The Vice-Chancellor:
This case does not necessarily call for a decision of the question, whether, as between the stockholders of an insolvent insurance company and the creditors, the former are entiiled to all the surplus which' remained with the company undivided at the time of its disaster over and above the entire capital ?
Although there is here such a surplus of upwards of forty-one thousand dollars, besides the dividend, amounting to-thirty-five thousand dollars, which was declared on the tenth day of November and made payable on and after the first day of December, yet the complainants, in their bill, only [671]*671• claim to have their parts or portions of this dividend, which they have not received, now paid over to them out of the funds in the hands of the receivers, instead of leaving the money there to be applied as assets of the company in discharge of its debts,
The complainants assert their right to the money upon? the ground of its having become theirs by an express appropriation and setting apart so much out of the company’s! earnings for the stockholders and thereby distinguished] from the general mass of the company’s funds; and I am convinced that enough has been done to produce this sepa- j ration in the view of a court of equity and to confer upon this amount the character of a trust fund which could not! afterwards be diverted to other objects.
The investigation of the affairs of the company and the-ascertainment of a clear surplus to warrant a dividend— declaring that dividend by a resolution of the board of directors—fixing the period for its payment—giving publicity to it—carrying the amount on the books of the company to the debit of profit and loss—apportioning the same among the stockholders, by filling up and signing checks upon the-bank where the funds were deposited for the purpose of being delivered to each stockholder when called for:—these are all acts which the company, by its officers, might lawfully perform. These acts became binding upon the com-l pany in its corporate capacity ; and gave to the stockhold.i ers individually rights which the directors and officers off the company could not afterwards take from them. If, fori instance, they had refused, after the first day of December, to deliver out the checks or make payment of the dividends and no insolvency had intervened, it appears to me there would have been no difficulty in the remedy by mandamus in favor of all the stockhoders or by action at the suit of" individuals from whom the payment was withheld.
Neither, I apprehend, could there be any valid objection to a bill in equity for the purpose of obtaining possession of the checks or the fund in the bank upon which they were drawn, upon the footing of its being a trust fund which the officers of the company were bound to distribute after the first day of December and over which they had no other [672]*672control. That the officers of the company considered the money which was deposited to its credit in the bank approprinted to meet the checks is evidenced by the fact that they went on delivering out checks to such of the stockholders as called for them until the seventeenth of December, when jjje disastrous fire had occurred; and they would have delivered checks to these complainants in like manner if they had called to receive them. It makes no difference, in my judgment, that the money was not told out and specifically set apart in the bank to meet these checks or that a separate fund was not created for the purpose or that the money intended to meet them still formed a part of the general mass standing to the credit of the company on the books of the bank: for this court can, nevertheless, lay hold of the mass and separate so much as may be necessary to accomplish what was intended and which accident alone prevented at the time. Up to the moment of the prostration of the company, the intention remained, on the part of those who were charged with the management of its affairs, to continue the appropriation and consummate the payment of the dividends which had been nearly completed. It was a matter no longer executory in the view of the parties ; and so far as it remained unexecuted this court will now perform it. The intention must be fulfilled ; and, for this purpose, a court of equity will consider, not merely the sums which were paid out in dividends, but the whole thirty-five thousand dollars as actually appropriated and set apart for distribution among the stockholders from and after the first day of December and regard it as a trust fund to which the stockholders had acquired vested rights—not in their corporate capacity, but as individuals to whom the money legally and equitably belonged distinct from their other interests in the funds and effects of the company.
Having acquired this right, as between them and the corporation, the assignment or transfer to the receivers could not take it away. The receivers do not stand in the light of purchasers for valuable consideration without notice 5 and, under such circumstances as exist here, are bound by trust: Adair v. Shaw, 1 Sch. & Lef. 262; Wood v. Dummer, 3 Mason’s R. 312.
[673]*673The act of the eighteenth of January, one thousand eight hundred and thirty-six, under which the receivers were , , appointed, vests in them all the property and efleets of the corporation; but, like any other assignment by operation of law, such as in bankruptcy or under our insolvent acts it does not pass trust property—but only such as the bank-. rupt or insolvent held or was possessed of or entitled to for his own benefit.
The next branch of this case is, as to the return premium claimed by the complainant on cancelling his policy.
