Waring v. O'Neill

Learned, P. J.:

No question was made by either party on the argument as to the authority of a receiver to submit a controversy, without action, under section-1279 of the New Code. In deciding this case, therefore, we are not to be considered as expressing any opinion in that respect.

Upon the argument, it was stated that, under the New Code, a case submitted was to be heard, in the first instance, at the Special Term, as was done in this instance. Wo are unable to find any authority for this view. Section 1281, like the corresponding section 37 2 of the Old Code, directs that the trial shall be had at the General Term. The proceedings, therefore, in this case at the Special Term seem to have been unauthorized; and, in strictness, the judgment might, perhaps, be reversed on that ground. But, as the parties have argued the merits of the case, we may treat this as the trial, without reference to the former proceedings.

At the time of the dissolution of the company and the appointment of the defendant as receiver, on the 31st of March, 1877, the plaintiff held what is called a paid-up policy in the company for $6,000. That is, he held an-agreemont, on the part of the company, that, for a certain consideration already received, the company would pay to his legal representatives, ninety days after notice of his death, $6,000; subject, however, to certain conditions which might forfeit the claim. The policy also contained the condition that any indebtedness to the company should be first deducted therefrom.

It is agreed between the parties that, to obtain a paid-up policy to the like amount on the plaintiff’s life, from a good and solvent *109company at the time of such insolvency and dissolution, would have cost $3,600.

Among the assets of the company which passed to the receiver was a bond and mortgage of one Ackerman for $8,500 and interest, payable June 1, 1877. Ackerman ivas the owner of the land at the time of the dissolution and of the appointment of the receiver. Afterwards, on the 25lh of July, 1877, Ackerman sold the mortgaged property to the plaintiff, subject to the mortgage; and the plaintiff assumed and agreed to pay this mortgage as a part of the purchase-money. The -plaintiff now asks that he may set off the sum of $3,600, which it Avould cost him to purchase another policy on his life, against so much of the mortgage debt, and that he may redeem the mortgage on paying the balance.

We do not think it is necessary, in this case, to decide just Avhat are the claims of the plaintiff upon his policy. That question is not Avithout its difficulties. Whether'the failure of the company is to be considered a breach of its contract of insurance; and, if so, what are the plaintiff’s damages — -whether or not, on a distribution of the assets, he will be entitled to the amount of his policy, less a discount for the time when it would probably become payable — these and many similar questions might have a bearing on the present case, in determining the extent of the plaintiff’s claim.

But, passing these and assuming, for -the purposes of this case (Avhat may not be true in fact), that, .at the dissolution .of the company, the plaintiff Avas a creditor for a debt then -payable, can he have the set-off which he asks ?

It is not denied by the plaintiff that, if Ackerman, after the insolvency and the appointment of a receiver, had bought a claim (for instance the plaintiff’s) against the company, this could not have been set off against Ackerman’s debt on his bond. And this is for the plain reason,. as it seems, that the rights of debtors and creditors must be determined -by their condition at the time of the appointment. The debtor is liable to pay his debt. The creditor is entitled to his pro rata share of the assets. Whatever claims the debtor of the company then had against it .may be set-off, and no others.

But the plaintiff seeks to evade this general .principle by.inakin’g *110himself, after the appointment of the receiver, a debtor to the receiver by his own voluntary act, to which the receiver is not a party. His position is this, that, after the appointment of a receiver, a debtor to the company may pay that debt to a creditor of the company; that such creditor may, in consideration thereof, agree with the debtor to pay to the receiver the debt which the debtor owes; and then that the creditor may have the debt which he has thus assumed, discharged by a set-off of his own claim against the company, to the extent of its full amount. This is plainly contrary to the principle above stated.

The doctrine for which the plaintiff contends would enable any creditor of an insolvent company to get his claim in full, if he could induce some debtor of the company to pay to him the debt, on consideration of his agreement to assume such debt then owing to the receiver. It does not change the character of the plaintiff’s position that, in this case, the debt of Ackerman was secured by a mortgage. Nor does it make any difference that Ackerman transferred land and not money to the plaintiff as the consideration of the plaintiff’s agreement to assume Ackerman’s debt.

Still, the fact is plain that, when the company became insolvent, Ackerman owed it a debt. To this debt the receiver became entitled, and he might collect it from Ackerman personally or from the land. On the other hand, the plaintiff, even if he were a creditor of the company for a debt presently payable, was entitled to have from the receiver only a pro rata share of the assets. He cannot, by agreeing with Ackerman to assume Ackerman’s debt to the receiver, prevent the receiver from collecting the full amount thereof.

Ackerman’s debt was owing to its full amount when the receiver was appointed. The full amount thereof was owing when the plaintiff assumed to pay it; and his agreement was to pay the same to the receiver who then owned the claim. On the other hand, at the time when the plaintiff made this agreement to pay the receiver, his only claim against the receiver was a right to share pro rata in the assets when they should be distributed. The receiver owed the plaintiff no debt, but was only under an obligation to distribute to him what should finally appear to be his portion. The plaintiff claims that he has become the principal debtor *111by his assuming the mortgage. So, too, if he had borrowed money of the receiver on bond and mortgage, he would be the principal debtor. But if he had himself borrowed this money of the receiver, after the dissolution, on his own bond and mortgage, ho could not set off against such loan the whole amount of his claim against the company, while it was uncertain what dividend the receiver might make. And he stands no better in this case than if he had himself borrowed the money from the receiver. For his obligation to pay was not contracted until after the appointment of the receiver; and he was never, in any way, a debtor to the company during its existence upon this bond or debt. For this reason, he cannot claim any benefit from the provision in the policy that an indebtedness to the company is to be deducted before payment. He never contracted with the company to pay this bond.

A judgment, therefore, must be entered on the submission declaring that the plaintiff is not entitled to redeem the bond and mortgage, except by paying the full amount thereof in cash, with costs against the'plaintiff.

Present — Learned, P. J., Boardman and Martin, JJ.

Judgment ordered for defendant on submission, with costs. ■