Waterman, Kaufman and Anderson, Circuit Judges.
Mrs. Sayre W. Klebanoff appeals from a partial summary judgment award of $58,896.09 in life insurance proceeds plus interest to W. Paul Flynn as trustee in bankruptcy of Mrs. Klebanoff's bankrupt estate. The District Judge, who was confronted with a complex factual setting, dealt thoroughly with the manifold contentions of the multiple parties and, as a result, the issues raised here already have been substantially pruned and refined for appellate consideration. Because of our disagreement, however, with the disposition below of a central issue in the case, we remand for consideration in the light of this opinion.
The material facts were undisputed and are extensively set forth in Chief Judge Timbers' reasoned opinion reported at 246 F. Supp. 935 (D. Conn. 1965).*fn1 We shall, therefore, merely summarize so much of the facts as are necessary to shed light on the legal issues presented.
Mrs. Klebanoff's husband, M. Edward Klebanoff (Edward), died on November 9, 1962. Prior to that time, he was the owner of ten life insurance policies issued by the Mutual Life Insurance Company of New York (MONY). Although Mrs. Klebanoff was the named beneficiary under each of these insurance contracts, Edward reserved all significant powers over them, including the right to designate a different beneficiary.*fn2
In the summer of 1962, the Klebanoff's financial underpinnings began to give way. Having borrowed substantial sums from the Tradesmens National Bank of New Haven (Tradesmens) on their promissory notes, both Klebanoffs defaulted in payments of principal and interest aggregating in excess of $75,000. On July 6, August 9 and September 7, 1962, Tradesmens commenced three actions in the Superior Court for New Haven County against the Klebanoffs and MONY seeking to recover the sums alleged to be due on the notes. In connection with this litigation, certain attachments and garnishments were effected and injunctions were obtained against both Klebanoffs and MONY temporarily enjoining them from "paying or permitting or causing to be paid the cash surrender value of any policy of insurance issued by [MONY] on the life of M. Edward Klebanoff and against changing or causing or permitting to be changed the beneficiary of any said policy of insurance or loaning money or causing money to be loaned against the security of any such policy or its cash surrender value and against pledging, assigning, transferring or in any other manner disposing of any of said policies or causing or permitting the same to be pledged assigned, transferred or in any other manner disposed of."
Meanwhile, several other creditors of the Klebanoffs filed an involuntary petition in bankruptcy against them. As a result, the Klebanoffs were adjudicated bankrupt as of August 22, 1962 and W. Paul Flynn became trustee in bankruptcy of each of their estates.
On July 9, 1963 (Edward having died the previous fall), Mrs. Klebanoff commenced the instant action against MONY seeking to recover, as named beneficiary, the proceeds of the ten life insurance policies which MONY had issued on her husband's life. In its role as stakeholder, MONY interpleaded by way of counterclaim, the adverse claimants to the proceeds of these policies -- Mrs. Klebanoff, Tradesmens, and Flynn, as trustee in bankruptcy of the bankrupt estates of both Klebanoffs. The parties agreed to reserve other issues for subsequent determination and Mrs. Klebanoff moved for partial summary judgment.*fn3
The District Judge determined that Flynn, as trustee of Mrs. Klebanoff's bankrupt estate, was entitled to the insurance proceeds. In so deciding, he rejected the claims of Tradesmens, Mrs. Klebanoff and Flynn, as trustee of Edward's bankrupt estate. And, although the ramifications were far more complicated below, on appeal, the dispute has evolved into a contest for the insurance proceeds between Mrs. Klebanoff and Flynn, as trustee of her estate. In this Court, Tradesmens supported the trustee's position and the trustee, in his capacity as representative of Edward's estate, in turn has not pressed his claim to the insurance proceeds.*fn4
In less than sparkling clear prose, section 70(a)(5) of the Bankruptcy Act, 11 U.S.C. § 110(a)(5), defines the conditions upon which a trustee may reach property claimed by a bankrupt such as proceeds of the life insurance policies in which Mrs. Klebanoff has asserted an interest:
The trustee of the estate of a bankrupt * * * upon his * * * appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt as of the date of the filing of the petition initiating a proceeding under this Act, except insofar as it is to property which is held to be exempt, to all of the following kinds of property wherever located * * * [:] property, including rights of action, which prior to the filing of the petition he could by any means have transferred or ...