Shloss v. Metro. Sur. Co.

• Decision Date: 21 November 1910
• Parties: SHLOSS v. METROPOLITAN SURETY CO.
• Court: Iowa Supreme Court

149 Iowa 382

128 N.W. 384

SHLOSS

v.METROPOLITAN SURETY CO.

Supreme Court of Iowa.

Nov. 21, 1910.

Appeal from District Court, Polk County; Hugh Brennan, Judge.

Action to recover on a policy of insurance against loss by burglary. A demurrer to defendant's answer being sustained, and defendant electing to stand upon his pleading, judgment was rendered for plaintiff, and defendant appeals. Affirmed.Henry & Henry, for appellant.

Oscar Strauss, for appellee.

McCLAIN, J.

The defenses relied on in the answer and held insufficient on demurrer were: First, that the contract of insurance sued on had been terminated by an adjudication of insolvency in a suit brought by the Attorney General of New York in a court of that state in which the company was a corporation; and, second, that as against plaintiff the defendant, appointed receiver of the company under the provisions of the statutes of New York, is entitled to the possession of the assets of the company found in this state, and plaintiff should have prosecuted his claim, if any he had, in the receivership proceedings in New York to wind up the affairs of the company.

1. It is alleged in the answer that on the 6th day of January, 1909, defendant was appointed temporary receiver of the company by a New York court in a suit instituted by the Attorney General, and the company was enjoined from exercising any of its corporate functions, powers, rights, or privileges, and from collecting or receiving any debt or demand or paying out any money, and that in said suit a final decree was entered on the 30th of the same month making the receivership permanent and the injunction perpetual and dissolving the corporation. The loss for which plaintiff sought recovery occurred in Iowa between these two dates.

It may be conceded that, on the decree of final dissolution in a receivership proceeding, the executory contracts of an insurance company are terminated, and that a policy holder is entitled to recover only what is due to him for breach of contract or by way of return of reserve value or premiums unearned, and that he cannot maintain a claim in the receivership proceeding for the amount provided in the policy to be paid in the event of loss on account of a loss suffered subsequently to the date of such final decree of dissolution. People v. Commercial Alliance L. Ins. Co., 154 N. Y. 95, 47 N. E. 968;Commonwealth v. American L. Ins. Co., 162 Pa. 586, 29 Atl. 660, 42 Am. St. Rep. 844;Taylor v. North Star Mut. Ins. Co., 46 Minn. 198, 48 N. W. 772. This conclusion is based on the proposition that by the decree of dissolution the company is rendered incapable of carrying out its contracts, its business is brought to an end, and the policy holders become creditors to the amount equal to the equitable value of their respective policies and entitled to participate pro rata in its assets; and a settlement of the company's affairs cannot be postponed to await a determination of the contingencies on which its policy engagements are dependent. Carr v. Hamilton, 129 U. S. 252, 9 Sup. Ct. 295, 32 L. Ed. 669;Dean's Appeal, 98 Pa. 102.

It may well be that, in the case of an assessment company, the appointment of a temporary receiver and the granting of a temporary injunction against the officers of the company restraining them from collecting the assessments out of which losses are by the terms of the contract to be paid also terminates the right of a member to participate in the distribution of the company's funds on account of a loss occurring pending the temporary receivership. People v. Equitable Reserve Funds L. Ass'n, 131 N. Y. 354, 30 N. E. 114;People v. Life & Reserve Ass'n, 150 N. Y. 94, 45 N. E. 8;Commonwealth v. Massachusetts Mut. F. Ins. Co., 119 Mass. 46. But it by no means follows in principle or on authority that, pending a temporary receivership for the company in which dissolution is asked on the ground of insolvency, its ordinary policies of insurance are terminated, and the policy holders are relegated to the position of creditors entitled only to a return of the reserve value of their policies or of unearned premiums. The very purpose of the proceeding being to ascertain whether the company is insolvent and should be dissolved, it would seem to be clear that, until the fact is ascertained and the dissolution decreed, the policies continue in force. “The appointment of a temporary receiver pendente lite does not dissolve a corporation nor restrain the exercise of its corporate powers. His functions are related to the care and preservation of the property committed to his charge.” Sigua Iron Co. v. Brown, 171 N. Y. 488, 64 N. E. 194. It would be most unreasonable to hold that policy holders could be compelled to carry the risk of the result of such proceeding during its pendency and of any loss happening while it continued, except for the reserve value of their policies, although ultimately the company might be found to be solvent and its contract of continuing validity. The situation of a policy holder who has paid the premium for a term of insurance is very different from that of a member of a mutual assessment association which by a temporary receivership and an order restraining it from collecting assessment is ipso facto incapacitated from continuing the contemplated relation between itself and its members.

It would also be manifestly unjust to hold that as to a loss occurring pending a temporary receivership, and for which if the receivership should be subsequently terminated without an adjudication of dissolution the policy holder would be entitled to claim the full amount of the loss, a subsequent decree of dissolution should relate back to the appointment of the temporary receiver, so as to relegate the policy holder who has suffered such loss to the position of a creditor entitled only to a right of reserve value or unearned...