Opinion
June Term, 1898.
Present — Van Brunt, P.J., Rumsey, O'Brien and McLaughlin, JJ.
***doubt*** George A. Baynes, claiming to act as manager and trustee for the United States department of the Great Northern Insurance Company of Manitoba, Canada, appointed James M. Lewis, of New York city, "my co-trustee for the funds of the Great Northern Insurance Company, deposited in the Farmers' Loan Trust Company, for the protection of policyholders in the United States, whose policies shall have been procured through the said James M. Lewis. Such funds shall consist of 60 per cent of the net premiums received by him, and I hereby authorize him to deposit said 60 per cent in the Farmers' Loan and Trust Company in our joint names, and to be used for the payment of losses and special expenses connected therewith, or for the return of such portion of premium in case of cancellation of any policy on which 60 per cent of same may have been so deposited and cancellation of same may have been demanded by the assured. It is agreed by and between the parties hereto that such 60 per cent of the net premiums as per account rendered monthly shall be deposited on the 20th of each second month preceding, and at the expiration of one year from the date of the first deposit, one-twelfth of the amount remaining to the credit of the trustees, including interest that may be added by the Farmers' Loan and Trust Company, shall be held subject to the order of the said George A. Baynes, as trustee of the Great Northern Insurance Company, and in like manner for each successive month thereafter, the one-twelfth of the total deposits of the previous twelve calendar months shall in like manner be subject to the order of the said George A. Baynes, as trustee of the Great Northern Insurance Company. Such co-trusteeship to remain in force so long as the said James M. Lewis shall represent me as manager of the Great Northern Insurance Company for the eastern department of the United States." The plaintiff and the defendant Sherwood took out policies of insurance in said company through said James M. Lewis, at New York city. The Western Brass Company, the assignor of the defendant Ranous, took out a policy of insurance through E.C. Curtis Co., agents at Chicago, Ill The property of each of these parties was destroyed by fire, and actions were brought against the Great Northern Insurance Company to recover upon such policies, attachments being issued against the funds deposited by Lewis in the Farmers' Loan and Trust Company in the names of James M. Lewis and George A. Baynes, trustees of policyholders of the Great Northern Insurance Company of Manitoba, Canada, under the instrument above referred to. This action is brought to obtain a construction of said instrument and a determination of the rights of the parties thereto. —
Judgment affirmed, with costs, on opinion of Mr. Justice Nash.
The following is the opinion of Mr. Justice Nash:
It must be held, I think, that neither of the parties have any standing in court as attaching creditors of the Great Northern Insurance Company, unless Baynes, as manager and trustee for the United States department, had authority to act for the company in appointing Lewis as its New York agent. The fund in suit was obtained by Lewis from the premiums upon the policies he issued, and if he had no authority to act for the company, the money he received did not belong to it, and could not be attached by its creditors. If Baynes was manager and trustee of the company, it was competent for him as such to enter into a contract with Lewis for the transaction of the business of the company and to make any lawful agreement in connection therewith that the company itself could have made or entered into, either with Lewis individually, or with him for the benefit of those who should become policyholders. It may, therefore, be assumed for the purposes of this action that Baynes was manager and trustee of the company, and had authority to make and enter into the agreement with Lewis under which he acted as the New York agent of the company and as the co-trustee of Baynes in the deposit of sixty per cent of the premiums paid to Lewis by the holders of the policies he issued. The principal question here is whether the agreement with Lewis created a trust in favor of the plaintiff and other holders of the policies he issued, or whether the sixty per cent of the premiums he received and deposited under the agreement must nevertheless be regarded part of the general assets of the company, subject to the payment of its debts and to attachment by its creditors. The agreement made with Lewis, that sixty per cent of the premiums he received should constitute a fund for the "protection of policyholders in the United States whose policies shall have been procured through the said James M. Lewis," must, I think, be regarded as in the nature of a trust created for the benefit of such policyholders as Lewis might obtain, and which they can enforce. It is not open to the objection made in behalf of the defendant Ranous, that "the officers and agents of an insurance company cannot pick out and select certain funds and by an agreement executed between themselves set the same apart for any particular creditors." The fund thus created never became the absolute property of the company, nor do the policyholders as beneficiaries attempting to enforce the provision made for their benefit stand in the attitude of general creditors. The agreement must be treated as one made directly between the company and the policyholders for whose benefit it was made. There is no inconsistency in appointing Lewis an agent of the company to transact its business, and at the same time constituting him the trustee of a fund to pay losses that might arise. An individual, or a corporation, can assign to an agent or officer a fund for any particular purpose which may be lawful, and vest in such agent or officer the title to property or assets, either in possession or expectancy, to meet obligations incurred or future liabilities. All that is required to accomplish the purpose is for the corporation to completely divest itself of all authority over or control of the fund. Here the fund never came to the treasury of the company. It was arrested in the course of transmission from the policyholders to the company by the agreement under which Lewis received and retained it for the use and benefit of the policyholders. The title was, by the agreement, vested in Lewis and Baynes as co-trustees, and at all times, by the terms of the agreement, has been beyond the control of the company. If the purpose of the agreement was lawful, an agreement which the company had the right to make, and there is no suggestion that it was not, then a trust was created which can be enforced by the policyholders intended as its beneficiaries. The purpose and effect of the agreement here is very much like that in the case cited in support of the plaintiff's contention. (Rogers Locomotive, etc., Works v. Kelley, 88 N.Y. 234.) Here, as there, the insurance company had parted with all right to the control of the fund inconsistent with the purpose declared by the agreement, with the further equity that here the beneficiaries themselves furnished the fund, with the control of which, or the right to control, they have never parted. That case is also authority for holding that here, as in every completely constituted trust, it is not necessary that the beneficiaries should have any knowledge of its creation Notice to or assent of the policyholders to be benefited was not essential to the completeness of the trust. My conclusion is that the moneys deposited by Lewis in the Farmers' Loan and Trust Company and the Chatham National Bank, under the agreement made with him, constitute a fund to which the holders of the policies issued by Lewis may resort for the payment of their losses; that as to this fund the plaintiff and the defendant Elizabeth Sherwood are in the same position, as beneficiaries equal in priority, and that neither could obtain priority over the other by attachment.