First National Bank v. Thomas

Pattison, J., delivered the opinion of the Court. The Metropolitan Life Insurance Company, of New York, on thé 29th day of October, 1920, at its office in the city of New York, issued unto Frederick H. Blaul, of Cumberland, Maryland, a life insurance policy for the sum of ten thousand dollars, payable to his estate in the event of his death within ten years from its date. This policy was received by Frederick H. Blaul, at Cumberland, Maryland, on November 1st, 1920, and on that day it was delivered to Laura Oliver Thomas, who is the appellee. On the same day he executed a codicil to his will made on the 20th day of October of the same year.

The appellants, Mary Jane Blaul, his wife, and the Liberty Trust Company, of Cumberland, were thereby made executors and co-trustees. The codicil was as follows: “Cumberland, Md., November 1, 1920. “I, Fred H. Blaul, of Cumberland, Maryland, declare this to be a codicil to the last will and testament already made by me. “I hereby give and bequeath to Laura A. Oliver the proceeds of Policy Ro. 2724609-A, amount ten thousand dollars ($10,000), all of which said amount of insurance upon my death shall be paid to Laura A. Oliver, regardless of any other provision made by me in my last will and testament, of which this is a codical. “As witness my hand on the day and year first above written. “Fred H. Blaul (Seal). ²⁴³ This codicil was also delivered to Laura Oliver Thomas, the party mentioned in the codicil, as she says, on the third day of November, 1920. On the 26th day of September, 1922, Blaul died, and at such time the policy mentioned was in the possession of Laura Oliver Thomas. By ah agreement between the attorneys for Laura Oliver Thomas, and the executors of Frederick H. Blaul, respectively, the policy of insurance was turned over by Laura Oliver Thomas to the executors to enable them to collect the proceeds on said policy, it being expressly agreed and understood, however, that the said Laura Oliver Thomas, in so doing, waived none of her legal and equitable rights in and to said policy or in the proceeds thereof.

As Laura Oliver Thomas claimed possession and title to the policy and the executors disputed her title thereto, it was agreed that by turning over said policy to the executors they should proceed to collect the proceeds thereof from the insurance company, and that such proceeds, when so collected, should be held subject to any legal and equitable title of the said Laura Oliver Thomas in and to the said policy, or the proceeds thereof, and subject to any right she might have to recover the same, and it was agreed and understood that the turning over of said policy, as stated, was done without prejudice to either of said parties. The Metropolitan Life Insurance Company paid to said executors the proceeds of said policy and thereafter Laura Oliver Thomas brought suit at law in the Circuit Court for Allegany County against said executors to recover the money they had collected upon the policy. The case was removed to the Circuit Court for Washington County and while it was there pending, and after much testimony had been taken, the bill in this case was filed by the appellant, the First National Bank of Cumberland, Maryland, on its own behalf and all other creditors of Frederick H. Blaul, deceased, who might join in and contribute to the cost of the proceedings, against Mary Jane Blaul and the Liberty Trust Company, executors and co-trustees of Frederick II. Blaul, deceased, and Laura Oliver Thomas, alleging therein not only the facts ²⁴⁴ we have stated, but further alleging that at the time of the alleged gift of the policy of insurance from Frederick H. Blaul to Laura Oliver Thomas, and at the times of the payment of premiums on said policy, the said Blaul was insolvent, an'd continued and remained insolvent until the time of his death; that the alleged gift of the policy was made by delivery of it without any written assignment and without notice to the Metropolitan Life Insurance Company or to any of the creditors of said Blaul; that it was void and was a fraud upon his creditors, and that the premium paid therefor at the issue of said policy and the payment of the premiums thereafter paid were made with money which of right belonged to creditors of said Frederick H. Blaul, and “that upon the face of said policy it appeared to be made for the benefit of his creditors, and that no gift of the same could be made by him without notice to or the consent of said creditors, none of whom gave such consent or had such notice.” It is further alleged that at the time of the .alleged gift, Frederick H. Blaul was indebted to the First Rational Bank in a large sum of money therein named, and that he was so indebted at the time of his death.

The bill also charged that he was indebted to other creditors at the time of. the alleged gift and at the time of the payment of the premiums upon the policy, and continued to be indebted to them to the day of his death; that his estate was “so hopelessly involved, as to leave nothing to any of his creditors, secured or unsecured.” The bill then charged that it was impossible for the rights of the creditors to be heard in the suit at law then pending in Washington County; that a judgment therein against the executors, either as individuals or in a fiduciary capacity, would prevent the equitable rights of all parties interested to be adjudged, and that the title to said policy and the proceeds thereof could not be determined in the proceedings at law; and that Laura Oliver Thomas, the plaintiff, as well as Mary Jane Blaul and the Liberty Trust Company, co-executors, the defendants in that suit, should be required to ²⁴⁵ come into equity and assert any rights they might respectively have to the proceeds of said policy, and that in the meantime the said Laura Oliver Thomas shall be enjoined against the prosecution of said suit in the Circuit Court for Washington County. The bill concluded with the following prayers: 1st. That the title to the said proceeds of said life insurance policy may be determined; 2nd. That the alleged gift of said policy of insurance by the said Frederick H. Blaul to the said Laura Oliver Thomas may be set aside and cancelled and annulled; 3rd.

