Case Name: Huber, Appellant, vs. Martin and others, imp., Respondents
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1906-03-20
Citations: 127 Wis. 412
Docket Number: 
Parties: Huber, Appellant, vs. Martin and others, imp., Respondents.
Judges: 
Reporter: Wisconsin Reports
Volume: 127
Pages: 412–450

Head Matter:
Huber, Appellant, vs. Martin and others, imp., Respondents.
December 16, 1905
March 20, 1906.
Mutual Insurance Corporations. (1-4,12) Charter provisions: Memberships: Commencement and termination: Rights, remedies, and interest of policy-holders. (5-7, 9-11,13) Title to corporate property: Equitable interests in corporate property: Rates for insurance: Assets: Surplus: Accumulation: Distribution: Charter: Amendment. (10, 11, 14) Constitutional Taw. (12, 16) Equity: Actions by members: Refusal of officers to act. (14-17) Statutes: Construction: Partial unconstitutionality. (15-17) Corporate existence: De facto corporations: Action to test validity of incorporation: Form: Parties. (17) Re-organimtion of corporations.
A mutual insurance corporation having a charter provision to the effect that a membership therein could only be created by accepting from it a policy of insurance and continue only till the end of the policy period, did business tor a considerable period of time, accumulating a large surplus. A law was then enacted authorizing a re-incorporation under the general law for the creation of insurance corporations, with the consent of two thirds of existing policy-holders representing at least one half the outstanding insurance, the re-organized concern to be the owner of the property of the superseded company for its use in the conduct of its business. The act provided that any existing policy-holder of such a mutual company, in case of its being superseded, should be entitled at his option to take stock in the new company to thé extent of such part of the total stock as the amount paid by him on his policy bore to the total amount of risks in force, or to receive such proportion of the surplus as the company’s actuary might deem equitable, that being coupled with a provision that all the property of the superseded company should become that of the new concern, as aforesaid, no part to be divided among the members thereof; The legislative basis of re-organization, in form, contemplated the possibility of members of the superseded company at a specified time, in the aggregate, securing a small percentage only of the stock in the new concern or of the surplus aforesaid, and of existing and past policy-holders of the mutual company, in the aggregate, obtaining not to exceed one third of such surplus or stock. A re-organization occurred in form under such law as to the corporation in question, plaintiff and others not consenting.
1. Under the charter of a mutual insurance company providing, in effect, that one can become a member only by taking out a policy of insurance and that the membership can survive only to the end of the policy period upon which it is based, no one can rightly be treated as a member for any purpose at any time unless he then holds an unexpired policy of insurance.
2. If the charter of a mutual insurance company contains no provision on the subject, membership commences only with the taking out of a policy and lasts only for the policy period.
3. As regards rights and remedies, the policy-holders in a mutual insurance company are stockholders therein the same as owners of stock in a stock corporation, there being no charter provision to the contrary.
4. The interests of policy-holders in a mutual insurance company are twofold, they are both insurers and insured. In respect to the former they are entitled to share in the losses and profits of the business on the basis of a partnership, except so far as the charter or policy contract provides otherwise.
5. The title to the property of a mutual insurance corporation is in the company, but the equitable interests therein are vested in the members the same as in case of a stock corporation. While the corporation owns the property the members own the corporation.
6. It is competent for a mutual insurance corporation, there being no limitation in its charter to the contrary, to make rates for insurance with a view of probably creating a surplus and of subsequently distributing the same to members so far as experience shall show that the same is not needed in the business.
7. In case of a distribution of the surplus of a mutual insurance cordpany or of its other assets, there being no charter provision to the contrary, existing policy-holders and such only are the legitimate distributees. In the aggregate, they are entitled to the whole. *
8. The legislature may alter or amend the charter of a corporation but cannot legitimately appropriate its property without the consent of all of its members, either to its own use or that of a private party, though such party be a successor corporation, in the absence of some authorization to the contrary in the charter originally.
9. For all except corporate purposes, the property of a mutual insurance company, the same as that of any other corporation, belongs to its members whether they are stockholders in the technical sense or in the broader one which includes policy-holders in such a company.
10. The property of a mutual insurance company and the equitable property rights of its members are within the guarantees of the state constitution as regards the inhibition against laws impairing the obligation of contracts, and the inhibition of the national constitution as regards the equal protection of the laws and deprivation of property without due process of law.
11. A law enacted during the life of a mutual insurance company providing for the distribution of its assets or a bestowal thereof upon another without consent of' all of its members, no authority in that regard being contained in the charter of such company, offends against the constitutional limitations referred to.
12. Any member of a mutual insurance company suing for himself and others similarly interested, may invoke equity jurisdiction to redress or prevent any wrong injuriously affecting the property rights of the corporation, when its officers will not move appropriately to that end.
13. The supposed common-law rule, that upon the termination of a corporation its debts become extinguished, its realty reverts to the grantors and its personal property goes to the sovereign, if it ever existed in fact, is wholly obsolete, except as to purely public corporations.
14. In case of a scheme of legislation for a particular purpose, created by the enactment of a law specially referring to the subject, and to other laws required for a complete plan, if the special enactment is the inducing provision and is unconstitutional, the whole is inefficient. The matter is governed by the rule, that where a part of a law is unconstitutional and was the inducement to the rest, which by itself would not have been enacted, the whole is void.
15. An unconstitutional act of the legislature is not a sufficient basis for a corporation de facto. That can exist only in case of a law under which it might have been created de jure.
16. The law that corporate existence cannot be inquired into, except by judicial proceedings in the name of the state, does not apply to a pretended but not even a de facto corporation.
17. In case of success, in form, of an attempt to re-organize a mutual insurance company on the stock plan under a law, in terms, authorizing it and the insurance business formerly, carried on by the old company being continued ostensibly by the new cre- • ation, using the former’s assets and good will, if the attempt is fruitless because of the enabling act being void such continued business is to be regarded as really that of the old corporation; as belonging to it.
[Syllabus by Maeshall, J.]
Appeal from an order of tbe circuit court for Washington county: James J. Dice, Circuit Judge.
Reversed.
Appeal from an order sustaining demurrers to tbe complaint. Tbe facts relied upon for a cause of action were these: Tbe defendant Germantown Tanners’ Mutual Insurance Company is a corporation created and existing under cb. 218 of tbe Laws of Wisconsin for tbe year 1854, and tbe defendant Germantown Insurance Company is a corporation ■existing under cb. 89, Stats. 1898, and cb.. 229 of tbe Laws of Wisconsin for tbe year 1903.. Tbe individual defendants are tbe officers and directors of tbe two corporations. Plaintiff is a policy-holder of the first-named company, bolding policy No. 67,198, dated August 1, 1901, and expiring by its • terms August 1, 1906, and by tbe law of 1854 mentioned be became a member thereof. Such company has, or did have before they were dissipated, as hereafter stated, assets in excess of $211,375.76, which are really the property of its members. September 28, 1903, tbe individual defendants and others wrongfully conspired together and organized tbe Germantown Insurance Company, to tbe end that it might acquire tbe assets of tbe Germantown Farmers’ Mutual Insurance Company for tbe use and benefit of the former and tbe members of such conspiracy without tbe consent of tbe policy-holder members of tbe old organization, and tbe purpose of such conspiracy was accomplished, so far as creating tbe new organization and putting its members in possession of such property. Such new organization has paid a small part of tbe assets wrongfully acquired to members of tbe old company. Nearly all tbe stock of tbe new organization has been taken by tbe officers and directors of tbe old company, they thereby wrongfully acquiring to themselves tbe large property aforesaid, which belonged to tbe old organization and its members, leaving said members no security for payment of their policies, except that assumed by tbe new organization. Plaintiff has been denied access to tbe books of tbe new organization, on wbicb account be is unable to state precisely tbe amount of unlawful gains wbicb it secured by tbe wrongful acts aforesaid. Tbis action is prosecuted on tbe bebalf of plaintiff and all others similarly situated for tbe benefit of tbe Germantown Farmers’ Mutual Insurance Company, sucli company being made a defendant because its officers are tbe persons guilty of tbe mischief complained of, and insist that tbe new organization has absorbed tbe old one, leaving tbe latter incapacitated to maintain any action.
