Kyle v. McGuirk, 5784.

• Decision Date: 13 February 1936
• Docket Number: No. 5784.,5784.
• Citation: 82 F.2d 212
• Parties: KYLE, Acting Collector of Internal Revenue, v. McGUIRK.
• Court: U.S. Court of Appeals — Third Circuit

82 F.2d 212 (1936)

KYLE, ActingCollector of Internal Revenue, v.McGUIRK.

No. 5784.

Circuit Court of Appeals, Third Circuit.

February 13, 1936.

Frank J. Wideman, Asst. Atty. Gen., Sewall Key, Norman D. Keller, and Arthur P. Curran, Sp. Assts. to the Atty. Gen., and Charles D. McAvoy, U. S. Atty., and Thomas J. Curtin, Asst. U. S. Atty., both of Philadelphia, Pa., for appellant.

Charles E. Kenworthey and Evans, Bayard & Frick, all of Philadelphia, Pa., for appellee.

Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

This is an appeal by Kyle, acting collector of internal revenue, hereinafter referred to as the collector, from a decree of the District Court for the Eastern District of Pennsylvania.The collector imposed a lien for taxes against John J. McGuirk for $3,648.82.McGuirk was the assured in a standard contract of life insurance of which his wife, the appellee herein, was beneficiary.The assured had the right to change the beneficiary, to borrow on the policy, and to receive the cash surrender value.The collector issued a warrant of distraint directing that a levy be made on the property rights of McGuirk in the policy.The warrant was served upon the insurance company which had issued the policy to McGuirk, to recover the value of the policy.The appellee filed a petition in the District Court praying that the warrant of distraint be vacated upon the ground that under the laws of the state of Pennsylvania no distraint to satisfy creditors of an assured can be made upon a policy of insurance payable to the wife of the assured.

The Pennsylvania Act of June 28, 1923, P.L. 884 (40 P.S.Pa. § 517) upon which the appellee relies provides that: "The net amount payable under any policy of life insurance or under any annuity contract upon the life of any person, heretofore or hereafter made for the benefit of or assigned to the wife or children or dependent relative of such person, shall be exempt from all claims of the creditors of such person arising out of or based upon any obligation created after the passage of this act, whether or not the right to change the named beneficiary is reserved by or permitted to such person."The District Court held that the act applied and entered a decree quashing the warrant of distraint.The collector appealed.He questions the jurisdiction of the District Court to enter the decree, and contends that the warrant of distraint was valid and enforceable.

The distraint is clearly nonenforceable if the state exemption act cited above applies.We find no authority for applying the act.As was said by the Tenth Circuit in Cannon v. Nicholas (C.C.A.)80 F.(2d) 934, 935: "State exemption laws, ex proprio vigore, do not apply.Fink v. O'Neil, 106 U.S. 272, 1 S.Ct. 325, 27 L.Ed. 196.Congress has not in the revenue laws, as it did in bankruptcy, recognized state exemption statutes; nor has it exempted either annuity contracts or life insurance policies."Our attention has been directed to the fact that in Bowers v. Reinhard, 78 F.(2d) 776, we applied the state exemption statute.It may be noted, however, that section 6 of the Bankruptcy Act(11 U.S.C.A. § 24) specifically provides that state exemption laws are applicable in bankruptcy.The assured in Bowers v. Reinhard, supra, was a bankrupt, whereas the assured in the...