Stone v. New Jersey & H. R. Ry. & Ferry Co.

• Decision Date: 10 June 1907
• Parties: STONE v. NEW JERSEY & H. R. RY. & FERRY CO.
• Court: New Jersey Supreme Court

66 A. 1072

75 N.J.L. 172

STONE

v. NEW JERSEY & H. R. RY. & FERRY CO.

Supreme Court of New Jersey.

June 10, 1907.

(Syllabus by the Court.)

Action by Theodore W. Stone, receiver, against the New Jersey & Hudson River Railway & Ferry Company. Motion to strike out notice of set-off granted.

Argued February term, 1907, before GARRISON, SWAYZE, and TRENCHARD, JJ.

Linton Satterthwait, for the motion. Edmund W. Wakelee and Wendell J. Wright, opposed.

SWAYZE, J. The plaintiff is a receiver of a mutual assessment insurance company of Pennsylvania, appointed by a court of that state. The action is brought to recover assessments upon a policy of insurance. The defendant seeks to set off a sum due to it for losses covered by the policy. The question raised by the motion is whether there is a right of set-off.

The right of set-off as against the receiver of an insolvent corporation does not rest upon the statute of set-off, hut upon the provision of the corporation act authorizing the receiver to settle debts due the company upon such terms as he shall deem just and beneficial to the corporation, and in case of mutual dealings to allow just set-offs. Receiver v. Paterson Gaslight Co., 23 N. J. Law, 283.

Whether the allowance of such a set-off as is here claimed is just or not depends upon the contractual relations between the insolvent company and the defendant. The contract is found in the defendant's applications and in the policies issued thereon, all of which are in the same terms. By the applications the defendant applies for membership and insurance. By the policies, it is entitled to share in dividends declared by the directors of the insolvent association, and, in case the fixed premium rate charged by the association is insufficient to pay losses, becomes liable to pay a pro rata additional sum to make up the deficiency, not exceeding 5 per centum of its gross traffic receipts.

Under such a contract the relation of the defendant to the association is twofold: It is assured thereby, and hence a possible creditor; it is a member of the association, and hence a quasi partner in the enterprise. The present suit is to enforce the liability of the defendant in the character of member. The set-off is a claim in its character of creditor. The injustice of allowing one member of a mutual insurance company upon the assessment plan to escape liability to contribute to the common fund, and thereby obtain an advantage over his fellow members, all of whom embarked in the same enterprise presumably on equal terms, and of allowing one creditor of an insolvent company to be preferred over other creditors merely by reason of his liability to contribute toward the payment of the losses of all, is manifest. The authorities seem quite unanimous against allowing a set-off in such a case. One of the early cases is Hillier v....