Upon such facts plaintiff, prayed for an accounting by tbe Germantown Insurance Company and tbe individual defendants as to all their doings in tbe premises, and for restraint upon them as to appropriating tbe good will of tbe German-town Farmers’ Mutual Insurance Company, or disposing of or injuring its assets, and for a receiver to take over tbe assets involved in tbe administration, and for general relief.
Separate demurrers were interposed to tbe complaint, first, for want of jurisdiction over tbe defendants or tbe subject of tbe action; second, for want of legal capacity to sue, in that plaintiff has no legal right to call in question tbe power of tbe defendant corporations or their officers to do any of tbe things mentioned in the complaint, and has no interest in tbe subject matter of tbe action; third, for misjoinder of causes of action; fourth, for insufficiency. Tbe demurrers were sustained and plaintiff appealed.
For tbe appellant there was a brief by Lewis & Roach, attorneys, and Quarles, Spence & Quarles, of counsel, and oral argument by T. W. Spence.
They contended, inter alia, that tbe plaintiff in tbe action bad legal capacity to sue. Secs. 3, 14, cb. 278, P. & L. Laws of 1854; sec. 1, ch. 215, Laws of 1870; Schimpf v. Lehigh ‘Valley Mut. Ins. Go. 86 Pa. St. 376; Mygatt v. Protection Ins. Go. 21 N. T. 52, 70; Strong v. Haney, 3 Bing., 304; White v. Haight, 16 N. Y. 310, 318; Lawrence v. Nelson, 4 Bosw. 240; Smith v. Hunterdon Mut. P. Ins. Go. 41 N. J. Eq. 473; Garitón v. Southern Mut. Ins. Go. 72'Ga. 371; Schwarzwaelder v. German Mut. F. Ins. Co. 59 N. J. Eq. 689; Dousman v. Wis. & L. S. M. & S. Co. 40 Wis. 418; Doud v. Wis., P. & 8. B. Co. 65 Wis. 108. Ob. 229, Laws of 1903, is unconstitutional. Secs. 10, 12, art. I, Const, of Wis.; sec. 1, XIVtb Amend. TJ. S. Const.; Emerson v. Nash, 124 Wis. 369, 102 N. W. 921; Grobe v. Erie Co. Mut. Ins. Co. 24 N. Y. Mise. 462; Schwarzwaelder v. Ger~ mam, Mut. F. Ins. Co. 59 N. J. Eq. 589; Luther v. C. J. Luther Co. 118 Wis. 112.
Eor the respondents there was a brief by Sawyer & Sawyer and S. S. Barney, and oral argument by Mr. N. W. Sawyer and Mr. Barney.
They contended, inter alia, that the assets or property of a corporation belongs to the corporation as a' legal entity and not to the members. Bent v. Hart, 10 Mo. App. 143; Spurlock v. Missouri P. B. Co. 90 Mo. 199; Mickles v. Bochester City Bank, 11 Paige, 118. The word “mutual,” as applied to fire insurance companies, has a very uncertain meaning. Under some charters there is a mutuality as to liability for losses and expenses, as to liability in the right to participate in the profits, if there be such, and1 mutuality in the right to vote, the number of votes being regulated by the amount of insurance. Schimpf v. Lehigh Valley Mut. Ins. Co. 86 Pa. St. 376; Carlton v. Southern Mutl Ins. Co. 72 Ga. 371; Mygatt v. Protection Ins. Co. 21 N. Y. 52, 70; White v. Haight, 16 N. Y. 310, 318; Schwarzwaelder v. German Mut. F. Ins. Co. 59 N. J. Eq. 589. The rights and liabilities of policy-holders are limited by the provisions of their contracts and the law which controls the organization of the company, and the plaintiff can assert no right not so given. Dewey v. Davis, 82 Wis. 500; Grobe v. Erie Co. Mut. Ins., Co. 53 N. Y. Supp. 628; S. C. 57 N. Y. Supp. 290 ; S. C. 169 N. Y. 613; Uhlman v. N. Y. Life Ins. Co. 109 N. Y. 421, 429; Block v. Valley Mut. Ins. Asso. 52 Ark. 201, 20 Am. St. Rep. 166; Carlton v. Southern Mut. Ins. Co. 72 Ga. 371. It is no part of the purpose of mutual fire insurance companies to distribute a surplus among tbeir mem' bers, and tbe members, wben insuring, understand tbat to be tbe case. Kerman v. Bundle, 81 Wis. 212, 222; Grobe v. Erie Go. Mut. Ins. Go. 53 N. T. Supp. 628; White v. Ilaight, 16 N. Y. 310, 318. Tbe fact tbat mutual companies are somewhat of tbe nature of partnerships does not entitle tbe members thereof to share in tbe profits of tbe company. Allen v. Winne, 15 Wis. 113; Dewey v. Davis, 82 Wis. 500; Uhlman v. N. Y. Life Ins. Go. 109 N. Y. 421; Grobe v. Erie Go. Mut. Ins. Go. 57 N. Y. Supp-. 290; Alvord v. Barker, 107 IoWa, 143, 77 N. W. 868; Oohen v. New York Mut. L. Ins. Go. 50 N. Y. 610, 623, 624; People v. Security L. Ins. & A. Go. 78 N. Y. 114; Bloch v. Valley Mut. Ins. Asso. 52 Ark. 201; Titcomb v. Kennebunh Mut. Ins. Go. 79 Me. 315, 9-Atl. 730, 732. Tbe plaintiff, by tbe allegations of tbe complaint, admits tbat tbe mutual company has been re-organized into and is tbe defendant’s stock corporation, by which it also admits tbat everything tbat was required to be done to accomplish tbat object was in fact done. Such being tbe case, it follows tbat tbe assets and liabilities of tbe mutual company are now tbe assets and liabilities of tbe stock company except as otherwise provided in cb. 229, Laws of 1903. Knight v. Ashland, 61 Wis. 233; Nat. F. & P. Works v. Oconto City W. S. Go. 105 Wis. 48, 53; Ma/yfield v. Alton B., G. <& E. Go. 100 Ill. App. 614; Manhattan F. Ins. Go. v. .Fox, 77 N. Y. Supp. 657, 660; Barry v. Kansas City, Ft. S. ,& M. B. Go. 52 Kan. 759, 776; Brum v. Merchants’ Mut. Ins. Go. 16 Eed. 140; Houston & T. G. B. Go. v. Shirley, 54 'Tex. 125; Morrison v. Am. Snuff Go. 79 Miss. 330. Tbe ■complaint does not state a cause of action in equity upon its face. Johnson v. Phenix Ins. Go. 66 Wis. 50; Hughes v. Hummer, 91 Wis. 116; Gannon v. Home Ins. Go. 53 Wis. 585; Lem v. 0. <& N. W. B. Go. Ill Wis. 198; Schneider v. Menasha, 118’Wis. 298; Security Nat. Bank v. St. Croix P. Do. 117 Wis. 211; John V. Farwell Go. v. Wolf, 96 Wis. 10; Allen v. Winne, 15 Wis. 113, 118; McElroy v. Minnesota P. M. Go. 96 Wis. 317; Alvord v. Barker, 107 Iowa, 143; Denver F. Ins. Go-, v. McClelland, 9 Colo. 11; Hinckley v. Pfis-■ter, 83 Wis. 64, 84; Brown v. Duluíh, M. & M. B. Go. 53 Fed. 889; Huntington v. Savings Bards, 96 U. S. 388; Alton B., G. & E. Go. v. May-field, 95 Ill. App. 146; People v. Security L. Ins. & Annuity Go. 78 N. Y. 114, 122; Dewey v. Davis, 82 Wis. 500; Davis v. Shearer, 90 Wis. 250; Gillman v. Druse, 111 Wis. 400, 411; Spalding v. North Milwaukee T. S. Go. 106 Wis. 481, 489; Milwaukee O. S. Go. v. Dexter, 99 Wis. 214, 226; Whitehill v. Jacobs, 75 Wis. 474; First Ave. L. Go. v. Parker, 111 Wis. 1, 9 ; Grobe v. Erie Go. Mut. Ins. Go. 53 N. Y. Supp. 628; Trisconvv. Winship, 26 Am. 