Pierson v. McCurdy

40 N.Y. Sup. Ct. 520
CourtNew York Supreme Court
DecidedOctober 15, 1884
StatusPublished

This text of 40 N.Y. Sup. Ct. 520 (Pierson v. McCurdy) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pierson v. McCurdy, 40 N.Y. Sup. Ct. 520 (N.Y. Super. Ct. 1884).

Opinion

Daniels, J.:

The object of the action was to obtain an accounting and recovery of certain moneys received by the defendant in October, 1871,. which were the property of the Mutual Protection Life Assurance Society. The company was organized and incorporated under the-general laws of this State to transact the business of life insurance. It continued to do so under that name until 1872 when its name-was changed to the Reserve Mutual Life Insurance Company,, under which name it continued business until March, 1877, when the plaintiff was appointed the receiver of its property and effects,, the company then being insolvent. The capital of the company was fixed at the sum of $100,000, and its assets in September, 1871,. amounted to $335,994.80. Early in October, 1871, a scheme was-set on foot by its officers and the defendant in this action, for the-acquisition of the assets and stock of the Widows and Orphans’ Benefit Life Insurance Company, and for the reinsurance of the risks of’ that company. The defendant was a trustee and one of the officers [522]*522of the Widows and Orphans’ Benefit Life Insurance Company, and was the person principally engaged in carrying this purpose into effect. To accomplish it an agreement was made with the 'president and other officers of the Mutual Protection Company, under which that company agreed to purchase, and afterwards did purchase, the majority of the stock and all ,the assets of the Widows and Orphans’ Company, and reinsured all the risks and assumed the liabilities of this company. By the ’ agreement which was entered into it was intended to acquire all the stock of the Widows and .Orphans’ Company, and to pay for its purchase its par value and accrued interest in gold, and under the agreement there was after-wards acquired by officers of the Mutual Protection Company a majority of the stock of the Widows and Orphans’ Company, for which payment was made as that had been stipulated in the agreement. At the time of this purchase the Widows and Orphans’ Company was well established in the life insurance business, and it was to acquire the advantages of that business that the officers of the Mutual Protection Company entered into the agreement which has already been stated. At the time when the agreement was made, and also when it was carried into effect, the Widows and Orphans’ Company was the owner of property and ■assets to the amount and value of $1,599,068.71, and its liabilities upon its outstanding risks and otherwise, and for its capital stock amounting to the sum of $200,000, was the sum of $1,667,975.65. The ex’cess of its liabilities over its assets and property was such as to leave its capital impaired to the extent of $68,906.94, and adding to that its probable liability upon what were called Tontine risks,” ■amounting to $20,445.40, its capital would be reduced $89,352.34. This was relied upon as an unlawful transaction in the suit brought by the receiver; and as these corporations were limited in the exercise of their authority to the powers conferred upon them by the ■statutes of the State, that probably was its nature, for it was practi•cally and in effect an amalgamation of two separate and independent ■corporations into one, the larger being absorbed by the smaller, and that was authorized by no provision contained in any statute relating at that time to corporations of this description. The law did •allow one company to reinsure the risks taken by another, but this was not an agreement or arrangement of that character. Tbe pur[523]*523pose and design was not so much to reinsure the risks of the Widows and Orphans’ Company as it was to acquire its property and management and afterwards to proceed with the transaction of its business. What was intended to be and was actually accomplished was not the reinsurance of the risks of one company by the other, but it was the bodily acquisition of the company itself and all its property and the agreement to reinsure its risks as an incident only in' the transaction, and- that was clearly an unauthorized and unlawful proceeding.

In the course of the consummation of the business about the sum of $160,000 was delivered to the defendant by the officers of the Mutual Protection Company, to be used and disbursed by him in the purchase of capital stock of the Widows and Orphans’ Company. This money was derived mostly, if not entirely, by means of checks drawn upon the account of the Mutual Protection Company, and that it was obtained from that source must accordingly have been well understood by the defendant at the time when he received the money. This money was held in trust by the Mutual Protection Company to meet its liabilities and protect the parties dealing'with it in the course of its life insurance business, and'its .appropriation to this purpose by its officers, with the concurrence of the defendant, was unwarrantable and unauthorized. The object was not to invest it for the benefit of the Mutual Protection Company, under the authority of chapter 318 of the Laws of 1868, allowing the funds or accumulations of a life insurance company to be invested in any stocks created under the laws of this State, which at the time should be at a market value in the city of New Yorir at or above par, but it was to obtain the control of the affairs of the Widows and Orphans’ Company in such manner as to subordinate them entirely to the management of the officers of the Mutual Protection Company and those elected to fill vacancies in the board of trustees of the Widows and Orphans’ Company, which it was stipulated should be created, and werfe afterwards in fact created for that purpose.

The money so received by the defendant, with the exception probably of a balance of $1,868.61, not paid, specially claimed by the receiver, was mostly disbursed and paid out by him in acquiring the title to stock of the Widows and Orphans’ Company, which [524]*524he afterwards transferred to the officers of the Mutual Protection Company for its use and benefit. Of these moneys $3,592.63-were retained by him as the price of thirty-five shares of the stock owned by himself in the "Widows and Orphans’Company;, but these shares, as well as those otherwise acquired by him,, were transferred in the manner already stated to the officers of the-Mutual Protection Company, and they were afterwards retained and apparently used for the benefit of the Mutual Protection. Company, and continued in that condition until the appointment, of the receiver. Neither before that time, nor at any time since then, were the shares offered, or proposed, to be returned to the defendant, or the persons from whom he had obtained them, in carrying out this arrangement. Previous to the time of the transfer of the shares, other shares in the Widows and Orphans’ Company had been sold in the city of New York at a premium above their .par value, but as a matter of fact that was more than they were-worth, for as the liabilities of the Widows and Orphans’ Company exceeded its assets, and to a very considerable degree would absorb-its capital, the actual value of the shares was much less than their par value. If the Tontine liabilities were not to be included in the-liabilities of the company, then the actual value of the stock was shown to be about sixty dollars a share.

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Bluebook (online)
40 N.Y. Sup. Ct. 520, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pierson-v-mccurdy-nysupct-1884.