People v. United States Mutual Accident Ass'n

88 A.D. 597, 85 N.Y.S. 137

Opinion

McLaughlin, J.:

In 1895 the United States Mutual Accident Association of the city of New York, a mutual co-operative insurance company organized \mder chapter 175 of the Laws of 1883, was dissolved by a judgment of this court in an action brought for that purpose by the Attorney-General, and Henry Winthrop Gray, the appellant herein, appointed a permanent receiver thereof. The Superintendent of Insurance of the State of New York at the time the receiver was appointed held securities of the value of $10,000- which had been deposited with him by the corporation in pursuance of section 215 of chapter 690 of the Laws of 1892. These securities belonged to such policyholders of the company as paid all of the assessments levied upon their respective policies from the time of issue to the dissolution of the corporation. (People v. Family Fund Society, 31 App. Div. 166.) Subsequent to the appointment of the receiver an act was passed -which directed that the securities held by the Superintendent of Insurance be transferred by an order of the Supreme Court to the receiver of the corporation to be distributed — or the proceeds thereof—by him “ among the respective holders of valid policies of such company for whose benefit and security the deposit or deposits were originally made.” (Laws of 1896, chap. 322, amdg. Laws of 1884, chap. 285, § 2.) In pursuance of this act the securities held by the Superintendent of Insurance were transferred and delivered to the receiver, but lie did not distribute . the same or the proceeds thereof among the policyholders entitled thereto; on the contrary, such proceeds were used by him, as was substantially all of the other property of the corporation, in paying the expenses of the receivership. From the time of liis appointment down to January 1, 1901, the receiver rendered semi-annual accounts of his proceedings which showed in detail the money received by him as well as the disbursements made. A copy of each account was also filed with the Superintendent of Insurance and with the Attorney-General. In each instance the accounts were sent to a referee, upon whose report an order was made confirming the action of the receiver, either approving of the disbursements or authorizing and directing that certain payments be made, or both. The Attorney-General had notice of these various applications to send the accounts to the respective referees, and a representative from his office appeared at some, if not all, of the hearings. The applications to confirm the reports of the respective referees were made upon notice to him. In 1902 an application was made by the Attorney-General to compel the receiver to render a final account of his proceedings, in response to which the receiver filed a final account showing that all the funds received by him had been disbursed, except the sum of two dollars and seventy-nine cents. The Attorney-General, as well as one Moses, representing certain policyholders, objected to each and every item contained in the. final account. The Attorney-General sought to examine the receiver as to the reasonableness of the expenditures which he had made, and the attorney for the policyholders sought to examine him as to the $10,000 received from the Superintendent of Insurance. The receiver insisted that such examination could not be had inasmuch as his intermediate accounts, which showed how the expenditures and disbursements of these funds had been made, had been previously passed upon by the court by the orders referred to, and that he, having paid out the money in compliance with such orders, could not again be required to account •for them. The receiver’s contention was sustained, and subsequently a motion,was made to set aside and vacate the intermediate orders settling the receiver’s accounts. The motion was granted, all such orders vacated and set aside, and it is from this order that the present appeal is taken.

