Court Opinion

ID: 7064740
Source: CourtListenerOpinion
Date Created: 2022-07-24 07:24:45.186137+00
Date Added: 2024-06-11T16:12:20.035932
License: Public Domain

Dissenting Opinion.
Comstock, J.
Action by appellee against appellant to recover the alleged surrender value of a life insurance policy. There was a trial by jury and a verdict for appellee for $4,419.14. With the verdict the jury returned answers to in-terrogatories.
It is assigned that the court erred (1) in overruling the motion for judgment in favor of appellant on answers to interrogatories; (2) in overruling appellant’s motion for a new trial. The amended complaint alleges that appellant, on March 13, 1882, issued to appellee a policy of *191life insurance, agreeing to pay to appellee’s wife, if living, and, if not, then to appellee, his executors, administrators or assigns, $5,000 within sixty days after satisfactory proof of appellee’s death; that the policy was issued on the tontine dividend savings fund plan, and that the tontine dividend period expired March 18, 1897, and upon the completion of that period the holder of the policy might withdraw in cash the policy’s entire share of the assets, which share appellant guaranteed should not be less than $2,784.95 in addition to the surplus apportionate; that the application upon which the policy was issued provided that the surrender value should be payable to appellee. It alleges that Annie T. Perkins, the beneficiary of the policy, died on the......day of ......, 1898, leaving the appellee surviving her.
The sixth paragraph of answer alleges that the appellee at no time paid the annual premium on the policy issued, which became due on March 18, .1894, 1895 and 1896, or any of said debts; that on July 14, 1897, appellant notified the appellee that because of the failure to pay such premiums the policy had become forfeited and void; that the appellee thereupon abandoned any claim to said policy, and agreed that the same had become forfeited and void; that he did, on May 13, 1901, file in the district court of the United States his petition in bankruptcy, and was duly adjudicated a bankrupt; that with the schedules filed in his petition in bankruptcy, which were verified by him, he stated that he had no policy of insurance and no unliquidated claims of any nature ; that he did not set out among his assets in any place in such schedule the policy in suit, nor any interest therein, but claimed that his only property was clothing and ornaments of the person amounting to $75, which were set off to him as exempt under the laws permitting exemptions to householders.
Appellee filed a reply to the answer, the first paragraph of which was a general denial to the second, third and fourth paragraphs of answer. The second was a reply to the fourth *192paragraph of answer, and sets out a statute of the state of New York, which provides that the repeal of a statute shall not affect or impair any act- done or accruing or forfeiture incurred prior to the time such repeal takes effect, but the same may be enforced and prosecuted as fully, and to the same extent, as if the repeal had not been effected, and that all actions and proceedings done prior to the taking effect of such repeal may be prosecuted and defended to final effect in the same manner as they might if such provisions were not repealed, and that such statute is now the law of New York. Appellee also filed an .amended fifth paragraph of reply, in which he admits that he filed the petition in bankruptcy asking that he be adjudged a bankrupt, and that on May 14, 1901, he was adjudged a bankrupt, but says that his estate was duly administered and settled, and that on November — he was duly discharged in bankruptcy. He files with this paragraph of answer a copy of his certificate of discharge. He further alleges that only one claim is filed against him in bankruptcy, and that claim has been fully paid. Appellee also filed a reply in two paragraphs to the sixth paragraph of answer, the first of which was a general denial. In the second paragraph he alleges that on July 14, 1897, he did receive notice that the policy sued on was forfeited for failure to pay the premium due on March 17, 1894, which notice was in answer to the communication from him asking his share in the surplus or surrender value cf the policy; that he believed the statement of the appellant that the policy was forfeited, and for