Price v. St. Louis Mut. Life Ins. Co.

• Decision Date: 29 January 1877
• Citation: 3 Mo.App. 262
• Parties: CELSUS PRICE, Superintendent, etc., Appellant, v. ST. LOUIS MUTUAL LIFE INSURANCE COMPANY, Respondent.
• Court: Missouri Court of Appeals

3 Mo.App. 262

CELSUS PRICE, Superintendent, etc., Appellant,

v.ST. LOUIS MUTUAL LIFE INSURANCE COMPANY, Respondent.

St. Louis Court of Appeals, Missouri.

Jan. 29, 1877.

1. Sections 19, 20, 22, and 41 of the “Act for the incorporation and regulation of life insurance companies” are general regulations for the protection and security of the citizen, in no way impair the obligation of a contract, and may apply as well to insurance companies organized under a special charter as to those organized under the general law.

2. A life insurance company which has reinsured all its risks, and has ceased to take other risks, but which is receiving premiums on old policies and paying losses, is transacting such a business of life insurance as may be the subject of injunction under the statute.

3. Where the allegations of the petition are not clear and precise, but are defective or ambiguous, if the court has complete jurisdiction of the matter and the parties it should not dismiss the cause, but should permit plaintiff to amend.

4. When a risk is reinsured, no privity ensues between the first insured and the reinsurer, and such reinsurance gives the first insured no rights as against the reinsurer.

5. The rights of dissenting policy-holders cannot in any way be affected by virtue of a reinsurance by the first insurer.

6. The right of a mutual life insurance company to reinsure does not carry with it a power to sell or transfer all their property against the will of a minority of the policy-holders, and a contract to so sell or transfer is, as against dissenting policy-holders, ultra vires and void.

APPEAL from St. Louis Circuit Court.

Reversed and remanded.

Frank J. Bowman, for appellant, cited: Wag. Stat. 735, sec. 13, p. 738, sec. 1, p. 753, sec. 41; Sess. Acts 1869, pp. 27, 40; The State v. Matthews, 44 Mo. 524-530.

Davis & Smith and G. A. Madill, for respondent, cited: Wag. Stat., ch. 76, art. 2, secs. 1, 41.

Farish & Griffin and W. L. Scott, amici curiæ, cited: The State v. Lawrence, 45 Mo. 492; Batchelor v. Bess, 22 Mo. 402; Sess. Acts 1861, p. 158; The State ex rel. v. Woodson, 41 Mo. 231; Story's Eq. Pl., sec. 10; Mays v. Biggs et ux., 3 Head, 38.

J. M. Semple, amicus curiæ, cited: Fithian v. Monks, 43 Mo. 502.

HAYDEN, J., delivered the opinion of the court.

This was a proceeding under the act for the incorporation and regulation of life assurance companies (Acts 1869, p. 26; Wag. Stat. 738), instituted by the superintendent of the Insurance Department to restrain the respondent from doing further business as a life insurance company, and to wind up its affairs. On December 17, 1876, the appellant filed his petition in the court below, in which he averred that on December 15, 1873, the Mound City Life Insurance Company, a corporation incorporated under the laws of this State, entered into a pretended contract of reinsurance, by which, in consideration of a pretended assignment to it of the assets of respondent, it agreed to reinsure the risks of the respondent; and appellant annexed a copy of the contract and made it part of his petition. The appellant further averred that, having good reason to suspect that the affairs of the respondent, which was then doing business in this State as a life insurance company, incorporated under its laws, by and through the Columbia Life Insurance Company (averred to be the Mound City Life Insurance Company by change of name), were in an unsound condition, he required of respondent a special statement of its affairs, and was by the president referred to the president of the Columbia Life Insurance Company; that, a special statement of the affairs of respondent being furnished, the appellant, not being satisfied that the affairs of respondent were or could be in a safe condition, appointed a disinterested person to make a personal examination into the affairs of the respondent, whose report, showing the condition of the affairs of the respondent, is annexed to the petition. The petition then states that the assets of the respondent on December 1, 1876, were $909,233.66; that there is due to policy-holders, for death-claims and endowments, $161,202.68; that the policies in force amount to about $7,300,000; sets forth that a large number of suits are pending against the respondent; that its assets are being so rapidly diminished as to render its further proceedings hazardous to the public and its policy-holders; and prays for an injunction to restrain the respondent from further proceeding with its business, that a receiver be appointed to take possession of its property, etc.