We think upon the authority of Platt v. New York & Sea Peach Railway Co. (170 N. Y. 451) the order appealed from must be reversed. In that case a receiver was appointed in an action brought to foreclose a mortgage for the benefit of Certain bondholders, and he was directed to take possession, with other property of the' railroad company, of certain moneys earned by it before his appointment. Such money he was subsequently directed by an order of the court to pay to the trustees of the bondholders after deducting the expenses of the receivership. This money belonged, not to the bondholders, but to the general creditors of the-corporation, and they had no notice of the application for the .order which directed payment to the trustees of the bondholders. Thereafter a general judgment creditor brought an action against the railroad for the purpose of sequestrating all its assets and appropriating the same to the payment of the judgment, and in that action another receiver of the defendant’s property was appointed, who subsequently made a motion in the foreclosure action to vacate the order-appointing the receiver therein, in so far as the moneys on hand at the time of his appointment were concerned; that the judgment entered therein be amended by an entry at the foot of the decree that the mortgage foreclosed was not and never had been a lien on the rents and profits which had accrued prior to the entrance and possession of the foreclosure receiver, and that that receiver-be ordered to pay to the sequestration receiver the amount of the money on hand at the time of the appointment of the former receiver. The motion was denied, and on appeal to the Appellate Division the. same was reversed and the motion granted (63 App. Div. 401), but on appeal to the Court of Appeals the same Was reversed, that court holding that while the moneys sought to be reached belonged in equity to the general creditors, in preference to the bondholders —and to this extent the Orders were erroneous — that, nevertheless, the same were not void, inasmuch as the court had jurisdiction of the person and subject-matter of the controversy; that the error could only be corrected by a direct appeal, and that the receiver was protected in the payments made by him in pursuance of the orders therein made. Judge O’Brien, who delivered the opinion, said : “ The receiver in the foreclosure action held the funds as an officer of the court, and was bound to obey its directions in regard to the final distribution, and it would be manifestly unjust to hold that after accounting^and paying over the money under an order of the court the receiver was still subject to be ordered by the same court, after, having obeyed the first order, to again account and respond to the sequestration receiver for the same fund. The order made upon the accounting is a protection to him against this double liability. The practice of moving before one judge at Special Term to declare void the order or judgment of another judge at Special Term' is Hot sanctioned by any provision of the. Code that I am aware of, or by any controlling authority. It virtually amounts to an appeal from one Special Term to another Special Term for a review of the first order. Moreover, the relief that was sought to be obtained by the last receiver was to hold the first one liable for moneys that came to his hands under an order- of the court, and which he had paid over in compliance with its directions, and this, too, upon the ground that the first receiver never had any valid appointment as such, or any authority to receive the money, the order- under which he acted being void. • If this contention be correct, then, obviously, the first receiver was a mere wrongdoer, and, if liable at all, could be held only in an action and not in a summary proceeding like this. If he was an officer of the court he is protected by its orders until reversed. If he was not, then he can be subjected to liability only in the way and by the same mode of procedure that is applicable to a trespasser who wrongfully appropriates the money or property that belongs to another,”

Nor do we think the Attorney-General was in a position to ask that the orders settling the receiver’s accounts be vacated. His predecessor in office had notice of every step taken in those proceedings. Copies of the receiver’s accounts were served upon him and he had notice of the appointment of the referees — indeed, attended before the referees, or some of them, and took part in the hearings. He also had notice of the application to the court for the orders confirming the reports of the referees. It was. his duty, if not satisfied with the reports of the referees passing the receiver’s accounts, to have made that fact known in a proper way to the court, and then, if not satisfied with the order made, to have appealed from it. He could not apparently acquiesce in the orders, and, after the. receiver had paid out the money as sanctioned or directed by the .court, come in and ask that all of the previous orders be vacated, to the end that he might make an investigation for the purpose of ascertaining whéther a proper disposition had. been made of the fund. The fact that the present Attorney-General was not in office-at the time in no way affects the question, because he is just as much bound by the acts-of his predecessor as such predecessor would have been had he remained in office. It is nowhere alleged in the moving papers that the Attorney-General was deceived or misled in any way, or that any fraud was. practiced upon him or the court by the receiver.

The position of the policyholders is different, and, independent of authority, we should feel inclined to affirm the order so far. as it affects them. They had no notice of the proceedings which resulted in the previous orders, but, under the decision of the Platt case, we. do not think this .gives them the right to have them vacated. In the Platt case the money which was on hand at-the time the receiver was appointed in the foreclosure action belonged to the general creditors of the corporation, and they had no notice of the orders which directed, that this money be paid to the trustee of bondholders. The court, nevertheless, held that the judgment creditors could not have the orders set aside, and that the foreclosure receiver was protected in the payment which he made. This decision, therefore, seems to be decisive in the present case . so far as the policyholders are conoerned.

The order appealed from, therefore, must be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

Van Brunt, P. J., O’Brien and Hatch, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.