Slurszberg v. Prudential Ins. Co. of Am.

• Decision Date: 13 February 1936
• Citation: 192 A. 451
• Parties: SLURSZBERG et al. v. PRUDENTIAL INS. CO. OF AMERICA.
• Court: New Jersey Supreme Court

192 A. 451

SLURSZBERG et al.

v. PRUDENTIAL INS. CO. OF AMERICA.

Supreme Court of New Jersey, Hudson County.

Feb. 13, 1936.

Action by Abraham J. Slurszberg and another, receivers of the Jewett Realty Corporation, against the Prudential Insurance Company of America, a New Jersey corporation. On defendant's motion to strike the second amended complaint.

Motion granted.

Frank W. Heilenday, of Jersey City, for plaintiffs. Perkins, Drewen & Nugent, of Jersey City, for defendant.

ACKERSON, Supreme Court Commissioner.

The first amended complaint herein having been previously stricken out upon motion, the defendant now moves to strike the second amended complaint upon the grounds that it is frivolous; shows no right, title, or interest in the plaintiff to the cash surrender value of the insurance policy upon which the action is based, and that the proceeds of said policy are exempt from the claims of creditors.

The second amended complaint discloses that on May 5, 1925, the defendant company issued its policy of insurance on the life of Thomas Sluberski in the sum of $5,000, payable to said Sluberski twenty years after the date of the policy, provided insured is then living, or, in the case of the prior death of the insured, then to his wife as beneficiary, with the right reserved by the insured to change the beneficiary and providing for a cash surrender value to the insured under certain specified conditions after the second year, increasing in amounteach year. It is specifically alleged that the premiums were paid in full until April 1, 1931, at which time the cash surrender value of the policy was $1,247.40.

The complaint further alleges that on November 29, 1928, the insured became indebted to the Jewett Realty Corporation in the sum of $1,600, and on March 5, 1932, a receiver of said corporation recovered a judgment against said insured for $1,417, and that on April 15, 1932, the right, title, and interest of the insured in said policy of insurance was sold by the sheriff under an execution upon said judgment to said receiver, and the policy was delivered to him. A copy of the policy in question is now annexed to and made a part of this complaint and by amendments the complaint is further made to allege that both the assured and the beneficiary were alive at the time of said levy and sale of said policy and are still alive; that "no claim for exemption pursuant to sections 38 and 39 of the New Jersey Insurance Law [2 Comp.St.1910, p. 2850, §§ 38, 39] was made either by Thomas Sluberski or any other person"; that, "by virtue of said execution levy and sale, all of the right, title and interest of said Thomas Sluberski" (the assured) "in and to said policy, * * * was assigned by operation of law" to said receiver, and "on or about April 20th, 1932, a written notice of said assignment was delivered to the defendant and accepted by it, and the said policy was duly surrendered to the defendant and demand made * * * for its cash surrender value, but the defendant refused and still refuses to pay the same or any part thereof", and that at said times the "policy was in full force and effect." It is further alleged that the plaintiffs were duly substituted as receivers of the Jewett Realty Corporation. It is important to note, however, that the complaint does not allege that the insured, Thomas Sluberski, ever assigned the policy to the plaintiffs or their predecessor, nor that he ever exercised his right to surrender the policy and receive the cash surrender value, or authorized the plaintiff to do so, or ever changed the beneficiary. Furthermore it is not alleged that the sale by the sheriff is expressed in any writing, nor that the alleged assignment "by operation of law" is evidenced by any written instrument whatsoever, nor that plaintiffs or their predecessor ever applied to change the beneficiary.

Since the plaintiffs are, in legal contemplation, creditors of the insured, it follows that the legal sufficiency of the complaint in this action depends in the first place upon whether the policy in question (or its alleged cash surrender value) is exempt from the claims of the creditors of the insured by virtue of sections 38 or 39 of the "Insurance Act" (P.L.1902, p. 422, [2 Comp.St.1910, p. 2850, §§ 38, 39]), which provides as follows:

38. "When a policy of insurance is effected by any person on his own life, or on another life in favor of some person other than himself having an insurable interest therein, the lawful beneficiary thereof, other than himself or his legal representatives, shall be entitled to its proceeds, against the creditors and representatives of the person effecting the same; * * * provided, that, subject to statute of limitation, the amount of any premiums for said insurance paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy."

