Williams v. Cheney , 69 Mass. 215 ( 1855 )

Bigelow, J.

It appears to us that the rulings and instructions under which this case was originally submitted to the jury were correct, so far as they were applicable to the several points raised by the counsel at the trial; and that the only just ground of exception is to the final ruling, in compliance with which the verdict was rendered by order of court, after the jury had failed to agree upon the questions of fact involved in the issue.

1. The authority of the secretary of the insurance company to make an assignment and transfer of the notes in suit to the plaintiff was a question of fact, to be determined by the jury, on the whole evidence bearing on this part of the case. The facts proved by the plaintiff upon this point were competent evidence to be submitted to the jury. The judge was therefore right in refusing to rule, as matter of law, that the authority was not shown.

2. The production, by the plaintiff, of the notes declared on, duly indorsed, was sufficient prima facie evidence that the corporation were duly organized, and competent to transact business. The defendants, by giving their notes to the corporation in their corporate name, as payees, admitted their legal existence and capacity to make and enforce the contracts declared on, so far, at least, as to render proof on that point unnecessary in the opening of the plaintiff’s case. Angelí & Ames on Corp. § 635. Besides; the defendants did not deny the legal existence and organization of the corporation in their answer. They could not, therefore, avail themselves of it in defence to the action. Christian Society v. Macomber, 3 Met. 235. St. 1352, c. 312, §§ 14, 18, 26, 27.

3. Nor was it necessary for the plaintiff to prove, as part of his prima facie case, before putting the defendants to their proof in defence of the action, that the corporation to which the notes were made payable, had complied with the requisitions of the statutes of New York, and of this commonwealth, in relation to mutual insurance companies. The notes, being for value received, on proof of their due indorsement by the payee before maturity, were of themselves sufficient, in the absence of all evidence on the part of the defendants, to make out a prima facie case. Until the contrary was proved, the maxim omnia rite acta prcesumuntur, was applicable. Bayley v. Taber, 6 Mass. 451.

4. The answers of the plaintiff, to interrogatories filed in another suit, were competent evidence, so far as they contained admissions by him of facts material and relevant to the points in issue in this action. By St. 1852, c. 312, § 67, all interrogatories are required to be answered fully, and the party interrogated is allowed to introduce into his answer any matter relevant to the issue to which the inquiry relates. These provisions secure to parties the right to make complete statements of all facts in relation to which they may be interrogated in any suit, and guard them against being compelled to make partial and garbled disclosures in answer to artfully contrived questions. There can therefore be no danger or hardship in allowing such statements to be used in evidence, in like manner as other admissions of a party to a suit, fairly made, are ordinarily admitted against him.

5. The provisions of Rev. Sts. c. 37, § 42, as modified by St. 1847, c. 273, § 2, do not apply to insurance companies organized and doing business on the mutual principle. They are, in terms, applicable only to stock companies, in which there is a fixed, definite capital, “ actually paid in in money, and invested.” This cannot include mutual insurance companies. Strictly speaking, they have no capital stock belonging to the corporation, and forming a permanent fund out of which losses are to be paid. Their resources or funds usually consist only of deposit notes and premiums on policies of insurance, which fluctuate from time to time, according to the amount at risk ; and the larger portion of which is never realized by the corporation in money, unless required for the payment of losses. But if there were any doubt on this point, it is made entirely clear by St. 1847, c. 273, § 3, which enacts, that the provisions of said section of the revised statutes shall not prohibit the making of insurance in this state by any company incorporated elsewhere on the mutual principle—clearly implying that its provisions are not applicable to such corporations.

The only question remaining on this part of the case is, whether the corporation, to which the notes in suit were made payable, is a mutual insurance company. Upon looking into the provisions of its charter, as fixed and established according to the provisions of the general statute of New York, we find that it is organized solely for the purpose of making contracts of insurance on the mutual principle. Its members consist only of persons holding policies in the company; its capital is to consist of premium notes; and its losses and expenses are to be borne and paid by assessments on such notes in proportion to their amount. These constitute the main and essential features of a mutual insurance company, as generally known under the laws of this commonwealth and elsewhere, and leave no doubt as to the nature and character of the company in question. The ruling of the court, therefore, that the provisions of Rev. St. c. 37, § 42, and St 1847, c. 273, § 2, did not apply to said company, was correct.

6. The acts of the defendants and the agent of the insurance company, in cancelling the policies on which the notes in. suit were given, being done without the knowledge or assent of the plaintiff, and after the notes were in his hands, cannot affect his right to recover on them, if he is a bona fide holder of them for value. The defendants, by the indorsement of the notes, had become bound to the plaintiff for the fulfilment of their contracts, and could not -escape from them by any such transaction wiih the payee. This is too clear to admit of any doubt.

