Court Opinion

ID: 6583220
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:40:12.321868+00
Date Added: 2024-06-11T15:57:21.809684
License: Public Domain

Hamersley, J.
(dissenting). In the result announced by the majority of the court I concur, but not with the reasons given in support of that result.
If the funds in question were accumulated by the defendant corporation in the transaction in this State of a business lawful under our laws, then such funds ought to be placed in the hands of Mr. Failey, the principal and domiciliary receiver appointed by the Indiana court; unless there are facts in the case which establish some clear ground of exception to the general rule.
The rule that when a corporation is chartered by a single State and does a lawful insurance business in other States through agencies and becomes insolvent, its assets should be gathered at the domicil, and there distributed according to the principles of equity, is sound and should be universally observed. It is based upon a recognized principle of international comity; and that principle as applicable between our several States, rests on reasons far more cogent than the reasons which support the principle as applicable between nations wholly independent. While it is true that for many purposes our States are independent, as really as if they were for all purposes separate sovereignties, and for this reason the rules of international comity may apply to questions arising between citizens of different States, yet it is also true that the citizens of all the States are fellow subjects of one common government, supreme within the sphere of its operation, and that the necessities growing out of such common government impose upon the several States obligations of the highest authority, inconsistent with that cautious and self-protecting administration of the law of comity that may be safely indulged in by States wholly foreign to each other. The full faith and credit positively given in each State to the judicial proceedings of every other State; the good faith and confidence impliedly required in dealing with such judicial proceedings; the commercial necessity of a *195distribution of assets of an insolvent corporation by one court, growing out of the guaranteed freedom and infinite variety of commercial intercourse; the impossibility in many cases of an equitable distribution except by one court; the concurrent jurisdiction, and at times exclusive jurisdiction, of Federal courts in such cases, all suggest cogent reasons for a loyal observance of the rule stated, unless the particular facts present a plain and unquestioned exception to the rule.
It will not, however, be necessary to inquire whether the particular facts in this case do, or do not, present such exception. Mr. Failey practically appears in this matter as a plaintiff; and, as the foundation of his claim and right to the assistance of this court, sets out in full the organization, constitution and laws of the defendant corporation, and a record containing the findings, orders and decrees of the Indiana court.
The Durham Branch, in its demurrer, says, that upon the documents set out by Failey, in connection with the findings, and orders of the Indiana court, it appears that the business transacted in this State was unlawful and contrary to public policy; and also in its claim alleges as a fact that the defendant corporation was not organized and qualified to do business in this State.
The Superior Court has made a finding of facts for the purpose of submitting to this court the whole' record, with the facts set forth in the finding, and of obtaining the advice of this court upon all questions arising upon the pleadings and record; including the questions arising upon the demurrer and the overruling thereof, and the question of what judgment upon the facts found should be rendered.
In the finding of facts the court finds, in addition to the facts otherwise appearing on the record, that the Indiana court had made certain further findings of fact, conclusions of law, and orders, which should be added to the record set out and relied upon by Failey in his claim, and makes such findings of fact, conclusions of law and orders a part of this record; and also finds that of the funds oil hand $- *196were accumulated in 1889 and subsequently; (it was stated in argument, and not questioned, that this blank should be filled by a sum representing nearly the whole amount accumulated) and that the corporation has never been authorized to do insurance business in this State.
Thus the main and determinative question we are called upon to decide is upon the facts contained in the record and found by the court:—Should the Superior Court now hold that the business transacted in this State by the insolvent corporation was a business contrary to our public policy? This question requires that we should first come to an understanding of the meaning and legal effect of the remarkable mass of words called the constitution and laws of the Order of the Iron Hall. They contain the articles of association—i. e., the charter of the corporation, the constitution adopted by the corporation, the constitution prescribed by the corporation for governing local branches, the general laws adopted by the corporation for its own government, and the few special laws governing delegated meetings of local branches, called district meetings, to be from time to time called by officers of and subject to the control of the corporation; special laws governing the life division— which do not appear to have been put into operation ; and an official summary of the effect of the constitution and laws in a number of enumerated cases. The meaning of this literature cannot be understood without the most thorough analysis of the whole and every part, and it is too voluminous to be quoted in full; but I am satisfied that a careful examination of the documents establishes the following conclusions:—
1. The defendant was incorporated in December, 1881, by filing articles of association in pursuance of a general statute of Indiana authorizing the incorporation of three or more persons for the purpose of organizing “ divisions or associations of temperance, or other charitable associations or orders.” The members of the corporation so organized consist, for all practical purposes, of its principal officers. The stated meetings of the corporation are biennial or quad*197rennial, and the officers are re-chosen at such meetings. Eight specified officers must receive salaries, and may receive other compensation. A body called the executive committee exercises all powers of the corporation concerning business matters, fixes the salaries and compensation of all officers, and is composed of nine officers, of whom six are of those required to be salaried.
