OPINION
SMITH, J.
Appellant
as Receiver of the Planters Fire Insurance Company, brought
suit on the following note:
"$
194.15
"Dated
at Mist, Ark.
"Entered
$ 191.50
"This
22d day of September, 1914.
"On
or before the 1st day of January, 1915, for value received, I
promise to pay the Planters Fire Insurance Company, or order,
one hundred and ninety-four and 15/100 dollars, at the home
office, Little Rock, Arkansas, with interest at the rate of
10 per cent per annum from date until paid.
"If
paid at or before maturity, all interest waived. Said amount
being for cash premium on my insurance, this day applied for,
and it is further agreed that if this note is not paid at
maturity, the whole amount of premium on said insurance shall
be considered as earned, and the contract be null and void,
so long as this note remains overdue and unpaid.
"P.
O. Little Rock, 800 Beach St.
"Otto
Siegle."
The
cause was heard on an agreed statement of facts, from which
the statements herein contained are copied.
The
insurance company was organized under the laws of Arkansas as
a mutual company, and did business on a mutual basis, and had
no capital stock. At its organization prior to 1895 it
adopted by-laws, among which were the following:
"ARTICLE I.
"Sec.
2. The annual meetings of the company shall be held on the
first Monday in February of each year at 10 o'clock a.
m., the first annual meeting to be held on the first Monday
in February, 1896, at 10 o'clock a. m., at which meeting
each member holding a membership contract with this company
in full force, shall be entitled to vote for directors of
this company, either in person or by proxy."
"ARTICLE
VI.
"Sec.
1. All membership contracts issued by this company shall be
signed by the president or vice president, and attested by
the secretary.
"Sec.
2. The directors of this company shall from time to time
determine the premiums to be made on all membership contract
holders, also to prescribe the time and manner in which said
premiums shall be paid, and shall also fix the compensation
of all officers, general and other agents.
"ARTICLE
VII.
"Sec.
1. A member may withdraw from this company at any time before
the expiration of his membership contract, and it may be
canceled by the company as provided for in the contract. In
which case the secretary will cancel the contract and return
the unearned portion of premiums.
"ARTICLE
VIII.
"Sec.
1. Should this membership contract remain in force for the
period of time for which it was written, the member shall
receive his pro rata of the net profits of the
company, which shall consist of premiums and interest
received, after deducting amount paid for losses, expenses of
management, taxes and all other claims growing out of the
business."
Section
2 of article VI was amended on May 1, 1915, to read as
follows:
"AMENDMENT TO ARTICLE VI, SECTION 2 OF THE
BY-LAWS.
"On
and after the adoption of this amendment to the by-laws, no
premium shall be made on any
policy issued to any member, by this company, beyond the
amount of the original premium."
Said
by-laws were attached to and made a part of the policy issued
to appellee. And it was further agreed "That up to the
time of the failure of said Planters Fire Insurance Company,
to wit, 4th of March, 1915, it had complied with the Act of
the Arkansas Legislature of April 24, 1905; that it had at
all times reserved 50 per cent of its premiums for the
payment of losses and for the benefit of its policy holders;
that on March 4, 1915, the date said receiver was appointed,
there were approximately $ 33,000 adjusted losses, which were
unpaid at that time, and approximately $ 50,000 in losses,
which were unadjusted and unpaid at said time, and that none
of the losses above mentioned have been paid in whole or in
part since March 4, 1915. That the assets of said company
consist largely of premium notes."
The
note sued on was executed in payment of a premium due upon a
policy of insurance for three years beginning September 22,
1914, and expiring September 22, 1917.
Upon
the facts stated appellant says he is entitled to a judgment:
First.
Because this being a mutual company, appellee is liable for
the entire amount of his premium.
Second.
Because, the note itself stipulates that if it is not paid
when due, the entire amount is considered as earned.
It is
insisted that a mutual company is not like a stock company,
in that there is no capital stock, and each policy holder is
a member of the association, and fire losses are to be paid
by assessments made on the members, and that under the
statutes of this State, and the by-laws of the insurance
company, appellee is liable for the amount of his note.
The question here involved was considered by the
Supreme Court of Tennessee in the case of Gleason v.
Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W.
1030, in which case it was said:
"This
case, on other features, was before this court at the last
term, coming from the Court of Civil Appeals by
certiorari. We had occasion at that time to consider
the nature of such companies, and the nature of the contract
between such companies and their members. These matters were
fully discussed in an opinion of the Court of Civil Appeals,
which we affirmed. Gleason v. Insurance
Co., 2 Higgins, 376.
"In
that case it was held that a member of one of these mutual
companies was liable for the amount of his premium note, even
though the company had failed and was unable to continue the
policy of insurance, and there had accordingly been a failure
of the consideration for which the note was given. It was
said that the members of such companies were both insurers
and insured; they were not only policy holders in such cases,
but quasi stockholders; and that their premium notes
were assets in the hands of such companies for the payment of
creditors.
"Companies
organized upon the plan of this one have no capital stock.
The cash paid in for premiums and the premium notes
constitute their assets, and the policy holders or members
sustain a relation to the company very similar to that of
stockholders. They can no more recover premiums paid in, nor
avoid premium notes, in case of insolvency, than could
stockholders in an ordinary corporation recover money paid in
subscription to stock, or avoid notes given for subscription
to stock.
"So
the insolvency of a company like this gives no right to a
policy holder to recover any premium paid, or to avoid the
payment of any premium note, so long as the company has
outstanding debts." See, also, Clark v.
Mfg. Mut. Fire Ins. Co., 130 Ind. 332, 30 N.E. 212;
Allen v. Thompson, 108 Ky. 476, 56 S.W.
823; Stone v. N. J. Ferry Co., 75 N.J.L.
172, 66 A. 1072; Hill v. Baker, 205 Mass.
303, 91 N.E. 380.
It is true that the amendment to article 6, section
2, was made after the passage of an Act [*] of the General
Assembly of this State approved April 24, 1905, entitled,
"An Act to regulate mutual fire insurance
companies," and was passed to conform to the
requirements of that act, and the insurance company gave the
bond there provided for. Section 3 of this act contains the
following, among other provisions: "Each policy holder
in such company shall be a member and liable to an assessment
while this policy is in force, providing that no assessment
can be made until the bond mentioned in section 4 is
exhausted. The profit of such company shall be divided among
the members pro rata, according to the amount of
premium paid on insurance carried by each, and such division
shall be made by the directors at such time and in such
amounts as the affairs of the company shall justify."
This act was passed for the better protection of policy
holders in mutual insurance companies; but we think it did
not operate to change the company from a mutual to a stock
company.
We
think there is nothing in the opinion in the case of
Federal Union Surety Co. v. Flemister, 95
Ark. 389, 130 S.W. 574, which conflicts with the views here
expressed. While the insurance company in that case was shown
to be a mutual company, the opinion called attention to the
provisions of the statute permitting foreign mutual
companies, such as that company was, to do business in this
State, and to the character of bond they were required to
execute as a condition...
