Cunningham v. Brockway Fast Motor Freight, Inc.

• Decision Date: 08 January 1940
• Citation: 11 A.2d 422,18 N.J.Misc. 101
• Parties: CUNNINGHAM v. BROCKWAY FAST MOTOR FREIGHT, Inc., et al.
• Court: New Jersey Supreme Court

11 A.2d 422

18 N.J.Misc. 101

CUNNINGHAM

v. BROCKWAY FAST MOTOR FREIGHT, Inc., et al.

Supreme Court of New Jersey, Passaic County.

Jan. 8, 1940.

Action by Robert Cunningham, custodial receiver for Auto Mutual Indemnity Company, a corporation of the state of New York, against the Brockway Fast Motor Freight, Inc., and others, to recover assessments against defendants as policyholders of indemnity company. On motion to strike the complaint.

Motion granted.

David Cohn, of Paterson, for plaintiff.

J. Lewis Abramowitz, of Paterson, for defendants J. Fishman & Sons, Inc., and Harrison Motor Freight.

WOLBER, Circuit Court Judge.

This matter comes before me on a motion made on behalf of defendants to strike the complaint herein on an agreed state of facts. I have received a memorandum of law on behalf of the plaintiff and memoranda on behalf of the defendants. Although plaintiff was allowed by me to file a further brief no later than Tuesday, December 26, 1939, none has been filed with me.

The agreed state of facts shows that the Auto Mutual Indemnity Company is a corporation organized under and by virtue of the insurance laws of the State of New York. This company had its principal place of business in New York City. It had no place of business in the State of New Jersey and was not authorized to do business therein. All policies concerning New Jersey residents were solicited.in New Jersey and written and approved through either the New York or Philadelphia office of the Auto Mutual Indemnity Company. Said policies covered property located in the State of New Jersey.

On November 24, 1937, the indemnity company was placed under the control of the Superintendent of Insurance of the State of New York. The Superintendent was appointed for the express purpose of liquidating the assets of the indemnity company and conserving the same for the benefit of creditors, in conformity with the laws of the State of New York.

From that date on, the Superintendent assumed and took over all business, property and assets of the indemnity company, and has continued to be in charge thereof for the purpose of liquidation.

On February 7, 1938, a determination was made by the Superintendent of Insurance of the State of New York, that there were insufficient funds and assets with which to pay creditors and other liabilities of the Auto Mutual Indemnity Company. This determination was made in conformity with the laws and statutes of the State of New York. The deficiency which he found to be existing at that time has continued and still exists.

According to the statutes of the State of New York, the Superintendent of Insurance has the duty of making an assessment against all the policyholders of the indemnity company under such circumstances as were existing, in such amount as he deems necessary to cover the excess of proper liabilities over reasonable value of assets. Such determination is then to be pro-rated amongst all policyholders. After the determination is made and pro-rated with proper notice, given by mail as required by the statutes of New York, the determination and assessment, according to the statutes of New York, has the same effect as if a judgment in the original action brought in the court in which the special proceedings are pending, meaning the proceedings with respect to the liquidation of the Auto Mutual Indemnity Company.

The assessment properly and legally made was determined by the Superintendent of Insurance of the State of New York to be 40% of the amount of the indebtedness of each policyholder, due and owing to the indemnity company.

The assessment in the amount of 40% was properly and legally made, notice thereof was given as provided in such cases, by an order to show cause entered on August 12, 1938, wherein all complainants, that is, policyholders of the insurer, were required to pay such assessment of 40% on or before September 19, 1938.

Amongst the policyholders of the indemnity company were the defendants named in this action, all of whom are within the State of New Jersey. These defendants represent all those who were policyholders of the indemnity company in New Jersey, all of whom received copies of the rule to show cause of August 12, 1938, wherein payment was demanded on said assessment on or before September 19, 1938, by mail as required by the statutes of the State of New York, and all of whom have defaulted in the payment thereof.

The policies of insurance effected and written by the indemnity company on behalf of the defendants-assured were policies covering property located in the State of New Jersey. The policies issued to the defendants, J. Fishman & Son, Inc., and the Harrison Motor Freight, doing business as the DeLuxe Transportation, were solicited of the said defendants in New Jersey and were for property located in the State of New Jersey.

