McMurray v. Commonwealth

| Mass. | Sep 19, 1924

Rugg, C.J.

The New England Equitable Insurance Company (hereafter called the insurance company), organized as an insurance company under the laws of this Commonwealth, was engaged prior to 1917 in the business of insurance of various kinds in forty States and Territories. In 1917, information was filed against the insurance company under St. 1907, c. 576, § 8. A receiver has been appointed. The insurance company is in fact insolvent. “ On September 9, 1918, a decree was issued by the Supreme Judicial Court, establishing rules and orders for winding up the affairs of the insurance company. These rules established October 15, 1918, as the date as of which claims of creditors should be computed. The last date set thereunder for filing claims was April 15, 1919, except that creditors whose claims were then in suit were to be allowed upon special petition to file late proofs of claim. On December 23, 1919, the decree was modified by permitting the receiver to accept and allow claims by injured employees of persons and firms insured by the insurance company under workmen’s compensation policies, from time to time as they should accrue, and0the receivers were authorized to pay, and did pay, by weekly instalments, to such employees claiming under workmen’s compensation policies, 75% of their claims as they accrued until July 10, 1918.” Allowed and undisputed claims aggregate $414,828.98. A large number of claims are known to be' in existence, some of which have been filed but not allowed, and some of which have not been filed. A considerable number of surety and fiduciary bonds of the insurance company are still outstanding, the penal sums in which make a large total.

The insurance company, in 1910,1911 and 1915, in order to do business in such States as made by law such requirement, deposited with the Treasurer and Receiver General bonds having a par value of $301,000, pursuant to the provisions of St. 1907, c. 576, § 99. See now G. L. c. 175, § 185.

The plaintiff has an established claim as an employee who has received an injury arising out of and in the course of his employment by an employer insured by the insurance company under the workmen’s compensation act. A substantial sum remains due him from the insurance company. He brings this suit in equity against the Commonwealth to enforce payment of the balance due him out of the bonds so deposited with the Treasurer and Receiver General.

The receiver of the insurance company and two creditors of the insurance company resident in other States severally have been allowed to intervene. The case has been reserved for our determination on the bill, answer, the intervening petitions and an agreed statement of facts. The question for decision is of novel impression in this Commonwealth. That question is, what is the proper method of distribution of the deposit with the Treasurer and Receiver General where the insurance company is in fact insolvent and its affairs are being settled by a receiver appointed by the court?

The governing statute makes no specific provision for the disposition of the deposit with the Treasurer and Receiver General in the event which has occurred. It is enacted that “ The Treasurer and Receiver General in his official capacity shall take and hold in trust deposits made by any domestic insurance company for the purpose of complying with the laws of any other State to enable such company to do business in such State . . . ,” and that the Supreme Judicial Court for Suffolk County shall have jurisdiction of a suit such as the one at bar “ to enforce, administer or terminate the trust created by such deposit.” These are the only statutory words pertinent to the facts here disclosed. According to the agreed statement of facts the deposit here sought to be reached was made “ for the benefit of all the policy holders and creditors of the insurance company.” See St. 1907, c. 576, § 85, G. L. c. 175, § 155.

The statute under which the deposit was made declares a legislative policy. The deposit was required in the first instance in order that the insurance company might be enabled to do business in other States. That is the statutory declaration of its design. Its manifest purpose was to afford assurance to policy holders and beneficiaries in other jurisdictions of the degree of monetary responsibility disclosed by the deposit of such an amount of securities with the chief fiscal officer of the Commonwealth. The deposit is in trust. It is a part of every insurance business to settle obligations as well as to attract new contracts of insurance. The trust declared by the statute cannot be said to have been performed until all obligations of the insurance company to policy holders and creditors have been either settled in full and its business closed up on that footing, or, if that cannot be done, until all its assets have been distributed fairly and according to law among its policy holders and creditors. The terms of the statutory trust do not in express words restrict the disposition of the deposit to the settlement of obligations due to policy holders. The agreed facts are that it was made “ for the benefit of all the policy holders and creditors of -the insurance company.” This is not in conflict with the statute but is in aid of its design. It is in accordance with the general legislative policy declared in our statutes. See G. L. c. 175, § 155. The distinction and importance under our frame of government of the public officer who was required to hold the deposit as trustee well may have been an additional guaranty of the standing of the insurance company.

The statute, St. 1907, c. 576, § 99, does not mean that the deposit is to be held in trust for the benefit of the policy holders and creditors in the several States, whose laws required such deposit as a prerequisite to the doing of business by the insurance company within their respective jurisdictions. It means simply that the deposit must be received by the Treasurer and Receiver General for the purpose of enabling the insurance company to comply with the laws of such other States. It would be most unusual for such deposit to be required for the exclusive or primary benefit of the policy holders and creditors of a single State. No statute of any State of such character is referred to in the record or has been called to our attention. The policy of this Commonwealth, both as to foreign and domestic insurance companies, is that such deposits must be “ in exclusive trust for the benefit and security of all the company’s policy holders and creditors in the United States.” See G. L. c. 175, § 155.

This trust as thus described and established is valid. It is for the benefit of a large number of widely scattered beneficiaries. Under our Constitution and laws, it is entitled to every protection for the furtherance of its beneficent aim. It is the duty of courts to conserve and cause to be executed according to its foundation every trust of this nature. No power is vested in courts to terminate trusts such as this until their purpose has been accomplished. Conant v. St. John, 233 Mass. 547" court="Mass." date_filed="1919-10-09" href="https://app.midpage.ai/document/conant-v-st-john-6434865?utm_source=webapp" opinion_id="6434865">233 Mass. 547. Forbes v. Snow, 245 Mass. 85" court="Mass." date_filed="1923-05-23" href="https://app.midpage.ai/document/forbes-v-snow-6436222?utm_source=webapp" opinion_id="6436222">245 Mass. 85, 93, and cases there collected.

