Withers v. Great Am. Nat. Life Guardian

• Decision Date: 17 May 1938
• Citation: 124 N.J.Eq. 4,200 A. 485
• Parties: WITHERS, Commissioner of Banking and Insurance, v. GREAT AMERICAN NAT. LIFE GUARDIAN.
• Court: New Jersey Court of Chancery

200 A. 485

124 N.J.Eq. 4

WITHERS, Commissioner of Banking and Insurance,

v. GREAT AMERICAN NAT. LIFE GUARDIAN.

Court of Chancery of New Jersey.

May 17, 1938.

Bill by Carl K. Withers, Commissioner of Banking and Insurance of the State of New Jersey, against Great American National Life Guardian, a corporation of New Jersey, for instruction of the court as to certain questions arising with regard to the distribution funds of defendant in complainant's hands.

Instructions in accordance with opinion.

Israel Spicer, of Newark, receiver, pro se. Samuel Kaufman, of Newark, for West Side Trust Co. David & Samuel Green, of Newark, pro se. Leslie H. Cohen, of Newark, pro se. Louis J. Cohen, of Newark, for Commissioner of Banking and Insurance. Nathan Susskind, of Bayonne, for Israel Epstein.

STEIN, Vice Chancellor.

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The receiver having filed his final report and account now prays instruction of the court as to certain questions arising with regard to the distribution of the funds in his hands.

The defendant is a mutual benefit association, carried on solely for the benefit of its members, and pays to its members benefits in case of sickness, disability or death. The fund from which such benefits are paid and the expenses of the association defrayed, are derived from fees, dues, assessments and other contributions collected from its members.

P.L.1935, chap. 237, regulated mutual benefit associations, and provided for the maintenance of a guarantee fund and a benefit fund. The defendant, pursuant to the provisions thereof, created such funds.

In 1936 the Legislature passed an act superseding chapter 237 of the Laws of 1935 effective January 2, 1937, Revised Statutes (1937) 17:45-1 et seq. The defendant association failed to qualify under the latter act, and at the instance of the Commissioner of Banking and Insurance on April 20, 1937, this court appointed a receiver for the association. At the time the receiver was appointed the defendant's guarantee fund consisted of $1,274 cash and $1,800. in United States Bonds, while the benefit fund consisted of $258.84.

The receiver seeks instruction with respect to the following matters:

(1) Whether the benefit fund is a trust fund to be disbursed solely in payment of claims for benefits under certificates and for the costs of prosecuting and defending suits.

(2) Whether the guarantee fund is a trust fund to be disbursed solely for the benefit of claimants for benefits under outstanding certificates.

(3) Whether claims for counsel fees for services in defending suits under the cer tificates issued prior to the decree of insol vency are entitled to share in the distribu tion of the guarantee fund.

(4) Whether the receiver should allow a claim under a death benefit certificate where the death occurred after the date of his ap pointment as receiver.

(5) Whether the receiver should proceed to levy and enforce an assessment against the members of the defendant-association.

(6) Whether administration costs are to De charged against the benefit fund and the 'guarantee fund to the extent that other funds are not available for that purpose.

(7) Whether the tax claim of the City of Newark is entitled to payment out of the two funds.

(8) Whether the claim of the Commis sioner of Banking and Insurance is to be classed as an administration expense.

I, II and III. Revised Statutes (1937) 17:45-8, provides: "Every such association shall establish a minimum guarantee fund.* * * and funds therefrom shall be disbursed only for the payment of claims for benefits under its outstanding certificates, but only on certification of the president and secretary of the association, after notice to the commissioner of banking and insurance, that the benefit fund hereinafter provided tor is insufficient to meet existing claims payable therefrom or that payment of such claims would result in the impairment of the reserve fund hereinafter provided for. In the event that the guarantee fund is reduced by such disbursements to less than the amount required by this chapter, the deficiency therein shall be made good by an assessment on all the members within six months after the notice above provided for and the by-laws of the association shall establish the procedure to be adopted in making such assessment."

Revised Statutes (1937) 17:45-9, provides: "Every such association shall establish a benefit fund into which shall be placed a specified percentage, not less than fifty per cent. of all dues and contributions collected by the association or by any agent thereof on sickness and accident disability benefit certificates hereafter...