165 Misc. 776 | N.Y. Sup. Ct. | 1938
This is an application by Globe and Rutgers Fire Insurance Company, a stockholder of Lawyers Title and Guaranty Company, now in the process of liquidation by the Superintendent of Insurance, to vacate a previous order of this court. Said order granted an application by certain holders of mortgage investments issued and guaranteed by Lawyers Title and Guaranty Company (1) for leave to intervene in the pending liquidation proceeding in order to submit a proposed plan of reorganization, (2) for the assumption of jurisdiction over the plan by the court, and (3) for the designation of a referee to hold hearings as to the advisability and feasibility of the plan, any modifications or amendments thereof which might be desirable and proper, and/or any alternative plans which might be submitted to the referee. The court appointed Hon. Edward R. Rayher as referee and provided in its order that unless the reorganization proved successful, the only expenses to be allowed would be the fee of the referee, the cost of the stenographer’s minutes, and the actual cost of printing, mailing and publishing notices to creditors and stockholders.
Attention should be called, at the very outset, to the fact that the Globe and Rutgers Fire Insurance Company, which is making the present motion, was a party to the proceedings which resulted in the making of the order sought to be vacated and, although represented by counsel who was present during the entire hearing, nevertheless raised no objection to the granting of the relief embodied in said order and took no appeal therefrom. It must, therefore, as pointed out presently, be deemed to have waived any right which it might otherwise have had to question the validity of the order. Although the motion could accordingly be denied on this ground, the court prefers to decide the application upon the merits instead of disposing of it on technical considerations.
Although the Superintendent of Insurance expressly conceded the court’s jurisdiction to grant the order, the application to vacate is predicated upon the contention that the order was beyond the power of the court to make in that the reorganization proceedings contemplate liquidation of the company by creditors, in violation of the Insurance Law which confers the power of liquidation of companies subject to the supervision of the Insurance Department solely and exclusively upon the Superintendent of Insurance. In order to determine whether this contention is well founded it is necessary to ascertain whether the reorganization proceedings do in fact look to or involve an unlawful delegation of the Superintendent’s statutory duty to liquidate. The proposed plan of reorganization which is annexed to the petition in the reorganization
That the Superintendent of Insurance may, with the court’s approval, lawfully sell the assets of a company which he is liquidating is not open to serious doubt. Section 421 of the Insurance Law expressly provides that “ the Superintendent may, subject to the approval of the court, (a) sell or otherwise dispose of the real and personal property, or any part thereof, of an insurer against whom a proceeding has been brought under this article.” In Broderick v. Betco Corporation (149 Misc. 245; affd., 244 App. Div. 710; affd., 269 N. Y. 642) this court upheld a sale of the assets of the Bank of Europe Trust Company, made by the Superintendent of Banks as liquidator of said institution, overruling (p. 248) the contention of the defendant in that case that the Superintendent of Banks had unlawfully delegated the power and authority to liquidate vested in him by statute. The sale in the case cited was made pursuant to the similar provision of section 69 of the Banking Law that the Superintendent of Banks “ upon such terms as the court shall direct, may sell or otherwise dispose of all or any of the real and personal property of such corporation or banker.”
The fact that the proceedings looking toward the reorganization of Lawyers Title and Guaranty Company were initiated by holders of mortgage investments and not by the Superintendent of Insurance himself does not affect the situation, in view of the fact that counsel for the Superintendent of Insurance, at the hearing of the application which resulted in the order now sought to be vacated, expressly stated that “ The Superintendent has no earthly objection and in fact consents to the acceptance of or the assumption of jurisdiction by this court.” Counsel for the Globe and Rutgers Fire Insurance Company, the moving party on the present motion, having taken the position that the Superintendent of Insurance opposed the prior proceeding for the court’s assumption of jurisdiction in an effort to work out a plan of reorganization, the Superintendent has submitted a memorandum containing the following statement: “ Counsel for the Superintendent of Insurance thereupon made it clear to the Court that the Superintendent did not oppose the assumption by the Court of jurisdiction over the reorganization proceeding.” It is emphatically stated that the Superintendent of Insurance did not raise any jurisdictional question.
The position taken by the Superintendent in regard to the proposals for the reorganization of Lawyers Title and Guaranty Company is in line with the policy adopted by the Insurance Department shortly after the Superintendent of Insurance commenced rehabilitation of the various mortgage guaranty companies. As
On March 14, 1935, the then Superintendent of Insurance, Hon. George S. Van Schaick, in an address delivered before the Association of the Bar of the City of New York, said: “ Among the companies in rehabilitation are some with well-established organizations which can be employed profitably in whatever form of mortgage business is finally evolved. This circumstance represents an asset to certificate holders and others who are creditors of these companies and, in the event such creditors are paid in full, to the stockholders of the companies. The worth of this asset depends upon the use to which these organizations are put. If they are indefinitely confined to the mere servicing of existing mortgages, their value will become less and will eventually disappear. If they are encouraged to survive and to adapt themselves to such form as the mortgage business shall take in the future, it is likely that the value of these organizations will increase.”
In the annual reports of the present Superintendent of Insurance, Hon. Louis H. Pink, submitted for the calendar years ending December 31, 1935, and December 31, 1936, respectively, Superintendent Pink referred to the type of reorganization which requires no legislation to legalize it, in the following language: “ One type [of reorganization] accompanies and is a natural incident to the liquidation of these companies. When the company is placed in liquidation claims are comparatively quickly determined. At this point rights against the assets of the- company become known. In many cases, however, because of the lack of a real estate market, it will be years before these assets can be reduced to cash. In lieu of an indefinite postponement of distribution which would require the services of the Superintendent for many years as a
It is hardly possible that the proceedings before the referee will result in the submission to the court of a plan of reorganization containing provisions which do call for an unlawful delegation by the Superintendent of Insurance of his statutory duty. Such a plan would undoubtedly be opposed by the Superintendent and would, of course, be disapproved by this court. At this time, however, these possibilities are purely conjectural. As it is much more likely that a reorganization plan may be worked out and presented for judicial approval which does not involve any unlawful delegation of the Superintendent’s powers and which meets with his approval, there is no proper basis, at this time, for granting the present application to vacate the order designating a referee to conduct hearings upon the plan proposed, and any modifications or other plans which may be submitted to him. There is nothing now before the court to justify it in assuming that the plan which will evolve from the proceedings before the referee will be an invalid one.
Even apart from the merits the present application would have to be denied, as pointed out previously, in view of the fact that the moving party participated in the hearing of the prior application and did not object to or oppose the relief therein sought. It thereby lost any right which it might otherwise have possessed to assail the propriety of the order granting said previous motion.
Some point has been made of the fact that a recently enacted statute providing for the reorganization of title and guaranty companies (Laws of 1937, chap. 926) is by its terms limited to companies “ in rehabilitation.” The failure of the statute to extend to companies in liquidation might perhaps prevent a reorganization of such company under a plan calling for the delegation of the Superintendent’s statutory duty to liquidate, whereas that kind of a reorganization would receive the sanction of the new statute if the company were in rehabilitation. The restricted scope of the statute does not, however, bar a reorganization under a plan which involves no unlawful delegation of the Superintendent’s duties and which is perfectly legal without any express statutory authorization. The method of reorganization proposed in the instant case does not contemplate any illegal delegation of the Superintendent’s duties, nor may it be assumed that the plan, if any, which will finally be submitted to the court will involve such an improper delegation.
The motion to vacate is accordingly denied.