that reason he in good faith omitted the policy from his schedules in bankruptcy, and stated therein that he had no policies of insurance; that he was afterwards adjudicated a bankrupt and' discharged with only one claim amounting to $54.21 filed against his estate, and this claim has been fully paid; that in October, 1902, he obtained information which led him to believe that his policy of insurance had not been forfeited, by reason of the failure of the appellant to give notice of the accrual of *193the premium provided by the New York statute; that he at once communicated with his counsel, who informed him that his policy was not forfeited because of the failure of the company to give the notice required by the New York statute. He denied that he ever agreed that the policy was forfeited, and thereupon brought suit: ■
The evidence shows that appellee failed to pay the annual premium which fell due March-18,1894, and each succeeding premium which fell due thereafter. On July 14, 1897, appellant notified appellee that because of the failure to pay such premium the policy had become forfeited and void. On May 13, 1901, appellee filed in the proper district court of the United States his petition in bankruptcy, and was duly adjudicated a bankrupt. In the schedules filed with his petition, and which were verified by him, he stated that he had no policies of insurance and no unliquidated claims of any nature. He did not set out among his assets in such schedules the policy in suit, nor any interest therein, but stated that his only property was clothing and ornaments of the person, amounting to $75, which were set off to him as exempt under the laws permitting exemptions to householders. Upon this set of facts appellant claims that appellee cannot maintain t-his action. Section seventy of the bankruptcy act of 1898 (30 Stat., p. 565, U. S. °Comp. Stat. [1901], p. 3451) provides that the estate and title of a bankrupt shall pass by operation of law, to his trustee as of the date he was adjudged a bankrupt, except such property as is exempt. This was the rule in 1841, under the law of 1867, and is under the present law. It appears from the record that no assets, liable for the payment of his debts, were shown by the bankrupt; that his indebtedness amounted to $30,000, but, in the absence of assets, no trustee was appointed, and only one claim of $54.21 filed against the estate. The bankruptcy act vests title of the assets of the bankrupt in the trustee without any assignment in fact. Atwood v. Bailey (1903), 184 Mass. 133, 68 N. E. 13.
*194In the case of First Nat. Bank v. Lasater (1905), 196 U. S. 115, 49 L. Ed. 408, 25 Sup. Ct. 206, the court held that a bankrupt, after his estate had been finally closed up, could not assert title to assets which he had omitted from his schedule. In the course of the opinion the court, by Brewer, J., said: “We have held that the trustees in bankruptcy are not bound to accept property of an onerous or unprofitable character, and that they have a reasonable time in which to elect whether they will accept or not. If they decline to take the property the bankrupt can assert title thereto. American File Co. v. Garrett [1884], 110 U. S. 288, 295, 28 L. Ed. 149, 152, 4 Sup. Ct. 90; Sparhawk v. Yerkes [1891], 142 U. S. 1, 35 L. Ed. 915, 12 Sup. Ct. 104; Sessions v. Romadka [1892], 145 U. S. 29, 36 L. Ed. 609, 12 Sup. Ct. 799; Dushane v. Beall [1896], 161 U. S. 513, 40 L. Ed. 791, 16 Sup. Ct. 637. But that doctrine can have no application when the trustee is ignorant of the existence of the property and has had no opportunity to make an election. It cannot be that a bankrupt, by omitting to schedule and withholding from his trustee all knowledge of certain property, can, after his estate in bankruptcy has been finally closed up, immediately thereafter assert title to the property, on the ground that the trustee had never taken any action in respect to it. If the claim was of any value (as certainly was this claim, according to the judgment below) it was something to which the creditors were entitled, and this bankrupt could not, by withholding knowledge of its existence, obtain a release from his debts and still assert title to the property. ’ ’ To the same effect are Scruby v. Norman (1902), 91 Mo. App. 517; Kenyon v. Wrisley (1888), 147 Mass. 476, 18 N. E. 227, 1 L. R. A. 348; In re Holden (1902), 113 Fed. 141, 51 C. C. A. 97.
