Case Name: PEOPLE v. THE SECURITY LIFE INSURANCE AND ANNUITY CO.
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1879-05
Citations: 7 Abb. N. Cas. 198
Docket Number: 
Parties: PEOPLE v. THE SECURITY LIFE INSURANCE AND ANNUITY CO.
Judges: 
Reporter: Abbott's New Cases
Volume: 7
Pages: 198–235

Head Matter:
PEOPLE v. THE SECURITY LIFE INSURANCE AND ANNUITY CO.
N. Y. Supreme Court, First Department ;
General Term, May, 1879.
Again, N. Y. Court of Appeals,
October, 1879.
Life Insurance.—Dissolution of Company.—Notice to Present Claims.—Policy-holders Creditors, not Partners.—Off-setting Premium Notes.—Reserve.—Rights of Annuitants. —Endowment Policies.—Mode of Ascertaining Present Value of Different Kinds of Policies.
Where a policy-holder died subsequent to the appointment of a receiver to close up the affairs of a life insurance company, and after the time when a renewal premium became due, which remained unpaid, but the policy was in full force at the .date of the receiver’s appointment,—Held, that it was a valid claim to the amount due upon it as an unmatured policy.
(Tnmatured endowment policies have no advantage or priority over ordinary unmatured policy claims, in the distribution of the assets of a dissolved life insurance company.
Policies in such a company, which were, by their terms, made upon a gold basis, both as to payments of premiums and amount assured, should have the dividends due thereon paid in gold.
Where, upon the application of a receiver, appointed upon the dissolution of a life insurance company, an order is made for the publication of notice to creditors to exhibit their claims, as required by 2 if. 8. 467, § 56, and the notice is duly published, claims against the company, not exhibited within the time mentioned in the notice, are precluded from sharing in the assets.
Holders of unmatured policies in dissolved life insurance companies are not entitled to have a pro rata portion of the premiums paid by them refunded to them before the payment, out of the assets, of other creditors.
The provisions of 2 li. 8. 470, §§ 75, 77, relating to refunding a portion of premiums, and canceling policies of insurance, are not applicable to life insurance companies, but apply only to fire and marine or other insurances, having a definite term to run.
The holders of unmatured policies in a dissolved life insurance company are not partners in the company, but are creditors for the present value of their policies at the date of the dissolution of the company, as estimated from tables showing the expectancy of life.
Where policy-holders have given notes in part payment of premiums, the amounts due upon such notes should be off-set against the value of the policies, and the dividend should be declared and paid upon the balance.
The value of an unmatured paid-up policy is to be computed in the same way as that of unmatured policies upon which annual premiums are payable.
The reserve is the balance of the premiums, ascertained by certain rules, necessary to carry the policy to maturity.
Annuitants of a life insurance company, upon its dissolution, are entitled to receive the present value of their annuities, computed upon the basis of the Northampton Tables, with interest at six per cent.
Annuities are not cases of insurance, and are not to be governed by the rules applicable to life insurance.
Upon the dissolution of a life insurance company, death claims which matured before the dissolution have no lien, legal or equitable, upon the funds of the company, and are not to be preferred to claims of holders of unmatured policies.
The general rules for estimating the values of running policies should not be used where, upon facts existing, the precise value of a policy may be easily ascertained.
Hence, where a life insurance company was dissolved and a receiver appointed December 14, 1876, and a holder of a policy upon which the premiums had been paid to March 27, 1877, died March 15, and his administrator served upon the receiver proof of his death, May 23, 1877, long before the expiration of the time under the published notice for the presentation of claims, and by the terms of the policy' the amount insured was payable ninety days after proofs of death,— Meld, that the present value of the amount insured at the time of the dissolution of the company was to be ascertained in the same manner as the present value of any certain sum of money payable at a definite future day.
Appeals from an order affirming the report of a referee.
This was a suit brought against The Security Life Insurance and Annuity Company by the attorney-general of the State, to wind up its affairs, because its assets were insufficient to reinsure its outstanding risks.
I. Supreme Court, General Term, May, 1879.
The decree of dissolution was entered, and Hon. William H. Wickham appointed receiver, on December 14, 1876. The receiver published a notice for the presentation of all claims on or before September 3, 1877. On December 31, 1877, Stephen A. Walker, Esq., was appointed a referee to ascertain and determine the claims against the funds in the receiver’s hands, who made the following report on July 11, 1878.
After stating that the reference was ordered to take proof and report to the court the names of all persons entitled to participate in the fund in the hands of the receiver, and the respective amounts of their net claims against the fund; what disposition should be made of any and all premium notes in the hands of the receiver ; whether any claims against the receiver were entitled to preference in payment, and if so, in what order, and the names of the claimants entitled to such preference; what dividend should then be declared among the creditors of the company from the fund in the hands of the receiver ; that he had caused a notice to be published for the hearing of the matters therein referred to him; that upon the hearing he had been attended by the receiver and his counsel, and by counsel for a large number of claimants and creditors; that a decree of dissolution had been entered, receiver appointed and notice to present claims published; and that, during the period limited by the notice, a great number of claimants appeared before the receiver, and, in a more or less formal manner, exhibited their various claims, which were allowed by him as subsisting and proper demands, at an amount to be thereafter determined by the court; he proceeded as follows :
“ The first question directed by the present order to be determined, and the first in logical order of treatment, is the names of the persons entitled to participate in the funds in the hands of the receiver. This involves the construction of the statutes so far as they direct respecting the steps (if any) necessary to be taken on their own behalf, by those who wish to claim the benefit of the decree. The previous orders of the court, directing a presentation of the claims to the receiver and the publication of a notice limiting the time for such presentation, under section 56 (supra), are inconsistent with the view urged upon the hearing by some of the counsel, that the receiver could admit, upon the presumptive evidence contained in the books of the corporation in his possession, many persons to the standing of claimants to the fund who had made no sign or taken no steps on their own behalf. This position is also inconsistent with the doctrine anciently held, and presumably still the law, though perhaps not so strictly followed as formerly, that the receiver can act only in behalf of the whole body of creditors, and has no standing in court in behalf of any special interest or in favor of any method of procedure or theory of law, being simply an appointee of the court for certain specified purposes.
“This view is inconsistent also with the statutes under which proceedings for dissolution are progressing in this case (2 JR. 8., pt. 3, c. 8, tit. 4, arts. 2, 3).
“ It is true that article 3, and not article 2, is designated in the Code (section 444), as furnishing the rule for the distribution of the assets of an insolvent corporation after a decree. Article 2, by its terms, provides for remedies against an insolvent corporation prior to a decree, though it also (section 37) makes the proceedings for distribution, provided in article 3, applicable to proceedings instituted by authority of article 2. The order of the court, under section 56 of article 2, made in this case, requiring the presentation of claims before a fixed date, and barring those who failed to comply, is not in contravention of any of the provisions of article 3, which provides for dividends at periodic times and permits claimants to appear at any time before a second dividend, and within sixteen months from the appointment of a receiver. This period has expired; the first dividend even has not been declared ; and the court has seen fit to make an order under article 56, limiting the time for the presentation of claims.
