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UNITED STATES v. BANKERS' NATL. LIFE INS. CO.

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY


November 3, 1961

UNITED STATES of America, Plaintiff,
v.
BANKERS' NATIONAL LIFE INSURANCE COMPANY et al., Defendants

The opinion of the court was delivered by: WORTENDYKE

This action against a life insurance corporation to foreclose an alleged tax lien upon the interest of the insured named in each of three policies issued by the company, presents the question whether the insured had any ascertainable property in each of the policies to which the asserted lien could attach.

Jurisdiction is conferred upon the Court by 26 U.S.C. 7403. The statutory conditions precedent to the institution of the action have been complied with. Tax liens are claimed to have arisen under 26 U.S.C. 6321. There was due to the plaintiff from the taxpayer (insured) on May 12, 1952, the sum of $ 92,640.50. That amount became a lien in favor of the United States upon 'all property and rights to property' of the taxpayer on May 4, 1950, when the constituent taxes were assessed by the Commissioner of Internal Revenue. The assessment list upon which the assessments appeared was received by the Collector of Internal Revenue at Brooklyn, New York, and he gave notice and made demand for payment thereof on May 15, 1950. The lien provided by 26 U.S.C. 6321 was perfected upon the latter date. 26 U.S.C. 6322.

 Defendant insurer admits the issuance of the policies upon the taxpayer's life -- No. 46802 in the amount of $ 10,000, No. 46803 in the amount of $ 10,000, and No. 55287 in the amount of $ 15,000 -- and that the insurer received notice of the asserted liens on July 7, 1950. The cash surrender values of the policies set forth in the complaint are denied by the insurer, which alleges that the policy provisions authorize the insured to change the beneficiary named in and to receive the cash surrender value of each policy. The insurer contends that the insured's right to receive the cash surrender value of each policy may not be exercised by a court or a creditor because the right is personal to the insured. Section 3-F of each policy provides that if a premium thereon becomes overdue 'a quarterly instalment of the annual premium * * * shall be charged against the policy as an automatic policy loan, with interest at the rate of five and one-half per cent per annum payable in advance, as long as the then loan value of the policy, including the cash value of any outstanding dividend additions thereto and any dividend deposit at interest arising from (the) * * * policy is sufficient to cover (the) * * * premium loan and all other indebtedness to the Company on account of (the) * * * policy.' Accordingly, the insurer alleges that it was obligated by the foregoing policy provisions to make automatic premium loan advances which reduced the cash surrender values available to the insured and created an indebtedness by the insured to the insurer on that account prior to the commencement of this action. In the counterclaim annexed to its answer, filed December 19, 1958, the insurer discloses that the cash surrender values of the policies as of that date were as follows: Policy No. 46802 $ 2,344.42 Policy No. 46803 2,652.25 Policy No. 55287 9,902.22.

19611103

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