Case ID: ny-sup-ct_18/html/0282-01.html
Source: Caselaw Access Project
Author: {"author": "Barnard, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ETHELBERT BELKNAP, Appellant, v. THE NORTH AMERICA LIFE INSURANCE COMPANY and others, Respondents.
    
      Action toremove trustee of a corporation — 2 S.S., 468, § 85 — “creditor in” — meant> judgment m'editor — chap. 463 of 1853.
    The word creditor, as used in section 35 of 2 Revised Statutes, 463, authorizing “ any creditor ” to maintain an action to procure the removal or suspension of a trustee of a corporation for an abuse of trust, means a judgment creditor. The owner of a paid-up policy issued upon his life by a life insurance company is not a creditor thereof within the meaning of that section.
    Said section was not repealed by section 17 of chapter 463 of 1853 providing for an examination of such companies by the comptroller, and the maintenance of an action against them by the attorney-general.
    Appeal from an order made at the Special Term, denying a motion for the appointment of a receiver and for an injunction.
    
      Réclfielcl <£¡ Sill, for the appellant.
    The policyholders are creditors within the meaning of section 35, article 2, title 4, chapter 8, part 3 of the Revised Statutes, and, as such, have a standing to invoke the power of a court of equity to restrain waste and misappropriation of the company’s funds by the officers and others. (1 Bouvier Law Diet., 409, tit. “ Creditor.”) The term “ creditor ” is used in our statutes in its broad and popular sense. Statutes must be interpreted according to the popular meaning of the language, unless some controlling reason appears for a special and restricted interpretation. (Ohase v. N. Y. O. R. R., 26 N. Y., 523, 525 ; Holmes v. Ga/rley, 31 id., 289 ; Wallace v. Harris, 20 Wend., 555, 562; The People y. Draper, 15 N. Y., 532.) The general design of the Revised Statutes was to secure equality in the distribution of the assets of insolvent corporations. (§ 9, art. 1, tit. 2, chap. 18, part 1, R. S., 592; § 11, art. 3, tit. 4, chap. 8, part 3, R. S., 2; id., 469; Brower v. Harbeck, 9 N. Y., 591, 593 ; Cvrtts v. Zeamtt, 15 id., 109,139,198,199; Gasserly v. Marmers, 9 Hun, 102.) Its provisions are intended to subject all proceedings which might lead to preferences to the control of the court in the equity suit, and to compel all claimants to “ exhibit .their claims and become parties ” to the equity suit (Rim v. Astor Fire Ins. Go., 59 N. Y., 143 ; Mickles v. Rochester City Bank, 11 Paige, 118, 125), so that each claim 'might be established as against every other, and no one secure any advantage over any other in point of time. A policyholder is a preferred creditor. (Re Groton Ins. Go., 3 Barb. Oh., 642; Ze Roy v. Globe Ins. Go., 2 Ed. Oh., 613, 614.) It would seem to be decided that any one interested in the distribution may file the bill to wind up a corporation, to obtain a distribution of its assets and the incidental relief afforded by section 56. (Mickles v. Rochester City Bank, 11 Paige, 125.) .The plaintiff has a standing to maintain this action wholly independent of any statute. This bill charges a plain misappropriation of trust funds, in which the plaintiff has an interest, by these officers and the Universal Company. (Grey v. The H. Y. and Virginia Ins. Go., 5 S. C. R. [T. & 0.], 228; Brewer v. Boston Theater, 104 Mass., 318; Mamrini v. Goldtlvwalte, 34 Texas, 135 ; Heath v. Frie R. R. Go., 8 Eleteher, 341; Dodge v. Wdlsey, 18 How. [U. S.], 321; Mott y. The Penn. R. Co., 30 Pa., 1; Manderson v. The Commercial Bank, 28 id., 319.) The action ought ordinarily to be brought in the name of the corporation; but when, as in this case, the officers are parties to the wrongs alleged, one may sue in behalf of himself and all others similarly situated. (Beaman v. Buff or d, 1 Sim. [U. S.], 550 ; Winch v. Birkenhead R. Go., 5 D. G. S., 562; 
      Mosley v. Allston, 1 Pb.iL, 790 ; Wood v. Draper, 24 Barb., 187; Robinson v. Smith, 3 Paige, 222 ; Gvmmngham v. Dell, 5 id., 607; Peabody v. Flint, 6 Allen, 52 ; Carpenter v. N. F. and F. H. R. R. Go., 5 Abb., 257; Cross v. Sackept, 2 Bosw., 617; Prouty v. The South. R. R. Co., 4 N. Y. S. O. R., 231.) A creditor at large may maintain such an action. {limes v. Lansing, 7 Paige, 584; 1 R. S., 767; 1 N. Y. Stat. at Large, 720; Middles v. Rochester City Bank, 11 Paige, 118, 126 ; Gorvroy v. Cray, 4 How. Pr. R., 166; Gonro v. Port Henry Iron Go., 12 Barb., 27, 58 ; Story Eq. Plead., § 99; Gal/way v. Steam Sugar Refining Go., 36 Barb., 256.)
    
