Case Name: Greene et al. v. Walton et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1891-02-04
Citations: 13 N.Y.S. 147
Docket Number: 
Parties: Greene et al. v. Walton et al.
Judges: 
Reporter: West's New York Supplement
Volume: 13
Pages: 147–149

Head Matter:
Greene et al. v. Walton et al.
(Supreme Court, General Term, Third Department.
February 4, 1891.)
Mutual Insurance—Liability of Directors.
Laws N. Y. 1875, c. 267, § 8, provides that “the directors * * * of any society or corporation organized under the provisions of this act * * * shall be jointly or severally liable for all debts due from said society or corporation, contracted while they are trustees, ” etc. A policy issued by a society incorporated under this act provided that “the directors of this society, either individually or as a body, shall not assume any liabilities personally by reason of the issuance of this certificate. ” Held, that the f oregoing statute formed a part of the charter of said society, and that said provision of such policy, being repugnant thereto, was void. Learned, F. J., dissenting.
Appeal from Schenectady county court.
Action by John G. Greene and Abram G. Yeeder against Anthony Walton and others, directors of the Hational Stock Owners’ Mutual Benefit & Indemnity Society, to recover the amount of an insurance certificate or policy, issued to plaintiffs by that society, insuring them against loss, by death, of a horse belonging to them. The claim was asserted as a personal demand against the defendants as directors of said society, and resisted by them on the ground of a clause in the policy exempting them from any personal liability thereon. The action was brought before a justice of the peace, who gave judgment for plaintiffs, which was affirmed on appeal to the county court, and from the judgment of affirmance defendants appeal.
Argued before Learned, P. J., and Landon and Mayham, JJ.
Edward D. Cutler, (Alonzo P. Strong, of counsel,) for appellants. Edwin C. Angle, for respondents.

Opinion:
Landon, J.
The policy provides that "the directors of this society, either individually or as a body, shall not assume any liabilities personally by reason of the issuance of this certificate." The statute (section 8, c. 267, Laws 1875) provides that "the directors shall be jointly or severally liable for all debts due from said society or corporation, contracted while they are trustees," etc. The provision of the policy is repugnant to the provision of the statute, and is void upon grounds of public policy. The statute forms part of the charter of the corporation, and the corporation can make no contract which its charter forbids. Abbott v. Railroad Co., 80 N. Y. 27. The corporation has power to make contracts for itself in aid of its business, but it has no power to make contracts in behalf of its directors. Presumably, the directors are competent to make their own contracts. This contract is not for the benefit of the corporation, and it is not a contract between the plaintiffs and the defendants, nor is it one like Lawrence v. Fox, 20 N. Y. 268, in which the benefit which one party might secure-to himself, he can secure to another, for the corporation could not secure a like benefit for itself. Sound public policy requires that a corporation shall make no contract nullifying as to its directors the provisions of the organic, act as to their personal liability. Otherwise a corporation might do business, not under the conditions prescribed by the statute to secure upright dealing, but under opposite conditions, and thus put at naught the wholesome restraints imposed by the sovereign power. It is not necessary to decide that the directors could not, by direct contract with the plaintiffs, protect themselves from personal liability. This contract was made while the defendants were trustees, and although it did not mature until after their successors were appointed, yet, when it did mature, it was the debt which was contracted while defendants were trustees. The policy promised payment to plaintiffs of "the net proceeds of an assessment of one per cent., to be levied upon all, as members of class A, not to exceed the sum of $100, to be assessed for according to the constitution and by-laws." No such "net proceeds of an assessment" have been paid. The reasonable construction of the policy is that such an assessment would produce something. The provision in the policy, "as this society is purely mutual, the payment of assessments is not obligatory, but is the voluntary contribution of its members, " was not strictly true. Every policy-holder had to pay his assessment or forfeit his policy. Such a penalty for non-payment might prove adequate to procure payment. The plaintiffs were entitled to recover something. It appears that an assessment was made. If there is any error, it is that it was not shown that the net proceeds of the assessment amounted to $100. Whether that error affects the merits we do not know, and we ought not, in order to promote the success of a scheme of insurance like this, to be astute in inquiring; and hence, under the rule applicable to appeals from justices' courts, we may affirm the judgment. Code Civil Proc. § 3063.
Mayham, J., concurs.