7. It was admitted at the trial that the agent of the insurance company to which the notes in suit were made payable, as' premium or deposit notes, had not complied with the requirements of Rev. Sts. c. 37, § 41, and 1847, c. 273, § 3, which relate to mutual insurance companies; and that he was therefore prohibited by Rev. Sts. c. 37, § 43, from making the contracts of insurance in this state, upon which the notes were given by the defendants. The consideration of the notes was therefore a contract, on the part of the insurance company, made through their agent, which he was prohibited from making by the statutes of this commonwealth. Under these circumstances, it is very clear, upon the well settled doctrine in this commonwealth, that the payee of the notes could maintain no action upon them. The contracts of insurance having been made in direct violation of the statutes of this commonwealth, the consideration of the notes was illegal, and they could not be enforced in the hands of the original party. Wheeler v. Russell, 17 Mass. 258. Courts of justice will not lend their aid' to carry into effect contracts entered into by parties with a view of accomplishing any thing which is prohibited by law. But it is equally clear and well settled that, if the consideration of a negotiable security is against law, yet the security cannot be avoided on that account in the hands of a bona fide holder, who is not privy to the illegality of the consideration. Ayer v. Hutchins, 4 Mass. 370. Churchill v. Suter, 4 Mass. 161. The instructions given to the jury were in accordance with these familiar principles of law; and the facts of the case, bearing upon them, were submitted to the jury with appropriate comments, to which we can see no valid objection.

It was suggested at the argument, that by St. 1851, c. 331, § 6, which was in force when the notes in suit were given, contracts of insurance are expressly made valid and binding, notwithstanding the requisitions of the statute have not been complied with by the company. But the provision referred to applies solely to a noncompliance with the requisitions of that statute, and does not in any way refer or relate to the provisions of Rev. Sts. c. 37, §§ 4(M3, and St. 1847, c. 273, § 3. The St. of 1851 relates solely to the appointment of agents of foreign insurance companies in this commonwealth for certain purposes, and the mode of filing evidence of their authority, and leaves the provisions of the former laws entirely unaffected by its provisions. By St. 1854, c. 453, however, which is a general act, making provisions concerning insurance by foreign insurance companies on property in this commonwealth, and repealing all former statutes inconsistent therewith, it is expressly enacted that all contracts made shall be valid and binding, although the companies and their agents have failed to comply with the requisitions of that statute. § 36. But it is also provided that this act shall have no effect on any action then pending, § 45. Besides ; a statute cannot retrospectively give validity to a void contract.

We have now gone over the several points raised by counsel at the trial, and comprehended in the original instructions given to the jury. If a verdict had been rendered under these instructions, we can see no valid objection in law which could have been taken by either party. But the jury having failed to agree, the court, for the purpose of determining the various questions of law in the case, ruled that the plaintiff was not entitled to recover, and directed a verdict for the defendants. This instruction cannot be maintained, for the obvious reason that it necessarily assumes the decision of facts, which it was the province of the jury exclusively to settle. In certain aspects of the case, accordingly as the facts might be found by the proper tribunal, .the plaintiff would be entitled to recover ; and this indeed was assumed in the instructions first given to the jury. Although, in the mind of the judge, the evidence in favor of the defendants might have greatly preponderated, the case nevertheless presented questions of fact for the determination of the jury. He might have set aside then: verdict, if in his opinion it was against the evidence or the weight of evidence, but he was not authorized to say what the verdict should be. For this reason, we are of opinion that the verdict must be set aside.

We have abstained from expressing any opinion upon questions not raised at the trial, although several were for the first time suggested in the arguments at the bar of this court. But there is one point so obvious, as to render it proper, with a view to a correct disposition of the case upon a new trial, to express an opinion upon it at this time. It is agreed that the plaintiff holds the notes in suit, as trustee for certain persons, to secure them against certain liabilities which they have assumed for the insurance company. It is stated in the exceptions that all these cestuis que trust were stockholders in the company, and owed the company notes to a larger amount than the sums for which they are liable on account of the company. If this be so, then it is clear that the plaintiff, if he recovers in this action on these notes, will not hold the money for the use of the parties for whose benefit he originally took them as trustee. Their liabilities on account of the company are more than balanced by then- debts to the company. The plaintiff then would hold the proceeds of the notes for the benefit of the company, from whom he received them. Having been assigned to him as collateral security only for the benefit of certain cestuis que trust, and their principal liability being in fact extinguished by the sums which they owe to the company, the purpose of the trust is accomplished, and the plaintiff holds the notes for the benefit of the assignor. To permit the plaintiff to recover on such a state of facts would be to allow the company to realize the proceeds of the notes to which they are not in law entitled. The plaintiff must recover, if at all, as a bona fide holder for value. He cannot claim to stand on such a footing, if the purpose of the trust on which he received the notes in suit is substantially fulfilled.

Exceptions sustained.