taking the assets of the company into its custody, and to prevent continuation or repetition of the alleged unlawful acts of the directors, and affairs which have resulted in dissipating the property of the association. Included in the moving papers is an affidavit of Mr. Hall, one of the examiners of the banking department, who states that the defendant began business in 1894, and that its first report of its business, filed in the department, showed that it had expended for operating expenses 36 per cent. of its gross receipts from all sources, counting as an operating expense the interest on the mortgages which it had assumed or money which it had borrowed. It is also stated in this affidavit that the last annual report, filed in 1896, showed that the defendant had expended about 41 per cent. of its gross receipts, and that the examiner reported that during the eight months previous to his examination of September, 1896, it was not doing any new business, but that its expenses of operation had been over $13,000 in excess of the sum which its by-laws authorized. The insolvency is also predicated upon the report of Mr. Eustace, dated September 29, 1896, and filed with the banking department, of which Mr. Eustace was an examiner. This report is, by statute, made a public record. Section 24 of the banking law (Laws 1892, c. 689). It shows that the assets amount to $122,892.74, while the liabilities are $144,599.76, leaving a deficiency of $21,707.02. By the articles of association the expenses of the corporation and the compensation of all officers and employés are to be paid only from the earnings, and are not to exceed the premium or membership fees collected, and are not to be in excess of one-tenth of 1 per cent. a month per share of the par value of all stock in force; and, while the amount which could be legally used for expenses was $8,341.10, the expenses were actually $21,511.79, leaving the fund overdrawn $13,170.69. The officers' salaries alone amounted to $10,528.99, which exceeded the authorized amount of expense by more than $2,000. The defendant, however, claims that three items of the liabilities, amounting to $33,875, are for sums due the members of the corporation; and that of this liability $5,350, which was stock belonging to former officers, had been canceled, leaving what is termed "stock in force" amounting only to $28,525, and that this latter amount was scaled down by a resolution passed at a meeting of the members, held October 10, 1896, at which over 90 per cent of the stock was represented, and that the reported deficiency of $21,707.02 with an addition of $240 was charged off the books pro rata against the shares of the members and so canceled. It is also claimed that this action was within the power conferred by the articles of association, and that the result leaves the corporation solvent. The appellant's counsel insists that the case of People v. Bankers' Loan & Investment Co., 13 Misc. Rep. 221, 34 N. Y. Supp. 235, decided by the general term of the common pleas, is authority for this action of the directors in charging off the deficit, but in that case it does not appear that the losses which were charged off were deficits arising from the illegal action of the officers or directors in the pay ment of salaries to themselves and other expenses, in violation of the articles of association, as is the fact in the present case. In fact, an and 78 New York State Reporter. examination of the papers in the case mentioned discloses the fact that the losses were on property of the corporation outside of the state. Losses may result from bad debts and the decision in question seems to relate to that class of cases, but we are referred to no authority and find it difficult to discover any principle which would enable the directors, by charging off pro rata the amounts illegally ap propriated or expended by them, to destroy their own liability to an action for the recovery of such unlawful payments. Indeed, it is claimed by the attorney general that the facts alleged in the moving papers subject the offenders to a criminal prosecution within the provisions of the banking laws. Other articles of the association provide for the issuance of certificates of stock, of various descriptions, to members, and the payment thereon of dues by such members un til the payments, together with profits from the business, shall equal $100, the par value of the shares; and that holders of certain classes of shares may, after given periods, withdraw shares by notice to the secretary, and thereby become entitled to receive the amount of dues paid, with 6 per cent. interest, or other amounts for different classes of shares. This would seem to afford a method of constituting the shareholders quasi creditors of the corporation, if they elected to become such. Two questions arise: First, is the defendant insolvent? And, second, has it violated its charter, and failed to accomplish the object of its existence? That the corporation was insolvent on September 29th, when the examiner made his report, is prima facie established thereby. The company was not rehabilitated with solvency by the subsequent action of the members' meeting of October 10th, so far as the nonassenting members are concerned, all of whom may have certain rights of action against the executive officers to compel