'St. Rep. 175-178. Tbe complaint should be dismissed for laches and want of equity. Holden v. Meadows, 31 Wis. 284, 291; Butler v. Mullen, 100 Mass. 453; Eusiis v. Bolles, 146 Mass. 413; Melms v. Pabst B. Go. 93 Wis. 174; Sterns v. Page, 7 How. 819, 829; Bostwick v. Mut. L. Ins. Go. 116 Wis. 392; Van Beck v. Milbrath, 118 Wis. 42, 46; Bong ■v. Parmentidr, 87 Wis. 129; Fuller v. Melrose, 1 Allen, 166; Newcomb v. Beed, 12 Allen, 362; Oovington & L. T. B. Go. v. Sandford, 164 U. S. 578; Beckmasv v. Consolidated T. Do. 114 Fed. 232, 254; Darmemeyer v. Coleman, 11 Fed. 97; Tanner v. Lindel B. Go. 180 Mo. 1, 79 S. W. 155; Zdbriskie v. Cleveland, G. & O. B. Go. 23 How. 381, 401; Kent v. Quicksilver M. Go. 78 N. Y. 159; Marlin v. Pensacola & G. B. B. Go. 8 Fla. 370, 73 Am. Dec. 713; State ex ret. Golumbus v. Mitchell, 31 Ohio St. 592; Tash v. Adam, 10 Cush. 252; Lawman v. Lebanon Talley B. Go. 30 Pa. St. 42; Dulse of Leeds v. Amherst, 2 Phill. Ch. 117, 123 ; Luther v. •O. J. Luther Go. 118 Wis. 112, 125; Schivarzwaelder v. German Mut. F. Ins. Go. 59 N. J. Eq. 589; Strong v. McCagg, ■55 Wis. 624; Michelson v. Pierce, 107 Wis. 85; Stein v. Benedict, 83 Wis. 603; Uhlman v. N. Y. Life Ins. Go. 109 N. Y. 421. Ch. 229, Laws of 1903, is a valid enactment. Bent v. Hart, 10 Mo. App. 143; Spurlock v. Hart, 90 Mo. 199; Mickies v. Rochester City Bank, 11 Paige, 118; Uhl-man v. N. Y. Life Ins. Co. 109 N. Y. 421; People v. Security- L. Ins. & A. Go. 78 N. Y. 116; Grobe v. Erie Go. Mut. Ins. Go. 53 N. Y. Supp: 628; S. G. 57 N. Y. Supp. 290; S. O. 169 N. Y. 613; State Bank v. State, 1 Blackf. 267; Att’y Gen. v. Gower, 9 Mod. 224; Titcomb v. Kenne-bunk Mut. Ins. Go. 79 Me. 315,-9 Atl. 730; Bank of Miss, v. Duncan, 56 Miss. 166; Acklin v. Paschal, 48 Tex. 147; Smith v. Hunterdon Mut. F. Ins. Go. 41 N. J. Eq. 473; Mason v. Ashland, 98 Wis. 540, 545; Nat. F. & P. Works v. Oconto City W. S. Go. 105 Wis. 48, 53; Schwarzwaelder v. German Mut. Ins. Go. 59 N. J. Eq. 589. In order to entitle a person to challenge an act of the legislature as unconstitutional and, therefore, invalid, he should be required to show that some substantial right was violated or infringed. The fact that he may be able to spell out some contractual right should be held insufficient if such right be manifestly valueless and of no benefit to him. The test as to whether a contract has been impaired is whether the value has been diminished. A contract made subject to an amendment is not impaired by such amendment. West Wis. R. Go. v. Supervisors, 35 Wis. 257, 272; Oshkosh W. W. Go. v. Oshkosh, 109 Wis. 208, 215; Peninsular L. & G. Works v. Union O. & P. Go. 100 Wis. 488, 491; Second Ward Sav. Bank v. Schranck, 97 Wis. 250, 262; Grobe v. Erie Go. Mut. Ins. Go. 53 N. Y. Supp. 628; S. G. 57 N. Y. Supp. 290; S. O. 169 N. Y. 613; Wright v. Minnesota Mut. L. Ins. Go. 193 U. S. 657; Spring Valley W. W. Go. v. Schottler, 110 U. S. 347; Shields v. Ohio, 95 U. S. 319; Green v. Biddle, 8 Wheat. 1; Nugent v. Supervisors, 19 Wall. 241-251; Buffalo & N. Y. G. R. Go. v. Dudley, 14 N. Y. 336; Hale v. Cheshire R. Go. 161 Mass. 443; Bishop v. Brainerd, 28 Conn. 289; Pemv-sylvania College Cases, 13 Wall. 190; Bailey v. Hollister, 26-N. Y. 112; Stewart v. Erie & Western Transp. Go. 17 Minn. 372; Supreme Lodge Knights of Pythias v. Knight, 117 Ind. 489.

Opinion:
Tbe following opinion was filed January 30, 1906:
Maeshall, J.
Counsel for tbe respective parties, as we view tbe complaint, in effect, take issue as to tbeir rights on tbis state of facts: A purely mutual company was organized under a charter providing that policy-holders only should be members thereof. It conducted its business for some fifty years. In that time it accumulated a surplus of over $200,000. At the time of the commencement of the action and during the re-organization acts hereafter mentioned, plaintiff was a member of the company. The entire membership at the time of such proceedings constituted but a small proportion of those who had joined the company from the beginning. The legislature, after the surplus was substantially as indicated, enacted a law in terms authorizing such a company to be turned into a stock corporation at the option of two thirds of its existing policy-holders representing not less than one half of its outstanding insurance. It did not recognize such policy-holders as having any greater several interests in the corporate property, or rights to participate in the taking of stock in the re-organized company, than past policy-holders, or treat them as being the owners of the corporate property and business, or having any interest therein worthy of being sought after in the re-organization proceedings, or as a result thereof, or policy-holders, past and present, as having, in the aggregate, rights in such property equivalent to but a small proportion of the whole thereof, or of a character reasonably probable to be realized upon. The scheme in its entirety was such that its execution in any case would probably or necessarily result in bestowing the net assets over liabilities of the company upon the new organization, and indirectly upon the promoters thereof as a mere gratuity. The officers of the Germantown Farmers' Mutual Insurance Company became tbe promoters of tbe Germantown Insurance Company, as a re-organization of tbe former, for tbe purpose.of enabling tbe new creation to acquire directly, and themselves to acquire indirectly, without consideration, tbe surplus assets of the old company. They fully executed such purpose as regards acquiring actual possession of such property and using tbe same as that of tbe new company. Tbe plaintiff and others similarly situated did not consent thereto.
Counsel for respondents by their attitude in printed and oral arguments accepted tbe situation stated, affirming that tbe conduct complained of is justifiable on principle and authority, that it is neither a wrong to appellant or to anyone else, of sufficient dignity at least to be a subject for judicial redress at bis suit or that of any other party; that it is not even one of those wrongs from the standpoint of good morals, laying one liable to tbe condemnation of bis fellow-men; and that, if it were otherwise as an original proposition, it is not a wrong under tbe circumstances by force of legislative authorization within its legitimate field. Counsel for appellant as confidently assert tbe negative, maintaining that tbe acts of tbe legislature involved, and to which respondents point for their justification, is a clear usurpation, — is within tbe condemnation of tbe letter and spirit of tbe constitution, state and national, and of elementary and judicial authority as well.
