People v. Commercial Alliance Life Insurance

The case of Barnes v. Newcomb, 89 N. Y. 108 , may possibly be <in authority for the proposition that where an application is made for the appointment of a receiver of a corporation upon the ground of its insolvency, and the company employs counsel, and opposes such application in good faith, and with a conviction of the solvency of the company audits right to-conduct its own business, and it has probable cause and reasonable ground for such opposition, the court may, in administering tbé fund, allow the reasonable expenses incurred tn repelling the-attack upon the corporation, which its officers regarded as unfounded. But where, -as in the case at bar, the officers of the company undoubtedly knew that the company was -insolvent, and acted in bad faith, there seems to be no possible ground upon which indemnity for expenses incurred can be allowed. It has been suggested that, as the attorneys in the case at bar acted in good faith, the b'ad faith of their credit cannot be imputed to them. But the authority quoted clearly only allows indemnity for reasonable expenses which the corporation has incurred in the conduct of an opposition in good faith. It certainly would be a strange proposition to hold that, although therofficers had acted in-bad faith, yet the agents whom they employed should be able to procure such an allowance in their behalf, and a preference over the other creditors of the corporation. We think, under the circumstances of the case at bar, that ho allowance can be made to the attorneys, notwithstanding that they acted in good faith, because of the want of good faith upon the part of the officers of the corporation who employed them. The order should be reversed, with $10 costs and disbursements, and the motion denied, with $10 costs.

Parker, J., concurs.

(dissenting).—The bad faith of the officers cannot be imputed to the corporation, its shareholders, its policy holders, and creditors, whom the attorneys represented, and whose right it was material to inquire into and to protect. The attorneys had no knowledge that the corporation was insolvent, and we re ignorant of the facts known to its officers, and their bad faith cannot be imputed to counsel. The officers did not employ the attorneys to defend their own interests alone, but to defend the interests of the-corporation and all persons represented by it. The order should be affirmed, with costs.