
    In the Matter of the Application of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance of the State of New York, for an Order to Take Possession of the Property and Liquidate the Business and Affairs of the Lexington Surety and Indemnity Company. George S. Van Schaick, as Superintendent of Insurance of the State of New York, as Liquidator of the Lexington Surety and Indemnity Company, Appellant; Anna Lombardi and Others, Respondents.
    First Department,
    May 4, 1934.
    
      
      Isaac Goldstein of counsel [Alfred C. Bennett, attorney], for the appellant.
    
      Sidney Moskowitz, for the respondents Anna Lombardi and Nathaniel Becher.
    
      Irving W. Weinblatt of counsel [Nathan Lieberman, attorney], for the respondent Harlem S. D. A. Church.
    
      Joseph Burger, respondent in person.
   Per Curiam.

The transfer of the choses in action specified under Exhibit A, not having been shown to have been made at a time when the surety was insolvent, constituted a proper restoration of part of the diverted funds. The attempted transfer of the funds and choses in action represented by Exhibit B, however, having rendered the surety company insolvent, is good only to the extent that trust funds may be traced into the property so assigned. Under the decision in Clarke v. Rogers (183 Fed. 518; affd., 228 U. S. 534) the defaulting trustee may not restore' the trust property from general funds if by so doing a preference would be accomplished.

The order entered March 17, 1934, accordingly should be modified by directing that a referee be appointed to hear and report at Special Term as to what property transferred under Exhibit B represents trust money wrongfully abstracted from the collateral account. If in mailing this investigation it develops that it is possible to determine priorities among the various claimants to any of this money, the referee should so report. As modified, the said order is affirmed, without costs.

The appeal from the order entered November 27, 1933, is dismissed.

Present'—Finch, P. J., Martin, O’Malley, Townley and Glennon, JJ.

Order entered March 17, 1934, modified as indicated in opinion, and as so modified affirmed, without costs.

Appeal from order entered November 27, 1933, dismissed.

Settle order on notice.  