Sun Life v Ingersoll G.R. No. 16475 November 8, 1921

J. Street

Facts:

Sun Life issued a policy on Dy Poco’s life for US$12,500. The contract stipulated that it would be payable to the said assured or his assigns on the 21st day of February, 1938, and if he should die before that date, then it would be given to his legal representatives. The payment of a stipulated annual premium during the period of the policy, or until the premiums had been completely paid for twenty years,

Dy Poco, was adjudged an insolvent by the trial court and Frank B. Ingersoll was appointed assignee of his estate. Poco died, and Tan Sit, was appointed as the administratrix of his intestate estate.

Both Ingersoll, as assignee, and Tan Sit, as administratix of Dy Poco's estate, asserted claims to the proceeds of the policy. The lower court found that Ingersoll had a better right and ordered Sun Life to pay.

The polic stipulated that after the payment of three full premiums, the assured could surrender the policy to the company for a "cash surrender value."  Butno more than two premiums had been paid upon the policy up to the time of the death of the assured. Hence this provision had not become effective. It must therefore be accepted that this policy had no cash surrender value, at the time of the assured's death, either by contract or by convention practice of the company in such cases.

Issue:

WON Ingersoll, as assignee, has a right to the proceeds of the insurance

Held: No. Sunlife must pay to the administratrix.

Ratio:

The property and interests of the insolvent which become vested in the assignee of the insolvent are specified in section 32 of the Insolvency Law.

Sec 32 declares that the assignment to be made by the clerk of the court "shall operate to vest in the assignee all of the estate of the insolvent debtor not exempt by law from execution."

Moreover, by section 24, the court is required, upon making an order adjudicating any person insolvent, to stay any civil proceedings pending against him; and it is declared in section 60 that no creditor whose debt is provable under the Act shall be allowed, after the commencement of proceedings in insolvency, to prosecute to final judgment any action therefor against the debtor. In connection with the foregoing may be mentioned subsections 1 and 2 of section 36, as well as the opening words of section 33, to the effect that the assignee shall have the right and power to recover and to take into his possession, all of the estate, assets, and claims belonging to the insolvent, except such as are exempt by law from execution.

These provisions clearly evince an intention to vest in the assignee, for the benefit of all the creditors of the insolvent, such elements of property and property right as could be reached and subjected by process of law by any single creditor suing alone. "leviable assets" and "assets in insolvency" are practically coextensive terms. Hence, in determining what elements of value constitute assets in insolvency, the court is at liberty to consider what elements of value are subject to be taken upon execution, and vice versa.

Section 48 of the Insolvency Law, didn’t declare items from the ownership of which the assignee is excluded. Moreover, all life insurance policies are declared by law to be assignable, regardless of whether the assignee has an insurable interest in the life of the insured or not.

The assignee in insolvency acquired no beneficial interest in the policy of insurance in question; that its proceeds are not liable for any of the debts provable against the insolvent in the pending proceedings, and that said proceeds should therefore be delivered to his administratrix.

In re McKinney:    no beneficial interest in this policy had ever passed to the assignee over and beyond what constituted the surrender value, and that the legal title to the policy was vested in the assignee merely in order to make the surrender value available to him. The conclusion therefore was that the assignee should surrender the policy upon the payment to him of said value, as he was in fact directed to do.

A surrender value of a policy "arises from the fact that the fixed annual premiums is much in excess of the annual risk during the earlier years of the policy, an excess made necessary in order to balance the deficiency of the same premium to meet the annual risk during the latter years of the policy. This is the practical, though not the legal, relation of the company to this fund. "Upon the surrender of the policy before the death of the assured, the company, to be relieved from all responsibility for the increased risk, which is represented by this accumulating reserve, could well afford to surrender a considerable part of it to the assured, or his representative. A return of a part in some form or other is now Usually made."

The stipulation providing for a cash surrender value is a comparatively recent innovation in life insurance. Furthermore, the practice is common among insurance companies even now to concede nothing in the character of cash surrender value, until three full premiums have been paid, as in this case.

The courts are therefore practically unanimous in refusing to permit the assignee in insolvency to wrest from the insolvent a policy of insurance which contains in it no present realizable assets.