company to issue bonds, secured by a mortgage on its road, as an equipped railroad; and that such bonds were issued and marketed, through the instrumentality of the president of the improvement company. It was held that the improvement company and its assignee were estopped to allege that the transaction constituted a gratuitous loan of the rolling stock, or to deny the title of the railway company thereto, as against the holder of bonds secured by the mortgage, which had been placed on the property on the faith of the ownership of the rolling stock by the company.1 § 7214. How Keep Accounts in Cases of the Receivership of a Railway having Separate Divisions. -It has been held that an order appointing receivers of the earnings of a railway company, directing them to keep their accounts so as to show the earnings and expenses of the separate divisions, and instructing the auditor to keep the accounts on a mileage basis, is proper, when that is shown to have been the basis upon which the company computed the earnings before the receivership. This was presumably a true and equitable basis between the divisions, in the absence of any showing that it was not just.2 § 7215. Powers of Receiver Appointed by the State.—A receiver appointed under the provisions of a statute of Tennessee, is vested with the powers and duties of the board of directors in managing the affairs of the company, and is a public agent of the State. It is to be observed that this statutory receiver was appointed by the Governor to take charge of a railroad which had received aid from the State, for the purpose of protecting the State's lien. Central Trust Co. v. Marietta &c. R. Co., 48 Fed. Rep. 850. Mercantile Trust Co. v. Missouri &c. R. Co., 7 Rail. & Corp. L. J. 30. The subject of the accounts of receivers relates to the subject of receivers generally, and not specially to the accounts of receivers of corporations, and, therefore, the writer will do no more than add a reference to the excellent chapter of Mr. High on that subject: High on Receivers (2d ed.), § 797, et seq. Tenn. Code, § 1101. Erwin v. Davenport, 9 Heisk. (Tenn.) 44. SECTION CHAPTER CLXXIV. RECEIVERS OF INSURANCE COMPANIES. 7219. Appointment of receivers of such companies. 7220. Circumstances under which appointed. 7221. Appointment at the suit of judgment creditors. 7222. Appointment at the suit of policy-holders. 7223. SECTION 7238. Valuation of policies in winding up. 7239. Rule adopted by statute in England. 7240. Manner of making the assessment. 7241. Equalizing those who have paid premiums in cash. Impeaching the decree appoint- 7242. Particularity in making the as ing the receiver. 7224. Receiver cannot reinsure risks. 7225. Cannot waive stipulations in policies. 7226. Payment of losses accruing dur- sessment. 7243. Requisites of notice of the assessment. 7244. Notes payable absolutely where no assessment is necessary. 7245. Arrangements among the members limiting their liability. 7246. Actions to enforce assessments upon premium notes. 7247. What the receiver must aver and prove. 7248. Recovery of interest on such premium notes. 7229. Proceedings where receiver dis- 7249. Receiver takes premium notes allows a claim. 7230. Compromising claims. 7231. Premium notes in the hands of 7232. Further of premium notes. assessments may be made. 7236. Effect of assessments by a former receiver. 7237. Extent and proportion of the assessment. 859 subject to equities. 7250. Illustrations of this principle. 7251. Right of set-off in actions on premium notes. 7252. Right of set-off under statutes 7253. Defenses to such actions. 5729 § 7219. Appointment of Receivers of Such Companies.— Corporations organized for conducting the business of insurance in all its branches, have become the subject of elaborate statutory regulation (it may be assumed) in all the States of the American Union; and the circumstances under which receivers may be appointed to wind up such corporations in the event of their insolvency, or in the event of their assets shrinking to such a limit as to render it unsafe to the public for them to continue their business, are generally the subjects of statutory definition and regulation. An attempt to collect and classify these statutes would be beyond the plan of the present work, and they are noticed only where they incidentally become the subject of judicial exposition.1 Statutes like that of New York, providing for arresting the business of an insurance company and appointing a receiver when the further prosecution of its business will be injurious to the public interests, are not repugnant to the provisions of State and Federal constitutions prohibiting the deprivation of a person of property without due process of law. Under some of 1 As to receivers of fire insurance companies in New York, see 2 Rev. Stat. N.Y. (7th ed.), pp. 1482-1485. As to receivers of marine insurance companies in the same State, see Ibid., pp. 1467-1471. A receiver of the assets of an insolvent insurance company, appointed under New York Laws of 1853, chapter 463, section 17, is governed, in respect of the duties of his office, by the provisions of the Revised Statutes relating to corporations, and by the practice of courts of equity. People v. Security Life Ins. Co., 78 N. Y. 114; 8. c. 34 Am. Rep. 522. 