228 F. 339 | E.D. Pa. | 1915
In the view we have taken of this case a short outline statement will put us in possession of all the facts necessary to an understanding of the controlling questions involved. We will give in the order named the facts admitted; those in controversy and those of the latter found by the referee.
Joseph J. Flanigan on May 5, 1902, took out a policy of insurance for $10,000 on his life in the Equitable Life Assurance Society. It was made payable to his wife, Margaret Flanigan, in case she survived him, and otherwise to his estate. On February 5, 1915, a petition in bankruptcy was filed, followed in due course by an adjudication and the election of a trustee. The bankrupt disclosed the existence of the policy by filling in the usual forms provided for the purpose accompanying his schedules. The policy was then in' force, the premiums having been paid to May 5, 1915. It had an agreed surrender value, of $2,500. The policy itself was not in the possession of the bankrupt, but of his wife. The trustee demanded it of her, that he might surrender it,.in order to receive its surrender value from the insurance company or from the bankrupt. The wife refused to give it up, claiming it to be her property. The trustee thereupon filed his petition, setting forth the facts, and praying for a sum-
The petition for review assigns for error: (1) The entertaining summary jurisdiction by the referee; (2) his conclusion that the title of the wife must rest upon a contract, which is itself based upon a consideration; (3) his finding that the premium moneys paid were not the moneys of the wife; and (4) his finding that the testimony of the wife was not credible.
Discussion.
A view of the actual situation makes this clear. Congress had in direct contemplation a policy of insurance payable to the bankrupt or his estate. The right of the bankrupt in the contract would be a chose in action, and the title to this as property would pass, along with the other property of the bankrupt, to and vest in the trustee. It would not ordinarily be practicable for the trustee to continue the premiums, and in consequence he would surrender the policy and receive the cash surrender value. The bankrupt might be of such an age or in such a state of health that the cancellation of the policy would be a loss to him, without any further benefit to the bankrupt estate than the cash surrender value. The Bankruptcy Act gives the bankrupt the privilege of paying within a limited time the cash surrender value to the trustee. If the money is paid, the title to the policy reverts to the bankrupt, clear of the claims of all creditors who prove their debts. It is evident that in the one case tire trustee collects from the insurance company the cash surrender value through and by his ownership and control of the policy. In the other case he obtains, not the surrender value, but an equivalent sum, through the same means, by giving up the ownership and control of the policy to the bankrupt. If the bankrupt declined to pay the trustee, and the trustee kept the policy alive, instead of surrendering it, the insurance moneys, when they became payable, would be payable to the trustee. If the trustee did not have the ownership and control of the policy, but it had been bona fide and for value assigned, and belonged to some one else having an insurable interest, the trustee could neither surrender it to the insurance company nor sell it to the bankrupt, and in consequence could get nothing. The fact (as is the case here) that the policy names the'wife as beneficiary does not in principle alter the rights of the trustee. What passes to him by operation of the bank
This conclusion leads to the direction that the order of the referee