2. The corporation undertakes to accomplish two distinct, though related objects : First, to organize and govern local branches of a secret social society; second, to establish and carry on an insurance business on the assessment plan, in which the insured must first have been admitted members of the secret society, and must continue in good standing as such members.
3. While the secret social society is under the absolute control of the corporation, the members of the society are not members of the corporation, and the corporation assumes no liability to furnish them the pecuniary aid usually provided by fraternal and mutual aid societies. The members of the society, as such, are called “ social members.” One of their privileges is the right to apply for insurance— i. e., to become “participant in the benefit fund,” and by the laws governing the secret society such insured members have the exclusive right to vote and hold office, the privilege of paying dues being common to all the members. The constitution provides that any person who has held a membership in the society for thirty days or more may, if he so desire, become a participant in the benefit fund. To become such participant he must make application, undergo medical examination, sign the obligations relating to conditions of insurance, etc., in the same manner as in the transaction of any insurance business, and the corporation states in its official summary of its laws that before insurance the insured must become “ an acceptable social member of the order, which is purely fraternal; ” and that after being a social member thirty days “ he may, if he so desire, make application to become a member of the benefit fund; ” or, at his option, he may remain a social member for life, and “ as such social *198member he would enjoy all the fraternal and social privileges of the order.” And again, “ social members shall pay the same dues as the members of the benefit fund, and cannot vote or hold office, neither are they entitled to any benefits for sickness or disabilitjr.” It is through the local branches of this secret society that the corporation secures its agents, and revenue for pushing its scheme of insurance. Each member, whether insured or not, pays into his local branch various fees and dues, by which all its expenses in maintaining attractive social features and drawing in candidates for the insurance business of the corporation, are provided for. It is also through these local branches that the corporation provides the revenues which it uses for its corporate expenses and to divide as salaries and compensation among the corporators. For such purposes the branches pay the corporation charter and registration fees, profits on the sale of paraphernalia and supplies, and such per capita tax on all members, whether insured or not, as the corporation sees fit to levy. It is necessary to keep in mind these distinctions. The secret society is not the corporation. The society supplies the corporation with funds for tire use of the few corporators, but the corporation is by its laws forbidden to give to members of the society any pecuniary aid in case of sickness, accident or death. No element of benevolence, charity, or mutual aid exists between the corporation and members of the society. The insurance business is a business distinct from the organization of the secret society, and is transacted directly between the corporation and its certificate holders, just as truly as if the business were carried on, as has been done in connection with the Masonic fraternity, by a corporation having no connection with the fraternity, beyond the fact that its field of insurance is confined to the members of the fraternity in good standing. These distinctions between the corporation and the secret society, between the corporation as the organizer of the secret society and as the manager of the insurance business, are clearly deducible from the constitution and laws submitted to us; although those docu*199ments are well calculated and perhaps intended to obscure and conceal such distinctions.
