Allen v. Winne

15 Wis. 113

Opinions

By the Court,

Cole, J.

Tbe facts in this case are substantially as follows: Winne commenced an action before, a justice of tbe peace of Walworth county, to recover an assessment made by him as receiver of tbe Troy Fire Insurance Company, upon a premium note given by Allen to tbe company on a policy of insurance. Tbe company was organized under tbe provisions of chapter 282, Gren. Laws of 1850. Tbe charter filed by tbe company in tbe office of tbe secretary of state, in pursuance of section 3 of tbe act, authorized tbe directors to divide applications for insurance into two or more classes, and provided that in case of such division, tbe premium notes should not be assessed for tbe payment of any loss, except in tbe class to which they belong. In pursuance of tbe charter, tbe directors, in tbe outset, divided tbe business of tbe company into two classes, one of which they named tbe “Farmer’s Department,” and tbe other tbe “Merchants’ Department.” Article 2, section 8 of by-laws of tbe company. They also provided that tbe accounts of each department should be kept entirely separate and distinct, and that no premium note should be assessed for tbe payment of any loss except in tbe class to which it belonged. Section 4 of by-laws. Tbe premium note given by Alien was in the “Farmers’ Department,” in which he was insured. All the property assigned to the receiver was in the Farmers’ partment. The debts of the company at the time of the assignment, were $1600 or $1800 in the Farmers’ Department, and $7000 or $8000 in the Merchants’ Department. The amount of assets in the Farmers’ Department, at the time of the assignment, was between $14,000 and $15,000 in premium notes, and $14,500 in stock notes only running for one year, the premium notes running from one to five years. Fitzpatrick and Yan Alstine, citizens of Illinois, obtained a j udgment in the United States district court against the insurance company, on a policy issued in the Merchants’ Department, for a loss which occurred in that department in the first year of the existence of the company. They were insured for one year; their policy was issued previous to the 27th day of October, 1851, that being the time the company ceased issuing policies in that department. Fitzpatrick and Yan Alstine, not being able to collect their judgment, filed a creditor’s bill in the district court, and procured the appointment of the receiver, Winne, to take charge of so much of the property and effects of the company as should be sufficient to satisfy the judgment. Winne, as such receiver, made an assessment upon the premium note of Allen, and upon other notes in the Farmers’ Department of the company, to pay this judgment; and the action was brought to recover this assessment. Allen obtained judgment before the justice, for costs; but the judgment was reversed by the circuit court. It is the correctness of this judgment of the circuit'court we have now to consider.

A number of highly interesting and important questions arise upon the record, and were fully discussed upon the argument. It was insisted on the part of the plaintiff in error, that a creditor’s bill against the corporation was not the proper remedy to enforce the collection of this judgment, either in the United States district court or in a state court, but that the only remedy in the case was a suit to sequestrate the property of the corporation for the benefit of all the creditors ; and it is contended that the district court has no jurisdiction over a proceeding to sequestrate the property of the corporation, it being organized and created by tbe laws of tbis state. It is further claimed tbat even if tbe United States district court could entertain jurisdiction of tbe creditor’s bill filed to enforce tbe collection of tbe judgment against tbe corporation, and could appoint a receiver in tbat suit, still sucb receiver could not bimself make assessments upon premium notes, but could only collect sucb as were made by tbe proper officers of tbe company. These questions, however, and others kindred to them, I shall not find it necessary to notice, because I think one objection, which goes to tbe foundation of tbe receiver’s right to recover upon tbe pleadings and evidence, well taken, and this overrides all other questions. Tbat objection is, tbat a premium note given in tbe Farmers’ Department could not be assessed to a loss in tbe Merchants’ Department.

