Foley v. Equitable Life Assur. Soc. of United States

• Citation: 49 N.E.2d 511,290 N.Y. 424
• Parties: FOLEY v. EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES.
• Decision Date: 20 May 1943
• Court: New York Court of Appeals

290 N.Y. 424

49 N.E.2d 511

FOLEY

v.EQUITABLE LIFE ASSUR. SOC. OF UNITED STATES.

Court of Appeals of New York.

May 20, 1943.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Lillian Foley against the Equitable Life Assurance Society of the United States to recover the cash surrender value of certain lapsed policies of insurance issued on the life of her judgment debtor. From an order of the Appellate Division of the Supreme Court, entered April 6, 1942, 263 App.Div. 605, 33 N.Y.S.2d 917, reversing on the law and the facts a judgment n favor of plaintiff entered upon a decision of the Supreme Court at Trial Term, 31 N.Y.S.2d 992, Daly, J., presiding, a jury having been waived, and granting a new trial, reargument of the Appellate Division order having been denied, 264 App.Div. 780, 35 N.Y.S.2d 726, plaintiff appeals.

Order of the Appellate Division reversed, and judgment of trial court modified in accordance with opinion and as so modified affirmed. Emanuel Redfield, of New York City, for appellant.

James D. Ewing and Eugene Z. DuBose, both of New York City, for respondent.

CONWAY, Judge.

There is presented for our determination a question as to the power and authority of a receiver in supplementary proceedings to make an election on behalf of an insured judgment-debtor to receive the cash surrender value or other designated cash value of certain insurance policies under applicable provisions of the policies.

The plaintiff was the wife of the debtor upon whose life twenty-four policies of insurance had been written by the defendant. Twelve of those policies may be designated as Class A policies and the other twelve as Class B policies. All twenty-four provided for a monthly life annuity payment to the debtor after he reached the age of sixty-five years or payment to his executors or administrators if he died before reaching that age.

In the Class A policies there were the following pertinent provisions: ‘Within three months after default in the payment of any premium after one full year's premium has been paid, the Annuitant may surrender this contract and elect one of the following Options: (a) Cash Value. To receive the Cash Surrender Value as provided in Schedule ‘C.’ (b) Paid-up Life Annuity. To purchase a nonparticiapting paid-up Life Annuity with monthly payments * * * (after sixty-five). If the Annuitant does not elect one of said Options within three months after such default, this contract will become a paid-up Life Annuity as provided under Option (b). * * *‘

In the Class B policies the pertinent provisions were:

‘Within three months after default in the payment of any premium after one full year's premium has been paid, the Annuitant may surrender this contract and elect one of the following Options: (a) Cash Value. To receive the Cash Surrender Value as provided in Schedule ‘C.’ (b) Paid-up Life Annuity. To purchase a non-participating paid-up Life Annuity with monthly payments * * * (after sixty-five). Such paid-up Life Annuity may be surrendered by the Annuitant on any anniversary of the Register date of this contract for its cash value, which shall be an amount equal to the sum which would have been payable in event of the death of the Annuitant at the date of such surrender.

‘If the Annuitant does not elect one of said Options within three months after such default, this contract will become a paid-up Life Annuity as provided under Option (b). * * *’

It will thus be noted that to obtain the cash surrender value of a Class A or Class B policy the annuitant was required to surrender his policy within three months after default, following the payment of one full year's premium, but that as to the Class B policies a paid-up Life Annuity policy could be surrendered and a cash value, as fixed in the policy, obtained on any anniversary of the Register date of the policy.

In 1934, plaintiff obtained a judgment against the debtor for $16,650. A subpoena was served upon the defendant in supplementary proceedings following the entry of judgment and thereafter an order was made appointing a receiver of the property of the debtor and of all his rights under the policies. On the return date of the motion for the appointment of the receiver, the brother of the debtor appeared and asserted that the policies had been assigned to him by the debtor by assignment dated November 23, 1935, and the debtor appeared and claimed that the policies were not subject to claims of his creditors under the laws of Pennsylvania of which he was a resident. Nevertheless a receiver was appointed on January 23, 1936, and he was directed, before entering upon the duties of his trust, to execute and file a bond to be approved by the court in a sum designated.

