Ellis v. Mutual Life Ins. Co. of New York

Decision Date09 February 1939
Docket Number6 Div. 327.
PartiesELLIS v. MUTUAL LIFE INS. CO. OF NEW YORK.
CourtAlabama Supreme Court

Rehearing Denied March 30, 1939.

Appeal from Circuit Court, Jefferson County; J. Edgar Bowron, Judge.

Bill for declaratory judgment as to distribution of dividends to policyholders by William H. Ellis against the Mutual Life Insurance Company of New York, to which respondent filed pleas to the jurisdiction. From a decree overruling a demurrer to pleas and dismissing the bill, complainant appeals.

Affirmed.

Where New York mutual life insurance company, whose corporate powers were by charter vested in board of trustees, had provided in member's policy pursuant to New York statute that shares of divisible surplus should be allotted as a dividend annually, member's suit challenging legality of distribution of divisible surplus constituted attempt to have court exercise "visitorial powers" over company and could not therefore be maintained. Insurance Law N.Y. § 83.

The charter of respondent, passed by an Act of the Senate and Assembly of New York April 12, 1842, Laws 1842, c. 246 provides that the persons therein named "and all other persons who may hereafter associate with them in the manner hereinafter prescribed, shall be a body politic and corporate, by the name of 'The Mutual Life Insurance Company of New York'; * * * the corporation hereby created shall have the power to insure their respective lives, and to make all and every insurance appertaining to or connected with, life risks, and to grant and purchase annuities. * * *

"§ 3. All persons who shall hereafter insure with the said corporation, and also their heirs, executors, administrators and assigns, continuing to be insured in said corporation, as hereinafter provided, shall thereby become members thereof during the period they shall remain insured by said corporation and no longer.

"§ 4. All the corporate powers of the said company shall be exercised by a board of trustees, and such officers or agents as they may appoint."

Further provision is made for the number of trustees, their selection, and terms.

"§ 8. The trustees may determine the rates of insurance and the sum to be insured. * * *

"§ 16. The operations and business of the corporation shall be carried on at such place in the city of New York as the trustees shall direct."

Section 13 of the original charter, and as amended by Act of 1851, Laws 1851, c. 60, provides for periodic striking of balance by the officers of the company and credit of each member with an equitable share of the profits of said company. By further amendment of § 13, by Act of 1862, Laws 1862, c. 131, it is provided that the company "may appropriate its dividends either to the purchase of additional insurance payable with the policy or at the option of the insured, in reduction of, or towards the annual payment of premiums on policies," with the consent of the superintendent of insurance; and that dividends may be declared every five years or oftener, at the option of the Company.

By amendment of the charter, by resolution of the Board of Trustees, in 1916, approved by the Attorney General and Superintendent of Insurance, it was provided that the Company should have power to make additional kinds of insurance, authorized by subdivision 2, Section 70 of the Insurance Law, of New York, Consol.Laws N.Y. c. 28, viz., disability resulting from sickness, etc.

By-laws of the Company, as amended in 1933, provide for election of Trustees, the time of meetings, and for certain standing committees of the Board of Trustees. It is provided that one such committee shall be the "Committee on Insurance and Agencies," and "This Committee shall have supervision of all questions relating to the distribution of surplus."

Section 83, Insurance Law of New York, is in pertinent part as follows:

"Section 83. Distribution of surplus to policyholders. Except as herein provided, every domestic life insurance corporation heretofore or hereafter organized, whether incorporated by special act or under a general statute, anything in its charter or certificate of incorporation or in such special act or general statute to the contrary notwithstanding, shall provide in every policy issued on or after the first day of January nineteen hundred and seven, that the proportion of the surplus accruing upon said policy shall be ascertained and distributed annually and not otherwise. Upon the thirty-first day of December of each year, or as soon thereafter as may be practicable, every such corporation shall well and truly ascertain the surplus earned by such corporation during said year. After setting aside from such surplus such sums as may be required for the payment of authorized dividends upon the capital stock, if any, and such sums as may properly be held for account of existing deferred dividend policies, and for a contingency reserve not in excess of the amount prescribed in this article, every such corporation shall apportion the remaining surplus equitably to all other policies entitled to share therein."

Wm. H. Ellis and Talbot Ellis, both of Birmingham, for appellant.

Douglas Arant and Bradley, Baldwin, All & White, all of Birmingham, and Louis W. Dawson, of New York City, for appellee.

THOMAS Justice.

The suit in equity was by complainant as a member and policyholder of respondent, a mutual life insurance corporation, existing under the laws of New York, and qualified to transact its business in Alabama, and was so engaged in this state when notice was issued and suit brought. There is no question presented as to the sufficiency of service of process upon the respondent.

The bill of complaint avers that the suit is filed in behalf of complainant and all other persons similarly situated; and the object was to have declared illegal the allotment and distribution by the non-resident mutual insurance corporation of its divisible surplus as dividends for the year 1937 and years subsequent thereto, and to obtain a decree against the respondent for alleged dividends which complainant claims he was deprived of on account of the alleged illegal and unlawful distribution to other classes of policyholders.

It is thus averred: "Complainant shows unto this Court that for many years after the execution and delivery of the policy herein involved until, to-wit: the calendar year 1937 and as to the policy herein involved on, to-wit: the 24th day of November, 1937, the Respondent paid dividends on said policy on the same general basis that it paid other dividends and without making a deduction thereof because of disability benefits granted but that during said calendar year 1937 and in particular on November 24th, 1937 as to the policy here involved the Respondent, contrary to the terms of the aforementioned policy made an additional deduction which it by notice to its policyholders stated was because of alleged losses because of disability benefits granted. That said additional deductions during said calendar year 1937 were made on policies such as your Complainant's which contained the disability provisions and were not made on other similar policies of the respondent which did not contain disability provisions."

