Klebanoff v. Mutual Life Insurance Company of New York

• Decision Date: 15 July 1965
• Docket Number: Civ. No. 9893.
• Citation: 246 F. Supp. 935
• Parties: Sayre W. KLEBANOFF, Plaintiff, United States of America, Intervening Plaintiff, v. The MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Defendant and Plaintiff on Interpleader Counterclaim, v. Sayre W. KLEBANOFF, the Tradesmens National Bank of New Haven, and W. Paul Flynn, Trustee in Bankruptcy of the Bankrupt Estates of Sayre W. Klebanoff and M. Edward Klebanoff, Defendants on Interpleader Counterclaim.
• Court: U.S. District Court — District of Connecticut

246 F. Supp. 935

Sayre W. KLEBANOFF, Plaintiff, United States of America, Intervening Plaintiff, v. The MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Defendant and Plaintiff on Interpleader Counterclaim, v. Sayre W. KLEBANOFF, the Tradesmens National Bank of New Haven, and W. Paul Flynn, Trustee in Bankruptcy of the Bankrupt Estates of Sayre W. Klebanoff and M. Edward Klebanoff, Defendants on Interpleader Counterclaim.

Civ. No. 9893.

United States District Court D. Connecticut.

July 15, 1965.

COPYRIGHT MATERIAL OMITTED

Ira B. Grudberg, of Jacobs, Jacobs, Jacobs & Jacobs, New Haven, Conn., for Sayre W. Klebanoff, plaintiff in main action and a defendant on counterclaim.

Philip S. Walker and Bradley B. Bates, of Day, Berry & Howard, Hartford, Conn., for The Mutual Life Ins. Co. of New York, defendant in main action and plaintiff on counterclaim.

Lawrence W. Iannotti (Richard H. Bowerman, on the brief), of Gumbart, Corbin, Tyler & Cooper, New Haven, Conn., for The Tradesmens Nat. Bank of New Haven, a defendant on counterclaim.

Charles H. Fischer, Jr., and James T. Brennan, of Fischer & Fischer, West Haven, Conn., for W. Paul Flynn, a defendant on counterclaim as trustee in bankruptcy of bankrupt estates of Sayre W. Klebanoff and M. Edward Klebanoff.

Sherin Reynolds, Dept. of Justice, Washington, D. C. (Fred B. Ugast and Charles A. Simmons, Dept. of Justice, Washington, D. C., Robert C. Zampano, U. S. Atty., and Howard T. Owens, Jr., Asst. U. S. Atty., New Haven, Conn., on the brief), for the United States, intervening plaintiff.

TIMBERS, Chief Judge.

In this action by the named beneficiary of ten life insurance policies to recover their face value of $100,000 following the death of her insured husband, the insurer, alleging that it is holding as stakeholder the sum of $58,895.99 due upon the policies, interpleaded by counterclaim, pursuant to Rule 22(1), Fed.R. Civ.P., three claimants of the insurance proceeds held by the insurer: plaintiff as named beneficiary; a bank as judicial lien creditor of plaintiff and the insured; and the trustee in bankruptcy of plaintiff and the insured.

JURISDICTION

Sayre W. Klebanoff (Mrs. Klebanoff), plaintiff in the main action and an interpleaded defendant on the counterclaim, is a Connecticut citizen.

The Mutual Life Insurance Company of New York (Mutual), defendant in the main action and plaintiff on the interpleader counterclaim, being a New York corporation and having its principal place of business in New York, is a New York citizen.

The Tradesmens National Bank of New Haven (Tradesmens), an interpleaded defendant on the counterclaim, being a national banking association organized under the laws of the United States and having its principal place of business in Connecticut, is a Connecticut citizen.

W. Paul Flynn (Flynn), an interpleaded defendant on the counterclaim as trustee in bankruptcy of the bankrupt estates of Mrs. Klebanoff and her deceased husband, M. Edward Klebanoff (Mr. Klebanoff), is a Connecticut citizen.

Diversity jurisdiction is well founded, there being diversity between plaintiff and defendant in the main action and between plaintiff and defendants on the interpleader counterclaim (although there is no diversity between defendants on the interpleader counterclaim); and the amount in controversy exceeding $10,000, exclusive of interest and costs.¹

FACTS

There is no dispute with respect to the material facts necessary to a determination of this motion for partial summary judgment. The facts are established by admissions in the pleadings, answers to interrogatories, a stipulation between the parties, documents agreed to by the parties as exhibits and records of judicial proceedings in the Bankruptcy Court and the Superior Court for New Haven County.

Death Of Mr. Klebanoff

The death of Mr. Klebanoff on November 9, 1962 signalled the obligation of Mutual to pay death benefits under insurance policies on his life and at the same time galvanized creditors of both Klebanoffs into action in reasserting with renewed vigor their claims upon the proceeds of the insurance while still in the hands of the insurer. Death brought into new focus the serious financial difficulties of both Klebanoffs over a period of many years — difficulties which had been the subject of extensive but inconclusive litigation in the Superior Court and the Bankruptcy Court. All hands have now settled upon this Court as the forum of final adjudication, at least as to the disposition of the proceeds of the life insurance. It is necessary to go back several months before Mr. Klebanoff's death to get our bearings.

