan, 69 N. Y. 585.
Thus, in Bruce v. Garden, 5 Ch. App. C. 32, the language of Lord Hatijeri-ey is: "The court requires distinct evidence of a contract—that the creditor has agreed to effect a policy, and that the debtor has agreed to pay the premiums, and in that case the policy will be held in trust for the debtor."
The case under consideration is not within the facts,and hence is not governed by the principles which ruled the cases above mentioned.
This is a case in which a debtor, presumably at the solicitation of his creditor, effected an insurance on his own life for the benefit of his creditor, the latter being designated in the policy as the beneficiary, and agreeing to pay the expense of effecting the insurance and of keeping the policy in force. It was also agreed that the debtor might at any time pay the debt, and reimburse the creditor for outlays in effecting and maintaining the insurance, and thereby entitle himself to an assignment of the policy. It has never been seriously questioned but that a person may insure his own life, and by the terms of the. policy appoint another to receive the money, upon the event of the death of the person whose life is insured; or, having taken a policy, valid in its inception, that he may in good faith assign his interest in such policy, as in any other chose in action. Hutson v. Merrifield, 51 Ind. 24 (19 Am. R. 722); Franklin Life Iris. Go. v. Sefton, 53 Ind. 380; Ashley v. Ashley, 3 Sim. 149; Mutual Life Ins. Co. v. Allen, 138 Mass. 24; Clark v. Allen, 11 R. I. 439 (23 Am. R. 496). See, also, note to Clark v. Allen, supra, 17 Am. Law Reg. 86; New York Mut. Life Ins. Co. v. Armstrong, Amick r. Butler, Administrator.
117 U. S. 591; Archibald v. Mutual Life Ins. Co., 38 Wis. -542; Eckel v. Rentier, 41 Ohio St. 232.
In either case the essential point is that the transaction be ■bona fide, and not merely a cover for obtaining wagering or merely speculative insurance, and a device to evade the law. Provident, etc., Co. v. Baum, 29 Ind. 236; Olmsted v. Keyes, 85 N. Y. 593; Campbell v. New England M. L. Ins. Co., 98 Mass. 381; Connecticut Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457; Guardian M. L. Ins. Co. v. Hogan, 80 111. 35 (22 Am. R. 180); Murphy v. Bed, 35 Alb. Law Jour. 490; Cunningham v. Smith, 70 Pa. St. 450.
The eases which hold invalid the taking or assignment of insurance policies turn upon the fact that in each case the transaction was found to be merely colorable, and a scheme to obtain speculative insurance. Franklin Life Ins. Co. v. Hazzard, 41 Ind. 116 (13 Am. R. 313); Cammack v. Lewis, supra; Warnockv. Davis, supra.
Where the person whose life is insured is the real contracting party, and continues to pay the premiums, it is of no consequence that the beneficiary, or appointee in the policy, has no insurable interest in the life of the insured. In such a case the policy is valid in auy event, and if the beneficiary or assignee be a creditor, and holds the policy as a security merely, he will be a trustee for the excess, as is any other creditor who holds securities for a debt. In case, however, the party insured is only nominally the contracting party, while the beneficiary named in the policy, or the assignee, has in reality procured the insurance, and paid the premiums, then, in order that the transaction may be taken out of the category of wagering contracts, the beneficiary must have had an insurable interest of a pecuniary character, ■or of that nature, either present or prospective, at the time ilie policy had its inception. A policy so taken is the property of the beneficiary, who occupies in that event no trust relation to the debtor. Hine & Nichols Life Ins. 75.
That a creditor has an insurable interest in the life of his Amick r. Butler, Administrator.
debtor has never been controverted. It is universally allowable that a creditor may in good faith take insurance upon the life of his debtor, either by procuring a policy in which he is designated as the beneficiary, or by assignment. We know of no authority to the contrary of this. While this is true, the amount of the insurance obtained must bear some just proportion to the debt, or the extent of the obligation assumed by the beneficiary, and the probable contingencies attending the future maintenance of the policy. The circumstances must be such as not to raise the presumption that the transaction on its face was a mere speculation.
As was said by the learned judge in Fox v. Penn M. L.. Ins. Co., 4 Big. L. & A. Ins. Rep. 458: "If a man should owe me $10, I can not go and insure his life to the extent of $10,000." Howry v. Home Life Ins. Co., 9 R. I. 346.