It is further averred that: "* * * on the policy here involved the annual dividend, notice of which was given Complainant in the premium policy notice due November 24th, 1936, was in the sum of $11.85, which your Complainant had the option of accepting in cash, or using for the purpose of an additional $29.00 paid up insurance or using toward payment of premium but that after the illegal and unlawful change whereby said dividends were reduced for the calendar year 1937 that the cash value of the dividend applied to said policy for said year was only $7.94 which your Complainant could take out at his option either in cash or which he could use for the purchase of additional paid up insurance in the sum of $19.00, or apply toward payment of premium." Paragraphs 7 and 8, Bill of Complaint.

The respondent filed several pleas challenging the jurisdiction of the court over the subject-matter of the suit because the courts of Alabama are without power to exercise visitorial powers over the respondent foreign corporation or interfere with the management of its internal affairs. The complainant interposed a demurrer challenging the legal sufficiency of the pleas to the jurisdiction. The trial court overruled the demurrer to the pleas to the jurisdiction, holding that the pleas were sufficient, and dismissing the bill. From the final decree dismissing the bill for want of jurisdiction the court over the subject-matter of the suit, this appeal was prosecuted, based on the ruling as the case was tried.

A statement of the pleading will be adverted to as follows: the complainant in his bill alleged in substance that on November 24, 1926, the respondent, a mutual life insurance corporation existing under the laws of the State of New York, executed and delivered to him in Alabama an ordinary policy of life insurance for the face amount of $2,000 with provisions for double indemnity in the event of accidental death and for benefits in the event of total and permanent disability. The entire policy was incorporated in the bill as an exhibit and supports the same. Grimsley v. First Ave. Coal & Lumber Co., 217 Ala. 159, 115 So. 90.

It was averred that no loan had been obtained on the policy; that all dividends thereon allotted by the respondent had been left with the respondent for the purpose of purchasing paid-up insurance in accordance with the terms of the policy, and that the total annual premium of $50.36 had been paid on the policy each year since its effective date.

The provisions relating to benefits in the...

To continue reading

Request your trial
15 cases
  • State Farm Mut. Auto. v. Superior Court
    • United States
    • California Court of Appeals
    • 16 Diciembre 2003
    ...to action alleging that insurer's method of calculating dividends breached insurance policy]; Ellis v. Mutual Life Ins. Co. of New York (1939) 237 Ala. 492, 187 So. 434, 436, 449-450 [action alleging that insurer breached policy by reducing dividends on disability policies is governed by in......
  • Pratt v. Mutual Life Ins. Co. of New York
    • United States
    • United States State Supreme Court of Kansas
    • 22 Enero 1944
    ...... issued to the plaintiff and that a change had been made in. the method of computing the amount of dividends to be. credited on plaintiff's policy. . . For a. second defense, the answer pleaded an action in the name of. William H. Ellis and others similarly situated against this. defendant wherein the court of last resort of the state of. Alabama held that the courts. [145 P.2d 115] . of New York, not those of Alabama, had power to supervise the. action of this defendant in appropriating its dividends to. policyholders. The ......
  • Ex parte Bentley
    • United States
    • Supreme Court of Alabama
    • 21 Mayo 2010
    ...corporations of another state in matters of vital concern to internal policy and management....' " Ellis v. Mutual Life Ins. Co. of New York, 237 Ala. 492, 504, 187 So. 434, 444 (1939)(quoting Hoglan v. Moore, 219 Ala. 497, 501, 122 So. 824, 828 (1929)). Thus, the Court in Ellis held that a......
  • Nichols v. Healthsouth Corp.
    • United States
    • Supreme Court of Alabama
    • 23 Marzo 2018
    ...94–40003, July 26, 1994) (Bankr. N.D. Ala. 1994) (not published in Bankruptcy Reporter), quoting in turn Ellis v. Mutual Life Ins. Co., 237 Ala. 492, 502, 187 So. 434, 442 (1939) ). See also Bagdon v. Bridgestone/Firestone, Inc., 916 F.2d 379, 382 (7th Cir. 1990) ("The choice between deriva......
  • Request a trial to view additional results
2 books & journal articles
  • Choice-of-law Issues in Shareholder Litigation Involving Alabama-based Corporations Organized Under the Laws of Other States
    • United States
    • Alabama State Bar Alabama Lawyer No. 75-3, May 2014
    • Invalid date
    ...other than the right of members or owners to inspect entity records." ALA. CODE § 10A-1-1.13.5. Ellis v. Mut. Life Ins. Co. of N.Y., 187 So. 434, 443 (Ala. 1939).6. See generally Jay M. Ezelle & C. Clayton Bromberg, Jr., The Internal Affairs Doctrine in Alabama, 72 ALA. LAW. 142 (2011).7. M......
  • The Internal Affairs Doctrine in Alabama
    • United States
    • Alabama State Bar Alabama Lawyer No. 72-2, March 2011
    • Invalid date
    ...v. Delaware in a Fight for the Right to Regulate Foreign Corporations, 48 B.C. L. Rev. 1047 (2007). 3. Ellis v. Mutual Life Ins. Co., 187 So. 434, 443 (Ala. 1939) (citations omitted).4. First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 621 (1983) (holding that ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT