*1 Michigan Reports. 484 UNDERWRITERS. GAUSS v. AMERICAN CASUALTY Deposit Insurance—'Reciprocal Exchanges—Distribution for Payment of Losses. given by requiring Statute amount be established reciprocal pay- be "available for the losses," ment entitles those whose have losses been estab- lished, disposition in to have made of the fund accordance with express intent of law without reference to doctrine of trusts chap. (Act pt. 5, 2, (g), No. 256, and trustees 1917). Appeal Ingham; (Leland W.), from Carr J. Sub- (Docket 1934. 11, mitted October No. Calendar 38,113.) Decided by Receivership proceedings E. Charles Gauss, against commissioner of American insurance, Cas- ualty insurance com- Underwriters, pany. his Fannon, Petition Edward next Fannon, Kuhs, friend Alfred and Pauline praying the sale of certain creditors, bonds impressed for the with a trust and denied. fund. Petition distribution of said trust appeal. Petitioners Reversed. Warner n & Eger, plaintiff.

Kelley, for Sessions, petitioner Lilly, Fannon. for Renihan S petitioner George Kuhs. Gould, B. reversal. (concurring). I concur Wiest, § Pub. (Act No. 256, The statute deposit, im- fixes and requiring 1917) Acts purpose con- such presses thereon 1934] Gauss any

trols without resort to the doctrine of trusts and trustees. Intervenors are under entitled, *2 establishing deposit, law disposition the to have express thereof made in accord with the intent of the law. deposit security

The liability stands as to in- parties. sured JJ., North, Fead, Butzel and Bushnell, con-

curred with Wiest, Edward M. Sharpe, Casualty J. The American Underwriters, exchange, insurance was organized December 1, 1924, under Act No. 256, pt. chap. (see Comp. 5, Pub. 2, Acts 1917 Laws seq.). § 1929, 12641 et At that time the law re- quired, precedent as a securing' condition to authority” depart- annual “certificate of from the through ment of insurance, the subscribers their attorney to file with the commissioner of insurance setting among a verified declaration forth other things attorney “that there is on with such and available for the losses, a sum of twenty-five-thousand (Act not than less dollars.” 3(g), 1917.) No. 256, The exchange complied requirement with this department from 1924 until 1926 when the insurance required deposited this amount with the Michigan Company. subsequent Trust However, prior exchange pur- 1926 and to 1930 the insurance following Argentine gov- chased the bonds: cent, sinking per gold external ernment, fund, six Kingdom Norway 35-year per bonds; $5,000 five cent, sinking mortgage gold fund external bonds; cent, per $5,000 Free State of Prussia six one-half sinking gold Eddy Taylor bonds; $5,000 Burt cent, Mortgage per gold First six bonds; $5,000 Reports. Michigan Development Washington Square first mort- Co. cent, deposited gold gage per bonds; six serial Company Michigan like Trust with the them purposes. de- were the bonds When intent Company, Michigan in- posited Trust with the depart- the insurance wrote to surance date of ment under following letter: “December your receipt acknowledge will Sir: This “Dear deposit of relative to 15th letter of December Underwriters American previously Company. re- I had Trust Company Michigan Trust a letter from the ceived requested you had in which stated from them. same information *3 Michigan Trust deposited with the $25,000 “The required law. guarantee Company fund as our pre- changing where it had it from banks Prior to up

viously deposited, with I took the matter been your department, I made all and have Mr. Corell my arrangements conversation in with accordance deposit with the banks the was with him. While certifying they merely fact to the a letter wrote subject they money to there in held the That insurance commissioner. the directions of the is the same arrangement into as had been entered you company. I note acknowl- with the trust having edge received such a letter from them. ‘‘ way agreement nothing in of a trust There is you. we $25,000' us file with With the cash for bought in like amount which we left with the bonds Company. department Trust bond only receipt having safe-keeping for the same. We they they as have certified that hold “Inasmuch subject to the directions of the insur- this conformity as is in and this ance commissioner your department arrangement made with at 1934] Gauss hearing spring, as inasmuch last

time ordinarily our would have free access to our de- we approval posits, I that this will trust meet department. of the “Very truly yours, Casualty Underwriters,

“The American “By Secretary counsel.” February, appointed receiver was the defendant and in Novem- possession Eng- ber, 1930, came into of three New par land Power Association bonds of the value of Light $3,000 and two Company Florida Power & par bonds of the value of $2,000. Under the .direcr tion of the court these bonds were sold and the proceeds largely pay expenses used to of the receivership, however, since these bonds were never part required under Act are not in involved litigation. this petitioned

In December, 1930, the receiver authorizing circuit court for an order him to sell by Michigan the bonds and securities held Trust Company. petition granted This was the re- parcels ceiver authorized to sell the bonds in at the price best obtainable.

