In re California Mutual Life Insurance

Works, J. Insolvent proceedings under the insolvent act of 1880.

The California Mutual Life Insurance Company was organized under the act of April 2, 1886, entitled “An act to provide for the incorporation of mutual insurance [365]companies for the insurance of life and health, and against accident.” (Stats. 1866, p. 752.)

In March, 1885, the corporation was regularly adjudged to be an insolvent debtor by the superior court of San Francisco, and in April following S. Prentiss Smith was elected and appointed assignee. Pursuant to notice, given as required by law, a large number of claims against the company were presented to the assignee, and among them the claim of Charles Baum and fifteen others, who are the appellants here. These claims, amounting to over five thousand dollars, were disputed by the insolvent and by the assignee, on the ground that they were for moneys paid by the appellants as stockholders of the corporation, on account of matured policies of insurance and as original debtors, and not as guarantors.

On the trial the alleged ground of the objection to these claims was found to be true; yet the court found and adjudged the claims to be valid claims against the insolvent, but payable only out of what the court denominated the “general assets,” as distinguished from and exclusive of the “ guaranty fund,” consisting of the “guaranty notes” made to the company as required by said act. (Secs. 8, 9.) What were thus called the general assets consisted only of a claim of the insolvent against the Republic Life Insurance Company of Illinois, which claim was unavailable and of no apparent value by reason of the insolvency of the last-named company. The “guaranty fund ” consisted of promissory notes of solvent persons made payable to the order of the insolvent five days after demand, according to section 9 of said act, amounting to about one hundred and forty thousand dollars, and immediately available for more than one hundred thousand dollars; while the allowed debts of the insolvent, including those due the appellants, were found not to exceed thirty-five thousand dollars.

If, therefore, the “guaranty fund” was properly applicable to the payment of all the debts allowed by*the court, [366]