Tbe very statement of tbe position which must be maintained in order to defeat tbe complaint as insufficient to show any wrongdoing as regards tbe appellant of which be can be judicially beard to complain in tbe manner attempted, or at all, at first sight, we must confess, so shocks tbe moral sense that one is inclined to enter upon a study of tbe subject with tbe impression that no substantial basis can be found for it in tbe law. As a rule, one can.'rightly acquire property only by gift inter partes or operation of law, or by finding or le gitimate reduction to possession of things belonging to tbe people in tbe sovereign capacity, or by estoppel or by adverse possession, or by creating it by one's own energy, or that in' connection with bis private capital, or such and tbe capital of others legitimately secured, or by purchase. To obtain property in any other way one must needs pass beyond the boundary line between right and wrong, measured by legal standards. It is quite probable that there have been many excursions beyond that line, and many more beyond the line, dividing right from wrong, tested by purely moral standards, in the administration of insurance trusts of different sorts,— some of the hind involved here and some having the stock feature of ownership, — 'the officers, or those connected with them, with their connivance or consent, or both, in various ways depleting the trust fund or using it for their private enrichment as never contemplated by the policy-holders, or the organic acts of the corporate creation. Such occurrences, whether viewed in their moral or legal aspects, as regards facility for transferring trust property to the private use of its chosen guardians, pale before the possible happenings,' if the stated case must be stamped with judicial approval. In that contingency nothing stands in the way but the uncertain will of the legislature, of the officers of our great mutual life insurance company, if they should be so inclined, so manipulating things as in time to reduce to their private ownership the great wealth constituting its surplus fund, and reducing to like ownership the good will of the insurance business itself, which has been built up by wise management and the patronage of the people through a period of more than half a century. The very thought that such a result would be possible if the law is as contended for by respondents' counsel, suggests the existence of such serious infirmity in our constitutional guarantees as regards property rights that one could not well conclude that they exist, except in the face of some unmistakable demonstration.
To give added emphasis to wbat has been said we will turn to eh. 229, Laws of 1903, under which respondents justify, showing that the result of executing the law in the case in question would produce all the dire results to the parties in interest above suggested.
The company was organized in 1854. It had done business for forty-eight years at the time of the acts complained of. At the end of such period, as appears hy the last public record, the amount of unexpired risks was $2,922,889. The amount paid for carrying such risks was $42,331.32. The length of the policy periods was about as follows: one fourth one year, one half two years, and one fourth five years. The total amount of premium assessments paid into the company's treasury from its organization was $896,558.64. Assuming that the average rate for carrying risks for the entire period of the company's existence was substantially the same as for the last five years thereof the total amount of risks from the beginning was approximately $68,334,000, indicating that at the time of the attempted re-organization the number of policy-holders and the amount of risks then in force was to the total number of persons who became members of the company from the start, and the total amount of risks carried during the entire period, as one to twenty-two. The reorganization act provided as follows:
"Sec. 1. Any mutual fire insurance corporation, organized under any law of this state" circumstanced as the one in question "may, with the consent in writing of two thirds (f) of the members of such corporation representing not less than one half of its outstanding insurance, become a stock corporation, by proceeding in accordance with the provisions of the statutes of this state regulating the organization of stock fire insurance corporations.
"Sec. 2. Every member of such corporation on the date of said annual or special meeting shall be entitled to priority in subscribing to the capital stock of such corporation, for one month after the opening of the books of subscription, and in the proportion that the amount of cash premium paid in by sucb member-bears to the total amount of risks in force on the date of said annual or special meeting; provided, that if any one of the' past or present members shall not subscribe for stock, then the said corporation shall, upon application, within ninety (90) days return to him his equitable proportion of the surplus of the company, to be computed by an actuary to be employed by the corporation for that purpose.
"Sec. 3. No part of the assets of such mutual fire insurance corporation shall be divided among the members thereof, but shall, after such re-incorporation, become the property of such stock corporation, to be expended by it for the ordinary disbursements of the company, in carrying on its business, including the payment of losses incurred upon its policies; and all property of such mutual fire insurance corporation shall be transferred to such stock corporation, organized as aforesaid, in the manner provided by law."
It will be observed that one month only was allowed after the opening of the books for subscriptions for stock in the new corporation for members of the old company to become subscribers. That contemplated that all persons who had become members of the company during the forty-eight years of its existence, and who were living, and the personal representatives or the heirs wherever they might be, of those who were dead, should exercise the right afforded by the act to take stock in the corporation within the thirty days named. No provision, however, was made for any notice to the possible beneficiaries of the opening of such books, nor as to the amount of capital stock of the new corporation. All that was left to the custodians of the property and business of the old concern, who presumably were to be, and who in.fact became, the promoters of the new organization. The complaint does not state what amount of stock was finally determined upon for the new organization. It could not have been less than $100,000, for that is the minimum fixed by the statute. It is safe to assume, probably, that it was fixed at that sum. So it appears by computation that every one of the existing policy-holders was afforded the opportunity, if he should de sire and discovered bis rights in time, to take stock to the amount, approximately, of fifty cents for each $1,000 of insurance carried. The rate would be substantially the same as applied to all persons who became policy-holders from the beginning. If all the existing policy-holders improved the very uncertain and wholly valueless opportunity to take stock, it would exhaust about $1,500 thereof. If all those possessing membership rights at any time during the existence of the company improved the opportunity afforded by the act to take stock, it would exhaust about $31,667 thereof, or somewhat less than one third. Thus it will be seen that the promoters of the enterprise and, in contemplation of law, the members of thé legislature in passing the act must have proposed from the start the appropriation for the use of such promoters of all the assets of the old company, alleged in the complaint to amount to some $250,000, and $211,375.76 in excess of all liabilities, actual and contingent, since the amount above secured to each policy-holder was too trifling to be called for.
The act treated, as before indicated, every one as having a membership right who at any time held a policy in the corporation and entitled to the same consideration as any other member. Provision was made, in form, to enable each one having any such right to claim a part of the surplus, in case of his failing to take advantage of the valueless opportunity indicated, to take stock, but such provision was likewise valueless as will be seen. As a condition of any past or pi'esent member obtaining any part of the surplus he was required to be vigilant and make application therefor, and then to take such sum for his appropriate share as the company's actuary might deem equitable. Obviously, if the legislative basis for subscription rights of members were taken as the equitable standard for measuring rights to the surplus, the amount coming to each member would not be worth the trouble required to obtain it. It must be presumed that the legislature intended to preserve to those desiring to become members of the new organization their equitable rights in that regard according to its views in respect thereto. In that light no reason is perceived why, if the company's actuary saw -fit to use such standard, it would not be justified, if the act of the legislature is valid. In any event, since past as well as present members are required to be considered, only about one twenty-second, or $9,545, of the surplus could be awarded to .present members, if the entire surplus were to be considered as a fund for distribution among members, past and present. That would afford about thirty-one cents per $1,000 of risk carried by the company. Thus, it will be seen, it would be a reflection upon every one concerned in passing the act in question and executing it, to entertain the idea that they seriously thought the result of administering it to the company in question would be otherwise than a bestowal upon the new corporation of the legal title, and upon the managing agents of the old company, — the custodians of its property, — who-would naturally, and did actually, become the organizers of such corporation, the equitable ownership of all property and business of the old company as a mere gratuity.
If what has been said needs reinforcement sec. 3 of the act furnishes it. That is sufficiently significant to bear repeating at this point:
"No part of the assets of such mutual fire insurance corporation shall be divided among the members thereof, but shall, after such re-incorporation, become the property of such stock corporation, to be expended by it for the ordinary disbursements of the company in carrying on its business, including the payments of losses incurred upon its policies."
How could all the property of the old organization become that of the new one, "io be expended by it for Us ordinary expenses " no part being divided among the members- of the old organization, and yet such members obtain their equal proportion under the second section of the act? The only conclusion reachable, it seems, is that the author of - the legislation did not give any thought to the subject of the second section as to its requiring any efficient distribution of the surplus. It could not be distributed as property of the old organization and at the saíne time be covered into the treasury of the new one for its ordinary disbursements in payment of its debts, expenses, and policies. So it is plain, not only from the spirit but the letter of the act, that the purpose thereof was to make a gift of the property of the old organization to the new one, the same being regarded as disposable at the will of the legislature.
