ATTORNEY-GENERAL v. THE NORTH AMERICA LIFE INSURANCE CO.

ATTORNEY-GENERAL v. THE NORTH AMERICA LIFE INSURANCE CO. N. Y. Supreme Court, Third Department, Third District; Ulster Special Term, October, 1878. Again, N. Y. Court of Appeals, May, 1879. Dissolution op Life Insurance Companies.—Injunction.—Receiver.—Withdrawal op Consent to Bring Suit.— Parties Intervening by Leave op Court.— Code Civ. Pro., § 1294. In a special proceeding pending before the supreme court for the purpose of winding up the affairs and distributing the effects of a dissolved corporation, the court has power to enjoin an action by a creditor against the receiver. If, such an action will necessarily hamper the court and receiver in the performance of their duties, and greatly increase the costs and expenses of the trust, it will be enjoined. When a proceeding is pending for the dissolution of a corporation, under L. 1853, c. 463, the remedy of every creditor is in that proceeding only, and in the district in which the same is pending. Leave to sue a receiver, improvidently granted in the supreme court, may be withdrawn by the court, though sitting in another district. In a proceeding by the attorney-general against an insurance company to close up its business, on account of its assets being insufficient to reinsure its outstanding risks, the court may permit parties in interest to appear and be made parties. The proceeding for the appointment of a receiver under 3 L. 1869, p. 3373, c. 903, is summary and special. An order by the court permitting interested persons to appear and become parties to such a proceeding, includes the right to appeal from orders made affecting their interests. Such persons,—Seld, to have been made parties in this case, by the service of the notice of application for confirmation of the actuary’s report, and them appearance in pursuance thereof, on the hearing at the special term; and to be “parties aggrieved” within the meaning of section 1394 of the Code of Civil Procedure. Dissolution of life insurance company. The North America Bife Insurance Company was organized under chapter 463 of the Laws of 1853,- and it also transacted business as a registered policy company under chapter 902 of the Laws of 1869. At a special term of the supreme court, held in the city of Schenectady, by Mr. Justice Bandon, on March 8, 1877, on the motion of the attorney-general of the State, after due notice to the company, such corporation was restrained from the further prosecution of its business, and Henry B,. Pierson appointed the receiver thereof. After this appointment, the receiver, with the approval of the superintendent of the insurance department, appointed an actuary, who, in conformity with the requirements of section 8 of said chapter 902 of the Laws of 1869, made a careful investigation into the affairs of said company, and reported, after such investigation, that the assets of the said corporation were not sufficient to meet its liabilities and the costs of the receivership. Such report was presented to the court, and its conclusions affirmed by order, duly entered. On January 16, 1878, upon an order to show cause, duly served, and upon the application of the attorney-general, the court, at special term held by Mr. Justice Landon, in the city of Schenectady, granted a second order under section 17 of chapter 463 of the Laws of 1853, dissolving the corporation, and again appointing Mr. Pierson its receiver. I. October, 1878. Motion for stay. On July 16, 1878, the court, at a special term held in the city of Schenectady by Mr. Justice Landon, made an order appointing Albert Parsons, Esq., counselor-at-law of the city of New York, a referee to ascertain the claims against such company. The order contained full directions to such referee to give notice by publication for all creditors to present and establish their claims and to make full report to the court. The object of this order was to ascertain what were valid debts and obligations against the corporation, with a view to the distribution of its assets among them, as the court is empowered and required to do by both the acts aforesaid. Subsequently to such last-mentioned order, and on or about July 20, 1878, one Benjamin Bies, a policyholder, in behalf of himself and all other creditors of the said The North America Life Insurance Company, who should come in and contribute to the expenses thereof, brought a suit against the said corporation and the said Henry B. Pierson, its receiver, for the purpose of ascertaining and declaring the debts and obligations of the corporation, and for the distribution of its assets ; or, in other words, a policy-holder of the