New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1896-04-07
LIFE INSURANCE FUNDS PROTECTED.
THE MONEY OF THE POIICY-HoLDEfs' 'O'
LAWRENCE HOLDS. CANNOT BE USED Di
DEposED PRESIDENT TO PAY THE COSTS

LAWRENCE HOLDS CANNOT BE USED 81
nrposrp PRESIDENT TO PAY THE COSTS
OF LITIGATION AGAINST HIM.
Samuel ". Milbank, as receiver OF '"e "u'ua ,.
Benefit Life Association OF America prousn. sun
against the American Surety Company Eu"'
Henry Kent and others to recover '"e Gum "
g 100 belonging to the insurance company anu VIC
posted with the Surety Company In lS9o. ms sum
of money was deposited security on an appeal
from the Judgment which removed Edward henry
Kent as president of the insurance association.
Justice Lawrence. in the Supreme COURT "pe0"
Term Yesterday handed down an opinion III la'o'
Of the receiver and directing the payment Vi '"e'
funds to him. Although the amount involved Is not
large the decision establishes important principles
in life insurance law
The action in which this judgment against heh'
as president was entered brought by the At
torney General against him for maieasahce III
Office The judgment against him for costs aniouh'eu
to more than 5000 and was entered against MN
personally. Yet he procured the ADOPTION oi
resolution by the Board OF Directors that SzoVo OF
the associations money be drawn out OF the security
fund and deposited with the Surety Company 10
secure Kent's bond on appeal When this action
was begun by the receiver against the surety Oon-
pany Mr. Kent came into court and asked 'iat lie
and his wife and mother be made parties, SO 'hat
they might set up certain equitable deiehces' one
Of these was that he made a settlement OF certain
which It wa agreed that these judgments against
him should be cancelled.
1t appeared upon the trial that soon after the
judgment against Kent was affirmed at Geherai
Term the Attorney General gave notice 10 the
Surety Company that these funds belonged to the
association and that they must not he used In the
payment Of the judgments. Therefore. when the
Surety Company paid the judgments against Kent
instead OF cancelng the judgments II took from the
Attorney General an assignment of them. Evidence
was introduced behalf Of Mr.. Kent showing
that he had suit against the association 1or ar
rearage OF commissions and that this was settled
in 1892 The association paid $500 In cash. Mr.
Kent also endeavorcd to have the judgments
against him cancelled. but the directors of the
association never took any action with regard 10
this and whatever said upon the subject was
merely the conversations between the attorneys
for the parties
Justice Lawrence in deciding that the money must
be paid by the Surety Company to Mr.. MIDank as
receiver. says Il am Of the opinion that the ohi-
GERS OF the insurance company had no right to use
the money In their hands for the purpose OF enab-
ing the president. who had been removed by the
Judgment OF this Court for mafoasance In office. to
take an appeal therefrom II seems to me that II
was the duty Of the Surety Company upon recciv-
ing the check OF the Insurance company as COL
security for the execution OF the Undertaking
10 ascertain the character OF the acton In which
the judgment entered and the nature Of the
Judgment appealed from. II 1t had sought such in
formation and had examined the constitution and
bylaws OF the company. 1t could readily have as
certaincd that the funds OF the insurance company
could not b. used for such purpose"
After recit.ng porto ms Of the bylaws requiring the
security fund 10 be used only for preventing
fraudulent Insurance. Justice Lawrence continues:
1T certainly cannot be contendcd that tho check
FOR t2.Jn drawn on the security fund and deposited
with the surety Company used FOR the pur-
pose OF preventing fraudulcnt Insurance. and AS
the check IL stated to have shown upon lis face
that II was drawn from the security fund. II seems
% me that the surety Company should be held 10
have beca put upon its guard and that it's failure
above stated or NJ TO the powers Of the officers
% The company ~ respect TO the security funi pre-
cilio' Il rom claiming In this action tnat II took
snch check innocenty. and Is entitled to hold the
same. or II. proceeds. as against The Insurance
APPEARS 70 me- upon THIS branch OF the case that
N" plaintiff t. entitled to Judgment against the Dc
inn amo ,n" ., sh ispSst Of go an me az
emulation thereon. Including Interest from June
p lsO. tho day ~ the Deposit and that II pay over
the proceeds thereof to the plaintiff as such re-
cc!ver"
Upon the other branch Of the case. Justice Law
renee holds that Mr. Kent could not have been lsno-
rant OF n" nature o! the action brought against
him ~ the Atorhey-G neral. and that the officers
OF INC lnsur ance company had no power TO make an
arrr 'nrnt by which they surr'ndercd 10 him he
s. no. or any portion thereof. - pny the Judgment
- the People against him: that "evcn'N II we're
true thar Kent lid enter Into an agreement with
~" ASSOCIATION IN nv Tor IN" appropriation - tho
money In question or any part thereof. 10 satisfy
such Judgment In compromis~ Of the alleged claims
which he had against the Insurance company. a
court OF equity should not give effect 10 such
Illegal and fraudulent agreement" Furthermore.
Justice Lawrence says that he IL not satisfied that
such agreement was made a matter Of fact. on
this state Of facts he holds that between the
fcdant Kent and The surety Company. the company
Is entitled to judgment permitting II Ia enforce the
judgments. ~ which II became the assignee. against
Mr.. Kent personally. and against any real estate
upon witch they may bc a lien. Henry ". Sackctt
Mas counsel Tor Nr Milhank. the receiver. Henry
G. Wilcox for TIE Surety Company and William
\. Copn FOR tho kents
COURT OF APPEALS