Gent v. Manufacturers

• Decision Date: 20 November 1883
• Citation: 107 Ill. 652,1883 WL 10348
• Parties: WILLIAM GENTv.MANUFACTURERS AND MERCHANTS' MUTUAL INSURANCE COMPANY.
• Court: Illinois Supreme Court

107 Ill. 652

1883 WL 10348 (Ill.)

WILLIAM GENT

v.MANUFACTURERS AND MERCHANTS' MUTUAL INSURANCE COMPANY.

Supreme Court of Illinois.

Filed at Ottawa Nov. 20, 1883.

APPEAL from the Appellate Court for the Second District;--heard in that court on appeal from the Circuit Court of Winnebago county; the Hon. WILLIAM BROWN, Judge, presiding.

Mr. A. D. EARLY, for the appellant:

Appellee was a corporation de jure, as well as de facto, before the contract was made with appellant. It had an existence sufficient for a charter, and for the election of directors, and the appointment of agents. Rev. Stat. chap. 73, secs. 1, 3, 6, 7, 8, 10.

The statute should not receive a construction converting every direction and detail of powers into a mandatory prerequisite of corporate existence. Cross v. Pinckneyville Mill Co. 17 Ill. 54; Tarbell v. Page, 24 Id. 47; Baker et al. v. Administrator of Backus, 32 Id. 79; Stone v. Great Western Oil Co. 41 Id. 85.

There is an unavoidable implication of a corporate existence, which antedates the making of the certificates required. The organization must necessarily be completed before they can be made. Merrick v. Reynolds Engine and Governor Co. 101 Mass. 381; First National Bank of Salem v. Aling, 117 Id. 476; Whitney v. Wyman, 101 U. S. 392; Johns v. People, 25 Mich. 499; Van Slyke v. Trempealeau County Mutual Fire Ins. Co. 48 Wis. 683.

Appellant's rights are the same, even though appellee is a mutual company. The difference is clearly shown in the following cases: Cumberland Valley Mutual Ins. Co. v. Schell,29 Pa. St. 51; Ellenberger v. Protection Mutual Fire Ins. Co. 89 Id. 464; New England Mutual Fire Ins. Co. v. Butler, 34 Maine, 451; Jones et al. v. Dana, 24 Barb. 395; Columbia Ins. Co. v. Cooper, 50 Id. 331; Rosenbergher, Light & Co. v. Washington Mutual Fire Ins. Co. 87 Id. 207.

An oral contract of insurance is binding. Wood on Fire Insurance, sec. 4; Hartford Fire Ins. Co. v. Wilcox, 57 Ill. 180; Hartford Fire Ins. Co. v. Farrish, 73 Id. 166.

If Holland did not have authority to make the contract, the subsequent ratification on the part of the company by its secretary, Ferguson, amounted to a previous authority. Angell & Ames on Corporations, (11th ed.) secs. 240, 304; Ewell's Evans on Agency, 49; Story on Agency, secs. 239, 248; Randell v. Van Vechton et al. 19 Johns. 59; Episcopal Society v. Episcopal Church, 1 Pick. 372.

Appellee having assumed to contract, and taking the benefit of the contract, is estopped to set up the defence of ultra vires. Diversy v. Smith, 103 Ill. 378; 2 Parsons on Contracts, 790; Bigelow on Estoppel, secs. 423, 511; Angell & Ames on Corporations, sec. 111, p. 96, and sec. 256; Morawetz on Private Corporations, secs. 106, 108, 142; Bell's Gap Ry. Co. v. Christy,54 Pa. St. 59; Trumbull County Mutual Fire Ins. Co. v. Horner, 17 Ohio, 407; Grape Sugar Co. v. Small, 40 Md. 395; De Groff v. American Linen Thread Co. 21 N. Y. 124; Bissell v. Michigan R. R. Co. 22 Id. 258; Parish v. Wheeler, 22 Id. 494; State Board of Agriculture v. Citizens' Street Ry. Co. 47 Ind. 407.

A corporation retaining a contract of its corporators after the recording of the certificate, is liable on it. Hughes v. Antietam Manf. Co. 34 Md. 316; Tonica and C. Ry. Co. v. McNeely, 21 Ill. 71; Johnson v. Ewing Female University, 35 Id. 518.

Mr. C. M. BRAZEE, for the appellee:

Corporations can only act in the manner and for the purposes named in the incorporation articles. Field on Corporations, secs. 246, 247.

The company was not liable for any contract or service made or had prior to its organization, and no recovery can be had on any such contract. Drainage Co. v. Durbin, 13 Ind. 173; Rockford and Rock Island R. R. Co. v. Sage, 65 Ill. 328; Diversy v. Smith, 103 Id. 279.

