Court Opinion

ID: 9652875
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:34:06.290206+00
Date Added: 2024-06-11T18:12:54.773362
License: Public Domain

BIGGS, Circuit Judge
(dissenting).
The decision in the case at bar should be governed by the parenthetical clause of Section 22(b) (1) for the amount by which each installment paid to the beneficiary exceeds the aliquot part of the proceeds of the face amount of each policy is “interest”; viz., a compensation for the use of the beneficiary’s money paid by each *16insurance company. Deputy v. DuPont, 308 U.S. 488, 498, 60 S.Ct. 363, 84 L.Ed. 416.
Using Metropolitan Life Insurance Company policy No. 777,204 as an example, as do the majority, it is clear that if the beneficiary had exercised option (1) and as the result the insurance company had paid the beneficiary an amount annually computed at 3%'% on the sum retained, this being denominated in the option as “interest”, the majority would deem it to be such and to lie within the parenthetical clause. Yet when the excess over the aliquot part of the face amount of the policy, amounting to 3%'% on the amount retained, is paid to the beneficiary by the company, the majority consider such a payment not to be “interest”.
I cannot see the validity of the distinction. When the beneficiary exercised the options she put money represented by the face amounts of the policies in the hands of the insurance companies. They use this money and pay for the privilege. To reiterate, they pay “interest” and the beneficiary receives it.
This view is in. accord with the decision of this court in Penn Mut. Life Ins. Co. v. Commissioner, 92 F.2d 962, with that of the Second Circuit in Equitable Life Assur. Soc., etc., v. Helvering, 137 F.2d 623, 626, and with that of the First Circuit in New Eng. Mut. Life Ins. Co. v. Welch, Collector, 153 F.2d 260.
The legislative history of the section requires such an interpretation. See for example the words cf Mr. Hull quoted in the majority opinion. The excess amounts paid to the beneficiary do not constitute amounts received under the policies but are sums paid by the insurance companies for the use of the money due from the companies upon the insured’s death. The excess amounts are paid by the insurance companies not “by reason of the death of the insured” within the purview of the section, but because the beneficiary availed herself of the privilege of making investments. True, offers of investments were contained in the insurance contracts but the acceptances of the options were the deliberate acts of the beneficiary, privileges exercised by her after the insured’s death. The beneficiary and the companies entered into collateral contracts. I conclude that Congress intended money paid by insurance companies under such circumstances to be treated as interest; hence the parenthetical clause.
For these reasons the judgment of the court below should be reversed.