§ 10. Licenses, franchises, and personal privileges.-A bankruptcy, even if voluntary, is not a breach of a covenant not to assign a lease or other property right.63 The trustee of a bankrupt tenant is therefore entitled to the leased premises for the remainder of the term.64 A contract between a publisher and an author whereby the former undertakes to publish and market literary productions of the latter, is not assignable;65 nor is a contract with a person for the manufacture by him of a particular commodity requiring special skill of the manufacturer.66 The same rule would be held to apply to a contract for personal services involving trust and confidence, as one between an insurance company and its agent, although under it the agent is entitled to commissions or renewal premiums on policies written by him before his bankruptcy. Whether a franchise or a license passes to the trustee on the bankruptcy of its owner depends usually on the terms of the instrument creating it, or, if that is silent, on whether it in its nature calls for personal skill or discretion.68 It is well settled that a bankrupt's interest in a license to sell liquors passes to his trustee;69 but this question is dependent upon the statute under which the license is issued.70 It has been held that the bankrupt may be ordered to transfer a seat in a stock exchange to his trus

67

63. Perry v. Lorillard, 61 N. Y. 214; Starkweather v. Cleveland Ins. Co., 2 Abb. (U. S.) 67, Fed. Cas. No. 13,308; In re Bush, 11 Am. B. R. 415, 126 Fed. 878, a tenant's covenant not to assign his lease without the landlord's permission in writing does not apply to an adjudication of the tenant's bankruptcy. The English rule is different. Doe v. Bevan, 3 Maule & S. 353; Doe v. Smith, 5 Taunt. 795; Dommett v. Bedford, 3 Ves. 148.

64. In re Adams, 14 Am. B. R. 23. 65. Matter of McBride, 12 Am. B. R. 81.

66. Jetter Brewing Co. v. Scollan, 15 Am. B. R. 300, 111 App. Div. (N. Y.) 925.

67. Matter of Wright, 16 Am. B. R. 778.

68. People v. Duncan, 41 Cal. 507; Stewart v. Hargrove, 23 Ala. 429; Parsons on Contracts, Part II, chapter 12, section 9.

69. In re May, 5 Am. B. R. 1; In re Becker, 3 Am. B. R. 412, 98 Fed. 407; Fisher v. Cushman, 4 Am. B. R. 646, 103 Fed. 860, aff'g In re Fisher, 3 Am. B. R. 406, 98 Fed. 88; In re Brodbine, 2 Am. B. R. 53, 93 Fed. 643. Compare In re Emrich, 4 Am. B. R. 89, 101 Fed. 231.

70. In re McArdle, 11 Am. B. R. 358, 126 Fed. 442, in which case the court applied the case of In re Fisher. supra, as limiting the right of a trus-i tee to realize upon the value of a

tee.71 But the question as to whether a seat in a stock exchange belongs to a bankrupt and is, therefore, to be administered as part of his assets by the trustee depends upon the facts in each particular case. 72 Special property, by way of lien, in securities deposited as a pledge, is not property within the meaning of the act which passes to the trustee.73

§ 11. Life insurance policies.-The test as to life insurance policies is was the interest of the insured transferable or subject to levy? If the policy had an expressed cash surrender value, payable to the bankrupt, and enforceable by him, it is, of course, within the proviso, and unless the amount thereof is paid or secured as therein provided, it passes to the trustee.74 This is so, even without the consent or assignment of the beneficiary, and the bankrupt may be ordered to execute any necessary papers to accomplish the

transfer.75 And even though the cash surrender value is not expressed in the policy, if it appear that the company will pay a prescribed amount upon its surrender, the effect is the same and the bankrupt may retain the policy upon paying or securing the payment of such amount.76 Where, however, there is no actual value, as, for instance, in "ordinary life" policies, nothing passes to the trustee.77 Where a policy has been pronounced valueless and turned over to the bankrupt, and the premiums thereof are paid either by himself or his wife, and the bankrupt dies soon after the policy is so turned over, the proceeds of the policy do not belong to his estate in bankruptcy.78 This subsection does not include policies payable to the wife or kindred of the insured, but only applies to policies payable to the insured or his personal representatives.79 The meaning and effect of the proviso clause in subdivision (5) is considered in a later paragraph.80 An endow

75. In re Diack, supra. For the duty of the trustee touching policies of life insurance, see In re Welling, 7 Am. B. R. 340, 113 Fed. 118.