“ Mr. Justice Grover, in reference to the relation of the two articles mentioned, uses the following language : ‘ The true meaning of the latter clause of section 81, article 3 ’ (the clause providing for a presentation of a claim after the first and before the second dividend), ‘is that all creditors neglecting to present their demands before the first dividend is made,, and who are not precluded from presenting them by section 56, article 2, may, upon presenting them before a second dividend is made, share in the distribution upon an equality with those who participated in the first dividend ’ (Matter of Harmony. Ins. Co., 45 i7. T. 315).
“ The receiver has authority, under these statutes, to. allow or disallow claims presented to him during the period designated in the order for that, purpose (Attorney-Greneral Life & Fire Ins. Co, 4 Paige, 224). Creditors not presenting their claims are barred from the benefits of the distribution (Harmony Insurance Company, supra).
“The distinction between creditors and those hold ing open and subsisting engagements, and the different rights of each (hereafter more fully considered), need not enter into the discussion of this point. If, as claimed by some of the counsel; the latter class of claimants are not barred of their rights until the second dividend provided for under article 3, and they are not affected by the order made under the authority of section 56 of article 3, it is nevertheless obvious to my mind that no provision is made under either article for the benefit of those who do not indicate in any manner their intention to apply for any relief. The receiver cannot represent, and the court cannot provide for, either creditors, or the holders of open and subsisting engagements, who pocket their losses and say nothing.
“No one, unless the interests of others are involved, can be made involuntarily a party to a suit; and in this case only those should be considered as entitled to a share in the assets who have indicated to the receiver a desire that their claims should be considered. Though the provisions of a statute limiting the time for presentation of claims may be made primarily for the benefit of the receiver, in order to enable him to close up his trust, an order of this kind, being made, vests and fixes the rights of those who comply with it, as against those who do not.
“What should be the mode adopted by which claimants should exhibit their claims to the receiver is not the subject of any statutory provision.
“ The Chancellor (in Judson v. Bossie Galena Co., 9 Paige, 598) indicated that creditors should become parties to a suit for sequestration of the effects of a corporation, prior to a decree, by a substantial compliance with the requirements of equity rules respecting proof of claims against the estate of a deceased person. A strict compliance with these rules is impossible in the present instance, as claimants would be quite unable to make affidavit (in the view respecting their interest in the fund which I am compelled to take) to the specific sums due to each.
“A more liberal view of the mode of presentation of claims is not inconsistent with the law and the practice, and I am convinced that a correct decision upon this first question will be the following, to wit: That all persons who, during the time mentioned in the advertisement for that purpose, exhibited their policies or receipts for premium, or made written application to him to be admitted as sharers in any distribution of the assets in his hands, and were notified by him of the admissions of their claims to such an amount as should be thereafter determined by the court, and no others, are entitled to the standing of claimants under the statute.
“ The names of all those persons who, according to the receiver’s testimony, have complied with the requirements above specified, are contained in the schedule annexed.
' “ The question of the amount, of the net claims of those who, under the views above expressed, are entitled to participate in a dividend, involves the whole subject of the proper distribution of the assets of an insolvent life insurance company, and consequently the construction of statutes, and the application of general equitable principles to matters for which it must be admitted such statutes were not expressly designed, and to which such principles have not been frequently applied.
“ The problem is to apply a statute, our sole authority and guide, to a system of things not contemplated by the makers of the. law, without impugning the equitable principles which the statute was passed to secure. Án orderly method of treatment of the whole case will be secured by considering the various claims for preference presented by different classes of claimants.
‘ ‘ First. It is claimed by some of the counsel that the assets of an insolvent life insurance company are subject primarily to the claims of those who have open and subsisting engagements in the way of insurance, with such corporation. That ordinary creditors are postponed, and a receiver becomes a trustee of funds and property to answer the claims of such persons as háve engagements of this character, the surplus only to be divided pro rata, first, among creditors, and second, among the stockholders. If there is no surplus, there is nothing for general creditors.
‘ ‘ The argument for this view is based mainly upon the provisions of sections 75 and 77, viz.: ‘If there shall be any open or subsisting engagements or con-' tracts of such corporation, which are in the nature of insurances or contingent engagements of any kind, the receivers may, with, the consent of the party holding such engagement, cancel or discharge the same by refunding to such party the premium or consideration paid thereon by such corporation, or so much thereof as shall be in the same proportion to the time which shall remain of any risk assumed by such engagement as the whole premium bore to the whole term of such risk, and upon such amount being paid by such receivers to the persons holding or being the legal owner of such engagements, it shall be deemed canceled, and discharged as against such receivers/
‘ ‘ ‘ The receivers shall retain, out of the moneys in their hands, a sufficient amount to pay the sums which they are hereinbefore authorized to pay for the purpose of canceling and discharging any open or subsisting engagement.’
“ The statute of 1853, sections 6, 17, is also quoted to support this view. In the first section mentioned, the superintendent of insurance is directed to hold securities deposited with him as ‘ security for policyholders in said companies,’ and in several of the sec tions of article III., besides those above quoted, a distinction is made between creditors and the holders of open and subsisting engagements.
“It has been determined by the court at general term in this case, in the decision more fully to be considered hereafter, that the provisions of section 75 are applicable to the present case; in other words, that it is not only fire insurance companiés and fire policies, but life companies and life policies which are included in its terms. It is necessary, therefore, to consider the object of this section of the Revised Statutes, and interpret it in the light of the purpose for which it was designed. This object was to facilitate the proceedings of a receiver in an effort to reduce the liabilities of a corporation, by placing the insured in a position where he could not, by any subsequent loss, make a claim for the whole amount insured. This section 75 has no practical application in the present case except (as decided by Dawiels, J., infra) to afford a rule by which the amount of liability of the insolvent corporation respecting a certain class of claimants may be ascertained.
‘1 The object of the section is to authorize the discharge, upon consent of the assured, of all claim against the receiver or the corporation.
“A subsequent special statute {Laws of 1836, § 5), which was designed to relieve the business community and the fire insurance companies after the great fire in 1835, authorized proceedings by receivers to accomplish the same result, but provided this relief in addition, that instead of returning the unearned premium, the receiver might effect a re-insurance, and if on tender of a new policy the person assured declined to receive it, he was to stand as a general creditor for the amount of the unearned premium upon the policy. But under either the general of the special act, the portion of. the premium corresponding to the unexpired risk must be in the receiver’s hands, or he cannot accomplish the purpose intended, which is the cancellation of the policy on an equitable basis.
“It is a proven fact in this case that the receiver has not funds sufficient to return unearned premiums. His right to do this depends on two things. First, the assent of policy holders (which is not proved), and, second, the effecting of the result contemplated by the section, i. e., a full acquittance and discharge mutually between insurer and insured. If a case were presented where the funds in the hands of the receiver were sufficient to return to all policy-holders the full amount of unearned premiums, as determined by the tables, there might be no good reason why a clause (originally designed to apply to fire insurance companies) might not be properly applied to a life company. But a dividend to each holder of such engagement does not meet the case. There must be full payment, or the end of the statute fails. Cessat ratio cessat lex, and if the facts in the case make the application of section 75 impossible, the holders of such engagements cannot claim the benefit of a preference which would result from holding the receiver to be their trustee for such portion of their unearned premiums as he may have in his hands. He must have the whole, or section 75 is not available for his or their relief.
