Cass County v. Mercantile Town Mutual Ins. Company

• Decision Date: 30 March 1905
• Citation: 86 S.W. 237,188 Mo. 1
• Parties: CASS COUNTY et al. v. MERCANTILE TOWN MUTUAL INSURANCE COMPANY, Appellant
• Court: Missouri Supreme Court

86 S.W. 237

188 Mo. 1

CASS COUNTY et al. v. MERCANTILE TOWN MUTUAL INSURANCE COMPANY, Appellant

Supreme Court of Missouri, Second Division

March 30, 1905

Appeal from Bates Circuit Court. -- Hon. W. W. Graves, Judge.

Affirmed.

Fyke Yates & Fyke for appellant.

(1) Defendant had no power to issue a policy of reinsurance so-called, or to do any other act or thing than to mutually insure the property of its members, and to raise funds for the payment of losses sustained by its members, by assessment upon its members. Laws 1895, p. 200, secs. 1, 2, 3, 4. Both the companies were organized for the sole purpose of mutually insuring the property of their members, for the purpose of paying any losses incurred by any member thereof, by assessment, as provided by their constitution and bylaws. To enable one to become a member of the company, such person must be the owner of property capable of being insured, and must be such person as upon whom an assessment can be levied for the purpose of paying losses of other members. The defendant company not only had no power, either expressed or implied, to issue the policy sued on, but was expressly prohibited from doing such business. R.S. 1889, sec. 5875. These companies are prohibited from engaging in any business other than the sole business of insuring the property of their members. The word "sole," used in the statute, is a restrictive word, a word of limitation. State ex rel. v. Perkins, 139 Mo. 115. (2) In case judgment should be rendered against defendant, its members could by no means be subject to an assessment for the payment of the judgment. Of course, the only assets it can have under the statute is such moneys as may be realized from assessment upon its members, and such assessment can only be legally made for the purpose of paying losses of its members. The contract sued on is, therefore, ultra vires, for the reason that the defendant had no power to make it, and that the State Town Mutual had no power to enter into such contract, because it is expressly prohibited from transacting such business. Ins. Co. v. Barker, 28 Ins. L. J. 205; Keener v. Grand Lodge, 37 Mo.App. 543; Wagner v. Benefit Soc., 70 Mo.App. 161; Ferbrache v. Grand Lodge, 81 Mo.App. 268; Ben. Assn. v. Bunch, 109 Mo. 560; Lucas v. Trans. Co., 30 N.W. 771; 27 Am. and Eng. Ency. Law, 371; Miller v. Ins. Co., 97 Tenn. 167. A fire insurance company is not liable on a policy against damages by lightning, unless the damage happened by fire. Andrews v. Ins. Co., 37 Me. 257. (3) The clause in the policy sued on, "Loss, if any, payable pro rata at the same time and in the same manner as the reinsured company," has been construed by the Supreme Court of Illinois. Ins. Co. v. Ins. Co., 67 Ill. 362. Under that decision the defendant, if liable at all, is only liable for its pro rata share of the amount actually paid by the Nevada company. (4) The Nevada company had no power to assign the reinsurance contract so-called; at least none is shown. The person whose property is originally insured is not privy to the reinsurance contract; but the proceeds of the reinsurance contract, if valid, must insure to all the policy-holders in the reinsured company. Strong v. Ins. Co., 62 Mo. 289.