4. The insurance business established and carried on by the corporation, consists in issuing certificates whereby the corporation undertakes to pay the bolder $1,000, in seven years, upon condition that the holder shall pay all assessments of $2.50 when called upon in pursuance of the laws made by the corporation, and upon the further condition that he shall continue a member in good standing of the secret society organized and controlled by the corporation. In order to attract the savings of the very smallest earnings, provision is made for issuing similar certificates for the payment of one, two, three, or four fifths of $1,000, upon condition of paying assessments of one, two, three, or four fifths of $2.50. The obligation of the corporation also involves the payment of certain weekly sums in case of the disability of the certificate holder; but as the whole amount so paid can in no case exceed one half of the sum named in the certificate, and in every case must be deducted from the sum agreed to be paid on its termination, this provision does not affect the character of the principal agreement. The obligation also involves the payment-of one half the amount named in the certificate in case of the death of the holder after the first two years of the term ; but this provision only covers a life risk for one and one half, or at most, for five years; and in view of the small percentage of mortality in any one term of five years, cannot seriously affect the principle of the insurance. The substantive business consists in the payment of a fixed sum at the end of seven years. The subsidiary provisions may furnish an excuse for calling the business accident and life, as well as endowment Insurance, but are in fact mere incidental attractions for the prosecution of the main scheme, which the whole literature of the corporation, as well as the seal, indicative of its main object described in the charter, authoritatively announces to be the payment of$1,000, in seven years.” The corporation promises to pay $1,000 in seven years in consideration of the payment of the assessments of $2.50 each, and upon the *200representation that those assessments shall not in the aggregate equal $1,000. Counsel claim that the corporation does not promise to pay $1,000, but only a sum “not exceeding $1,000.” I think this error arises mainly from a misapprehension of the .effect of the certificate. That paper, it is true, contains a promise to pay “a sum not exceeding $1,000,” but it contains no promise as to the time or as to any detail. The only promise is to pay a sum “in accordance with and under the provisions of the laws ” of the corporation, and this paper is authenticated by the seal of the corporation, which contains the charter, declaration of its main purpose and object, “$1,000 in seven years.” To the laws we must look for the actual promise. The law says:—“ There shall be attached to this Order a benefit fund, in which members may participate (except social members), as they may severally elect, either in the sum of $1,000, $800, etc., on which they shall pay the rates and be entitled to the benefits prescribed in the following table : ”
“TABLE OF BATES AND BENEFITS.
“ Amount paid on each assessment, . . $2.50
Weekly benefit when sick or disabled, . $25.00
Amount paid on total disability, . . $500.00
Payable at death, ..... $500.00
Benefits paid at end of seven years not exceeding, ......$1,000.00 ”
Here is a direct promise that the certificate holder shall participate in the fund “in the sum of $1,000,” and “shall be entitled” to $25.00 a week during sickness, $500 on total disabilitjr, $500 at death ; (the obligation to pay these sums is absolute, it is not a mere promise to pay a sum not exceeding $500), and at the end of seven years benefits not exceeding $1,000—i. e., the benefits remaining unpaid of the sum of $1,000 which he has elected as the sum which specifies his participation in the benefits. No other construction can be given this language except as a subterfuge for palpable fraud —and such construction the court cannot give. And this construction of the direct promise of “ $1,000 in seveu years ” *201is fully confirmed by a careful examination of the whole body of the laws. The only exception to the obligation is contained in the section which provides that when one assessment» of $2.50 shall realize an amount less than $1,000, if the certificate be in the amount of $1,000, the certificate holder shall receive no more than the “whole amount of said assessment.” That is, until the business increases so as to include more than 400 certificate holders, (the number necessary to produce $1,000 at $2.50 each,) each certificate holder whose claim matures must be content with the product of one assessment ; and the insertion of this exception is strong affirmation that the promise to pay the whole sum named in the certificate is binding in every other case.
