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CONSUMERS TIME CREDIT, INC. v. REMARK CORP.

November 16, 1965

CONSUMERS TIME CREDIT, INC., a corporation,
v.
REMARK CORP., a corporation, Lewis Bokser, individually, Maurice Kramer, Merit Metalcraft Corporation, a corporation, Liberal Sales Credit Co., a corporation, Sales Finco, Inc., a corporation, Reskob, Inc., a corporation, Lewis Bokser, Inc., a corporation, and Sara L. Bokser, Defendants, Industrial Valley Bank and Trust Company, Central Penn National Bank, the Small Business Administration and Oxford Industrial Corporation, Garnishees



The opinion of the court was delivered by: LORD, III

 This action was begun by a writ of fraudulent debtor's attachment. The writ directed the marshal to attach the personal property of the corporate defendants, and of Lewis Bokser and Sara L. Bokser. The final paragraph of the writ directed the attachment of

 
"all other personal property of Remark Corp., a corporation, Lewis Bokser, Individually and Lewis Bokser, Individually and trading as Durabilt Paving Co., Maurice Kramer, Merit Metalcraft Corporation, a corporation, Liberal Sales Credit Co., a corporation, Sales Finco, Inc., a corporation, Reskob, Inc., a corporation, Lewis Bokser, Inc., a corporation and Sara L. Bokser."

 The petition of the defendants Lewis and Sara L. Bokser to dissolve the attachment has previously been denied. 227 F. Supp. 263 (E.D.Pa.1964). They now petition to have certain life insurance policies and the proceeds of the sale of a bond and mortgage released from the attachment.

 The life insurance policies name Lewis Bokser as the insured and Sara L. Bokser, his wife, as the beneficiary. Petitioners contend that the policies are exempt from attachment by virtue of the Act of June 28, 1923, P.L. 884, No. 335, § 1, 40 P.S. § 517, which provides as follows:

 
"The net amount payable under any policy of life insurance or under any annuity contract upon the life of any person, heretofore or hereafter made for the benefit of or assigned to the wife or children or dependent relative of such person, shall be exempt from all claims of the creditors of such person arising out of or based upon any obligation created after the passage of this act, whether or not the right to change the named beneficiary is reserved by or permitted to such person."

 The purpose of this statute is to provide the widow and family of an insured with a fund for their maintenance, clear of the claims of creditors. See In re Lang, 20 F.2d 236 (E.D.Pa.1927), aff'd. Dussoulas v. Lang, 24 F.2d 254 (C.A.3, 1928). This the plaintiff concedes, but it argues that the statute is inapplicable where both husband and wife are the debtors.

 This appears to be the first time this question has been presented under the Pennsylvania statute. Elsewhere, most courts which have considered the question under similar statutes have long held that the policies are exempt even from the claims of creditors of the beneficiary. Dellefield v. Block, 40 F. Supp. 616 (S.D.N.Y.1941); Holmes v. Marshall, 145 Cal. 777, 79 P. 534, 69 L.R.A. 67 (1905); Bowman v. Wilkinson, 153 Cal.App.2d 391, 314 P.2d 574 (1957); Brown v. Balfour, 46 Minn. 68, 48 N.W. 604, 12 L.R.A. 373 (1891).

 The exemption conferred by the Pennsylvania statute extends specifically only to the "claims of the creditors of such person," and "such person" refers to the insured. In some instances, such as in the Holmes, Bowman and Brown cases, supra, the statutes have simply provided that policies and proceeds are to be exempt from execution, without reference to whose creditors are affected. The courts have considered that terminology sufficient to prevent execution even where the beneficiary is a party to the debt.

 Plaintiff argues that to hold these policies exempt would be to give fraudulent debtors an opportunity to build up a fund which would be beyond the reach of creditors. That the statute is capable of some abuse by unscrupulous debtors probably cannot be gainsaid. But interpreting it so as to exempt the policies from creditors of both the insured and the beneficiary does not so greatly increase the risk of abuse as to outweigh the more uniform effectuation of legislative purpose it would accomplish. To prevent a creditor of the beneficiary from reaching the insurance proceeds where the debt has been incurred by the beneficiary after the receipt of the proceeds would present altogether different problems of administration and of post-mortem fraud and improvidence. These problems might require a different result. See Recor v. Recor, 142 Mich. 479, 106 N.W. 82, 5 L.R.A.,N.S., 472 (1905); Reiff v. Armour & Co., 79 Wash. 48, 139 P. 633, L.R.A.1915A, 1201 (1914). But they are not involved in the instant case: since the insured is still alive, the obligation, if any is finally found, was obviously incurred before the distribution of the proceeds of the policies.

 We are bound to construe this statute as the Pennsylvania courts would. It is impossible to be sure just how the Pennsylvania courts would construe this particular provision, but we do know that statutes granting exemptions from the claims of creditors are to be construed liberally because of their benign motivation. Maschke, to Use of Ehnes v. O'Brien, 142 Pa.Super. 559, 17 A.2d 923 (1941); Bell's Estate, 139 Pa.Super. 11, 10 A.2d 835 (1940). Our interpretation is certainly not out of harmony with Pennsylvania's construction of similar exemption statutes. See Beall Estate, 384 Pa. 14, 17, 119 A.2d 216, 54 A.L.R.2d 1329 (1956) (Dictum); Ogle v. Barron, 247 Pa. 19, 92 A. 1071 (1915); Kruczaj v. Komar, 24 Pa.Dist. & Co. 211 (C.P.1935). In the Kruczaj case, the statute expressly applied to debts incurred by the beneficiary, but we have no reason to think that the variant wording of the instant statute was by legislative design or that it should dictate a different result.

 Finally, plaintiff has suggested that before these policies are deemed exempt, there must be a determination that they are in fact genuine contracts of insurance intended to benefit the wife, and not subterfuges actually designed to benefit the husband. Plaintiff has not, however, given us any factual reason for suspecting that the policies in question are anything but insurance policies on the life of the husband, payable to the wife. In these circumstances, In re Bowers, 11 F. Supp. 848 (E.D.Pa., 1934), cited by the plaintiff, is simply inapplicable and the policies qualify for the exemption. In re Lang, supra; In re Rose, 24 F.2d 253 (E.D.Pa., 1927), aff'd, Dussoulas v. Lang, 24 F.2d 254 (C.A.3, 1928).

 The remaining questions relate to the attached proceeds of a bond and mortgage owned by Lewis and Sara L. Bokser jointly. This property is presumptively owned by the husband and wife as tenants by the entireties. Nachman v. Nachman, 417 Pa. 389, 208 A.2d 247 (1965). Plaintiff has alleged that the property was actually owned by the Boksers, not as tenants by the entireties, but as partners. Plaintiff has adduced no facts to support this conclusory allegation, and ...


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