late corporation brought an action in this court against the court’s own receiver to do the very thing which the court, without such suit and without its aid, was fully competent to do, and was actually and in due form proceeding to do. That action this motion seeks to enjoin and restrain. JR. W. Pecleham, for the receiver and motion. Addison Brown {Stanley, Brown & Ciarle, attorneys), for Benjamin Bies, opposed. No person can be enjoined in a cause to which he is not a party (1 Barb. Ch. 631; 19 How. Pr. 54; Van Sanf. Eq. Pl. 119; 4 Paige, 439 ; 10 Abb. Pr. 472 ; 5 Bosw. 703; 16 Ves. 338). The motion should be made in the action sought to be enjoined (1 Barb. Ch. 619 ; 1 Hoff. Ch. Pr. 89; 2 Paige, 66 ; 11 How. Pr. 366; 9 Abb. Pr. N. S. 37 ; 54 N. Y. 463). An injunction granted on this motion would be of no binding force, Bies not being a party (Fellows v. Fellows, 4 Johns. Ch. 25; Iveson v. Harris, 7 Ves. 257; 1 Barb. Ch. Pr. 633; 13 Wend. 642; Clarke, 34; 32 How. Pr. 51; 19 Barb. 356; 9 How. Pr. 425). The only exception to this rule is the case of a servant or agent of a defendant (1 Duer, 483, 4 ; 2 R. S. *534). The court has no authority in either of these two special proceedings to issue an injunction on Bies’ suit on motion (Code Civ. Pro. § 602 ; Batterson v. Finn, 32 How. Pr. 503; R. S. § 56, tit. 4, c. 8, Part III). Legal proceedings are not allowed by a court of equity to be conducted by a receiver except upon neglect by'the proper parties (Edwards' Receiver, 158; Parker v. Dunn, 8 Beav. 497; Ireland v. Eade, 7 Id. 55). As to the mode whereby creditors shall be heard, there is no difference in principle, whether it be by order in this special proceeding, or by action brought on leave. In this case, it should be by action, because less embarrassed with doubts than the other mode (L. 1853, c. 463, §§ 11, 17; 2 R. S. *464, § 42; Mann v. Pentz, 3 N. Y. 415 ; 59 Id. 163; Matter of Continental Ins. Co., 4 N. Y. Weekly Dig. 263; Attorney-General v. Life and Fire Co., 4 Paige, 224 ; Re Security Life Ins. Co., 11 Hun, 96; Harmony Fire Ins. Co., 45 N. Y. 310; Franklyn v. Sprague, 10 Id. 589; Berkshire v. Joilliard, 13 Hun, 506). See note on Intervening, at the end of this case. [MAJORITY — Westbrook, J.] Westbrook, J. [After stating the facts.]—The first question which this motion presents is, Has this court, in the special proceedings pending before it for the purpose of distributing the effects of a dissolved corporation, power to enjoin the action ? It will be observed that the suit is against the court’s own officer, and the necessary and inevitable effect thereof is more or less to interfere with the action of the receiver. If a person molested a receiver in any Way other than by action, would it be seriously argued that the court could not restrain him ? If the answer to the question is favorable to the power of the court to interfere, then why may it not do so now ? It is an individual who is hampering and annoying the receiver in his trust, and the mode of annoyance does not alter the power of the court. The court for its own dignity will arrest and punish an interference with its receiver, and the mode and manner which the party has taken to interfere cannot take away the jurisdiction of the court. The plaintiff in the action has seen fit to interfere with a receiver duly appointed, by bringing an action in a locality and district distant from that in which such receiver was appointed, and having paid no attention himself to the rights or convenience of the receiver, he is in no situation to ask that protection should be sought in the district which he has chosen. This is not a case where an action is pending in one district and a suit is brought in another to restrain it, though even then the court could interfere in the latter district (Erie Railway Co. v. Ramsey, 45 N. Y. 637) ; it is rather analogous to the case of one pending in one district, and on a second suit being brought in another for the same purpose, the party who is thus sued moves in the first action to stay the second. The juris.diction of the court in such a case is too undoubted to be questioned. The fact that a proceeding first instituted is not an action, eo nomine, makes no difference. It was something, whether it be called an action or special proceeding, which gave this court full power over the corporation and its assets, for the purpose of distribution in and by that proceeding ; and as a grant of power to do an act is also a grant of power to do every other act and thing necessary to be done in the progress of its accomplishment, it necessarily follows, as the court has power in this proceeding to distribute the assets