In respect to the peculiar features before referred to there is no similar law anywhere, so far as we are able to discover. Counsel for respondent place great reliance on Grobe v. Erie Co. Misc. Ins. Co. 24 Misc. 462, 53 N. Y. Supp. 628, affirmed 39 App. Div. 183, 57 N. Y. Supp. 290, which will be discussed at some length hereafter. As suggested by counsel for appellant, the law there, quite unlike the one before us, dealt with existing members of the old organization as, in the aggregate, the equitable owners of its assets and entitled to become the owners of all of the stock of the new corporation. The total amount paid into the corporate treasury was deemed to stand for all the stock in the new organization. Each policy-holder was secured the right to take such proportion of the entire stock as the amount paid by him on unexpired insurance bore to the aggregate of all sums so paid by existing members. Laws of N. Y. 1896, ch. 850. We venture to say that, except in the one instance before us, no law has been enacted for converting a mutual insurance company, or other non-stock organization, into a stock company, not recognizing the members of the old company as its owners and entitled to be recognized as such in the organization of the new •one.
Proceeding logically the next question to be taken up is this: Who were the members of the Germantown Farmers' Mutual Insurance Company at tbe time of tbe attempted reorganization ? Tbe law of its creation answers that most distinctly, if effect is to be given to tbe plain letter thereof. Sec. 3, cb. 278, Laws of 1854, provides that "every person who shall at any time become interested in said company by insuring therein, and also bis heirs, executors, administrators and assigns, continuing to be insured therein . . . shall be' deemed and taken to be members thereof for and during the-terms specified in their respective policies, and no longer" "With language so plain it seems useless to spend time endeavoring by construction to read some idea out of it not found in its letter. Words which are plain, both in themselves and when applied to the subject with which they deal,, in that they lead to no absurd consequence, must be taken according to their ordinary import, nothing being added thereto.or taken therefrom. State ex rel. Heiden v. Ryan, 99 Wis. 123, 74 N. W. 544; Gilbert v. Dutruit, 91 Wis. 661, 65 N. W. 511. The quoted language was changed somewhat by the amendatory act of 1878. Ch. 306, Laws of 1878. The-law as changed retained all the significant words of the original act or used equivalents so as to make the dominant features more prominent. The act is in harmony with elementary principles. If it were not for the emphatic declaration the result would be the same in the absence of some provision of the charter to the contrary. It is thus laid down by text-writers, based on authority: "Membership dates in each case from the time when the insurance is effected" and "membership in the mutual insurance company ceases upon the termination of the policy." 21 Am. & Eng. Ency. of Law (2d ed.) 264-266.
Erom the foregoing it is evident that whatever private interests there were in the assets of the Farmers' Company over and above sufficient to satisfy its liabilities, were the property of persons holding unexpired policies therein, and that part of the legislation under which respondents seek to justify tbe attempt to dispose of tbe corporate property without their consent must stand tbe same test as any legislative attempt to take property of one person and give it to another, •or to impair contractual rights. We are not unmindful of the authorities called to our attention, which will be as fully as need be referred to hereafter, for support for the doctrine that there is something peculiar respecting the ownership' of property of a mutual insurance company rendering it a subject of legislative disposal, or distribution by equity jurisdiction on the basis of recognizing all contributors to the fund, regardless of whether they are actual members of the company at the time thereof or not. We are unable to see any logical foundation in reason or in good law for any such doctrine.
Where is the ownership of the net assets of a mutual insurance company located ? That the legal title is in the corporation goes without saying. The rule in that regard must be the same in case of one corporation as another. Why is not the equitable right, — the real beneficiary interest, — independently of the corporate use, vested in the members of the cor-' poration in one case the same as in the other? It would seem that, after the corporate purposes are exhausted, the property of every business corporation belongs to its members, is self-evident. It is no answer to the proposition to say, no member has "any aliquot part of the corporate assets subject to identification, conservation and recovery," for that is true as to any corporation. It is likewise no answer to say, it is no part of the business of a purely mutual insurance company to distribute its profits among the members, unless that is provided for by the contract or the organic act. Unless prohibited from doing so> such a corporation, in the event of its accumulating a needless surplus, may distribute the same to its members (Mygatt v. N. Y. P. Ins. Co. 21 N. Y. 52, 65), and may make such distribution at such times and to such extent as the governing authority may de termine. Equitable Life Assur. Soc. v. Host, 124 Wis. 657, 102 N. W. 579. Indeed no reason is perceived why sucb an insurance company may not make rates with a view to the probable accumulation of a surplus and the distribution of so much thereof, from time to time, as may appear from experience not to be needed. Moreover, it may be that such distribution would be due to members and enforcible in case of the surplus being unreasonably large, as there is reason to believe it was in this case. Why was the company carrying a surplus equal to over six per cent, upon the face of its policies and more than five times' the amount paid into the corporate treasury on account thereof ? Assuming the management was honest, does it not look as if the rates were made with a view to the probable accumulation of a surplus and probable dividends to members therefrom? The logic of counsel's argument at this point seems to fail entirely.
However, the question at issue is not what right a member of a corporation of the sort under consideration, while it is a going concern, has in its net assets, but what right has he when it ceases to do business; when its property 'must necessarily pass out of its hands, though his interest in the latter situation would appear to be more appreciable in case of a surplus accumulated in contemplation of a distribution thereof to members than otherwise. Obviously, if he has an equity in the surplus, whenever it is no longer needed in any reasonable view for the corporate business, the right to realize thereon must exist.
The authorities supporting- the last foregoing are not numerous. One would not expect them to be on a matter which so appeals to one's common sense as necessarily right upon fundamental principles. However, harmonious quotations from text and judicial authorities could be given at great length. To illustrate: "The principle which lies at the foundation of mutual insurance, and gives it its name, is mutuality; in other words, the intervention of each person insured in tbe management of the affairs o'f the company, and the participation of each member in the profits and losses of the business, in proportion to his interest." 2 May, Ins. (4th ed.) § 548. "Each person insured becomes a member of the body corporate, clothed with the rights and subject to the liabilities of a stockholder." Id. § 548; 21 Am. & Eng. Ency. of Law (2d ed.) 267; Korn v. Mut. Assur. Soc. 6 Cranch, 192. "Although the members of a mutual company are not usually denominated stockholders, and are not stockholders in the usual sense of the word, yet they are in point of fact stockholders." 2 May, Ins. (4th ed.) § 549. "The property of the corporation belongs to its members." Opinion of district judge in Temperance Mut. Ben. Asso. v. Home Friendly Soc. 187 Pa. St. 38, 44, 40 Atl. 1100. "There is nothing to prevent a mutual company from carrying on its operations with a view to profits and dividends." Mygatt v. N. Y. P. Ins. Co. 21 N. Y. 52, 66. In Riddell v. Harmony Fire Co. 8 Phila. 310, the distribution of the assets, not surplus, of a mutual organization was enjoined at the suit of a member on the ground that such distribution was improper, except on surrender of the charter or dissolution of the corporation. The case proceeds upon the ground that the property of a non-stock corporation, not public, needed for its business belongs to the members, but not recoverable, of course, in possession, so long as the corporation is a going concern. The title to the property in any corporation — the substantial beneficial ownership — is in its members. 1 Clark & M. Priv. Corp. 23.
Titcomb v. Kennebunk Mut. F. Ins. Co. 79 Me. 315, 9 Atl. 732, relied upon by counsel for the respondents, is in harmony with the foregoing, notwithstanding some discussion, which will be referred to hereafter. The case went upon the ground that there were no existing policy-holders. The last policy had expired. It was absolutely without membership.
In Carlton v. Southern Mut. Ins. Co. 72 Ga. 371, it was beld, generally, that a member in a mutual insurance non-stock company, in the absence of charter regulations, is entitled to participate in any lawful distribution of its surplus on the basis of a partnership agreement. It was said, quoting from the syllabus:
"A mutual insurance company is based on the idea that each of the assured becomes one of the insurers, thereby becoming interested in the profits and liable for the losses. Without a charter, such an organization would -be governed by the general' law of partnership."
