Court Opinion

ID: 7946064
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:20:33.416634+00
Date Added: 2024-06-11T16:33:55.783360
License: Public Domain

ON REHEARING.
Stone, J.
This cause has been before the full bench upon a rehearing granted on motion of the Lansing Insurance Agency et al. and by consent of the petitioner. Although the application for a rehearing is based upon the one question whether cash premium policies are assessable, yet the briefs of the several parties in interest, as well as that of the attorney general as amicus curice, have gone into nearly all of the questions considered by us in the original opinion. For a statement of the contents of the record, and the facts of the case, we refer to the original opinion {ante, 422), which we do not deem it necessary to enlarge or change, except as hereinafter set forth.
Upon the first hearing of the case, our attention was not called to section 7256, 2 Comp. Laws, which reads as follows:
“ It shall not be lawful for any company organized upon the mutual plan to do business, or take risks upon the stock plan, neither for a company organized as a stock company to do business upon the plan of a mutual insurance company.”
A careful examination of our statutes satisfies us that the section above quoted has not been repealed or modified, *477except as it may be said to be affected by Act No. 197, Pub. Acts 1909, with the provisions of which last act it is not claimed that the Citizens’ Mutual Eire Insurance Company of Holly has ever complied. Eor the purposes of this case, therefore, we must consider said section 7256, 2 Comp. !Laws, as still in force. There. can, we think, be no question that the company with which we are here dealing was organized upon the mutual plan under the provisions of Act No. 82, Laws 1873, being chapter 195, 2 Comp. Laws, and that the provisions of section 7256, 2 Comp. Laws, apply here. We are frank to say that, had we known of the existence of this statute, we should have held, as we now hold, that such of the cash premium stock plan policies as did not contain the assessment liability clause were void, as we held the farm policies to be, because issued contrary to the express provisions of the statute. An examination of the record and briefs in the case of Osius v. O'Dwyer, 127 Mich. 244 (86 N. W. 831), shows that section 7256, 2 Comp. Laws, was not referred to, nor considered by the court. It was not necessary to a disposition of that case to pass upon the validity of the policy. The case simply decides that the policy there considered was an ordinary contract of insurance, and did not make the defendants members of the company, and liable for assessment. That this was true cannot be questioned.
We are now satisfied that such of the cash premium stock plan policies as did not contain the assessment liability clause, and all of the farm risk policies, are in the same class and should be treated as void, because issued in violation of the statute. This brings us to the question whether the holders of these policies are entitled to a return of the unearned premiums. In our former opinion we held that the holders of the farm risk policies were not entitled to a return of unearned premiums in any case. A further investigation of the question satisfies us that this conclusion was not equitable or just under the circumstances. While the contracts are void and cannot be en*478forced, it does not follow that the holder of the cash premium stock plan policy of any class should not be entitled to a return of the consideration paid. If an insurance company issues today to A. a void policy, and receives the premium, both parties acting in good faith (as all the parties here seem to have acted), and tomorrow it is discovered that the policy is void, it would seem to be just and equitable that A. should be entitled to receive back the premium paid. If the risk did not attach, and in consequence the risk was never actually carried by the insurer, there has been a failure of consideration, and the insured is entitled to a return of his consideration paid, namely, the premium, as money had and received to his use. 19. Cyc. p. 609; Waller v. Assurance Co., 64 Iowa, 101 (19 N. W. 865), and the many cases there cited; 2 May on Insurance (4th Ed.), § 567, and cases cited. While no recovery can be had upon the contract, because ultra vires and void under the statute forbidding it, and such contract cannot be made binding by estoppel even, yet applying the equitable rule which this court has applied.to Sunday contracts, and void contracts of that nature, the parties should be placed as near as may be in statu quo. Tucker v. Mowrey, 12 Mich. 378; Winfield v. Dodge, 45 Mich. 355 (7 N. W. 906, 40 Am. Rep. 476); Brazee v. Bryant, 50 Mich. 136 (15 N. W. 49). This is a proceeding in equity, and certainly the rules which should apply in the equitable action of assumpsit for money had and received should apply here. The opinion of this court in the recent case of Hoyt v. Paw Paw Grape Juice Co., 158 Mich. 619 (123 N. W. 529), is very pertinent, and is, we think, controlling of this question. A distinction should be made between contracts merely ultra vires and void and those which are illegal or immoral, such as wager policies and similar contracts where the parties are in pari delicto. 15 Am. & Eng. Enc. Law (2d Ed.), p. 932; 19 Cyc. p. 759; Walhier v. Weber, 142 Mich. 322 (105 N. W. 772.
It may be said that, to be logical, we should hold that *479these policy holders are entitled to recover the entire premium paid, and not merely the unearned portion thereof. But we think that when we consider that this is an equitable rule to be applied in an equitable proceeding, where the holders of policies have only asked for the return of unearned premiums, and where the reports of the company have shown the manner in which the business was done from time to time, and the contracts were entered into in good faith and were treated as binding upon all parties, until the failure of the company, it would not be just or equitable to the members who must pay the. assessment to require of them more than the unearned, portion of the premiums. We are content with, and adhere to, the conclusion in our former opinion wherein we; held that the holders of such cash premium stock plan policies as contain the assessment liability clause must be considered members of the company, with all the rights and subject to all the liabilities of membership, and are liable to assessment. Their contracts were legal and binding, and it follows that they are entitled to unearned premiums under the terms of their contract. As we held before, we now repeat:
“There was here a contract to pay unearned premiums. * * * The logical view is that the company has received under the contract more money than it has earned,, and justice requires it, in a case like this, to make a refund.”
We think that a distinction should be made between this class and the members who hold mutual policies, and who paid assessments from time to time, as the obligations of the company required them to be made.
We conclude therefore:
(1) That the holders of the mutual or assessment plan policies and the holders of such of the cash premium stock plan policies as contain the assessment liability clause are. members of the said company, and are liable to assessment.
(2) That the holders of such cash premium stock plan *480policies as did not contain the assessment liability clause, and the holders of the farm risk policies, will not be considered members of said company, and are not liable to assessment, and their policies are void.
(3) That the holders of both classes of the cash premium stock plan policies and the holders of such of the farm risk policies as were issued on the stock plan are entitled to unearned premiums, the same to be prorated.
(4) That an assessment upon the mutual policy holders, including the cash premium stock plan policy holders which contain the assessment liability clause, be mad'e by the receiver, not only to pay valid loss claims, but also to pay unearned premiums on cash premium stock plan policies of all classes, including cash premium stock plan .farm risk policies, and also all necessary expenses and costs. The cash premium stock plan policy holders, here held to be liable to assessment, should be allowed to offset the unearned premiums. It will be the duty of the receiver to ascertain and report to the circuit court in chancery the number of each class of cash premium stock plan policies, and the amount of unearned premiums due thereon, as well as the amount required to pay valid losses, upon the basis of this opinion, together with the costs for services, and the expenses of the receiver. Whereupon an assessment shall be ordered by said court upon the basis of this opinion. The order of the circuit court relating to policies issued on farm property is so modified as to entitle the holders of cash premium stock plan policies in that class, if any, to unearned premiums.
The costs of this proceeding will be borne by the fund of the said company to be provided for in the assessment.
Bird, C. J., and Ostrander, Moore, McAlvay, Brooke, and Blair, JJ., concurred.