112 Neb. 105 | Neb. | 1924
Action in equity to enjoin the defendant insurance company from distributing certain funds among charter members under contracts or certificates to be referred to later. A number of holders of said certificates are joined as defendants, and the question for decision is whether or not the contracts were valid obligations of the company within their powers to assume. The case is submitted on the pleadings and a stipulation of facts.
In September, 1904, five citizens of Norfolk, Nebraska, executed articles of incorporation of the Elkhorn Life and Accident Insurance Company, which were duly filed and approved by the secretary of state September 30, 1904. The plan of operations was the mutual benefit natural or stipulated premium plan. The company was organized under chapter 43, Comp. St. 1903, which provided that no such company should be organized or transact any business of insurance until it had received at least 250 applications for insurance. In compliance with this requirement, the organizers of the company solicited and procured 250 applications, and thereupon commenced business under its arti
“Charter Membership Certificate (250 Required by State Law).
“This contract, entered into this-day of-190 — , by and between the Elkhorn Life and Accident Insurance Company of Norfolk, Nebraska, party of the first part, and-of-, Nebraska, party of the second part, witnesseth:
“II. That in consideration of the payment of five ($5.00) dollars, receipt of which is hereby acknowledged, being the fee for said charter membership and the further payment of the sum of-(less membership fee), being the -premium on $-of insurance, as per the agreements and terms of the policy, said premium to be paid upon delivery of policy,- is hereby accepted as a charter member of the Elkhorn Life and Accident Insurance Company.”
“HI. The Elkhorn Life and Accident Insurance Company hereby agrees and guarantees to set aside from the expense element (5) five per cent, of the gross annual premiums written each year as a dividend fund, and that so long as the said-shall continue the payments of premiums as per terms of said policy that he shall be entitled to such share of said dividends as shall be obtained by dividing such dividend fund equitably among the charter members remaining in force, dividends to be computed on the first day of January each year.
“Elkhorn Life and Accident Insurance Company,-, Secretary.
“Signed by-, Charter Member.”
Certificates of this character appear to have been issued to the 250 original applicants, although there appears to be no record or mention thereof until May 20, 1905, after the company had regularly commenced business, when new certificates were issued in the following form:
“The Elkhorn Life and Accident Insurance Company hereby agrees to set aside from the expense fund five per cent, of the gross annual premium written each year, on which the payment is made to the company, as a special dividend fund for the exclusive benefit of the charter members, who are limited to the holders of the first two hundred and fifty policies issued and paid for. On the first day of January of each year this fund will be divided equally among the charter members retaining their membership with the company, and will be applied to.reduce the premium so long as premiums are to be paid, and will be paid in cash annually thereafter on the anniversary of the date of the policy. Upon the termination of said policy this contract shall cease and no further benefits will be derived therefrom.
“In witness whereof, the said The Elkhorn Life and Accident Insurance Company of Norfolk, Nebraska, has caused this certificate to be signed by its president and secretary and caused the corporate seal to be hereto affixed, this -day of-, A. D.-.
-, President.
“(Seal) -, Secretary.”
These second certificates were to be in lieu' of the others, but only a small number of the latter were returned to the company. No record exists regarding authorization or issuance of these second certificates, except the stubs in the book from which they were taken. Policies of insurance in regular form were issued to the 250 original subscribers; they contained no reference to these certificates.
The following sections of the constitution or articles of incorporation of the defendant company are the only ones material to our present inquiry:
“Article 4. Members: The persons insured, who may be designated policy holders, are the members of the asso
“Article 6. The Plan in General: The object for which this company is formed is to insure the lives of individuals, to furnish benefits to the widows, heirs, orphans or legatees of deceased members, and of paying accident indemnity, upon the mutual benefit natural or stipulated premium plan.”
In 1906 the attention of the insurance department of the state was called to the existence of these “charter membership contracts,” and the department insisted that they be canceled or modified, and considerable correspondence took place between the company and the department, but nothing further was ever done in .that regard until April 24, 1909, when a resolution was passed attempting to limit the number of years that payments should be made under those contracts; and February 25, 1911, the board of directors ordered a dividend of $8 to be paid upon each of said certificates and the remainder of the so-called “dividend funds” to be applied upon the expenses of certain litigation. No dividends have been paid upon said certificates since 1917, when they ceased upon advice of the company’s counsel. The funds of the company have never been separated into “Reserve,” “General,” and “Surplus,” except each year the
Section 3994, Comp. St. 1903, provides that the notice of assessment must state the purpose for which it is to be used, and any surplus shall be set aside and used only for such purpose ás the by-laws and notices specify.
The principle is well established that the powers of a corporation are defined by and limited to those provided for and granted by its charter and the statute under which it is organized, and it possesses no powers other than those expressly stated and such as are necessarily implied therefrom. State v. Atchison & N. R. Co., 24 Neb. 143. They include, unquestionably, the power to do all acts and make all contracts necessary to the proper and orderly conduct of the business of the corporation. The present contracts are in a sense preorganization contracts; they originated
The insurance company is willing to perform the contracts in question; but, owing to their questionable validity,
The judgment of the district court is reversed and the cause remanded, with instructions to enter a decree for the plaintiff as prayed.
Reversed.
Note — See insurance, 32 C. J. p. 1030, sec 84 (1925 Ann.).