15 Wis. 113 | Wis. | 1862
Lead Opinion
By the Court,
Tbe facts in this case are substantially as follows: Winne commenced an action before, a justice of tbe peace of Walworth county, to recover an assessment made by him as receiver of tbe Troy Fire Insurance Company, upon a premium note given by Allen to tbe company on a policy of insurance. Tbe company was organized under tbe provisions of chapter 282, Gren. Laws of 1850. Tbe charter filed by tbe company in tbe office of tbe secretary of state, in pursuance of section 3 of tbe act, authorized tbe directors to divide applications for insurance into two or more classes, and provided that in case of such division, tbe premium notes should not be assessed for tbe payment of any loss, except in tbe class to which they belong. In pursuance of tbe charter, tbe directors, in tbe outset, divided tbe business of tbe company into two classes, one of which they named tbe “Farmer’s Department,” and tbe other tbe “Merchants’ Department.” Article 2, section 8 of by-laws of tbe company. They also provided that tbe accounts of each department should be kept entirely separate and distinct, and that no premium note should be assessed for tbe payment of any loss except in tbe class to which it belonged. Section 4 of by-laws. Tbe premium note given by Alien was in the
A number of highly interesting and important questions arise upon the record, and were fully discussed upon the argument. It was insisted on the part of the plaintiff in error, that a creditor’s bill against the corporation was not the proper remedy to enforce the collection of this judgment, either in the United States district court or in a state court, but that the only remedy in the case was a suit to sequestrate the property of the corporation for the benefit of all the creditors ; and it is contended that the district court has no jurisdiction over a proceeding to sequestrate the property of the
By section 11 of chapter 232, under which tbe company was organized, tbe charter filed in tbe office of tbe secretary of state was to be examined by tbe governor, and if found to be in accordance with tbe requirements of tbe act and consistent with tbe constitution and laws of tbe s1 ate, tbe governor was to so certify to tbe secretary of state. Tbis was done in tbe present case, tbe governor certifying that be bad examined tbe charter and bad found it to be in accordance with tbe requirements of tbe act and consistent with tbe laws and constitution of tbe state. Tbe charter thus examined and certified to be correct, authorized tbe directors of tbe company to divide applications for insurance into two classes, according to tbe degree of hazard, and provided tbat tbe premium notes in sucb case should not be assessed for tbe payment of any loss except in tbe class to which they belong. Section 9 of tbe charter of tbe company. In fur tberance of tbis system of transacting tbe business of tbe corporation, on its organization, by-laws 3 and 4, before referred to, were adopted ; which also divided tbe risks into a Farmers’ and Merchants’ Department, and provided tbat tbe accounts of each department should be separate and distinct, and tbat no premium note should be assessed for tbe payment of any loss except in tbe class to which it should belong. While tbe general law conferred upon tbe corporators, trus
It is suggested that there is something in section 5 of the act under which the company was organized, which forbids the making of such contracts by the members of the corporation. The only part of that section which can have any bearing upon this case, is the latter clause, which, in effect, declares that no mutual insurance company, where dividends are not to be declared on earned premiums, shall commence business until agreements have been entered into for insurance, the premium notes on which shall amount to five thousand dollars, and the notes received therefor, and per centage paid — said notes payable when called for according to the charter or by-laws of the company, to pay losses and expenses ; nor shall any company which may be organized under this act, expose itself to any loss on any one fire or inland navigation risk or hazard, to an amount exceeding ten per cent, of the capital. Now all this provision requires is, that premium notes to the amount of five thousand dollars shall be secured as a condition to the company’s organizing and doing business.* And even those notes were made payable when called for according to the charter and by-laws of the company, to pay losses and expenses. Whether it was competent for the directors to provide, in their charter and by-laws, that the notes given in the first instance, for the purpose of assisting in forming the company, might be divided, and assessed to pay only a certain class of losses to which they belonged, it is not material to inquire. I confess I see no solid objection to it, if the insured, who constitute the association, have a mind so to agree among themselves. But however this may be, Allen's note was not one of those notes. The policy of Fitzpatrick and Yanalstine in the Merchants’ department, was issued for one year, and expired previous to the 27th day of October, 1852, almost a year before the note was given by Allen. In any view of the case, it cannot therefore be said that they had a right to
We were referred to tbe case of Thomas v. Achilles, 16 Barb. (S. C.), 491, where it is held that a mutual insurance company organized under tbe general insurance act of April, 1859, of that state, bad no right to divide its risks into two classes, according to tbe degree of hazard, and to assess tbe premium notes only for a loss happening in tbe class to wbicb such notes belong. Justice MaeviN thought such a provision in tbe charter contrary to tbe policy of tbe law, wbicb intended that tbe company should possess $100,000 in premium notes, as capital stock, to meet any losses tbe company might sustain. Tbe counsel for tbe plaintiff in error pointed out and commented on tbe very obvious distinction existing between tbe New York statute and tbe one under wbicb tbis company was organized. Tbe New York statute provided that tbe premium notes executed to tbe company should he deemed valid and should he negotiable and collectable for the purpose of paying any losses which might accrue. 2 New York Rev. Stat., Banks & Bros.’ Edition, p. 744, Title 18, part 1, section 5; while by our law tbe notes were payable when called for by tbe charter and by-laws of tbe company. Tbe distinction is material and important, and would render tbe reasoning of Justice MaeviN, in Thomas vs. Achilles, even if sound, inapplicable to tbe case at bar. But still I am not prepared to adopt tbe doctrine of Thomas vs. Achilles as sound law even under tbe New York statute. For I am utterly unable to perceive bow or in what manner tbe policy of that statute would be contravened or violated by permitting a mutual insurance company to divide its risks, and make tbe premium notes liable only for a loss occurring in tbe department in wbicb they are placed. Suppose it is assumed that such a provision of law was intended for tbe pro-