By section 11 of chapter 232, under which tbe company was organized, tbe charter filed in tbe office of tbe secretary of state was to be examined by tbe governor, and if found to be in accordance with tbe requirements of tbe act and consistent with tbe constitution and laws of tbe s1 ate, tbe governor was to so certify to tbe secretary of state. Tbis was done in tbe present case, tbe governor certifying that be bad examined tbe charter and bad found it to be in accordance with tbe requirements of tbe act and consistent with tbe laws and constitution of tbe state. Tbe charter thus examined and certified to be correct, authorized tbe directors of tbe company to divide applications for insurance into two classes, according to tbe degree of hazard, and provided tbat tbe premium notes in sucb case should not be assessed for tbe payment of any loss except in tbe class to which they belong. Section 9 of tbe charter of tbe company. In fur tberance of tbis system of transacting tbe business of tbe corporation, on its organization, by-laws 3 and 4, before referred to, were adopted ; which also divided tbe risks into a Farmers’ and Merchants’ Department, and provided tbat tbe accounts of each department should be separate and distinct, and tbat no premium note should be assessed for tbe payment of any loss except in tbe class to which it should belong. While tbe general law conferred upon tbe corporators, trus tees or directors of any company organized under its provisions, power to make suck needful by-laws, not with the ¡constitution of the United States, or the constitution or laws of this state, as to them might seem necessary and expedient. Now, as before stated, Allen was insured in the Farmers’ Department; the note which he gave was for a policy in that department, and was made payable in such portions and at such times as the directors might, agreeably to the charter and by-laws, require. So the contract made by him with the company was not to pay absolutely the sum mentioned in his note to meet all and any loss, nor to pay at the discretion of the directors; but was merely and truly an undertaking to pay to the extent of his note, in case such payment should be necessary to meet losses in the Farmers’ Department, and such expenses as were incident to the transaction of the business during the continuance of the company’s contract to insure him. This is obviously the nature, extent and condition of his contract with the company, and nothing more. This being so, with what reason or propriety can it now be claimed that these conditions in the contract are not to measure and fix the liability of Allen, but may be wholly disregarded, and an assessment may be made upon his note to pay a loss which he never agreed to pay ? What right has the court to override the agreement of parties solemnly entered into, as clearly we must do when we say that the proceeds of an assessment upon premium notes given in one department, and to meet only losses in that department, may be lawfully 'applied to pay losses in the other ? It is an axiom, that courts will enforce contracts according to their terms and conditions, when such contracts are not contrary to good morals, and contravene no principle of law or public policy. Courts frequently have great difficulty in construing contracts — in arriving at the true import of the language used, and at the intent and meaning of the parties; but when the intention is apparent, they are to be carried out and enforced, unless some legal impediment intervenes to prevent their execution. There is surely no room for saying that the intention of the parties to this contract is not clear and unmistakable. It is that the party insured in one ^ePar^me11^ agreed to pay bis just proportion of all losses happening in that department, to the extent of his premium note, an¿ tpe eXpenses of carrying on the business during the time the corresponding agreement to insure existed. The company was not to have any dealings in regard to insurance except with its own members. Each one. of those members was to be insured, and to be indemnified, in case of loss, at the expense of those insuring in that department in which he was insured. A person insuring in the Merchants’ Department agreed to look to his associates in that department in case of loss; while one insured in the Farmers’ Department agreed to look to those in that department for indemnity. Each class agreed to meet the losses in its department, but not the losses in the other department. This is the general principle and plan of doing business in this company. If there is any difficulty in doing business upon this sytem — if it is found to be impracticable to work out this result, it is a matter for which the courts are not responsible. The parties have seen fit to enter into such contracts with these conditions, and the courts must enforce them as the parties have made them, if capable of being enforced. And if they cannot be carried out, the controversy must end for that reason. Now it is said, to sustain this mode of doing business, would result practically in two corporations uftder one charter. But if this be so, what then ? Is it not a sufficient answer to the objection, that the parties adopted this scheme; of doing business; made their contracts of insurance with reference to it; agreed to look to a certain fund for the payment of losses ; and became liable only for certain risks ? They have so made their contracts — let them abide by their conditions. Fitzpatrick and Yanalstine have no right to call upon Allen to make good their loss. He never agreed to indemnify them. He made no such contract; and the court really makes one for him in holding him liable for tl tat loss. Upon what grounds the court can thus enlarge, vary and extend the scope and meaning of contracts, I am at a, loss to discover. It seems to me inequitable and improper to do it. And I deem it a sufficient answer to any supposed inconveniences in doing business upon this system of dividing the risks into two classes, making those insured in one department responsible only for losses in that department, that parties have seen fit to make such contracts, and I know of no principle of law or public policy which has been violated by them.

