In re Bonvillain

• Decision Date: 05 April 1916
• Docket Number: 2054.
• Citation: 232 F. 370
• Parties: In re BONVILLAIN.
• Court: U.S. District Court — Eastern District of Louisiana

232 F. 370

In re BONVILLAIN.

No. 2054.

United States District Court, E.D. Louisiana.

April 5, 1916

Borah Himel & Bloch, of Franklin, La., for bankrupt.

FOSTER District Judge.

In this matter the bankrupt surrendered certain policies of life insurance, but claimed them as exempt by virtue of Bankr. Act July 1, 1898, c. 541, Sec. 6, 30 Stat. 548 (Comp. St. 1913 Sec. 9590), and the law of Louisiana (Act 189, adopted July 9, 1914). The trustee declined to set aside the policies as exempt, and the bankrupt applied to the referee for an order to compel him to do so. The referee, however, approved the action of the trustee, on the ground that Act 189 of 1914 is unconstitutional with regard to debts existing before its passage, and therefore without application to the said policies. It is this order that is asked to be reviewed.

The bankrupt contends that the trustee is without discretion, and is obliged to set aside and make a report of all property claimed as exempt, leaving it to the creditors to except to the report, if so minded, and hence that the trustee should be ordered to allow the exception. This is entirely too technical a view to take of the matter. The trustee could not arbitrarily refuse to set aside property to which the bankrupt was clearly entitled by law; but he represents all of the creditors, and is vested with some discretion. In a proper case questions regarding the bankrupt's right to exemptions may as well be raised by the trustee as by the creditor, and it is immaterial how this is done, provided all parties have their day in court.

There is no dispute as to the facts. Bonvillain was adjudicated a bankrupt on July 28, 1915. He scheduled unsecured debts amounting to over $47,000 and no assets, except the policies in question, which at the date of the adjudication had net cash surrender values of about $4,000. All of the debts scheduled had matured before the passage of Act 189 of 1914. The policies had all been in existence at least 15 years. They were originally payable to Bonvillain, the insured, or his estate, but some years before bankruptcy had been assigned by him to his wife, with full reservation of his right to change the beneficiary at will. Undoubtedly the policies are such as would pass to the trustee, unless exempt. In re Herr (D.C.) 182 F. 716; In re Jamison Bros. (D.C.) 222 F. 93; In re Shoemaker (D.C.) 225 F. 330; Hiscock v. Mertens, 205 U.S 202, 27 Sup.Ct. 488, 51 L.Ed. 771.

And while it may be conceded Act 189 of 1914 is valid, and not in conflict with either the state or federal Constitutions (Holden v. Stratton, 198 U.S. 202, 25 Sup.Ct. 49 L.Ed. 1018), it could not be, and was not intended to be, retroactive. Therefore, if the ordinary creditors could have looked to the policies for the payment of their debts, the act would have no effect as to them. Louisiana Constitutions, 1898 and 1913, art. 245; Lloyd v. Hamilton, 52 La.Ann. 861, 27 So. 275; Blouin v. Ledet, 109 La. 711, 33 So. 741; Taylor v. Saloy, 38 La.Ann. 65; Martin v. Kirkpatrick, 30 La.Ann. 1214; Sturges v. Crowninshield, 4 Wheat. 122, 4 L.Ed. 529; Gunn v. Barry, 15 Wall. 610, 21 L.Ed. 212; Edwards v. Kearzey, 96 U.S. 595, 24 L.Ed. 793.

Could the creditors of the bankrupt have realized on these particular policies by execution or otherwise. The solution of the question depends on the law of Louisiana. Nichol v. Levy, 5 Wall. 433, 18 L.Ed. 596. There are no Louisiana decisions directly in point, and very few from other jurisdictions. Policies of life insurance are, however, by the modern jurisprudence, treated as property, though of a peculiar kind, and as choses in action, which, though not subject to execution at common law and in the absence of a statute, may be reached in equity by creditors. Kratzenstein v. Lehman, 18 Misc.Rep. 590, 42 N.Y.Supp. 237; Rice v. Smith, 72 Miss. 42, 16 So. 417; Biggert v. Straub, 193 Mass. 77, 78 N.E. 770, 118 Am.St.Rep. 449; Heilbron's Estate, 14 Wash. 536, 45 P. 153, 35 L.R.A. 602; Skinner v. Holt, 9 S.D. 427, 69 N.W. 595, 62 Am.St.Rep. 878; Burlingham v. Crouse, 228 U.S. 459, 33 Sup.Ct. 564, 57 L.Ed. 920, 46 L.R.A. (N.S.) 148.

With regard to the policies herein claimed it will be noted they are at present payable to the wife. By an unbroken line of decisions in Louisiana it is settled that an ordinary policy of life insurance payable to the wife is her separate property, not subject to the community debts, and unassignable without her consent. See Succession of Emonot 109 La. at page 365, 33 So. 368. But the Supreme Court of Louisiana also recognizes the general rule that a policy is a chose in action...