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In re Power

July 2, 1940

IN RE POWER; PUEBLO SAVINGS & TRUST CO.
v.
POWER; RICKLES V. SAME.



Appeal from the District Court of the United States for the Southern Indiana, Indianapolis Division; Robert C. Baltzell, Judge.

Author: Wilkerson

Before EVANS and MAJOR, Circuit Judges, and WILKERSON, District Judge.

These appeals are from orders denying petitions by which the trustee in bankruptcy sought to recover, as an asset of the estate, the interest of the bankrupt in an annuity contract purchased by him in 1928 from the AEtna Life Insurance Company.

The annuity contract recites:

1.That it is issued in consideration of the payment of a single payment of $19,954.

2. The insurance company agrees to pay $100 a month for 204 months. It also agrees that if either Power or his wife shall be living oin April 28, 1942, it will continue the monthly payments during the lifetime of both or either of the annuitants, such payments to terminate with the last payment preceding the death of the survivor. At the death of the survivor of the annuitants, after the payments certain have been made, the contract shall become null and void and the premium shall remain the property of the company.

3. Each annuity payment under the contract shall be payable as it becomes due to Power, if then living: otherwise to his wife, if living, and if neither be then living to the son of the annuitants, if then living, or if said son is not then living to the executors or administrators of the last survivor of said annuitants and said son.

4. Neither of the annuitants nor the beneficiary under the contract shall have the right to transfer or assign, or to anticipate his or her right to the annuity payments thereunder.

In the bankrupt's schedules the annuity is listed under the heading: "Property in money, stocks, shares, bonds, annuities, etc.", as follows: "Annuity with AEtna Life Insurance Company. Taken out in 1925. No cash or surrender value. Pays $100. per month to Clifton Norwood Power for life and same amount upon his death to his wife for her life. Non-revocable. Claimed as exempt. Supposed value of bankrupt's interest 0."

At the first meeting of creditors the bankrupt was examined wiht reference to the annuity and testified that it had no cash value. The attorney for the appellee, Pueblo Savings and Trust Company, was present at the examination, requested the referee to examine the annuity contract, and stated that he "frankly believed that it had no cash value". The attorney further stated that his client believed the annuity had a cash value and he wished the court to pass on that question.

By an order made October 11, 1938, the referee in bankruptcy appointed the trustee and found that the bankrupt was entitled to the exemptions provided by the statutes of Indiana for a householder, the same being section 2-3501, Burns' Indiana Statutes, Annotated, of 1933, as amended by Acts Ind. 1937, c. 296, ยง 1. The referee further found that the annuity contract had no cash or surrender value, was not assignable or transferable by the bankrupt and could not be levied upon to pay his debts, and that it did not pass to the trustee in bankruptcy. The trustee was directed in the order to "file his report setting apart the bankrupt's exemptions allowed by law, as claimed, and report the items and estimated value thereof to the court".

Thereafter the trustee filed his report of exempted property. In the schedule of property designated and set apart to be retained by the bankrupt as his own property under the provisions of the bankruptcy act the trustee lists: "Annuity with AEtna Life Insurance Company. Taken out in 1925. No cash or surrender value. Pays $100. per month to Clifton Norwood Power for life and the same amount upon his death to his wife for her life. Nonrevocable." The report continues: "To which exemption bankrupt is entitled as rovided by the statutes of Indiana, same being section 2-3501, Burns' Indiana Statutes, Annotated, of 1933; that the annuity contract * * * issued by the AEtna Life Insurance Company * * * and the insurance policy * * * issued by the Mutual Life Insurance company * * * are exempt by virtue of the provisions of chapter 143 of the Acts of the General Assembly of 1925, being section 39-703, Burns' Indiana Statutes, Annotated, of 1933".

On November 1, 1938, the referee made an order approving the trustee's report on exemptions and directing that the property set forth in the report be set off to the bankrupt.

After the bankrupt was discharged and before the trustee had filed his final report, the trustee entered motions to withdraw his report of exempt property, to modify the findings of the referee as to the annuity and to recover as an asset of the estate the interest of the bankrupt in the annuity.the trustee states in his motion that the inclusion of the annuity contract in his report of exemptions was in obedience to the directioins of the referee; that, upon further examination of the subject he was of the opinion that the bankrupt had a valuable interest in the contract, and that it was not exempt under the laws of Indiana. The bankrupt resisted the trustee's motion, claiming that as neither a creditor nor the rustee excepted to the determination of exemptions by the trustee within 20 dyas, as provided in General Order No. XVII,, 11 U.S.C.A. following section 53, the determination and the order of the referee approving it were an adjudication of the rights of the bankrupt in the annuity which precluded ...


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