It is suggested that there is something in section 5 of the act under which the company was organized, which forbids the making of such contracts by the members of the corporation. The only part of that section which can have any bearing upon this case, is the latter clause, which, in effect, declares that no mutual insurance company, where dividends are not to be declared on earned premiums, shall commence business until agreements have been entered into for insurance, the premium notes on which shall amount to five thousand dollars, and the notes received therefor, and per centage paid — said notes payable when called for according to the charter or by-laws of the company, to pay losses and expenses ; nor shall any company which may be organized under this act, expose itself to any loss on any one fire or inland navigation risk or hazard, to an amount exceeding ten per cent, of the capital. Now all this provision requires is, that premium notes to the amount of five thousand dollars shall be secured as a condition to the company’s organizing and doing business.* And even those notes were made payable when called for according to the charter and by-laws of the company, to pay losses and expenses. Whether it was competent for the directors to provide, in their charter and by-laws, that the notes given in the first instance, for the purpose of assisting in forming the company, might be divided, and assessed to pay only a certain class of losses to which they belonged, it is not material to inquire. I confess I see no solid objection to it, if the insured, who constitute the association, have a mind so to agree among themselves. But however this may be, Allen's note was not one of those notes. The policy of Fitzpatrick and Yanalstine in the Merchants’ department, was issued for one year, and expired previous to the 27th day of October, 1852, almost a year before the note was given by Allen. In any view of the case, it cannot therefore be said that they had a right to to an assessment upon that note to pay their loss. For the note was not in existence until some time after that loss occurred. It was not, therefore, one of the stock notes mentioned in the case, but was given long after the company was organized; after the notes had been divided into two classes, and the directors had declared, both in the charter and by-laws, that notes given in one department should not be assessed to pay losses in the other. I discover nothing in this provision of the general law which forbids the making of these contracts, but the contrary. For it does not declare that the premium notes shall be absolutely payable to meet any and all losses, but that they shall be made payable according to the charter and by-laws of the company. Assuming that the intention of the 5th section was, that the company should always have actual securities in the way of premium notes to the amount of five thousand dollars, still the law does not prevent the company from dividing their risks into classes, and compelling the insured to look only to the fund which that class of risks in which they have been placed, produces, to indemnify them against loss. All persons insuring in the company became members of it, and what principle of law or public policy was violated in permitting them to make such arrangements in regard to the risks and payment of losses as .might seem advantageous to them? The law, I think, properly leaves the whole matter to the control of the company, and I can see no possible objection to it. And in the case of Keiley vs. Troy Fire Insurance Company, 3 Wis., 254, Chief Justice WhitoN must have considered the provisions in this charter and by-laws, touching a division of the risks of the company, and the fund to which the insured must look for indemnity, and held such provisions valid. For he says: “The company could not apply the proceeds of an assessment upon the premium notes in one department to pay losses which had occurred in the other, but could lawfully order an assessment upon the premium notes to pay its debts, taking care to apply the proceeds of the assessments according to its charter and by-laws.” This very case solves the difficulty suggested by the counsel for the defend ant in error to tbis mode of transacting tbe business, namely, that tbe debts wbicb accrued for losses in either of tbe partments, were debts of tbe company and not of tbe departments. Admitting tbis is so, still, by tbe express agreement of tbe parties, these debts are to be paid out of a particular fund devoted to that purpose. They are not to be paid absolutely out of any funds, but only according to tbe provisions of tbe charter and