It is soon enough for corporate bodies to enter into contracts incumbering their property when they are duly organized according to their charter, and have their chosen and impartial directors to conduct their business. N. Y. and N. H. R. R. Co. v. Ketchum, 27 Conn. 170; Franklin Ins. Co. v. Hart, 31 Md. 59; Western Screw and Manf. Co. v. Cousley, 72 Ill. 531; Stowe v. Flagg, Id. 397.

There are very great differences between stock and mutual insurance companies, the rule being that no waiver or special contracts can be made with the mutual company, while there may be with stock companies. May on Insurance, secs. 146, 148, 149, 548, 552; Belleville Mutual Ins. Co. v. Van Winkle, 1 Beasley, (N. J.) 333; Hackney v. Allegheny Mutual Ins. Co. 4 Barr, (Pa.) 185. A party becoming insured in a mutual company becomes a member, and is charged with notice of the charter and by-laws, powers of agents, and all acts of the company. Mitchell v. Lycoming Mutual Ins. Co.51 Pa. St. 402; May on Insurance, 552.

What is necessary in order to constitute the organization of an incorporation under a general act of the legislature, other than under a special charter? Bigelow v. Gregory, 73 Ill. 197.

Until all acts necessary for a full and complete organization of the appellant had been done, and the certificate filed for record, the corporators or their solicitors could make no existing contracts of insurance covering a period of time before the organization or legal existence of the appellee. Dunning v. Smith, 3 Johns. Ch. 332; Bigelow v. Gregory et al. 75 Ill. 197; Dart v. Herculese, 57 Id. 447.

Mr. JUSTICE WALKER delivered the opinion of the Court:

In the month of July, 1880, a number of persons in Winnebago county determined to organize the Manufacturers and Merchants' Mutual Insurance Company, to insure against loss by fire. They published the notice required by the statute, and filed a declaration of intention with the Auditor, together with a copy of the charter they proposed to adopt. On the 7th day of that month the Attorney General of the State certified to the Auditor that he had examined the notice and charter, and found they conformed to the law. The persons thus engaged designated persons to solicit insurance. Holland and De Forrest, who had been appointed for the purpose, saw appellant, and induced him to agree to take a further insurance on the machinery in his factory. He, at the time, agreed to take insurance in the company for $1000. He gave his note, payable to the company, for $150, and accepted a draft for $30, dated August 10, 1880, by which he agreed, on demand, to pay to the order of E. Lyman, treasurer of the company, $30, as a twenty per cent assessment on his premium note of $150, for $1000 insurance under policy No. 36, of even date therewith, in the company. The draft was drawn by James Ferguson, as secretary of the company. There were no other writings entered into in reference to the matter, all else being verbal. On the 3d of February, 1881, the promoters of the enterprise applied to the Auditor to examine the notes and securities held by them, and for a certificate of compliance with the law. He made the examination, but finding some of the notes informal he declined to give the certificate. On the 5th of the month the corporators made the oath required by the statute. On the night of that day appellant's factory was burnt, with the machinery. This was on Saturday, and on the next Monday, the 7th of the month, appellant gave notice of the loss, and notified the secretary that he considered the company liable, and obtained permission to save all he could out of the ruins. On the 9th of the month, four days after the fire, the corporators sent a messenger to Springfield to file its list of premium notes with the Auditor, they having obtained such notes in place of those rejected by the Auditor, and they obtained the final certificate from the Auditor, and filed it for record with the clerk in Winnebago county on the 11th day of February, 1881. Thereupon the company wrote on the note, draft and application of appellant, the words, ““cancelled February 11, 1881.” The company thereupon refused to pay the loss, on the ground that it had made no contract, and was not bound by the acts or agreement of the corporators before the organization was completed. Thereupon appellant brought suit in the Winnebago circuit court, and on a trial he recovered a verdict and judgment for the sum of $1000, and interest. The company appealed to the Appellate Court for the Second District, where the judgment was reversed, but the cause was not remanded, the court holding appellant could not recover, and he appeals to this court and asks a reversal.

Appellant insists that the application, the premium note, and acceptance of the draft by him, and their delivery to and retention by the corporators, constitute a contract of insurance; that he did all he would have been required to do had the company been organized at that time, and as it was intended to be an insurance by all parties, the company, on becoming organized, was precluded from denying that the contract was binding on it; that the incorporators, not only by agreement, but by using the premium note and the draft as an assessment of twenty per cent of its capital furnished to the Auditor, and without which it would not have had the requisite amount of capital to complete its organization, the company is estopped from denying the...