Hope Mutual Life Insurance v. Taylor — 25 N.Y. Super. Ct. 278

Majority

p. 278

The Hope Mutual Life Insurance Company, plaintiff and respondent, vs. Charles J. Taylor, defendant and respondent.

Headnote

1. Although a corporation can properly enforce only such contracts as are authorized by its charter, yet where third persons become interested by'dealing with the company in good faith, believing that a particular contract was made according !o its powers, every presumption and intendment is to be made in favor of the appropriate exercise of such powers, in the particular case.

2. The defendant, by his promissory note promised, twelve months after date, or sooner, if required, to pay to the plaintiff or order a certain sum ($1000) or such assessment on the same as the trustees of the plaintiff (an insurance company) should find it necessary to impose, for the purpose of paying losses upon policies of insurance, agreeably to the terms of his subscription to a guaranty fund of such company. By the subscription paper so referred to, the subscribers agreed to contribute to a fund for the indemnity of persons insured by such company, as a security, in addition to expected profits, by their promissory notes, which were to be given upon condition that the same should be held by the company for the sole purpose of paying losses which should occur; and be had recourse to for any deficiency by being made subject to a pro rata assessment.

Held that-such note not being strictly within authority given to the plaintiff by its act of incorporation, to receive notes or other securities for premiums in advance; in any action brought thereon by the company, before its dissolution, it was incumbent on the plaintiff to show that the note was not in fact at variance with the statute.

3. The defendant, being one of the trustees of thb company, assisted in the passage of a resolution by them which authorized the raising of a guaranty fund “ upon such terms and conditions as were riot at variance with the charter and by-laws of the company.”

JECeld that between him and creditors who gave credit to the company upon upon the strength of that resolution, it was to be presumed that the note conformed to the charter and by-laws of the company.

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4. Held, also, that the resolution, to which the defendant was a party, or of which' he had knowledge before giving his note, estopped him from urging want of authority, or non-conformity to the charter, as a defense to a creditor’s suit.

5. Held, further, that an action upon the note could be sustained without the aid of the statute. That the general powers incident to all corporations and necessary to enable them to conduct their business, authorized them to receive such note, as forming a part of their guaranty fund; and that in the hands of a receiver of such corporation it was a valid security, for the benefit of its creditors.

6. The statute of limitations begins to run, upon such a note; from the time of the making an assessment thereon and notice thereof to the maker.

7. A foreign receiver cannot sue in his own name ás such in our courts. Hence an action upon such a note is properly brought, in this state, in the name of the company; notwithstanding such receiver has been appointed by the court in another state, in the exercise of its equity powers.

(Before Moncbibf, Monem, and McCum, JJ.)

Heard April 8, 1864;

decided April 30, 1864.

This case came before the court on exceptions, ordered to be heard in the first instance at the general term. The action was to recover the amount of a promissory noté, of which the following is a copy :

“ Dollars, 1000.

New York, 1st May, 1847.

Twelve months after date, or sooner if required, I promise to pay to the Hope Mutual Life Insurance Company, of Stamford, Connecticut, or order, one thousand dollars, or such assessment on the same' as the trustees find it necessary to impose for the purpose of paying losses, agreeably to the terms of my subscription to" the guaranty fund of said Company, dated 19th April, 1847, for value received.

C. J. Taylob.”

The subscription paper referred to in the note, after reciting that “ Whereas it has been deemed advisable by ‘ The Hope Mutual Life Insurance Company/ of Stamford, Connecticut, to create a fund for the indemnity of persons insured by said company, as a security, in addition to expected profits,” provides that the subscribers thereto have agreed to contribute thereto, the amounts respectively set opposite their names, by giving their promissory notes, upon condition that the same shall be held by said company for the sole purpose of paying

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losses which shall accrue upon policies which shall he issued by said company, and shall not be used until the other funds in the hands of the company shall have been first applied ; that for any deficiency, the- notes should be subject to an assessment; that the indemnity fund should only be liable for losses upon policies ; that for such notes, the subscribers shall be entitled to six per cent interest; that whenever a surplus of capital of $25,000 shall be acquired, out of the profits of business, the indemnity shall cease, and the notes be returned. It being understood that the subscribers, in lieu of having such return, may absorb the amount of their notes in premiums of policies on their own lives, or lives of others procured through their agency.

The plaintiffs were incorporated by the general assembly of Connecticut,'' in May, 1846, and were organized in September of that year by the election of trustees, ‘of whom the defendant was one. The 8th section of the act of incorporation provided that “ The company, for the better security of its dealers, naay receive, during the two first years after the passage of this act, notes or other securities for premiums, in advance, of persons intending to receive its polices, and may negotiate the same for the purpose only of paying claims against it in course of its dealings, upon such terms and conditions as may be provided for by the by-laws of said corporation.” * * * *

Section thirteen provided that “ Persons giving notes or other securities in advance, according to section eight of this act, may be allowed therefor, not exceeding six per cent, in addition to any other profits they may be entitled to as members of this company.”

On the. 26th of March, 1847, the trustees passed a resolution authorizing the raising a guaranty fund of from $15,000 to $50,000, upon such terms and conditions as were not at variance with the charter and by-laws of the company, and authorized the executive committee, to receive subscriptions. The defendant’s subscription and note were made pursuant to this resolution.

In May, 1854, it was found that the company was entirely

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insolvent, all its assets, except the guaranty fund, having been exhausted, and there was a large outstanding indebtedness for losses and other debts. W. T. Minor was appointed by the Superior Court of Fairfield county, Connecticut, the receiver of the assets of the company, including the guaranty notes, and an assessment of seventy-five cents on the dollar was levied on the guaranty notes, of which the defendant received notice in December, 1854, or January, 1855.