I have recently had occasion to examine and pass upon this point, in the case of other receivers and have considered them bound, under similar circumstances, to return such portion of the premium as might be deemed unearned, when they accepted a surrender of the policy before proceeding to malte a dividend amongst the creditors generally. I have now only to reiterate that opinion.
By the general act relative to the dissolution of insolvent corporations (2 R. S. 470, § 75,) receivers are authorised to cancel any open and subsisting policy or contract by consent of the party holding it. This has been done in the present case with the complainant and others ; and upon its being done, the receivers are authorized to refund such proportion of the premium for the time the policy has to run as the whole premium bears to the whole term of the risk. The object of this provision in the statute is, to enable receivers to settle up the affairs of the company with as little delay as possible and without waiting for the natural termination of outstanding and contingent risks. It may be for the interest of present creditors, as well as stockholders, to bring all such matters to a close in order to have their rights secured against the consequences of contingent liabilities of the company and so that the receivers may know, at once, all the creditors and what is the nett amount of assets to be distributed. This can effectually be done by the course adopted by the receivers; and I think it is the true construction and just meaning of the statute that the premium spoken of to be refunded is to be returned upon the cancelment of the policies. It is, indeed, a condition-precedent. The language of the statute is, “ and upon suchv [674]
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The Vice-Chancellor:
This case does not necessarily call for a decision of the question, whether, as between the stockholders of an insolvent insurance company and the creditors, the former are entiiled to all the surplus which' remained with the company undivided at the time of its disaster over and above the entire capital ?
Although there is here such a surplus of upwards of forty-one thousand dollars, besides the dividend, amounting to-thirty-five thousand dollars, which was declared on the tenth day of November and made payable on and after the first day of December, yet the complainants, in their bill, only [671]*671• claim to have their parts or portions of this dividend, which they have not received, now paid over to them out of the funds in the hands of the receivers, instead of leaving the money there to be applied as assets of the company in discharge of its debts,
The complainants assert their right to the money upon? the ground of its having become theirs by an express appropriation and setting apart so much out of the company’s! earnings for the stockholders and thereby distinguished] from the general mass of the company’s funds; and I am convinced that enough has been done to produce this sepa- j ration in the view of a court of equity and to confer upon this amount the character of a trust fund which could not! afterwards be diverted to other objects.
The investigation of the affairs of the company and the-ascertainment of a clear surplus to warrant a dividend— declaring that dividend by a resolution of the board of directors—fixing the period for its payment—giving publicity to it—carrying the amount on the books of the company to the debit of profit and loss—apportioning the same among the stockholders, by filling up and signing checks upon the-bank where the funds were deposited for the purpose of being delivered to each stockholder when called for:—these are all acts which the company, by its officers, might lawfully perform. These acts became binding upon the com-l pany in its corporate capacity ; and gave to the stockhold.i ers individually rights which the directors and officers off the company could not afterwards take from them. If, fori instance, they had refused, after the first day of December, to deliver out the checks or make payment of the dividends and no insolvency had intervened, it appears to me there would have been no difficulty in the remedy by mandamus in favor of all the stockhoders or by action at the suit of" individuals from whom the payment was withheld.
Neither, I apprehend, could there be any valid objection to a bill in equity for the purpose of obtaining possession of the checks or the fund in the bank upon which they were drawn, upon the footing of its being a trust fund which the officers of the company were bound to distribute after the first day of December and over which they had no other [672]*672control. That the officers of the company considered the money which was deposited to its credit in the bank approprinted to meet the checks is evidenced by the fact that they went on delivering out checks to such of the stockholders as called for them until the seventeenth of December, when jjje disastrous fire had occurred; and they would have delivered checks to these complainants in like manner if they had called to receive them. It makes no difference, in my judgment, that the money was not told out and specifically set apart in the bank to meet these checks or that a separate fund was not created for the purpose or that the money intended to meet them still formed a part of the general mass standing to the credit of the company on the books of the bank: for this court can, nevertheless, lay hold of the mass and separate so much as may be necessary to accomplish what was intended and which accident alone prevented at the time. Up to the moment of the prostration of the company, the intention remained, on the part of those who were charged with the management of its affairs, to continue the appropriation and consummate the payment of the dividends which had been nearly completed. It was a matter no longer executory in the view of the parties ; and so far as it remained unexecuted this court will now perform it. The intention must be fulfilled ; and, for this purpose, a court of equity will consider, not merely the sums which were paid out in dividends, but the whole thirty-five thousand dollars as actually appropriated and set apart for distribution among the stockholders from and after the first day of December and regard it as a trust fund to which the stockholders had acquired vested rights—not in their corporate capacity, but as individuals to whom the money legally and equitably belonged distinct from their other interests in the funds and effects of the company.
