Corey v. Sherman
| Decision Date | 21 October 1895 |
| Citation | 64 N.W. 828,96 Iowa 114 |
| Parties | J. C. COREY, et al., v. JAMES P. SHERMAN, Assignee, et al., Appellants |
| Court | Iowa Supreme Court |
Appeal from Blackhawk District Court.--HON. D. J. LENEHAN, Judge.
Action in equity to have set aside a general assignment for the benefit of creditors, to have declared not collectible certain instruments in writing executed by the plaintiff and others, to have canceled an assessment made on those instruments, to enjoin the maintenance of actions to recover the assessment, for the appointment of a receiver, to require an assessment against certain guarantors, and for general equitable relief. There was a hearing on the merits, and a decree, from which the defendants appeal.
Reversed.
Charles A. Clark, Boies, Couch & Boies, and Geo. W. Bunhan for appellants.
Alford Gates, Mullen & Pickett, and Henderson, Hurd, Daniels & Kissel for appellees.
OPINION
The defendants are the Citizens' Mutual Insurance Company of Waterloo, Iowa James P. Sherman, as assignee of that company, and other persons who were concerned in its organization and business. The plaintiffs are policy holders of the company. Measures were taken to organize the company in February, 1887. Soon after that time, it commenced to insure property owners against loss or damage by fire, lightning, cyclones, tornadoes, and windstorms, and continued in that business until the latter part of January, 1891. On the third day of February, 1891, it made a general assignment for the benefit of its creditors. The notice and articles of incorporation provided for a corporation to do a mutual insurance business, and which should have a guaranty fund of not more than fifty thousand dollars, to be secured by the obligations of persons who should subscribe to it, in such form as the directors should approve. The form of the guaranty for this fund which was adopted is as follows: Eighteen persons signed this obligation for shares of the fund amounting in the aggregate to the sum of fifty thousand dollars, all but one or two of whom are made parties defendant. Two kinds of policies were issued by the company. To obtain one kind, the person who desired insurance signed an application which contained a promise to pay the company a specified sum at such time and by such installments as the directors of the company should order, pursuant to the articles of incorporation and by-laws of the company, the assessments not to exceed in any one year a sum named; and the assessment for the first year was usually paid in advance. If the policy was desired for the term of six years, and the obligation was for the sum of sixty dollars, ten dollars would be paid in advance, and not more than ten dollars during each year of the life of the policy. For convenience, policies of that class may be termed "assessment policies." For the other, or cash, policies, the assured paid money in advance, or gave their notes payable in full without condition. More than one-half the policies issued by the company were on the cash plan. The assessments on the deposit obligations or notes were made each year in advance, and notice thereof was sent to each policy holder, subject to assessment, thirty days before his assessment matured. The receipts of the company from ordinary sources were not sufficient to pay losses and expenses, and during the year 1890 it incurred debts for money borrowed to meet its liabilities to the amount of about eleven thousand dollars. On the twenty-third day of January 1891, the subscribers to the guaranty fund met and ordered a special assessment of ten per cent. of the amount of each subscription to the guaranty fund. This was the first assessment on account of that fund which had been made. Three days later the board of directors of the company met and ordered a special assessment of twenty-five per cent. on the gross amount of each deposit note held by the company on account of policies which were in force before the first day of January, 1891, for the purpose of paying accrued losses and expenses. It was also ordered that no new policies should be issued until a further order by the board. On the third day of February, 1891, the subscribers to the guaranty fund met, and adopted a resolution rescinding the action of January 23d making a special assessment of ten per cent. of the guaranty fund, and directing that the portion of the assessment collected should be refunded. On the same day the board of directors also ordered that the portions of the assessment collected should be refunded. At the same time, notice was received from nearly all of the subscribers to the guaranty fund of their withdrawal from it. The board of directors then took action as follows: "On motion, it was resolved that general assignment of the property and business of this company be, and the same is hereby, made for the benefit of all the company's creditors, in proportion to their respective claims." On the next day the board elected James P. Sherman assignee, and directed the president and secretary to execute all papers necessary to carry out all orders of the board, and papers were executed accordingly. In February, 1891, the assignee obtained from the judge of the proper district court an order which in terms authorized the delivery to any policy holder of his deposit note upon the payment by him of the twenty-five per cent. assessment made by the board of directors on the twenty-sixth day of January. Not quite five thousand dollars were realized from that assessment, and notes upon which the assessments were so paid were surrendered to the makers. In May, 1891, the district court set aside the assessment of January 26, 1891, so far as it applied to the deposit notes upon which it had not been paid, and ordered a new assessment upon all deposit notes in the hands of the assignee, and which he had not surrendered upon the payment of an assessment of twenty-five per cent., as directed by the order of the judge made in February. The new assessment varied according to the time the note upon which it was made took effect, from nine per cent. to thirty-five and five-eighths per cent. The order provided that parties who had paid the assessment ordered by the board, and taken up their notes, should receive credit for the amounts they had paid. In September of the same year, the board of directors, on the suggestion of the assignee that the assessment of January 26th was not on a legal basis, and at his request, set it aside, and made a new assessment, in most if not all respects identical with that made by the district court. The money which the last assessment made by the court and by the board of directors was designed to raise was to be used in paying expenses of the company and losses, including those sustained by the holders of cash policies. It is probable that more than one-half the losses were under policies of that class. The indebtedness of the company seems to have exceeded the sum of thirty-five thousand dollars, and, to pay it, there has been collected only about five thousand dollars.
The plaintiff, who are makers of deposit notes which were assessed by the district court in May, 1891, and by the board of directors in September of that year, claim that the organization of the company was not made according to law; that it is not a mutual insurance company; that business transacted by it was not authorized by law; that it was procured by fraud; that the assessments in question are illegal; that an assessment of the subscriptions to the guaranty fund should be made and enforced, and the proceeds used to pay the losses and expenses of the company, before the deposit notes should be assessed. The plaintiffs further allege that the questions presented by their petition are of common and general interest to more than two thousand persons, policy holders in the company on the mutual plan, who have a unity of interest in the object of this litigation; that it is impracticable to bring them all before the court in this action, or for each one of them to bring separate actions; and that this action is brought for the individual benefit of the plaintiffs, and to prevent a multiplicity of suits, for all who are similarly interested. The district court found for the plaintiffs, and ordered and adjudged that the assessment made by the court in May, 1891, and by the board of directors in September, 1891, be set aside and canceled; that the notes made by the plaintiffs, or any of them, to the company, and held by the assignee, be canceled, and held to be illegal and void; and that the defendants be restrained from collecting or attempting to collect or transfer any of such notes. This cause has been submitted to us twice. On the first submission an opinion was filed (60 N.W. 232), but a rehearing was granted, and the cause is again submitted for our determination.
I. The appellants contend that the district court did not have jurisdiction to hear and determine this cause, for the reason that the plaintiffs had a plain, speedy, and adequate remedy in the ordinary course of law. This question was not raised by the pleadings, nor presented to ...
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