the repayment of salaries and expenses which were received or incurred by them in violation of the articles of association above referred to. Mere insolvency, nicely calculated to a fraction, and based upon the theory that all of the remaining assets are absolutely good, cannot impair the rights of the nonassenting members. "The insolvency of such an institution is sui generis. There can be, strictly speaking, no insolvency, for the only creditors are the stockholders by virtue of their stock. The so-called insolvency is such a condition of affairs of the association as reduces the available and collectable funds below the level of the amount of stock already paid in. The association is said to be insolvent when it cannot pay back to its stockholders the amount of their actual contributions, dollar for dollar." Towle v. Investment Soc., 61 Fed. 446. We are, therefore, forced to the conclusion that the corporation is in fact insolvent. The other question-as to the violation of the charter and the failure of the defendant to fulfill the object of its existence seems to depend upon several propositions. One of the articles of association reads as follows: "The objects of the company shall be to accumulate a fund for the purchase of real estate, to erect buildings, or to make other improvements on land, and to pay off incumbrances thereon; to aid its members to acquire real estate, to make inprovements thereon, and to remove incumbrances therefrom; and for the further purpose of accumulating a fund to be returned to its members who do not obtain advances, when the funds of the company shall amount to one hundred dollars per share." If If the corporation is insolvent, its object is certainly defeated, and its usefulness to its members is impaired, if not totally destroyed. The report shows not only that it has failed to accumulate a fund, but that its officers have dissipated the premiums received from its members, in violation of the articles of association. Besides, so far as appears from the papers, the officers have clearly violated the article which forbids the payment of salaries and expenses except from earnings, and then only within a certain and definite limitation. there is any liability on the part of the officers to repay the sums illegally expended or appropriated by them for their own salaries, the receiver can enforce the repayment of these sums with greater certainty and effect that even the new officers would be apt to do in authorizing and prosecuting an action in behalf of the corporation against their predecessors, all the more that the allegations of the complaint in such an action must necessarily contain charges of vio lation by such officers of their fiduciary duties. We consider, therefore, that the best interests of the members of the corporation will be conserved by affirming the order appointing the temporary re ceiver. Order affirmed, with costs. All concur, except BARTLETT, J., not voting. (20 Misc. Rep. 35.) HUFF V. JEWETT et al. (Supreme Court, Special Term, Allegany County. March 24, 1897.) 1. INSURANCE-CONDITIONS OF POLICY-MORTGAGE ON REALTY. A policy covering both realty and personalty is not vitiated by the fact that the realty was subject to a mortgage when the policy was issued, where the only provision on the subject in the policy is that, "if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage," it shall operate to invalidate the entire policy. 2. COSTS-INDIVIDUAL L'ABILITY OF JOINT DEFENDANTS. Code Civ. Proc. § 455, providing that the joining of persons severally liable as defendants does not affect the right of either to any order "or other relief" to which he would have been entitled if he had been sued separately, does not relieve defendants from liability for costs because the recovery against each was less than $50, where they were sued jointly as underwriters in a policy which limited the liability of each to $50. Action by Addie Huff against Edgar B. Jewett and others on a fire insurance policy. Judgment for plaintiff. Smith & Dickson, for plaintiff. WOODWARD, J. This is an action to recover on an insurance policy issued to the plaintiff by the Buffalo Fire & Marine Underwriters, through their attorney, Henry S. McFall, on the 26th day of July, 1895. On that day, for and in consideration of $6.75 as premium, Henry S. McFall, attorney for the underwriters, caused to issue a policy of insurance in a sum not exceeding $900 upon certain and 78 New York State Reporter. real estate and personal property, fully set forth in the policy, located in the town of Granger, in the county of Allegany, and state of New York. On the 8th day of October of that year, and during the term of the policy of insurance, fire upon the premises of the plaintiff, Mrs. Addie Huff, destroyed a portion of the property cov ered by this policy of insurance, aggregating, as shown by the proofs of loss, $700. It is substantially conceded on the part of the defendants that the loss was sustained, that the proofs were made in the manner indicated in the policy, and that the fire was not due to any action, or refusal to act, on the part of the plaintiff, and that the demand for the payment of the claim complied with all of the provisions of the contract; but it is held on behalf of the defendants that the contract of insurance is vitiated by the fact that at the time