[166 NJSuper Page 111] In this case the question is whether the cash surrender value of a life insurance policy is subject to
sequestration and levy for the payment of alimony or whether it is immune.
On June 24, 1977 a final judgment of divorce was entered herein where plaintiff husband was ordered to pay alimony to defendant wife of $75.00 per week. As part of equitable distribution plaintiff was awarded two life insurance policies on his life having a cash surrender value of $4,400. Immediately upon divorce plaintiff changed defendant from beneficiary and substituted his mother who was later made a party to this action; she has made no claim of irrevocable rights in the policies.
When plaintiff failed to pay alimony, defendant secured judgment for arrears against him in the sum of $2,325. Thereafter defendant moved by order to show cause against the insurer, John Hancock Insurance Company, restraining it from paying any of the cash value of the two policies to plaintiff, and subsequently a levy was made on the cash value of the policies by the sheriff. The insurance company then filed a motion resisting payment of the sums levied upon. By affidavit the company stated that plaintiff had applied for a loan in the maximum amount of both policies totalling $2,293; however, this was denied to him because of the pending litigation.
The insurance company filed a memorandum of law raising two principal defenses against payment: first that under N.J.S.A. 17B:24-6 the proceeds were exempt from levy, and second, that only a loan was requested by plaintiff and that, absent final cashing and surrender of the policies by the insured, no asset of plaintiff existed to be levied upon.
The insurance company relies heavily upon Slurszberg v. Prudential Life Ins. Co. , 15 N.J. Misc. 423 (Sup. Ct. 1936), which holds that the statutory exemption of the proceeds of life insurance from the claims of creditors covers the cash surrender value as well as the insurance benefit. However, Slurszberg is distinguishable from the present case, for there plaintiffs were receivers of a realty corporation and determined by the court to be, pursuant to the statutory
definition, "in legal contemplation, creditors of the insured" (at 425). In the present case the creditor (defendant) is a former spouse, judgment creditor for alimony and not the ordinary "creditor(s) of the insured." As will be seen in the following cited cases, our courts have repeatedly held that an alimony judgment creditor stands in a special class outside that of a general creditor.
In Fischer v. Fischer , 13 N.J. 162 (1953), the Supreme Court held that Police and Firemen's Pension Fund benefits could be reached to satisfy a judgment for alimony notwithstanding a statutory provision, N.J.S.A. 43:16-7, that the fund benefits should be exempt from collection process. The court explained (at 168) that
A workers' compensation award was reached for the satisfaction of a judgment for alimony and child support in Steller v. Steller , 97 N.J. Super. 493 (App. Div. 1967), notwithstanding the statutory provision, N.J.S.A. 34:15-29, that such compensation was not assignable and was exempt from all creditors for levy, execution or attachment.
A pension originating in a labor contract was reached by an alimony judgment creditor in Thiel v. Thiel , 41 N.J. 446 (1964). There the court stated (at 451) that "[r]egardless of the precise and restrictive wording of an exemption provision, the restraint created should not be a barrier against recourse to the fund when it provides the only reasonably accessible asset for support of the wife within her state of residence." ...