76. Hiscock v. Mertens, 17 Am. B. R. 484, 205 U. S. 202, 51 L. Ed. 771, aff'g 15 Am. B. R. 701, 142 Fed. 445, rev'g 12 Am. B. R. 712, in which case the Supreme Court expressly states that the "cash surrender value " meant by this section is the amount which would have been paid by the company had the policy been surrendered, even though no amount was stipulated in the policy. See also Holden v. Stratton, 198 U. S. 202, 14 Am. B. R. 94; Matter of Phelps, 15 Am. B. R. 170; In re Coleman (C. C. A.), 14 Am. B. R. 461, 136 Fed. 818; Clark v. Equitable Life Assur. Co., 16 Am. B. R. 137, 143 Fed. 175; Gould v. New York Life Ins. Co., 13 Am. B. R. 233, 132 Fed. 927; In re Buelow, 3 Am. B. R. 389, 98 Fed. 86. Contra Van Kirk v. Slate Co., 15 Am. B. R. 239, 140 Fed. 38; In re Welling, 7 Am. B. R. 340, 113 Fed. 189; In re

Slingluff, 5 Am. B. R. 76, 106 Fed.
154, repudiating In re Hernich, 1 Am.
B. R. 713. See also In re Becker, 5
Am. B. R. 438, 106 Fed. 54.

77. Gould v. New York Life Ins. Co., 13 Am. B. R. 233, 132 Fed. 927.

78. Benjamin v. Chandler, 15 Am. B. R. 439, 142 Fed. 217; Meyers v. Josephson, 10 Am. B. R. 687, 124 Fed. 734.

79. Pulsifer v. Hussey, 9 Am. B. R. 657, 97 Me. 434. As to assignment of policy as collateral, see In re Sanderson, 18 Am. B. R. 101.

are

80. Fire insurance policies rarely an asset, unless a fire loss has occurred just prior to the bankruptcy. Compare In re Hamilton, 4 Am. B. R. 543, 102 Fed. 683. See also Long v. Farmers' State Bank (C. C. A.), 17 Am. B. R. 103. The bankruptcy of the insured is not such a transfer of title as to render a policy void under a clause giving that effect to a change of ownership. Starkweather v. Cleveland Ins. Co., Fed. Cas. No. 13,308.

ment policy of insurance on the life of a bankrupt, payable to him at the end of the term if living, or in case of his prior death to his wife, is one in which he has an interest which passes to his trustee.81 Life insurance policies which have not lapsed either at the time of the filing of the petition or of the adjudication have a cash surrender value, although it may be the practice of the company not to accept a surrender until the policy has lapsed.82

12. Property sold to the bankrupt on condition. Here also the interest of the bankrupt's trustee depends on the law of the State.83 If the bankrupt was in possession under a contract invalid as to creditors, as, for instance, because not filed in accordance with that law, both possession and title pass to the trustee.84 But creditors are not purchasers or lienors.85 In some jurisdictions the rule obtains that the delivery of goods, with the provision that the title shall not pass until the purchase price has been paid, is void as to the creditors of the party to whom they are delivered; in such case goods found in the bankrupt's possession, delivered under such conditions, pass to the trustee.86 A statute requiring the filing of contracts for the conditional sale of property is not to be avoided by pretext: it will not be effectual to call a contract "lease" which provides for the payment of rent for the use of

81. In re Schofield, 17 Am. B. R. 916, 147 Fed. 862.

82. Hiscock v. Mertens, supra. 83. In re Shuts Printing, etc., Co., 14 Am. B. R. 668, 136 Fed. 989. A leading case is In re Garcewich, 8 Am. B. R. 149, 118 Fed. 87. See also In re Burkle, 8 Am. B. R. 542, 116 Fed. 766, and In re Howland, infra.