The respondent, in its answer, admits the contract with the Mound City Life Insurance Company; says that the respondent has no knowledge or information sufficient to form a belief as to whether the appellant had good or any reason to suspect that the affairs of the respondent were in an unsound condition; admits that many suits are pending against the company for premiums, and denies that its assets are being so rapidly diminished as to render its further proceedings hazardous to the public or to its policy-holders. The answer then sets up that, under powers in its charter expressed, and being in 1873 prohibited by order of the court below, at the suit of the then superintendent of the Insurance Department of this State, from doing any further new business, it made the contract of reinsurance annexed to the petition; says that that contract was lawful, fair, and reasonable, and made to secure the payment of its policies with a sound and able company, was approved by the then superintendent of insurance and by the court below, and alleges that it has been fully kept and performed by the respondent, and, up to the institution of the present suit, by the reinsuring company; that since the date of the contract all legal claims upon respondent have been promptly met; and ends by denying the jurisdiction of the court below, on the ground that respondent has ceased to do new business, to assure lives, or to dispose of or purchase annuities or endowments, and on the ground that, having reinsured all its risks, it is not subject to the provisions of the 41st section of the above-named act.

The plaintiff filed a motion for judgment upon these pleadings, which motion the court overruled. The court then dismissed the petition; whereupon the appellant filed a motion to set aside the order of dismissal, on the ground that the court erred in dismissing the case, and that, in any event, the plaintiff was entitled to amend his petition.

The contract annexed to the petition provides, in substance, that the St. Louis Mound City Life Insurance Company reinsures all outstanding risks of the St. Louis Mutual Life Insurance Company, and guarantees their prompt payment to the policy-holders, and assumes all liabilities of every kind of the St. Louis Mutual Life Insurance Company, and agrees that policy-holders and creditors may enforce their demands against the reinsuring company precisely as they might have done against the company originally liable; and covenants to indemnify the St. Louis Mutual Life against any demands whatsoever existing at the date of the agreement. The reinsuring company is to issue to the stockholders of the original company stock of the reinsuring company equal in amount, at its par value, to the par value of the stock which is to be thus replaced, subject to such setoffs as exist against the original stock; the stockholders in the company reinsured, to subscribe for stock in the reinsuring company, which is to be paid by their stock in the company reinsured, and no exchange of stock to be made in cases where no such subscription is made. The stockholders in the reinsuring company are to be paid the par value of their new stock at the expiration of twelve months, if they make demand at that time; and the reinsuring company may tender, at any time within twelve months, to the several stockholders of the company reinsured, the par value of the new stock; and, if they do not accept it when offered, the person so refusing forfeits all right to be paid the par value of his stock. The reinsuring company agrees to secure an increase of its capital stock to $1,000,000, to be subscribed by responsible persons and secured according to law, within sixty days, this increase to include the $100,000 par value of the new stock, and all to be approved by the State superintendent of insurance. The reinsuring company agrees that its actual surplus is $400,000, and that it will file its annual report as required by law, exhibiting such surplus. And the company reinsured covenants that its last statement of October 27, 1873, is a fair exhibit; and that it has not since disposed of any of its property, except in the regular course of business; and that it will, on delivery of the agreement, sell and transfer to the reinsuring company, by sufficient conveyances, all its property, at the expense of the reinsuring company, with covenants of special warranty only. The agreement in duplicate to be approved by the State superintendent of insurance and by Judge Madill of the Circuit Court, and to be deposited with W. E. Burr as an escrow; and delivery of the agreement to be made only when the superintendent of insurance shall certify that the stock has been duly subscribed as provided, and the subscriptions paid or secured. If this is not done within sixty days, the agreement is to be cancelled. The company reinsured is to proceed with its business, in its regular course, until the agreement is carried into effect, and the transfer of property made according to its terms.

The first question which arises in this case is whether the court below had jurisdiction of the proceeding against this respondent. If it had not, the court was authorized to dismiss at any stage of the case. This question involves the inquiry whether the defendant is subject to the provisions of the act for the incorporation and regulation of life insurance...