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or authority to proceed in the case. The court pursued this doctrine to an untenable degree of strictness and nicety. A petition signed by and in the name of the attorney for the judgment creditor, was not sufficient to confer jurisdiction; and an order made thereon for the sequestration of the property of the corporation and the appointment of a receiver, was unauthorized and void. Nor could this be cured by an order subsequently made by a judge at Special Term, granting leave to amend the petition. Nor did an amendment, in pursuance of such an order, cure the defect, but it was held to be inerely adding nullity to nullity. The reason was, that à petition complying with the statute was necessary to the jurisdiction of the court in the first instance, and that the court could not make any order amending its process or its pleadings until it had acquired jurisdiction; it could not make a void proceeding valid by an amendment in the same proceeding or matter.?
8 7222. Appointment at the Suit of Policy-holders. — Unless there is a statutory scheme of procedure which displaces the ordinary jurisdiction of equity, there is no room to doubt that a bill may be filed by a policy-holder, on behalf of himself and other policy-holders, to procure the appointment of a receiver; and upon such a bill, charging a loss of the funds of the society, through the negligence of the directors, and on an answer and affidavit showing that the secretary had absconded with part of the funds, and that some of the directors were in needy circumstances, - it was held by the English Court of Appeal in Chancery, in 1854, that a receiver ought to be appointed and the society enjoined from the further prosecution of its business.'
8 7223. Impeaching the Decree Appointing the Receiver. It seems very clear that in such an action the defendant cannot, by way of defense, impeach the validity of the proceed.
* Bangs V. McIntosh, 23 Barb. • Bangs 0. McIntosh, 23 Barb. (N. Y.) 591.
(N. Y.) 591,
ings appointing the receiver upon any ground less than a want of jurisdiction in the court to make the appointment. An answer that the officers of the company had entered into a fraudulent combination with A. and B., and procured the institution by A. and B. of the suit against the company in which the receiver was appointed, and in which the assessment sued for was made; and that they had, by fraud, collusion, improper admissions, and false testimony, procured the decree of appointment of the receiver and the making of the assessment, - has been held bad on this ground, and also on the further ground of failing to allege any material facts consti. tuting the fraud.
§ 7224. Receiver cannot Reinsure Risks. — The receiver of an insolvent insurance company will not be authorized to reinsure its risks, and to that end, to pay a new premium out of the assets of the company; but his proper course is to refund the unearned portion of the premiums received, where the assured are willing to receive them, and let them reinsure for themselves, if they see fit."
§ 7225. Cannot Waive Stipulations in Policies. It is clear that a receiver cannot waive a stipulation in a policy of insurance which the terms of the policy prohibit the offi. cers of the company from waiving, - at least, under a view that where such a stipulation in a policy is valid, a waiver of it by the officers of the company does not estop the company, in the face of such a stipulation. Similarly, it was held by Chan
1 Ante, 99 6864, 6929.
• Re Croton Ins. Co., 3 Barb. Ch. (N. Y.) 642.
Evans o. Trimountain Mut. Fire Ing. Co., 9 Allen (Mass.), 329. In a per curiam opinion, the court say: “We cannot say that a mutual insurance company, which wishes to prevent the possibility of controversy as to the terms of supplementary agreements, may not provide that it will
not be bound by any oral consent which its officers may give to a variation in the terms of the liability which it has assumed. This is what the present company has undertaken to do. And, although the case, upon the agreed facts, is one of hardship to the plaintiff, the rule of law cannot be varied on that account, and the receiver had no right to dispenge with these rules and determine the case upon principles of equity.”
cellor Walworth that it is the duty of receivers of corporations, proceeding under the Revised Statutes of New York, to allow all claims against the corporation which they shall be satisfied are legal and just; but that they should allow no claim which could not have been the ground of a recovery against the corporation, either at law or in equity. It was held by Assistant Vice-Chancellor Hoffman in 1839, that a receiver of a life insurance company has no authority to waive a defect in preliminary proofs of loss, required to be made by a policy of insurance, in order to entitle the insured to the indemnity thereby secured. It is doubtful whether this decision ought to be quoted as authority for such a proposition. It was rendered at a time when it was the law of New York that even the president of a fire insurance company could not, without special authority in its charter, waive the full preliminary proofs of loss required by its policies, but that such waiver required the action of the board of directors, or of a committee of the directors authorized to settle the claim.: This decision is believed not to express the modern law; but that law is believed to be that such a waiver may be made by whatever officer of the corporation acts as its agent and mouth-piece in corresponding or dealing with the insured in respect of his proofs of loss. To the acts and representations of the agent, or to his failure to act or speak, the insured is entitled to give credit, and he cannot, in general, look beyond that agent or fish out the board of directors, which, in many cases, is practically a non-existent body, committing all the details of the business to ministerial offi
More recently it has been conceded that a receiver of a fire insurance company, appointed under the laws of New York, has the same right as the company would have had to waive a clause of forfeiture in a policy of insurance founded on the death of the insurer, and to consent to a continuation of the policy after his death.'
| Attorney-General v. Life &c. Ins. Co., 4 Paige (N. Y.), 224.
? McEvers v. Lawrence, 1 Hoff. (N. Y.) 172, 175.
