In re Voluntary Dissolution of Home Provident Safety Fund Ass'n of New York

• Decision Date: 15 December 1891
• Citation: 129 N.Y. 288,29 N.E. 323
• Parties: In re VOLUNTARY DISSOLUTION OF HOME PROVIDENT SAFETY FUND ASS'N OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

129 N.Y. 288

29 N.E. 323

In re VOLUNTARY DISSOLUTION OF HOME PROVIDENT SAFETY FUND ASS'N OF NEW YORK.

Court of Appeals of New York.

Dec. 15, 1891.

Appeal from supreme court, general term, first department.

Petition by the Home Provident Safety Fund Association of New York for voluntary dissolution. The corporation was dissolved a receiver appointed, and an order entered directing the Farmers' Loan & Trust Company to transfer to the receiver all property received by it from the corporation. Part of the proceeds of such property was afterwards paid out by the receiver, under orders of the court, for attorneys' and referee's fees. Subsequently the trust company applied for an order to compel the receiver to repay the moneys he had obtained from the trust company. The special term ordered that the moneys should be repaid to the trust company, and also directed the attorneys and referee to repay to the receiver the amounts they had been paid. The general term reversed the order directing the receiver to repay to the trust company, and affirmed as to the attorneys and referee. The trust company and the attorneys and referee appeal. Reversed.

The other facts fully appear in the following statement by PECKHAM, J.:

Proceedings by petition to the court were taken in behalf of the trustees of the company above named, to provide for its voluntary dissolution. The matter was referred to a referee, who reported that it would be unwise for the corporation to continue business, and that it should be dissolved. A motion was made in behalf of the petitioners to confirm this report, and for a final order for the dissolution of the company, and the appointment of a receiver of its property, as provided by statute. The notice of this motion was served upon the attorney general, and the superintendent of the insurance department, and some others who had made themselves parties to the proceedings, but no notice of any application to the court was given the Farmers' Loan & Trust Company, one of the appellants here. Upon the hearing of the application above noticed, the report of the referee was confirmed, the corporation dissolved, and the temporary was appointed the permanent receiver of all the stock, property, things in action, and assets of the corporation. The Farmers' Loan & Trust Company was in the same order directed to turn over, transfer, and assign to the receiver all funds, securities, and property received by it from the corporation, or held by it under or by virtue of any contract made between it and the corporation, in trust or otherwise, for the members of the corporation. The receiver served a copy of the order on one of the officers of the institution, and demanded or requested payment by it to him of all the moneys or property it held of the dissolved corporation, in accordance with the provisions of such order. The officer of the institution upon whom the copy of the order was served, and of whom the demand was made, complied with its terms, and delivered all the securities, amounting to about the sum of $11,000, which it held in trust for the members of the dissolved corporation who were holders of certain of its certificates. The receiver, having taken possession of such securities, (which were registered United States bonds,) had them transferred to his name, and subsequently they were sold under direction of the court, and a portion of the proceeds paid out by the receiver under orders of the court and in good faith, in reliance upon such authority. A portion of the money was paid to the attorneys who had carried on the proceedings to obtain a dissolution of the corporation, for payment of their services therein, and to pay the referee's fees in such proceeding, and other disbursements. Another portion was paid for counsel fees to receiver's own counsel. The amount of money paid out by him under the orders of the court was $2,852.16, and the total amount received was $11,203.44, leaving a balance in his hands of the funds received by him from the Farmers' Loan & Trust Company of $8,353.28. Subsequently the trust company applied, on notice to the receiver, etc., for an order to compel the receiver to repay the moneys which he had obtained from the trust company, and the ground of the application was that the trust company had no notice of the application for the order made peremptorily requiring it to pay over such funds, and that it was not a voluntary payment, and that it was entitled to have the money repaid to it, to the end that its rights, and those of the parties interested in the fund, might be protected. The court at special term ordered that the moneys should be repaid the trust company, regardless of what direction would have been made had the trust company or the beneficiaries under the trust agreement been notified and heard, and it also directed the attorneys and referee to repay to the receiver the amounts they had been respectively paid by him. The receiver and the attorneys and referee appealed to the general term from this order, where the provision directing the receiver to repay to the trust company was reversed, but that requiring the attorneys and referee to repay to the receiver was affirmed. The trust company and the attorneys and referee have appealed from the order of the general term to this court. Other facts appear in the opinion.

David McClure and Nelson Smith, for appellants.

George S. Hastings and Chas. A. Jackson, for respondent.

PECKHAM, J., ( after stating the facts.)

It must be assumed that the insurance company which has been dissolved had the power to enter into the contract which it did execute with the Farmers' Loan & Trust Company, for no party to this dispute questions that fact. In May, 1884, the trust company and the insurance company entered into an agreement by which the insurance company agreed to deposit with the trust company moneys under these circumstances: The insurance company proposed to issue to persons becoming members of its association certificates of membership, and in such certificates it would state that, in consideration of the sum of $10 to be received on each $1,000 of the amount of each certificate from the person holding the same, it would pay such sum to the trust company, as trustee, for the purpose of creating a safety fund to be paid out by the trust company under the circumstances stated in the certificate. A like statement as to the payment of one dollar for a tontine pension fund was to be placed in each certificate, and to be paid as stated. These details were set out in full in the agreement with the trust company, as recitals of the obligations the insurance company was under to its members holding such certificates, and then the two companies agreed, each with the other, that the insurance company would pay to the trust company these moneys, and the trust company would keep and pay them in the manner and for the purposes stated in the agreement. It was understood that the funds belonged to the insurance company, subject to the trusts provided in the agreement. The trust company was to receive, hold, manage, and deposit the funds paid to it, in a manner provided for in detail. It was to invest the moneys as fast as it could in United States bonds, registered in its name as trustee, and accumulate the fund, with the interest, until it amounted to $300,000, when the further interest, in case no default was made by the insurance company, was to be paid to it. In case of failure on the part of the insurance company to perform its obligations entered into with its members who held these certificates, then the trust company was to convert the securities into money, and divide the same in accordance with the recited agreement contained in the certificates, and reiterated between the insurance and trust companies in their agreement. All payments required in the agreement to be made by the trust company to the certificate-holders after default were, by the terms of the agreement, to be made at the office of the trustee or of its successor. Sufficient has been set forth in regard to this agreement to show that the trust company was the trustee of a fund provided by the insurance company, which the former company agreed to dispose of in a particular way before the default of the insurance company, while after that event the trust company agreed to apply the fund in payment of the obligations of the insurance company to its certificate-holders.

The first question which here arises is as to the power of the court, upon proper notice and hearing, to take this fund out of the hands of the trust company, and administer it through the instrumentality of its own receiver. If it have that power, it would seem rather superfluous to send the fund back to the trust company for the purpose of going through the mere form of notifying that company of an intended application to compel it to pay the same over to the receiver. The trust company gave notice to the receiver that it would apply for an order to repay the money to it, and in its papers the grounds of its application were set forth. The receiver appeared in obedience to the notice, and set up facts which he claimed were sufficient to warrant the court in ordering the fund to be retained by him. The notice of the application, and the papers used upon the...