Lancashire Insurance v. Maxwell

This action cannot be maintained without holding that when the superintendent of the insurance department receives securities from a foreign fire insurance company in excess of the $200,000 prescribed by the act of 1853, Laws of 1853, ch. 466, § 23; 2 Birdseye’s Statutes, p. 1639, he takes them as a voluntary trustee and not in his public or official character. “As to the surplus of the funds held by the defendant Maxwell, over $200,000,” says the learned counsel for the respondents, “ he is a mere voluntary trustee; ” and the court below adopted this view, declaring the excess to be a mere voluntary deposit, as to which the superintendent did not stand in the attitude of a trustee appointed by the statute, with the exclusive right to be continued as such. The fund in the hands of the superintendent was treated as being divisible into two parts: one consisting of securities to the amount of $200,000, which he holds as a statutory trustee under the act of 1853; and the other made up of the additional securities deposited with him by the Lancashire Insurance Company, which he holds as a private trustee, and not in pursuance of any duty devolved upon him by law.

It does not seem to me that this construction of the statute is correct.

The act of. 1853 requires a foreign fire insurance company doing business in this state to “ deposit with the superintendent of the insurance department, for the benefit and security of policy holders residing in the United States, a sum not less than $200,000 in stock of the United States or the state of New York, in all cases to be, or to be made to be, equal to a stock producing six per cent per annum.” The act does not say precisely $200,000, or not more than $200,000, but not less than $200,000. The company must deposit as much as that and may deposit a great deal more, as the Lancashire Insurance Company has done. But I find no warrant in the language of the law itself for distinguishing between the trust upon which the superintendent of the insurance department holds the first $200,000 which he receives and the trust upon which he holds the resL The deposit is to be made for the benefit and security of policy holders residing in the United States. The complaint in this case alleges that the first sum of $200,000 was so deposited for the benefit and security of such policy holders, and then proceeds to say that the company “ from time to time deposited other stocks of the United States with the successive superintendents of the insurance department of this state, to be held by them and their respective successors in office/or the further benefit and security of their policy holders in the United States.” This is the precise trust contemplated by the act of 1853, and the aggregate securities constitute the sum not less than $200,000, of which the superintendent is the statutory trustee.-

In order to make him an unofficial trustee of a voluntary trust so far as the securities in excess of $200,000 are concerned, it is necessary to ignore the true nature of the transactions between the Lancashire Insurance Company and the various superintendents of insurance. The plain import of the allegations in the complaint is that the so called additional securities were turned over

The circumstances under which the securities were put into the hands of the superintendents, as disclosed by the complaint, leave no doubt in my mind that the only trust in contemplation between the parties at any time was the statutory trust provided for in the act of 1853. The head of the insurance department became and continued and remains officially responsible for the safe keeping and proper management of the whole fund, and not merely for the $200,000 first paid in, as would be the case if the respondents were correct in their contention that the trust is purely volutitary as to the balance. If it is voluntary, it cannot be in any sense official, for the assumption of a voluntary trust in this matter by the superintendent of the insurance department is not authorized by law.

The case of Ruggles v. Chapman, 59 N. Y., 165 ; 64 id., 557, and the Matter of the Guardian Mutual Life Ins. Co., 13 Hun, 115 , are authorities for the proposition which is well stated in the opinion of the learned judge at special term, “ that the court has no power to interfere with the possession or administration of securities or funds in the hands of a statutory trustee for possession and administration (the question of misconduct being eliminated), because the trusteeship is made and governed exclusively by the terms of the statute itself.” Having reached the conclusion that the superintendent of the insurance department is an official trustee as to the entire fund deposited by the Lancashire Insurance Company, it follows that he cannot be deprived of the custody or control of any part of it on any of the grounds set out in the complaint; and hence, that the complaint does not state facts sufficient to constitute a cause of action.

For these reasons, I think the judgment should be reversed.

Van Brunt, P. J., concurs.

I concur; The judgment should be reversed, with costs, and the demurrer sustained, with costs of the special term and of this appeal.