COHN
v.
MALONE, TRUSTEE OF COHN, BANKRUPT
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A bankrupt debtor assigned life insurance policies to his wife as beneficiary while retaining the contractual right to change beneficiaries at any time, and the trustee in bankruptcy sought to recover the policies' cash surrender value for distribution to creditors. The Supreme Court held that the debtor retained sufficient ownership interest in the policies to make them property of the bankruptcy estate, and that a Georgia statute protecting beneficiary designations did not prevent the trustee from reaching the policies since the statute only protected beneficiaries against third parties, not against the insured's own retained power to change beneficiaries.
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Mr. Justice McReynolds delivered the opinion of the court.
In 1902 and 1905 the bankrupt took out two policies on his life in the Penn Mutual Life Insurance Company, loss under one payable to his “executors, administrators or-assigns,” under the other to his sister and brother with full power in the assured “while this policy is in force and not previously assigned, to change the present beneficiary or beneficiaries.” By formal written instruments dated July 15, 1910, he assigned both policies to his wife “if she, outlives me, otherwise to my estate, with full power to the insured to change the beneficiary or surrender this policy to said company at any time, this to be done by instrument in writing under his hand and seal to be recorded at the home office of the company.”
While both policies were in the bankrupt’s possession, the trustee demanded them in order that their cash surrender value might be secured and distributed under the Bankruptcy Act. The bankrupt defended upon two grounds: First, that the cash surrender value was not property which could have been transferred by him. prior to bankruptcy; and second, that the assignment to his wife could not be defeated by the trustee because protected by § 2498, Georgia Code, 1910, which provides— “The assured may direct the money to be paid to his personal representative, or to his widow, or to, his children, or to his assignee; and upon such direction given, and assented to by the insurer, no other person can defeat the same. But the assignment is good without such assent.”
The Circuit Court of Appeals held both grounds of defense bad. 236 Fed. Rep. 882. As to the first, its ruling accords with the doctrine recently announced in Cohen v. Samuels, 245 U. S. 50. In respect of the second that court declared:
“Nothing in the terms of the statute, especially when they are considered in the light of the circumstances of its enactment, indicates that it had any other purpose or effect than to deny to anyone other than the assured himself the power to defeat a direction by him to pay to his personal representative, or to his widow, or to his children, or to his assignee, the money payable in a life policy issued to him. The provision does not' purport to make every such direction by the assured irrevocable by him, or to invalidate a stipulation in a life policy giving the assured, the right to change the beneficiary at any time during the continuance of the policy. The statute puts a direction by the assured to pay to his widow on the same footing as one to pay to his assignee. If a policy is assigned as security for a debt which the assured pays during his life, certainly the statute is not to be given the effect of putting it out of the power of the assured to changé the beneficiary upon the reassignment of the policy to him by the satisfied creditor. Nothing in its terms justifies giving it a different operation or effect in the case of a direction to pay to the widow. We are not of opinion that the provision quoted had the effect of conferring on the bankrupt’s wife, as the result of her having been named as the beneficiary, a vested and indefeasible interest in policies by the terms of which the beneficiaries could be changed by the bankrupt at any time.” And we approve its conclusion.
Petitioner has not complained here of the action below concerning a third policy, issued by the New York Life Insurance Company.
The judgment of the Circuit Court of Appeals is
Affirmed.
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Citator
Cited By (16 total)
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In re Messinger. Ex parte Riley, 29 F.2d 158 (2d Cir. 1928)…he cash surrender value was an asset which passed to the trustee under section 70a, supra, because the insured had power, by reason of the reservation in the policies, to make them payable to himself. To the same effect was Cohn v. Mar- [*160] lone, 248 U. S. 450, 39 S. Ct. 141, 63 L. Ed. 352, and our own decision in Matter of Greenberg, 271 F. 258. Does section 55a of tbe Insurance Law allow an exemption to tbe bankrupt within the provisions of section 6 of the Bankruptcy Act? Only in such event can the In…1 / 2
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Schmidt v. Fid. Mut. Life Ins. Co. of Philadelphia, 256 U.S. 395 (U.S. 1921)…on surrender of the policy, but otherwise to leave to the injured the benefit of his life insurance; Burlingham v. Crouse, 228 U. S. 459, 473; Everett v. Judson, 228 U. S. 474. In two recent cases, Cohen v. Samuels, 245 U. S. 50, 53; Cohn v. Malone, 248 U. S. 450, we have held that the surrender value of a policy not in terras payable to the bankrupt but which could be made sp, payable at the bankrupt’s will by a simple declaration changing the [*398] beneficiary, must be regarded as assets to which the trus…
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In re Redbord. Petition of Derby, 3 F.2d 793 (2d Cir. 1924)…of such value in the trustee, even when the policy is payable to a beneficiary other than the bankrupt, if the latter has reserved absolute power to change the beneficiary. Cohen v. Samuels, 245 U. S. 50, 38 S. Ct. 36, 62 L. Ed. 143; Cohn v. Malone, 248 U. S. 450, 39 S. Ct. 141, 63 L. Ed. 352; Frederick v. Fidelity, Insurance Co., 256 U. S. 395, 397, 41 S. Ct. 503, 65 L. Ed. 1009. In the policy involved herein the bankrupt had reserved the power to change the beneficiary, and there is no doubt that the cash…1 / 2
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- Cohen v. Samuels, 245 U.S. 50 (U.S. 1917)