Court Opinion

ID: 3578581
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:30:10.762746+00
Date Added: 2024-06-11T13:57:04.142488
License: Public Domain

The defendant insists that the surrender and cancellation of the note is a complete bar to a recovery upon it; that if it was cancelled without payment by the defendant of his just proportion of the losses and expenses of the company, the receiver could only have resorted to a special action to recover such proportion, which should have been brought within six years after the surrender of the note.
I think this position is unsound. The receiver is at least in as good a condition to recover on this note as the company would have been, had they remained solvent and continued to carry on their business. Although the policy became liable to be surrendered as to so much of the insured property as had been sold by Lynde; the note nevertheless, in contemplation of law remained a binding obligation of the defendant, who was liable to pay all just assessments upon it for losses and expenses which had accrued before the surrender of the policy. The defendant paid nothing for the cancellation of the note; so that the transaction is left to be reviewed as one destitute of consideration, and to be tested by the provisions of the statute incorporating the company. The language of the act can not be misunderstood. It plainly declares the terms upon which only the defendant was entitled to receive his note, and this was upon the payment of his just proportion of all losses and expenses. *Page 394 
This he does not pretend to have done; and now to permit a mere naked surrender of the note by the secretary of the company, without a reckoning of the losses and expenses to which it was subject, and without consideration, to defeat a recovery for the benefit of the creditors of the corporation, would not only be to violate the language and spirit of the charter, but would operate as a fraud upon creditors.
These premium notes constituted the entire fund out of which the losses of the company were to have been paid. If one could have been surrendered without consideration and without payment of its proportion of losses, all might have been, and thus through the mere grace or recklessness of a secretary the entire security of persons insured might have been annihilated. A result so disastrous and unjust can not be permitted to be wrought with so great facility. It is far better to treat these notes as the creatures of the statute, and bound to answer the purpose of their creation. They are permitted to exist for a specific purpose, and until that is answered they can not be annulled. They are not subject to the mere will of any man, but are controlled by the will of the legislature. The statute appointed them as security for losses and expenses, and they must be regarded as obligatory, until they are satisfied. As the creatures of the statute they can only be delivered up and cancelled according to its provisions. The surrender in the present instance was therefore simply void, and the case is to be regarded as though this abortive act had not been performed. This conclusion rests upon the facts presented in the bill of exceptions, which rebut the presumption that might have arisen in favor of the defendant, had the mere fact of surrender and cancellation appeared without its attendant circumstances.
Nothing was paid as a consideration for the surrender of the note, nor was there any account of losses and expenses to which it was subject; while it satisfactorily appears that losses had accrued before the note was surrendered for which it was liable to be assessed. This continued the obligation of the note, and subjected it to the power of the receiver, whose duty it became to enforce it for the benefit of the creditors of the company. *Page 395 
The note was payable in such portions and at such times as the directors might legally require. The receiver was endowed with all requisite authority to secure and enforce obligations in favor of the company. The assessment made by him and which embraced this note, for aught that appears, was a proper requirement, and rendered so much as he called for, due and payable. Until then the time of payment had not become fixed, so that the statute of limitations had not run against the note. Nor is there any thing in the objection that the suit should have been brought within six years after the surrender of the note. The action is not based on a tortious cancellation of the instrument; it is rightfully brought on the note itself, which the plaintiff asserts still exists as a valid security. An alledged cancellation and surrender of it is presented, as an obstacle to his recovery, and he shows that the act of surrender was unauthorized and void. This leaves him to recover on the note itself, as if no surrender had been set up.
The offer to prove that the company was solvent was properly overruled. The appointment of receiver concluded the defendant, who if not a member of the company stood in the relation merely of their debtor, and was not at liberty to question collaterally the facts upon which the court of chancery acted in appointing the receiver, nor could this evidence otherwise have aided the defence, as it did not tend to show that the defendant had paid his just proportion of the losses and expenses of the company, which seems to have been the only thing that could have helped him.
I perceive no material error in the rulings at the circuit in respect to the admissibility of evidence. The books of the company were prima facie evidence against the defendant, so far at east as to prove their by-laws, and their transactions while he remained a member of the concern; and the losses which accrued, I think were sufficiently proved otherwise.
On the whole I think the learned judge at the circuit was justified in directing the jury to find in favor of the plaintiff, and that the judgment of the supreme court must be affirmed.
Judgment reversed, and new trial granted. *Page 396