2 New York Laws 1869, ch. 90, § 7. Attorney-General v. North America Life Ins. Co., 82 N. Y. 172, 183. It is pointed out in the opinion that the proceedings are not arbitrary; that there is, first, the judgment of the Superintendent of Insurance, and then a hearing before a court, subject to a right of final appeal to the Court of Appeals. See People v. Atlantic Mut. Life Ins. Co., 74 N. Y. 177. It is also pointed out in the case just cited that the decision of the Supreme Court at Special Term, restraining a life insurance company from the further prosecution of its business, and appointing a receiver upon an application of the Attorney-General under the statute, is not final; but that it is for the General Term, and afterwards for the Court of Appeals, to scrutinize all proceedings in every case, and to determine whether a cause existed for the interference, and whether there was sufficient reason for continuing it; and that the controlling question for decision in such case is, Are the assets of the corporation sufficient to justify the belief that it may continue the business of life insurance with these statutes, a receiver may be appointed on the application of the State Commissioner of Insurance, or State Superintendent of Insurance, by whatever name called, on his finding that the assets of an insurance company have fallen below a prescribed statutory limit. Unless the governing statute enacts or implies the contrary, a receiver of an insurance company may be appointed on an application of one of its stockholders, as in the case of other corporations. § 7220. Circumstances under Which Appointed. The mere fact that the assets of an insurance company have fallen safety to the public? In Wisconsin, jurisdiction of an action by a creditor or a stockholder to wind up the business of an insolvent mutual insurance company, and, as incidental thereto, to grant an injunction restraining the continuance of its business and the disposing of its property, and to appoint a receiver, is conferred by Wisconsin Revised Statutes, sections 3218, 3219, which apply to mutual as well as other insurance companies. Re Oshkosh Mut. Fire Ins. Co., 77 Wis. 366; 8. c. 9 L. R. A. 273; 46 N. W. Rep. 441. 1 Thus, by the Connecticut Statute 1875, page 12, the Insurance Commissioner, on finding that the assets of any life insurance company of that State are less than three-fourths of its liabilities, is to apply to the Superior Court for the appointment of a receiver and the annulling of its charter. It is no answer to a petition for this purpose that the respondents had, by legislative permission, transferred all their assets to another company, which had assumed all their liabilities, so long as the holders of their policies had not assented to the arrangement. Stedman v. American Mut. Life Ins. Co., 45 Conn. 377. * Ante, § 6878. Thus, under the provisions of the Revised Statutes of New York relating to proceedings by and against corporations (2 Rev. Stat. N. Y., 463, § 39, et seq.), an applica tion may be made by a stockholder, without the intervention of the Attorney-General, to restrain an insolvent insurance company from exercising its corporate rights and franchises, and for the appointment of a receiver. Osgood v. Maguire, 61 N. Y. 524. The court say that "the practice and decisions are in accordance with this view of the law: Mann v. Pentz, 2 Sandf. Ch. (N. Y.) 257; Re Franklin Bank, 1 Paige (N. Y.), 85; Hill v. Nautilus Ins. Co., 4 Sandf. Ch. (N. Y.) 577, 580; Verplank v. Mercantile Ins. Co., 1 Edw. Ch. (N. Y.) 46; 8. c. 2 Paige (N. Y.), 438." Effect of a statute avoiding transfers after petition for receiver: Sands v. Hill, 55 N. Y. 18. Status of checks given to settle losses prior to appointment of receiver: Merrill v. Anderson, 10 Hun (N. Y.), 604. Reduction of contracts of life insurance in place of winding up, under English statute, see Stat. 33 & 34 Vict., ch. 61, § 22. This statute includes mutual life insurance companies: Re Great Britain Mut. Life Ins. Soc., 16 Ch. Div. 246; Lind. Comp. Law (5th ed.), p. 635; Re Great Britain Mut. Life Ins. Soc., 19 Ch. Div. 39; s. c. affirmed, 20 Ch. Div. 352. below the statutory limit, so that it is prohibited from continuing its business, does not, under all statutory systems, demand the appointment of a receiver; but, in the absence of special circumstances requiring such an appointment, the directors may wind up the affairs of the company, reinsure its risks, and go out of business; and it may go out of business without the interference of a court of equity by such an appointment. The governing principle applicable to such cases is, that the mere fact of insolvency does not require the appointment of a receiver, unless it appears that prejudice will ensue to parties in interest from allowing the affairs of the corporation to remain in the hands of its directors, to be wound up by them. Some of the statutes confer upon the court superintending the administration, through its receiver, power to direct the receiver to continue the business. Under such a statute, the court will not make such a direction, where it is apparent that very few of the policy-holders will, in fact, pay any future premiums. When an application is made by the Attorney-General, under the New York statute for the appointment of a receiver to wind up a life insurance company, the question for decision is said to be, whether the assets of the corporation are sufficient to justify the belief that it may continue the business of life insurance with safety to the public; and where it appeared, from the evidence adduced upon such an application, that the assets of the company 1 Streit v. Citizens' Fire Ins. Co., 29 N. J. Eq. 22. See Rawnsley v. Trenton Mut. &c. Ins. Co., 9 N. J. Eq. 347. So, as to a railroad company, see Union Trust Co. v. St. Louis &c. R. Co., 4 Dill. (U. S.) 114. Under some statutory schemes, actuaries are also appointed, presumably for the purpose of investigating, on mathematical lines, the affairs of the company, and ascertaining how much it will take to restore it to a safe basis, and whether or not it can go on. The duties of an actuary appointed by a receiver of an insurance company pursuant to the provisions of New York Laws, 1869, chapter 902, relate only to those specified in section 8, of the act, and terminate with his report, unless such duties are continued by the court; and the compensation which is to be paid must be fixed by the court, and is not under the control of the receiver, Superintendent of Insurance, or actuary. Re North American Life Ins. Co., 55 How. Pr. (N. Y.) 465. New York Stat. 1869, p. 902. People v. Atlantic Mut. Life Ins. Co., 15 Hun (N. Y.), 84. |