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198 U.S.

Argument for Respondent.

mediately cash surrender policies, pass to the trustee, see In re Slingluff, 106 Fed. Rep. 154; In re Welling, 113 Fed. Rep. 189; In re Diack, 100 Fed. Rep. 770; Ladd v. Union Insurance Company, 116 Fed. Rep. 878; In re Boardman, 103 Fed. Rep. 783; In re Martens, 131 Fed. Rep. 972; Gould v. N. Y. Life Ins. Co., 132 Fed. Rep. 927.

If the policies are of the cash surrender sort, $70a, which would hold them for the trustee, does not give way to the state exemption clause. Compare In re Welling, 113 Fed. Rep. 189, with In re Boardman, 103 Fed. Rep. 783.

Supposing the estate exemption clause applicable, the Washington law does not mean that endowment policies are exempt to the insured debtor in his own lifetime, and that any kind of policy whatever is exempt from the creditors of a beneficiary also.

The law should receive a sensible construction. Holy Trinity Church v. United States, 143 U. S. 457; United States v. Kirby. 7 Wall. 482; Heydenfeldt v. Mining Co., 93 U. S. 634; Scott v. Deweese, 181 U. S. 202, affirming 89 Fed. Rep. 843; Lee Kan v. United States, 62 Fed. Rep. 914; Chinese Merchants' Case, 13 Fed. Rep. 605; Lau Ow Bew v. United States, 144 U. S. 47.

Thirty-five States and Territories have passed laws exempting life insurance, of which twenty-four have exempted the insurance as a fund, not for the insured, but for the beneficiary.

When this Washington statute was passed, twenty-four of these thirty-five statutes did not intend that the insured should endow himself with life insurance for his own uses while living, and the same statutes, while making the insurance exempt to the wife, as against his creditors, made no such provision as that she might have creditors too and hold the proceeds free. These statutes are: Arkansas, Sandels and Hills Code, 1894. § 4944; Delaware, Code, 1893, ch. 76, § 3; Dist. of Col., Code, 1902, § 1162; Florida, Rev. Stat., 1892, § 2347; Hawaii, Civil Laws, 1897, § 1903; Illinois, 2 S. & C. Ann. Stat., 1896, p. 2259, ch. 73, 189; Indian Territory, Stat., 1899, 3023; Maryland, 1 Gen. Laws, §§ 5, 8, 9, p. 803; Michigan, Comp. Laws,

Argument for Respondent.

198 U. S.

1897, § 8695; Mississippi, Ann. Code, 1892, § 1964; Missouri, Rev. Stat., 1899, § 7895, p. 1842; New Jersey, 2 Gen. Stat., 1896, p. 2019; New Mexico, Comp. Laws, 1897, § 2042; New York, Rev. Stat., 1 Code and Gen. Laws, 3d ed., Birdseye, p. 1046; Domestic Relations Law, Art. 3, § 22; Pennsylvania, 1 Pepper & Lewis Dig., 1896, § 91, col. 2383; Ohio, 2 Bates' Ann. Statutes, 2d ed. §§ 3628, 3629; Oklahoma, 1 Stat., 1903, p. 795; Rhode Island, Pub. Stat., ch. 166, § 21; South Dakota, Rev. Code Civil Pro., 1903, § 347, p. 929; South Carolina, 1 Code, 1902, § 1824; Tennessee, Ann. Code, 1 Grayson, 1895, § 2294; Vermont, Stat., 1894, § 2653; West Virginia, Code, 1887, ch. 66, § 456.

Of these States some further restricted the thing by making such exemption to the beneficiary only when a wife, others only to a small sum, a few hundred dollars, under any circumstances.

See in comparison the sweeping monstrosity possible under a liberal interpretation of the Washington law, "the proceeds or avails of all life insurance." To the insured while he lives if he wants to endow himself, to the insured bankrupt from others if they choose to endow him, no limit either, in any amount.

The other eleven States afford no precedent for this. Five of them: Connecticut, Rev. Stat., 1902, § 4548; Kentucky, Stat., 1894, § 654; Massachusetts, 2 Rev. Laws, 1902, ch. 118, § 73, p. 1154; New Hampshire, Pub. Statutes, 1901, ch. 171, § 1; Wisconsin, Stat., 1898, § 2347, exempt the policy in the wife's favor only against creditors of the husband, like the other States, or of the person paying the premium. North Carolina and Georgia, are too obscure to be made out upon this point at all. Alabama, 1 Code, 1896, § 2607; Iowa, Code, 1897, § 1805; Kansas, Gen. Stat., 1901, § 3463; Maine, Rev. Stat., 1903, ch. 49, § 106. In Maine the exemption amounts to only $150. And see Smealey v. Felt, 43 Iowa, 607; Murray v. Wells, 53 Iowa, 256.

