Lowene v. American Fire Insurance

| New York Court of Chancery | May 25, 1837

The Chancellor.

There had not been any specific appropriation of any part of the funds of the company to pay the complainant’s loss previous to the insolvency of the company or the appointment of the receivers, and the vice chancellor was therefore right in supposing that a priority of loss did not entitle the claimant to a preference in payment over other creditors. Even if the loss had been actually adjusted at the time a statement of the situation of the company was made with a view to the declaring of a dividend among the stockholders of the surplus profits, the preference claimed could not be allowed unless there had been a specific lien created upon some particular fund for the payment thereof. The decision of the vice chancellor in the case of Le Roy v. The Globe Insurance Company, (2 Edw. Rep, 657,) proceeds upon the ground that the declaring of the dividend and the setting apart of the surplus fund in the bank, and drawing the checks upon that fund, was a specific appropriation of so much of that fund for the payment of the dividends, and gave to the several stockholders an equitable lien thereon pro tanto. The case would have been entirely different if the directors had merely declared a dividend without appropriating any specific fund for the payment thereof. In that case the unpaid dividends would have been mere debts against the company in favor of the stockholders, who must have come in rateably with other creditors in case of insolvency. In the present case the fact that the complainant’s loss occurred before that of the other creditors, who had paid their premiums for the risk while the company was solvent, gave him no legal or equitable claim to a preference after other losses had occurred, which rendered it impossible for the company to pay the whole. The provisions of the revised statutes relative to proceedings against corporations in equity, contemplate an equal distribution among all the creditors, without reference to the time in which their respective debts accrued ; although the creditor upon whose application the receiver is appointed has actually proceeded to judgment and execution against the company. (2 R. S. 2d ed. 378, § 36, 37.)

The bill is not properly framed for a rateable dividend of the fund in the hands of the receivers, as none of the other creditors are parties to the suit. Neither is the bill filed by the complainant in behalf of himself and other creditors. Besides, the statute under which the receivers were appointed contemplates a different mode of proceeding to ascertain the rights of the parties and to distribute the assets of the company among the creditors.

The decree of the vice chancellor is therefore affirmed, with costs.