Mr. Klebanoff's Life Insurance Policies

In June 1962, Mr. Klebanoff was the owner of ten policies of insurance issued on his life by Mutual. The named beneficiary of each policy at all times has been his wife, Mrs. Klebanoff. Each policy reserved to the insured all significant powers under the policy, including the right to change the designation of beneficiary, the right to borrow against it, the right to cash it and other customary rights of policy ownership.

Superior Court Proceedings

For some time prior to July 6, 1962, both Klebanoffs had borrowed sums of money from Tradesmens evidenced by promissory notes, signed either as maker, co-maker or endorser. Beginning on July 6, 1962, they defaulted in payments of principal and interest aggregating some $75,397.36, according to Tradesmens. By writs, summonses and complaints dated July 6, 1962, August 9, 1962 and September 7, 1962, Tradesmens commenced three actions in the Superior Court for New Haven County against both Klebanoffs and Mutual seeking to recover from both Klebanoffs on notes alleged to have been signed, in part, by Mr. Klebanoff and, in part, by Mrs. Klebanoff; the notes, as of the respective dates of the writs, were alleged to be due and payable to Tradesmens.

In connection with the commencement of each of these actions, certain attachments and garnishments were effected. On November 9, 1962 and November 21, 1962, Tradesmens obtained orders for further attachments in each of the three actions.

In connection with the actions instituted by Tradesmens on July 6, 1962 and August 9, 1962, injunctions were issued by the Superior Court against both Klebanoffs and Mutual temporarily enjoining them from "paying or permitting or causing to be paid the cash surrender value of any policy of insurance issued by Mutual on the life of M. Edward Klebanoff and against changing or causing or permitting to be changed the beneficiary of any said policy of insurance or loaning money or causing money to be loaned against the security of any such policy or its cash surrender value and against pledging, assigning, transferring or in any other manner disposing of any of said policies or causing or permitting the same to be pledged, assigned, transferred or in any other manner disposed of."

The three actions remain pending in the Superior Court. The attachments and garnishments have not been released or discharged. The injunctions set forth above remain in effect. Final adjudication of the instant action in this Court will be determinative of the rights of the parties in the three pending Superior Court actions, to the extent of the insurance proceeds here involved.

Bankruptcy Court Proceedings

Both Klebanoffs were adjudicated bankrupt as of August 22, 1962, pursuant to an involuntary petition filed that date by three creditors of the Klebanoffs. Mrs. Klebanoff filed in the Bankruptcy Court a schedule of debts in which she included each of the notes which she is alleged to have signed and for which judgment against her is sought in the three actions brought by Tradesmens in the Superior Court. The Referee in Bankruptcy found that both Klebanoffs were insolvent, within the meaning of the Bankruptcy Act, on July 6, 1962. The judicial encumbrances obtained against both Klebanoffs at the time of commencement of the original Superior Court action constituted the acts of bankruptcy relied on by the petitioning creditors.

On February 26, 1963, the Referee fixed April 15, 1963 as the last day for filing objections to the discharge of Mrs. Klebanoff, bankrupt. On June 13, 1963, the Referee denied Tradesmens' petition for an extension of time to file objections to her discharge and granted Tradesmens' petition to stay the issuance of a discharge to her until ten days after final determination of whether any of the proceeds of the insurance on the life of Mr. Klebanoff constitute assets of Mrs. Klebanoff's bankrupt estate. On July 31, 1963, the Referee denied Mrs. Klebanoff's petition to declare null and void liens obtained by Tradesmens against the life insurance policies here in issue.

District Court Proceedings

On July 9, 1963, Mrs. Klebanoff instituted the instant action against Mutual, alleging, so far as is here relevant, that as the named beneficiary she is entitled to the proceeds of the ten insurance policies issued by Mutual on the life of Mr. Klebanoff. By way of counterclaim, and as part of its answer, Mutual interpleaded the adverse claimants to the life insurance proceeds: Mrs. Klebanoff, Tradesmens and Flynn as trustee in bankruptcy of the bankrupt estates of both Klebanoffs. Pleadings have been filed by each of the defendants interpleaded on the counterclaim; each claims to be entitled to the life insurance proceeds admitted to be due from Mutual. As stakeholder of the interpleaded sum, Mutual claims no beneficial interest therein; it does seek to recover out of the interpleaded sum its costs and counsel fees on the interpleader counterclaim.²

Mrs. Klebanoff — as plaintiff in the main action and one of the defendants on the interpleader counterclaim — has moved for partial summary judgment, declaring that she as the named beneficiary of the ten life insurance policies is entitled to the interpleaded insurance proceeds. The motion is for partial summary judgment because the parties have reserved for later...