US SUPREME COURT DECISIONS

The statute of the Washington, Laws of 1897, p. 70, exempting proceeds or avails of all life insurance from all liability for any debt is not in conflict with the constitution of that state as construed by its highest court, and exempts the proceeds of paid-up policies and endowment policies payable to the assured during his lifetime.

Courts will not read into a broadly expressed state statute of exemption limitations which do not exist therein because they do exist in similar statutes of other states or because they deem the limitations equitable. To do so would not be construction of the statute, but legislation, and the broad terms of the statute show an intention of the legislature of the state to adopt broader and more comprehensive exemptions than those adopted by the other states.

Policies of insurance which are exempt under the law of the the bankrupt are exempt under § 6 of the Bankrupt Act of 1898, even though they are endowment policies payable to assured during his lifetime and have cash surrender values, and the provisions of § 70a of the act do not apply to policies which are exempt under the state law.

It has always been the policy of Congress, both in general legislation and in Bankrupt Acts, to recognize and give effect to exemption laws of the states.

Separate proceedings in bankruptcy were begun in the District Court of the United States for the District of Washington, Northern Division, against Daniel N. Holden and chanrobles.com-red

Page 198 U. S. 203

Lizzie Holden, his wife. They were consolidated. Both the parties were adjudicated to be bankrupt, and J. A. Stratton became the trustee of both estates.

All the liabilities of the bankrupts were contracted between the first day of September and the first day of December, 1900, and the creditors of each were the same. There were two policies upon the life of Daniel N. Holden, one for $2,000, the other for $5,000, issued by the same company. Both bore date June 15, 1894, having been issued as the result of an arrangement by which the insured and his wife, as the beneficiary, surrendered a policy for $10,000, dated May 21, 1890.

The policy for $2,000 was a full-paid, nonparticipating one, and the amount became due only upon the death of the insured, and was then payable to the wife, or, in the event she did not survive her husband, to his executors, administrators, or assigns. The policy for $5,000 was on what was termed the semi-tontine plan. An annual premium of $233.80 was required to be paid for ten years from the date of the previous policy, which had been surrendered -- that is, until May 21, 1900 -- and therefore, at the date when the bankrupts contracted the debts set forth in their schedules, and at the date of the adjudications in bankruptcy, this period had expired, and no further payment of premiums was necessary. Upon the death of the insured, the amount of the policy was to be paid to the wife as the beneficiary, or, in the contingency of her prior decease, to the executors, administrators, or assigns of the insured. It was provided, however, that, upon the completion of the tontine dividend period of twenty years -- on May 21, 1910 -- if the insured was then alive, he or his assigns, if creditors, might surrender the policy and receive its full cash value or a nonparticipating policy, payable to the original beneficiary, or if she was not alive, to the executors, administrators, or assigns of the insured, or the option was given to keep the policy in force, and to withdraw the surplus to the credit of the policy in cash, or use the same to purchase additional insurance.

The bankrupts made application to have these policies set chanrobles.com-red

Page 198 U. S. 204

aside to them, because, it was asserted, they were exempt by the law of the State of Washington. This was resisted by the trustee upon the ground that the policies had a cash surrender value of $2,200, which it was the duty of the bankrupts to pay to the trustee as a condition precedent to the exemption of the policies. The referee sustained the claim of the trustee. His ruling was reversed by the district court. On a petition for revision, the circuit court of appeals held that the bankrupts were obliged to pay the cash surrender value as asserted by the trustee. 113 F.1d 1. An appeal was prosecuted to this Court, and was dismissed. 191 U. S. 115. This writ of certiorari was then allowed. 193 U.S. 672. chanrobles.com-red

Page 198 U. S. 207