53 N.Y.S. 628 | N.Y. Sup. Ct. | 1898
The defendant insurance company was organized in 1814 as a mutual insmance corporation, and ever since has carried on a very successful business. The mode of insurance as spread in its constitution is conformable to the requirements of the statute applicable to such companies. Each person designing to avail himself of the insurance provided by its charter paid as cash premium a certain sum fixed by the board of trustees, and as further collateral security deposited his promissory note for such sum as said trustees determined, restricted, however, to five times
There are many averments in the complaint that have very little to do with the substantive cause of action, averments evidently in
Again, it is charged that a large number of the members became “ distrustful of the management ” and made á vigorous effort at the last annual election to oust the trustees, but the latter secured their retention by proxies, from the various members. This accusation, inasmuch as no unfair or fraudulent conduct is charged, is a trifle amusing. Each proxy represented a member, and as that was the mode of voting prescribed by the organic law of the company, any one could be energetic in. procuring powers of attorney from his associate members, and the fact that one man was more successful possibly than his rival in the race, should not subject him to obloquy. About, all there is in that allegation is that two' parties were striving for the ascendancy, and the defeated party, like an unfortunate candidate for political preferment, felt sore over its defeat and has come to regard the election of its competitor as a public calamity,
Again, the complaint alleges that the act .permitting the change fróm a mutual to a stock corporation without the consent of the members was .enacted through the influence of these trustees. Ro averment of any improper interference on their part is embodied in the complaint, so that this charge has little of merit in it so> far as the pleading shows. The further allegations relate to the excellent financia] status of the company and the various acts showing the intention of the trustees to become a stock corporation in pursuance of the legislative enactment mentioned. After all the pith of the controversy is as to the right of the trustees to make this change without the consent of the members, The argument of the plaintiff is that every-policyholder by virtue of his membership, is a co-partner and entitled to a pro rata share in the assets of the corporation. ' I do not so interpret his relations to the corporation.. If that were so the death of a policyholder would ipso facto dissolve
Again, in Uhlman v. New York Life Ins. Co., 109 N. Y. 421, citing the above case as authority, Judge Peckham says, at p. 429: “ It has been held that the holder of a policy of insurance, even in a mutual company, was in no sense a partner 'of the corporation ’-which issued the policy, and that the relation between the policyholder and the company was one of contract, measured by the terms -of the policy.” See, also, People v. Security Life Ins. Co., 78 N. Y. 114.
I am aware that in Lawrence v. Nelson, 21 N. Y. 158, a contrary doctrine was held, but in that case the scheme of insurance provided for making annual statements, and if the business showed profits a certificate was ‘delivered to' each policyholder, showing the amount to which he was entitled as profits, only it was stated in the certificate such sum should'be retained by the company to meet any losses that might be incurred. The very charter of the company provided for this distribution, and it was essential to construe their relation as thatiof a partnership. In the case of Mygatt
It seems ■ to me, however, the question involved in this action does not depend for its solution upon this relationship of plaintiff to the company. Insurance companies, at least since the creation of the insurance department in 1859', have been Under the dominion largely of that department and of the legislature of the state. Their manner of organization, their method of doing business, and, in certain contingencies, their very life, are within the control of the legislature or its creature, the insurance department, and enactments in execution of these rights have, from time to time, been made. The object is primarily to insure safety to the policyholder in effecting his .insurance. When this defendant company was organized in 1814 every member or incorporator knew of the right of the legislature to control the management of the company, and to'enact further legislation to make effective its power to conserve and guard the rights of policyholders. The right to’ organize an insurance company is a public franchise, and the plaintiff and the early incorporators -knew this fact, and /that they must expect to conduct their business subject to whatever restrictive enactments ■the legislature should see fit to impose.
The amendment in the law of 1896, permitting the .change to a stock corporation, to be made dependent only upon the action of the trustees, was one of the rights inherent In the power of the legislature to control and regulate the affairs of these companies. The trustees were the chosen representatives of the members of the corporation, and the legislature did not transcend its power in^ committing the right of transfer to the trustees instead of h> the individual members. Thd requirement that $200,000 in cash must . be subscribed and contributed to its assets as a condition precedent to the’ change, embodies nothing new in substance. That requirement and the manner of p-arf ecting the change to insure the rights of the policyholders and permit them' to take stock in- the nfew corporation are either parts of the old law, or essential to- the new corporation. While section 125 of the General Insurance Law then in force contained' no- restriction limiting the formation of such.companies to a minimum capital of $200,000; yet such was' fairly the scope .of" the law as provided in section 124. The designation of a specific capital was probably to- overcome the elimina
I cannot subscribe to the argument of plaintiff’s counsel that chapter 850 of the Laws of 1896 fails to provide for a transfer of the assets of the old company to the new. That is the marrow of ■ the statute. The whole scheme of the law, as evinced in'section 125, both before and since the amendment of 1896, was to extinguish the mutual company upon the completion of the stock corporation. ¡The assent of the superintendent of insurance, the vote of three-fourths of the directors, the priority given to the members in the taking of stock, the examination by the superintendent after the capital stock has all been paid for, and his certificate thereof, are all steps preceding the extinction of the mutual company by the creation of the new. The old company is “ reorganized.” The transformation from the chrysalis to the winged state is not more complete than from the mutual to the stock corporation. The reorganized company assumes the payment of the existing policies and receives the premiums. If this is not.the scope of the statute then it is shorn of its substance.
The complaint is not framed in fraud. If pertinent allegations changing the scope of the action to one of fraud had been made, a vastly different question would be presented. '
There is nothing in the averments of the complaint making an accounting necessary, and it is not sought ti> interfere with the trustees in the prosecution of the business of the company, so section 56 of the General Insurance Law does not seem to me to be applicable to the case as argued by defendant’s counsel.
The demurrer is sustained, with costs.
Demurrer sustained, with costs.