In tbe case of Savage vs. Medbury, 19 N. Y., 32, it appiears that tbe charter and by-laws of the Empire State Mutual Insurance Company contained provisions for different classes of hazards, and that premium notes should not be assessed for any losses except in tbe class to wbicb tbey belonged. And although tbe validity of such a provision was not directly before tbe court for adjudication, yet Chief Justice JOHNSON, in alluding to this provision, with others, thiows out no bint that be considered it invalid, as contrary to tbe policy of tbe law of that state, but does, I think, assume that it governs the rights of tbe parties in the special cases to wbicb it relates. See also Waite vs. Haight, 17 N. Y., 310.
I have placed no stress'upon the fact that tbe governor, by tbe 11th section of tbe act of 1850, was to examine: tbe charter and certify that its provisions were consistent with tbe constitution and laws of tbe state. That was dons in this case. Tbe charter contained the provision for dividing tbe risks, and that tbe losses should be met by assessments on tbe premium notes in each class. As tbe company was organized and commenced doing business on this plan, the insured relying upon tbe certificate of tbe governor and the legality of tbe provisions in tbe charter, were I now of the opinion that those provisions were invalid because they contravened tbe policy of tbe law, I should feel constrained to also declare void all contracts of insurance and premium notes wbicb 'bad been given upon the faith of such provisions being lawful. These premium notes were undoubtedly given by tbe insured in consideration of the risk which the company assumed, and with the distinct understanding that
I tbink the judgment of the circuit court should be reversed, and that of the justice affirmed.
Rehearing
A rehearing having been granted, the cause was argued before the full bench.
Winsor & Smith, for plaintiff in error:
Allen is not liable to contribute to the satisfaction of the judgment, because his premium note belonged to the Farmers’ Department, and the judgment was for a loss in the Merchants’ Department. The New York general law under which Thomas vs. Achilles, 16 Barb., 497, arose, provided that no mutual insurance company in any county of the state, with certain exceptions, should commence business until agreements had been entered into for insurance, the premiums on which should amount to $100,000, and the notes received therefor, payable at the end of or within twelve months from the date thereof, which notes should be considered apart of the capital stock, and should be deemed valid, and should be negotiable and collectable for the purpose of paying any losses which might occur or otherwise. N. Y. Rev. Stat., 4th Ed., p. 1280, sec. 5; N. Y. Laws of 1849, chap. 308, sec. 5. Under this law, it is held by the courts of New York that the notes given on the organization of a mutual insurance company are capital stock, and payable absolutely. And the same courts hold further that the premium notes given to the company subsequently are only subject to the payment of actual losses and expenses, and cannot be collected until after a legal assessment for that purpose. Devendorf vs. Beardsley, 23 Barb., 656; White vs. Haight, 16 N. Y., 310; Savage vs. Medbury, 19 id., 32. In the case of Thomas vs. Achilles the court evidently failed to notice the distinction between these two classes of notes, and treated the subsequent premium notes as being, like the stock notes, devoted to the payment of all losses, without regard to the different departments. Nevertheless the distinction is very plain. Under the New York law the original notes are absolute promissory notes, intended to be so in form as well as sub
Under our law, tbe notes given on tbe organization of a company like tbe Troy Eire Insurance Company, are not different from the premium notes given afterwards. These original notes, it will be seen by reference to tbe law, are not made capital stock as they are in Hew York, nor are they to be made payable absolutely, nor negotiable, nor collectable for tbe payment of all losses or otherwise; but they are to be payable when called for according to the charter and bylaws of the company, to pay losses and expenses. Tbe charter and by-laws of this company both provide that no premiam note in one of tbe departments shall be assessed to pay any loss in tbe other department. Allen, who was insured in lie Farmers’ Department, cannot be called upon to contribute, to pay a judgment for a loss in tbe Merchants’ Department. Tbe receiver, therefore, bad no title to Allen's premium note. Title is tbe right to control, to use, to apply. There was no purpose for which tbe receiver could lawfully use or apply tbe proceeds of that note. He could not apply them to the judgment, because such application would be in direct violation of tbe contract itself, and of tbe charter and by-laws of tbe company; be could-not apply them to any other purpose, because -the judgment was tbe only claim against the property of tbe company over which tbe district court bad acquired jurisdiction. Tbe only right of that court to control tbe property of tbe company rested upon its author ity to compel satisfaction of tbe judgment; consequently it could neither make nor authorize any application of such proceeds, except to satisfy tbe judgment.
