#### H. B. Waldron, as Trustee, etc., Plaintiff, v. Frances H. Becker et al., Defendants.

(Supreme Court, Montgomery Trial Term,

November, 1900.)

Bankruptcy — Action by trustee to recover contingent interest of bankrupt in life insurance policies.

Where a person, who subsequently becomes a bankrupt, procures life insurance policies upon the endowment and the tontine plans, some payable to his wife and others to himself and all containing conditions which, under certain contingencies, reserve an interest to him, and thereafter assigns those payable to himself to a third person as collateral security by assignments containing provisions under which some interest may revert to him, his trustee in bankruptcy has, under him, sufficient interest in the policies to maintain an action to set aside transfers of them made by him before he became a bankrupt and to obtain an adjudication as to the interest of the trustee in.the policies.

The Bankruptcy Court must, however, determine what the trustee shall receive upon the policies and how he shall treat the interest of the bankrupt in them.

Action to set aside the transfer o-f certain property by a bank" rapt, and to obtain an adjudication as to his ownership of certain property, and also to obtain a decree as to his rights in certain insurance policies.

H. Y. Borst, for plaintiff.

White & Ferguson, for defendants.

Houghton, J.

The plaintiff is trustee in bankruptcy of Charles W. Becker. The action is brought to set aside the transfer of certain property by the bankrupt, and to obtain an adjudication as to his ownership of certain property, and also to obtain, a decree as to his rights in certain insurance policies.

At the close of the trial, an opinion was dictated by the court, deciding upon the facts that the mill, machinery and stock claimed *183by the plaintiff to belong to the bankrupt, as well as certain'moneys and certain insurance policies, belonged to Frances H. Becker and not to Charles W. Becker, the bankrupt. In addition to the questions thus disposed of, there remained for determination the rights of the parties in four life insurance policies issued upon the life of Charles W. Becker by the Northwestern Mutual Life Insurance Company. The first of these was issued September 16, 1881, for $2,000, and was payable to his wife, defendant Frances H. Becker. The second was issued the 4th day of October, 1882, for a like amount, payable in like manner. Each of the policies contained this clause: “ In case of the death of the said beneficiary before or at the time of the death of the person whose life is insured, the amount of the insurance shall be payable at maturity to the executors, administrators or assigns of said person whose life is insured.” The policies further provide that “ in cáse the insured shall not die within the period of twenty years from the date of the policy, the whole amount shall be payable at the end of that time.” The third policy was issued on the 11th day of August, 1884, for the sum of $2,000, payable to the insured upon death, with a twenty-year tontine feature, which allowed the policy to participate in certain earnings, and among which conditions was one that the policy should have at the end of said period a cash value of $883.40, in addition to such surplus as might be earned. This policy was assigned by the insured to his wife, December 10, 1894, and on the following day was assigned by her and the insured to the defendant Wendell, as collateral security for the payment of the sum of $4,600. The assignment from the assured to his wife contained the following clause: “ In the event of the death of said assignee before the policy becomes due, then, in that case, the proceeds thereof shall be payable when due to my executors, administrators and assigns.” The remaining policy was issued on the 21st day of January, 1889, for $5,000, payable to the insured at his death, within twenty years, and if he should survive, to him at the end of said period. On the 21st of January, 1889, the insured assigned this policy to his wife, the assignment, however, containing this provision: *“*Provided, however, and this assignment is upon the express condition, that if the said Charles W. Becker, the person whose life is insured in said policy, shall be living at the expiration of the tontine period named in said policy, then this , assignment shall thereupon cease and *184determine, and all interest therein shall thereupon revert to and absolutely vest in the said Charles W. Becker. The intent of this instrument being to grant to said assignee the proceeds of said policy only in the event of the decease of said Charles W. Becker before the expiration of the tontine dividend period therein named.” The assignment further provides that, “ In case of the death of the said assignee before the policy becomes due and before the expiration of the tontine period, then it should be payable to the insured or his executors, administrators or assigns.” The insured and said Frances H. Becker, on the 12th of March, 1895, assigned said policy as collateral security to defendant Wendell.

I think it must be held that Charles W. Becker has some interest in these policies; and, subject to the equitable lien of his wife and Wendell, for premiums which they may have paid, and the indebtedness of Wendell, for which they may have been pledged, such an interest as passes to the trustee to be distributed amongst the creditors of the bankrupt. The peculiar provisions of the policies and the terms of the assignments give the insured certain rights under certain circumstances which are available, and property within the meaning of the law.

If chapter 80 of the Laws of 1840 shall be said to apply, then full force bias been given to that law, by reserving to the wife by this decision other insurance, upon which the annual premiums are substantially $500. But the insured has not procured the issuing*, or made the assignment of the policies in question to his wife for her sole use, as provided in said law, but by his contracts with the company, or by his assignments to her, has reserved to himself certain rights which were property in his hands at the time of the filing of his petition in bankruptcy.

The policy of insurance considered in Matter of Diack, 3 Am. Bank Rep. 123, was similar to some of those under consideration, and the principle there enunciated is applicable to all. In the well-considered opinion by Judge Brown, he held that the bankrupt had some interest in the policy which passed to his trustee, subject to any equities which might be existing against him. This ease is followed in Matter of Boardman, 4 Am. Bank Rep. 620, and the bankruptcy decisions, holding a contrary doctrine, are repudiated.

The defendant Frances H. Becker has such proportional rights *185in all of the policies as the amount of the premiums paid by her bear to all the premiums paid upon the various policies. The defendant Wendell has the same rights with respect to premiums paid by him, and also a lien for any loams which he may have made for which the policies were assigned as collateral security.

What amount the trustee shall ultimately receive, or in what way he shall treat the interest of the bankrupt in the various policies, either by sale or by postponement of action until the policies shall become due, are questions to be determined by the Bankruptcy Court.

If counsel should be advised that the amount of premiums paid by the bankrupt and defendants Becker and Wendell, and the amount of the indebtedness, for which the policies are pledged as security, should be incorporated in the judgment in this action, facts may be agreed upon, or a reference had to take the proof and report to this court before entry of judgment.

Ordered accordingly.