The Treasurer and Receiver General is ready to continue the execution of his trust according to its terms and under the direction of the court. No ground is revealed on this record warranting his removal as trustee and the substitution of the receiver in his stead.

There are now and have been for many years provisions in our statutes for the appointment of receivers of insurance companies. See now G. L. c. 175, §§ 6, 178, 179, 180. If it had been the purpose of the Legislature that securities, deposited in trust as are those here involved, should be turned over to a receiver for administration, it is probable that express provision to that end would be found in the statute. The absence of statutory words to that effect is strong indication that no such course of administration was intended. The terms of the trust and the public officer with whom the deposit is made indicate that the securities ordinarily should not be made subject to any charges of administration, such as expenses of a receivership. The bald cost of distribution alone commonly could be charged against it.

The conclusion follows that the securities ought to remain with the Treasurer and Receiver General and ought not to be ordered transferred to the receiver. Similar decisions have been reached in other jurisdictions, where statutes more or less resembling the one here under consideration have been construed. Cooke v. Warner, 56 Conn. 234" court="Conn." date_filed="1888-04-09" href="https://app.midpage.ai/document/cooke-v-warner-6582355?utm_source=webapp" opinion_id="6582355">56 Conn. 234. Ruggles v. Chapman, 59 N.Y. 163" court="NY" date_filed="1874-12-01" href="https://app.midpage.ai/document/ruggles-v--chapman-3620748?utm_source=webapp" opinion_id="3620748">59 N. Y. 163. People v. Chapman, 64 N.Y. 557" court="NY" date_filed="1876-04-04" href="https://app.midpage.ai/document/people-ex-rel-ruggles-v--chapman-3608319?utm_source=webapp" opinion_id="3608319">64 N. Y. 557. Lancashire Ins. Co. v. Maxwell, 131 N.Y. 286" court="NY" date_filed="1892-03-01" href="https://app.midpage.ai/document/lancashire-insurance-v-maxwell-3588995?utm_source=webapp" opinion_id="3588995">131 N. Y. 286. Vandiver v. Poe, 119 Md. 348" court="Md." date_filed="1913-01-14" href="https://app.midpage.ai/document/vandiver-v-poe-3485849?utm_source=webapp" opinion_id="3485849">119 Md. 348. State v. Matthews, 64 Ohio St. 419. Other decisions at first sight of a contrary appearance rest upon specific phraseology of different statutes. Attorney General v. North American Life Ins. Co. 80 N.Y. 152" court="NY" date_filed="1880-02-24" href="https://app.midpage.ai/document/matter-of-atty-genl-v--north-am-l-ins-co-3588117?utm_source=webapp" opinion_id="3588117">80 N. Y. 152. Smyth v. Munroe, 84 N.Y. 354" court="NY" date_filed="1881-03-01" href="https://app.midpage.ai/document/smyth-v--munroe-3632664?utm_source=webapp" opinion_id="3632664">84 N. Y. 354. Phillips v. Perdue, 111 Tex., 112" court="Tex." date_filed="1921-04-06" href="https://app.midpage.ai/document/phillips-v-perue-3954668?utm_source=webapp" opinion_id="3954668">111 Texas, 112.

The settlement of the affairs of an insurance company by a receiver appointed by the court imports an equitable distribution of its available assets among all those who, under the rules established by the court, prove themselves to be creditors and justly entitled to share in its property. The ascertainment of those creditors involves finding out who are policy holders and who are creditors on other kinds of claims and the classification of them so far as necessary and the determination of whatever preferences, if any, are required by the law. That must be done in any event. It would be an unnecessary duplication of labor and an unwarranted expense upon policy holders and creditors to require such an inquiry and determination both in the receivership proceedings and in the case at bar.

The agreed facts show that a justice of this court in 1918 and 1919 entered a decree establishing rules and orders for winding up the affairs of the insurance company. If those rules and orders have been faithfully and energetically followed and executed, it seems likely that the time must be ripe for the ascertainment of the policy holders and creditors entitled to share in the assets in the hands of the receiver and in the proceeds of the securities involved in the case at bar. It appears to us that in any event decrees ought to be entered in that case by January 1, 1925, of such nature as to afford information to the Treasurer and Receiver General whereby a distribution of the proceeds of the securities on deposit with him may be made in accordance with the principles herein declared.

The case is to stand continued until not later than the first of January, 1925, unless this time is further extended by a single justice upon good cause shown, in order to enable the entering of appropriate decrees in the receivership case, declaring those entitled to share in the assets of the insurance company as policy holders and creditors; copy of such decree when entered is to be filed in the case at bar; appropriate decrees then are to be entered authorizing and directing the Treasurer and Receiver General .to convert into cash the securities deposited with him; and, after deducting his actual expenses, to distribute the proceeds among such policy holders and creditors in the proportions required by justice and equity, and for terminating the trust and discharging the Treasurer and Receiver General and the Commonwealth from further liability under the trust. Both the costs of the plaintiff, to be taxed as in an action at law, and the disbursements of the Attorney General in printing his brief are to be charged against the fund; details of the several decrees to be determined by the single justice.

Ordered accordingly.