Court Opinion

ID: 3556482
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:07:19.528109+00
Date Added: 2024-06-11T13:46:12.588333
License: Public Domain

Two questions are raised in this case.
1. Must the plaintiffs show that the assessment of February 24, 1870, was needed to pay losses and expenses before they can recover?
2. Can the right of those persons to hold the office of directors, who assumed to act as such February 24, 1870, be called in question in this suit?
1. By section 6 of the plaintiffs' charter, every person becoming insured is required to pay a premium in cash, and to deposit his written agreement to hold himself liable for an equal amount in the capital stock of the company, to be assessed and collected by the directors in such sums and at such times as they shall deem expedient. The premiums and deposits thus made are considered the absolute funds of the company, and are made liable and held pledged to pay (1) the expenses of the company, (2) money borrowed, (3) losses, and notes given in payment of losses. In case it should happen that the absolute funds of the company should be consumed, each member is liable to pay, at the discretion of the directors during the term of his policy, a sum not exceeding two dollars for each dollar of premium and deposit.
A distinction is here made between the absolute funds of the company, and funds raised by ordinary assessments after the absolute funds have been expended. It has been settled, both in this state and in Massachusetts, that in assumpsit by a mutual fire insurance company against one of its members, upon his premium note promising to pay the company a certain sum of money in such portions and at such times as the directors of the company may, agreeably to their charter and by-laws, require, where such member is liable to assessment only for losses and expenses occurring during the term mentioned in his policy, the plaintiffs cannot recover unless they show an assessment duly made for such losses or expenses. Insurance Co. v. Harvey,45 N.H. 292; Insurance Co. v. Fitzpatrick, 2 Gray 279. *Page 53 
If this suit were to recover an assessment not exceeding two dollars for each dollar of premium and deposit, it must fail, because the plaintiffs have failed to show what expenses and losses were included in the assessment. The case shows that there were several losses, — one of $1,000, another of $600, and another of $4,650; but when they occurred, whether before or during the term covered by the defendant's policy, is not shown. But the absolute funds of a mutual insurance company stand differently. They can be collected at any time under the direction of the directors, and when collected be applied to the discharge of any debts and liabilities of the company — even losses and expenses which occurred before the insured became a member of the corporation. Long Pond Ins. Co. v. Houghton, 6 Gray 77. Whether this provision of the plaintiffs' charter is a wise one, or is equitable, is a question not open to inquiry. It is the law as enacted by the legislature, and was assented to when the defendant accepted his policy.
2. The second question relates to the legality of the organization of the company, and of the election of the directors. The legality of its organization, or the fact of its existence, is not open to the defendant to question. The giving of a note to a corporation is an admission by the defendant of the existence of the corporation, and he is not permitted to deny that there is a duly organized corporation — Society v. Perry,6 N.H. 164; Ang.  A. on Corp. 381; and in general, when a defendant intends to insist that there is no such corporation, he must plead it either in bar or statement. School District v. Blaisdell, 6 N.H. 197; Concord v. McIntire, 6 N.H. 527. Whether there was a board of directors capable of acting, on February 24, 1870, presents a question of more difficulty.
By section 3 of the company's charter, it is provided that the property and affairs of the company shall be controlled and managed by a board of directors, who shall be members of the company, and be chosen by ballot at the annual meeting thereof, and shall hold their offices during one year, and until others chosen shall have accepted the trust in their stead. Vacancies happening between the annual meetings may be filled by the remaining members, and a majority is constituted a quorum for the transaction of business.
By article 1 of the by-laws, it is provided that the annual meeting shall be holden on the first Monday in August annually; — all meetings shall he notified by advertisement in one or more newspapers printed in Nashua, but in case of omission to notify the annual meeting, it shall not thereby be lost, but shall be adjourned for the transaction of business until the requisite notice shall be given. The number of directors to be chosen is not fixed by the charter or by-laws.