of the dissolved corporation, it will enjoin and restrain any individual who seeks by a new and unnecessary action to deprive it of this power. The suit brought by Bies is in this (the supreme) court, and it would be a little singular if the court itself, which alone is interfered with, must speak in behalf of its own dignity and its own protection in the spot and locality which he has chosen and which he dictates, as the only one for it to assert its rights and its prerogatives. Of the power, then, to enjoin this action, there can be no doubt; and we next inquire why should not the power be exercised % Of what possible use is the action % The statutes under which Mr. Pierson was appointed receiver are ample to protect all parties interested. Under them this court must and is proceeding to distribute. All its powers are in full and complete exercise, and whilst the legal machinery of the court requires no aid, a suit is brought for the ostensible purpose of giving assistance, when none is sought or required. It is brought, too, in the same court, which has already complete jurisdiction, and to which the suit can add nothing or from it subtract nothing. But the action is more objectionable, even, than we have stated. The supreme court is holding the property, through Mr. Pierson, its own receiver, for the purpose, when it shall by its reference already ordered, ascertain who the creditors are, of directing “a distribution of its effects” (L. 1853, c. 463, § 17; L. 1869, c. 902, § 8), and an action has been brought in the same court against itself (for one against its receiver, who is acting under its orders, is one against the court), to quicken its action and to guide its judgment. The statement of the proposition is enough, without argument. No fraud, no collusion, wrong or negligence is imputed to the receiver, and if they were, the court can act on motive; but the simple and only aim of the action is declared to be to facilitate the receiver and court in the execution of their trust. I have been unable to see that either requires that aid, and as that action will necessarily hamper the court and receiver, and greatly increase the costs and expenses of the trust, the action must be enjoined. There is another objection, also, to the maintenance of this action, which has not been stated. The act of 1853, under which Mr. Pierson was appointed receiver, by section 11, makes all companies formed under it subject to all the provisions of the Revised Statutes in relation to corporations, “ so far as the same are applicable, except in regard to annual statements, and other matters herein otherwise specially provided for.” This court, in Attorney-General v. Continental Life Insurance Company (53 How. Pr. 16), held, that a proceeding to wind up and dissolve a corporation, and distribute its effects, was specially provided for by the act, and that consequently no action could be maintained by a creditor or a stockholder under the Revised Statutes for a similar object. This decision, though made at special term, was acquiesced in by the parties affected by it, and has generally been regarded as sound by the profession. What a creditor or a stockholder could not do before the attorney-general and the court have acted under the statute of 1853, it surely ought not to be allowed to do after such action ; and precisely this the suit brought aims to do, to wit, to ■distribute the effects of the corporation, whilst the court is, acting under the act aforesaid. Under the Revised Statutes, when an action had been brought to dissolve, and distribute the assets of an insolvent corporation, the remedy of every creditor was in that suit and proceeding only, and in the district in which the same was pending (Rinn v. Astor Fire Insurance Co., 59 N. Y. 143). Though the mode of procedure against the corporation may be changed, all other provisions, “ so far as the same are applicable,” remain unaltered and unaffected. The same provisions of the statutes and the same rules of equity which induced the court of appeals to hold as it did, in the case just cited, apply to the one before us. The plaintiff, in the suit •brought, and all other creditors, must seek their remedies in this proceeding and in the district in which it is pending. The law requires this, as well as the danger of a conflict of jurisdiction and needless additional expense and costs, and for this reason, also, the motion must be granted. II. May, 1879. Appeal by intervenors. After the receiver’s appointment, and on April 24, 1877, one Violetta A. Bedell, a policy-holder, petitioned the court to be permitted to intervene and appear by counsel in this proceeding