The Government has moved for summary judgment in an action to foreclose tax liens on insurance policies.
April 18, 1960, the District Director of Internal Revenue, having assessed against Brody federal taxes amounting to $193,136.12 plus interest, and having vainly demanded payment by Brody, served upon The Equitable Life Assurance Society a notice of levy. The notice, after referring to the lien provided for by § 6321 of the Internal Revenue Code of 1954 [see 26 U.S.C., 1958 ed., § 6321] stated that “all property * * * [and] credits * * * now in your possession and belonging to this taxpayer (or with respect to which you are obligated) * * * and all * * * obligations owing from you to this tаxpayer are hereby levied upon and seized for satisfaction of the aforesaid tax.”
Pi'eviously Equitable had issued two policies upoxx the life of Bx-ody.
(1) Policy 11,653,183, in the face amount of $30,000, is a 15 year endowment plan policy issued in 1943. It matured as an endowment on April 28, 1958, and (after deduction of a policy loan) had a value of $3,821.15, as of the date of defendant’s answer on December 15, 1961. The policy provides that the insurer will pay to the insured the face amount (less, of course, loans, etc.) on April 28, 1958 “provided * * * *907 this policy is then in force and is then surrendered properly released.”
(2) Policy 10,777,528, in the principal sum of $1,000, is a policy on the convertible plan with the right to change the policy reserved to Brody. In July 1956 Brody elected to convert this policy to an endowment policy to mature Jаnuary 21, 1962. In June 1956 Brody prepaid all remaining premiums. On January 24, 1957, at Brody’s request, the Equitable endorsed a change of beneficiary to the “U.S. Treasury Department — Internal Revenue Service” as beneficiary fоr any death benefit. Brody remained the endowment payee. The policy provides that the insurer will pay the insured on January 21, 1962 the face amount (less, of course, loans, etc.) “provided * * * this poliсy * * * is then surrendered properly released.”
October 27, 1961 the United States filed in this Court its complaint, seeking enforcement of its tax liens, and naming as defendants Brody and the Equitable. Brody, although he had been a resident of Massachusetts, was not found in this District and was not served personally. Equitable, being authorized by the Commonwealth of Massachusetts to do business here, answered on December 15, 1961. It defended on the ground that the venue of this action did not lie in Massachusetts, that Brody was an indispensable party, and that until the policies were surrendered Equitable was under no liability.
July 9, 1962, on motion by the United States, this Court, pursuant to 28 U.S.C. § 1655, as construed in United States v. Metropolitan Life Ins. Co., 4th Cir.,
December 18, 1962 the United States filed a motion for summary judgment, accompanied by an affidavit and certificates. February 4, 1962 Equitable filed an affidavit which does not contradict any of the material facts alleged by the Government, but which does state that a Florida attorney of Brody has the two policies in Miami Beach.
For the following reasons this Court has concluded to grant the Government’s motion.
1. Jurisdiction of this Court rests upon 28 U.S.C. § 1340 which provides that “The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue.”
2. Alternаtive statutory bases justify laying the venue of this action in this District. 28 U.S.C. § 1391(c), providing that “A corporation may be sued in any judicial district in which it is * * * licensed to do business”, applies to a suit against Equitable, which is licensed to do business in Massachusetts. 28 U.S.C. § 1396, providing that “Any civil action for the collection of internal revenue taxes may be brought in the district where the liability for such tax accrues, in the district of the taxpayer’s residence, оr in the district where the return was filed,” applies to this action for the collection of internal revenue taxes due from Brody whose liability for tax accrued in Massachusetts and who filed his tax here.
3. § 6321 of thе Internal Revenue Code of 1954, 26 U.S.C., 1958 ed., § 6321, provides that “If any person liable to‘ pay any tax neglects or refuses to pay the same after demand, the amount * * * shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” In construing the predecessor of this statute, § 3670 of the Internal Revenue Code of 1950, which used identical words, the Supreme Court held that the interest •which an insured had in the cash surrender value of a life insurance policy constituted “property or rights to property.” United States v. Bess,
4. However, Equitable аrgues that the Government’s lien is not enforceable because this Court has not within its jurisdiction the policies themselves, and, Brody not having appeared, this Court cannot compel the Florida attornеy to bring these policies from Miami Beach. At the root of that argument is the misconception that the insurance policies here involved are specialties embodying rights of action, and anаlogous to investment securities which cannot be levied upon until the security is actually seized. Cf. Uniform Commercial Code § 8-317(1); Mass.G.L. c. 106 § 8-317(1). But in a non-negotiable policy the instrument itself is not the vital thing; rights in connection with it do not pass to one who is merely a bona fide transferee for value of the instrument itself. Interests in a nonnegotiable insurance policy, like interests in any contract, are incorporeal choses in action. When a court has jurisdiction over the obligor, that is, the insurance company, it has power effectively to deal with the obligation. United States v. Metropolitan Life Ins. Co., 4th Cir.,
5. Furthermore, Equitable is mistaken in assuming that because Brody has not personally appeared in this case, and has not been personally served, Equitable may later be required to make a second payment to Brody. In this case this Court caused Brody to be served by publication, pursuant to 28 U.S.C. § 1655. “As the .insured was not present within the state, it was proper that he be served by publication.” United States v. Metropolitan Life Ins. Co., 4th Cir.,
6. Equitable also argues that, apart from general considerations, these particular insurance policies preclude this Court from enforcing the Government’s lien unless the Government causes the policies themselves to be surrendеred. The contention is that these policies specifically make it a condition precedent to Equitable’s duty to pay that it receive a surrender of the policies themselves. Admittedly such а contention finds support in the discredited rulings in United States v. Mass. Mut. Life Ins. Co., 1st Cir.,
7. The surrender of the policies themselves would be a formality serving absolutely no purpose in the case at bar. Neither policy is negotiable. By now both policies have matured and there could be no claimants except persons who ■derived through Brody, thе endowment payee. Even when this action was brought, that is, even before the second policy had matured, the only potential beneficiary of a death payment was the plaintiff in the case, the United States. :So the insurance company never ran any risk that upon these policies a valid claim ■could be made by some one not a party or privy to this case. And indeed it is not clear how at any time possession of the policies themselves would, except in an evidential sense, help any claimant thereunder.
8. But there is a principle, broader than the facts just recited, whiсh shows that there is no merit to Equitable’s contention that it is entitled to get the policies before it makes payment. The ■only substantive reason for an insurer wanting the policies themselves is to precludе groundless claims based thereon .after the policies had been fully paid. But against such groundless claims Equitable “will be as well protected by the .judgment of the court as by the surrender of the policies, since the policies ■are not negotiable.” United States v. Metropolitan Life Ins. Co., 4th Cir.,
To refuse the United States the right to reach Brody’s property because it has not produced Brody’s policiеs would be to allow the insurance company to insist •on a formality that has no discernible substantial significance. Just as the insurer would not be allowed to withhold payment if the policies had been physically destroyed, so this Court sees mo reason to allow the insurer to withhold payment when this Court’s judgment will legally destroy any further obligation of the insurer.
Motion for summary judgment granted.