American Casualty Insurance Company's Case

McSherry, C. J., delivered the opinion of the Court. There are twenty appeals in the record now before us. The cases were elaborately and ably argued during the last October term of this Court and the preparation of the opinion was then assigned to the late Chief Judge Robinson. His lamented death occurring shortly afterwards without his having done more.than hurriedly sketch an incomplete outline of some of the many questions involved delayed a decision till now.

We have had the benefit of Judge Robinson’s notes and will avail of them in this opinion. The American Casualty Insurance and Security Company of Baltimore City was incorporated under the laws of Maryland in January, eighteen hundred and ninety, and began operations with a paid up capital stock of one million dollars. Its business embraced many and divers lines of insurance and indemnity. It was authorized to write and did write policies of insurance against accidents,- against losses by railroads and street railways, arising from injuries to property and persons, whether passengers, employees or strangers; and it engaged in various other kinds of indemnities.

In a little less than four years its whole paid up capital, with the large sums which it had received in premiums —except, however, the funds in Court for distribution — has been swept away by losses, and there are now outstanding liabilities due by it in a very large aggregate amount and to many thousand creditors. Becoming hopelessly insolvent a bill was filed against it by some of its creditors and an order was passed thereon on November the twenty-third, eighteen hundred and ninety-three, appointing receivers to take charge of its assets. The receivers now have in hand certain funds of the insolvent company and the questions before us relate to the method of distributing the same. A portion of these funds is invested in certain securities which ⁵⁵⁹ had been deposited by the company with the Treasurer of Maryland, and the residue consists of moneys derived from other sources ; and the question which is presented at the threshold is whether the proceeds of these securities when sold and the accrued and accruing interest thereon constitute a special or trust fund applicable to a particular purpose — to the payment of a particular class of creditors — or are general assets available for the settlement of all claims due by the insolvent company.

All of the questions involved were passed upon by the Court below in its order of August the eighth, eighteen hundred and ninety-five, from which order the pending appeals were taken. After determining by this order what was the special and what the general funds, and after directing how the commissions, costs and auditor’s fees were to be paid, the Circuit Court ordered that the taxes claimed to be due to the Mayor and City Council of Baltimore were not properly chargeable upon the assets in the hands of the receivers, and further that there were three classes of creditors. The order then proceeded to define each of these classes, and prescribed rules for ascertaining the different values of the several policies held by them. Following, with a single exception, the paragraphs of the order appealed from we come, first, to the question relating to the division of the funds into a special and a general fund.

At the time of the appointment of the receivers there was standing in the name of the Honorable Spencer C. Jones, Treasurer of Maryland, Baltimore City stock of the par value of two hundred thousand dollars, which had been deposited with him by the company as a guarantee for the payment of the policies issued by it. On December the second, eighteen hundred and ninety-three, the receivers filed their petition in the Circuit Court setting forth the facts in reference to the deposit of these securities, and praying the Court to require Mr. Jones to transfer and deliver’ them to the petitioners, to the end that the same might be administered under the order and direction of the Court. To this peti ⁵⁶⁰ tion an answer was filed by Mr. Jones asserting that these securities were held by him as a trust fund for the benefit of the policy-holders of the company and that they could not be applied to any other or different purpose. Presenting this view he submitted to such decree as the Court might deem proper to pass in the premises.

Upon the petition and answer a decree or order was passed whereby Mr. Jones, the Treasurer of Maryland, was directed to assign and deliver this Baltimore City stock to the receivers, to be held by them for the benefit of the policy-holders, subject to the further orders of the Court. Whether this fund is a special or trust fund, or,.on the other hand, belongs to the general assets of the company, depends entirely upon the facts and circumstances under which it was deposited with Mr. Jones. If these are such as to create a trust in behalf of the policy-holders, then the fund must be applied as the terms of the trust direct. In determining whether or not a trust has been created Courts will take into consideration the situation and relations of the parties, the character of the property and the purpose which the settlor had in view in making the declaration.

