United States v. Massachusetts Mut. Life Ins. Co., 594.

• Decision Date: 22 April 1941
• Docket Number: No. 594.,594.
• Citation: 38 F. Supp. 333
• Parties: UNITED STATES v. MASSACHUSETTS MUT. LIFE INS. CO.
• Court: U.S. District Court — District of Massachusetts

38 F. Supp. 333

UNITED STATES v. MASSACHUSETTS MUT. LIFE INS. CO.

No. 594.

District Court, D. Massachusetts.

April 22, 1941.

Michael Gould, Sp. Asst. to the Atty. Gen. (Edmund J. Brandon, U. S. Atty., and George F. Garrity, Asst. U. S. Atty., both of Boston, Mass., Samuel O. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe, Sp. Asst. to the Atty. Gen., on the brief), for plaintiff.

F. H. Nash (of Choate, Hall & Stewart) and Raymond P. Baldwin (of Stewart, Chase & Baldwin), both of Boston, Mass., for defendant.

SWEENEY, District Judge.

This is an action brought under 26 U.S. C.A. Int.Rev.Code, § 3710, wherein the United States seeks a judgment against the defendant to the extent of the value of property (or rights to property) in its hands belonging to one Edwin G. Robinson, Jr., which it failed to surrender on plaintiff's levy and demand. Except as to one dividend item, about which there is no controversy, and which will be disposed of later in this decision, the defendant denies that the plaintiff has stated a claim on which relief can be granted, because Edwin G. Robinson, Jr., the insured, and Frances G. Robinson, the beneficiary, under a life insurance policy, are necessary and indispensable parties, and have not been joined in this action. The defendant also alleges that, under the terms of the policy between the defendant and the insured, and under the law with respect thereto, the net cash surrender value of the policy is not subject to distraint by the Collector of Internal Revenue. It further defends on the ground that, under the terms of the policy, there has been no election by the insured or the beneficiary to presently receive the benefits of the cash surrender value, and, accordingly, that there is no money presently due the insured Robinson. It further defends on the ground that the insurance company has been informed by the insured Robinson that he owes nothing to the plaintiff, and, this being so, it cannot be held by the plaintiff in the absence of joining Robinson as a party defendant. In further defense, it says that if held liable in this suit to the plaintiff it may also be held liable in another suit by the insured, and hence it would be denied the due process of law guaranteed by the Fifth Amendment of the Constitution.

Findings of Fact.

The following stipulation of facts has been filed by the parties which this court adopts as its findings of fact:

"1. This is a suit by the United States under the authority and direction of the Attorney General and at the request and with the consent of the Commissioner of Internal Revenue arising under and by virtue of the laws providing for internal revenue and the collection thereof, particularly Section 3710 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 3710.

"2. The defendant is a corporation organized under the laws of Massachusetts engaged in the transaction of the business of life insurance in the State of Massachusetts and in many other states of the United States, including the States of Washington and Oregon, at all the times hereinafter mentioned.

"3. Shortly after September 28, 1908, in the State of Washington, the defendant delivered to Edwin G. Robinson, Jr., then a resident of said state, in consideration of a premium there paid to it, a policy of life insurance on his life, No. 245474. The policy was a twenty-payment life policy in the face amount of Two Thousand Dollars ($2000). A copy is hereto annexed marked `A'. This is a photostat of a document manufactured from the records, not a photostat of the original policy, but the company believes it to be a true duplicate. This policy was duly kept in force by the payment of premiums for twenty (20) years and became fully paid up on September 28, 1928.

"4. Upon security of said policy, the insured received from the defendant a loan of Four Hundred Fifteen Dollars ($415) on December 29, 1916, upon which the insured was obliged to pay interest at the rate of six percent (6%) per annum. No part of said loan has been repaid.

"5. The net cash surrender value of said policy on December 5, 1939, was Nine Hundred Forty-Four Dollars and Ninety-One Cents ($944.91) payable under the terms of the policy on legal surrender of the policy.

"6. The beneficiary named in the policy at its issuance and ever since has been Frances G. Robinson, wife of the insured. At all the times mentioned in the complaint and now the domicile of the insured and his wife has been in the State of Oregon and their residence has been and is 1423 Sixth Street, S.W., Portland, Oregon. Both are now living. On July 29, 1939, the insured by a writing filed at the Home Office of the defendant notified it that he surrendered and released his right to change the beneficiary and made his said wife the irrevocable beneficiary under the policy. A copy of said writing, dated July 26, 1939, is hereto annexed marked `B'.

"7. The plaintiff has not seized the actual physical policy.

"8. On November 29, 1939, two papers entitled `Notice of Levy on Policy No. 245,474' and `Warrant for Distraint', and on December 5, 1939, a `Final Notice and Demand', were served upon the defendant at its Home Office at Springfield, Massachusetts, by a Deputy Collector of Internal Revenue. A copy of each is annexed marked respectively `C', `D' and `E'. Notice of levy and warrant for distraint were served on the defendant by serving the General Agent, Philip Englehart, at Portland, Oregon, under date of June 17, 1939. A copy of each is annexed hereto and marked `F' and `G'. The cash surrender value June 17, 1939, was $945.43.

"9. On November 28, 1939, the date of the `Notice of Levy', the cash surrender value of the policy was $945.40. On December 5, 1939, the total amount payable according to the terms of the policy, including dividend accumulation, was $957.59, made up as follows:

                Value of the policy                   $1452.00
                1939 Dividend                            12.68
                                                      ________
                                                       1464.68
                Policy Loan            $415.00
                Interest                 92.09          507.09
                                       _______        ________
                Net cash value                         $957.59"
                

I also find that a levy and warrant of distraint were served on the defendant on June 17, 1939, and that on July 26, 1939, the taxpayer mailed his policy to the defendant with the request to make his wife the irrevocable beneficiary instead of the revocable beneficiary as theretofore. I find that on August 9, 1939, the defendant mailed the policy back to the insured declining to make the required indorsement because it had already received notice of the Government's lien on the policy.

Discussion.

The statute involved, 26 U.S.C.A. Int. Rev.Code, § 3710, reads as follows:

"(a) Requirement. Any person in possession of property, or rights to property, subject to distraint, upon which a levy has been made, shall, upon demand by the collector or deputy collector making such levy, surrender such property or rights to such collector or deputy, unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process.

"(b) Penalty for violation. Any person who fails or refuses to so surrender any of such property or rights shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes (including penalties and interest) for the collection of which such levy has been made, together with costs and interest from the date of such levy."

Except for United States of America v. Metropolitan Life Ins. Co., D.C., 36 F.Supp. 399, which was decided on January 6, 1941, no other case has been called to my attention which involves the identical question presented here.

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