In the case in hand the distributees were held to include all stockholders, and that the word "stockholders" under the terms of the charter included every person who had contributed to the fund on hand, whether holding any unexpired- insurance or not. That conclusion was reached based on language peculiar to the charter. It has no application whatever to such a charter as the one in question on that point.
It does not seem best to spend further time on the branch oft the case last treated. We hold that there is no difference between business corporations as regards ownership of property. In the general sense, every member of a mutual corporation is a stockholder and is the equal of any other member similarly situated, or any member of any corporation having an equal interest, proportionally, as to holding the beneficiary title to the corporate assets. Eor corporate purposes only the corporate entity owns the property, otherwise it belongs to the members. No principle of law is more firmly founded in reason, and none more important to be kept in bold relief by courts so as to challenge the attention of those who have to do with corporate affairs, especially corporations dealing with the subject of insurance. The officers of such a-concern have no greater authority over its assets, as regards appropriating the same to their private use, than those in other corporations. Neither does legislative power legitimately extend to interfering with property rights more in one case than in the other. False notions of this matter, wbicb may be, perhaps, attributed in part to courts, has led to the erroneous idea that the members of a mutual insurance company have no rights save those expressed on the face of their policies; that otherwise they have no interest in the corporate assets which the courts will protect. That is a very erroneous and very dangerous doctrine. Nothing will be more productive of good administration of such concerns as the one under discussion, than to have it definitely proclaimed by the courts, as we do now, that, while the corporate property belongs to the corporation for corporate purposes, the corporation itself belongs to the members thereof, and that any such member, however small his interest, may knock successfully at the judicial doors to prevent the use of the corporate assets in any other way than in strict harmony with what has been said. If such were not the case, wrongs of a serious nature would quite likely go without redress and rights without protection..
But it is said that under the reserved power in the constitution what the legislature may create, as regards corporate -organizations, it may alter or destroy, and that as it may pro-wide for the dissolution of a corporation it may also provide for the disposition of its assets. .Begardless of the legislative •control suggested, the law-making body has no authority to appropriate private property to the use of the state, except under the taxing or police power, or power of eminent domain, or rto a private party. There can be no confiscation of corporate :any more than of individual property.
"Corporations are persons within- the meaning of the constitutional provisions forbidding the deprivation of property without due process of law as well as a denial of the equal protection of the laws." Covington & L. Turnp. R. Co. v. Sanford, 164 U. S. 578, 17 Sup. Ct. 198; Pembina Con. S. M. & M. Co. v. Pennsylvania, 125 U. S. 181, 189, 8 Sup. Ct. 737; Santa Clara Co. v. Southern Pac. R. Co. 118 U. S. 394, 6 Sup. Ct. 1132.
We are cited to the supposed ancient rule of the common law that upon the termination of a corporation its real estate reverts to the grantor and its personalty to the sovereign and that its debts become extinguished. Some bearing is claimed for that. While it has some distinguished support in modem times (2 Kent, Comm. *307), it long since became obsolete, if it ever was the law, except as regards public corporations. It was distinctly repudiated by this court in Lindemann v. Rush, 125 Wis. 210, 104 N. W. 119, 124. The authorities supporting such repudiation are substantially without conflict. Late Corporation (Mormon Church) v. U. S. 136 U. S. 1, 47, 10 Sup. Ct. 792; 3 Purdy's Beach, Priv. Corp. § 1327; 2 Cook, Corp. (5th ed.) § 641; 2 Morawetz, Priv. Corp. (2d ed.) § 1032; 5 Thompson, Corp. § 6746. American courts have, except in a very few instances, never recognized the doctrine, and quite recently it was held by the Court of Queen's Bench in Bankruptcy that it never had any place in the common law of England. In In re Higginson & Lean (1899) 1 Q. B. 325, 79 L. T. Rep. 673, Weight, J., said that no instance was recorded in the books where such doctrine was ever applied by any English court and referred to an American decision, Bank of Vincennes v. State, 1 Blackf. (Ind.) 267, where the contrary was held, as having been reasoned on a false basis. We may safely close this branch of the case by saying that, aside from dicta here and there, in the whole not worthy of serious consideration, there is no legitimate support anywhere for the rule that the property of a business corporation upon its termination and the payment of its debts goes otherwise than to its members, if it has members to take. It is quite remarkable that the ancient rule should, for well nigh two centuries, have been confidently asserted from time to time by judges and text-writers as the law, Including writers of such eminence as Bacon, Kyd, and Kent, have first been repudiated quite unanimously in America, and then be declared in the supposed place of its origin to never bave been a part of tbe common law. Here, tbe language of Justice Bradley, in Late Corporation (Mormon Church) v. U. S. 136 U. S. 1, 17, 10 Sup. Ct. 792, confining the application of tbe supposed ancient rule to public corporations, bas been universally adopted.
We should not pass wholly from this subject without referring to tbe fact that so learned a writer as Judge Elliott in bis valuable work on Private Corporations at see. 606, adds to tbe corporations specified by Justice Bradley, to which tbe supposed ancient rule now applies, mutual insurance companies, referring to Titcomb v. Kennebunk Mut. F. Ins. Co. 79 Me. 315, 9 Atl. 732, and Cummins v. Hollis, 108 Ga. 402, 33 S. E. 919. Tbe Tiicomb Case is also referred to in 2 Clark & M. Corp. at sec. 328, but without approval so far as bearing on tbe question in band. It is unfortunate that so careful a writer as Judge Elliott should bave lent bis distinguished approval to tbe cases cited by adopting tbe construction thereof which be incorporated into bis text. An examination of Cummings v. Hollis, suprcn, shows that it went distinctly upon tbe ground that tbe corporation was public. It was based on tbe decision in Mason v. Atlantic Fire Co. 70 Ga. 604, which involved also a public corporation. By implication tbe Hollis Case held that in case of the dissolution of any corporation not public tbe net property would go to its members, using this language: "On tbe dissolution of a corporation of this character, its assets are appropriated in other ways than by a division among its members." ' In harmony therewith tbe same court said in Dade C. Co. v. Penitentiary Co. 119 Ga. 824, 829, 47 S. E. 338, 340: "Tbe mere fact that a corporation bas no capital stock does not necessarily deprive its members of their proportionate rights in tbe corporate property."
True, in Titcomb v. Kennebunk Mut. F. Ins. Co., supra, tbe supposed ancient rule of tbe common law was quoted with approval. That fact, as it appears, bas been a disturbing ele ment in tbe preparation of text-books and in tbe decisions of some courts, but tbe fact remains that it was not applied to tbe case in band. It was beld, as before indicated, that tbe property escheated to tbe state because all tbe policies bad expired and, therefore, tbe corporation was without membership. Tbe idea was there met that in a distribution of a surplus by a corporation all persons who have ever been members of tbe company should be recognized, and it was said that such a rule for tbe distribution of corporate assets is entirely impracticable, as we have heretofore said. This language was used: "To distribute among them a small amount of assets, and to determine what each former policy-holder's share ought in equity to be, would be attended with difficulties and an amount of labor which tbe end would not justify."
It should be noted that in Smith v. Hunterdon Co. Mut. F. Ins. Co. 41 N. J. Eq. 473, 4 Atl. 652, tbe rule of distribution condemned in tbe Maine case was adopted by a process of reasoning not deemed to be logical. It ignored tbe obvious fact that tbe members of a corporation, and tbe members only, own tbe corporation and that it is not permitted to any court upon its own notions, of equity to take any part of the corporate property and distribute it to those not members. If the rule were applicable in any event, it could not be to a corporation whose charter expressly provides, as in this case, that only persons bolding unexpired risks shall be deemed members. The New Jersey court was evidently persuaded to tbe course adopted by Carlton v. Southern Mut. Ins. Co. 72 da. 371, failing to observe that it turned upon a construction of language in tbe charter which'the court felt bound to bold was used to make every one who contributed to tbe corporate surplus a member, or stockholder, as was said, for tbe purposes of any distribution of such surplus.
