Court Opinion

ID: 8776728
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:04:37.870929+00
Date Added: 2024-06-11T17:02:36.745374
License: Public Domain

ARCHBALD, District Judge.
On September 1, 1901, the bankrupt took out a policy of insurance in the Pacific Mutual Life Insurance' Company on his own life, which was in force when he went into bankruptcy, December 23, 1909, and has been kept up, to the present time, by the payment of the last annual premium. The policy was on what is known as the 15-year endowment plan, and by it the company promised to pay $1,000 to the bankrupt on September 1, 1916; or, if he should die previous to that date, to pay the same amount to Mildred Plerr, his daughter, should she survive him; or, if not, to the executors, administrators, and assigns of the bankrupt, or to such other beneficiary as he might designate, as provided! in the policy. As to changing the beneficiary, it was agreed that, provided the policy" had not been assigned, there might be a new designation by the bankrupt at any time, and from time to time, during the continuance of the policy, on filing with the company a written request to that effect, duly acknowledged, accompanied by the policy; such change to take effect upon the indorsement of the same by the company on the policy. According to the schedule attached! to the policy, it had a cash surrender value, at the time of the adjudication, of $350; and, in view of this, a rule has been taken on the bankrupt, in pursuance of the statute, to show cause why he should not pay or secure this amount to the trustee, or otherwise, the trustee be entitled to the policy. On March 31, 1908, this policy was changed by the bankrupt so as to be payable to his executors, administrators, and assigns, eliminating his daughter. And on March 23, 1909, it was again changed and made payable to himself on September 1, 1916, as before, or, in the event of his death prior to that time to his wife, Margaret Herr, should she survive him, or otherwise to his executors, administrators, and assigns; and that is the way it stood when he went into bankruptcy.
It is clear, under this showing, that the trustee is entitled to the policy or its surrender value. While the wife, as it stands, is the contingent beneficiary, the policy is under the complete control of the bankrupt, who may change the situation at any moment, and realize upon it, without regard to her, either giving it up and getting the surrender value, or continuing it with a newly designated beneficiary, just' as he may choose. This absolute dominion over the policy makes it his, and *718it'therefore passes with the rest -of his property to his trustee, subject .only to the right to redeem, as provided by the act, on paying the surrender value.
This question has been considered in numerous cases, and by the decided weight of authority the right of the trustee has been sustained. In re Diack (D. C.) 3 Am. Bankr. Rep. 723, 100 Fed. 770; In re Boardman (D. C.) 4 Am. Bankr. Rep. 620, 103 Fed. 783; In re Coleman, 14 Am. Bankr. Rep. 461, 136 Fed. 818, 69 C. C. A. 496; Matter of Phelps, 15 Am. Bankr. Rep. 170; Clark v. Insurance Company (C. C.) 16 Am. Bankr. Rep. 137, 143 Fed. 175; In re Wolff (D. C.) 21 Am. Bankr. Rep. 452, 165 Fed. 984; In re White, 23 Am. Bankr. Rep. 90, 174 Fed. 333, 98 C. C. A. 205, 26 L. R. A. (N. S.) 451; In re Moore (D. C.) 23 Am. Bankr. Rep. 109, 173 Fed. 679; Matter of Hettling, 23 Am. Bankr. Rep. 161, 175 Fed. 65, 99 C. C. A. 87; In re Orear (C. C. A.) 24 Am. Bankr. Rep. 343, 178 Fed. 632. It is not necessary that .an actual cash surrender value should be stipulated for in- the policy.; - it is .enough if it is conceded by the practice of the company. Hiscock v. Mertens, 205 U. S. 202, 27 Sup. Ct. 488, 51 L. Ed. 771. It is true that in some instances, where the wife is a beneficiary, the policy has been held to be exempt, being protected, as it is said, against the claims of creditors, by the law of the states where the cases respectively arose. In re Booss (D. C.) 18 Am. Bankr. Rep. 658, 154 Fed. 494; In re Pfaffinger (D. C.) 21 Am. Bankr. Rep. 255, 164 Fed. 526. In re Whelpley (D. C.) 22 Am. Bankr. Rep. 433, 169 Fed. 1019 ; In re Johnson (D. C.) 24 Am. Bankr. Rep. 277, 176 Fed. 591; Holden v. Stratton (Wash.) 198 U. S. 202, 25 Sup. Ct. 656, 49 L. Ed. 1018. But that is not the preváiling view, at least where, as here, the bankrupt is authorized to change the beneficiary at will. In re White, 23 Am. Bankr. Rep. 90, 174 Fed. 333, 98 C. C. A. 205, 26 L. R. A. (N. S.) 451. And the policy is not saved to the wife therefore, in my judgment, under the laws of Pennsylvania (Act April 15, 1868 [P. R. 103]; Act May 1, 1876 [P. R: 60] § 25), in the case in hand. In the Booss Case, 'supra, decided by Judge Holland, the right to change the beneficiary apparently was not givén.
. It is true that, if the bankrupt died to-day, the money due on the policy would belong to his wife. But it is also true that at once, .upon the discharge of the present rule, the bankrupt could eliminate ■her,..by.the designation of a new beneficiary, andl get the surrender value, of, the policy, which the trustee therefore, by the terms of the statute; is entitled to claim. It is the uncertainty of her interest that-makes it of no concern. It is only to policies where she h'as’something dependable that the exemption applies. Because of the bankrupt’s- absolute command over it, the surrender value is to be regarded.,as payable to him, within the meaning of the law.
The rule is made absolute, and the bankrupt is required to pay to the trustee the cash surrender'value of the policy at the time of the adjudication, amounting to $350, or otherwise the policy shall pass as assets to the trusteq.