Allison v. Fid. Mut. Fire Ins. Co.

• Decision Date: 23 April 1908
• Docket Number: No. 15,501.,15,501.
• Parties: ALLISON v. FIDELITY MUT. FIRE INS. CO. HOWELL v. LEIGH.
• Court: Nebraska Supreme Court

81 Neb. 494

116 N.W. 274

ALLISON

v.FIDELITY MUT. FIRE INS. CO.

HOWELL

v.LEIGH.

No. 15,501.

Supreme Court of Nebraska.

April 23, 1908.

Syllabus by the Court.

Mutual fire insurance companies, organized under the provisions of chapter 45, p. 257, Sess. Laws 1897, are not authorized to transact a reinsurance business.

A contract of reinsurance made by a mutual insurance company, organized under the provisions of chapter 45, p. 257, Sess. Laws 1897, is ultra vires, and assessments cannot be collected on account of such policy.

In an action by one insurance company against another, both of which were organized under the provisions of chapter 45, p. 257, Sess. Laws 1897, to recover assessments on policies of reinsurance, the reinsured company is not estopped from pleading the defense of ultra vires.

Appeal from District Court, Douglas County; Kennedy, Judge.

Action by Edward M. Allison against the Fidelity Mutual Fire Insurance Company. On the insolvency of the defendant, E. R. Leigh was appointed receiver, and Robert B. Howell, receiver of the Merchants' & Manufacturers' Mutual Insurance Company, sued E. R. Leigh to recover a certain assessment. Judgment for defendant, and plaintiff appeals. Affirmed.

See 104 N. W. 753.

Isaac E. Congdon, for appellants.

Baldridge & De Bord, for appellees.

GOOD, C.

The Merchants' & Manufacturers' Mutual Fire Insurance Company and the Fidelity Mutual Fire Insurance Company were each mutual fire insurance companies organized under chapter 45, p. 257, Sess. Laws 1897, entitled “An act to authorize the organization of mutual insurance companies to insure city and village property against loss by fire, lightning, tornado, cyclone or windstorm, and to regulate their conduct,” and carried into Cobbey's Annotated Statutes of 1903 as sections 6525 to 6544, inclusive. Both companies failed and passed into the hands of receivers in actions instituted in the district court of Douglas county. In the case of Wells v. Merchants' & Manufacturers' Mutual Fire Insurance Company Howell was appointed as receiver of that company, and in the case of Allison v. Fidelity Mutual Fire Insurance Company Leigh was appointed receiver of the last-mentioned company. Howell, as receiver of the Merchants' Company, filed in the Allison Case a claim against the Fidelity Company for assessments levied against the Fidelity Company by the Merchants' Company and by the district court; the former assessments being made before the company passed into the hands of the receiver, and the latter being ordered by the court in the receivership proceedings. The Merchants' Company had issued to the Fidelity Company a large number of policies, whereby it undertook to reinsure the Fidelity Company on a number of risks written by it. The assessments which formed the basis of the claim were on these reinsurance policies. On the trial to the district court judgment was rendered in favor of the defendant, the Fidelity Company, and Howell, as receiver of the Merchants' Company, has appealed.

The district court held against the claim of the plaintiff upon the ground that the companies were not authorized to transact a reinsurance business, and that the acts of reinsurance were ultra vires and void, and there could therefore be no recovery for assessments on the policies of reinsurance. It is a well-known and recognized principle of law that a corporation possesses only such powers as are granted to it. This is modified to the extent that all powers which are necessary to the enjoyment of the rights and privileges granted are included in the grant of powers. This is upon the theory that it is essential that the corporation shall have the right to carry out and enjoy the rights and privileges conferred upon it, so that any right or power which is essential to the enjoyment of the powers granted is implied. In Smith v. Steele, 8 Neb. 115, 118, it is said: “But a corporation is a mere creature of the statute, and, being such, it possesses only those properties and powers which the charter of its creation confers upon it.” In State v. A. & N. R. Co., 24 Neb. 143, 38 N. W. 43, 8 Am. St. Rep. 164, it is held: “The powers of a corporation organized under legislative statute are such, and such only, as the statute confers. The charter of a corporation is the measure of its powers, and the enumeration of these powers implies the exclusion of all others.” And in the body of the opinion, at page 162 of 24 Neb., page 50 of 38 N. W. (8 Am. St. Rep. 164), the following language, taken from Thomas v. Railroad Co., 101 U. S. 71, 25 L. Ed. 950, is quoted with approval: “Conceding the rule applicable to all statutes that what is fairly implied is as much granted as what is expressed, it remains that the charter of a corporation is the measure of its powers, and that the enumeration of these powers implies the exclusion of all others.” In State v. Nebraska Distilling Co., 29 Neb. 700, 718, 46 N. W. 155, 161, it is said: “Unlawful acts of a corporation are not limited to those which are mala prohibita and malum in se, but include powers which the corporation is not authorized to exercise, and contracts which they are not empowered to make.” The law under which these companies were organized did not specifically grant the power or right to reinsure, but appellant contends that the right of reinsurance is essential and necessary to the transaction of the business authorized to be carried on, and...