Brown v. Equitable Life Assur. Soc. of the United States

• Decision Date: 07 February 1907
• Citation: 151 F. 1
• Parties: BROWN v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

151 F. 1

BROWN v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.

United States Court of Appeals, Second Circuit.

February 7, 1907

H. S Marshall (John R. Dos Passos, Joseph De F. Junkin, George Gordon Battle, Edmond F. Harding, of counsel), for appellant.

Allan McCulloh (Henry Hill Pierce and Alexander & Green, of counsel), for appellee.

Before LACOMBE, TOWNSEND, and COXE, Circuit Judges.

PER CURIAM.

This cause comes here by appeal from order and decree of the United States Circuit Court for the Southern District of New York sustaining demurrer to and dismissing amended bill. The bill, brought by a policy holder on behalf of himself and all other policy holders of defendant and its annuitants, alleges the incorporation of defendant as an insurance company under a charter and declaration which provides that its cash capital stock shall be $100,000, divided into shares of the par value of $100 each, on which its stockholders are entitled to receive semiannual dividends not exceeding 3 1/2 per cent. The bill further alleges that the defendant's net earnings are to be accumulated, that it is to be conducted on the mutual plan, and that the surplus as ascertained upon a balance struck by its officers is to be equitably credited or applied for the benefit of the policy holders.

The bill further alleges that the complainant has elected to receive his equitable share of said surplus; that the amounts apportioned and allowed to him by the defendant are not the real amounts of his equitable share in the true surplus, but that, by reason of abuse of discretion, wrongs, and inequitable conduct of its officers and agents, the defendant and its officers and stockholders have wrongfully retained and fraudulently wasted, and misappropriated to themselves, a large portion of the surplus of the defendant belonging to the policy holders, and that certain of said stockholders in a pending suit have asserted the stockholders' ownership of and right to the whole or a portion of said surplus as against said policy holders. The report of the investigating committee of the board of directors, commonly known as the 'Frick Report,' and the report of the superintendent of insurance of the state of New York of June 21, 1905, are made a part of the bill, and it is averred that the statements therein contained are true. The bill further avers that complainant has no adequate remedy at law, and prays for equitable relief.

The defendant assigns various grounds in support of its demurrer which may be summarized under the claim that the bill fails to state a cause of action, and it relies upon various decisions of the courts of the state of New York and of the federal courts where it is claimed that upon a similar state of facts said courts have held that a policy holder had no right to such equitable relief.

An examination of the authorities which are material to this discussion shows that, upon whatever other grounds the courts may have reached conclusions adverse to the rights of policy holders, yet in none of said cases in the federal courts or in the court of last resort of the state of New York have there been definite, specific allegations of facts charging bad faith, willful neglect, abuse or indiscretion, fraud or misappropriation by the defendant. A single citation from the opinion of the court in Uhlmann v. New York L.I Co., 109 N.Y. 421, 17 N.E. 363, 4 Am.St.Rep. 482, will serve to illustrate the principle which appears to be applicable generally to the cases cited by defendant where these questions have been considered.

In the Uhlmann Case, Judge, now Mr. Justice, Peckham, delivering the opinion of the court, says as follows:

'We do not, however, accede to the claim of the defendant herein to its full extent as made in the brief submitted, which is that the apportionment, as made by the defendant, is absolutely, and at all events conclusive upon the policy holders. We hold that, under the terms of this policy, the apportionment was to be equitably made, and, in the first instance, by the defendant's officers or agents. But, inasmuch

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