Plaintiff, who subsequently became assignee of the receiver so appointed, and the defendant appear to agree that the date to which the title of the receiver related back under Civil Practice Act, sections 807 and 808 is November 6, 1935, which was the return date of the subpoena served upon defendant, although the subpoena had been served prior thereto, and we shall take that as the appropriate date. See Foley v. Equitable Life Assur. Soc., 173 Misc. 1031, 1032, 19 N.Y.S.2d 502. The receiver, however, although appointed by order dated January 23, 1936, did not have his bond approved until February 9, 1937, and it was not filed until four days later.

In the meantime the attorney who represented both the plaintiff and the receiver, following defaults in payments of premiums by the debtor, made demands upon the defendant for the payment of the cash surrender values of the policies. Under applicable provisions of the Class A and Class B policies those demands were timely only as to four of the policies in each class in that they were made within three months after defaults.

In order to assist creditors the Legislature has provided by Civil Practice Act, sections 807 and 808 as follows:

‘s 807. Vesting of property in receiver. The property of the judgment debtor, whether acquired before or any time after the appointment of a receiver, is vested in a receiver who has duly qualified, from time of filing the order appointing him or extending his receivership. * * *

‘s 808. Extension of receiver's title to personal property. Where the receiver's title to personal property has become vested, as prescribed in the last section, it also extends back by relation, for the benefit of the judgment creditor in whose behalf the special proceeding was instituted, as follows: * * *

‘2. Where an order, subpoena or warrant has not been served, as specified in the foregoing subdivision (on judgment debtor), but an order has been made or subpoena issued requiring a person to attend and be examined concerning property belonging, or a debt due, to the judgment debtor, the receiver's title extends to the personal property belonging to the judgment debtor, which was in the hands or under the control of the person or corporation thus required to attend, at the time of the service of the order or subpoena, and to a debt then due to him from that person or corporation. * * *’

The general rule is well stated in Clark on Receivers, section 223, as follows: ‘The status of the property and the relations toward it of all parties interested in it, are fixed by the order appointing a receiver and the conditions are not changed by an order providing that the receiver shall give bond for the faithful discharge of his duties in order that the property may be bound and the rights of creditors therein secured. If the jurisdiction of the court over the property did not attach contemporaneously with the order appointing a receiver, the purpose of the court in appointing a receiver might be defeated by the failure of the person appointed receiver to accept the position, or his inability to give the bond required. Or, in the interim between the order appointing a receiver and his giving the required bond, a creditor might obtain an advantage by securing a confession of judgment, and in innumerable other ways. The order for the appointment of a receiver, followed by the consummation of the appointment by the giving of a bond, vests the estate of the judgment debtor in such receiver as of the date of the order, without the execution of any transfer or assignment according to the New York law.’ See to the same effect, Matter of Schuyler's Steam Tow Boat Company, 136 N.Y. 169, 32 N.E. 623,20 L.R.A. 391 (revd. on another point sub nom. Moran v. Sturges, 154 U.S. 256, 283, 284, 14 S.Ct. 1019, 38 L.Ed. 981);Matter of Christian Jensen Co., 128 N.Y. 550, 28 N.E. 665;Matter of Delaney, 256 N.Y. 315, 319, 176 N.E. 407.

It may well be urged that when the receiver finally qualified by the filing of a bond and his title related back, in this instance by seeming agreement of the parties to the return date of the subpoena served upon the defendant, that all the incidents should also be related back to the should also be related back to the same date. There are some difficulties, however, which militate against such a holding and which we think are determinative at least in this instance. Assuming that the right of election could be exercised by the receiver before his qualification, there would be no one to whom this defendant could have paid the cash...