In re Brinson
| Decision Date | 16 December 1919 |
| Docket Number | 1407. |
| Citation | 262 F. 707 |
| Parties | In re BRINSON. |
| Court | U.S. District Court — Southern District of Mississippi |
Magee & Gibson, of Monticello, Miss., for bankrupt.
This is a petition for revision of an order of the referee holding that the trustee in bankruptcy is entitled to the cash surrender value of an insurance policy on the life of the bankrupt, and requiring the bankrupt to pay to the trustee the amount of such cash surrender value before being entitled to claim said policy as exempt.
Among the assets listed in the bankruptcy schedule was a life insurance policy for $1,000, payable to the wife of the bankrupt as beneficiary, but with the right reserved to the insured to change the beneficiary by written notice to the company. The cash surrender value of the policy upon the filing of his petition and on the date of adjudication was $249. This amount, as well as the policy itself, is claimed as exempt by the bankrupt.
When he filed his petition the bankrupt also claimed as exempt certain real estate and $250 in cash out of $996.58 which he had on hand. The claim for land exemption was denied, and the one for $250 in cash allowed by the referee, and no appeal was taken from his order in either instance.
But the trustee demanded payment of the sum of $249, which was the cash surrender value of the insurance policy, and the referee entered an order requiring payment thereof by the bankrupt within 30 days, and providing that, should the bankrupt fail within said time, to comply with the terms of said order then the trustee was directed to take the necessary steps to obtain from the insurance company the said sum, either as cash surrender value or loan value, for the benefit of the creditors of the estate. Ten days were allowed in the order in which the bankrupt might appeal therefrom, which appeal was duly taken.
The bankrupt claims that the cash surrender value of the policy is exempt under the Mississippi law. The referee after quoting section 70a of the Bankruptcy Law (Act July 1, 1898, c. 541, 30 Stat. 565 (Comp. St. Sec. 9654)), says in his certificate:
Section 6a of the Bankruptcy Act is as follows:
' Act July 1, 1898, c. 541, 30 Stat. 548, Sec. 6 (Comp. St. Sec. 9590).
The claim of the trustee to the cash surrender value of this policy depends entirely upon section 70a of the Bankruptcy Law, which provides that the trustee of the estate of a bankrupt, upon his appointment and qualification, shall be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, to all of his property of designated kinds, 'except in so far as it is to property which is exempt.'
There is a proviso to subdivision 5 of section 70a which says 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 30 days after the cash surrender value has been ascertained, pay or secure to the trustee the sum so ascertained, and continue to hold and own such policy free from the claims of creditors participating in the distribution of his estate, but that if he fails to do this the policy shall pass to the trustee as assets.
It is obvious that sections 6a and 70a first preserve to the bankrupt the title to all property exempt to him by law, and in addition that the proviso to 70a gives the bankrupt the right to secure to himself any nonexempt insurance policy free from claims of creditors by paying to the trustee within a stipulated time the cash surrender value. The trustee takes no title to any life insurance policy which is exempt under the law of the state; but, if the policy is not so exempt, the trustee takes a qualified title, defeasible by the bankrupt upon payment of the cash surrender value of the policy.
I do not think the case of Cohen v. Samuels, 245 U.S. 50 38 Sup.Ct. 36, 62 L.Ed. 143, is decisive of the question here, because there the policy was not claimed as exempt under the state law. There, as here, the policy was upon the life of the bankrupt, payable to another as beneficiary, but with the absolute right in the insured bankrupt to change the beneficiary without the latter's consent, and there, as here, the policy had a cash surrender value, which the company was willing to pay to the bankrupt. But there, as here, the policy was not directly in words payable to the bankrupt, and therefore literally did not fall within the terms of the proviso 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 continue to hold and own the same by paying to the trustee the cash surrender value thereof. The court held that under subdivision 3 of section 70a the trustee was vested with all powers which the bankrupt might have exercised for his own benefit, and that, although the policy was not payable to the bankrupt, it could have been so payable at his own will and by his simple declaration. The effect of this decision is simply that, where the...
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