C. W. Sloan and R. T. Railey for respondents.

(1) Plaintiffs as assignees could sue defendant without showing prior payment by Nevada company. 1 May on Ins., sec. 11; Strong v. Ins. Co., 4 Mo.App. 27; Strong v. Ins. Co., 62 Mo. 289; Gantt v. Ins. Co., 68 Mo. 503. (2) Defendant received due notice and proofs of loss from Nevada company. It had notice of suit by plaintiffs against said Nevada company, and actively participated with the Nevada company, in defending said cause. It is therefore bound by the judgment rendered therein. Koontz v. Kaufman, 31 Mo.App. 410; Wood v. Ensel, 63 Mo. 193; Landis v. Hamilton, 77 Mo. 565; Garrison v. Transfer Co., 90 Mo. 137; St. Joseph v. Railroad, 116 Mo. 643; Dempsey v. Schawacker, 140 Mo. 689; Railroad v. News Co., 151 Mo. 390; 1 Herman on Estoppel, sec. 157, p. 168; 1 May on Insurance, sec. 11; Ins. Co. v. Ins. Co., 17 Wend. 359. The contract of reinsurance was fully executed; was neither directly or indirectly prohibited by defendant's charter nor the law under which it was issued; was neither immoral, illegal or contrary to public policy, but on the contrary was along the same line of business in which defendant was engaged, and necessary for the protection of both companies in respect to risks which are too large for either company alone to handle. Having received and held on to the premium collected of the Nevada company, defendant is estopped from insisting that said contract of reinsurance is illegal or void. Smith v. Richardson, 77 Mo.App. 432; City of Goodland v. Bank, 74 Mo.App. 365; St. Louis v. Davidson, 102 Mo. 149; Ins. Co. v. Railroad, 149 Mo. 178; Ins. Co. v. McClelland, 9 Colo. 11; State v. Ins. Co., 30 Kan. 585; Ins. Co. v. Ins. Co., 17 Wend. 359; Watts v. Ins. Co., 82 N.W. 441; C.O.N.G. & F. Co. v. C.C.D. Co., 53 N.E. 711; Railroad v. McDonald, 46 N.E. 1022; Wright v. Hughes, 21 N.E. 907; Lewis v. A.S. & L.A., 73 N.W. 799; Bank v. Elevator Co., 51 N.W. 642; Arms Co. v. Barlow, 63 N.Y. 70; Mayor v. Senneborn, 113 N.Y. 423; Buffalo v. Balcom, 134 N.W. 535; McDonald v. Mayor, 68 N.Y. 23; Bank v. Dimrock, 24 N.J.Eq. 27; Kennedy v. Bank, 101 Cal. 495; Davis v. Railroad, 131 Mass. 258; Railroad v. Proctor, 29 Vt. 93; 2 Dillon, Mun. Corp. (4 Ed.), sec. 936; Bigelow on Estoppel (5 Ed.), 685; Hendersonville v. Price, 96 N.C. 423; Daniels v. Tearney, 102 U.S. 415; Ferguson v. Landram, 5 Bush (Ky.) 230. (3) It is claimed that defendant is only liable for its pro-rata share of the $ 350, paid by Nevada company. This contention is clearly untenable. Gantt v. Ins. Co., 68 Mo. 533; Blackstone v. Ins. Co., 56 N.Y. 104. (4) It is claimed that the Nevada company could not assign the policy sued on. Defendant admitted at the trial that policy sued on was on October 14, 1899, by an order of board of directors of Nevada company in due form assigned to plaintiffs. The policy belonged to the Nevada company and there is nothing in the case cited, nor in the statute, which prohibited it from assigning said policy. The right of assignment is not shown to be illegal, contrary to public policy, nor opposed to business principles. It was therefore valid. Gantt v. Ins. Co., 68 Mo. 503.

OPINION

BURGESS, P. J.

The petition is in the usual form. Among the defenses set up in the answer is that the policy sued upon was ultra vires of the defendant company. The court made a special finding of facts as follows:

"In this cause the court doth find, from the evidence and admissions, the facts to be as follows:

"That defendant is a mutual fire insurance company organized under the laws of Missouri, Laws 1895, p. --; that the State Town Mutual Fire Insurance Company of Nevada, Missouri, is a similar company, organized and doing business by authority of the same legislative act; that on October 28, 1898, said last-mentioned company by its policy No. 4451, insured a certain brick store house for one William Dolan, in the town of Freeman, Cass county, Missouri, in the amount of $ 3,000 said policy running the period of one year; that prior thereto William Dolan and wife had executed to Cass county, one of the plaintiffs herein, a mortgage on said store building and lots to secure the payment of a note of $ 2,000 bearing interest at the rate of seven per cent per annum, which mortgage was duly recorded; that to this policy of insurance was a mortgage clause attached, making loss, if any, payable to said Cass county as its interest might appear; that on December 29, 1898, the building described in said policy No. 4451, aforesaid, was totally destroyed by fire; that on the 27th day of March, 1899, said William Dolan and Cass county, as plaintiffs, instituted suits on said policy against the said company of Nevada, Missouri; that thereafter Charles W. Sloan was appointed receiver and later trustee of William Dolan, a bankrupt, by the United States district court, and by said court authorized to prosecute said case so instituted as above stated; that afterwards the venue of said cause was changed to the circuit court of Bates county, Missouri, where said cause was tried on July 3, 1899, said trial resulting in a judgment for plaintiffs in the sum of $ 3,045.55 on said policy No. 4451, and for costs; that from this judgment no appeal was taken; that on said judgment only the sum of $ 300 was ever paid by the Nevada company; that of the pendency of this suit the defendant in this cause was duly notified long before the trial thereof and the defendant herein advised with the defendant in that action as to proper matters of defense.

"The court further finds that the defendant herein on November 8 1898, issued to said Nevada company its policy No. 4981 covering a period from November 8, 1898, to December 28, 1899, insuring said Nevada company against all direct loss by fire under its policy No. 4451 to an amount of $ 1,500, which policy No. 4981 is filed in this cause; that said policy No. 4981 was on the 14th day of October, 1899, duly assigned to the plaintiffs herein by the Nevada company; that after the burning of the store building of the said William Dolan on January 10, 1899, the general manager and adjuster of defendant met the agent and adjuster of the Nevada company at Freeman for the purpose of adjusting the loss, but after investigation the said manager and adjuster of this defendant advised the Nevada company to resist payment of said policy No. 4451, which was done with the result aforesaid; on January 28th this defendant received from the Nevada company the proofs of loss theretofore made to it by said Dolan, and upon the...