Court Opinion

ID: 6598644
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:05:45.561406+00
Date Added: 2024-06-11T15:57:56.333862
License: Public Domain

A rehearing having been granted, the cause was argued before the full bench.
Winsor & Smith, for plaintiff in error:
Allen is not liable to contribute to the satisfaction of the judgment, because his premium note belonged to the Farmers’ Department, and the judgment was for a loss in the Merchants’ Department. The New York general law under which Thomas vs. Achilles, 16 Barb., 497, arose, provided that no mutual insurance company in any county of the state, with certain exceptions, should commence business until agreements had been entered into for insurance, the premiums on which should amount to $100,000, and the notes received therefor, payable at the end of or within twelve months from the date thereof, which notes should be considered apart of the capital stock, and should be deemed valid, and should be negotiable and collectable for the purpose of paying any losses which might occur or otherwise. N. Y. Rev. Stat., 4th Ed., p. 1280, sec. 5; N. Y. Laws of 1849, chap. 308, sec. 5. Under this law, it is held by the courts of New York that the notes given on the organization of a mutual insurance company are capital stock, and payable absolutely. And the same courts hold further that the premium notes given to the company subsequently are only subject to the payment of actual losses and expenses, and cannot be collected until after a legal assessment for that purpose. Devendorf vs. Beardsley, 23 Barb., 656; White vs. Haight, 16 N. Y., 310; Savage vs. Medbury, 19 id., 32. In the case of Thomas vs. Achilles the court evidently failed to notice the distinction between these two classes of notes, and treated the subsequent premium notes as being, like the stock notes, devoted to the payment of all losses, without regard to the different departments. Nevertheless the distinction is very plain. Under the New York law the original notes are absolute promissory notes, intended to be so in form as well as sub*124^ance! payable absolutely, transferable at pleasure from band —to all intents capital stock, and not subject to assessment; while tbe premium notes given afterwards can only be col-leeted after assessment pursuant to tbe charter and by-laws of tbe company. Tbe case of Thomas vs. Achilles seems to be overruled by tbe other cases above cited, and by one in 21 Barb., 605. But if not overruled, it cannot settle tbe question under our general law, as to tbe liability of members of one department of a mutual insurance company to pay losses in other departments.
Under our law, tbe notes given on tbe organization of a company like tbe Troy Eire Insurance Company, are not different from the premium notes given afterwards. These original notes, it will be seen by reference to tbe law, are not made capital stock as they are in Hew York, nor are they to be made payable absolutely, nor negotiable, nor collectable for tbe payment of all losses or otherwise; but they are to be payable when called for according to the charter and bylaws of the company, to pay losses and expenses. Tbe charter and by-laws of this company both provide that no premiam note in one of tbe departments shall be assessed to pay any loss in tbe other department. Allen, who was insured in lie Farmers’ Department, cannot be called upon to contribute, to pay a judgment for a loss in tbe Merchants’ Department. Tbe receiver, therefore, bad no title to Allen's premium note. Title is tbe right to control, to use, to apply. There was no purpose for which tbe receiver could lawfully use or apply tbe proceeds of that note. He could not apply them to the judgment, because such application would be in direct violation of tbe contract itself, and of tbe charter and by-laws of tbe company; be could-not apply them to any other purpose, because -the judgment was tbe only claim against the property of tbe company over which tbe district court bad acquired jurisdiction. Tbe only right of that court to control tbe property of tbe company rested upon its author ity to compel satisfaction of tbe judgment; consequently it could neither make nor authorize any application of such proceeds, except to satisfy tbe judgment.
Wyman Spooner, for defendant in error :
*125The receiver sues as an officer of the district court, which, in the exercise of its jurisdiction, has taken and Allen's note, together with other assets and credits of the company, to pay a debt existing in the form of a -judgment against the company; not against a particular part or department of the company, but against the company as an entirety. On this judgment is the whole or only a part of the company liable ? If only a part, how is that part to be ascertained, and by what proceedings can it be legally reached by the courts and compelled to satisfy the judgment? Could the district court, in confiscating the assets and collecting the credits of the company, and appointing a receiver to make the money to satisfy the judgment, go behind such judgment to ascertain the nature of the indebtedness on which it was founded, and what part of such company were, by agreement among themselves, liable on such original indebted-mess, for the purpose of discriminating among the members and compelling a portion only to contribute to the payment of such judgment? And can this court, in this case, fora like purpose, go behind both the original judgment against the company and the decree of the court appointing - a receiver to take possession of the assets and credits ?