      Robert Sewell, for the North America Life Insurance Company, respondent.
    
      Ashbel Green, for the Universal Life Insurance Company, respondent.
   Barnard, P. J.:

The plaintiff is a policyholder in the North America Life Insurance Company, having a paid-up policy. He avers in his complaint, that the North America Life Insurance Company, through its officers, has made a corrupt and injurious arrangement with the Universal Life Insurance Company, whereby the management of both companies is conducted by the same directors and partially by the same officers. That these combined companies have made some other arrangement, whereby property of the Guardian Life Insurance Company, has come into their possession and they have so mingled the funds of the three companies, that it is impossible to trace the same. The complaint also avers other frauds and imperfections, and asks that a visitation of the three companies may be made under the direction of the court; that all persons who are directors both of the Universal and North America companies may be removed from their offices; that the injurious contracts and arrangements may be declared void; that the North America company may, if insolvent, be dissolved and its affairs wound up, and asks for a receiver in the meantime.

The motion for a receiver and for a referee to visit the three companies was denied on the ground that the plaintiff had no standing to bring tbe action. Is a policyholder in a life insurance company a creditor? Assuming him to be a creditor at large, does tbe word “ creditor ” in tbe statute mean a judgment creditor ? If tbe plaintiff bas a right to sue under tbe Revised Statutes (2 R. S., 462, §§ 33, 34 and 35) does tbe law of 1853 (chap. 463, Laws of 1853 § IV), take away bis right ? These are tbe questions involved on this appeal.

I do not think tbe plaintiff is a.creditor. He bolds a paid-up policy. After be dies tbe insurance company will owe bis representatives tbe amount thereof, if no fraud or misrepresentation bas been used to obtain tbe policy, if no warranty bas been broken and if tbe assured does not violate any of tbe conditions contained in tbe policy itself. There is no present right. There is no certainty that there ever will be an established debt. Tbe creditor must be a judgment creditor; so held in reference to tbe statute word “ creditor ” in other sections. • (Greenwoood v. Brodhead, 8 Barb., 593; Crippen v. Hudson, 13 N. Y., 161; Frisbee. Thayer, 25 Wend., 398.)

Any other meaning to tbe word creditor would involve a possible joinder of incongruous causes of action and triable in a different way. If tbe debt at large was claimed to be upon contract and tbe contract was denied and tbe debt should be averred to be paid, bow is tbe issue tried ? When tbe Revised Statutes were passed a legal and equitable claim could not be joined in one complaint.

If creditor meant a creditor at large with an unproven debt, why did tbe legislature give bim a standing in a court of equity, when bis vei’y debt must be proven in a court at law.

As to tbe third,question I see no reason to bold that chapter 463, Laws of 1853, section IV, was intended to repeal tbe Revised Statutes. By that section tbe comptroller was given power, on suspicion of unsound condition, to cause an examination to be made into tbe affairs of tbe suspected company. If be found tbe company in an unsound condition he is directed to withdraw tbe certificate granted to tbe company, and no new policies are to be issued.

Tbe comptroller is also directed to communicate tbe fact of tbe unsoundness of tbe company to tbe attorney-general, whose duty it is then made to apply to tbe Supreme Court for an order requiring tbe company to show cause why it should not have its business closed.

By section 11 of this act of 1853, the life insurance corporations are made subject to the Revised Statutes, “ except in regard to annual' statements and other matters herein otherwise specially provided for.” The argument is made that, by section 17, a dissolution is provided for, and consequently that, by section 11, the Revised Statutes are not applicable. The Revised Statutes (2 R. S., 462, § 33) are addressed to an entirely different class of cases than those expressed in section 17, of Laws of 1853. The power to dissolve a corporation authorized by law to make .insurances was given to the Court of Chancery for insolvency or inability to pay its debts ; for violation of charter or of any act binding upon it. (2 R. S., 463, § 39.) Section 17 of the Laws of 1853 does not necessarily reach either of these cases.

I cannot, therefore, hold that the Revised Statutes are repealed because the .present case is specifically provided for in the law of 1853. "

Order affirmed, with costs and disbursements.

Present — BarnArd, P. J., and Gilbert, J.; Dykman, J., not sitting.

Order affirmed, with costs and disbursements.