Attorney General v. Bay State Beneficiary Ass'n

Knowlton, J.

The petitioner has a claim whose validity is established, which, under the provisions of the St. 1890, c. 421, § 10, is a lien upon all the property of the corporation. In the language of this section, it has “ priority over all indebtedness thereafter incurred, except as hereinafter provided in case of the distribution of assets of an insolvent corporation.” The only question before us is whether the proceedings in which the claim is presented constitute a distribution of assets of an insolvent corporation within the meaning of the statute.

*276 It is agreed that at the time of the appointment of the receivers the accrued liabilities against the association exceeded the amount of its assets. It was then and is now an insolvent corporation. This is a proceeding for the distribution of its assets. Unless there is something in the statute to indicate that some other case was intended, to the exclusion of cases of this kind, the claim must be held to be within the exception. In section 11 of this chapter there is a provision for the appointment of a receiver, and the distribution of the assets of such a corporation, when, upon an examination by the insurance commissioner after notice, it appears to him that its liabilities exceed its resources, and that it cannot within a reasonable time pay its accrued indebtedness in full.

In section 13 of this chapter, as amended by the St. 1896, c. 515, § 6, there is a provision that when the insurance commissioner, on investigation, is satisfied of any one of several other things in the condition or conduct of such a corporation, which it is unnecessary now to mention, or “ that its condition is such as to render its further proceedings hazardous to the public or to its policy holders,” the facts shall be reported to the Attorney General, and thereupon a receiver may be appointed “ to take possession of the property and effects of the corporation, company, or association, and to settle its affairs, subject to such rules and orders as the court may from time to time prescribe, according to the course of proceedings in equity.” We are of opinion that the settlement of the affairs of an insolvent corporation under this provision of the statute is a distribution of the assets such as is intended in the exception in § 10. We see no good reason why there should be a difference in the rules regulating the distribution of assets between a settlement of the affairs of a corporation under this section and a settlement under § 11. In neither section is there any express provision that the distribution shall be ratable; but the course of proceedings in equity in such cases calls for a distribution which shall be proportional, and which shall not give a preference, except where there is a lien or title which has precedence over the claims of general creditors. By the terms of the statute the petitioner’s lien is not given precedence when there is a distribution of the assets of an insolvent corporation.

*277 In the present case the proceedings were commenced under this provision of the statute. The information alleges, and the court finds, that after an investigation by the insurance commissioner of the resources of the company it appears that “ its condition is such as to render its further proceedings hazardous to the public and to those holding its policies.” There was, therefore, a decree for a ratable distribution of its assets.

We are of opinion that there is no good reason for construing the language of this exception narrowly, and that the petitioner is not entitled to priority in the payment of her claim.

Decree accordingly.