‘1 The section was not primarily intended to afford a principle upon which the amount of claim should be fixed. It directs a mode of administration on the part of the receiver, which, being adopted by consent and agreement of the parties, without regard to judicial proceedings, a certain desirable end could be attained. It is only in this view that the principle adopted by the general term, respecting the applicability of this section to life insurance, can be adopted without producing the result of excluding death claimants and creditors from any share whatever in the assets of this compa ny. Such a result would controvert all the equities, and—
“I, therefore, find and decide that the holders of policies upon lives in being, otherwise called holders of subsisting and outstánding engagements, are not entitled to the preference claimed (See Matter of Croton Ins. Co., 3 Barb. -QTi. 643; Leroy v. Globe Ins. Co., 2 Echo. Ch. 673).
“This ruling covers the case of policies paid up in full, as well as others, and also those where premiums were to be paid in cash, as well as those upon which part cash and part notes were, by the terms of the policy, receivable for premiums.
‘ ‘ Second. Another claim for priority, to be considered, is that of matured liabilities upon life insurance policies including the claims of general creditors for supplies furnished, services rendered, &c.
“Ho argument was presented to me distinctly claiming that a general creditor, as such, is to be preferred to the holders of outstanding and unexpired policies of insurance, upon which the current premiums have been duly paid, but the contention was that the holder of a policy which had become payable by reason of the death of the person whose life was insured by it, was to be preferred to all holders of policies upon which premiums had been regularly paid, and the policies in full force as subsisting engagements of the company, and the assured were still alive. This claim for preference is urged on the ground, that the former is a creditor, the latter is not. To put the proposition conversely, all creditors of the corporation are to be paid in the order prescribed by statute. The holders of policies where no death loss has occurred are not creditors.
11A very careful consideration of this subject has led me to the conclusion that I am not called upon to express my individual judgment upon it, owing to prior proceedings and decisions in the present case. The petition of Mrs. Miller (11 Run, 98), urging her claim for preference in distribution as a death loss, presented the question distinctly to the special and the general terms, and the claim for preference was denied. The court of appeals dismissed the appeal as outside its jurisdiction, but, in its opinion, left the decision of the general term in full force, as a binding authority in the case upon the points considered. The decision of Mr. Justice Daniels must, therefore, be followed by me, and I interpret it as establishing three principles for my guidance in determining the details of a final distribution of the assets of this corporation : First. That section 75 of the statute is applicable to life insurance as well as to fire insurance corporations. Second. That death claims and general creditors are entitled to no preference ; and, Third. That holders of unexpired policies are entitled to the status of creditors in such distribution, section 75 of the statute furnishing an equitable and proper rule to follow in determining the amount upon which, as such creditors, they are severally entitled to dividends from the receiver.
“ In obedience to the rules thus laid down, a computation of the various amounts due to the holders of living policies, where no default regarding payment of premiums had occurred, based upon the principle suggested in section 75, to wit: that the amount of unearned premiums upon each policy, at the date of the winding-up order, is the measure of the liability of the company in each case, has been made by Samuel H. Hurd, Esq., a competent actuary, and such computations appear upon the schedule adjacent to the names of the respective claimants. The basis of this calculation is the American Experience Table of mortality, and the rate of interest that recognized in the insurance laws of this State, viz.: four and one-half per centum.
“There is much force in the suggestion that these tables were made the subject of statutory provisions for an altogether different purpose ; but admitting, as I am directed to do by the decision of the court, that the amount of unearned premiums must determine the amount to be credited the individual claimant, it is, perhaps, sufficient to say that no suggestion has been made why any other table or any other rate of interest than the ones having a statutory recognition should be adopted.
“The schedule annexed also contains the names of holders of death claims and other general creditors, with the face value of their respective claims, entitled to participate in a dividend, under the rules respecting presentation to and allowance by the receiver, before mentioned.
“ Third. A claim for preference is urged respecting the following policies:
“Policy No. 48,813, upon the life of Thomas J. Lockwood, deceased.
“Policy No. 10,950, upon the life of Magdalina From, deceased.
“ The ground for such claim being, that the person assured in each of these policies died, and the policies thereupon matured, and the whole amount for which the deceased life was insured became payable at a period subsequent to the decree of the dissolution, and during the period for which the company had received the current premiums. It is urged that the claimants under these policies should be placed on the footing of death claims before a dissolution, upon the amount assured, and not upon the estimated value of unearned premiums paid by the assured.
“It is strenuously contended that equitable principles will not permit a person to receive a dividend upon the full amount insured when death occurred the 13th of December, 1876, while the beneficiary under a policy maturing by death on the 15th should be allowed only the pittance which results from a dividend on unearned premiums. Such an argument savors rather of sentiment than law, and might be answered by saying that a single day of life has been counted of much more value than the difference between the sums allotted in the two cases supposed. But the practical answer to the suggestion is the absolute necessity of fixing a definite time by which all reckonings must be guided. A movable date produces injustice and confusion. If a death occurs during any part of the period of the sixteen months allowed the receiver for a reduction of the assets of the corporation to money, and the payment of the two dividends, the claimant, under the policy, has an equal right with those whose right accrues upon the first day after the receiver’s. appointment. The interest of the great body of non-matured policy-holders is served by designating as early a day as possible upon which values are to be fixed. The less the period during which the risk is carried, the greater the amount of unearned premium restored. In the absence of express statutory regulation, it seems proper to bring the rights of all parties to a measure of time determined by the date when the court intervened, stopped the business of the concern, dissolved it, and appropriated its assets for equal distribution among those interested.
“I therefore find that the policies mentioned under this head are to be classed among non-matured policy claims, and the amounts due upon them are accordingly computed upon the same basis.
‘ ‘ Fourth. A claim for priority is urged in the case of policy No. 7,977, on the life of AaronS. Lippencott, who died subsequent to the appointment of the receiver, and after the time when a renewal premium became due, which remains unpaid. The policy was in full force at the date of the receiver’s appointment, and I am of opinion, for reasons above stated, that the claim is valid to the amount due upon it as an unmatured policy.
‘•'•Fifth. Another claim is that some advantage or priority should be allowed to the holders of what are termed unmatured endowment policies, in which the sum insured was contracted to be paid absolutely at some specified age, to the person assured, or other beneficiary, and before the specified age was reached, if death* occurred.
“It is impossible to distinguish this class of cases from ordinary unmatured policy claims. The rate of premium in the cases is increased by reason of the increased risk involved in the absolute payment at a fixed age, should the assured reach it; but except this increase of premium, the endowment element adds no new feature, and those claims are therefore valued by the actuary upon the same principle, and appear in the schedule as unmatured policy claims. Endowment claims maturing before the appointment of the receiver are allowed as debts of the corporation for the amount, which, by the terms of the engagement, it undertook to pay.
‘1 Sixth. Another class of claims urged as presenting exceptional features is that of the annuitants. In this case, all payments to the company have been completed; the undertaking is to pay a specified sum per annum during the life of the annuitant. A form of the bond given by the corporation in such cases is attached to this report.