No hardship can result to members of a mutual insurance company from their relation with tbe organization being considered as above stated. Every policy-holder knows, or ought to know, that be will remain a member so long as be remains-a policy-holder and no longer. He knows, or ongbt to know,, that as soon as bis membership relation is established he becomes possessed of an equitable interest in the assets of the company consisting of all accumulations prior to his time, and such as may be added thereto during his membership, but which cannot be realized on in possession in the absence of a necessary distribution of the surplus on account of the company going out of business, or in some proper way. He knows, or ought to know, that it is entirely optional with him whether to preserve his interest in the company and thereby protect his contingent rights, or to allow them to lapse by ceasing to be a member. He also knows, or ought to know, that in case of his interest so lapsing it will inure to the benefit of those associated with him who- choose to retain their memberships and those who come after him, the doors of the company swinging freely to let in new members and to let old ones out according to choice, those at any moment of time being then and then only the owners of the company to all intents and purposes the same as members of any other corporation.
To summarize at this point: The members of the German-town Farmers' Mutual Insurance Company at the time of the proceedings under ch. 229, Laws of 1903, to supersede it by a new corporation, denominated the Germantown Insurance Company, were the persons then having unexpired policies in the former. F'or all except corporate purposes they were the beneficial owners of its assets. In case of its being wound up the net assets constituted a fund for distribution between the members according to their respective contributions to the company's treasury. In case of any distribution of its surplus, other than following a dissolution, they were entitled to so participate. The surplus in excess of the reasonable needs of the corporation was a proper subject for distribution at any time. The right of the corporation to hold its property in harmony with that situation, and tbe rights of the members to have the same so held and administered, were property interests resting on contractual obligations and so within the guaranty of the state constitution as regards the passage of laws impairing the obligations of contract, sec. 12, art. I, Const, of Wis., and that of the national constitution as regards the deprivation of property without due process of law, or denying to persons the equal protection of the laws. NlVth Amend. U. S. Const. Due process of law does not extend to the taking of private property or the violation of private rights for private ends. The act of the legislature in question, in terms or in effect, authorizes the appropriation of the property of one private corporation and the equitable interests therein of the members thereof to the use of another private corporation and of its members in violation of the corporate charter rights of the former corporation, and in defiance of the wishes of such of its members as do not choose to consent thereto. The proposition affirmed by counsel for respondents, stated at the outset in the opinion, must, therefore, be answered in the negative. The act of the legislature, ch. 229, Laws of 1903, is unconstitutional and void and furnishes no justification for the acts complained of. To that extent the complaint states a good cause of action and should have been sustained.
All cases and the authorities, generally, so far as we can discover, not excepting the one to be presently specially mentioned, upon which counsel for respondents mainly rely, are in substantial harmony as regards members of a corporation of the sort under discussion being the owners of the corporate property, subject to the corporate purposes, in the absence of some charter provision to the contrary, as we have held. If there was want of harmony as to who are to be deemed members of a corporation of the kind in hand,, in the absence of a charter provision on the subject, it would not be material in this case since the charter here expressly provides that only tbe holders of unexpired policies can be deemed to be members.
We have thought best to proceed to this point without referring to the decision most confidently relied upon by counsel for respondents, — Grobe v. Erie Co. Mut. Ins. Co. 24 Misc. 462, 53 N. Y. Supp. 628, affirmed 39 App. Div. 183, 57 N. Y. Supp. 290, or the one on which with equal confidence counsel for appellant rely, — Schwarzwaelder v. German Mut. F. Ins. Co. 59 N. J. Eq. 589, 44 Atl. 769, because the former, when rightly understood on the. main point,— that as to the validity of legislation providing for the trans-. fer of the property of one corporation to another and the substitution of the latter for the former without the consent of all of the members of the old corporation, — is entirely inapplicable to the case before us from the attitude of respondents, and. is in harmony with the 'ease relied upon by appellant, as we shall see, and both bear on the question yet to be treated of, whether if the appellant has a ground of complaint he invoked the proper remedy.
Before proceeding to the next point we will state briefly our view of the above cited New York case on the main question. The court there met this situation: The insurance company sought to be superseded was formed in 1874 under a general law. There was a re-organization law then in force substantially like the one here, except that it treated all policy-holders of any mutual company sought to be superseded, at the time of the re-organization proceedings, owners of the company as regards the. right to take the entire stock in the new corporation. In short, it contemplated the substitution of one corporation for another without any change of membership, except at the option of the members of the old corporation. When the subject of dispute was organized there was a system of laws on the statute books, originating as early as 1853 and continued to and inclusive of the re-organization proceedings, authorizing any mutual0 insurance company by consent of two thirds of its members to re-organize on the stock plan. The law in that regard, as the court held, be•came, by implication, at the creation of the charter of the corporation sought to be superseded a part of such charter. The court said that every person who participated in the reorganization knew of the fact, or ought to have known of it, and that by joining the company he impliedly agreed to submit to a re-organization of it at any time in the future when-ever the requisite two thirds of its members so desired and the legal requirements in the matter were complied with. The result was that the re-organization was sustained solely on' the ground that the re-organization proceedings were in harmony with the charter of the corporation sought to be superseded. That, as it will be observed, is in perfect harmony with the decisions as regards laws authorizing the turning of •voluntary organization into corporate entities. We have just held, Spiritual and P. Temple v. Vincent, ante, p. 93, 105 N. W. 1026, that such re-organization law as to corporations antedating its passage cannot disturb their property rights. That is in harmony with authorities generally. Schiller Commandery v. Jaennichen, 116 Mich. 129, 74 N. W. 458. The difficulty with the position of counsel for respondents, •as regards the New York case, is this: There was a re-organization act preceding the corporate charter and was in effect a part of it, while here the re-organization act came after the charter, and, therefore, if given effect, is a modification of it interfering with vested property rights. The vital part is not the change of the charter but the confiscation, so to speak, of the corporate property. Inferentially the New York court held that in the circumstances we have here the re-organization law could not be sustained.
Turning to the New Jersey case, upon which counsel for appellant rely, the situation before the court was precisely like that here. There was no provision, express or implied, in the charter of the corporation sought to be superseded author izing a re-organization without the consent of all its members,, or at all. The re-organization act, the same as here, came subsequent to the corporate charter. The corporation was-formed in 1893. The plaintiff became a member thereof in 1898. The re-organization act was passed in 1899. The-court held that such act, as regards authorizing a new corporation to supersede the old one contrary to the wishes of any member of the old one, was unconstitutional. Thus it will be seen that both cases are in harmony. Both condemn the act in question.
On the subject of whether plaintiff has a cause of action in equity the point is made, in addition to those heretofore discussed, that the complaint, in effect, admits the incorporation of the stock company; that therefore it became vested with the property of the old organization, and, there being no allegation that the new company is not ready, willing, and able to pay all the liabilities of the old company, the latter could not maintain this action, therefore plaintiff cannot. The complaint, as we understand it, makes no admission that the new company is vested with the title to the assets of the Germantown Farmers' Mutual Insurance Company. It admits that it has manual possession thereof, but charges that the legal title and right of possession is in the mutual company. It further alleges that the officers of the latter are so-concerned in the commission of the wrong that there is no> reasonable ground to expect that they will efficiently assert its-rights. That makes a clear case for the plaintiff, since he is-pecuniarily interested in the protection of the old company's rights, to invoke equity to enforce its cause of action. Whether the right of the mutual company is legal or equitable makes no difference as regards the rights of the appellant to invoke equity. That field of judicial activity only is open to him. One of the most common and important subjects of equity jurisdiction is the protection of equitable rights formed on-legal or equitable rights of corporations, public or private,. wbeu those wbo should resort to judicial remedies to conserve the same will not do so. Land, L. & L. Co. v. McIntyre, 100 Wis. 245, 256, 75 N. W. 964; Kircher v. Pederson, 117 Wis. 68, 93 N. W. 813; Balch v. Beach, 119 Wis. 77, 95 N. W. 132.
