
    In the Matter of the Application of The People of the State of New York, by William T. Emmet, Superintendent of Insurance, for an Order to Take Possession of the Property and Liquidate the Business of The Empire State Surety Company. Richmond Radiator Company, Appellant; William T. Emmet, as Superintendent of Insurance, Respondent.
    First Department,
    December 4, 1914.
    Insurance — liquidation of business of surety company pursuant to section 63 of the Insurance Law — violation of order restraining creditors from taking proceedings against insolvent corporation — filing claim in another State — contempt.
    The Supreme Court, in a proceeding directing the Superintendent of Insurance to take possession of the property and liquidate the business of a surety company, pursuant to section 68 of the Insurance Law, may grant an order restraining creditors of the surety company from taking proceedings against it for the purpose of recovering them claims.
    Where such a restraining order is served upon a creditor and he files his claim with the Superintendent of Insurance, the Supreme Court acquires jurisdiction over his person, and may punish him for failure to obey the order.
    Hence, a creditor of such a corporation who after the service of said order upon him files a claim in the United States court in another State, against funds deposited by said surety company, as a condition of doing business within that State, violates the provisions of the injunction order and may be punished for contempt.
    Hotchkiss, J., dissented, with opinion.
    Appeal by Richmond Radiator Company from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 2d day of September, 1914, granting a motion to punish the appellant for contempt in violating an injunction order.
    
      White & Case, for the appellant.
    
      Frederic G. Dunham, for the respondent, Superintendent of Insurance.
   Ingraham, P. J.:

On the 16th day of December, 1912, an order was duly made in this proceeding directing the Superintendent of Insurance to take possession of the property and liquidate the business of the Empire State Surety Company, pursuant to section 63 of the Insurance Law. (See Consol. Laws, chap. 28 [Laws of 1909, chap. 33], § 63, added by Laws of 1909, chap. 300, as amd. by Laws of 1912, chap. 217.) Among other things, that order provided: That until the further order of this court, the policyholders and creditors of the said corporation and all other persons be, and they hereby are, enjoined and restrained from bringing * * * any action at law or suit in equity or special proceeding against the said corporation; and from making or executing any levy upon the property of the said corporation, or in any way interfering with the said Superintendent of Insurance, or his successor in office, in his or their possession, control and management of the property of the said corporation or in the discharge of his or their duties as liquidators thereof.” Prior to the 15th day of March, 1913, the appellant filed with the Superintendent of Insurance a claim for materials furnished to E. H. Eichardson & Son, Hampton, Va. On the 28th of April, 1913, the order of the 16th of December, 1912, containing the said injunction was duly served upon the appellant. On the 27th of December, 1913, there was filed in a certain proceeding instituted in the United States District Court for the Western District of Virginia a petition of the appellant, whereby the petitioner prayed that its claim of $1,500 he allowed as a claim in the State of Virginia outstanding against the said Empire State Surety Company, and, therefore, entitled to he paid out of the proceeds of the funds deposited by said Empire State Surety Company as a condition of doing business within that State. This proceeding was thereupon instituted to punish the appellant for contempt for violation of the injunction of the 16th of December, 1912.

By filing its claim with the Superintendent of Insurance against the insolvent corporation, the liquidation of which this State had undertaken, and by the service of the order of this court of the 16th of December, 1912, upon the appellant, the Supreme Court acquired jurisdiction over the appellant, and it was bound to obey its orders. Whether that order was or was not improvidently granted is not in controversy in this proceeding. The only question is whether the court had jurisdiction to make the order, and, if it had, whether the appellant, had violated the injunction therein contained.

I have no doubt but that the court had jurisdiction to make the order. The said Empire State Surety Company was a New York corporation. The Supreme Court of this State had instituted a proceeding to liquidate its business and apply its assets to the payment of its debts. All the property of the corporation, wherever situated, thereby vested in the Superintendent of Insurance for the purpose of liquidation. The Supreme Court had jurisdiction to take possession of its assets and direct their application to the creditors of the corporation, and it had jurisdiction to restrain the creditors of the corporation from taking proceedings against it for the purpose of recovering their claims, and to restrain the creditors from interfering with the possession of the property by the Superintendent of Insurance. It may be that, upon a proper application to the court, it might have relieved the appellant from the injunction and allowed it to file the claim against the said company in Virginia. But the appellant, if it violated the order of the Supreme Court, was liable, in this State, at any rate, for the penalty which the statute imposes for a violation of its orders. The Superintendent of Insurance was entitled to receive from the State of Virginia the proceeds of the funds deposited by the said Empire State Surety Company in the State of Virginia, in excess of any liens to which it was subject. An attempt by a creditor of the said company to obtain a lien upon that fund in the State of Virginia was an attempt to deplete the property of the said company which would come into the possession of the liquidator for the purpose of being applied to the payment of the corporation debts.

