Kockos Bros. v. Canadian Fire Insurance

Does a bankruptcy proceeding, in which no attempt was made to set aside a prior attachment of proceeds of an insurance policy, of itself serve to release the insurer garnishee of liability to the judgment creditor for funds attached? The trial court answered yes by granting defendant’s motion for summary judgment. Plaintiff appeals.

Defendant issued a fire insurance policy in the sum of $15,000 upon property of Future Manufacturing Cooperative, Inc. The insured property was substantially destroyed by fire January 3, 1956. On January 11, 1956, plaintiff herein filed an action against Future to recover $13,501.62 alleged to be due plaintiff upon contract. Writ of attachment issued, and levy was made upon defendant insurer directing it to withhold all sums due to Future. Defendant made no reply to the levy, but concedes that it then held $15,000 due to *470 Future. Future filed its voluntary petition in bankruptcy January 30 and was adjudicated a bankrupt next day. A receiver was appointed and the usual injunction against instituting or prosecuting actions against the bankrupt was issued, but was not served on plaintiff. On February 2, defendant paid the $15,000 in insurance…