for the protection of her interest, and the following order, omitting the formal parts, was granted: The order allowing the suit to be brought was imprudently granted, and one withdrawing the consent to bring it must be entered. It was the consent of this same court which was obtained, and it can properly be withdrawn by the same tribunal which granted it, though sitting now in another district (McArdle v. Barney, 50 How. Pr. 97). There was no appeal. “Ordered, that the firm of Barnes & Hanover be allowed to appear, either generally or specially, as attorneys for the petitioner, Violetta A. Bedell, and any persons similarly situated, who have or may choose to retain them; and that notices of all motions and all proceedings in court herein, on the part of the attorney-general, and on the part of Henry R. Pierson, receiver herein, be served upon the said firm of Barnes & Hanover, Staats Zeitung Building, Hew York, with liberty to said firm to appear in said motions and proceedings in court in behalf of the said Violetta A. Bedell, and such other person or persons as aforesaid, as they may be advised.” The actuary appointed by the receiver in compliance with the requirements of Laws of 1869, chapter 902, section 8, made his report to the court and receiver, and a copy of such report was served upon Barnes & Hanover, with a notice that it would be presented to the court at a special term on Hovember 17, 1877, and an application made for instructions and directions upon the subjects embraced therein. At the time of the hearing of the motion, Messrs. Barnes and Hanover, as attorneys for various policyholders, filed objections to the confirmation of the report, but the court, holding that it showed that the assets of the company were not sufficient to pay its liabilities, confirmed it. Messrs. Barnes & Hanover then served a notice of appeal, stating “ that George Wolford and sundry other policy-holders in the defendant, The Horth America Life Insurance Company, hereby appeal to the general term,” &c. This notice was signed “ Barnes & Hanover, Attorneys for” quite a number of policyholders, not, however, including Violetta A. Bedell. Upon the hearing of the aforesaid appeal, the counsel for the receiver raised the objection that the appellants were not parties to the proceeding, nor entitled to become such by substitution or otherwise, and the court, having sustained the objection, dismissed the appeal. From the order entered thereupon, the attorney for the intervening policy-holders appealed to the court of appeals. William Barnes (Barnes & Hanover, attorneys), for divers policy-holders, appellants. Augustus BcTioonmaker, Jr., attorney-general. B. W. Peckham, for the receiver, cited, in support of general term decision (Tracy v. First Nat. Bank of Selma, 37 N. Y. 523 ; People ex rel. &c. v. Lynch, 54 Id. 681; Code of Pro. § 325 ; Code of Civ. Pro. §§ 1294, 1296; Martin v. Kanouse, 2 Abb. Pr. 390 ; Matter of Bristol, Id. 397; E. B. v. E. C. B., 28 Barb. 299 ; L. 1869, c. 902, §§ 7, 8 ; People ex rel. v. Security Life Ins. Co., 71 N. Y. 222). [CONCURRENCE — Andrews, J.] Andrews, J. By the order of the special term of April 24, 1877, liberty was given to Barnes & Hanover to appear in behalf of Violetta A. Bedell, a policyholder in the North America Life Insurance Company, and any persons similarly situated, in all motions and proceedings herein, and the order provided that notices of all motions and proceedings in court on the part of the attorney-general, or of the receiver of the corporation, be made upon said firm. Prior to the making of this order, and on March 8, 1877, a receiver of the company had been appointed upon the application of the attorney-general, pursuant to the provisions of Laws of 1869, chapter 902, and the company enjoined from the further prosecution of its business. There was no appeal from the order of April 24. The receiver, as the officer of the court, represented the policy-holders and the creditors of the company. But it was competent for the court, in the exercise of its equitable jurisdiction, to permit parties interested in the administration of the property and assets of the corporation, to appear and be made parties to proceedings taken by or against the receiver, by which their rights might be affected. It was in the discretion of the court to allow the policy-holders, who stood in the positions of cestuis que trustent, to appear and represent their own interests. There is in strictness no suit to which the policy-holders can be made parties. The proceeding for the appointment of a receiver under the act of 1869 is summary and special. The object of the order of April 24, as is