84. In re Yukon, etc., Co., 2 Am. B. R. 805, 96 Fed. 326; In re Frazier, 9 Am. B. R. 21, 117 Fed. 575; Chesapeake Shoe Co. v. Seldner, 10 Am. B. R. 466, 122 Fed. 593; In re PressPost Publishing Co., 13 Am. B. R. 103, 132 Eed. 301. Compare In re Leigh Bros., 96 Fed. 806, aff'g 2 Am.

B. R. 606; In re Howland, 6 Am. B.
R. 405, 109 Fed. 869.

85. In re Bozeman, 2 Am. B. R. 809; In re Kellogg, 7 Am. B. R. 270, 112 Fed. 52; In re Hinsdale, 7 Am. B. R. 85, 111 Fed. 502. Compare In re McKay, 1 Am. B. R. 292.

86. This is the rule in Pennsylvania, In re Tice, 15 Am. B. R. 97; In re Poore, 15 Am. B. R. 174, 139 Fed. 862; In re Poore, 15 Am. B. R. 407, 140 Fed. 786; Matter of Rodgers, 16 Am. B. R. 401, 143 Fed. 594; Matter of Hess, 14 Am. B. R. 635, 136 Fed. 988; In re Franklin Lumber Co., 17 Am. B. R. 443; In re Builders Lumber Co., 17 Am. B. R. 449.

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an article for a prescribed time, with the right to pay the purchase price at the end of the term, all payments of rent to be applied thereon; such a contract is for a conditional sale and, unless duly filed, the property sold will vest in the vendee's trustee in bankruptcy for the benefit of his creditors.87 Under a statute providing that an unrecorded contract of conditional sale is void only as against subsequent purchasers, pledgees or mortgagees in good faith, a failure to record such a contract prior to the adjudication in bankruptcy of the vendee does not affect the title of the conditional vendee as against the vendee's trustee.8 Where seizure is necessary to establish the creditor's rights, title will not pass unless seizure is made before the bankruptcy.89 Where, however the property is merely consigned for sale, the bankrupt is not a vendee on condition.90 As to the avails of goods so consigned, but sold by him before the bankruptcy, the funds being mingled with his own, title thereto passes to the trustee.91 Where consigned goods are found among the assets and identified by the consignor, but not otherwise, the trustee should apply for an order permitting him to release them to the real owner. In actual practice this is frequently done. Care should be taken to distinguish between goods sold on condition and goods consigned, and positive identification of the latter should be required.92 Where the contract under

87. Unitype Co. v. Long (C. C. A.), 16 Am. B. R. 282, aff'g 14 Am. B. R. 668, 136 Fed. 989. But if the vendor, on finding the vendee is in financial difficulties, refuses to deliver machinery unless it be agreed that it be held under a lease, the title remaining in the vendor, the title does not vest upon delivery, In re Naylor Mfg. Co., 14 Am. B. R. 284, 135 Fed. 206.

88. Hewitt V. Berlin Machine Works, 194 U. S. 296, 11 Am. B. R. 709; Matter of Cavagnaro, 16 Am. B. R. 320, 143 Fed. 668; York Mfg. Co. v. Cassell, 15 Am. B. R. 633, 201 U. S. 344, rev'g 14 Am. B. R. 52.

Compare In re Tweed, 12 Am. B. R. 648; First Nat. Bank v. Staake, 202 U. S. 141, 15 Am. B. R. 639.

89. In re Ohio, etc., Co., 2 Am. B. R. 775.

90. In re Columbus Buggy Co., 16 Am. B. R. 750, 143 Fed. 859; Deere Plow Co. v. McDavid, 14 Am. B. R. 653, 137 Fed. 802; In re Miller, 14 Am. B. R. 439, 135 Fed. 868; In re Flanders, 14 Am. B. R. 27, 134 Fed. 560; In re Galt, 13 Am. B. R. 575, 56 C. C. A. 470.

91. Compare Bills v. Schliep, 11 Am. B. R. 607, 127 Fed. 103.

92. Adams v. Meyers, Fed. Cas. No. 62. See In re Levin, 11 Am. B. R. 446, 127 Fed. 886.