“In reference to this class of claimants, I do not see that the decision of the general term in this case gives any rule for my guidance. There is no applicability in section 75 of the statute, certainly. Each of the claimants has paid a gross sum, under the engagement of the company to return annually a certain sum during the life of the beneficiary; the transaction is not insurance, and the payment is not premium. The company has failed, and broken its engagement; the injured parties are entitled to damages. The measure of these damages must be determined upon legal principles, and are not difficult of assessment. The rules of the supreme court provide for cases of this kind, and, in my judgment, should be adopted in determining the amount of the claim. If the question were before a jury, the company having negligently or willfully refused to carry out the contract, I apprehend the court would not recur to any branch of the insurance law, or any learning upon the subject of reserve values or unearned premiums, for aid in determining the measure of damages, but would be . directed by its own rules in fixing the amount to be awarded (Schell v. Plumb, 55 J5T. T. 592).
“Computations based upon the age of the respective annuitants at the time of the appointment of the receiver have been accordingly made, upon the basis of the Northampton Tables, with interest at six per cent., and appear with the names of the annuitants who have proved their claims, in the schedule attached.
• “The order under which the present inquiry is proceeding requires the referee to report what disposition shall be made of any and all premium notes in the hands of the receiver. The face of these notes, as appears by the receiver’s testimony, is $881,883.41.
“It also appears that there are notes in his hands to a considerable number which were filled up and credited to the policy-holder as payment or part payment of premium, which were never signed, and remain merely as memoranda of a loan allowed the policyholder by custom of the company. The usual form of note is as follows :
“ ‘New York, 187.
“ ‘ Twelve months after date, for value received, promise to pay the Security Life Insurance and Annuity Company of New York, or order, dollars.
In case of the death of , insured in Policy-No. , the amount of this note to be deducted from the amount of'the said policy or canceled by profits.
“ 1 [Interest on this note payable annually in advance.] ’
“The proper disposition of this question affects the interests of every creditor of the company, and is of great importance. It is urged, on one side, that these notes are not simply a contract between the company and the assured; that every policy-holder has an interest in the contract; and that, being executed primarily as a security for the payment of losses, they should be collected by the receiver, if possible, and that the law should aid such collection by decreeing that if-there were any unpaid losses of the company, the fact that the maker of the note held an unmatured policy upon his life should not prevent a judgment against him for the face of the note. In other words, so long as there are unpaid losses due to persons insured by the company, and the maker of the note holds no liquidated claim against it, there should be no set-off of a liability which is unmatured and contingent. The - numerous decisions of the courts respecting premium notes in fire insurance cases, where losses had overwhelmed the companies, and receivers have been authorized to prosecute and collect premium notes, are cited in support of this view. The decisions cited are doubtless correct law, and should be followed. The proposition, however, for a wholesale collection of these notes by suit, or an attempt at it, is simply a statement in another form of the proposition that the holders of open and subsisting engagements are not creditors of the corporation, and have no standing as claimants to the funds in the receiver’s hands. As I am obliged, as before stated, to hold the converse of this proposition, the theory thus presented respecting the premium notes must be abandoned.
‘1A second proposition has been ingeniously pressed, to wit: that the amount of these notes in the hands of the receiver should be set off against the dividend to be declared in favor of each claimant and creditor, and not against the face of the creditor’s claim. It is argued that this produces more equitable results than any other method, as between those policy-holders who have paid their premiums in cash wholly and those who have given notes. It is a matter of easy calculation to prove that a person insuring in this company at a given time for a given amount, and paying one-half cash and one-half notes for premiums, has an advantage in the distribution of the assets over a person insuring at the same time and for the same amount, and paying all cash. The reserved values or unearned premium adopted as the basis of distribution is the same in both cases. The cash dividend to the one is twice as great as to the other, but the cash loss by the failure of the company many times as great. It is claimed that this inequality may be avoided by treating the notes as cash assets, and their return to'the maker in payment of dividends as a cash payment. It is, perhaps, unnecessary, by comparative mathematical calculations to prove that by adopting this principle, it can be shown that as between the two classes mentioned less inequality of loss would result, inasmuch as the matter seems to be provided for upon a different principle, by the statute, as judicially interpreted.
“ Receivers of insolvent corporations are clothed with all the authority vested by statute in trustees of insolvent debtors (2 H. S. 469, §§ 68, 70, 72, 74). This authority comprises the power to set off credits or debits, and pay the proportion or receive the balance due in case mutual debts have subsisted between the • debtor and any other person. By the terms of the premium notes received by the Security Company, it was expressly provided that, interest being paid on the face of the note, the payment of its face value should be made out of the amount due the holder of the policy when it matured. The giving of notes was part and parcel of the continuing contract for insurance. The subject matter and consideration of both the policy and the notes is the same. The obligation of the maker to pay the note and of the company to pay the policy, is reciprocal. It is difficult to see what element is wanting to make the contract mutual in the ordinary statutory sense of the word. The decisions support this interpretation. In Osgood v. Degroot (36 N. Y. 348), a loss not adjusted was set off against a premium note, to recover judgment upon which the suit was brought.
“Mr. Justice Vast Hoesebt, in Masters v. Eclectic Ins. Co. (not reported), signed a decree providing 1 that all holders of policies have claims against the fund for the amount of the respective valuations of the policies, less the amount due from such policy-holders by reason of loans, or otherwise, the balance so due to be adjusted pursuant to the statutes of mutual credits,’ citing the provisions of law above referred to.
“ I believe, therefore, that these statutes and decisions authorize the judgment, that the amounts due upon premium notes and for loans to policy-holders, and deferred premiums at the date of the appointment of the receiver, with the interest thereon, are to be deemed and held a credit in favor of the corporation, to be set off in each case against the sum due the policyholder, under the valuations of the policy made by the actuary, and that the proper sum upon which a dividend is to be declared is the difference between said amounts.
“The appropriate column upon the schedule of claims allowed contains the amount opposite the name of each creditor and claimant of the proper set-off in each case.
“Certain policies of this company were, by their terms, made upon a gold basis, both as to payment of premiums and amount assured. The law recognizes the validity of a special contract of this character, and the distribution under these proceedings should effectuate it. Such policies are designated as gold policies upon the schedule, and dividends due upon such policies must be paid in gold.
“ As to the amount of the dividend to be declared, it appears there are of claimants, ....... 7,045
Amount of allowed claims, . . $2,132,811.44
Amount in receiver’s hands, . . . $175,000.00
“It is proper to recognize the fact that no immediate distribution will occur in consequence of this report. The questions decided are too numerous and intricate, and the views of eminent counsel too diverse, to make a payment proper before such time as the court of last resort shall have settled the principles which should govern each case. The expenses incurred, chargeable to the estate, will outrun the natural accumulation of the money in the receiver’s hands. In view of this fact I decide that a dividend of seven (7) per cent, upon the amount of each claim allowed, is the proper order in the premises.”
The Supreme Court, at both special and general terms, confirmed this report on the opinion of the referee.
II. JY. Y. Court of Appeals, October, 1879.
Appeals were taken by the following parties to the court of appeals:
1. By Rebecca L. Miller and others, who were owners of claims against the company for policies which had become matured by the death of the life insured, prior to the dissolution of the company, and the appointment of the receiver.