No technical terms or expressions are needed. It is sufficient if the language used shows that the settlor intended to create a trust, and clearly points out the property, the beneficiary and the disposition to be made of the property. 27 Am. & Eng. Ency. of Law, 26, and the citations in notes 1, 2 and 3. In this case the trust is alleged to have been created by an accident insurance and security company doing business in all parts of the country and having its home office in this State.

In many States of the Union insurance companies of every kind doing business in such States are required to deposit with some one of the State’s officers a certain named sum of money or approved securities of a designated value, as a guarantee for the payment of losses ■ sustained by the policy-holders. And in this State every life insurance company is required to deposit with the Treasurer of the State public securities of the value of one hun ⁵⁶¹ dred thousand dollars as a guarantee for the payment of the policies issued by the company. The American Casualty Company it is insisted however, is not a life insurance company within the meaning of the Code of Public General Laws, and was not therefore obliged to make a deposit of any kind with the Treasurer; and further, that the Treasurer as such had no lawful authority to accept such deposit. We need not stop to consider whether the deposit in this case was made by the company under the impression that it was a statutory requirement, or whether it was made voluntarily with a view to strengthen its credit and to give confidence to its policy-holders of its ability to meet its obligations.

The fact is the company did make the deposit with Mr. Jones and did take from him at the time the following certificate : “ I, Spencer C. Jones, do hereby certify, that I am Treasurer of the State of Maryland, and that the American Casualty Insurance and Security Company of Baltimore City, a corporation chartered by said State, and located in the city of Baltimore, has deposited in this office securities of the denominations and descriptions particularly set forth and described in the schedule signed by me and hereto annexed, amounting in par value to the sum of two hundred thousand dollars; and I further certify, that said securities are now held by me as such Treasurer aforesaid, in my official capacity, on deposit as a guarantee for the payment of the policies of insurance issued by said company. In witness whereof, I have hereunto set my hand, at the city of Annapolis, this twenty-eighth day of July, A. D. 1892. Spencer C. Jones, Treasurer of Maryland.” The schedule annexed to this certificate is entitled “ Schedule setting forth the several denominations and a particular description of the stocks and other securities * * held by me in trust for the policy-holders of the American Casualty Insurance and Security Company of Baltimore City, as stated in the foregoing certificate.” Here then is an express declaration by the, trustee that this city stock was deposited with him by the company, and that it was held by him in ⁵⁶² trust as a guarantee for the payment of its policy-holders ; and this certificate was delivered by Mr. Jones to the company, and was in its possession at the time the receivers were appointed. An intention to create a trust of this kind may be inferred from conduct and circumstances without any express declaration.

Allen v. Withrow, 110 U. S. 119 . In the case at bar we have the most explicit proof of the creation of the trust, for there is the unequivocal declaration of the trustee that he held the funds in trust, and by the acceptance of the certificate there is the direct admission on the part of the company itself as to the existence of the trust, and there is a clear designation of the cestuis que trustent who are entitled under it. This is sufficient. Smith v. Darby, 39 Md. 268—a case directly in point.

The evidence of the trust then is conclusive, not only as to its creation, but also as to the objects and purposes for which and the persons for whose benefit it was established. And in reply to the objection that Mr. Jones has no right to accept the deposit as Treasurer of the State, it js sufficient to say that it is quite immaterial whether he held it in his official or in his individual capacity. If a trust existed it will not be defeated by the inability of the trustee to act. A Court of Equity will never suffer a trust to fail for the want of a trustee.

Nor can the action of Mr. Jones in surrendering the fund under an order of a Court of Equity to the receivers be held to have revoked the trust or to have in any manner affected the rights of the cestuis que trustent thereunder. If he did not care to take upon himself the responsibility of distributing the fund among the parties entitled to it, he had the undoubted right either to invoke the aid of a Court in its distribution, or upon the petition of the receivers to surrender it to the Court, whose officers the receivers were. As to sec.-205, Art. 16 of the Code, which requires trustees to whom any property has been conveyed or limited for the benefit of creditors or to be sold for any purpose, to .give bond to be filed with the Clerk of the Court, it is only necessary to say ⁵⁶³ that it has no application to a trust of this character. That section relates only to the assignment or conveyance of property for the purpose of sale, and it provides that no' title shall pass to any trustee until such bond shall be filed and approved, and that no sale made by any such trustee without such bond shall be valid.