As life insurance is a fund realizable by death and not by

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any one during his lifetime, the term excludes endowment policies payable during life of insured. Talcott v. Field, 52 N. W. Rep. 400.

MR. JUSTICE WHITE, after making the foregoing statement, delivered the opinion of the court.

The law of the State of Washington upon which the bankrupts relied to sustain the exemption of the policies was originally enacted in 1895 (Laws of Washington, 1895, p. 336), and was reenacted in 1897. Laws of 1897, p. 70. The original act provided "that the proceeds or avails of all life insurance shall be exempt from all liability for any debt," and the amendment of 1897 enlarged this act by making it also applicable to accident insurance.

The Circuit Court of Appeals held that the policies were not exempt, even although embraced by the state exemption, because of the requirements of section 70 of the bankrupt act of 1898. This was sustained upon the theory that section 6 of the bankrupt act, adopting the exemption laws of the several States, was modified, as to life insurance policies, by a proviso found in section 70a. In addition, in this court it is insisted on behalf of the trustee that, even although the construction of the bankrupt act adopted by the Circuit Court of Appeals was a mistaken one, nevertheless the policies were not exempt, first, because the law of Washington making the exemption was in conflict with the constitution of that State; and, second, because the law, even if valid, did not authorize the exemption of policies of the character of those here involved.

As section 6 of the bankrupt act gives effect to the exemptions allowed by the state law, it follows that the contentions that there was no valid state law exempting insurance policies, or that the exemption here claimed is not embraced within the state law, if such law be valid, lie at the threshold of the case, and must be disposed of before we come to consider the true interpretation of the bankrupt law.

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To decide the contentions involves purely state and not Federal considerations. No decision of the Supreme Court of the State of Washington holding the exemption law to be invalid because repugnant to the state constitution has been referred to. On the contrary, in In re Heilbron's Estate, 14 Washington, 536, the exemption law in question was considered and upheld by the Supreme Court of Washington. In that case the court maintained the contention that to cause the provisions of the statute to retrospectively apply to debts which had been contracted prior to the passage of the act would render the act unconstitutional, both from the point of view of the Federal as well as the state constitution, and therefore that the law must be construed as having only a prospective operation. All the reasoning, however, of the opinion of the court by which the conclusion referred to was reached assumed as a matter of course that the law, if operating prospectively, was not an unconstitutional exercise of power by the legislature. And it is also worthy of remark that the amendment including accident insurance was adopted by the legislature of Washington subsequent to the decision in In re Heilbron's Estate. Of course, as the question of the repugnancy of the statute to the constitution of Washington upon the grounds now asserted was not presented in that case, the decision cannot be said to be conclusive of the question. But it has its due persuasive force.

Considering the contention, however, as an original question, we think its unsoundness is quite clear. The fallacy which the proposition embodies consists in presupposing that because the constitution of the State of Washington provides that the legislature "shall protect by law from forced sale a certain portion of the homestead and other property of all heads of families," thereby a limitation was imposed upon the general power of the legislature to determine the amount and character of property which should be exempt. Two cases are referred to as supporting the contention. In re How, 59 Minnesota, 415; Skinner v. Holt, 9 S. Dak. 427. But those

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cases were based upon constitutional provisions widely different from the one here relied upon. To the contrary, in California, where a constitutional provision obtains identical with the one we are considering (const. Cal. article XVII, sec. 1), it has been decided that the character and amount of property which shall be exempt from execution is "purely a question of legislative policy." Spence v. Smith, 121 California, 536. And it is further to be observed that the legislature of California has acted under that assumption, and has in effect exempted life insurance policies from execution. Thus it is provided in the Civil Code of California as follows:

"SEC. 3470. Property exempt.-Property exempt from execution and insurances upon the life of the assignor, do not pass to the assignee by a general assignment for the benefit of creditors, unless the instrument specially mentions them, and declares as intention that they should pass thereby. En. March 21, 1872."

Conceding the constitutionality of the statute, it is next insisted that it does not embrace an exemption of the avails of the policies in question. The arguments supporting this contention are somewhat involved, but are all embraced in the following propositions: First, life insurance, it is said, in its strictest and technical sense, relates only to a fund realizable by death, and therefore the words "all life insurance," in the Washington statute, must be given that restricted meaning, hence the statute is inapplicable to one of the policies which partakes of the nature of an endowment. Second, exemptions of life insurance policies, it is asserted, do not generally protect the avails of insurance from pursuit by creditors of the insured, where the proceeds of the policies are payable to his estate, nor do they protect the avails of insurance from pursuit by the creditors of the wife of the insured or other beneficiary. The application of these propositions is based upon the fact that in both of the policies the wife one of the bankrupts— was named as a beneficiary in the event of surviving her husVOL. CXCVII-14

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