The policy can not, however, be limited to the amount of the debt. If it were otherwise the creditor would inevitably be compelled to lose whatever sums he might be required to pay in effecting the insurance and paying premiums.
The beneficiary takes the chances of all future contingencies, including the continued solvency of the company; or if it be a company in which the fund is to be accumulated by assessments upon the members, that a sufficient number will continue therein to pay the debt and reimburse him for his advances.
No general rule applicable to all cases can be laid down, except that the interest must be of a substantial character, and such as, under all the circumstances, to take from the transaction the suspicion of mere wagering. Connecticut Mutual Life Ins. Co. v. Luchs, 108 U. S. 498.
In the case before us the application for membership shows that the person whose life was insured was within a few months of forty-nine years old, and in good health. The certificate of membership required the payment of sixteen dollars into the treasury of the society the first year, ten dollars annually for the ensuing four years, and four dollars annually Amick v. Butler, Administrator.
thereafter during the lifetime of the member, besides paying into the treasury, upon the death of each member, hispro rata mortality assessment. In consideration of the agreement to comply with these, among other conditions, the society agreed to pay the beneficiary named, absolutely, upon the death of the member, the sum of two thousand dollars. In the language of the court in Bevin v. Connecticut Mutual Life Ins. Co., 23 Conn. 244: "All the books hold this to be a sufficient interest to sustain a policy of insurance. * * * The policy must, we think, be held to be a valued policy." See note to Currier v. Continental Life Ins, Co., 52 Am. Rep. 134. The transaction being thus relieved from any features of a merely speculative character, the policy vested an absolute right in the beneficiary named therein tocollect from the society upon the death of the member the full amount stipulated to be paid, and the amount thus collected became the property of the beneficiary, unless the parol agreement to turn the policy over to the debtor upon the conditions already stated affected the creditor with an enforceable trust in favor of the personal representative. We can discover no principle upon which a trust can be maintained in the absence of any offer by the debtor in his lifetime to pay the debt and reimburse the creditor for his advances. The right to the insurance vested absolutely in the beneficiary as soon as the contract, of insurance was consummated. "The moment this policy was executed and delivered, it became property, and the title to it vested in some one. It will not be claimed that it vested in the person whose life was insured. It must have vested then in all or in a part of the payees." Continental Life Ins. Co. v. Palmer, 42 Conn. 60.
The transaction had none of the characteristics of a mortgage. It was entirely at the option of the debtor whether or not he would reimburse the creditor for the sums expended in procuring the insurance. Whatever the creditor might have done in respect to the collection of his debt, it was beAinick i). Butler, Administrator.
youd his power to compel the iusured to reimburse him for his advances iu procuring and maintaining the policy. The debtor had not agreed to repay advances voluntarily made. The advances having been made for the creditor's own benefit, he had no remedy against the debtor or his legal representative to recover them. The rule iu cases involving analogous principles is that where the owner of property vests the title absolutely in another in pursuance of an agreement which gives the grantor the option to repurchase or not, at his election, the transaction does not create a mortgage. Vosa v. EUer, 109 Ind. 260; Hays v. Carr, 83 Ind. 275.
The right to the policy, and to the benefits to be derived therefrom, was absolute in the beneficiary until both the debt and the advances were paid, even conceding that the oral agreement referred to would have been enforceable in the lifetime of the insured.
The beneficiary in a life policy, who has an insurable interest in the life of the insured, at the inception of the policy, may enforce payment for the full amount, notwithstanding the debtor, on whose life it runs, may have paid the debt. "Any interest, sufficient to justify the insurance, and relieve it of the gambling aspect, will render it valid, and such policy will continue valid in the hands of a beneficiary or assignee, regardless of the cessation of interest, provided the facts show entire good faith and a sufficient justification." Hine & Nichols Life Insurance, 82; Olmsted v. Keyes, supra; Connecticut Mut. Life Ins. Co. v. Scliaefer, supra.
Perhaps, owing to the peculiar nature of contracts such as we are considering, if the debtor, iu his lifetime, had tendered the amount of the debt and the advances, the claim of the legal representative might be supported. But, in the absence of an offer to comply with his agreement, we can discover no rational ground upon which the court can now compel the appellant to surrender money to which, according to every principle of law, he has a perfect title, and in