Doane v. Millville Mut. Marine & Fire Ins. Co.
| Citation | 45 N.J.E. 274,17 A. 625 |
| Parties | DOANE v. MILLVILLE MUT. MARINE & FIRE INS. CO. |
| Decision Date | 17 May 1889 |
| Court | New Jersey Supreme Court |
(Syllabus by the Court.)
Appeal from court of chancery; BIRD, Vice-Chancellor. See 11 Atl. Rep. 739.
Suit by S. H. Doane, a judgment creditor, against the Millville Mutual Marine & Fire Insurance Company. Several appeals were taken from various portions of the decree, relating to the distribution of the assets of the defendant company, which had been declared insolvent on bill filed by the complainant, a judgment creditor, by various parties. The appeals were argued together.
Learning & Black, for J. Holmes Hand and Richard S. Learning, appellants. Mr. Pancoast, with John J Reeves et al., appellants. Grey & Grey, for John M. Moore and D. Wilson Moore, appellants. Jas. H. Nixon, with several policy-holders, appellants. William H. Potter, with Howard S. Carll and Ebenezer M. Wright, respondents. Thos. E. French, with the receiver, respondent.
These appeals bring up for review parts of the decree made in pursuance of the opinion reported in 43 N. J. Eq. 522, 11 Atl. Rep. 739.
The question to be first considered relates to the obligation resting upon the members of the corporation to contribute to the fund for the payment of its debts. The charter (P. L. 1859, p. 144) enacts that all persons who shall insure with the corporation shall thereby become members thereof, and, before receiving their policies, shall pay such sum of money, and deposit their promissory note or notes for such sum of money, as shall be determined upon by the directors; that the corporation shall have a lien on the property insured to the amount of the deposit note or notes given for the insurance; that the notes shall be paid at such times and in such manner as the by-laws may determine; and that the corporation may maintain suits at law or in equity for the collection of the notes or any part thereof. There are no other provisions looking towards individual liability, and, although the corporation is styled a "mutual" insurance company, it is plain that the mutual responsibility of the members was designed to extend no further than their deposit notes should require. On referring to these deposit notes, we find that they promised the payment of designated sums of money "in such proportions, and at such time or times, as the directors of said company might, agreeably to their charter, require." As already stated, the charter directs that these notes be paid at such times and in such manner as the by-laws should determine. Hence the by-laws become the test by which the responsibility of the members on their notes is to be ascertained. The by-laws have, since the organization of the company, divided these notes into two classes,—those given for insurance against marine loss, and those given for insurance against fire loss,—and have provided that no assessment should be made upon notes of either class for losses incurred in the other class, but that notes in each class should be assessable for the losses in that class and for an equitable share of the expenses of the company. It is therefore evident that each member is to contribute such a proportion of his deposit note as will be necessary to make up the amount of the losses in that class of insurance to which his note belongs, and a just share of the expenses of the company, and that his responsibility then ends. This accords with the principle upon which the business of insurance is ordinarily conducted. The property to be insured is classified with reference to the risk of loss to which each species is subjected, and the premiums charged for insuring the property in each class are such as will in the aggregate meet the losses in that class, a fair share of all the expenses, and a profit to the insurer. When, as in the present company, there is mutual insurance, a profit is not to be sought for, but, if nevertheless realized, it must, according to the charter, be returned to the members. There are reported cases in which it has been held that the amount of the deposit notes given to mutual insurance companies was absolutely recoverable by the companies without any formal assessment, and that besides each member was liable to an assessment for such sum as was necessary to pay losses upon the policies issued. These decisions turn upon peculiar provisions, either in the statutes or in the by-laws, to which the deposit notes refer. Insurance Co. v. Houghton, 6 Gray, 77, and White v. Haight, 16 N. Y 310, are instances of this sort. They cannot, however, be taken as guides in the present controversy, where the grounds for adjudication are so dissimilar. The conclusion above stated is that to which the charter of this company and its contract with its members lead.
It appears that on July 28, 1885, the directors of the company resolved to cease writing policies, on account of the unpromising outlook for future business, and decided that 2 1/2 per cent. on their premium notes would pay all existing fire obligations and necessary expenses, and therefore instructed the secretary to require a payment of 2 1/2 per cent. on all premium notes on policies offered for cancellation. In alleged pursuance of this resolution the secretary surrendered many premium notes on receipt of 2 1/2 per cent. It now appears that 2 1/2 per cent. of the fire notes will not equal the fire losses and expenses, and the question was raised in the court below whether the surrendered notes are subject to further assessment. It having been decreed that they are, John M. Moore and D. Wilson Moore appeal therefrom. We think the decree is right. The resolution above quoted did not direct the secretary to surrender the notes, but only to require a certain payment upon them as a preliminary to the cancellation of the policies. Section 14 of the by-laws then became applicable, which provides that, The purport of this is that, while the surrender of the policy will terminate the membership of the holder, and fix the period after which losses will not affect him, yet his premium note must be retained to secure a due proportion, not only of prior assessments, but also of prior losses. The payment of the due proportion of the prior assessment of 2 1/2 per cent. did not warrant a surrender of the note; it should still have been held for the due proportion of prior losses. Even if the directors intended that the notes should be given up on...
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