Counsel also claim that the business scheme of this corporation does not involve the representation that assessments imposed on the certificate holders shall not in the aggregate equal $1,000. There is no foundation for such a claim. We are called upon to declare the legal meaning of a body of laws prepared for the sole purpose of attracting and building up a large business. The purpose for which such laws are framed is as truly an element in their construction as the eontextural meaning of the particular language used to accomplish that purpose. In passing on the character of the business disclosed by laws so framed, we are bound to exercise that knowledge of the patent, well established and universally recognized elements of human nature, and of business transactions which the court must be presumed to possess. In this case the business, the securing of which is the object and sole object of the laws, consists in obtaining from a large number of the public the payment to the corporation of $2.50 from time to time upon the promise by the corporation of paying to each contributor $1,000 at the end of seven years. It is certain that such a business cannot exist without the belief on the part of the contributors that the assessments of seven years will be less than $1,000. By the very fact of offering to the public, for the purpose of obtaining business, the prospectus contained in these laws, the corporation makes the representation that $1,000 is to be obtained in seven *202years by contributing in small sums less than that amount. Such representation is written into their prospectus by the fact of publication, unless it is clearly excluded by the language used. It is true the corporation might have, said: “ This business cannot honestly be carried on without collecting from each contributor in assessments the full amount of $T,000.” If this language had been used no business would have been done and the laws would not be before us for construction. Not only is no such language used, but the representation implied in the very fact of presenting this business to the public is plainly set forth in the laws of the corporation. The law providing for the payment of assessments says: “ All payments shall be made in accordance with the following sections, and in no other way or manner.” And until the laws are changed no assessment can be made except as provided. The only provision for calling for payment of assessments is that if the treasury requires an assessment shall be made, and that “ when it is evident from the claims filed in regular form that two assessments are necessary in any one month, the'n it shall be the duty of the supreme accountant to make the calls for said assessments at the same time, dating the calls one on the 1st and the other on the 15th of the month, except when those dates occur on a Sunday or legal holiday, in which case they shall be -dated the preceding day.” And in its official summary of the laws, intended for those unable to wade through the whole mass of legislation, the corporation says: “ When it is necessary to call two assessments in one month, they shall be issued from the office of the supreme accountant on the first day of such month, or as near thereto as may be expedient.” Surely it needs no argument to show that these laws not only confirm the representation made in the very fact of presenting this scheme to the public, but contain the representation that not more than two assessments a month—i. e., $420 in seven years, will be required to obtain the payment of $1,000, and that therefore the laws make no provision for calling further assessments.
In confirmation of the view taken, attention may be called *203to the fact that the Superior Court has made a part of the record of this case, conclusions of law found by the Indiana court in the proceeding which Failey sets out as the basis of his claim. These conclusions of law are:—
“ 1. That the defendant, in the issuance of certificates of membership in the benefit fund in the finding of facts described, was engaged in doing a health, accident, life and endowment insurance business, and the same was neither charity nor benevolence within the meaning of the statutes and laws of Indiana.
“ 2. That under the said contracts made by the defendant with persons holding certificates in the benefit fund, the defendant was bound to pay the full or gross amount severally named in said certificates, at the expiration of seven years from the date thereof, if then in force, less the payments (if any) theretofore made on such certificates on account of sickness or disability benefits. * * *
“ 4. That the defendant is not a mutual company, in the sense that the certificate holders in its benefit fund are members of the (Supreme) Sitting of the Order of Iron Hall, as the certificates constitute contracts entered into by the defendant on the one part and certificate holders on the other part, of the legal tenor and effect stated in the second conclusion above.”
We find therefore that the record and facts before us clearly establish the conclusion that the essential business carried on in this State by the corporation, was the issue of certificates promising the payment of $1,000 in seven years, upon condition that the certificate holder shall pay during that time assessments of the fixed sum of $2.50 each, for the purpose of enabling the corporation from the money so paid in assessments, to pay $1,000 as each certificate matures; and that this business necessarily involved the representation that the aggregate of assessments in each case would be less than $1,000; and further involved the representation, in fact made in the conduct of the business in this State, that the aggregates of assessments in each case would not exceed $420. The provision for a so-called “reserve fund” does *204not affect the character of this business. That provision simply permits the reservation of one fifth of each assessment, one seventh of the money so reserved, to be used annually in payment of matured certificates for the purpose of reducing the amount of future assessments.
The difficulty with the business consists in the impossibility of paying §1,000, from assessments amounting to §420, or any sum materially less than §1,000 ; and this difficulty is not to be avoided by using one fifth ~of the inadequate assessments, at the rate of one seventh a year, for the purpose of reducing the inadequate assessments of the future.
Nor is the character of the business materially affected by so-called “ lapses,” i. e., the possibility of a certain percentage of certificate holders forfeiting the assessments paid, by neglect to continue such payments. If the business really depends on sueh lapses, and its object is to pay a large profit to matured certificate holders from money obtained by means of such lapses, then the business is unsound and dishonest. But the lapses are a necessary incident, and do not materially affect the character and result of the business. The percentage of such lapses is established by insurance experience; the main portion of such lapses must be at the beginning, and not at the close of the term; the security of the certificate holder must consist in maintaining, not in diminishing, the number of those liable to assessment; and a slight mathematical process will demonstrate that such lapses cannot prevent the eventual loss to some one involved in a business based on a principle of paying §1,000 for §500.