apparent upon its face, was to give the policy-holders represented by Barnes & Hanover a standing in court, to enable them to appear and be heard upon applications made by the attorney-general or the receiver in respect to the affairs of the company, and the right to appear, and thereby become parties to such proceedings, included the right to appeal from orders made affecting their interests. The order of the general term, dismissing the appeal of the policy-holders from the order confirming the actuary’s report, was erroneous. The order of confirmation was made upon the application of the receiver for instructions upon the matters embraced in the report, which application was made on notice to Barnes & Hanover, as attorneys for policyholders, given pursuant to the order of April 24. They appeared and filed exceptions to the report, and were heard before the special term on the application for the order for confirmation. The policy-holders, in whose behalf the exceptions were filed, then appealed to the general term, and their appeal was dismissed, on the ground that they were not parties to the proceedings, and had no right to appeal. They were, we think, made parties by the notice served on them, pursuant to the order of April 24, and their appearance in pursuance thereof on the hearing at the special term, and were parties aggrieved within the' meaning of section 1294 of the Code. The order of the general term is therefore reversed, and the case remitted to that court for hearing and decision on the merits. I All the judges concurred. Ordered accordingly. Note on Intervening. The principles by which the court is guided in applications to intervene are indicated by the following authorities, which will afford the reader a clue to the subject at large: Birdsong v. Birdsong, 2 Head (Tenn.), 289, 302 (1859, Supreme Ct. of Tenn., opinion by Wright, J.). “ The general rule requiring all persons in interest to be made parties to the suit is in most" cases not in any just sense a right of the parties brought before the court, but rather a rule prescribed by courts of equity to themselves in the exercise of their jurisdiction, founded upon their notions of public policy, or public convenience. It is in a great measure a rule of discretion, founded "in the anxiety of those courts to do justice among all the parties having an interest in the subject matter or object of the suit, whether that interest be mediate or immediate, present or future, for the purpose of suppressing future controversy and litigation. Citing Story Eq. Pl. § 185, a.” “The general rule,” says Story (Story Eq. Pl. § 207), in speaking of the necessary parties plaintiff in equity cases of trust, ‘' is, that in suits respecting the trust property, brought either by or against the trustees, the cestuis que trust (or beneficiaries), as well as the trustees, are necessary parties. The trustees have the legal interest, and therefore they are necessary parties. The cestuis que trust (or beneficiaries) have the equitable and ultimate interest to be affected by the decree, and therefore they are necessary parties.” And he says further (§ 208): “Upon the general principles of courts of equity there would be an impropriety in binding either the legal claimants or the equitable claimants, unless they were fully represented and permitted to assert their rights before the court; and if not bound the decree would not be final on the matter litigated. If the cestuis que trust (or beneficiaries) should not be made parties to the suit, and their interests are apparent, a court of equity will sometimes, as a matter of indulgence, and to prevent further delay and expense, allow them (if they wish) to bring forward their claims by petition, in order to have their interests ascertained, and their rights protected. But at all events they may bring a bill against their trustees and the original plaintiff, and assert and protect their rights in the other suit.” The foregoing statement, so far as it supports the idea that the cestuis que trust are necessary parties, in the strict sense, is not in accordance with the procedure now adopted in the courts of most of the States of the Union, or of the United States. The cestuis que trust are proper, but not, as against defendant, necessary co-plaintiffs. Redfield says, in Story on Equity Pleadings, 8th ed., p. 289, § 287, d: “ Sometimes one not a necessary party to the bill may be admitted on his own petition in order to secure his interest or claim in the subject of the suit; as where the bill is brought for specific performance of a contract for the purchase of land, and the claimant asserts a paramount title to the