Doane v. Milville Mut. Marine & Fire Ins. Co.

• Decision Date: 28 December 1887
• Citation: 43 N.J.E. 522,11 A. 739
• Parties: DOANE v. MILVILLE MUT. MARINE & FIRE INS. CO.
• Court: New Jersey Court of Chancery

11 A. 739

43 N.J.E. 522

DOANE

v. MILVILLE MUT. MARINE & FIRE INS. CO.

Court of Chancery of New Jersey.

December 28, 1887.

Bill for receiver. On exceptions to master's report.

W. S. Casselman, for complainant and receiver. D. J. Pancoast, for defendants Lemy & Blight. S. H. Grey, for defendant Woods. Potter & Nixon. for defendant Carll.

BIRD, V. C. The defendant company is an insolvent corporation. On the twenty-first day of September, 1885, a bill was filed setting forth the inability of the company to pay its debts. An order to show cause why a receiver should not be appointed, together with an order restraining the company from performing any duties whatsoever devolving upon it, was issued. Upon the return of the order, a receiver was appointed and an injunction awarded; soon after, a reference to ascertain the true condition of the company, the nature and extent of its liabilities, and to report the extent of its obligations, by way of marine losses, and also by way of losses by fire. The master having made his report, exceptions thereto have been presented. One important exception is in these words: "That the said master has certified that the losses that occurred under the mutual marine policies can only be collected from the assets of the mutual marine; that the amount of the different parties for losses that occurred under mutual fire policies can only be collected from the assets of the mutual fire. Whereas he ought to have certified that losses that occurred under mutual marine policies can be collected from the assets of the mutual marine and mutual fire, and that the amounts due the parties for losses that occurred under mutual fire policies can be collected from the assets of the mutual fire and mutual marine." This presents the judgment of the master, as it appears by his report, and the objections thereto. The question raised is serious enough. Let us look at it. In so doing we must consider the charter, the by-laws, and the nature of the company, and the conduct, both of it and of its members, for a long period of its existence.

Its charter was obtained in the year 1859. Pamph. Laws 1859, p. 144. By this it was provided that the said corporation was incorporated "for the purpose of insuring their respective vessels, buildings, household furniture, merchandise, and other property against loss or damage by sea or fire." They were authorized to pass by-laws for the purpose of carrying into effect the object had in view by the charter. Section 8 of their by-laws provided that the company should keep the marine and fire accounts separate, and declared that the companies should be assessed to pay losses in their respective departments, and the expenses of the whole business should be charged to the different departments, fire and marine, as equitably as possible. It seems that, during a very long period, if not during all their existence, they endeavored to preserve a distinction between the marine and fire insurance. The proof shows that, at the very outset, circulars were issued, making known this distinction, which circulars were distributed by their agents, containing this language: "Both fire and marine insurance effected; but no fire notes can be assessed for a marine loss, nor a marine note for a fire loss." In addition to this by-law and this circular, it appears that the agents of the company faithfully represented the resolution of the company to everyone who became members thereof, so that marine policy-holders understood that they were independent of the fire policy-holders, and that the fire policy-holders understood that they were independent of the marine policy-holders. It is also in evidence that for a long period of time, if not during the entire existence of the company, the marine branch was much more profitable than the fire branch of the company; so much so, that while there was little or nothing in the treasury to the credit of the fire, there was nearly $40,000 to the credit of the marine; and it also appears that, at times, the former became indebted to the latter by the use of a portion of the money due to the latter, in order that the fire department of the company might be maintained.

The exceptants regard this attempt upon the part of the company to carry on two separate branches of business, under their charter, as void,—ultra vires; hence, as I have said, the question is a serious one. The view, however, which I take of it, relieves me from determining, at this stage of the transaction, whether or not it was the intention of the legislature to permit the company to carry on two separate and distinct branches of business. They had the power to insure against risks by sea, and also the power to insure against risks by fire. Whether, by mutual arrangement and agreement, they could fulfill the object of their mission and keep within the law by only applying the profits of the marine department to that department alone, and of the fire to the fire department alone, I am not prepared to decide. But there is another view to be presented. I am clear that a corporation of this character may be estopped, by its resolutions and by its acts, as well as individuals. The corporation at its inception declared that they would carry on the two departments separately, making no other connection between the two than that the expenses of the institution should be as equitably borne by each as possible. This intention was immediately made known by their by-laws and by their circulars and by their agents. It cannot, therefore, be said that any individual was misled by supposing that the entire premium notes or assets of the company, whatever they might be, would be subject to the payment of his claims against the company. With his eyes opened, with this important fact before him, he voluntarily became a member of this association. He thus obliged himself to accept these terms, and also obliged himself, to every other member of the company, that he would see to it that these terms were carried out. It was a mutual agreement between all concerned. This simple statement of facts seems to warrant the conclusion that, after the existence of this company for over 20 years, during which entire period all persons becoming interested acknowledged the force of the by-law, consented thereto, and also to the circular and the action of the agents. It seems to be impossible that the court could declare the action of the company void, without, at the same time, doing great injustice. Each member had a right to take the other at his word; each had a right to confide in the integrity of the company, and in its power to proceed upon the basis indicated; and if each policyholder made his investment and secured a benefit upon the principle involved, how can the court now say to him, "You did an unlawful thing, and the profits or benefits which you expected to derive therefrom you are not entitled to?" Or how can the court say to another class that "the action of the company being contrary to law, you are not only entitled to no profits or benefits, but you are under obligations to do that which you did not contract to do,"—which must, in this case, upon the one hand or the other, inevitably be the result, if the doctrine of estoppel be not applied. For there would be no complaint if it were not the fact that one of those branches has fallen far short of profit, while the other, for the time being at least, was very profitable. Therefore let me again ask, how can the court say to those who are in the branch of the company which has been profitable, that "you are not only not entitled to any credit because of the profits which have been made to your department, according to the contract, but you must pay, to the amount of your premium note, that proportion of indebtedness which the other branch of the company has incurred?" In what department of the law has any such proposition found a foothold? It what department of equity has it ever been declared that where one individual solemnly contracts with another for the purpose of a particular thing,...