Such a business is clearly distinguishable from legitimate insurance. All insurance has a wagering element, and by the common law of this State wagering contracts are unlawful. In insurance, however, the wager is not the controlling element. The object of the contract is protection; in fire and other insurance of property, protection of the actual value of the property destroyed; in life insurance, protection of the value of a man’s life to his family or his creditors.
But in any such case, if the element of protection is eliminated, if there is no insurable interest, if the contract is a *205mere speculative bet on contingencies, if nothing but the wagering element remains, then the contract becomes obnoxious to the law which pronounces wagers illegal. In these certificate contracts there is no element of protection to property ; it is a purely business speculation. The bait held out to the certificate holder is the hope of getting $1,000 without paying for it. He risks his little stakes of $2.50 (a small sum purposely fixed for bringing the temptation home to a great mass of the people), in the expectation of succeeding in the scramble for a thousand dollars in seven years.
This business is also distinguishable from that quasi insurance business, which really partakes more of the nature of investment or saving bank business, called endowment insurance. This is a comparatively new branch of insurance business; but in States where the standard of safety and solvency has been established by legislation, the law says, that for a $1,000 seven-year endowment insurance policy, issued at the age of 80, the company shall charge, and the insured shall pay, $125.74 each year until maturity ; and that after deducting the current cost of insurance each year, the whole balance must be carefully invested and compounded at the standard rate of interest. Whether this particular regulation is essential to the conduct of the business or not, it is plain that the business of issuing $1,000 seven-year endowment policies indiscriminately' to all persons between 18 and 65, on payments not exceeding $60.00 a year, cannot be honestly conducted; and such impossibility cannot be altered by calling premiums “assessments.” Life insurance may come to be safely' conducted on the assessment plan, and possibly human ingenuity may devise a scheme for safely conducting endowment business on that plan; but it is a mathematical certainty that the so-called endowment business this corporation has attempted to conduct, can only result in loss to the certificate holders.
Still more clearly should this business be distinguished from that of fraternal and mutual aid societies. The latter have no element of speculation ; they are purely protective, and are based upon the necessity and duty of mutual aid in *206time of trouble; and so act as powerful incentives in promoting that cultivation of thrift and mutual helpfulness which is essential to the prosperity and good order of society. For this reason they are favored by the law, and entitled to its protection. But the former has no element of protection, and is purely speculative. It seeks not to help the unfortunate, but to make profits out of their misfortunes, and tends directly to discourage thrift and promote that speculative spirit which is a serious danger to society. Between these two there is an impassable gulf, and not the least of the injury resulting from the business of this corporation is its direct tendency to discourage and weaken legitimate fraternal and mutual aid societies. This business, therefore, is nominally an insurance business, whose essential characteristics are: 1. The elimination of the protective element of insurance, so that the wagering element ceases to be incidental and becomes the controlling element. 2. The certainty of ending in a money loss to a large number of certificate holders.
Such conclusion is a mathematical certainty. If fourteen men agree to pay equal assessments into a common fund, so that at the end of seven years each one may draw out $1,000, it is evident that each will pay in the amount he draws out. Such agreement is harmless, but will never be entered into. If, however, a company issues its certificates promising to pay $1,000 in seven years upon the payment of such assessments as the certificates mature, and obtains fourteen certificate holders, one eacli year for fourteen years, and continues the business of collecting assessments and paying benefits until the last certificate matures, we have this result:—The first man pays $143 in assessments, and draws out $1,000—a net profit of $857 ; the last man pays $2,593 in assessments, and draws out $1,000—a net loss of $1,593 ; the first six men make a profit of about $3,000 ; the seventh and eighth pay in and draw out the same amount, and the last six lose about $3,000 ; and in any method adopted for putting in execution such a scheme, either the certificate holders draw out the same *207amount they pay in, or some members make a profit out of the losses of others.
The subsidiary elements introduced by the defendant in its scheme may modify results, but cannot affect the principle. It is an inherent element in every such scheme that whenever the business closes, some one must be a loser. It is also certain that practically the business cannot be carried on without a rapid increase of members. As soon as- the limit of increase is reached the business must close, and so the extent of the loss will be great in proportion to the success of the business. When, to such a scheme is added the fact that the corporation which carries it on makes large gains, proportioned to the extent of its business, and induces the public to take its certificates by the representation that $1,000 will be so gained in seven years through the payment of a much less sum, the fraudulent character of the business becomes yet more apparent and far more dangerous to the public.