For the reasons we have given we agree with the Court below that the funds arising from the sale of the city stock and the interest accrued and accruing on that stock until sold must be treated as impressed with a trust and must be applied solely to the payment of the claims of the policyholders, subject, however, to such prior or paramount liens upon it as will be hereinafter alluded to. We have just said that we agree with the Court below in that part of the order appealed from which defines the special and the general funds; but we cannot concur in that portion which provides that the general fund shall be set apart for the payment of all creditors “ other than the claims of the policy-holders.” The policy-holders after they have exhausted the special fund are entitled to participate along with all other creditors in the general fund. Passing by, for the moment, the intervening provisions of the order relative to the costs and commissions and which will be disposed of later on, we come now to the claim filed, by the Mayor and City Council of Baltimore for taxes. This appeal presents two questions: First.

Whether the tax levied by the municipality for the year eighteen hundred and ninety-three upon the shares of stock of the company held by residents and non-residents is a debt due and payable by the company or only collectible from the. shareholders ; and secondly, if the tax be a debt due and payable by the company, is it a prior lien over the claims of all other creditors ? These taxes cannot, of course, be considered a debt due by the company unless they are made so by statute, because the' shares of stock are the property of the share-holder and under the Code must be valued to him. But the Code further provides that the shares of stock of ⁵⁶⁴ corporations owned by residents or non-residents of the State shall be valued at their actual cash value, “ but the tax assessed on such stock shall be levied and collected from said corporation, and may be ,charged to the account of such non-resident stockholders ” and shall be a lien on the shares held by them respectively. Code, Art. 81, sec. 138, as to non-residents, and sec. 141 as to residents.

The statute thus makes explicit provision for a certain and prompt method of collecting the taxes due upon shares of stock, whether held by residents or non-residents, by imposing upon the -corporation the obligation and the duty to pay the tax itself. In the case of shareholders not residing in the State it is the only mode in which the State can reach their shares for taxation. National Bank v. Kentucky, 9 Wall. 353 . And when this Court came to deal with the same question, American Coal Co. v. Co. Com.

Al. County, 59 Md. 197 , we held that “the statute having created the duty and obligation to pay when the shares are assessed to the individual owners, that duty and obligation on the part of the corporation may be‘ enforced by a proper action at law.” It these taxes are a debt due by the corporation they are a debt due by it and to be paid by it regardless of any dividends or profits payable by the corporation to the shareholder and out of which it might be reimbursed. New Orleaus v. Houston, 119 U. S. 265 . Though this is conceded ±0 be so whilst the corporation is a going concern, the contention is that when the company becomes insolvent and its property has passed into hands of receivers such taxes cannot be held to be a debt of the corporation for the payment of which its assets are liable.

In reply to this, it may be observed that the tax is by the express terms of the statute charged to and made payable by the corporation. If this be so and if the tax was due at the time of the insolvency, then obviously the insolvency could in no manner affect' thé right of the city to demand payment out of the company’s assets. By Art. 4, sec. 827, Code of Public Local Laws, the city of Baltimore is empowered to levy ⁵⁶⁵ taxes annually upon the assessable property of the city and to provide by ordinance for the collection of the same. The city has provided by ordinance that taxes levied shall be paid on or before the first day of October in the year for which the levy was made, and that the collector may enforce the payment of the same after giving thirty days notice.

These taxes were consequently due when the company’s assets passed into the hands of the receivers; and being then due, the Act of 1892, ch. 518, directs that they shall be paid and satisfied by the officer or person selling under judicial process the property, real or personal, upon which such taxes are payable. As these taxes were due and payable when the company became insolvent, they are, in our opinion, a prior lien upon the assets in the hands of the receivers and must be paid out of the general fund, and if that should be insufficient the balance must be paid out of the special fund. This brings us to that part of the order of August the 8th, which classifies the various creditors, numbering in the vicinity of four thousand. The order divides these creditors into three groups.