Having acquired this right, as between them and the corporation, the assignment or transfer to the receivers could not take it away. The receivers do not stand in the light of purchasers for valuable consideration without notice 5 and, under such circumstances as exist here, are bound by trust: Adair v. Shaw, 1 Sch. & Lef. 262; Wood v. Dummer, 3 Mason’s R. 312.
[673]*673The act of the eighteenth of January, one thousand eight hundred and thirty-six, under which the receivers were , , appointed, vests in them all the property and efleets of the corporation; but, like any other assignment by operation of law, such as in bankruptcy or under our insolvent acts it does not pass trust property—but only such as the bank-. rupt or insolvent held or was possessed of or entitled to for his own benefit.
The next branch of this case is, as to the return premium claimed by the complainant on cancelling his policy.
I have recently had occasion to examine and pass upon this point, in the case of other receivers and have considered them bound, under similar circumstances, to return such portion of the premium as might be deemed unearned, when they accepted a surrender of the policy before proceeding to malte a dividend amongst the creditors generally. I have now only to reiterate that opinion.
By the general act relative to the dissolution of insolvent corporations (2 R. S. 470, § 75,) receivers are authorised to cancel any open and subsisting policy or contract by consent of the party holding it. This has been done in the present case with the complainant and others ; and upon its being done, the receivers are authorized to refund such proportion of the premium for the time the policy has to run as the whole premium bears to the whole term of the risk. The object of this provision in the statute is, to enable receivers to settle up the affairs of the company with as little delay as possible and without waiting for the natural termination of outstanding and contingent risks. It may be for the interest of present creditors, as well as stockholders, to bring all such matters to a close in order to have their rights secured against the consequences of contingent liabilities of the company and so that the receivers may know, at once, all the creditors and what is the nett amount of assets to be distributed. This can effectually be done by the course adopted by the receivers; and I think it is the true construction and just meaning of the statute that the premium spoken of to be refunded is to be returned upon the cancelment of the policies. It is, indeed, a condition-precedent. The language of the statute is, “ and upon suchv [674]*674amount being paid by such receivers to the person holding or being the legal owner of such engagement, it shall be deemed cancelled and discharged as against such receivers.”
Thus, they are first to pay, in order to obtain an effectual cancellation. How, then, can such policy-holder be required to come in as a creditor pro rata with general creditors ? He is clearly entitled to a priority and preference. The effect would be the same to the creditors, if, instead of procuring outstanding policies to be cancelled upon the terms prescribed, the receivers had caused reinsurances to be made according to the ninth section of the act of the 18th January, 1836. Under this last act, they must pay the premiums for such reassurance out of the assets of the company. In all probability7, this would not have diminished the assets any the less; and the course here pointed out for cancel-ling policies by substituting others in their place, where the holders consent to receive them or, when such holders refuse, to enable receivers to obtain an indemnity against the loss of the assets which come to their hands by means of such continuing risks and outstanding contracts of the company7, appears to me to be founded upon the same principle, namely, that of accelerating the settlement of the affairs of insolvent insurance companies and, necessarily too, at some expense to the funds of such companies. Consequently, the policy-holders who have, by mutual consent or arrangement with the receivers, given up or cancelled their contracts of insurance, are entitled to a return of premium out of the assets as a part of the expense to which such assets are subjected before dividend or distribution among the creditors.
I shall decree that the receivers hand over to the stockholders the amount of the unpaid dividend declared on the tenth day of November and payable on the first of December, one thousand eight hundred and thirty-five; and to the policy-holders, such portion of the premium as remained unearned at the time of cancelling their respective policies.
The complainant is likewise entitled to his costs of this suit out of the assets of the company.