The facts found in the record before us strikingly illustrate the substantial fraud in'which the business set forth in the pleadings must result. It appears from the statement contained in the record of the condition of this company at the time of the appointment of Failey receiver, that the corporation has received several hundred thousand dollars, used for corporate expenses and for division among its officers, and at the time of failure was in receipt of a revenue for such purposes of upwards of $60,000 a year; that a large number of the earlier certificate holders have received net profits averaging about $420 each ; and that the 60,000 remaining certificate holders, if all the money collected for assessments and not paid out on matured certificates, is divided among them, must lose about $2,000,000. Such is the result of a few years successful business, when conducted with all the honesty which such a business will permit. This practically illustrates what the documents before us demonstrate, that the very essence of the business carried on in this State, and which now seeks the aid of the court of equity, is *208paying unearned profits to the few from the losses of the many.
I believe no case has been decided upon the precise question whether such a business is contrary to public policy, but courts have plainly characterized its nature when opportunity has been given. In Massachusetts, in reference to a corporation doing a somewhat similar business, but organized under a peculiar statute of that State, the court says:—“ It is not in our power to declare the business contrary to public policy, and a fraud on an unprotected part of the community, since the Legislature have authorized it, but it is well to understand with what kind of business we are dealing. No one who does understand it, we think, would hesitate to agree that all legislative conditions must be complied with strictly.” Fogg v. Supreme Lodge U. O. Golden Lion, 156 Mass., 431. In New Jersey, in holding that a similar business was not within the meaning of the New Jersey statute authorizing the formation of benevolent and charitable institutions, the court says :—“ How can it ever be said that the Legislature ever intended to allow the learned and skillful and financially able to make profit, under the guise of benevolence and charity, out of the unlearned and unskilled, and those who are so unfortunate as to suffer from financial disability ? After the fullest and most careful reflection I am unable to discover any method or principle of law by which this scheme can be sustained under this Act. With all due respect to the learned counsel who presented the case for the defendant, it seems to me that the scheme prescribed by the constitution and by-laws in this case, has more the appearance of a lottery than of a charity.” Peltz v. Supreme Chamber Financial Union, 19 Atl. Rep. 671. In Pennsylvania, a corporation organized under a general statute authorizing incorporation for the purpose of “ the maintenance of a society for beneficial or protective purposes to its members from funds collected therein,” attempted a somewhat similar business, and the Court of Common Pleas, in revoking its charter, says:—“ The leading feature about which all others cluster, is this vicious proposition to give *209a man good money for nothing. This cannot be done as a business matter, honestly and fairly.” And the Supreme Court, in sustaining the revocation of the charter, says :— “ The auditor and the court below have sufficiently demonstrated that the only persons likely to be benefited by the scheme set forth in the charter are the officers themselves. It manifestly belongs to that class of associations, by far too numerous, the practical effect of whose operations is to enrich a few at the expense of confiding and ignorant people. Such corporations are ‘ unlawful and injurious to the community.’ ” In re National Indemnity and Endowment Co., 142 Penn. St., 450.
We have before us now, a corporation which has-carried on in this State the insurance business described, not as a system of mutual aid between the members of a mutual aid society, but independently, the society such as it is, simply defining the field of insurance; and the question is distinctly raised—Is that business contrary to our public policy? In determining this question we are embarrassed by no unfortunate legislation directly or impliedly authorizing such business. It is a fundamental principle of our law that courts will not undertake to administer justice in behalf of one whose claim is based upon a violation of law, whether that law be a statute, a legal principle, or a rule of conduct based upon accepted views of sound ethics and public interest, which has been incorporated into our system of jurisprudence by force of the well established judicial recognition which defines our unwritten law. Courts are established to settle rights founded in law. They have no jurisdiction of violations of the law, except for the purpose of punishment. This principle is found in the earliest records of our law, and has been enforced and illustrated in innumerable eases.
