Gould v. New York Life Ins. Co.

• Decision Date: 02 November 1904
• Citation: 132 F. 927
• Parties: GOULD v. NEW YORK LIFE INS. CO. et al.
• Court: U.S. District Court — Eastern District of Arkansas

132 F. 927

GOULD v. NEW YORK LIFE INS. CO. et al.

United States District Court, E.D. Arkansas, Western Division.

November 2, 1904

J. M. &amp J. G. Taylor, for plaintiff.

Rose Hemingway & Rose, for defendant New York Life Ins. Co.

White &amp Altheimer, for defendant Sallie A. McKenzie.

This cause having been submitted to the court, a trial by jury having been waived, the court made the following findings of facts:

The plaintiff is trustee in bankruptcy of the estate of B. F McKenzie, who died after the adjudication in bankruptcy. He seeks to recover by this action the sum of $5,000 from the defendant insurance company on a policy issued by it on May 16, 1903, on the life of the deceased bankrupt. The policy was a twenty annual payment life policy, payable upon the death of the assured to his executors, administrators, or assigns. The widow of the deceased bankrupt having made a claim for the money as administratrix of the estate of her deceased husband and also as the widow, the insurance company declined to pay the money, whereupon this suit was instituted, making the insurance company and the administratrix and widow of the deceased bankrupt parties defendants. The insurance company admitted an indebtedness of $4,731.92 on the policy, and paid the money into court, leaving it to the court to determine who is entitled thereto. The other defendants filed separate answers, the administratrix claiming the fund as belonging to the estate, and the widow claiming dower if it is held that the money belongs to the trustee in bankruptcy. Other facts agreed upon by the parties and adopted by the court as part of its findings of facts are as follows: 'On May 16, 1903, Ben F. McKenzie took out a policy of insurance in the New York Life Insurance Company for $5,000. He did not pay the premiums in cash, but executed his note for same, which was paid by the company, deducting the amount thereof from the face of the policy which was paid into court. That on the 16th day of May, 1903, he took out another policy of insurance in the Union Central Life Insurance Company for the sum of $5,000. Both of these policies were payable to the estate of the said Ben F. McKenzie, and are hereto attached, and made part hereof. On February 16, 1904, McKenzie, on his own petition, was adjudicated a bankrupt by the District Court of the United States, Eastern District Of arkansas, and on the-- day of February, James Gould was appointed as trustee of his estate. In the schedules filed by McKenzie as aforesaid the policies of insurance were listed as part of his assets, but the policies were retained by McKenzie. On the 11th day of May, 1904, at his examination held before the referee, McKenzie was ordered to and did turn over these policies to the attorneys of the trustee. The annual premium of $254.85 on the policy issued by the New York Life became due on May 16, 1904, and the premiums on the Union Central policy became due one year after the date of its issuance. It was provided in the policy issued by the New York Life Insurance Company that if the premium should not be paid on May 16, 1904, the policy should be automatically extended for its full value until July 16, 1904. The trustee in bankruptcy did not pay the premium due on May 16th, nor report to the court the fact that such premiums were due, and did not ask an order to pay such premiums, or an order to revive said policy. Neither did the trustee have the policy appraised, or offer same for sale with the other assets of the bankrupt, nor did the trustee ascertain the cash surrender value of the policy at the date of adjudication, or give the bankrupt an opportunity to pay same to him. That, if the bankrupt had lived until after July 16th, the policy would have lapsed, as did the policy in the Union Central Insurance Company, on account of the failure of the trustee to pay premiums. That at the time of his death the bankrupt was about thirty years of age, and in good health, and the cause of his death was suicide. That the policies had no cash surrender value on the date of adjudication, and would not have had any until two annual premiums had been paid. That the said Ben. F. McKenzie died by his own hand on June 19, 1904, leaving, him surviving, the defendant Sallie A. McKenzie, his widow, with whom he had intermarried on January 17, 1901, and that he and the said Sallie A. McKenzie lived and cohabited together as man and wife from that date until his death. ' The court further finds that the policy had no substantial value at the time of the bankrupt's adjudication, its only value being speculative, depending upon the death of the bankrupt before July 16, 1904.

TRIEBER District Judge.

The determination of the questions of law involved in this case depends upon the construction of section 70 of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat.565 (U.S. Comp. St. 1901, p. 3451)). Neither the Supreme Court of the United States nor the United States Circuit Court of Appeals for this, the Eighth, Circuit, the only courts whose judgments are conclusive on this court, has ever construed this section on the issues involved herein. While there are a number of decisions of other courts on this subject, they are anything but harmonious. The court must, therefore, determine this cause according to its own judgment, aided by the reasoning of the learned judges who have heretofore passed upon these questions.

Section 70 of the bankruptcy act, which is entitled 'Title to Property,' provides what property of the bankrupt shall pass to the trustee.

After enumerating certain specific kinds of property in the first four subdivisions, the fifth is as follows:

'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 sums 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.'

The contention of the learned counsel for the defendant is that under this provision the title to a life policy, payable as the one in controversy is, to the assured's executors administrators, or assigns, does not pass to the trustee in bankruptcy, because it has no surrender value. The intent of Congress, as clearly expressed in section 70, was that the title to all property of the bankrupt not exempt under the laws of the state where the bankrupt resides from levy or sale under execution, and from the sale of which by the trustee something may be realized for the benefit of the bankrupt's creditors, should vest in the trustee. It will be noticed that this subdivision 5, Sec. 70a, 30 Stat. 566 (U.S. Comp. St. 1901, p. 3451), provides for the vesting in the trustee of the title, not only of all property subject to seizure or sale under judicial process, but also all property which, prior to the filing of the petition, the bankrupt might have transferred. This practically covers everything which the bankrupt might own, and from which, by...