No. 305 | 2d Cir. | May 17, 1926
(after stating the facts as above).
What we consider the dominant and controlling facts of this litigation have been stated with fullness, because, after reflecting on the exhaustive arguments submitted, we are of opinion that the acts of the parties have rendered irrelevant most of the propositions of law discussed. The final facts proven by the evidence may be thus summarized:
On February 7th Niagara Insurance Company could not lawfully make a contract. The normal exercise of its business and corporate functions had been stopped by the injunction procured and served by the insurance department, which injunction was contained in an order to show cause that was the first step in the winding-up procedure on which the department had embarked. The sale of bonds on February 7th was not the act of, nor an act produced by, Niagara Company; that sale was -by the direction
The departmental motive was the feeling most justifiably produced by investigating the affairs of the Mechanics’ & Merchants’ Bank of Philadelphia. To that bank the officers of the insurance department had traced a very large part of Niagara Company’s cash, and from that bank they had traced most of that money into unsecured loans to persons related to Marcino or unknown as solvent borrowers. The deputy superintendent regarded the Philadelphia deposits as probably worthless, and certainly of no value for purposes of reinsurance, on which step the department was determined, unless ■ Marcino and his associates made up the whole of the impairment of capital which the state’s examiners had ascertained and declared; a deficiency amounting to a sum not far from the amount transferred by Mareino’s influence to the Philadelphia bank.
The object of the superintendent of insurance seems to us praiseworthy in every way. It was to safeguard the interests of the policy holders in the Niagara Company. If Marcino et al. saw fit or were able within a short time to make good the entire impairment, they might escape until the next time; but if, as a condition, or in the hope of adjourning hearing on the show cause order, about $40,000 could be squeezed out of them, the departmental officers in Buffalo thought (as the deputy superintendent said) that the Niagara Company could at least be reinsured, and the investments of the policy holders saved.
The manner in which the sale of February 7th was carried through is strongly corroborative of the power, motive, and purpose we find in the insurance department. The deputy superintendent was in full charge. He knew certainly nothing more than he had discovered in Philadelphia, but what he knew strengthened his suspicions and translated them into action. He would not take the bonds proffered by Marcino. He feared complications and said so. He insisted on Marcino selling them, and yet would not trust Marcino to turn over the cash received for the sale so positively ordered.
The insurance department never bought or received these bonds, much less did the° Niagara Company receive or deal in any way with the bonds themselves. Niagara Company assuredly received the money, not because it ’asked or bargained therefor, but because the deputy superintendent compelled the transaction. Niagara Company was but a receptacle for money that the insurance department wanted to “sweeten’-’ the reinsurance agreement already contemplated.
Marcino was promised nothing by Niagara Company for either bonds or money, and the only promise, (if it was one) made by insurance department to Marcino was to delay hearing on the “show cause order” if he produced $40,000, and that delay occurred. Neither insurance department nor Niagara Company ever was a holder of the bonds; therefore neither could be a holder for value, nor a bona fide holder, nor one in due course, and all the phrases of the Negotiable Instruments Law (Consol. Laws, c. 38) are inapplicable. And when Niagara Company received the money, by order of insurance department, it paid (and certainly neither did the department) no consideration. That word signifies the price which is of value to the obligor or detriment to the obligee, a benefit to the promisor or a loss to the promisee; it is the material cause of contract. These most general definitions (and others) may be found in Corp. Jur. sub. nom. “Consideration.”
But consideration eannot exist without a contract; there must be a promise, an obligation; and here there was no contract with Marcino or any one else, no promise, and no obligation. Therefore the $39,-130.08 which always was under the control of defendant superintendent of insurance, and which soon fell into his actual custody, was never anything more than the proceeds of stolen bonds, sold by the thief, Marcino, to some innocent holder through the New York Stock Exchange, which proceeds the insurance department took without contract or consideration, and by such taking procured no better title than Marcino had; i. e., no title.
Nor did the department give or cause any better title in another than Marcino had, for we find as a fact that the money stayed in the custody óf the defendant superintendent; the Metropolitan Company had not received it when this suit began. Whether any actual transfer of the funds •after the notice of February 23d would have changed rights, or impaired remedies, need not be considered, for there was no transfer. It follows that the facts show defendant superintendent of insurance as having the sum in suit in hand, but having no title thereto; the money belongs to plaintiff and the result below was right.
It is plain that defendant superintendent does not assert and never has suggested that this money is owned by the state of New York, or that the state has any interest in the matter, except as it desires to fulfill a duty by winding up insolvent insurance companies. Compliance with the decree below will not involve the doing of “any affirmative act which affects the state’s political or property rights.” Hopkins v. Clemson College, 221 U.S. 636" court="SCOTUS" date_filed="1911-05-29" href="https://app.midpage.ai/document/hopkins-v-clemson-agricultural-college-of-south-carolina-97453?utm_source=webapp" opinion_id="97453">221 U. S. 636, 31 S. Ct. 654, 55 L. Ed. 890, 35 L. R. A. (N. S.) 243. That a state or national official, appointed to perform acts and duties which, though appropriate for governments, do not involve any sovereign rights of that government, is not immune from suits virtute officii, is we think especially clear. In re Chetwood, 165 U.S. 443" court="SCOTUS" date_filed="1897-02-15" href="https://app.midpage.ai/document/in-re-chetwood-94620?utm_source=webapp" opinion_id="94620">165 U. S. 443, 17 S. Ct. 385, 41 L. Ed. 782; Tindal v. Wesley, 167 U.S. 204" court="SCOTUS" date_filed="1897-05-10" href="https://app.midpage.ai/document/tindal-v-wesley-94710?utm_source=webapp" opinion_id="94710">167 U. S. 204, 17 S. Ct. 770, 42 L. Ed. 137; Matter of Carnegie Trust Co., 161 A.D. 280" court="N.Y. App. Div." date_filed="1914-03-06" href="https://app.midpage.ai/document/in-re-carnegie-trust-co-5231898?utm_source=webapp" opinion_id="5231898">161 App. Div. 280, 146 N. Y. S. 809. Of course, a state may prefer to assume a position of ownership of assets of insolvent or embarrassed corporations (Lankford v. Platte Iron Works, 235 U. S. 461, 35 S. Ct. 173, 59 L. Ed. 316), but New York has not assumed that position.
We note Allen v. United States (C. C. A.) 285 E. 678, as a very relevant ease, and that the court there went “no further” than to declare “that certain deposits” were held “in trust,” leaving it to the state courts which had jurisdiction of settling the accounts of the Massachusetts commissioner of banks to decree payment. The reason for this aetion was (page 684) that there might be others similarly situated and the assets insufficient to pay all in full. No such difficulty exists here; defendant superintendent has a particular fund to which, and to all of it, plaintiff has established his right. Decree affirmed.