First: Clerks, servants and employes to the extent of their salaries or wages due and unpaid for not exceeding three months prior to the appointment of the receivers. These creditors are allowed their claims for salaries and wages due and unpaid for not exceeding three months prior to November the twenty-third, 1893, as preferred claims under Art. 47, sec. 15 of the Code, and such allowance is free from objection, but is, in no contingency, payable out of the special fund. Second: Policy-holders of the company, and, thirdly, all other creditors. First.

Who are included within the terms clerks, servants and employees? By the section of the Code to which reference has just above been made, it is provided that “whenever any person or body corporate shall make an assignment * * or shall be adjudicated insolvent * * or shall have his, her or its property or estate taken possession of by a receiver * * in the distribution of the property ⁵⁶⁶ or estate of such person or body corporate all moneys due and owing from such person or body corporate for wages or salaries to clerks, servants or employees contracted not more than three months anterior “ to such assignment, insolvency or receivership” “shall first be paid in full, &c.” Under no circumstances can these claims be paid out of the special or trust fund. That trust, as we have said, was created for a particular purpose and it was created as far back as eighteen hundred and ninety-two, long before any debt now due for wages or salaries and entitled to priority under the statute was contracted. The trust fund devoted to a special purpose cannot therefore be considered such property and estate belonging to the company at the time it became insolvent as would be liable for the satisfaction of these claims.

In the case of Lewis v. Fisher et al., 80 Md. 139 , we held that an attorney at law was not a clerk, servant or employee; and we have now to determine whether an insurance adjuster is within these terms. What is the precise nature of the duties of an adjuster the record does not disclose. But an adjuster was not, as we understand it, a person in the continuous employment of the company; that is, one who devoted his whole time and service uninterruptedly to the company. In his petition Mr. Phelps says he was employed as an adjuster in the State of Alabama at a salary of one thousand dollars and expenses.

It was his duty and the duty of other adjusters when an accident occurred to ascertain all the facts and circumstances in connection with such accident — how it happened, whether it was through the fault of the insured corporation, the nature and extent of the injury, and to make report thereof to the company. All this involved the exercise of judgment and discretion and required some familiarity with the principles of law relating to the legal liability of the insured. Now, it is clear, we think; that the word “ employee ” as used in the statute was intended to have a limited meaning, and that it cannot be applied in its broadest sense, or as including every one in the service or employment of a corporation or indi ⁵⁶⁷ vidual. The object of the statute was to provide for the payment of the wages and salaries due a certain class of persons to whom such wages or salaries were deemed always necessaiy for their support and maintenance.

The statute first provides for the payment of the wages and salaries of clerks, persons rendering mere clerical services, then, of servants or employees. The statute did not mean by employees persons rendering services of a higher degree than clerks. The duties of an adjuster being, as far as we are able to discover, of the character we have described, these officers, whilst in a general sense employees, cannot by any fair rule of construction be considered employees in the limited and restricted meaning of that term as used in the statute. To hold otherwise would result in the inclusion of a large class of persons in the service of a company or individual as preferred creditors, though they are obviously not within the scope, purpose and object of the Code, under which provision is made for a preference.

But it was .insisted that the conclusions reached by this Court in Lewis v. Fisher et al., supra, are in conflict with the decision in Moore v. Heaney, 14 Md. 558 . Such is not, however, the fact. Two entirely different statutes, relating to different subjects, were construed in the two cases. In Moore’s case the Act of 1854, ch. 23, relating to the exemption of the wages or hire of “ a laborer or other employee ” from attachment, was interpreted] whilst in Lewis’s case the identical statute now involved — the Act of 1888, ch. 383, Art. 47, sec. 15 of the Code — was before us.

In Moore's case this Court gave a wide and liberal meaning to the word “ employee,” so as to bring as large a class of persons as possible within the provision which created an exemption in favor of laborers and other employees from the stringent terms of the attachment law and from the equally harsh effects of an attachment levied by way of execution on wages. The Act of 1854, creating an exemption in favor of a class of persons least able to protect themselves and largely dependent on their wages for support, was given a ⁵⁶⁸ liberal and not a technically strict construction that might perhaps have been placed upon it. But the Act of 1888 (Art. 47, sec. 15 of the Code), was designed to create a preference in behalf of certain creditors in the distribution of an insolvent’s assets, and to that extent it disturbs and destroys the equality amongst all the creditors, which equality it was the obvious, if not declared, policy of the insolvent system to promote and preserve. Hence it was that without questioning the decision in Moore’s case, which defined the words “ other employee ” as used in a statute relating to one subject, we gave in Lewis' case to the term “ employee ” as used in another and a totally different statute, and as restricted by the context and by the words with which it was associated a less comprehensive signification.