The appellant, Rebecca L. Miller was, upon her own petition to the supreme court, made a party to the proceedings on her own behalf, as well as on behalf of all other persons interested in the distribution, similarly situated with her. Shortly thereafter she petitioned the court for payment in full of these claims; her petition was denied; the denial was affirmed at the general term (11 Hun, 97), and the appeal therefrom to the court of appeals dismissed (71 if. T. 222). She claimed, before the referee, that she and her associates, and all other creditors of the company, were entitled to be paid in full their respective demands, before any part of the proceeds could be distributed among the policy-holders whose claims had not become due by death or the lapse of time. Also, that the notes which had been given for premiums were assets in the hands of the receiver, and should be collected.
2. By D. B. Grilliland, administrator of Thomas J. Lockwood, who, on March. 27, 1875, being then forty-four years of age, had taken out an ordinary life policy on his life for $3,000, payable ninety days after satisfactory proof of his death. The premiums on his policy were payable annually on March 27, in each year. He died March 15, 1877, his premium having been paid up to his death, and his administrator filed proof of the death with the receiver, May 23, 1877. He claimed that he was entitled to prove a claim for $3,000, the face of the policy, against the company, but the referee denied this claim, and allowed him to. prove only for the unearned premium, i. e., the reserve value of the policy.
3. By Louis Kyler and William Roone, holders of current policies.
4. By Rebecca C. Hart, holder of a paid-up policy for $2,000, she having elected, under the Revised Statutes, part III., c. 8, tit.' 4, § 75 (2 Edm. 491), to cancel and discharge her policy, and having demanded of the receiver to refund her such proportion of the premium paid thereon as the time unexpired of the risk bore to the whole thereof. She claimed that her policy could not have been valued or required to share in the distribution at all, except by her consent. That it was an open and subsisting engagement, within .the meaning of section 75 (supra), in the nature of insurance, as to which she was entitled to have repaid her in full the unearned portion of the premium paid upon her policy, at- her election, or to have the receiver set apart and retain or pay into court this unearned portion, to accumulate until the policy matured by the death of the assured, and that, having elected to cancel her policy, she was entitled to this unearned portion in full or pro rata with those of her class (paid-up) only.
Hamilton Cole, for receiver.
Death claims are not entitled to priority in payment (Matter of Security Life, &c. Co., 11 Hun, 96; Lowne v. American Fire Ins. Co., 6 Paige, 482; De Peyster v. American Fire Ins. Co., Id. 486). The holders of unmatured policies are creditors, not co-partners (Fisher v. Hope Mut. Ins. Co., 69 N. Y 161; Baldwin v. Burrows, 47 Id. 199; Ogden v. Astor, 4 Sandf. 311; Patterson v. Blanchard, 5 N. Y. 186). The premium notes- are to be set off against the claims of the policy holders who have made them (3 R. S. 6 ed. p. 41; Osgood v. De Groot, 36 N. Y. 348). Holders of policies in force at the time of dissolution are not entitled to payment of returned premiums before other claims are paid. If section 90 of 3 Revised Statutes, 6 ed. p. 785, applies, and the assent of the policy-holders is shown, it seems difficult to see how their right to priority can be avoided (Matter of Croton Ins. Co., 3 Barb. Ch. 643 ; Levy v. Globe Ins. Co., 2 Edw. Ch. 673). But section 90 never was intended to cover life insurance companies at all.
Robert Sewell (Sewell & Pievee, attorneys), for ap pellant Rebecca L. Miller, and others.
The policyholders were partners (In re Overend, Grissil’s case, L. R. 1 Ch. 528 ; Kean v. Johnson, 1 Stockt. 401 ; Collyer on Partn. 641 ; Hoyle v. P. & N. R. R. Co., 54 N. Y. 314; Kohler v. Black River Co., 2 Black, 715 ; Angell & Ames on Corp. §§ 41, 591; Bissett on Partn. 248 ; Story on Partn. §§ 107, 109, 254, 255 ; Oakley v. Aspinwall, 2 Sandf. 7; Penny v. Black, 9 Bosw. 310; Manhattan Brass Co. v. Sears, 45 N. Y. 797; Ontario Bank v. Hennessy, 48 Id. 545; Bullard v. Kenny, 10 Cal. 60; Schimpf v. Lehigh T. Co., 7 Ins. L. J. 665; In re European Co., 5 Bigelow Ins. Rep. 718 ; New York Life Ins. Co. v. Statham, 5 Ins. Law J. 868; Mygatt v. New York Pro. Co., 21 N. Y. 61). A policy-holder is not a creditor (King v. Accumulative Life Ins. Co., 3 C. B. N. S. 151; S. C., 5 Bigelow Ins. Rep. 635 ; Belknap v. North America Life Ins. 11 Hun, 282; Day v. Connecticut Life, 19 Alb. L. J. 195). A member of a corporation may sue it for a cause of action not arising out of his membership, but not for something connected with the very contract ' which makes him a member (Hill v. Manchester W., 5 A. & D. 866; Culburton v. H. Company, 4 McLane, 544). A policy-holder is authorized to sue by the statute. The provisions of the Revised Statutes, which allow receivers to return a proportionate part of premiums paid, do not apply to life insurance (New York Life Ins. Co. v. Statham, 5 Ins. L. J. 866; McKenty v. Universal Life, 4 Bigelow Ins. Rep. 153; Rawls v. American Ins. Co., 27 N. Y. 282). The receiver should recover from the policy-holders such amount of the premium notes as will be necessary to pay all losses (Osgood v. Ogden, 4 Abb. Ct. App. Dec. 425 ; Conyland v. N. C. Co., Phillip’s Eq. [N. C.] 341; In re Atlantic M. L. I. Co., 16 Alb. L. J. 453 ; Farmers’ Bank v. Maxwell, 32 N. Y. 579 ; Hope M. Ins. Co. v. Perkins, 2 Abb. Ct. App. Dec. 383; How v. Allen, 1 Sandf. 171; Brouwer v. Appleby, 1 Id. 158; Desraimes v. Merchants’ Co., 1 N. Y. 371; Bangs v. Grey, 12 Id. 477; White v. Havens, 5 Abb. Ct. App. Dec. 582; Cooper v. Shaver, 41 Barb. 151; Jackson v. Roberts, 31 N. Y. 304; Howland v. Meyer, 3 Id. 290 ; Brown v. Crooke, 4 Id. 51; Cruikshank v. Brouwer, 11 Barb. 228; Lawrence v. Nelson, 21 N. Y. 158; S. C., 4 Bosw. 240). The history of legislation, on the subject of “mutual” insurance companies, is very suggestive (L. 1849, c. 308 ; L. 1836, c. 42 ; L. 1838, c. 217; L. 1840, c. 262; L. 1842, c. 246; White v. Haight, 16 N. Y. 321).
Horace W. Fowler, for appellant Gilliland.
There are no statutory provisions regulating the distribution of the assets of an insolvent life insurance company amongst the holders of unregistered policies (Stout v. Chapman, 5 Hun, 222). The money in hands of the receiver should be divided amongst the creditors in proportion to their respective demands (3 R. S. 6 ed. p. 755). The relation between the policy-holders and the company is that of debtor and creditor (In re Miller, 11 Hun, 98 ; Cohen v. New York Mutual Life Ins. Co., 50 N. Y. 625). A policy of life insurance is a mere contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his life (Dalby v. India, &c. Assurance Soc., 15 C. B. 365 ; S. C., 2 Smith Lead. Cas. 330). The policy-holder should prove for the value of the reversion, less the value of the annuity (Bell’s case, L. R. 9 Eq. 706 ; Holdrich’s case, L. R. 14 Id. 72) ; congress has prescribed a like rule in bankruptcy (U. S. R. S. § 5068). If the demand of the policy-holders against an insolvent life insurance company is one for damages, policies maturing by death before the distribution should receive a dividend on their face values (Shaw v. Republic Life Ins. Co., 69 N. Y. 286 ; Frost v. Knight, L. R. 7 Exch. 112 ; Roper v. Johnson, L. R. 8 C. P. 167). In determining the value of a claim, the court is not confined to facts known at the date of the receiver’s appointment (Holdrich’s case, supra; Wilcox Plummer, 4 Pet. 172, 182 ; Sedgw. on Dam. 118, 121, 122).
