Irving Trust Co. v. Maryland Casualty Co.

Before it went bankrupt, Maryland Casualty Co. (defendant) was a Delaware corporation doing business in New York. To pay its debts to four surety companies, Maryland Casualty and its subsidiaries transferred interests in real property in New York, Florida, Missouri, and New Jersey, along with the associated personal property (e.g., mortgages) directly to the sureties or their nominees. Nine months later, creditors forced Maryland Casualty into involuntary bankruptcy. The bankruptcy court found Maryland Casualty insolvent and appointed Irving Trust Company (Irving) (plaintiff) as bankruptcy trustee. Irving brought an equitable action to recover the transferred interests under the New York corporate code, claiming Maryland Casualty was at or near insolvency at the time, and that the surety companies knew or should have known Maryland Casualty made the transfers intending to prefer the surety companies over other creditors. The trustee’s bill in equity did not say where the transfers were made, but the contracts required delivery in New York. The court dismissed the bill in equity, reasoning the New York corporate-code section Irving referenced made officers, directors, and shareholders of a foreign corporation liable for transfers made in or near insolvency to the same extent as those of domestic corporations, but did not make the transfers themselves illegal. Irving appealed.