State ex rel. Gibson v. American Bonding & Cas. Co.

Decision Date23 October 1928
Docket Number39093
Citation221 N.W. 585,206 Iowa 988
PartiesSTATE OF IOWA ex rel. BEN J. GIBSON, Attorney-general, Appellee, v. AMERICAN BONDING & CASUALTY COMPANY et al., Appellees; W. F. GRANDY, Receiver, Appellant
CourtIowa Supreme Court

Appeal from Woodbury District Court.--C. C. HAMILTON, Judge.

Application to have a certain fund in the hands of a receiver of an insolvent bonding and casualty company decreed to be held in trust for the benefit of the claimant. The court established the claim as prayed, and the receiver appeals. The facts appear in the opinion.

Affirmed.

Burgess & Gill, for appellant.

McKinley & Killinger, E. G. Smith, and Shull, Stilwill, Shull & Wadden, for appellee.

Kass Zink & Kass, Amici Curiae.

FAVILLE J. STEVENS, C. J., and EVANS, KINDIG, and WAGNER, JJ concur.

OPINION

FAVILLE, J.

The American Bonding & Casualty Company was incorporated in this state on June 2, 1916, to transact business under Chapter 4, Title IX, of the Code of 1897, relating to insurance other than life. The authorized capital stock at the time of incorporation was $ 500,000. On January 25, 1918, a resolution was adopted, authorizing an increase of the capital stock to $ 1,000,000, and on January 19, 1920, amended articles of incorporation were adopted, fixing the capital stock at $ 750,000. On January 24, 1921, temporary receivers were appointed for said company, and subsequently, a permanent receiver was appointed. Policies issued by said corporation provided indemnity for personal injuries caused by accidental means, for loss of time caused by sickness; and said company also issued what are known in the record as "surety bonds," "plate glass policies," "burglary policies," "fidelity bonds," "automobile liability and property damage policies," and "landlord's or tenant's public liability policies." It appears that, at the time of the appointment of the temporary receiver, there were on deposit with the insurance department of the state of Iowa capital assets consisting of mortgage loan securities in the amount of $ 703,250, and that all of said assets were delivered by the commissioner of insurance to the receiver of said corporation. Regarding said securities it is stipulated and agreed "that the securities on deposit with the commissioner of insurance of the state of Iowa were so deposited with said commissioner under his ruling requiring said company to deposit with said commissioner of insurance of the state of Iowa the said capital assets of said company before the original license to do business would be granted to said company, and that said capital assets, as invested in bonds and first mortgage securities, were so deposited with said commissioner of insurance, in compliance with his demands, and that the securities so turned over to W. F. Grandy, as receiver of the A. B. & C. Co., on February 8, 1922, were securities so deposited with the commissioner of insurance in compliance with his demands, and on his ruling that said capital assets be deposited with said commissioner of insurance before licensing said company, for the protection of policyholders of said company, in accordance with his interpretation of the law."

At the time of the organization of said corporation, and at the time that said securities were so deposited with the commissioner of insurance, there was no statute in this state requiring that a corporation engaged in the business in which said corporation was engaged should make a deposit of securities with the commissioner of insurance. The appellee's claim in this case, amounting to $ 45,514.85, is for unearned premiums on certain policies of said company that were outstanding at the time of the appointment of receivers for said corporation. It is admitted that the policies, bonds, and contracts on which the appellee's claim for return of unearned premiums is based are written on the standard from of policy provided by the statutes of this state.

The fund did not lose its trust character because it was deposited with the commissioner of insurance under an evidently mistaken belief on the part of the commissioner, and also the company, that such deposit was required. The stipulation of the parties is that the securities were deposited with the commissioner "under his ruling requiring said company to deposit with said commissioner of insurance of the state of Iowa the said capital assets of said company before the original license to do business would be granted to said company," and that said deposit was in compliance with his demand and his ruling for the protection of the policyholders of said company, in accordance with his interpretation of the law. There is no allegation of fraud or duress. The fact that the deposit was made by reason of a misapprehension of the statute, and the belief on the part of the parties that it was essential, did not deprive the deposit of its trust character, or change the terms under which it was deposited,--namely, "for the protection of policyholders."

I. The trial court held that the securities deposited with the commissioner of insurance constituted a trust fund which passed into the hands of the receiver, and that the appellee, as the holder of claims for unearned premiums, was entitled to have its claim established, as against said fund. While the securities deposited with the commissioner of insurance were not deposited in pursuance of any statute of this state requiring the deposit to be made, they were deposited in pursuance of a demand by the commissioner of insurance, and, under the stipulation, were so deposited "for the protection of policyholders of said company." Even though the deposit of said securities was not required by law, the deposit was made by the corporation as a segregation of certain of its assets for a particular purpose,--to wit, "the protection of its policyholders." This was not an illegal act on its part, and did not contravene the public policy of the state with regard to certain other insurance companies, and, in fact, was in keeping with it. The corporation had a legal right to set apart said securities in the hands of the insurance commissioner, or some other trustee, as a trust fund "for the protection of its policyholders." It matters not whether the commissioner of insurance thereafter held the same as a public official or as a private individual. No question is raised of his right to act as the custodian or trustee of such a fund, and we see no legal objection to the creation of such a trust fund in his hands for a particular lawful purpose. A similar situation existed in American Cas. Ins. Co.'s Case, 82 Md. 535 (34 A. 778, 38 L. R. A. 97). In said case, as in the one at bar, a deposit of securities was made with a state official, as a guarantee for the payment of the policies of insurance issued by the company making the deposit. Such a deposit was not required, under the statutes of that state. The court said:

"We need not stop to consider whether the deposit in this case was made by the company under the impression that it was a statutory requirement, or whether it was made voluntarily, with a view to strengthen its credit, and to give confidence to its policyholders of its ability to meet its obligations. The fact is, the company did make the deposit * * *."

If a trust existed, and was created by the act of the company, it will not be defeated because of any inability or want of authority on the part of the trustee to act. It is elementary that a court of equity will not allow a trust to fail for want of a trustee. In any event, the fund was held by the commissioner of insurance as a trustee, and was surrendered by him to the receiver appointed by the court, and is now in the custody of the court. We treat the fund, therefore, in the hands of the receiver as being a trust fund created by the corporation "for the protection of the policyholders of said company."

II. Our inquiry then becomes one as to whether or not the appellee as the holder of a claim for unearned premiums, is entitled to have said claim established as against said trust fund; or, in other words, was the trust fund created for the protection of the appellee, as a policy-holder in said company? Does appellee's claim for unearned premiums accrue to him "as a policyholder," entitling him to "protection" under the stipulated terms of the trust? We therefore first ascertain whether or not the unearned premiums are provided for in the policy of the appellant company, or by the statues of the state, so that they come within the terms under which the securities were deposited, and...

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1 cases
  • State ex rel. Gibson v. Am. Bonding & Cas. Co.
    • United States
    • Iowa Supreme Court
    • October 23, 1928
    ...206 Iowa 988221 N.W. 585STATE EX REL. GIBSON, ATTY. GEN.,v.AMERICAN BONDING & CASUALTY CO. ET AL.No. 39093.Supreme Court of Iowa.Oct. 23, 1928 ... Appeal from District Court, Woodbury County; C. C. Hamilton, Judge.Application to have a certain fund in the hands of a receiver of an insolvent bonding and casualty company decreed to be held in trust for the ... ...

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