We were referred to tbe case of Thomas v. Achilles, 16 Barb. (S. C.), 491, where it is held that a mutual insurance company organized under tbe general insurance act of April, 1859, of that state, bad no right to divide its risks into two classes, according to tbe degree of hazard, and to assess tbe premium notes only for a loss happening in tbe class to wbicb such notes belong. Justice MaeviN thought such a provision in tbe charter contrary to tbe policy of tbe law, wbicb intended that tbe company should possess $100,000 in premium notes, as capital stock, to meet any losses tbe company might sustain. Tbe counsel for tbe plaintiff in error pointed out and commented on tbe very obvious distinction existing between tbe New York statute and tbe one under wbicb tbis company was organized. Tbe New York statute provided that tbe premium notes executed to tbe company should he deemed valid and should he negotiable and collectable for the purpose of paying any losses which might accrue. 2 New York Rev. Stat., Banks & Bros.’ Edition, p. 744, Title 18, part 1, section 5; while by our law tbe notes were payable when called for by tbe charter and by-laws of tbe company. Tbe distinction is material and important, and would render tbe reasoning of Justice MaeviN, in Thomas vs. Achilles, even if sound, inapplicable to tbe case at bar. But still I am not prepared to adopt tbe doctrine of Thomas vs. Achilles as sound law even under tbe New York statute. For I am utterly unable to perceive bow or in what manner tbe policy of that statute would be contravened or violated by permitting a mutual insurance company to divide its risks, and make tbe premium notes liable only for a loss occurring in tbe department in wbicb they are placed. Suppose it is assumed that such a provision of law was intended for tbe pro- Section of tbe insured. Cannot tbe insured protect tí iem-selves quite as well as tbe court, and can tbey not waive, tbe benefit wbicb tbe statute affords them, by an express agreement among themselves to do so ? Can tbey not agree to look to a particular fund for pay in case of loss, instead of looking to tbe whole assets of tbe company? If tbey caB-not make such agreements without contravening some supposed policy of tbe law, then tbe law has a policy too thin and shadowy to meet my apprehension.

In tbe case of Savage vs. Medbury, 19 N. Y., 32, it appiears that tbe charter and by-laws of the Empire State Mutual Insurance Company contained provisions for different classes of hazards, and that premium notes should not be assessed for any losses except in tbe class to wbicb tbey belonged. And although tbe validity of such a provision was not directly before tbe court for adjudication, yet Chief Justice JOHNSON, in alluding to this provision, with others, thiows out no bint that be considered it invalid, as contrary to tbe policy of tbe law of that state, but does, I think, assume that it governs the rights of tbe parties in the special cases to wbicb it relates. See also Waite vs. Haight, 17 N. Y., 310.

I have placed no stress'upon the fact that tbe governor, by tbe 11th section of tbe act of 1850, was to examine: tbe charter and certify that its provisions were consistent with tbe constitution and laws of tbe state. That was dons in this case. Tbe charter contained the provision for dividing tbe risks, and that tbe losses should be met by assessments on tbe premium notes in each class. As tbe company was organized and commenced doing business on this plan, the insured relying upon tbe certificate of tbe governor and the legality of tbe provisions in tbe charter, were I now of the opinion that those provisions were invalid because they contravened tbe policy of tbe law, I should feel constrained to also declare void all contracts of insurance and premium notes wbicb 'bad been given upon the faith of such provisions being lawful. These premium notes were undoubtedly given by tbe insured in consideration of the risk which the company assumed, and with the distinct understanding that they were only to meet one class of losses. They ought to be applied, to this object or declared void for all purposes.

I tbink the judgment of the circuit court should be reversed, and that of the justice affirmed.