The doctrine of tbe New York court, cited to our attention from Grobe v. Erie Co. Mut. Ins. Co. 39 App. Div. 183, 57 N. Y. Supp. 290, that "tbe unascertained interest of a mere member of a corporation is not of sufficient significance to challenge attention of a court of equity to protect it. To permit corporations to be managed by suits in equity, instituted in the interests of persons holding such indefinite rights, would produce intolerable confusion and end substantially in the destruction of such enterprises," has no place here. We-had occasion to examine it at some length in Land, L. & L. Go. v. McIntyre, supra. It is entirely inconsistent, as it seems, with the real functions of equity jurisdiction. The idea that a member of a corporation pecuniarily interested in the vindication or prevention of some wrong to it, which it has not capacity to do for itself because of the attitude of unfaithful officers, cannot in behalf of himself and others similarly interested apply successfully at the door of equity because his interest as a single member is small, is unworthy to' be entertained. It has not found and cannot find any favor here. There is no such reproach upon our judicial system. The jurisdictions are exceptional where the rule is not recognized and broadly applied that where a cause of action exists^ in favor of a corporation and its governing body refuses to-enforce it, any member thereof may do so, suing in equity in behalf of himself and others. The direct injury to the corporation is the primary end, in such action, to be remedied.. It may be very large and the interest of the active instrument-in conserving it may be very small. The former is the significant end, the latter is sufficient for the case so long as it' is appreciable as a property interest. 4 Thompson, Corp" § 4479. In Schwarzwaelder v. German Mut. F. Ins. Co. 59 N. J. Eq. 589, 44 Atl. 769, under sncb conditions as we have 'here, equity jurisdiction at the suit of a single policy-holder enjoined the re-organization proceedings upon the ground that the threatened injury to him was irreparable. The court held that the re-organization could no-t proceed against the protest of a single member, and that as neither the common law nor statute offered any adequate legal remedy for such a deprivation of property the matter was within one of the well recognized heads of equity jurisprudence.
The point is made that the complaint alleges that the Ger-mantown Insurance 'Company is a corporation organized un•der the provisions of ch. 89, Stats. 1898, and ch. 229, Laws •of 1903, and that such being the case it must necessarily, as a de facto corporation at least, be the owner of the assets of the old corporation and beyond the reach of any but direct proceedings at the suit of the state to inquire into its right in the matter. True, the complaint so alleges, but the allegation must be construed in the light of the whole pleading. It can mean no more than that everything was done, which it was -competent to do under the laws referred to, to make the Ger-mantown Insurance Company a corporation. The whole -gravamen of the pleading is that the law of 1903 offends against the constitution and therefore everything done under it is void. The complaint states: "The individual defendants with divers other persons combined and confederated for the unlawful purpose" of depriving the .Germantown Farmers' Mutual Insurance Company of its property "and therefore caused to be organized the above named defendant, Ger-mantown Insurance Company, and thereafter undertook to re-incorporate said Germantown Farmers' Mutual Insurance Company into a stock corporation under the name of'the Ger-mantown Insurance Company, and undertook" to transfer the property of the old company to the Germantown Insurance Company, and tbrongb tbe acts of such individual defendants the latter company converted the property of the old corporation to its own use. "While it speaks of the new creation as a corporation it pleads the underlying fact, — the fact that the proceedings to incorporate it are such only as the reorganization act, in terms, authorized. "Whatever there is in the complaint, suggesting in terms that the legal effect of such acts was to create even a de facto corporation, is contrary to the whole spirit and obvious intent of the pleading and in any event cannot control contrary to the law governing the matter. The law of 1903 being unconstitutional, as we hold it to be, and being1 the inducing feature of the legislative scheme under which the ré-organization occurred, the whole must fall together. That is, the general statute as regards the incorporation of mutual insurance companies must be deemed to have been incorporated in the act of 1903 for a complete scheme of re-incorporation of mutual insurance companies. Clearly the legislature would not have used the general law for the incorporation of insurance companies ' as a means of turning existing mutual into stock companies as it did without the enabling act of 1903. That law must be deemed the inducing provision and so the whole scheme falls under constitutional limitations. Slauson v. Racine, 13 Wis. 398; State ex rel. Walsh v. Dousmam, 28 Wis. 541; State ex rel. La Valle v. Sauk Co. 62 Wis. 376, 22 N. W. 572; Gilbert-Arnold L. Co. v. Superior, 91 Wis. 353, 64 N. W. 999.
The foregoing results in the respondent company having-no basis for corporate existence but the unconstitutional law,, which is not sufficient to support even a de facto corporation. The latter can exist only where there is a'valid law under which the corporation might have been created de jure. It is in the latter situation that the existence of a corporation ,can only be inquired into by a direct action in the name of the state. Evenson v. Ellingson, 67 Wis. 634, 646, 31 N. W. 342; In re Incorporation of North Milwaukee, 93 Wis. 616, 67 N. W. 1033; Gilkey v. How, 105 Wis. 41, 81 N. W. 120.; Winneconne v. Winneconne, 111 Wis. 10, 12, 86 N. W. 589; Methodist E. U. Church v. Pickett, 19 N. Y. 482; Vanneman v. Young, 52 N. J. Law, 403, 20 Atl. 53.
It is proper and perhaps best to observe, in passing, tbat upon tbe facts alleged tbe title to tbe business and assets formerly possessed by tbe Germantown Farmers' Mutual Insurance Company is still in sucb company entirely unimpaired by tbe re-organization law and tbe acts wbicb occurred under it. Tbe business conducted by its pretended successor, tbe Germantown Insurance Company, must be regarded as a mere continuation of its business with all tbat sucb situation means.
If it were a fact in tbe case before us tbat tbe Germantown Insurance Company was a valid corporation, it would make no difference witb plaintiff's cause of action if tbe fact remained tbat it bad obtained wrongful possession of tbe assets •of tbe Farmers' Company and tbe officers of tbe latter would not take tbe proper steps to remedy tbe mischief. This is not an action necessarily depending on whether the wrongdoer was a valid corporation or not. It is not an action to inquire into corporate existence. It is one to recover into tbe possession of tbe Germantown Farmers' Mutual Insurance Company its property in specie, or tbe equivalent thereof, wbicb has been, as is alleged, wrongfully taken from it. Tbat might be accomplished whether tbe new company was or was not a corporation de jure or de facto. It is only a mere incident of tbe action tbat it is held to be neither.
Some other questions of minor importance are discussed in tbe briefs of counsel. They are included, it is thought, in those heretofore treated, or are rendered immaterial by what has been said. Tbe discussion of tbe ground of demurrer tbat tbe complaint is insufficient to state a cause of action, to wbicb this opinion has been mainly directed, really covers tbe charge of want of jurisdiction and want of capacity to sue. Tbe cause of action of tbe Farmers' Company is grounded on tbe wrongful conduct of tbe individual defendants, wbicb was made fruitful by means of tbe unconstitutional law under wbicb tbe new company was organized, in tbat it resulted in depriving tbe Farmers' Company of its property. Tbe cause of action of appellant, standing for bimself and others, is grounded on bis pecuniary interest in tbe enforcement of tbe rights of bis company. His right is equitable, and bis remedy necessarily so. On tbat account, and since there is no legal remedy for him, tbe indirect injury is of sufficient and substantial character to be a proper subject' for redress. Tbe jurisdiction of tbe subject matter is grounded on tbe necessary uses of equity, and tbe insufficient basis for tbe corporate existence of tbe new organization, if tbat were a necessary fact Plaintiff's legal capacity to sue is based on tbe foregoing situation and tbe fact tbat without such. capacity tbe wrong complained of would go unredressed, tbe attitude of those who only could directly act for tbe Farmers' Company being hostile to such action. Tbe challenge to tbe jurisdiction of tbe person and to improper joinder of causes of action appears not to be pressed here, and to be so obviously without merit as not to require more than this passing mention.
We apprehend tbat we have sufficiently covered tbe whole subject presented fox consideration as to render it useless to proceed further.
By ihe Oourt. — Tbe order appealed from is reversed.