On November 18, 1937, Robert Cunningham, plaintiff in this matter, was appointed temporary custodial receiver by Vice Chancellor Vivian M. Lewis, to take over all the business, property and assets of the Auto Mutual Indemnity Company, which were to be found in New Jersey by the same court.

Defendant's motion to strike the complaint sets forth the following reasons:

(1) That the plaintiff, a mutual insurance company of the State of New York, was not at any time licensed to do business in the State of New Jersey and therefore cannot maintain this action, relying more specifically on Sections 5 and 69 of the 1902 New Jersey Insurance Law, R.S. 17:17-5 and 17:32-10, N.J.S.A. 17:17-5, 17:32-10.

It will be noted that in the 1937 R.S, Section 5 of the Insurance Law will be found in Part 1, Insurance Companies Generally, Chap. 17, Formation; while Section 69 will be found in Chap. 32, Foreign Companies.

(2) That the complaint is vague and insufficient in that the statutes of the State of New York are not properly pleaded.

(3) That the complaint does not indicate or state that the plaintiff herein has authority to maintain this suit.

(4) That the assessment sued upon was not properly made, in that such a proceeding being in the nature of an action in personam, no jurisdiction was ever had by the New York officials over the herein defendants, as the latter were never properly notified; no service was made upon the herein defendants within the State of New York.

In Delaware & H. Canal Co. v. Mahlenbrock, 1899, 63 N.J.L. 281, 43 A. 978, 45 L.R.A. 538, (Depue, J.), in construing Section 97 of the Corporation Act of 1896, N.J.S.A. 14:15-3, requiring the filing of a statement in the office of the Secretary of State by foreign corporations transacting business in this state, it was held that the statute does not apply where the foreign corporation, accepting an order for goods given to it by a resident of New Jersey, receives a guarantee executed in this state and mailed to the corporation at its home office and thereupon fills the order—the contract not being concluded in New Jersey.

Section 98 of our Corporation Act of 1896, N.J.S.A. 14:15-4, provided that until such corporation so transacting business in this state shall have obtained said certificate of the secretary of state it shall not maintain any action in this state upon any contract made by it in this state.

This case is an authority which would indicate that Section 69 of our Insurance Law does not apply to the instant situation because according to the agreed state of facts, while policies were solicited in New Jersey and covered property therein, they were written and approved through either the New York or Philadelphia office of the indemnity company. The indemnity company did not enter New Jersey by its agents and engage in the general prosecution of its ordinary business therein.

In Stockley v. Perry, 1902, 26 N.J.L.J. 4 (Essex County Circuit Court, Swayze, J.), the receiver of a Pennsylvania mutual live stock insurance company sought to recover from the defendants an assessment for the proportion of said defendants of the unpaid liabilities of the company incurred while they were members thereof and while their insurance was in force. The agreement of each defendant, as set forth in the application signed by him, is "to pay all assessments levied upon me for the mortuary and expense funds as the same are called for and in the time prescribed by the company." The policy issued to each defendant also contained the following terms: "The insured agrees to pay any assessment that may be levied upon him from time to time for the mortuary or expense funds and within the time provided for in the notice of assessment."

In that case it was urged at the oral argument that the company cannot recover because of the provisions of Section 69 of the Insurance Act of 1902, P.L.1902, p. 434, N.J.S.A. 17:32-10. Mr. Justice Swayze held that this act is clearly inapplicable, as the company had been decreed insolvent several years before the act was passed. The policies in question had been previously issued and the court said: "It is too clear for argument that this act could not apply."

It was further argued that the declaration did not show that the company was authorized to transact business in New Jersey. The court said the policies were Pennsylvania contracts, and enforceable in New Jersey under the rule of Northampton Mutual Live Stock Ins. Co. v. Tuttle, 1878, 40 N.J.L. 476 (Van Syckel, J.), unless subsequent legislation affects the company.

The court held that all subsequent statutes refer only to companies transacting business in New Jersey, and relying upon the case of Delaware & H. Canal Co. v. Mahlenbrock, supra, held that there was nothing to show that the company of which the plaintiff was receiver was transacting business in New Jersey within the meaning thus settled.

In answer to the bar of Section 69 to this action by the plaintiff, reliance is had upon the opinion of Mr. Justice Brandeis in the United States Supreme Court on April 1, 1935, in the case of Broderick v....