Ainley v. Am. Mut. Fire Ins. Co.

• Decision Date: 20 December 1900
• Citation: 84 N.W. 504,113 Iowa 709
• Parties: AINLEY v. AMERICAN MUT. FIRE INS. CO.
• Court: Iowa Supreme Court

113 Iowa 709

84 N.W. 504

AINLEY

v.AMERICAN MUT. FIRE INS. CO.

Supreme Court of Iowa.

Dec. 20, 1900.

Appeal from district court, Polk county; W. F. Conrad, Judge.

Action on a promissory note. The defendant appeals from judgment on a directed verdict. Modified.Chas. E. Hunn, for appellant.

Read & Read, for appellee.

LADD, J.

The evidence shows conclusively that on the 20th day of April, 1897, the defendant was indebted to the Merchants' & Bankers' Insurance Company, or Theodore F. Getchell, or both, in the sum of $6,000. This was for money advanced for the organization of the defendant company, and premiums on reinsurance. Getchell insists he had no personal interest in the debt, and took the note in suit for the benefit of the Merchants' & Bankers' Insurance Company, and afterwards assigned it to plaintiff, as its secretary. On the other hand, the defendant asserts that the note was executed for the purpose of guarantying the payment of certain certificates held by Getchell. But these certificates merely evidenced a debt of the defendant. The company was organized in October, 1896, and the transaction out of which this controversy arose grew out of the transfer of its control from Getchell and his associates to L. E. Seager and those with him. The article relating to guaranty certificates may be set out: “Article VI. For the purpose of promptly providing for the payment of expenses incident to organization, and any losses and expenses that may be subsequently incurred that the money on hand realized from assessments will not promptly pay, a guaranty fund is hereby provided, to be created, not exceeding fifty thousand ($50,000) dollars, and divided into shares or portions of one hundred dollars each, par value, for which certificates shall be issued, signed by the president and secretary of the company, to such persons as may be entitled thereto, which said certificates may be transferred by assignment on the books of the company kept for that purpose, and not otherwise, and the holders of such shares shall be members of this company during the time such certificates are held. Such certificates shall be subject to assessment by the board of directors in an amount not to exceed ten per cent., when the company is fully organized and ready for business, and be subject to such further assessments as the board of directors may deem expedient and necessary, but no assessment can be for a greater amount than ten per cent. of the par value of certificates outstanding, nor can an assessment be made for any other purpose than a temporary advancement to provide for the prompt payment of losses and expenses, and shall be repaid, with interest thereon at the rate of eight per cent. per annum, from the moneys realized by assessments upon pledges of its members for insurance and for premiums. The board of directors may, at their discretion, pay up all or any portion of the moneys advanced on certificates of the guaranty fund, and retire such certificates, or any part thereof; and, whenever such fund shall be so paid up and retired, the directors of the company shall thereafter be elected by and from the other members of the company.” If, then, the amount advanced was represented by these certificates running to Getchell, the company was expressly pledged to repay it, with interest, at such time as the board of directors, in their discretion, might choose. At the time mentioned the guaranty fund was, by amendment, reduced to $20,000, and from the proceeds of new certificates then issued $3,300 of this indebtedness was paid. The purpose of the new board of directors appears...