Gray v. Reynolds

• Decision Date: 19 May 1897
• Parties: GRAY v. REYNOLDS.
• Court: New Jersey Supreme Court

37 A. 461

55 N.J.E. 501

GRAY

v. REYNOLDS.

Court of Errors and Appeals of New Jersey.

May 19, 1897.

Appeal from court of chancery; Reed, Vice Chancellor.

Claim by L. M. Reynolds, trading under the firm name of L. M. Reynolds & Co., against George R. Gray, receiver of the United States Credit-System Company. The receiver disallowed a part of the claim, and from an order of the chancery court setting aside such adjudication in part said receiver appeals. Reversed.

Howard W. Hayes, for appellant.

Edward A. Day, for respondents.

DEPUE, J. The respondents are merchants carrying on business in Virginia. The United States Credit-System Company is a corporation of this state, incorporated in 1888. The business for which this corporation was created was the issuing of certificates of guaranty, which may be called contracts of insurance, or indemnity to traders for losses incurred by the failure of their customers who are debtors to the traders and become insolvent. A policy issued by this company runs for one year, and covers losses on goods sold during that year by the insolvency of their customers during that year; in other words, the goods must be sold, and the insolvency of the customer must also occur, during the period of time covered by the policy. Losses incurred after the certificate expires, on sales made during its term, are provided for by other parts of the contract, not material to this case. The vice chancellor very properly describes the kind of insurance undertaken by this company as sui generis. Indeed, so peculiar is the system of insurance engaged in by this company that its contracts of insurance appear to be protected, as its exclusive property, by a copyright. In this adventure there is no reserve fund to meet the obligations it incurs, no surrender value, and no opportunity for reinsurance in other companies. The complainants took out a policy, No. L169, dated and issued May 24. 1894. This policy covered the period from June 1, 1894, to May 31, 1895. The company became insolvent August 23, 1894. The order appointing a receiver adjudges that upon that day the company was insolvent The day on which insolvency occurred, as adjudged by the order appointing a receiver, fixes the time to which the several claims of creditors must be referred for adjustment. Mayer v. Attorney General, 32 N. J. Eq. 815. The complainants presented to the receiver a claim for $517.60, which was the amount of loss actually suffered on goods sold during the continuance of the policy up to the date of insolvency, which was allowed. They also presented claims for losses on goods sold after the policy was issued, where...