John E. Schmidt having died pending bankruptcy, his trustee, the present petitioner, sued the insurance company, respondent, in the court of common pleas of Allegheny county, Pa., to recover the proceeds of a certain policy of life insurance, with interest from the date of death. By an amended statement plaintiff limited his claim to the surrender value of the policy at the time of the adjudication of bankruptcy. The court of common pleas gave judgment in favor of defendant; on appeal the Superior Court affirmed the judgment (75 Pa. Super. Ct. 77); the Supreme Court of the state refused an appeal, thereby making the judgment of the Superior Court final; and a writ of certiorari brings the case here.
The facts in brief are as follows: September 20, 1902, the insurance company issued a policy of insurance upon the life of John E. Schmidt in the sum of $1,000, payable upon surrender of the policy properly receipted, after acceptance of proof of death; payment to be made to his wife, Annie M. Schmidt, or, if he should survive her, then to his administrators, executors or assigns, subject to certain provisions, one of which was:
'The insured, with the written approval of the president or vice president, may upon the surrender of this policy, change the beneficiary, or with such approval it may be assigned.'
December 19, 1912, a petition in involuntary bankruptcy was filed against Schmidt; on January 8th following he was duly adjudged a bankrupt; and one month later petitioner was elected and duly qualified as his trustee. The policy was not included in the schedule of assets, and petitioner had no knowledge of it until after the proceeds had been paid by the insurance company to the widow. Upon the date of the adjudication of bankruptcy the policy had a cash surrender value of $322. April 4, 1913, the bankrupt died, proof of the fact and cause of his death was duly made and accepted by the company, and May 7, 1913, it paid the face of the policy to the beneficiary named therein and took her receipt therefor. Neither then nor at any time before had the company knowledge of the adjudication in bankruptcy, or notice that the trustee would claim the whole or any part of the policy.
The trustee's suit to recover the surrender value is grounded upon section 70a of the Bankruptcy Act (Act July 1, 1898, c. 541; 30 Stat. 544, 565 [Comp. St. § 9654]), under which the trustee is vested by operation of law with the title of the bankrupt as of the date he was adjudged a bankrupt, to rights and property not exempt, including:
'(3) Powers which he might have exercised for his own benefit, but not those which he might have exercised for some other person; * * * (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him: Provided, that when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise the policy shall pass to the trustee as assets. * * *'