8 Dawes v. North River Ins. Co., 7 Cow. (N. Y.) 462.
• Hine v. Homestead Fire Ins. Co., 29 Hun (N. Y.), 84, 85.
8 7226. Payment of Losses Accruing During the Receivership. In the case of a strictly mutual insurance company, it is to be kept in mind that the policy-holders are the only members of the company,' and that, when their policies expire by their own limitation, their holders cease to be members. There is no joint-stock or other common fund than such as accrues from the payments of assessments laid against the members on the premium notes, which are usually given by them as a sort of mutual guaranty fund. The contract of insurance in such a company is, in substance and effect, a multipartito contract among all its members, under which each one agrees to pay such a ratable assessment laid by the directors as may be necessary to provide a fund for the payment of any losses which may accrue to any of the members under his policy of insurance. It necessarily follows that, when such a company, by reason of its inability to continue its business, passes into the hands of a receiver for the purpose of a judicial winding-up, this is tantamount to a breach of this multipartite contract subsisting among its members. Unless there is a statute, such as is believed to exist in some States, applicable to some conditions, allowing a receiver, under the order of the court, to continue the business of the company, the
effect of the judicial proceeding to wind up is to cancel and put an end to every one of its contracts of insurance, and to leave the holders of the policies entitled, at most, to damages for the breach of the contract made by the other members, through the corporation, with himself. The measure of
Mygatt 0. New York Protection That what the policy-holder is Ins. Co., 21 N. Y. 53. This is, in entitled to may be placed on the footsome cases, declared by statute, ing of damages for the breach of the though unnecessary. Thus, a statute contract embodied in his policy, is not of New Jersey (Pub. Laws N. J. 1863, a fantastic conception, will appear p. 395), enacts, " that all persons who from an opinion of the Court of Apshall insure in or with the corpora- peals of New York, written by Earl, tion, shall, while they continue so in- J., in which he said: “ The comsured, be deemed and taken as mem- pany is the creature of statute, and its bers of said corporation."
mode of action for the protection of Mayer 0. Attorney-General, 32 the policy-holders is regulated by X. J. Eq. 815.
statute. From the nature of the
damages for the breach of this contract is called the surrender value of the policy. It is a necessary conclusion from this that such a judicial sequestration of the assets of the corporation terminates its liability for future losses, so that the receiver cannot pay any loss happening after the date of the order enjoining the company from continuing its business.?
case, the agreement must also be im- Rep. 772; Carr v. Union Mut. Fire plied that it will obey the statute, Ins. Co., 33 Mo. App. 291 (under a the law of its creation, and of its ex- statute). istence; that it will do its business Taylor v. North Star Mut. Ins. as required by the statute; that it Co., 46 Minn. 198, 200; 8. c. 48 N. W. will properly keep and invest its Rep. 772; Com. v. Massachusetts funds, and be in a condition at all Mut. Ins. Co., 119 Mass. 51; Mayer times, as the statute requires, to dis- v. Attorney-General, 32 N. J. Eq. 815, charge all its liabilities. Therefore, 824. A statute of Missouri enacts as when it violates the law, fails to keep follows: “Unless, under the proon hand funds required by law, and visions of this chapter, reinsurance becomes insolvent, discontinues bus- of a dissolved company is effected and iness, makes it impossible for the its assets conveyed to the reinsuring assured to pay premiums, and fails to company, the Superintendent of the carry the policies, it has broken its Insurance department, under the engagements with its policy-holders, direction of said court, shall apply and becomes liable to them on account the sums realized from the assets of of such breach. The policy-holders
such dissolved company: then have a claim for damages, just fourthly, to the payment of the debts as they would have if, while doing
and claims allowed against such combusiness, it had, without just cause, pany, and the unearned premiums refused to receive the payment of
and the surrender - values of its premiums and to continue the pol- policies, in proportion to their reicies in life.” People v. Security Life spective amounts." Rev. Stats. Mo. Ing. Co., 78 N. Y. 114, 125; 8. c. 34 1879, Ø 6047; Ibid. 1889, § 5918. Am. Rep. 522. The learned judge Under this statute it is held that cites, as to the general nature of the “when a mutual fire insurance comcontract of insurance, and the dam- pany is dissolved, the claimants of ages accruing from its breach, com- unearned premiums and of the surmonly called the surrender-value, render-values of policies stand on an New York Life Ins. Co. v. Statham, equal footing with general creditors 43 U. S. 24; Fischer v. Hope Mut. whose claims have been duly allowed; Life Ins. Co., 69 N. Y. 161; Bell's and that a judicial order directing Case, L. R. 9 Eq. 706; Cook's Case, payment of all the balance remaining L. R. 9 Eq.703; Holdich's Case, L. R. on hand to a creditor whose allowed 14 Eq. 72.
claim is larger than such balance, is * People v. Security Life Ins. Co., erroneous, because contrary to the 78 N. Y. 114, 125; 8. C. 34 Am. Rep. statute, provided there are unearned 522; Taylor v. North Star Mut. Ins. premiums and surrender-values reCo., 46 Minn. 198, 200; 8. C. 48 N. W. maining due and unpaid.” Carr v.