Freedy v. Trimble-Compton Produce Co.

• Citation: 32 S.W.2d 147
• Decision Date: 03 November 1930
• Docket Number: 16787
• Parties: FREEDY, Insurance Com’r of Wisconsin, v. TRIMBLE-COMPTON PRODUCE CO.
• Court: Court of Appeals of Kansas

32 S.W.2d 147

FREEDY, Insurance Com’r of Wisconsin, v. TRIMBLE-COMPTON PRODUCE CO.

No. 16787

Court of Appeals of Missouri, Kansas City

November 3, 1930

Appeal from Circuit Court, Jackson County; Allen C. Southern, Judge.

Action by Milton A. Freedy, Insurance Commissioner of Wisconsin against the Trimble-Compton Produce Company. Judgment for defendant, and plaintiff appeals.

Case transferred to Supreme Court.

ARNOLD, J., dissenting.

Wm. C Forsee and Forsee & Forsee, all of Kansas City, for appellant.

Leslie J. Lyons, of Kansas City, for respondent.

OPINION

JOHNSON, Special Judge.

Plaintiff, as commissioner of insurance for the state of Wisconsin, brought this action in a justice court against defendant, a corporation, domiciled in Missouri, upon an alleged judgment rendered against defendant in the circuit court of Milwaukee county, Wis.

The case was here on a former appeal from a judgment recovered by plaintiff, but that judgment was reversed and the cause remanded because the statement on which the cause was tried failed to plead the Wisconsin law which gave jurisdiction to the court to render the judgment and which conferred on the commissioner the right to sue. Smith v. Trimble-Compton Produce Co., 222 Mo.App. 777, 9 S.W.2d 865.

After the case was returned to the circuit court, plaintiff filed an amended statement, to which a demurrer was interposed by the defendant and sustained by the court. Plaintiff refused to plead further, and judgment dismissing the case was rendered, and plaintiff appealed.

The material facts pleaded in the amended statement are as follows:

Defendant held successive policies of automobile insurance issued, from 1917 to 1921 inclusive, by a mutual company of Wisconsin engaged in the business of automobile insurance, the last of which policies expired February 18, 1922.

By the terms of these policies defendant, as the insured, became a member of the company, entitled to vote at all meetings, but this membership ended with the insurance, and thereafter defendant was not a member. The company was managed by a board of directors elected by the members.

The policies required of the insured payment of a fixed premium, and in addition imposed a liability on the insured "for his ratable proportion of the claims and expenses incurred during each year of membership not provided by the funds of the company," and provided "the determination of the board of directors of such ratable proportion due shall be final and conclusive." There was a change in the wording of these provisions in the policies issued after May, 1920, but without substantial change of meaning.

After defendant ceased to be a member, an action was brought against the company in the circuit court of Milwaukee county, Wis., to wind up its affairs on the ground of insolvency, and on April 1, 1922, an order of liquidation was made in that case, and the commissioner of insurance was vested with the title to all assets of the company, including choses in action, and empowered to deal with them in his representative capacity.

On October 30, 1923, the court entered a decree of assessment to pay the debts of the company and the expenses of liquidation against all who were members or policyholders from September 4, 1915, to March 2, 1922. The adjudged losses were $421,958.10, and the defendant was assessed the aggregate sum of $253.61 on the policies it held from 1917 to 1922.

Defendant was not a party to this proceeding, and entered no appearance therein. Following the assessment, a demand was made on defendant by the commissioner for the amount assessed, but payment was refused, and this suit followed.

The amended statement alleges "said assessment for said amounts remains a final and binding judgment against defendant and is herein sued for as such," and prays for a money judgment against defendant in the sum of $253.61, "together with interest at six per cent. per annum from the date of said judgment."

Plaintiff claims the title to the cause of action is vested in him under the Wisconsin statute which is a part of the corporate charter of the mutual company. Defendant does not dispute plaintiff’s capacity to sue, and there is no question of his right to maintain this action, if otherwise the petition be sufficient. Section 1162, Rev. St. 1919; State of Oklahoma ex rel. Freeling v. National City Bank, 220 Mo.App. 474, 274 S.W. 945, 34 Cyc. 486.

