236 F. 882 | 5th Cir. | 1916
At the time the petition in bankruptcy was filed and when the adjudication of bankruptcy was made there were in existence three policies of insurance on the bankrupt’s life, two in the Penn Mutual Life Insurance Company, issued, respectively, in 1902 and 1905, and one in the New York Life Insurance Company, issued in 1902. At that time the bankrupt’s wife was the beneficiary of each of the policies. By the terms of each of the policies the assured, the bankrupt, had the right, at any time during the continuance of the policy, to change the beneficiary if the policy was not then assigned. By the terms of the Penn Mutual policies each of them had a present stated “loan or cash surrender value.” The New York Life policy did not, in terms, provide for a “cash surrender value” during the 20-year accumulation period of the policy, but provided that stated “cash loans can be obtained by the insured on the sole security of this policy on demand at any time after this policy has been in force two full years, if premiums have been duly paid to the anniversary of the insurance next succeeding the date when the loan is made.” The petitions tó superintend and revise bring into question decrees to the effect that the trustee in bankruptcy was not entitled to either of the policies, or to be paid the cash value thereof.
“The assured may direct the money to be paid to Ms personal representative, or to his widow, or to his children, or to his assignee; and upon such direction given, and assented to by the insurer, no other person can defeat the same. But the assignment is good without such assent.”
“The trustee of the estate of a bankrupt, upon his appointment- and qualification * * * shall * * * be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all * * * (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him: Provided, that when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate, or-personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise the policy shall pass to the trustee as assets.” Bankruptcy Act, § 70a.
Under the terms of this section if an existing policy on the life of the bankrupt confers upon him a property interest which prior to the filing of the petition he could by any means have transferred, the trustee is entitled to the policy or its surrender value. Under such policies as those here in question the interest of one who happens to be the beneficiary at the time the bankruptcy of the assured occurs is al
“Congress undoubtedly liad the nature of insurance contracts in mind in passing section 70a with its proviso. Ordinarily the keeping up of insurance of either class would require the payment of premiums perhaps for a number of years. For this purpose the estate might or might not have funds, or the payments might be so deferred as to unduly embarrass the settlement of the estate. Congress recognized also that many policies at the time of bankruptcy might have a very considerable present value which a bankrupt could realize by surrendering his policy to the company. We think it was this latter sum that the act intended to secure to creditors by requiring its payment to the trustee as a condition of keeping the policy alive. In passing this statute Congress intended, while exacting this much, that when that sum was realized to the estate the bankrupt should be permitted to retain the insurance which, because of advancing years or declining health, it might be impossible for him to rejilaee. It is the twofold purpose of the Bankruptcy Act to convert the estate of the bankrupt into cash and distribute it among creditors and then to give the bankrupt a fresh start with such exemptions and rights as the statute loft untouched. In the light of this policy the act must bo construed. We think it was the purpose of Congress to pass to the trustee that sum which was available to the bankrupt at the time of bankruptcy as a cash asset; otherwise to leave to the insured the benefit of his life insurance.”
In view of the policy evidenced by the proviso it cannot be supposed that it was contemplated by the lawmakers that the privilege extended to the bankrupt of retaining his insurance by paying or securing to the trustee the present value which it has was to be withheld because of
Our conclusions are that each of the policies mentioned passed to the trustee, but, as to each of them, subject to the right of the bankrupt to retain or reclaim it by paying or securing to the trustee the sum which the policy by its terms made available to him at the time of the bankruptcy as a cash asset. It follows that the petitions to superintend and revise should be granted and the decrees complained of reversed ; and it is so ordered.