Boland v. Whitman, Receiver of & Sinnissippi Insurance

Elliott, J. The ruling of the court upon the demurrer to the complaint raises the first question presented in» the case. The only objection urged to the complaint is, that it is not' accompanied by a transcript of the decree of the Mariom Circuit Court in the case of Eoss and Cluggish against the* insurance company, by which the plaintiff" was appointed, receiver of the company and the assessment made on the*premium notes. The objection cannot be sustained. The suit is founded on the premium notes, and not on -the decree of the Marion Circuit Court, within the purview -of the seventy-eighth section of the code. The plaintiff’s right to sue on the notes and the fact that a legal assessment had been made rest in averment, but the statute does not require that the evidence or a copy of it, by which the [69] facts are to be proved, should be filed with the complaint, as at is not the foundation -of the action, though essential t© a recovery. Errors are also assigned on the ruling of the court in «sustaining demurrers to the .second, third, fourth, and sixth paragraphs of the appellant’s answer. The second paragraph .sets up a rescission of the contracts of insurance and a surrender of the policies for which the notes sued on were given, before the proceedings were commenced in the Marion Circuit Court, under which the plaintiff was appointed receiver of said company. It is contended on behalf of the appellee that this paragraph is had, for the reason that neither the directors of the company nor any agent thereof, acting by their authority, possessed the power to rescind said contracts of insurance or release the appellant from the obligation of said notes, during the period the policies were to run. In support of this position, it is argued that, the insurance ■company being a mutual one, organized under the laws of this State, the appellant, by virtue of his policies and the execution of the premium notes, became a member of said company, and that all the other policy holders in said company were parties in interest in the premium notes executed by the appellant, and that the appellant could not, therefore, be permitted to withdraw from the company, or be released from the obligations created by said notes, without ■.the consent of all the other x^olicy holders. It is true, that the appellant by virtue of his policies became a member of the company, and so continued as long as he remained insured, and was liable to assessments on his premium notes for losses to the .company by fire, occurring whilst he was •so insured. Rut the management and control of the affairs and business of such companies are committed to and invested in a board of directors, elected by the corporators, and the directors elect a president, vice president, and treasurer, and may also appoint agents of the company for the transaction of such business as may be properly transacted [70] by them. The directors represent the corporation and thecorporators, and the latter are bound by the acts ©f the directors in all matters properly pertaining to the business of the company. A policy of insurance and the premium, notes given therefor constitute a contract between the- company and the insured, and no- reason is perceived why such a contract may not he rescinded by the mutual agreement of the insured and the corporation-, the latter acting- through its hoard of directors or- an agent duly authorized by them such a power on the part of the hoard of directors, it seems, to us, is essentially necessary to the safé and proper transaction of the business ©f the company. "We think the paragraph was-, good, and the- demurrer to-it should not have been sustained. The third paragraph presents a more doubtful question.. The alleged representations-- as to the times and amounts of the assessments that might be made on the- premium notes,, amount to nothing as a defense. Under the statute, assessments on the premium notes could only he made to pay-losses by fire, and as- the appellant Is presumed to. know the law, he must be presumed to know the dates- of such assessments, and the amounts thereof depended entirely on the dates and amounts of sueh losses, which it was impossible-at that time to foresee or- foretell, and it was therefore his own folly, if he confided In any representations- made by the agent of the company. But It Is alleged that the agent,, by the authority of the directors, represented that the company was entirely solvent and able to pay all losses, and. was then worth two. million dollars, and that appellant relied on said representations, and was Induced thereby to enter into- said contracts of insurance 5 but that, In fact, the company was then Insolvent and not able to. pay losses, and that it was not worth any considerable- amount-.. In view of -the principle on wbleb the company is organized, it is but reasonable to, presume that the alleged representation that the company was then worth two million dollars had reference to the amount of the- premium notes; [71] held by the company, on which assessments might be made to pay losses. "With this construction, do the allegations, constitute a defense to the action ? The question is certainly not a very clear one, but the majority of the court are inclined to hold the paragraph good. A. B. Carlton, for appellant. F. Wilson, A. C. Voris, J. E. McDonald, A. L. Roache, and E. M. McDonald, for appellee. The fourth paragraph is clearly bad. If the appellant can impeach the decree of the Marion Circuit Court in this collateral manner for fraud, still the paragraph is bad, because it fails to allege any material facts constituting fraud» The sixth paragraph is good, for the reasons stated in discussing the second paragraph. Besides, the policies became void on the sale and conveyance of the property by the appellant, unless they had been assigned to the purchaser by the consent of the company; and the appellant would not be liable to be assessed on his premium notes for losses occurring after such sale and conveyance. The judgment is revei’sed, with costs, and the cause remanded, with directions to the common pleas to overrule the demurrer to the second, third, and sixth paragraphs of the answer, and for further proceedings.