Court Opinion

ID: 5499716
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:57:41.076272+00
Date Added: 2024-06-11T08:33:53.877129
License: Public Domain

Landon, J.
The learned judge at special term held that the defendant had ■wholly explained its various transactions to which the department objected, •except that with respect to the surrender to the makers of the notes held as capital stock. With respect to its capital stock, the learned judge held that it had not, by the surrender of its notes, violated the law. In this respect *we think the learned judge erred. Section 18, c. 466, Laws 1853, under which *266the Orange County Mutual Insurance Company, in 1875, extended its charter for 30 years, provides that “every mutual insurance company heretofore incorporated under the laws of this state, and doing business with a capital in premium notes of at least $50,000,” is authorized to extend its charter under the act cited. We assume, as the counsel for both parties concede, that when the Orange County Company, in 1888, applied for a change of name, and to amend its charter conformably to the general act of 1853, its capital was in premium notes of at least $50,000. Under its charter it did not have the extensive privileges which an organization under the act of 1853 would secure to it. Its capital of $50,000 in premium notes was much less valuable as a security than the capital of a mutual company under the act of 1853 is required to be. By section 6 of that act it is provided as follows: “Nor shall any mutual insurance company in any other county of the state [than New York or Kings] commence business until agreements shall have been entered into for insurance with at least 200 applicants, the premiums on which shall amount to not less than $100,000, of which $20,000 at least shall have been paid in cash, and notes of solvent parties, founded on actual bona fide applications for insurance, shall have been received for the remainder.” Section 13 of the general act provides: “All notes deposited with any mutual insurance company at the time of its organization as provided in section 6 shall remain as security for all losses and claims until the accumulation of the profits invested, as required by the eighth section of this act, shall equal the amount of cash capital required to be possessed by stock companies organized under this act; i. e. $50,000, the liability of each note decreasing proportionately as the profits are accumulated; but any note which may have been deposited with any mutual insurance company subsequent to its organization, in addition to the cash premium on any insurance effected with such company, may, at the time of such insurance, be relinquished and given up to the maker thereof or his representatives, upon his paying his proportion of all losses and expenses which may have accrued thereon during such term. ” This section speaks of two classes of notes. The first are those deposited at the time of the organization of the company, and serve as capital until $50,000 of surplus profits can be accumulated and invested as capital. Section 6 provides that “each of said notes shall be payable in part or in whole at any time when the directors shall deem the same requisite for the payment of losses by fire or inland navigation, and such incidental expenses as may be necessary for transacting the business of said company.” The second class of notes mentioned in section 6 above quoted are premium notes in part payment of insurance, and may be surrendered as specified in that section. These premium notes form no part of the capital of a mutual company organized under the act of 1853. The capital of such a company must be either capital or stock notes and cash, or both together, with the authorized investments of surplus earnings, the latter, as it is accumulated, replacing the former; and, when reaching $50,000, entirely superseding it. But the deposit notes must be retained until the $50,000 shall be accumulated.
Now., the Orange County Mutual Insurance Company, by virtue of its special charter, was permitted to do business upon its capital of premium notes. Under section 19 of the act of 1853 it sought to change its name and avail itself of the larger powers conferred by the act of 1853. It is obvious that it ought not to pass from its narrow field of powers and operations to the wider one contemplated by the act of 1853, except bj’ becoming financially as strong as if originally organized under that act. Section 19 provides that it could change its name and avail itself of the powers conferred by the act of 1853, by complying with the regulations therein prescribed, “and upon the same proceedings being had as are required by the tenth section of this act, ” (1853.) The part of such proceedings here material to be inquired into is the requirement that the company “has received and is in actual possession of the cap*267ital, premiums, or bona fide engagements of insurance, or other securities, as the case may be, to the full extent and of the value required by the sixth section of this act.” It did not have 200 applicants for insurance. It did not have $80,000 in stock notes. It did not have $20,000 in cash. It did have 172 applicants for insurance, and $52,712.15 of notes. It did not have any cash. It is not clear to us how it was entitled to amend its charter under section 19 of the act of 1853, but the attorney general and superintendent of insurance evidently thought that the notes which it did have were stock or capital notes, and that, as it had been permitted to extend its charter under section 18 as a mutual company “doing business with a capital in premium notes of at least $50,000,” it might be permitted to organize under the act of 1853 with that amount of capital in stock notes. Be this as it may, the company was permitted to change its name and amend its charter so as to be entitled to the privileges conferred by the act of 1853. The defendant now claims that the notes which it made the basis of its amended charter were premium notes, and not stock notes, and therefore deliverable to the makers according to the usual course of business respecting premium notes. One or the other of two conclusions seems irresistible. If the notes were premium notes, then the company did not comply with the terms of the act of 1853 with respect to capital stock, and has ever since been doing business upon a capital unauthorized by that act, and far below its requirements; or, if the notes were stock notes, then the company has violated the act in surrendering them to the makers, before it had invested or accumulated from its surplus earnings the sum of $50,000. In either event the defendant should comply with the statute or stop business. This motion was treated and defended as if it were itself the order to show cause. We are unwilling under the circumstances to suspend the corporate existence of the defendant, provided it is able and willing to make good its capital. We reverse the order below, but reserve the case for further and final order until the February term of the court. The defendant may, at the opening of such term, show that it has made good its capital. The certificate of the superintendent of the insurance department may be offered as evidence of that fact, or other evidence may be submitted. All concur.