That the said Laura Oliver Thomas may be enjoined from proceedings with the prosecution o£ the said suit at law in the Circuit Court for Washington County; 4th. For general relief. The executors, as defendants to said bill, answered, admitting the salient allegations of the bill, including the insolvency of Frederick H. Blaul at the times named, and that the gift of the policy was made without any written assignment of it, or without notice to the Metropolitan Life Insurance Company, or the creditors of said Blaul and without lawful consideration; that it was made upon an immoral and illegal consideration and was a fraud upon the creditors of the said Frederick H. Blaul; and they, further answering the bill, alleged that they had the legal and equitable claim and right to the proceeds of the policy, that the same might be distributed to the creditors of Blaul, whose claims were largely in excess of the assets of the estate. They also averred in their answer that the gift was not a legal gift or an assignment of the policy; that the said Laura Oliver Thomas was not entitled to receive the proceeds thereof, but on the contrary the proceeds of said policy were payable to them, as executors, and that they were entitled to the same for the benefit of the creditors of the said decedent.

Laura Oliver Thomas, in her answer to the bill, admitted many of the facts therein alleged, but denied the insolvency of Frederick H. Blaul at the time of the alleged gift or at the times premiums were paid upon the policy. She also ²⁴⁶ denied the necessity of a written assignment of the policy or of a notice to the insurance company or his creditors to make the assignment valid. And she averred that the gift was a gift inter vivos by physical delivery of said policy, and was a legal gift under the laws of Maryland. In her answer she consented to the order enjoining her from proceeding with said law suit, and agreed to be governed by the decision of the lower court or any appeal therefrom.

By an agreement of the solicitors for the respective parties, all errors and irregularities in the pleadings in the case were waived, and the court was asked to determine to whom the proceeds of said policy belonged, under the admitted facts in the pleadings and the testimony taken at the hearing. Evidence was heard by the court both as to the insolvency of Frederick H. Blaul and as to the nature and character of the alleged gift, and it decreed “that the Liberty Trust Company and Mary Jane Blaul, co-executors and co-trustees of the estate of Frederick H. Blaul, deceased, pay the costs of this proceeding out of the proceeds of the insurance policy Mo. 2724609A issued by the Metropolitan Life Insurance Company of Mew York on the 29th day of October, 1920, payable to the estate of Fred H. Blaul for the sum of ten thousand ($10,000) dollars, and that the balance of said proceeds, together with interest- due thereon, be paid by said co-executors and co-trustees to Laura Oliver Thomas.” It is from that decree that the appeal in this case has been taken. The First Mational Bank, in a written agreement with Laura Oliver Thomas, admitted “the validity of the gift of the policy of life insurance in question in this cause except as to the insolvency of Fred H. Blaul, deceased, at the time of making the said gift.” While the executors of Blaul attack the validity of the alleged gift upon the grounds: first, that Laura Oliver Thomas, the appellee, had no insurable interest in the life of Frederick H. Blaul; second, that the assignment of the policy was not in writing; and third, that the delivery of the policy was not a good and complete gift. ²⁴⁷ We will first consider the contentions of the executors in the order stated, dealing first with the contention that Laura Oliver Thomas had no insurable interest in the life of Frederick H. Blaul, and that because of such fact the alleged gift was void. In Rittler v. Smith, 70 Md. 261 , Smith, the appellee, was indebted unto Rittler in the sum of about one thousand dollars and, Smith being insolvent Rittler took out certificates of insurance on Smith’s life in several mutual aid associations.

These certificates were all in favor of Rittler and he paid all the premiums or assessments thereunder. Upon Smith’s death, Rittler collected from these certificates of insurance $2,124.82. After deducting therefrom the debt and interest due Rittler, the premiums he had paid, and the cost and expenses of effecting the insurance, there remained a balance of $473.53. Thereafter the administratrix of Smith filed a bill claiming this balance as belonging to the estate of the decedent.

Rittler in his answer denied her claim, and insisted that the money belonged to him. The case was heard on bill and answer, and the court below decreed in favor of the complainant. Upon appeal to this Court, the decree of the lower court was reversed. In that case, the Court said, “In support of the view taken by the appellee’s counsel, cases have been cited in which it has been held that the assignee of a life