The opinion of the court was delivered by: KNIGHT
At the time of adjudication, bankrupt carried five several policies of endowment insurance on his life. Possession of such policies having been taken by the trustee in bankruptcy, the bankrupt applied for an order declaring exempt from the claim of creditors the proceeds of the cash surrender value of such policies, and directing the trustee to surrender the policies to the bankrupt. The referee granted the order, and, for the review of this, an application is now made.
Three of the policies insured the life of bankrupt in the sum of $10,000. Each of these provided for the payment of that sum to Blume Horwitz, wife of insured, on proof of insured's death prior to the maturity of the endowment, and for the payment of such sum to insured on his surviving such maturity period.
Two policies insured the life of bankrupt in the sum of $10,000 and $5,000, respectively. Each of these provided for payment of the sum therein stated to said wife, on proof of death of insured prior to the maturity of the policy, and payment to insured of a definite amount in monthly payments, beginning with the date of maturity, if he were then living.
Each policy has a cash surrender value, and in each the right to change the beneficiary is reserved.
Section 70a of the Bankruptcy Act (11 USCA § 110(a) provides that the trustee shall be vested "by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all * * * (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him."
Section 6 of the Bankruptcy Act (11 USCA § 24) provides that section 70a, supra, shall not "affect the allowance to bankrupts of the exemptions which are prescribed by the State laws in force at the time of the filing of the petition." Section 55-a of the Insurance Law of New York state (Consol. Laws, c. 28), effective March 31, 1927, in part reads: "If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person."
Section 70a, supra, also provides that, when a bankrupt has a policy of insurance having a cash surrender value "payable to himself, his estate, or personal representatives," he may pay the cash surrender value and retain the policy. It has been definitely held by the Supreme Court that this sentence is not a limitation on section 6, supra, and applies only to policies which are not exempt by other provisions of law. Holden v. Stration, 198 U.S. 202, 25 S. Ct. 656, 49 L. Ed. 1018.
In determining the meaning and effect of section 55-a, supra, this court will be guided by the construction placed on it by the court of last resort in New York state. Holden v. Stratton, supra; Ehrhart v. New York Life Insurance Co. (D.C.) 45 F.2d 804; In re Erstine (D.C.) 41 F.2d 559; Smith v. Metropolitan Life Insurance Co. (C.C.A.) 43 F.2d 74.
In default of any decision by such court of last resort, the federal court will place its own construction. Arbogast v. Gottfried (C.C.A.) 58 F.2d 156; In re David (D.C.) 54 F.2d 140; Garber v. Bankers' Mortgage Co. (D.C.) 27 F.2d 609; Vought v. Kanne (C.C.A.) 10 F.2d 747; Ralph v. Cox (C.C.A.) 1 F.2d 435; In re Erstine, supra.
Section 55-a relates wholly to "a policy of insurance." Such "policy of insurance" means a life insurance policy. The title to the statute enacting 55-a reads: "An Act to amend the insurance law, in relation to the rights of creditors and beneficiaries under policies of life insurance." Chapter 468, Laws of 1927, New York state. There are different kinds of life insurance, named in accord with the terms and conditions. Among such are what are called "general insurance," or "old line insurance," "assessment," "endowment," "annuity," "group," "tontine," and others.
Life insurance is a contract for the payment of a definite sum upon the happening of a particular event and dependent upon the duration of a period of human life. In its earliest use, policies were ordinarily payable to named beneficiaries at the death of the insured. Time developed the plan of insurance agreements for the benefit of the insured or both insured and beneficiaries. All the policies here questioned come in the last-named group. Endowment policies have been in use since 1805. Forms of insurance other than general insurance have been known for many years. Corpus Juris, 37, p. 360, §§ 1-5. The Insurance Law of New York state as enacted in 1849, and as amended from time to time, in no way declares or shows the intent that "endowment" insurance is not included in the term "life" insurance. The act of 1849, chapter 308, relates only to fire insurance, health and life insurance, and this classification has been continued to this date. Various sections of the Insurance Law of New York state refer to "endowment" policies, but the connection in which the term is used indicates no intent to classify an endowment policy as other than a life insurance policy (sections 3, 9, 88, 101, 101 1/2). Baron v. Brummer, 100 N.Y. 372, 3 N.E. 474; Miller v. Campbell, 140 N.Y. 457, 35 N.E. 651; Vance on Insurance (2d Ed.) p. 1, 1930, p. 547; Holden v. Stratton, supra; Cooley on Insurance, vol. 1, p. 783. It is my conclusion that the bankrupt's policies come within the provisions of section 55-a of the New York Insurance Law.
The courts of New York state have not passed upon the specific question presented. A number of cases in those courts have been cited in the briefs submitted. Among such are these: Chatham Phenix Nat. Bank v. Crosney, 251 N.Y. 190, 167 N.E. 217; U.S. Mortgage & Trust Co. v. Ruggles, 258 N.Y. 38, 179 N.E. 250, 79 A.L.R. 802; Amberg v. Manhattan Life Ins. Co., 171 N.Y. 314, 63 N.E. 1111; Baron v. Brummer, supra; Miller v. Campbell, supra; Maurice v. Travelers' Insurance Co., 121 Misc. 427, 201 N.Y.S. 369. None are directly in point, and, with a single exception, relate to policies issued prior to March 31, 1927.
Section 55-a in its language is derived, in substance, from the Massachusetts and Pennsylvania statutes. Other states, notably New Jersey and Ohio, have similar statutes.The New York statutes and these other ...