In re Croton Insurance — 2 Barb. Ch. 360

Majority

p. 360

In the matter of the Croton Insurance Company.

Headnote

Where an insurance company .is interested .in. the prosecution of an-appeal from a decree of salvage, and a -third person, at the request of the corporation, becomes, surety for th‘e appellant, and the company- becomes insolvent .pending the appeal, the-surety is-not.en titled. to. a priority in payment:ou.t .of the.property,of the.corpo,, ration,, in.the,hands of a receiver,- for .the.jnoney.wliich such.surety-.is alternaréis; compelled to pay-.upon. the appeal .bond; although the liabilities .of the corporation were.considerably diminished by the.result of such appeal.

AZiierwhere a third person becomes surety for the.-receiver of an-insolvent corpora-. tion; upon-an. appeal-brought .by. hinvibr-the. benefit .of. the., fund to..which he., is. . entitled as-receivcr,- or-.where the-.fund coming to,the-.hands,of a receiver is actual-. ly.increased. to. the extent.of the moneys.which such third person is obliged to pay in consequence of his having become such surety.-

A°.person who pays- money -as surety for an insolvent-.corporation, is not-entitled to a-priori ty of payment,- over .-other creditors-.of .-'the corporation, outofdts corporate, property, id- the hands of a receiver-appointqd.by,the,court.of ehapeery to. close,, up the-affairsefthe company; but he.is entitled -to be .paid rateably with other creditors,, although he is:not compelled to pay .the claim for which he became liable-as surftv until after-the aopointment.ofthe receiver,

THJ«;oas9 cam9;before the chancellor upon.the petition of. G, S, Wayne, for. a- priority in,payment, out of,the assets .of the;. Groton Insurance Gompany, in.the-hands of. the receiver.;, the,company being, insolvent-.. Previous to the,, insolvency of the corporation.it had.insured;, the schooner, Emeline Peterson, by a time policy. During, the. continuance of the.- risk, the- schooner, was wrecked,, and was abandoned, by. the. master,- and. crew. Subsequently, Hill and Wheaton,, with- the. assistance. of the. maste.r.and. crew, got-the schooner-off the shoals, upon which she had been wrecked, ,and brought her into Philadelphia. Hill and. Wheaton-there libelled-her. for salvage, and the master, and crew, intervened; in that.suit, by a. supplementary libel, also claiming salvage-for- themselves, A decree was;made awarding salvage to all the libellants, to, the-amount; of $-1278,. with costs. The, insurance company, being liable, to pay the, amount, of this decree, under its policy upon, the vessel,, appealed in the name of the owner of the vessel; and the petitioner, at the request of the corporation, became security to abide the judgment of the court upon the appeal. The schooner was thereupon released

p. 361

iron: the custody , of the marshal, and was afterwards removed from the jurisdictiomofthe-cpurl, by, the owner. Pending this appeal, the corporation? became insolvent, and a receiver was appointed to wind up-its affairs, TJhe appeal- was. afterwards prosecuted: to . a decision, as... the, petitioner alleged, by the. receiver; but the receiver denied that it was.prosecuted by him, or by- his authority or, consent, or for his benefit. Upon the hearing, of the appeal the supplemental libel was dismissed, and the salvage upon the vessel and cargo was reduced to $800; leaving the proportion thereof which was chargeable upon the schooner, or its owner, and which the petitioner was liable to pay in consequence of his becoming such security upon the appeal, $590,17, including costs.

G. R. J. Bowdoin, for the petitioner.

O. L. Barbour, for the receiver.

Upon the facts stated in this petition, the petitioner is entitled to have the amount which he is liable to pay, on. account of his suretiship, allowed as a just claim-against the assets of the corporation, in the hands of the receiver ; and to be discharged rateably with the claims of other creditors, when he shall have paid the same to the libellants, so as to discharge the corporation from any further claim of the libellants, or of the owner of the vessel, for- the amount for which he is liable upon the appeal. To this extent the receiver swears he has offered to allow and register the claim, to be paid rateably with,-the claims of other, creditors, out of the assets of the company, which may come to his hands.- for distribution. And I see nothing in the facts of this claim entitling it to a preference in payment out of the funds which are in the hands of the receiver, over other debts-due from this.insolvent corporation.

Wayne’s contract was with the corporation, before its insolvency, and not with the receiver; and the effect of the decision upon the appeal was not to increase the funds in the hands of the receiver, but merely to diminish the amount of a

p. 362

claim which, if the original decree had not been appealed from, would have been payable out of the corporate funds rateably with all other debts. The claim of the petitioner would have been entirely different if he had become the surety upon an appeal brought by the receiver of the corporation, after his appointment as such receiver, and at his request; or if the funds in the hands of the receiver had actually been increased by any thing done by the petitioner for him, or at his request.

Petition dismissed.