Wyman Spooner, for defendant in error :
There is no other legal alternative than to adopt the ruling of this court in the case of Kelly vs. The Troy Fire Insurance Company, 3 Wis., 254, that the company is but one body, although it may within itself have different departments; that the judgment, from whatever cause arising, is the debt of, and a judgment' against the whole company; that, under its charter and by-laws, the company might lawfully collect and assess all its premium notes, “ taking care to apply the proceeds according to its charter and by-laws. The district court could not discriminate as to members or departments in its order requiring the company to assign its assets and credits, because the company held them as the assets and credits of the company as a corporation, a sipgle body. And the same court, having become possessed of these, held them as the company held them, to pay the debts of the company, and being so possessed, could, through its receiver, do whatever the company might legally do in the collection, taking
Allen's note is a promise to pay the corporation — not any * le-partment or portion of it — a certain sum, without condit; m or limitation, except that such sum shall be paid in such portions and at such times as the directors may require, agreeably to their charter and by-laws. How the charter and bylaws require no loss previous to assessment or demand of payment, nor even that there shall be an indebtedness existing at the time of assessment, which is, in effect, only a • le-mand of a payment of a part of the sum specified; and the re is no requisition that the assessment or demand shall extend beyond the individual note. Suppose then there were m understanding, or even an express agreement, that the mon *y to be assessed and collected on Álleri!s premium note shou > d be applied in a particular way or to a particular purpof.1, (and this is the most that can be made even by constructs »n or intention out of the charter and by-laws of the company) and the directors proceed to require Allen to pay a certa a portion of the whole, with or without the avowed purpose >,o pay the debts of the company. Oould Allen set up the agre ment by way of defense against the payment? And could the court, in an action to enforce payment, in anticipate >n that the directors would or might misapply the proceeds when collected, let in an inquiry as to what the directo-a might possibly do with the money, after it was collecte I, contrary to their declared purpose to pay the debts of the company? Certainly not; because this court has already d¡dared (in the case of Kelly vs. The Troy Fire Insurance Co., that the premium notes may be indiscriminately collected at the will of the directors, for the purpose of paying debts and expenses — losses or no losses, debts or no debts. In, this case the district court has assumed to stand in the place
As to the attempt to discriminate and explain the opinion in Kelly vs. The Troy Fire Ins. Co., by assuming that it did not apply except in cases where the object is to carry on the business of the company, and that the receiver has no authority to do this, it is sufficient to say, that in justice and equity, the making of assessments to pay debts already existing is quite as necessary as the providing for future indebtedness, and quite as essential to the successful prosecution of business.
Winsor & Smith, in reply :
We admit that the district court has attempted to appropriate Allen's note to pay the judgment in favor of Fitzpatrick and Yan Alstine. We- further admit that the judgment is a debt against the company as cm entirety — that is, against the corporation. But it is not' a debt against the members of the company in their individual capacity. We admit that the property of the company is liable. But we deny that the liability of any person whatever upon a contract with the company (whether such person is a member of the company or not), is affected by the facts so admitted. And we deny that the liability upon such contract is any greater in consequence of the fact that the action is brought by a receiver. Williams vs. Lakely, 15 How. Pr. R., 206; Savage vs. Medbury, 19 N. Y., 32. If the company could
The counsel for the parties argued several other questions at length; but as the questions were not passed upon by the court, the argument is here omitted.
By the Court,
Upon the first argument in this case I did not sit, and took no part in the decision, for the reason that I then supposed that I had once been employed as counsel. The facts were, that I was once employed as counsel by an agent of a number of parties interested in the questions involved in this case, and on the former hearing I supposed the plaintiff in error was one of them.
A rehearing was asked for upon affidavits showing that such was not the fact, and it was granted, the whole court deeming it my duty to act in the case.
I deem it necessary only to say that I concur in the views already expressed in the opinion of Justice Cole, the result being that the judgment is reversed, with costs.