39. "Every policy of life insurance made payable to or for the benefit of a married woman, * * * whether procured by herself, her husband or by any other person, * * * shall inure to her separate use and benefit, and to that of her children, according to the terms and provisions of the policy, * * * subject to the above provisions relating to premiums paid in fraud of creditors."

Plaintiffs insist, in the first place, that these sections of the "Insurance Act" do not apply to the policy in question because it is asserted that the policy is an endowment policy, a mere device for saving, and not a life insurance policy as contemplated by the foregoing statute; and that in any event the insured is the present "lawful beneficiary," and, in order to be exempt from execution, the policy must be "in favor of some person other than himself" (the insured).

The difficulty with the first contention is, that, while the policy in question may contain investment features so far as the endowment provision is concerned, nevertheless, the policy contains a definite life insurance feature also, and the Legislature did not specify that the exemption would not apply if the policy contained features and benefits in addition to regular life insurance. The Legislature was concerned with protecting the future of those dependent upon the continued life of the insured no matter by what name the policy is designated or how many other features or benefits it may contain.

It is a matter of common knowledge that life insurance policies are termed "general," "ordinary," "old-line," "paid-up," "tontine," "assignment," "endowment," etc., dependent upon the terms and conditions of the different forms of contracts. The newer forms of policies and their broader provisions are designed to meet competition between the companies and to attract purchasers. In Cooley on Insurance, vol. 1, pp. 782, 783, we find this statement: "Life insurance is not, however, necessarily insurance for the full term of one's life. Some life policies are contracts of investment as well as of insurance."

The addition of these new features does not, however, divest the policy of its chief character, or make it other than a life insurance policy. Baranovich v. Hor-watt (Aetna Life Insurance Co.), 113 Pa. Super. 467, 173 A. 676.

Regarding plaintiffs' second contention it may be said that, while the endowment or investment feature of this policy is payable to the insured, contingent, of course, upon his being alive at the end of twenty years from its date, nevertheless, the life insurance provision of the policy covering the intervening period is "in favor of some person other than himself," and so falls within the specification for exemption required by the statute. The plaintiffs Overlook these separate and distinct features of the policy.

The plaintiffs further claim that sections 38 and 39 of said "Insurance Act" are unconstitutional in that they violate article 4, section 7, subsection 4, of the State Constitution, which provides that: "To avoid improper influences which may result from intermixing in one and the same act such things as have no proper relation to each other, every law shall embrace but one object, and that shall be expressed in the title."

The full title of the act in question is: "An Act to provide for the regulation and incorporation of insurance companies and to regulate the transaction of insurance business in this state."

It is argued that the aforesaid sections of the "Insurance Act" make the legislation dual in character, i. e., insurance, and the exemption of the proceeds thereof from execution, and that the latter object is not expressed in the title of the act.

The test to be applied in determining this question is found in Stockton v. Central R. R. Co., 50 N.J.Eq. 52, 70, 24 A. 964; 971, 17 L.R.A. 97, where it is said: "The end aimed at is that each law shall have a single general object, which shall be stated in its title, and that all parts of the law shall be germane to that one subject." (Italics mine.)

The origin of life insurance is traceable to benevolent motives, the object being to secure to the family of a person who is dependent on a salary, or other income which ceases with his life, a support upon the death of insured, by small contributions from the annual income. 37 C.J. 360, § 3.

Sections 38 and 39 of the act in question are clearly germane to the subject of life insurance, and are intended to secure its primary object as above explained, i. e., to secure to the widow of the insured a support upon his death by keeping the proceeds of the policy intended for her benefit free from the claims of the insured's creditors. The "transaction of insurance business" not only comprehends the writing of policies upon the life of an insured, but also the payment of the proceeds thereof at his death. Hence the protection of such proceeds to effectuate the object of the insurance as above expressed is germane to the subject of transacting insurance business.

It seems idle to argue that legislation upon the subject...