DISTRICT COURT, S.D. NEW YORK
September 20, 1932
In re SOLOMONS
The opinion of the court was delivered by: CAFFEY
CAFFEY, District Judge.
By the terms of section 55-a of the New York Insurance Law (Laws 1927, c. 468, Consol. Laws N.Y. c. 28), the right of exemption of the policies on the life of the bankrupt is vested in the beneficiary. The record is rather scanty. It does not contain the policies or recite their substance. As I understand, however, all are payable to the wife of the bankrupt, and none to "himself, his estate, or personal representatives." For that reason, the proviso in Bankruptcy Act section 70a (5), 11 USCA § 110 (a) (5), seems to me to have no bearing on the controversy now under consideration.
Despite some expressions in Re Messinger (C.C.A.) 29 F.2d 158, 68 A.L.R. 1205 (Cf. In re Sturdevant (D.C.) 29 F.2d 795, where beneficiaries were before the court), I am not satisfied that the bankrupt may set up the exemption. It seems to me that only the beneficiary is interested (Cf. Chatham Phenix Nat. Bank & Trust Co. v. Crosney, 251 N.Y. 189, 167 N.E. 217). She has not appeared in these proceedings. If it be true that the bankrupt has no interest, and that therefore he cannot raise the question of the validity or applicability of the exemption as against the claim of the bank, obviously it would be premature now to discuss that question. Inasmuch, however, as counsel themselves have not argued the effect of the failure to bring in the beneficiary, I shall make no final determination of the point until they have had opportunity to file briefs upon it.For that purpose time is extended to September 27.
Undoubtedly the referee has jurisdiction to determine whether a filed claim shall be allowed. This, I take it, is clear from sections 57d, 57f, and 57k of the Bankruptcy Act, 11 USCA § 93 (d, f, k), and General Order XXI, subd. 6 (11 USCA § 53). Nevertheless, before the referee can exercise this jurisdiction of his own motion, a condition precedent is that, within the meaning of section 57d, there shall be "cause" therefor.
The statute of limitations does not destroy a debt. It merely creates a bar to the remedy for its enforcement. It may be insisted on or it may be waived. Before it can constitute a bar, it must be pleaded. In re Salmon [C.C.A.] 249 F. 300; In re Weidenfeld [C.C.A.] 277 F. 59. In the absence of a party to the proceeding having advanced the statute of limitations as a defense, manifestly, as I believe, the referee is without authority, upon his own motion, to interpose it. I think, therefore, that the "cause" specified in section 57d of the statute which would warrant the referee in expunging the bank's claim, upon his own initiative, has not been shown to exist and, accordingly, that the defense of the statute of limitations cannot be deemed properly to be an obstacle to the allowance unless it be interposed by some one (other than the referee) who is competent to do so.
The defense was not presented by the bankruptcy trustee or by any creditor or claimant. Only the bankrupt has brought it forward. Certainly ordinarily only the trustee or some other creditor or claimant is entitled to insist on it. Cf. In re Lewensohn (C.C.A.) 121 F. 538.
The bank's claim was "proved," as provided by law (Cf. Whitney v. Dresser, 200 U.S. 532, 26 S. Ct. 316, 50 L. Ed. 584), and neither any other claimant or creditor nor the trustee has disputed it or opposed it on any ground whatever. The sole objector is the bankrupt, and the sole ground of objection assigned by him is that the claim was barred by the statute of limitations when the bankruptcy petition was filed. Whether that reason is good depends upon whether, within section 57d, the bankrupt is a party in interest. It seems settled that he is not (In re Sully [C.C.A.] 152 F. 619; Gregg Grain Co. v. Walker Grain Co. [C.C.A.] 285 F. 156; Anchor Grain Co. v. Smith [C.C.A.] 297 F. 204), and hence that he is not entitled to have the claim disallowed.
In these circumstances I see no occasion to discuss the effect of the bankrupt setting out the claim in his schedule. It may well be, in so far as concerns the bankrupt (if he could properly set up a defense), that the coupling with his inclusion of the claim in the schedule a statement that it is barred by the statute of limitations would, in the sense of section 59 of the New York Civil Practice Act, be sufficient to prevent the listing from, in and of itself, constituting an acknowledgment of the debt. The difficulty is that the action of the bankrupt in the case at bar is insufficient to raise the issue, because he is without right to litigate in this court whether or not the bank has an allowable claim.
It is plain that the beneficiary of the policies is vitally concerned in the petition of the trustee for an order directing the turning over to itself of the cash surrender value of the policies. In any event, she should be afforded opportunity, if she desires, to be heard in opposition; particularly if, after examining the additional briefs called for near the beginning of this memorandum, I should conclude that the bankrupt has no interest in or is not eligible to raise questions as to the validity and applicability of section 55-a of the Insurance Law. As these matters may be again before the court, upon the appearance of the beneficiary, I withhold comment at present upon the arguments advanced orally and by brief before me on the subject.
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