Petitioner Fannon is a of a creditor 'member and subscriber defendant insurance ex- change. upon judgment His claim is based recov- January, ered the Kent circuit court in *4 against judgment against Homerich and Todd and a exchange, garnishee in the defendant, the insurance sum of $5,000. a

Petitioner Kuhs is also similar cred- together claim itor and her her husband in the sum of $2,000. has been allowed Michigan Reports. ’ petitioners In June, 1932, claims allowed were as exchange. losses the receiver of the insurance May, petition filed a in the circuit Ingham county asking court of the bonds proceeds impressed of the bonds be with a trust only and be used for the of losses and that special appointed by trustee be the court to direct the sale and distribution of the bonds and petition The trial thereof. court denied their petitioners appeal. principal question

The for this court to decide is: required by Was the fund Act 3(g), §2, Pub. Acts 1917, a trust fund for the policy benefit of those who suffered losses from the implied if not, And can a trust be holders? from Casualty written the letter the American Under- department of insurance on Decem- writers to the 18,1926? ber

In our discussion of the issues we involved, assume that the fund now in the re- hands of the originated ceiver is the same which in 1924 when the American Underwriters first complied do with the statute and was authorized to ex- as a automobile insurance business change. person particular

“A form of words need use no trust to make himself a trustee,”' to create a or 522; all 231 Mich. that is re- Dillon, Faulds every supplying quired detail of written evidence (7th Ed.), Perry § 1. If the the trust. 1 on Trusts expressly writing does not declare instrument can words from which the court but contains parties intent of the it was the infer that Perry imply trust. 1 will then the court so, to do Ed.), trusts (7th 25. “The doctrines Trusts on personal applicable equally estate, to real and are *5 1934] 489 Gauss v. govern same rules will trusts both kinds property.” Perry (7th Ed.), §16. 1 of on Trusts assignment “To a must be an of create there designated property to a trustee with the intention passing title to hold for the benefit of thereto, separation legal others. a There must be enjoyments (26 estate from the beneficial L. R. C. 1186).” p. Equitable Realty Trust Co. v. Milton Co., 261 Mich. 577. always necessary

In trusts not charitable it is not que that the cestui trust should be in at existence Perry the time creation of the trust. on (7th Ed.), § Trusts passed by legislature the act was

When it was require every reciprocal their intention to set aside a fund of at least each year paid. could out of which losses It does not provision specific segregating particular contain a payment any special fund as a trust for the “deposit” but does use the words creditors, class of for the of losses.” and “available People Covelesky, 217 Mich. this 90, 100, court said: well-recognized

“A of stat- rule for construction having adopted set- utes is that when words are tled, law it is to be assumed meaning at common definite and well-known they are used with the sense meaning which had at common law unless contrary plainly intent is shown.” meaning capable The common of “available” is, purpose, being for a certain used and the term meaning. “losses” has both a and technical “ parlance pecuniary in insurance ‘Loss’ is the injury resulting from the of the con- occurrence tingency against, contingency insured whether that disability (1) person or sickness of death, Reports. injured, (2) injury to, of, the destruction *6 liability

property legal (3) to third insured, persons' by subjected to which insured has been specific (4) any contingency cov- events, other p. policy.” ered 33 C. J. part part pertinent

That of the act to this case is (g), § 3 which reads, “That there is on attorney with such and available for the payment twenty- losses, sum of not less than five thousand dollars.” The letter of 1926, does not of itself create a trust fund, but is - explanatory of the fund. Taken together they contain the essential elements trust fund. There is first the declaration owner that the fund is to be used for the of losses. Second, beneficiaries are those credi- tors whose claims have been allowed as losses, Darby, Smith v. que 39 Md. 268, are the cestui trustent and as such are entitled to the benefit of the fund. In the American Insurance Company’s (34 Case, 82 Md. 535 Atl. 38 L. R. A. 97), special the court held that a fund for the benefit policy holders an company insolvent insurance charged any portion cannot be of costs administering commissions incurred in totally fund which is distinct. of the lower

The decree court is reversed and the receiver is directed to sell said bonds under the apportion direction of court persons entitled thereto. thereof those Inas- public question no much as this is a costs will be allowed. J., J., C. concurred Potter, Sharpe,

Nelson M. Sharpe, Edward