land under the defendant in' a form liable to be embarrassed by the decree. But we apprehend this will not ordinarily be done unless where fraud or connivance is alleged, or conspiracy to defeat the interest set up by such claimant. “§ 237, b. And in some of the American States the rule requiring all interests to be represented in the suit is not enforced as one of strict law, but is treated as one of discretion merely. And it is said if parties whose interests are apparent are not joined, they may come in by petition, and have the benefit of the proof already taken, and will not be driven to a second contest.” In these two sections from BedfleWs Story authorities are not collected, and the point seems to have received little consideration. The numerous cases cited below show how fully the courts recognize the propriety of admitting .parties having only an equity which is already represented by one having the legal title. The doctrine of courts óf equity, allowing persons who have an interest in the decision of the controversy to be heard, and to be made a party, is so broad and so necessary to the administration of equity, that, in a case where the United States have an interest, but cannot' constitutionally become a party, the attorney-general will be allowed1 to intervene, and be heard without becoming a party. Florida v. Georgia, 17 How. U. S. 478, 493. On the general subject, in addition to the foregoing authorities,, the reader may be referred to the following cases : Halstead v. Cockroft, 40 N. Y. Super. Ct. (J. & S.) 519; O’Hara v. MacConnell, 93 U. S. (3 Otto) 150; Carey v. Broom, 92 Id. (2 Otto) 171; Farmers’, &c. Bank v. Polk, 1 Del. 167; Forbes v. Memphis, &c. R. R. Co., 2 Woods, 323; Cronin v. Watkins, 1 Term. Ch. 119; Cowdrey v. Cheshire, 75 N. C. 285; Hubbard v. Burrell, 41 Wisc. 365; Stretch v. Stretch, 2 Tenn. Ch. 140; Speak v. Ransom, Id. 210; Calvert on Parties, 1 Law Library, 35 [58]; Hopkirk v. Page, 2 Brock. Marsh. 20, 42; Carter v. Mills, 30 Mo. 432; Drew v. Harman, 5 Price, 319; Willett v. Stringer, 17 Abb. Pr. 152; Dwight’s Case, 15 Id. 259; Davis v. Mayor, 14 N. Y. 506, 526; Gould v. Mortimer, 16 Abb. Pr. 448; Kelsey v. Murray, 18 Id. 294; Scheldt v. Sturgis, 10 Bosw. 606; Rothwell v. Dewees, 2 Black, 613; Francis v. United States, 5 Wall. 338; United States v. Patterson, 15 How. U. S. 10; Bellocque v. United States, 8 Ct. of Cl. 493; Cunningham v. Pell, 6 Paige, 655. The same principles are illustrated by the practice in admiralty and in the court of claims. Andrews v. Wall, 3 How. U. S. 568. It is incident to the jurisdiction by a court of admiralty proceeding in rem, to entertain supplemental suits or petitions by third persons intervening and claiming to be jointly entitled, with the complainants, to the res or a part thereof. Compare People v. Albany, &c. R. R. Co., 57 N. Y. 161. United States v. The Anthony Mangin, 2 Pet. Adm. 452 (1802, Dist. of Md., opinion by Winchester, J.). Where proceedings are in rem, all the world become parties to the sentence, as far as the right of property is involved, and consequently all persons in any way interested in the property in question are admissible, to claim and defend their interests. Turner v. United States, 2 Ct. of Cl. (Nott & H.) 390 (1866). Under the act relative to captured and abandoned property (12 Stat. at L. 280, March 12, 1863), which allows any person claiming to have been the' owner of any such abandoned or captured property to prefer his claim in the court of claims,—two parties, claiming each to have been the true owner of the property seized, and to be entitled to the proceeds, may be joined as parties claimant, and their conflicting claims be settled in one suit. Crowell v. United States, 6 Ct. of Cl. 23 (1870, opinion by Nott, J.). Four several actions were brought in the court of claims by assignees of the respective causes of action, but all the causes were in effect on the same contract, and were brought in the name of the same assignor. The court, in order to avoid doubt whether several actions would lie on a single contract, granted a motion by the claimants to consolidate the cases into one, to be prosecuted by the contractor, for the use of the different parties respectively. After trial, the liability of the United States having been fully established, and the evidence not being fully sufficient to determine the respective interests of the several claimants,—Held, that the cause should be referred to a referee to take proof of the rights and interests of the respective parties for whose use and benefit the action was prosecuted, and judgment be suspended until the coming in and confirmation of the report.