Raphael J. Moses, Jr., for appellants Kyler and Roone, holders of current policies, and of Rebecca C. Hart, holder of a paid-up unmatured policy.
Where a scheme contemplating the mutual payments and benefits in the nature of insurance has to be abandoned, equity allows, as claims against the fund on hand, the unearned portion of the premium paid (Widows’ Fund Assoc., 17 Ves. 17; Pearce v. Riper, Id. 1; Beaumont v. Meredithe, 3 Vesey & B. 181; New York Life Ins. Co. v. Statham, 93 U. S. [3 Otto] 24 ; Fisher v. Hope Mut. Life Ins. Co., 69 N. Y. 161; Stevenson v. Snow, 3 Burr. 1237). Such policy-holders are entitled to a position as creditors for the reserve unearned (Bell’s case, 7 Eq. 709; Lancaster’s case, Cairns Dec. p. II. 81; Walberg’s case, 79; Hine's Ins. Stats. 79, § 17, also p. 86, § 28 ; Statutes of Conn. p. 104, §§ 32, 33; Stats. of Iowa, p. 211, § 56; Stats. of Miss. p. 473, § 17; L. 1869, c. 902; L. 1879, c. 161; Leroy v. Globe Ins. Co., 2 Edm. Ch. 673, 674; Croton Ins. Co., 3 Barb. Ch. 643). I claim a preference in behalf of the holder of a paid-up unmatured policy, solely upon a construction of the provisions of the statute, and refer to R. S., part III., c. 8, tit. 4, art. 3, §§ 70, 75, 77, 79, 82 and 89.
William Barnes (Barnes & Hanover, attorneys), for policy-holders supporting order.
Policy-holders and creditors who did not make any claim within the advertised period of six months, should be excluded (Harmony Fire, &c. Ins. Co., 45 N. Y. 313, 317; S. C., 9 Abb. Pr. N. S. 349, 350, 358; 2 R. S. 466). The premium notes should be offset, pro tanto, against the values of the note policies or other claims against the company (2 R. S. p. 47, § 36; Matter of Globe Ins. Co., 2 Edw. Ch. 675, 625). The provisions of the Revised Statutes, allowing receivers of unexpired policies to cancel the same by refunding the pro rata part of the unearned premium, &c., was not designed to include the business of life insurance companies (Le Roy v. Globe Ins. Co., 2 Edw. Ch. 673; Matter of Croton Ins. Co., 3 Barb. Ch. 642; 11 Hun, 96 ; 2 R. S. 470, § 75 and note ; L. 1821, c. 148 ; L. 1817, c. 146; L. 1814, c. 172 ; L. 1836, c. 3). Death claims arising after the dissolution of the corporation are not entitled to dividends on the full face of the policies, but merely on their net value when the existence of the corporation was terminated by the decree of the court. Death claims should not have priority over other debts and liabilities (2 R. S. [Edm. ed.] 484, § 37; Id. 486, § 48; Id. 492, §§ 72, 73, 74, 75, 77, 78, 79 ; 2 R. 8. 48, 47, §§ 32-36 ; Lowne v. American Fire Ins. Co., 6 Paige, 482, 485 ; De Peyster v. American Fire Ins. Co., Id. 486 ; Morgan v. New York & Albany R. R. Corp., 10 Id. 290). Provisions on this subject in other States and countries (Hines Ins. Laws, 104, § 32; 16 Assurance Mag. 395; 35 and 36 Vict. c. 41). Rule for valuing a life policy (Id.; Analogous provisions, 2 R. S. [Edm. ed.] 89, §§ 27, 28; U. S. R. S. § 5101). An incorporated life insurance company is not a partnership, and when it has policy-holders in different States, is not dissolved by war between the States (Cohen v. New York Mut. Life Ins. Co., 50 N. Y. 610 ; Mutual Benefit Life Ins. Co. v. Hillyard, 9 Vroom [N. J.] 444). The supreme court of the United States have recognized the equitable values of policies as claims, and the holders thereof as creditors (New York Life Ins. Co. v. Statham, 93 U. S. [3 Otto] 24; New York Life Ins. Co. v. Seyms, 3 N. Y. Weekly Dig. 373 ; S. C., Ins. L. J.; Manhattan Life Ins. Co. v. Buck, Id. ; L. 1869, c. 902, § 8).

Opinion:
Earl, J.
The defendant was dissolved and a receiver was appointed of its assets, under section 17 of the act, chapter 463 of the Laws of 1853. It was organized under the same act, and by section 11 of the act it was made subject to all the provisions of the Revised Statutes in relation to corporations, so far as the same were applicable, except as otherwise specially provided in the act. No provision was made in the act regulating the conduct of the receiver in such a case, or the distribution of the assets, or any of the proceedings subsequent to the appointment of the receiver. All of such matters were left to be regulated by the provisions of the Revised Statutes and the practice of courts of equity, and to those provisions and that practice we must look, so far as needful, for the solution of the questions presented for our consideration.
1. The supreme court, at special term, upon the application of the receiver, made an order for the publication of notices to creditors to exhibit their claims, as required by the Revised Statutes (2 R. S. 467, § 56), and the notice was duly published. The referee held, that claims not exhibited within the time mentioned in the notice were precluded from sharing in the assets, and this holding was confirmed at both the special term, and, as I understand its order, the general term. I entertain no doubt that this is right, for the reason stated in the opinion of the referee (Matter of Harmony F. & M. Ins. Co., 45 N. Y. 310).
2. It is claimed, upon the part of some of the holders of unmatured policies, that they are entitled to have refunded to them a pro rata portion of the premiums paid by them, before the payment, out of the assets, of any other creditors, and this claim is based upon the following provisions of the Revised Statutes (2 R. S. 470, §75): "If there shall be any open and subsisting engagements or contracts of such corporation, which are in the nature of insurances or contingent engagements of any kind, the receiver may, with the consent of the party holding such engagements, cancel and discharge the same, by refunding to such party the premium or consideration paid thereon by such corporation, or so much thereof as shall be in the same proportion to the time which shall remain of any risk assumed by such engagement as the whole premium bore to the whole term of such risk, and upon such amount being paid by such receiver to the person holding or being the legal owner of such engagement, it shall be deemed canceled and discharged as against such receivers." Section 77: "The receivers shall retain, out of the moneys in their hands, a sufficient amount to pay the sums which they are hereinbefore authorized to pay, for the purpose of canceling and discharging any open or subsisting engagements."
This claim has been disallowed by the court below, and, we think, properly.