Nor does defendant challenge the jurisdiction of the Wisconsin court to wind up the affairs of the mutual company, but contends that, since defendant was not made a party to that proceeding and had ceased to be a member of the company before the institution of the suit, the Wisconsin court acquired no jurisdiction over its person, and consequently was without authority to render a personal judgment against it.

Plaintiff urges that for the purposes of assessment defendant was in privity with the corporation, although defendant’s membership ceased, and therefore the decree in an action against the corporation bound defendant, although it had not been served with process and had not appeared in the case.

We do not share this view. The privity between defendant and the corporation ceased with the insurance, and thereafter the rights and liabilities of the parties were fixed and measured by the terms of the insurance contracts in which defendant as the insured had bound itself to contribute to the payment of losses incurred during the insurance period and to abide by the decision of the board of directors respecting such losses, and defendant’s ratable proportion thereof. In an action to which defendant was not a party and could not properly be made a party, the Wisconsin court had no power or authority to hold defendant as in privity with the corporation of which he had been a member, but had ceased to be a member before the suit was brought. In no sense could it be said the corporation continued as the representative of defendant after defendant had ceased to be a part of the corporate organization. And it is elementary that one cannot be bound by an action or proceeding in court without being given his day in court. Nor may the tribunals of one state acquire jurisdiction over the persons of another state unless found within their territorial limits. Wilson v. Railway Co., 108 Mo. 588, 18 S.W. 286, 32 Am. St. Rep. 624.

Grant the Wisconsin court had jurisdiction in an action to wind up the corporation, to ascertain and adjudge the losses and apportion them ratably among the members who were in privity with the corporation, it had no jurisdiction to render a final judgment against one who was not a stockholder or member and whose only relation to the company at the time was that of a debtor to the company under the contract which defendant had not yet fully performed.

In a mutual insurance company wherein losses must be borne by policyholders, each policyholder is insurer as well as insured, and the provisions in the contracts which required defendant to pay its ratable proportion of the losses incurred during the term of insurance was a part of the consideration of the insurance, and was an obligation which defendant had to meet if losses occurred in that period.

The rule is well settled that one who has been a member of a mutual company is liable to assessment, although made after he has ceased to be a member, if the assessment be made to cover only such losses and expenses as occurred during the period of his membership. 32 C. J. 1226.

In Boone County Home Mut. Insurance Co. v. Anthony, 68 Mo.App. 424, this court, speaking through Ellison, J., declared: "The loss for which defendant was assessed occurred before defendant’s contract of insurance expired; but the assessment against defendant for his portion of the loss was not made until after the insurance expired. Defendant contends that the plaintiff company had no authority to assess him after the expiration of the contract, notwithstanding it was for a loss occurring before. We do not so construe the contract. The consideration for the note which plaintiff received was insurance for the period named. The consideration which the company received was the mutual liability which the defendant assumed with other members, to pay his portion of any loss which occurred while he had the benefit of the insurance. The fact that the assessment was not made until after the defendant’s term expired ought not to affect the question. Certainly, this is the right view of the matter, for any other view would allow defendant his insurance against loss during a time when he refuses to aid in paying a loss to one of his brother members."

The stipulation in the policies requiring defendant to pay its ratable share of the losses and expenses incurred during the insurance term was no more than the contractual expression of the duty and obligation imposed on the defendant by the nature of its relation to the company. And defendant was required to perform this duty or obligation when, as provided in the contract, it would be ascertained by the board of directors that losses and expenses had been incurred for which an assessment on the members was a necessity. Obviously the losses incurred in any given year could not be definitely ascertained at the close of that year. Investigations and adjustments had to be made and litigated losses had to take their course through the courts. Defendant agreed that, when the board of directors should ascertain the losses for any given policy year and should assess defendant’s proportionate share of such losses, the determination thus made should be conclusive.

"Unless otherwise provided by the statute or charter an assessment may be made within a reasonable time after the expiration of the policy to...