Fuqua Bus Line v. Pink

• Decision Date: 27 March 1942
• Citation: 290 Ky. 213
• Parties: Fuqua Bus Line v. Pink.
• Court: United States State Supreme Court — District of Kentucky

290 Ky. 213

Fuqua Bus Line v. Pink.

Court of Appeals of Kentucky.

March 27, 1942.

1. Corporations. — A decree assessing stockholders of an insolvent corporation is conclusive against nonresident stockholders, although not served with process within state in which it was rendered or made parties to the proceedings, in so far as necessity for such decree and amount of assessment are concerned, to enter such decree and its determination is conclusive as to such questions; but such stockholder is not precluded from litigating any matter which bears upon extent or duration of his stock holdings or other personal defenses.

2. Insurance. — Where notice that insured under automobile liability policy issued by New York mutual company was subject to contingent liability as a member was contained on back of policy under the heading "declarations" between two headings unrelated to insurance contract, notice was not an "indorsement" on the policy, so as to be part of the policy, and, hence, notice did not render insured subject to assessment.

3. Insurance. — Even if notice contained on back of automobile liability policy issued by New York mutual company informing insured that it was subject to contingent liability as a member could be regarded as an indorsement, it would not be a part of the insurance contract, so as to render insured subject to assessment, where no reference was made to it in body of the policy.

4. Insurance. — The fact that New York company issuing automobile liability policy was designated "mutual" in the policy would not necessarily signify that policyholders were members or subject to assessment.

5. Insurance. — Where charter does not forbid, a mutual company may issue policies for a cash premium and to policyholders who do not become members.

Appeal from Franklin Circuit Court.

S.H. Brown and Richardson & Redford for appellant.

William A. Young for appellee.

Before William B. Ardery, Judge.

OPINION OF THE COURT BY SIMS, COMMISSIONER.

Reversing.

The Mutual Indemnity Company (hereinafter referred to as the company) was a corporation organized under the laws of New York and was engaged in automobile indemnity insurance. On January 1, 1937, it issued a policy to the Fuqua Bus Lines, which was terminated on Nov. 27, 1937, by the insolvency of the company. The earned premium on the policy was $1,381.86. Louis H. Pink, Superintendent of Insurance of the State of New York, was named as receiver of the company, and on Aug. 12, 1938, he mailed to the appellant notice of a 40% assessment made against all members of the company by the Supreme Court of New York. In the notice appellant was given ample time to show cause why it should not be held liable to pay such assessment.

An ancillary receiver was named for Kentucky by the Franklin Circuit Court and this action was brought by such receiver in that court against appellant on the New York assessment. Appellant's special demurrer to the jurisdiction and its general demurrer to the petition as amended seeking personal judgment against it on the New York assessment, were both overruled. Thereupon it filed answer.

The first paragraph of the answer is a traverse. The second paragraph pleads fraud by the officers and agents of the company in the procurement of the sale of the policy to appellant in that they knew the company was insolvent but represented it to be solvent; they further represented it was reinsured with Lloyds and that the policy was nonassessable; all of which was false but was relied upon by appellant. The third paragraph of the answer pleaded the assessment made by the New York court was void. The fourth paragraph pleaded the policy was issued in Kentucky and did not provide for an assessment, nor for a maximum contingent liability in conformity with Kentucky Statutes, Section 743a-14.

The court sustained a motion to strike these various pleas. Appellant refused to plead further and judgment was entered for appellee for $560.51 on a stipulation of facts covering the allegations of the petition.

The first question for determination is, what was the legal effect on appellant of the assessment by the New York court? The answer appears in an annotation in 48 A.L.R. 669:

"It seems well settled that a decree assessing stockholders of an insolvent corporation is conclusive against non-resident stockholders, although not served with process within the state in which it was rendered or made parties to the proceedings, in so far as the necessity for such decree and the amount of the assessment are concerned, to enter such decree, and its determination is conclusive as to such questions. Such stockholder is, however, not precluded from litigating any matter which bears upon the extent or duration of his stock holdings, or other personal defenses, such as payment, the Statute of limitations, applicable to his liability as distinguished for the liability of the corporation, and the like."

A few of the cases supporting the rule are Pink v. Town Taxi Co., Me., 21 A. (2d) 656; Pink v. A.A.A. Highway Express, 191 Ga. 502, 13 S.E. (2d) 337, 137 A.L.R. 934; Great Western Telegraph Co. v. Purdy, 162 U.S. 329, 16 S. Ct. 810, 40 L. Ed. 986; Pink v. A.A. A. Highway Express, 62 S. Ct. 241, 86 L. Ed. . . . .

At the end the policy is signed by the president and by the secretary of the Company. On the back of the policy appear three headings: "What To Do and What Not To Do in Case of Accident"; "Notice To Policyholders"; "Safety Code Reminders." Under the first and third headings there appear eight separately numbered paragraphs, while under the second heading there are three such paragraphs. Under the first heading advice is given about rendering aid, taking names and addresses of witnesses, noting the nature of damage, not to run away from an accident, etc. Under the third heading the insured is reminded to see that his brakes are in good order, to be alert in driving, to obey traffic regulations, etc. The second heading "Notice To Policyholders" reads:

"1. The Insured is hereby notified that by virtue of this Policy he is a member of the Auto Mutual Indemnity Company and is entitled to vote either in person or by proxy at any and all meetings of said company.

"2. The annual meetings are held at the Home Office of the Company in New...