Manson, Application of

• Decision Date: 29 September 1964
• Citation: 130 N.W.2d 182,24 Wis.2d 673
• Parties: Application of Charles MANSON, Commr. of Insurance, for authority to liquidate Market Mens Mut. Ins. Co., a Wis. corp. WISCONSIN MUTUAL INS. CO., Appellant, v. Charles MANSON, Commr. of Insurance of the State of Wisconsin, Liquidator, Respondent.
• Court: Wisconsin Supreme Court

Page 182

130 N.W.2d 182

24 Wis.2d 673

Application of Charles MANSON, Commr. of Insurance, for

authority to liquidate Market Mens Mut. Ins. Co.,

a Wis. corp.

WISCONSIN MUTUAL INS. CO., Appellant, v. Charles MANSON, Commr. of Insurance of the State of

Wisconsin, Liquidator, Respondent.

Supreme Court of Wisconsin.

Sept. 29, 1964.

Wheeler, Van Sickle, Day & Goodman, Madison, for appellant.

Charne & Tehan, Milwaukee, for respondent.

HEFFERNAN, Justice.

The surplus notes which are the bases of the respective claims of appellant and respondent were executed pursuant to the authority of the Wisconsin Statutes 201.17(2), (1955). That subsection of the statute makes the acceptance of the terms imposed therein a condition for the issuance of surplus notes. Whether the notes issued pursuant to statute are presently payable depends upon the meeting of the conditions set forth in the statutes. Sec. 201.17(2) Stats. provides:

'Any mutual insurance company may borrow money from any officer, member or other person, for the purposes of its business or to enable it to comply with any requirement of law. No discount, commissions or promotion expenses shall be allowed or paid on such loan. Upon receiving the full amount of the principal to be used solely for such purposes, the company may issue its surplus notes, which shall fully recite the conditions of the loan; provided that no such notes shall be issued by any such company or be paid, discharged or retired in whole or in part without prior approval of the commissioner of insurance, and no surplus note or notes shall be issued by any mutual insurance company unless it accepts the requirements imposed by this subsection. Except as herein provided, such notes and indebtedness shall not be a liability or claim against any of the assets of the company. The principal and interest shall be payable only from the surplus over all other liabilities. The amount of principal and interest unpaid shall be reported in each annual statement. Surplus notes issued pursuant to the provisions of this section shall not be deemed a security within the meaning of the term as defined in chapter 189 and the provisions of said chapter shall not apply to such surplus notes.'

Two points set forth therein and which are incorporated into the terms set forth on the face of the notes are determinative of this case.

(1) No notes shall be paid in whole or in part without the prior approval of the commissioner of insurance.

(2) These notes shall not be a claim against the assets of the company, and the principal and interest shall be payable only from surplus over all liabilities.

The performance of the obligation or payment of a promissory note is essentially the satisfaction of a contractual obligation, and the terms of the contract control unless they are in violation of sound public policy (11 Am.Jur.2d 29). In this case the contract, the note, is framed in the very words of the Legislature's declaration of public policy as set forth in the statutes.

It is clear that the commissioner has not consented to the payment of the notes of Market Mens received by Wisconsin Mutual. He, in fact, is the party resisting the payment, as well he should, since the statute and the note make it clear that payment shall be made only out of surplus and not out of the assets. As was aptly stated in Re Mid-Continent Mutual Insurance Company (1945), 246 Wis. 460, 462, 17 N.W.2d 602,

'There was no such surplus out of which to pay them, else why liquidation?'

In the instant case there is admittedly no surplus. To allow the offset, as against the liquidator's claim, of the not yet matured note held by Wisconsin Mutual, would be the use of an asset (the obligation of Wisconsin Mutual to Market Mens) to satisfy the claim for payment of surplus notes held by Wisconsin Mutual.

The appellant herein contends that the statutory liquidation of an insurance company is...