That the transactions in question are in violation of law is plain. In the first place, the record finds that the corporation “ has never been authorized to do insurance business in the State of Connecticut.” Sec. 2892 of the General Statutes says:—It shall not be lawful for any foreign corporation, organized for the purpose.of furnishing life or accident in*210suranee, or indemnity upon the assessment plan, to do any business in this State unless authorized by the Insurance Commissioner. Counsel claims that this prohibition has no application, because of a subsequent section which says it shall not be construed to apply to any “ secret or fraternal society, nor to any association organized for benevolent and charitable purposes whose members are employed by one or by one or more similar corporations,” etc. I think an examination of the whole law clearly shows that the words “ secret or fraternal society ” include only the well known class of associations formed for dispensing aid or benefits to their members, and that the exception does not apply to a corporation doing an assessment insurance business distinct from the benevolent operations of any secret or fraternal society. It will hardly be claimed that the mere word “secret ” is efficacious to exclude from the operation of the act any corporation that may choose to call its janitor a “ watchman ” or its doorkeeper a “vedette.” But there is no exception to § 2905; and that section provides that no foreign insurance corporation shall, directly or indirectly, transact business in this State until it shall have first appointed, in writing, the Insurance Commissioner of this State its lawful attorney, on whom process may be served. The record shows that this has not been done. I do not wish, however, to •seek a ground for violation of public policy in the mere failure to comply with such requirements, when the actual transactions have been in violation of rules of conduct touching ■the gravest interests of society, and which are as well established law as if expressed in the form of a statute.
The insurance business of this defendant cannot exist -without resulting in a fraud. In cannot be conducted without untrue representations. It is essentially of a wagering nature. Its direct and necessary tendency is an unmitigated public injury. The evils resulting from mere wagering purchases -of stock, and which the law condemns as absolutely illegal, are slight compared with the disaster that must follow schemes of insurance which can only be started by appeals to the gambling spirit of a whole people, and can only end *211in widespread loss. The rules of a public policy which condemn this business are well settled by judicial decisions, and this case really involves no new application of such rules; but if, in fact, it were a case of new application, the public injury is so great, and the violation of plain principles of law so clear, that the court should not hesitate to make the application. In Egerton v. Brownlow, 4 House of Lords Cases, p. 161, Lord Lyndhurst says:—“ The inquiry must, in each instance where no former precedent had occurred, have been into the tendency of the act to interfere with the general interest. The rule, then, is clear; whether the particular case comes within the rule, it is the province of the court in each instance acting with due caution, to determine.” And Lord Chief Baron, Sir Frederick Pollock, in the same case, page 149, says :—“ After all these authorities, am I not justified in saying that, were I to discard the public welfare from my consideration, I should abdicate the functions of my office—I should shrink from the discharge of my duty? * * * I think I am bound to look for the principles of former decisions, and not to shrink from applying them with firmness and caution to any new and extraordinary case that may arise.”
The question before us is not raised by the conflicting claims of the certificate holder and the corporation as to the validity or legal effect of a particular contract, but it is raised by the application of this corporation, through its receiver, asking the aid of a court of equity, for the purpose of settling its affairs, to put him in the possession of money due on account of business transacted in this State. The facts set out in this application, and the finding of the Superior Court, clearly show that the business so transacted, was essentially fraudulent and in violation of our public policy. The courts of this State cannot assist those who prosecute their business contrary to its settled policy, either in the prosecution of that business, or after its prosecution has ceased. Courts of equity will give no aid even in adjusting the accounts in a partnership formed for such purpose. Watson v. Murray, 23 N. J. Eq., 257; Anderson v. *212Powell, 44 Iowa, 20; Watson v. Fletcher, 7 Graft., 1. And a fortiori they will give no aid to a foreign corporation, in obtaining possession of property claimed to have been acquired through such violation of law. The claim of Mr. Failey must therefore be denied.
There is no question raised as to the jurisdiction of the Superior Court to distribute the funds now in the hands of Scofield, receiver. There appear to be no creditors, and no parties in interest, except the contributors to these funds. It is alleged and shown that the only protection against the dissipation of these funds through a multiplicity of suits, lies in their distribution by order of court. It is doubtless true that in the complications now existing, the funds can be most speedily and justly distributed through receiver Scofield. Possibly the view I have taken of the case may involve some modifications of the directions for distribution announced by the court, but such modifications would not be of sufficient practical importance to justify discussion, or to furnish ground for dissent.
For the reasons stated, I concur in the advice given to the Superior Court.