Case Name: Furniss v. Sherwood
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1850-04-13
Citations: 3 Sandf. 521
Docket Number: 
Parties: Furniss v. Sherwood.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 5
Pages: 521–524

Head Matter:
Furniss v. Sherwood.
The provision of the revised statutes, making invalid the assignment and transfer of the effects of monied corporations, in case of their insolvency, with the intent of giving a preference to a particular creditor, is applicable to mutual insurance companies.
A transfer of a note made by an insolvent monied corporation, further to secure a loan, made previous to its insolvency on an understanding or verbal agreement with its president, that the lender should at all times be kept adequately secured by col-laterals, is in violation of the statute, and cannot be sustained.
Where pending a suit on a note so transferred, the lender made an arrangement with ■ the receiver of the company, by which he became legally entitled to the note ; it was held that it could not avail him to maintain the action.
(Before Oakley, Ch. J., and Paine, J.)
March 8 ;
April 13, 1850.
Tms was an action of assumpsit, to recover the amount of a promissory note for $1500, made by the defendant, dated March 14th, 1846, and payable in seven months after date, to the order of The Croton Insurance Company, and endorsed by the president of the company to the plaintiff. It was given in renewal of a previous subscription note to the company, made in 1845.
The facts appearing on the trial were as follows: On the 18th of February, 1846, the finance committee of the company adopted a resolution, empowering the president to take such steps as he might deem necessary to raise from the assets belonging to the company, the money which might be needed from time to time, which resolution was reported to the trustees, on the 27th of February. That, subsequently, in the month of March, the president, in pursuance of the resolution, applied to the plaintiff for a loan to the company of $6,000, and an arrangement was made, by which the plaintiff lent to it that sum, in his notes, which were discounted for its benefit at a bank. The loan was made upon the collateral security of notes, which were assets of the company. On the maturity of the loan, June 24, 1846, the company’s note was renewed for $5,500, and an arrangement was made by the president with the plaintiff, as a condition of the renewal, that the plaintiff should be furnished with additional security, in accordance with which arrangement, the note in suit was transferred to him, on the 16th day of July, 1846. There was an agreement between the plaintiff and the president, when the loan was made, to the effect, that he should be kept secured for the loan by the transfer of collaterals from time to time. The company became insolvent on the 14th day of May, 1846; and the fact was known to the plaintiff before July.
The counsel for the defendant moved for a non-suit, on the ground that Mr. Stacey, the president of the company, had no authority to indorse the note in suit, and that the transfer of the note was void, having been made when the company was insolvent. The court denied the motion, reserving the latter question.
It was proved, that upon the settlement of a suit commenced by the receiver of the company against the plaintiff, the receiver relinquished to him all claim for or in respect of the note of the defendant upon which this suit was brought.
A verdict was taken for the plaintiff, for the amount of the note and interest, subject to the opinion of the court.
M. 8. Bi&well, for the plaintiff.
J. N. Taylor, for the defendant.

Opinion:
By the Court. Oakley, Ch. J.
The question has been raised whether the provisions of the revised statutes, relative to monied corporations, are applicable to mutual insurance companies. It is very evident that some of those provisions do not" apply, because from their nature, they can only have reference to banks. But there are others which are applicable; and we do not see how we can except these insurance companies from the operation of a statute, which expressly embraces them, and some of whose provisions are applicable in their very nature to such companies.
The revised statutes in the title referred to, provide that in case of the insolvency of a monied corporation, no assignment, conveyance, or transfer of any of its effects, made when insolvent, or in contemplation of insolvency, with the intent of giving preference to any particular creditor or creditors of the corporation, shall be valid in law, and every person receiving, by means of such conveyance, assignment, &c. any of the effects of the company, shall be bound to account therefor to its creditors, stockholders, or their trustees, as the case shall require. The statute further provides, that every director who shall violate, or be concerned in violating this provision, shall be deemed guilty of a misdemeanor.
The object and spirit of this act is, undoubtedly, to secure an equal distribution of the effects of a monied corporation, among the creditors, in case of its insolvency. It is obvious, therefore, that in order to maintain the validity of the transfer of the note in suit to the plaintiff, his case must in some way be excepted from the force of the statute.
He relies upon a general understanding, made at the time of the loan to the company, with the president through whom the loan was effected, that he should be furnished at all times with adequate collateral security; and that, in accordance with this arrangement, the note in suit was subsequently transferred to him. But if such an understanding has an operative effect, it might extend to and cover all the assets of the company. We do not see how such an understanding, not carried into effect before the actual insolvency of the company, can overrule the statute. Nor can the arrangement with the receiver, which took place subsequent to the commencement of the suit, enable the plaintiff to maintain this action. He must sue again, and the defendant can then present his claim for an offset, and have 'it determined.
Judgment for the defendant.