The same word used in different statutes relating to different subjects does not necessarily have the same meaning. As observed by Pollock, C. B., in Reg. v. Skeen, Bell C. C. 97, “ there is no word in the English language which does not admit of various interpretations.” We come now to the rules laid down in the order of August the eighth for ascertaining the values of the various policies ; and it will be necessary for the sake of clearness to make some general reference to the nature and character of these contracts of insurance or indemnity. No useful purpose Gould be served, but this opinion would be protracted far beyond all reasonable limits, if the provisions and stipulations contained in the various policies were set forth at large. We may say, however, that with suitable modifications and changes to adapt them to the particular character of loss designed to be covered in each case, and to adjust them to the sort of business in which the insured was engaged, all the policies purport to be either individual accident insurance policies, employee’s indemnity bonds or contracts under which, for a designated and agreed consideration, the company stipulated to indemnify the assured against liability for damages (not exceeding a specified amount) which might arise out of injuries to property, or ⁵⁶⁹ out of an injury to, or the death of, certain persons standing in various relations to the assured — these injuries both to persons and to property and these deaths happening upon described premises and being such as the assured might, in consequence of being responsible for their occurrence, be legally bound to answer for in damages.

The object of the insurance then, except in the case of a mere individual accident policy, was to provide means with which the assured might be reimbursed for any loss he had sustained if he were the holder of an employee’s indemnity bond, or for any damages which he might lawfully be required to pay and did in fact pay by reason of such injuries or deaths as the policies covered, if he were the holder of the other classes of.indemnity. The amount actually paid by the assured to the person injured or to the representatives of the person killed or to the owners of the property damaged or destroyed, settled and measured, within the limits specified in the policy, the extent of the insurer’s liability. And whilst the mere liability of the assured to pay unascertained damages for any of the causes set forth in the contract of indemnity did not determine the precise amount which the insurer was bound to pay to reimburse the assured, it nevertheless fixed the insurer’s liability to the assured under the contract. The happening of the event which subjected the insured to a claim for damages established the period when the corelative obligation of the insurer became complete and ceased to be contingent except as to the amount to be paid.

The liability of the insurer was thereby fixed, though the extent of that liability might, and in most cases must necessarily have been unascertained until a subsequent period. Now, the insolvency of the company cancelled all outstanding policies of insurance for the future. Doane v. M. I. Co., 43 N. J. Eq. 522. It is apparent that all casualties for which the various insured corporations and individuals holding the insolvent company’s policies might be responsible must have happened either before or after the date of ⁵⁷⁰ the insolvency.

If the accidents, which form the basis of the claims now made for indemnity, happened after the insolvency was declared, then, inasmuch as the insolvency can-celled the policies, there can be no claim under the policies, but as the company by its insolvency committed a breach of its contracts, the policy-holders thereupon became entitled to damages for that breach, and these damages are the values of the destroyed policies. Mason v. Cronk, 125 N. Y. 503 ; People v. Security Life Ins. Co., 78 N. Y. 125 . The policies being thus destroyed, of course, all liability under them, from the date of the insolvency, for accidents occurring subsequently to the insolvency, ceased, consequently losses which happened after the insolvency under policies in existence at the date of the insolvency, are not provable against the funds in the receiver’s hands.

Whilst this is so, the values of the destroyed policies are provable, and according to well-settled rules, these values consist solely of the unearned or return premium. And this the Circuit Court decided. With respect to the other category, the occurrence of the casualty before the date of the insolvency — there are two contingencies presented: First, where the accident or injury insured against occurred and the damages were ascertained and actually paid by the assured before the appointment of the receivers;