United States District Court, Northern District of Illinois, E.D
December 16, 1959
MATTER OF SOLOMON SCHRIAR, SEYMOUR SCHRIAR, AND ARTHUR SCHRIAR, INDIVIDUALLY AND AS CO-PARTNERS DOING BUSINESS AS CHICAGO MOTIVE PARTS COMPANY, A CO-PARTNERSHIP, BANKRUPTS.
The opinion of the court was delivered by: Miner, District Judge.
On August 4, 1959, the Trustee in Bankruptcy petitioned the
Referee for an order directing Solomon Schriar to turn over
forthwith three life insurance policies. The named
beneficiaries under these policies are, according to that
sworn petition, the two sons and a daughter of Solomon
Schriar, none of whom are dependent upon him.
On August 24, 1959, the said bankrupt answered the petition
claiming that the insurance policies described therein are
exempt under Section 6 of the Bankruptcy Act, 11 U.S.C.A.
§ 24, and Chapter 73, Section 850 of the Illinois Revised
Statutes. He there claimed that in order for an exemption to
apply concerning those policies, it is not necessary that the
children named beneficiaries be dependent on the
insured-bankrupt. Both parties have filed briefs on the issue.
No cases construing the pertinent part of the Illinois statute
have been cited by either party, and both assert that none
On October 29, 1959, the Referee ruled that:
"the exemption provided in Section 850, Chapter
73 of the Illinois Revised Statutes of Illinois,
requires that children of the insured be
dependent upon such insured for said exemption to
"As a matter of law the exemption provided in
Section 850, Chapter 73 of the Revised Statutes
of Illinois, requires that children of the
insured be dependent upon such insured * * *."
The Referee held that the Trustee is entitled to the
possession of the insurance policies "in order that the cash
surrender value thereof may be obtained for the benefit of the
creditors herein." The bankrupt, Solomon Schriar, was ordered
to turn the said insurance policies over to the Trustee
On November 12 and November 18, 1959, the bankrupt and the
Trustee, respectively, filed additional memoranda analyzing
certain Illinois cases concerning exemptions of life insurance
policies payable to children and spouses. These cases,
however, were decided between 1881 and 1934, and even if they
were to state a rule contrary to that of the instant statute,
that rule would be no longer valid in view of the fact that
the instant statute was enacted in 1937.
The statute itself is unambiguous and has the effect of
granting an exemption to proceeds of life insurance policies
only when the beneficiaries are (1) a wife or husband of the
insured, or (2) a child, parent or other person dependent upon
the insured. The statute reads as follows:
"All proceeds payable because of the death of
the insured and the aggregate net cash value of
any or all life and endowment policies and
annuity contracts payable to a wife or husband of
the insured, or to a child, parent or other
person dependent upon the insured, whether the
power to change the beneficiary is reserved to
the insured or not, and whether the insured or
his estate is a contingent beneficiary or not,
shall be exempt from execution, attachment,
garnishment or other process, for the debts or
liabilities of the insured incurred subsequent to
the effective date of this Code, except as to
premiums paid in fraud of creditors within the
period limited by law for the recovery thereof."
The issue posed by Referee Streeter in his certificate to
this Court is:
"Under Section 850 of Chapter 73 of the
Illinois Revised Statutes on insurance, is a
Trustee in bankruptcy of an insured bankrupt
entitled to the cash surrender value of the
bankrupt's life insurance, where the
beneficiaries of the insurance policies are adult
children who are not dependent upon the bankrupt
It is the opinion of this Court that the said certified
question must be answered in the affirmative. The statute is
susceptible of only one construction. The Court is unable to
read it to mean anything other than that insurance policies
payable to children are exempt from the claims of creditors
only when the children are dependent upon the insured-debtor.
The order of the Referee must be sustained in full. The
Petition for Review is denied.
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