There is no other legal alternative than to adopt the ruling of this court in the case of Kelly vs. The Troy Fire Insurance Company, 3 Wis., 254, that the company is but one body, although it may within itself have different departments; that the judgment, from whatever cause arising, is the debt of, and a judgment' against the whole company; that, under its charter and by-laws, the company might lawfully collect and assess all its premium notes, “ taking care to apply the proceeds according to its charter and by-laws. The district court could not discriminate as to members or departments in its order requiring the company to assign its assets and credits, because the company held them as the assets and credits of the company as a corporation, a sipgle body. And the same court, having become possessed of these, held them as the company held them, to pay the debts of the company, and being so possessed, could, through its receiver, do whatever the company might legally do in the collection, taking *126same care ™ aPP^n§ ^ proceeds. If there be any internal question as to the comparative extent to which the individual members of the company may be liable, by lie rules of their compact, to contribute to the common fund, and for what purpose, that must be determined by a spec ,al action brought for that purpose by one or more of the ot ier members, and neither party, in such action, can stand as .he
Allen's note is a promise to pay the corporation — not any * le-partment or portion of it — a certain sum, without condit; m or limitation, except that such sum shall be paid in such portions and at such times as the directors may require, agreeably to their charter and by-laws. How the charter and bylaws require no loss previous to assessment or demand of payment, nor even that there shall be an indebtedness existing at the time of assessment, which is, in effect, only a • le-mand of a payment of a part of the sum specified; and the re is no requisition that the assessment or demand shall extend beyond the individual note. Suppose then there were m understanding, or even an express agreement, that the mon *y to be assessed and collected on Álleri!s premium note shou > d be applied in a particular way or to a particular purpof.1, (and this is the most that can be made even by constructs »n or intention out of the charter and by-laws of the company) and the directors proceed to require Allen to pay a certa a portion of the whole, with or without the avowed purpose >,o pay the debts of the company. Oould Allen set up the agre ment by way of defense against the payment? And could the court, in an action to enforce payment, in anticipate >n that the directors would or might misapply the proceeds when collected, let in an inquiry as to what the directo-a might possibly do with the money, after it was collecte I, contrary to their declared purpose to pay the debts of the company? Certainly not; because this court has already d¡dared (in the case of Kelly vs. The Troy Fire Insurance Co., that the premium notes may be indiscriminately collected at the will of the directors, for the purpose of paying debts and expenses — losses or no losses, debts or no debts. In, this case the district court has assumed to stand in the place *127of the company and of its directors, and acting through its receiver, to take possession of Allen's note, to make an ment upon it, and to sue for the collection of the amount of such assessment, for the declared purpose of paying a debt and satisfying a judgment against the company. Can this court, by any legitimate and proper course of legal proceedings, in the trial of this action, be made cognizant of the fact that this money, when collected, may be misapplied, and therefore refuse a judgment for its recovery ? Such a question can only be tried in an action commenced specially for the purpose (in which Allen or some other aggrieved member or members must be complainant, and the directors, or in this case the receiver," defendant), to compel the proper application of the money when collected. See Willard’s Equity, p. 151.
As to the attempt to discriminate and explain the opinion in Kelly vs. The Troy Fire Ins. Co., by assuming that it did not apply except in cases where the object is to carry on the business of the company, and that the receiver has no authority to do this, it is sufficient to say, that in justice and equity, the making of assessments to pay debts already existing is quite as necessary as the providing for future indebtedness, and quite as essential to the successful prosecution of business.
Winsor & Smith, in reply :
We admit that the district court has attempted to appropriate Allen's note to pay the judgment in favor of Fitzpatrick and Yan Alstine. We- further admit that the judgment is a debt against the company as cm entirety — that is, against the corporation. But it is not' a debt against the members of the company in their individual capacity. We admit that the property of the company is liable. But we deny that the liability of any person whatever upon a contract with the company (whether such person is a member of the company or not), is affected by the facts so admitted. And we deny that the liability upon such contract is any greater in consequence of the fact that the action is brought by a receiver. Williams vs. Lakely, 15 How. Pr. R., 206; Savage vs. Medbury, 19 N. Y., 32. If the company could *128not assess Allen's note to pay tlie loss of Eitzpatrick and Yan Alstine, tlie receiver could not. The order of the district court could not give validity to such appropriation. “ The court could not change the contract.” 15 How. Pr. R., 209. The question presented is, “ Is Allen liable by his contract, as controlled by the charter and by-laws of the company (to which it refers), to pay anything for the purpose for which it is demanded by the receiver ?” This question has no connection with the question whether the company is but one body, or whether all its property is liable for the payment of all its debts. The receiver’s title to the note is not the general title, but a special one, founded upon the judgment in the suit wherein he is receiver. His title cannot be greater than that of Eitzpatrick and Yan Alstine, for whom he acts as legal trustee. If it could, it is for him to show the further facts on which such title rests, before he can recover.
The counsel for the parties argued several other questions at length; but as the questions were not passed upon by the court, the argument is here omitted.
By the Court,
Paine, J.
Upon the first argument in this case I did not sit, and took no part in the decision, for the reason that I then supposed that I had once been employed as counsel. The facts were, that I was once employed as counsel by an agent of a number of parties interested in the questions involved in this case, and on the former hearing I supposed the plaintiff in error was one of them.
A rehearing was asked for upon affidavits showing that such was not the fact, and it was granted, the whole court deeming it my duty to act in the case.
I deem it necessary only to say that I concur in the views already expressed in the opinion of Justice Cole, the result being that the judgment is reversed, with costs.