I do not think that the question whether this injunction was too broad, or should not have enjoined the appellant from taking this proceeding to enforce its claim, can be considered on this appeal. The questions, it seems to me, are whether the court had jurisdiction — which I think it clearly had; whether the court acquired jurisdiction over the person of the appellant— which I think it clearly did; whether the appellant, by filing its claim in the United States District Court for the Western District of Virginia, violated the provisions of this injunction order—which I think it clearly did. The appellant was, therefore, in contempt, and the court has the power to punish it for such contempt.

By section 770 of the Judiciary Law (Consol. Laws, chap. 30; Laws of 1909, chap. 35) the court was authorized to determine whether the accused had committed the offense charged, and was then directed to make a final order providing that it be punished by fine or imprisonment. Section 773 of the Judiciary Law provides: “Where it is not shown that such an actual loss or injury has been produced, a fine must he imposed, not exceeding the amount of the complainant’s costs and expenses, and two hundred and fifty dollars in addition thereto * *

I do not see in the record any statement that tends to show that the Superintendent of Insurance has been occasioned any loss or injury by the institution of this proceeding in violation of the injunction, nor does it appear that he was entitled to any costs or expenses of the proceeding.

I think, therefore, the order should be modified by fixing the fine at the sum <of $250, and striking out the sum of $50 as compensation to the petitioner, and as so modified affirmed, but without costs.

Scott, Clarke and Dowling, JJ., concurred; Hotchkiss, J., dissented.

Hotchkiss, J. (dissenting):

The claim of the appellant is that Huffman, the subcontractor in whose favor the claim originally arose, and who was the assignor of the Model Company, appellant’s predecessor in interest, was at the time the debt was contracted, a citizen of Virginia and, as such, under the laws of that State, was entitled to a lien on the securities in the hands of the Virginia commissioner; and that appellant became subrogated to Huffman’s rights with respect to such securities. It is doubtless true that by filing its claim with Superintendent Emmet, appellant subjected itself to the jurisdiction of this court and that, as an incident to such jurisdiction, the court was invested with power to make such orders as were necessary for the protection of the assets amenable to the proceedings pending before it, and in that behalf to direct and control the appellant with respect to its claim as filed. But by the mere act of filing its claim, appellant did not release any security it may have had therefor, or the right to enforce the same. (People v. Remington, 121 N. Y. 328; Matter of Binghamton General Electric Co., 143 id. 261.) Securities deposited under circumstances similar to those under which the securities held by the Virginia commissioner were deposited, have been held to constitute a separate fund, to be administered for the benefit of those in whose behalf the fund was created. (See People v. Granite State Provident Assn., 41 App. Div. 257; affd., 161 N. Y. 492.) The fund in question was not under the jurisdiction of this court, nor could this court control its distribution. It was held by the State of Virginia, which was undertaking its distribution in a special proceeding to which all persons having claims against the fund were invited to become parties. It would in no way have inured to the advantage of the general assets of the surety company had the appellant refrained from filing its claim. Such action on its part would only have increased the pro rata distribution of those who did file claims. The securities constituting the Virginia fund had passed out of the possession of the surety company and were not under its control, and the respondent had no interest in the fund as such. He was at most entitled to contest the right of the Virginia authorities to distribute the same, or the right of the appellant or other claimants under the Virginia law to participate in such distribution, always providing that the respondent should be admitted by the Virginia courts to intervene in the proceedings there pending. By filing its claim, appellant did not interfere with or embarrass any such right on respondent’s part. Nor, had respondent not so intervened, would a determination in those proceedings that appellant was entitled to participate in the fund have had the effect, as against the respondent, of an adjudication as to appellant’s status as a creditor so far as any New York assets or any general assets of the surety company were concerned. The situation was then entirely different from what it would have been had defendant attempted to subject the general assets of the surety company in a foreign jurisdiction either to a general or to a special claim on appellant’s part. It is not claimed that on this appeal appellant can raise any question concerning the validity of the injunction order, but we may properly inquire whether the injunction, when fairly construed, extended to any such situation as that disclosed by this record; and that question, as a question of law, I think must be answered in. appellant’s favor. But if I am wrong in this, and assuming the question to be one of fact, the situation was at least one of such doubt that, under the circumstances disclosed,, no willfulness or contumacy being disclosed, the order appealed from was unwarranted.

Order modified as stated in opinion, and as modified affirmed, without costs. 
      
       Since amd. by Laws of 1913, chap. 29.—[Rep.
     