The case finds that the last annual meeting, which was holden in pursuance of a published notice, as required by article 1 of the by-laws, was holden August 7, 1865. Assuming, in the absence of any intimation to the contrary, that that meeting was legally called and holden, it appears that there were chosen, at that meeting, eighteen directors. Of this number, three had died previous to February 24, *Page 54 
1870, and seven had ceased to be members by reason of their policies having expired. F. F. Kimball had been chosen, by the surviving directors, a director in place of his brother, A. Kimball, who was one of the three deceased directors. So that, on February 24, 1870, if the board elected in August, 1865, is to be considered as holding over, the board consisted of nine members, viz., Messrs. Merrill, Morrill, Blunt, Otterson, White, Courser, Colburn, Fleeman, and F. F. Kimball. Five of these gentlemen being a quorum, viz., Messrs. Merrill, Morrill, Blunt, White, and F. F. Kimball, were present at the directors' meeting, February 24, 1870, and voted for the assessment. If the board elected in 1865 held over, the vote creating this assessment would seem to be legal; but, if it is admitted that the board elected in 1865 did not hold over, then, at the time the meeting of February 24, 1870, was held, the board of directors, acting as such, consisted of McQuesten, Merrill, Morrill, Blunt, Otterson, White, Hammond, and F. F. Kimball, eight in all. McQuesten and Hammond had ceased to be members by reason of their policies having expired, which would leave a board consisting of six members, all of whom, except Otterson, were present and voted the assessment.
At the meeting holden February 24, 1870, eleven directors were chosen; but McQuesten, Hammond, Stetson, and Hill were ineligible by reason of their policies having expired, which would leave the board consisting of seven members, viz., Merrill, Morrill, Blunt, Otterson, White, Courser, and F. F. Kimball, all of whom, except Otterson and Couser, were present and voted for the assessment.
The plaintiff's claim that although the assessment may not have been voted by a board of directors legally elected, yet, being in office under color of an election, their acts are valid.
In Hughes v. Parker, 20 N.H. 58, it was held — GILCHRIST, C. J., delivering the opinion of the court — that the law, in requiring the directors to be chosen at the annual meeting, does not imply that elections held at other times shall be wholly void. The law is merely directory, and does not, in terms or by implication, attach such a consequence to an omission or non-observance of the prescribed modes of exercising the power of electing directors. The following authorities were cited and commented upon, in support of this position: Hicks v. Launaston, Rolle's Ab. 514; The King v. Poole, B. R. H. 27; Prowse v. Foot, 2 Bro. P. C.; People v. Runkle, 9 Johns. 147; Rex v. Loxdale, 1 Burr. 447; Rex v. Leicester, 7 B.  C. 12; Dwarris on Statutes 714.
In Hughes v. Parker it was also held that irregular elections are voidable only, and not void; that the acts of officers in, under color of an election, are binding so long as they retain their offices; and that the legality of their election cannot be brought collaterally in question, but proceedings should be instituted for the express purpose of trying it, and of evicting them, if not properly entitled to the offices which they have assumed to exercise.
We do not, therefore, find it necessary to decide whether the nine remaining members of the board, elected in 1865, held over, or whether *Page 55 
the election of February 20, 1870, or the election next prior to that, were valid elections. A quorum of either board was present and voted the assessment. They were in office, acting under color of an election, and the legality of their election cannot be questioned, collaterally, in this suit.
The records used on the trial were not admissible. The first clerk only was sworn. While he was in office, the records were kept by his son. He could not delegate the signing of his name to another. The present clerk never was sworn, and, consequently, never was qualified. There being, then, no legal records, parol evidence was admissible of the acts of the company.
We do not find any occasion to compliment the plaintiffs upon the manner in which their officers have managed the affairs of the company.
CUSHING, C. J., and LADD, J., concurred.
Unless the defendant elects a trial on the question whether the notes were obtained by fraudulent representations, there must be
Judgment for the plaintiffs.