Ruggles v. Chapman — 59 N.Y. 163

Majority

p. 163

Philo T. Ruggles, Receiver, etc., Appellant, v. Orlow W. Chapman, Superintendent, etc., impleaded, etc., Respondent. The Same, Appellant, v. The Same, Respondent.

(Argued November 19, 1874;

decided December 1, 1874.)

Headnote

The receiver of an insolvent life insurance corporation, appointed in an action brought by a creditor and stockholder,' under the provisions of the Revised Statutes, to procure its dissolution and a distribution of its assets, has no authority to require from the superintendent of the insurance department the securities deposited with him by said company, as security for the policyholders, in pursuance of the requirements of the act providing for the incorporation of such companies. (§ 6, chap. 463, Laws of 1853, as amended by chap. 800, Laws of 1862.)

The courts have no power to compel the superintendent to transfer the trust imposed upon him by said act.

These are appeals, the one from a judgment of the General Term of the Supreme Court, in the first judicial department, affirming a judgment of Special Term, sustaining a demurrer on behalf of defendant Chapman, to plaintiff’s complaint, the other from a judgment of said General Term, affirming a judgment in favor of said defendant, entered upon a case submitted under section 372 of the Code. (Reported below, 1 Hun, 324 ; 2 N. Y. S. C. [T. & C.], 600.) Both present the same questions and similar facts.

Plaintiff was appointed receiver of the Eclectic Life Insurance company, a corporation organized under the insurance laws of this State, in a suit brought by a creditor and stockholder, under the provisions of the Revised Statutes, for the purpose of dissolving said corporation and winding up its

p. 164

affairs, on the ground of insolvency. The said company had assigned to and deposited with defendant1' Chapman, as superintendent of. the insurance department of this State, in-pursuance of the requirements of said insurance laws (§ 6, chap. 463, Laws of 1853, as amended), securities to the amount of $101,000. Plaintiff demanded the- transfer and delivery to himself of these securities. This said defendant refused.

John L. Hill for the appellant.

Defendant improperly withholds the funds in suit. (McCartee v. Orphan Asylum, 9 Cow., 437 ; Laws 1848, chap. 308, § 17; Laws 1853, chap. 463, § 11; Laws 1851, chap.)

Charles S. Fairchild for the respondent.

In each of these cases the substantial question .is presented by the claim of the plaintiff to require from the superintendent of the insurance department, a transfer of certain securities which he holds in his official character. The plaintiff is a receiver appointed by the Hew York Common Pleas, in the exercise of its equitable 'jurisdiction, at the suit of a stockholder and creditor of the Eclectic Life Insurance Company, in a suit to establish its insolvency, and procure its dissolution, and the distribution of its assets. The securities which the defendant holds, were placed in his hands by the insurance company in question, in pursuance of the requirements of the law. (4 Edm. Stat. at Large, 218, § 6.) His duty in respect to such securities is defined by the same statute. It is there enacted that the superintendent of the insurance department shall hold such securities, as security for policy-holders in said companies. By a subsequent section of the same act (§ 17, pp. 224, 225), it is made the duty of the attorney-general, under specified circumstances, to apply to the Supreme Court for the dissolution of the company and the distribution of its assets, including the securities deposited as aforesaid. The Supreme Court, in case it is made to appear that the assets and funds of the company are insufficient

p. 165

to reinsure the outstanding risks, is required to decree the dissolution and distribution as before mentioned. Undoubtedly any surplus which should remain after satisfying the policy-holders, would be applicable to the satisfaction of the general creditors of the corporation. On the other hand, in a proceeding to dissolve a corporation, under the general provisions of the statutes, the receivers who are appointed have certain general and defined powers and duties, and are required to make distribution upon principles which look to the preservation of equality of right among all the creditors, with some immaterial exceptions. We do not perceive the authority of such a receiver to require from the superintendent of the insurance department, the surrender of a trust which has been devolved upon him by law. We are entirely clear that the superintendent could not voluntarily transfer the trust, and we are at a loss to find any authority in the courts to compel him to do so. ¡Not regarding for the moment his official character and the statutory sanction of his trust, if it rested on contract alone, it is difficult to see on what footing a court could assume into the hands of its receivers, property lawfully held in trust, in the absence of misconduct on the part of the trustee. Mortgagees in trust could not be compelled to yield to receivers representing creditors at large. It is quite obvious that there are difficulties in the way of harmonizing these two independent schemes of dealing with insolvent insurance companies; but we are of opinion that the claims of the receiver cannot be asserted as paramount to the statutory duty of the superintendent. We venture to add that it is better that the legislative power should be invoked to resolve the difficulty and to provide for the protection of the rights of the parties interested in such cases, by general laws, than that the courts should attempt to build up a system out of the discordant and scanty material of positive enactments, now to be found in the statutes.

The judgments must be affirmed.

All concur, except Gboveb, J., not sitting.

Judgments affirmed.