of the issuance of the policy of insurance there was an unsatisfied mortgage against the real estate, and that the plaintiff was not in fact the sole owner of the property, as asserted under oath in the proofs of loss. It is also contended that, assuming the judgment of the court to be in favor of the plaintiff, such judg ment cannot carry costs, inasmuch as the several defendants are, under the contract, individually and severally liable for the amounts which they have undertaken to insure, and which in this instance aggregate less than $50. The contention of the defendants that the policy of insurance is vitiated by the fact that a mortgage upon the real estate was in existence at the time of the issuance of the policy, and that this fact was not discovered to the agent or attorney of the underwriters, cannot be sustained. There is nothing in the policy which requires the insured to discover to the agent the existence of any such mortgage, while it is specifically provided at line 18 of the policy that, "if the subject of insurance be personal property, and be or become incumbered by a chattel mortgage," it shall operate to invalidate the entire policy, showing conclusively that a mortgage upon real estate was not considered objectionable; and the courts have held repeatedly that a mortgage upon real estate is to be treated as an incumbrance, not as a defect in the "sole ownership" on the part of the insured. The fact of the existence of the mortgage not being material, and in no wise affecting the validity of the contract at the time that it was entered into, the "false swearing" of the plaintiff in the formal proof of loss as to the ownership of the property can have no bearing upon the question, and the plaintiff is clearly entitled to recover the amount of the claim. The learned counsel for the defendants presents a somewhat novel question when he contends that the plaintiff is not entitled to the costs in this action. He bases his argument in support of this proposition upon the provisions of sections 454 and 455 of the Code of Civil Procedure, which provide that a party may bring an action. against persons severally liable at his option, but that "the joining of a person as defendant in an action, with another person, as prescribed in the last section, does not affect his right to any order or other relief to which he would have been entitled, if he had been separately sued in the action." It requires a considerable stretch of the imagination to suppose that the legislature, in giving the plaintiff the option of suing jointly or severally, had any idea of restricting him in the collection of the costs by the use of the words "or other relief." To compel this plaintiff, a resident of Allegany county, to make a pilgrimage to Buffalo, search out and maintain separate actions against each of the several defendants, with no power to collect the costs, aside from those which might be secured before a justice of the peace, is such a substantial denial of justice that no doubtful construction of the statutes can be tolerated. It seems clear that the fair construction of these sections of the Code are intended to protect the rights of the plaintiff equally with those of the defendant, and that the words relied upon by the defendants to relieve them of the obligations which they assumed in refusing to comply with the terms of their contract with the plaintiff are to be understood to guaranty to the defendant all of his rights as an independent litigant, enabling him to make any special defense which the facts of the case might warrant, but stopping short of relief from contingent liabilities, such as the payment of his pro rata of the costs of the action. To allow an insurance organization in Buffalo to make contracts in Allegany and other rural counties which could only be enforced through the judgments of justices of the peace or other local tribunals in the city of Buffalo, without imposing the costs upon the plaintiffs, would be to permit such organization to accept the premiums upon a line of insurance which would, in nine cases out of ten, be utterly valueless to the insured: and the courts, organized for the purpose of promoting justice, cannot sanction such a construction of the statutes without doing great violence both to the cause of justice and to the rules of common sense. The plaintiff is entitled to a judgment for the amount of the claim as proved, together with the costs of this action. (26 Civ. Proc. R. 230; 15 App. Div. 594.) GILLIN v. CANARY. (Supreme Court, Appellate Term, First Department. March 25, 1897.) ACTIONS CONSOLIDATION-EXCEEDING JURISDICTIONAL AMOUNT. Actions in the city court of New York, involving amounts which aggregate more than $2,000, to which sum the jurisdiction of the said court is limited by Code Civ. Proc. § 316, cannot be consolidated under Code Civ. Proc. 817 (applicable to all courts of record), authorizing the consolidation of actions pending in the same court. Appeal from city court of New York. Action by Robert F. Gillin against Thomas Canary on promissory notes. From an affirmance of the judgment in favor of plaintiff (41 N. Y. Supp. 1116), defendant appeals. Reversed. Argued before DALY, P. J., and MCADAM and BISCHOFF, JJ. Joseph C. Rosenbaum, for appellant. Oppenheim & Severance (W. F. Severance, of counsel), for respond ent. |