In September, 1849, the company made a report under oath to the comptroller of this state, in which it is stated that the company at that time possessed “a capital actually paid in and invested, unimpaired, together with premium notes, guaranty bonds and cash assetts,” of #208,528.48. This was made up as follows :

Premium notes,............#17,150 29

Guaranty bonds and notes,....... 83,000 00

Seven per cent bonds and mortgages, . . . . 58,000 00

Six “ “ ' .... 43,000 00

Cash on hand, . ........... 7,378 19

#208,528 48

In May, 1850, the company, by its report, showed the net profits of its business to be #25,479.14, which' was made up as follows :

Cash on hand,............' #5,813 84

Premium notes,........... 14,149 41

Due from agents,...........5,515 89

#25,479 14

The defendant’s counsel requested the judge to instruct the jury:

1st. That the plaintiffs had no authority under their charter to raise the guaranty fund, or to take and hold the defendant’s note.

2d. That the right of action upon the note was barred by the statute of limitations.

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3d. That the plaintiffs, having acquired a capital of $25,000 in 1850, the guaranty notes were discharged, and

4th. The capital of the company, in 1849, amounting to $208,528.48, the guaranty fund was discharged, and the note had thenceforth no legal validity.

The judge refused to instruct the jury as requested, and directed a verdict for the plaintiffs for the amount claimed. To which refusal and direction the defendant excepted.

Judgment upon the verdict was suspended, and the exceptions were directed to he heard in the first instance at the general term.

T. Smith, for the plaintiffs.

A. H. Dana, for the defendant.

By the Court,

This action, although brought in the name of The Hope Mutual Life Insurance Company, is , in reality for the benefit of the creditors of that insolvent corporation. A court in Connecticut, of competent jurisdiction, has declared its insolvency, and passed all its assets into the hands of a receiver.

Upon an-examination of the statute under which the company was incorporated, I am inclined to the opinion that the note in suit is not strictly within the authority, given by tho 8th section of the act, to receive notes or other securities for premiums in advance ; and if the action had been brought by the company before its dissolution, I think they would have been obliged to show that the note was not in fact at variance with the statute. A corporation can enforce such contracts, only, as are authorized to be made by its charter. But where other persons have become interested, having dealt with the company in good faith, believing in their power to contract, every presumption and intendment is made in favor of such power, and its appropriate exercise. (Bissell v. The Michigan Southern and Northern Indiana Railroad Co., 22 N. Y. Rep. 258 .)

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The defendant was one of trustees of the company, and assisted in the passage of the resolution of the 26th of March, 1847, authorizing the raising of a guranty fund “ upon such terms and conditions as were not at variance with the charter' and by-laws of the company.” I think, as between the defendant and the creditors who were induced to give credit to the company upon the strength of that resolution, it is but fair to presume that the note was conformable to the charter and by-laws of the company. Such, in principle, is the decision in Ogden v. Andre, ( 4 Bosw. 583 ,) affirmed by the Court of Appeals in April, 1863. Besides, the resolution of the trustees, to which the defendant was a party, or had knowledge, before the giving of his note, must estop him from urging want of authority or non-conformity to the charter, as a defense to a creditor’s suit.

But the action can be sustained without the statute. The general powers incident to all corporations, and which are necessary to enable them to conduct their business, enabled them to receive the note in question, as forming a part of their guaranty fund, and in the hands of the receiver it was a valid security. (White, receiver, v. Haight, 16 N. Y. Rep. 310 .)

As this view of the case has been so fully examined and clearly decided in our neighboring state of Connecticut, by its highest court, (Hope Mutual Life Insurance Co. v. Weed, 28 Conn. R. 51,) in a suit upon one of these guaranty notes, we may content ourselves by referring to the very able opinion of Ch. J. Strong in that case, as furnishing all the reasons necessary to sustain the verdict in this. Even were we inclined to differ with that eminent judge, which we are not, comity towards the judgment of the highest court of another state should conclude us.

Notice of the assessment upon the defendant’s note was given to the defendant in December, 1854, or January, 1855, from which time the statute of limitations began to run. The suit having been commenced in May, 1860, six years had not elapsed after the liability of the defendant was fixed.

The only remaining exceptions were to the third and fourth requests to instruct the jury.

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The allegations that the company had realized a net profit of $25,000 in 1850, and that in 1849 the capital of the company, by their statement to the comptroller, amounted to $208,528.48, were not supported by proof. All except $5,813.84 cash in hand, of the $25,000 item, was made up of premium notes and sums due from agents, the greater part of which, according to the evidence, was worthless. And the larger item of capital in 1849, was made up of securities from which the company realized little or nothing. Besides, in making up these statements, the debit side for loss was wholly omitted, which would materially lessen the amounts.

The six per cent interest upon the defendant’s note became a debt against the company, and was entitled to its proportionate payments out of the assets which passed to the receiver. (Hope Life Insurance Company v. Weed, supra. Duncan v. Stanton, 30 Barb. 533 .)

This action was properly brought in the name of the company. The receiver was appointed by the Connecticut court in the exercise of its equity powers, and not under any statute of the state. A foreign receiver cannot sue in his own name in our courts. (Booth v. Clark, 17 How. U. S. Rep. 322.)

I am of opinion that none of the exceptions were well taken, and that the plaintiff should have judgment upon the verdict.

Cases cited

Ogden v. Andre 4 Bosw. 583 N.Y. Super. Ct. 1859-05-21 p. 283
Duncan v. Stanton 30 Barb. 533 N.Y. Sup. Ct. 1859-12-13 p. 284