A wilful omission to state a debt in his schedule is good ground for refusing a discharge. Section 29 of the bankruptcy act (30 Stat., p. 554, U. S. Comp. Stat. [1901], p. 3433), prescribes punishment by imprisonment of a bankrupt for knowingly and fraudulently concealing, while a *195bankrupt or after his discharge, any property belonging to his estate. These provisions emphasize the importance of the surrender by the bankrupt to the trustee of all the assets of the bankrupt. If the conduct of the bankrupt, whether from want of knowledge of the law or of the facts, or from a fraudulent purpose, results in a wrong to his creditors, the law will not permit him to reap any benefit from such conduct. No trustee was appointed, for the reasons before stated, but if the title remained in the bankrupt it did so as trustee for the benefit of his creditors. He cannot be heard to say that the trustee did not take possession of the policy or that no trustee was appointed. Under the facts shown, the good or bad faith of the bankrupt is not material because the result of his conduct is in any event to wrong his creditors. Courts will not permit one, who from any cause knowingly does an act which necessarily defrauds his creditors, to profit thereby to the detriment of his creditors. Appellee’s sworn statement that he had no policy of insurance was a concealment — an affirmative act operating as a fraud upon his creditors. But appellee argues that this action may be maintained, notwithstanding the proceedings in bankruptcy. The argument is made upon three propositions: First, all claims not filed against the estate of the bankrupt within one year of the date of the adjudication are barred; citing section fifty-seven of the bankruptcy act of 1898 (30 Stat., p. 560, U. S. Comp. Stat. [1901], p. 3444); Bray v. Cobb (1900), 100 Fed. 270; In re Shaffer (1900), 104 Fed. 982; In re Rhodes (1900), 105 Fed. 231; In re Liebowitz (1901), 108 Fed. 617; In re Moebius (1902), 116 Fed. 47; Hutchinson v. Otis (1903), 190 U. S. 552, 23 Sup. Ct. 778, 47 L. Ed. 1179. Said section fifty-seven, supra, has been held, in the cases cited, to prohibit the filing of proof of a claim subsequent to one year after the adjudication. The question of concealment, fraudulent or otherwise, by the bankrupt did not arise. The general purpose of the act is to settle estates in bankruptcy within a reasonable, time. The *196particular purpose is to subject all the bankrupt’s property, except that which is exempt, to the discharge of his indebtedness.
The second proposition is, that, when all claims that have been approved within the year are paid, the surplus of the estate goes to the bankrupt. 30 Stat., p. 564, §66, U. S. Comp. Stat. (1901), p. 3448; Loveland, Bankruptcy (3d ed.), §270; Boyd v. Olvey (1882), 82 Ind. 294, 303. Section sixty-six, supra, provides that debts which remain unpaid after the final dividend has been declared shall be paid by the trustee into court. Dividends remaining unclaimed for one year shall, under the direction of the court, be distributed to the creditors whose claims have been allowed but not paid in full, and after such claims have been paid in fall the balance shall be paid to the bankrupt. Loveland, Bankruptcy (3d ed.), §270. Boyd v. Olvey, supra, decides that the judgment of the district court conclusively determines the fact that the assignee had performed his duties, was entitled to a discharge, and that the estate was finally settled. We quote as follows from said case: “Involved in this adjudication is a subordinate matter that the property here in dispute was never assets in the hands of the assignee. There can be no doubt as to this, because the fact was so stated in the assignee’s report, was so referred to in the register’s certificate, and was thus brought before the court for consideration, and it was considered and determined by the judgment confirming the report and discharging the assignee.” The case wholly differs from the one at bar, and the section of the statutes is not pertinent to the question before us.
The third proposition is that, where no trustee has been appointed, the title remains in the bankrupt, and if no trustee is ever appointed the bankrupt is never divested of title. Fuller v. New York Fire Ins. Co. (1903), 184 Mass. 12, 67 N. E. 879; Loveland, Bankruptcy (3d ed.), §149; 5 Cyc. Law and Proc., 343. Section forty-four of the bankruptcy *197act provides that the creditors, at their first meeting after the adjudication, shall appoint a trustee. If the creditors do not act, the courts will do so. It has been held that where only a single creditor appears at the first meeting and proves his debt, the right to choose a trustee belongs to him. The trustee could acquire no title in exempt property, and, as there were no other assets upon the facts as represented by the bankrupt, such-appointment would have been idle. It cannot be maintained that inasmuch as the verified statement made by the bankrupt rendered it unnecessary to appoint and prevented the appointment of a trustee, that he, the bankrupt, was never divested of title. The fact that the appellee, by a clear violation of the statute, prevented the appointment of a trustee, will not give him the right to that which a compliance upon his part with the law would have vested in the trustee. By the proceedings in bankruptcy all title in the policy passed from the bankrupt. This would include a possibilty coupled with an interest. Williams v. Heard (1891), 140 U. S. 529, 11 Sup. Ct. 885, 35 L. Ed. 550.
It follows.that appellee had no right of action, and the judgment should be reversed.