In re Beha

• Citation: 171 N.E. 572,253 N.Y. 365
• Court: New York Court of Appeals Court of Appeals
• Decision Date: 06 May 1930
• Parties: In re PEOPLE by BEHA, Superintendent of Insurance. In re FIRST RUSSIAN INS. CO. Claim of FRED S. JAMES & CO.

253 N.Y. 365

171 N.E. 572

In re PEOPLE by BEHA, Superintendent of Insurance. In re FIRST RUSSIAN INS. CO. Claim of FRED S. JAMES & CO.

Court of Appeals of New York.

May 6, 1930.

In the matter of the application of the People, by James A. Beha, Superintendent of Insurance, for an order to take possession of the property and conserve the assets for the benefit of creditors of the First Russian Insurance Company, wherein Fred S. James & Company filed a claim. From an order (227 App. Div. 784, 237 N. Y. S. 866) of the Appellate Division affirming an order of the Special Term, which confirmed the report of a referee and directed payment of the claims of creditors from the surplus in the hands of the superintendent of insurance, the Superintendent of Insurance appeals by permission.

Affirmed.

Appeal from Supreme Court, Appellate Division, First department.

James F. Donnelly, Alfred C. Bennett, John M. Downes, and Clarence C. Fowler, all of New York City, for appellant.

Frederick B. Campbell and Paul C. Whipp, both of New York City, for respondent First Russian Ins. Co.

Louis J. Wolff and David Rumsey, both of New York City, for respondent Fred S. James & Co.

CARDOZO, C. J.

By an order of the Supreme Court made in August, 1925, the superintendent of insurance was directed to take possession of any property in this state belonging to the First Russian Insurance Company, a Russian corporation, in order to conserve and liquidate its assets ‘as the nature of the case and the interests of its policyholders, creditors, stockholders or the public may require.’ Insurance Law, § 63, subd. 4 (Consol. Laws, c. 28).

Before the entry of that order the respondent Fred S. James & Co., as assignee of a foreign creditor, a British corporation, had procured a warrant of attachment against the property of the insurance company in an action growing out of business transacted in Great Britain, and had caused a levy to be made upon assets of the defendant company in the possession of a trust company.

The assets thus subjected to the lien of the attachment had been deposited with the trust company in trust for the benefit of domestic policyholders and creditors. The claims of such policyholders and creditors, in so far as they had their origin in business transacted in this country, were a primary charge upon the fund, and attachment liens and others were subordinate thereto. Matter of People ex rel. Stoddard (In re Norske Lloyd Ins. Co.) 242 N. Y. 148, 151 N. E. 159. Even so, there was a reversionary interest in the surplus, if surplus there should prove to be, which, until an order had been made for the appointment of a liquidator, was subject like other assets to attachment or sequestration in aid of claims arising from business done abroad (Murphy v. Second Russian Ins. Co., 240 N. Y. 554, 148 N. E. 702).

The superintendent of insurance has now completed the task of liquidation in respect of domestic claims, and holds a surplus in his hands to be disposed of as if it had been committed to his custody as an ancillary receiver. Ins. Law, § 63, subd. 5; Matter of People by Beha (In re Second Russian Ins. Co.), 243 N. Y. 524, 154 N. E. 590. This surplus, which is part of the fund that was attached while in the possession of the trust company, is claimed by the attaching creditor to the extent that recourse thereto is necessary to satisfy its lien. The debt having been proved, an order has been made that principal and interest be paid by the liquidator out of the fund in his possession. The question to be determined is the propriety of the award of interest.

There is indeed a general rule in the distribution of estates that from the time when the assets have been subjected to the administration of the law, interest ceases to run in favor of any creditor who seeks a share of the...