By the act of 1853, the corporations organized under it were made subject to such provisions of the Revised Statutes as were applicable, and the sections above cited are not applicable to life insurance companies. They can apply only to fire and marine or other insurances having a definite term to run. In the case of a running or unmatured life policy, the time which shall remain of the risk cannot be known. If these sections apply, then' the unjust result will follow that the more one has paid upon one of the policies, the less he will receive; and the one who has paid the least, and has the longest expectation of life, will receive the most. These sections are applicable only to cases where the insurance is an indemnity for some certain time against some risk ; and in such cases the amount paid for the indemnity may be apportioned. If the risk has been carried half of the time, half of the premiúm has been earned, and the nearer the risk has been carried to the end of the time, the more of the premium has been earned ; the less valuable the policy has become to the assured, and under these sections, therefore, less would have to be refunded. But life insurance is not an indemnity against any risk, but an absolute engagement to pay a sum certain at the end of a definite or indefinite time. In such cases the policy becomes more valuable as its end is approached, and any such settlement as could be made under these sections would be quite absurd.
But the claim is made, on the part of some of the appellants, that the holders of unmatured policies are not creditors, but partners in the company, and that they are therefore not entitled to share in the assets until after payment of the death claims of other creditors. The argument that they are to be treated as partners is quite ingenious, but, I think, clearly unsound. The statute of 1853, to which this company owed its creation, made it a corporation. It had a capital stock of $110,000, divided into shares, which was contributed, not by policy-holders, but by the stockholders. Its business was managed by directors chosen by the stockholders. No policy-holder, unless a stockholder, had any voice in any way in the election of its officers or the management of its business. Every policy-holder in such company enters into engagements with the company, and not with any other policy-holder. He pays the premiums upon his policy, not to make a fund to insure others, but solely as a consideration of his own insurance. The company receives the money as its own,- and holds it as its own, and may do with it what it will, except as it is restrained by some statute. It is wholly immaterial to the assured what the company does with the money, provided it remains solvent until the maturity of his policy. It is true that the company relies upon all the premiums paid to carry on its business, and that it could not discharge its obligations out of its capital alone. The law requires that it. shall keep and have, at all times, assets, invested in a certain way, sufficient to meet all its liabilities—that is, that it shall keep solvent. But they who pay their money for insurance are no more jointly interested, or in any sense partners, than the depositors in a bank. The depositors swell the assets of the bank and also its liabilities, and they have a common interest that the bank shall keep its funds so as to be able to discharge its liabilities, and that is all. It is true that when such a company insures one, it takes into account the fact that it- has insured and is to insure many others, and that fact has a bearing upon the amount of premiums charged, but the premium is, after all, solely for the particular insurance. The fund produced by the payment of all the premiums does not in any sense belong to the policyholders, but belongs exclusively to the company, and the policy-holders are interested in it in the same way only that the creditors of any other corporation are interested in its funds.
There is nothing in the statute of 1853 which makes the policy-holders members of the company. Section 10 of that act provides that the company may sue any of its "members or stockholders," and that any of the "members or stockholders" may sue it. The words "members and stockholders" here mean the same person. Every member of such a company is a stockholder, and every stockholder a member. The provision is wholly unnecessary, and has no significance. It is a superfluous provision, frequently found in similar statutes.
There is a provision in the charter of this company that the stockholders may receive a semi-annual dividend of not exceeding three and one-half per cent., and that, at intervals of three years, the net profits, after paying such dividends, shall be paid, twenty per cent, to the stockholders, and eighty per cent, to the policyholders. It is claimed that this sharing in the profits makes the policy-holders partners. These profits were not to be paid to them as the income of any business which they were carrying on or in which they were interested. They were the profits of the company in its business. The policy-holders could make no profits. They could never receive back more than they paid, and never as much, interest upon their payments being taken into account, and hence any dividend to them under this charter could in no proper sense be called, as to them, profits. As to the company, they might be profits earned by good management and too large pre-, miums, profits earned solely out of the stockholders. These so-called profits, when divided, would be simply an equitable adjustment of premiums paid. If such profits should exist, they would show that the company had been exacting more premiums than were just and fair, and the excess was to be refunded in this mode.
This novel claim of partnership is not sustained by any authority, and even in the case of a mutual life insurance company was repudiated by Judge Allen, in his opinion in Cohen v. New York Mutual Life Ins. Co. (50 N. Y. 610).
But the further claim is made that these policyholders, although not partners, are not creditors, and as such entitled to share in the assets of the company on a footing of equality with other creditors, and this claim must now be somewhat examined.
It is true that there is no provision in the policy that any portion of the premiums shall be refunded. There is an agreement on the part of the company that, upon the payment of the annual premiums, it will pay the stipulated amount at death.
There is also the agreement necessarily implied that it will receive the annual premiums and carry the insurance to its term. The annual premium is not paid solely for an insurance for the year in which it is paid, but, as stated by Mr. Justice Bradley, in New York Life Ins. Co. v. Statham (93 U. S. 24), each premium is part consideration of the entire insurance for life ; or, as stated by Mr. Justice' Strong in the same case, the assured, by paying the first premium, obtains an insurance for one year, together with a right'to have the insurance continued from year to year, during his life, upon payment of the same annual premium, if paid in advance. Whichever of these be the true theory, the agreement is necessarily implied that the company will receive the premiums and keep the policy in life ; and this is not all. The company is the creature of statute, and its mode of acting for the protection of the policy-holders, is regulated by statute. From the nature of the case, the agreement must also be implied that it will obey the statute, the law of its creation and of its existence ; that it will do its business as required by the statute ; that it will properly keep and invest its funds, and be in a condition, at all times, as the statute requires, to discharge all its liabilities. Therefore, when it violates the law—fails to keep on hand funds required by law, and becomes insolvent, discontinues business, makes it impossible for the assured to pay premiums, and fails to carry the policies—it has broken its engagements with its policyholders, and becomes liable to them on account of such breach. The policy-holders then have a claim for damages, just as they would have if, while doing business, it had, without just cause, refused to receive the payment of premiums, and to continue the policies in life ; and to this effect have, I believe, uniformly been the decisions (New York Life Ins. Co. v. Statham, supra ; Fischer v. Hope Mut. Life Ins.. Co., 69 N. Y. 161; Bell's case, L. R. 9 Eq. 706 ; Cook's case, Id. 703; Holdich's case, L. R. 14 Eq. 72).
These policy-holders are, therefore, in the same position as any other persons would be, who held running contracts of value with the company, which- it had broken—claimants for damages.
What is the damage sustained by each of these policy-holders ? Clearly the value of the policy which has been destroyed. When such value has been ascertained, the true measure of damage has been arrived at. But the difficulty is to determine the value. In any given case the precise value cannot be ascertained.
If the time of death were certain, and the rate of interest determined, there would be no difficulty. Then the present value of the amount to be paid at death, diminished by the amount of the present value of all the premiums to be paid, would give the value. But the time of death is uncertain, and hence the present value of a running policy must always be somewhat speculative and uncertain. Yet, as in all cases of difficulty, the courts charged with the duty of ascertaining value, must take the best light the nature of the case admits.
To persons of a certain age there is an average expectancy of life, and this is shown in certain tables used in the business of life insurance, showing the expectancy of life for persons of all ages.
These tables are built upon long and varied experience, and are deemed sufficiently reliable, in the absence of a better basis, for the guidance of the courts, of public officers and of insurers. One of such tables is annexed to the act, chapter 623 of the Laws of 1868, and that is the table used by the referee in this case. As before stated, the annual premiums are not consideration of assurance for the year in wffiich they are paid ; for they are equal in amount, whereas the risk in the early years of life is much less than in the later. Therefore, during the early years the assured has paid more than sufficient to carry the risk during those years, and. this excess is to aid in carrying the risk during the later years, when the annual premiums would be insufficient for such years. This excess is called the equitable value of the policy, and goes to make up what is called the reserve fund. This reserve, together with the same annual premiums, ought to be sufficient to enable the assured to obtain a policy for the remainder of his life for the same amount in another solvent company, and hence may be taken as the measure of present value, assuming that there has been no change in the value of his life since his assurance, except that caused by the efflux of time. But the health of a policy-holder may, since his insurance, have become so impaired that his life is not now reinsurable, and hence, in his particular case, the value to be arrived at upon this basis would not be the measure of his damage. But yet I am inclined to think that even in such cases the basis would have to be generally adhered to, for the reasons stated by Lord Cairxs, in Lancaster's case, to be found in a note to Holdich's case, above cited, because it would be wholly impracticable, in the cases of thousands of policy-holders, to determine the state of health for reinsurance of each policy-holder, compared with his state of health at the date of his policy. The inquiry would be so much a matter of speculation and uncertainty, and would lead to so much litigation, delay and expense, that it would be practically impossible, it seems to me, to administer the assets of an insolvent company in that way. But what the general rule in such a case should be it is not important to determine now, as all these lives must be assumed to be in a normal state, as there is no proof as to the precise state of any pne. As I understand it, the referee in this case adopted the basis mentioned, with the aid of the table above referred to, in estimat ing the value of the running policies at the date of the dissolution of the company ; and in this I cannot perceive, from any evidence in the case or any information furnished by the briefs of learned counsel, that any error was committed; and I therefore conclude that these policy-holders are creditors of the company for the present value of their policies as thus estimated.
3. The receiver holds a large amount of premium notes, given by policy-holders in part payment of premiums ; and the referee held that the amounts due upon such notes should be offset against the value of the policies, and that the dividend should be declared and paid upon the balance. In this there was no error. A policy-holder who has given such a note is a creditor only for the balance, after deducting such note from the amount due him for the value of his policy; and in holding that the dividend was to be made upon such balance, the referee has followed the rule laid down in the statutes and the decisions (2 R. S. 47, § 36 ; Id. 464, § 42, and Id. 469, § 68 ; Matter of Globe Ins. Co., 2 Edw. Ch. 625; Osgood v. De Groot, 36 N. Y. 348).
4. Our attention is called to the case of an unmatured paid-up policy, and the claim is made that it should be treated differently from unmatured policies upon which annual premiums are payable. But there can be no difference. The value of such a policy must be computed in the same way as the others. It is the balance of the premiums, ascertained by the rules used in such cases, necessary to'carry the policy to maturity, or, in other words, the unearned premium, which is called the reserve.
5. There are several annuitants of this company— persons to whom the company, for gross sums paid, agree to pay certain sums annually during life—and the referee held that these persons were entitled to receive the present values of their annuities, computed upon the basis of the Northampton Tables, with interest at six per cent. It is claimed on behalf of some of the appellants that in this there was error. I. can perceive none. These are not cases of insurance, and they are not to be governed by any of the rules applicable to life insurance. They are cases simply where, for a gross sum paid, the company become' bound to pay certain sums annually during the lives of the annuitants. It has been the uniform rule of the courts in this State to use these tables to ascertain the present value, and to capitalize such annual payments (Schell v. Plumb, 55 N. Y. 592; Rule 76 of the Supreme Court).
6. The claim is made that the death claims which matured before the dissolution of the company should be paid before the claims of holders of unmatured policies ; and I think this claim was properly disallowed by the referee. Upon the assumption which we háve shown to be a proper one—that the holders of such policies are creditors of the company—this claim has no basis to rest on. No decision has ever been made, - that I can find, giving the preference claimed. The death claimants have no lien, legal or equitable, upon the funds of the company, and without such lien they can have no preference.
It is the rule of the statute, as well as of equity, that all the creditors of such a corporation, when it becomes insolvent, shall share in its assets in proportion to their claims (2 R. S. 47, § 36 ; Id. 466, § 48 ; Id. 471, § 79). The fact that one claim is matured gives it no preference over others not matured. There is nothing in the nature of life insurance that gives the preference. One who has paid his money to carry his policy to maturity has no better right or greater equity than another who has paid his money to carry a policy toward maturity.
The holder of a running policy has paid his money, not to make a fund to pay death claims, but for insur anee upon his own life. He expects the benefit of the money he has paid, either by receiving the amount insured at the maturity of his policy, or damages for the breach, if the company fails to carry his policy . to maturity. To the extent of such damages he is on the same footing, legal and equitable, with every other creditor. The opinion of Chancellor Euuyoít in the case of Yannatta v. New Jersey Mut. Life Ins. Co., with a copy of which we have been furnished, is not in point, as that was a mutual company in the chapter of which the holders of running policies were liable to assessment to pay death losses.
7. This company was dissolved and a receiver appointed December- 14, 1876. Thomas J. Lockwood, holding a life policy upon which the premiums had been paid to March 27, 1877, died March 15. The appellant Gilliland was appointed his administrator, and served upon the receiver proof of his death, May 23, 1877—long before the expiration of the time under the published notice for the presentation of claims'. The referee allowed him only the reserve value of his policy at the date of the dissolution of the company, computed in the same way as the values of running policies were computed, disregarding entirely the fact of the subsequent death of the assured. In this I think he erred. The claimant was entitled to be allowed as his damages the value of this policy. There is no statute regulating how such value as between the receiver and the claimant shall be determined. The rules by which the referee determined the values of running policies will not in all cases do justice. In some cases they may give a claimant more damage than he has sustained, and in other cases less. In their general applications, however, they will work out results sufficiently accurate for judicial action. In general, they furnish the only practical basis of computation, and hence are' sanctioned. But these rules, adopted from the necessity of the case, should not be used where, upon facts existing, the precise value of a policy may be easily ascertained. Their use is not then justified by any necessity or consideration of convenience. Here the whole premium had been paid, and at the time when the claim was presented, the precise value of the policy at the time of the dissolution could easily be shown. It was free from uncertainty or speculation. The amount insured was payable ninety days after the proofs of death, and the present value of that sum on the 14th day of December was the value of the policy, and that value could be ascertained like the present value of any certain sum of money payable at a definite future day. There can be no embarrassment in allowing the values of such policies to be computed in this way where the death occurs, and the proofs of death are furnished at any time before the • expiration of the time for presenting claims. This mode of computation is sustained by Bell's case and Holdich's case, above cited.
I have now considered all the allegations of error brought to our attention by the various appeals, and my conclusion is that the order appealed from should be affirmed, except as to the appellant Gilliland, and that as to him it should be modified to conform to the views above expressed.
Costs in this court must be allowed to the receiver and to the appellant Gilliland, to be paid out of the assets, but to none of the other parties.
All concurred, except Audrews, J., absent.