Maine Mutual Marine Insurance v. Farrar , 1876 Me. LEXIS 136 ( 1876 )

Appleton, C. J.

This is an action of assumpsit upon the following described note:

“Bangor, January 1, 1872.

Twelve months after date, I promise to pay to the order of the Maine Mutual Marine Company one thousand and one dollars, payable at Bangor, Maine, value received. Edwin S. Farrar.”

On the margin is written: “Given for special policy No. 115.” The policy referred to is an ordinary open policy.

By the Special Act of 1870, c. 470, § 9, the plaintiff company, “for the better security of those concerned,” was authorized to “receive notes for premiums in advance, of persons intending to receive policies,” with a power to negotiate them, “for the purpose of paying claims or otherwise, in the course of its business ;” and a compensation might be allowed to the signers thereof, at a rate not “exceeding six per cent, per annum.”

By § 10, no policy was to be issued until applications should be made for insurance to the amount of fifty thousand dollars.

Before the company went into operation and commenced business, signatures were obtained to an agreement by parties to give their notes for premiums in advance in accordance with the charter and by-laws of the company. The amount of fifty thousand dollars was obtained; and in April 26, 1870, the company was duly organized and ready to issue policies.

The notes given in pursuance of the agreement, were for a sufficient and valuable consideration. The signers by the 7th by-law, and by a vote of the company, were allowed a compensation from the profits of the company for their signatures. The notes or their renewals are held by the plaintiffs, for the security of its dealers; and if needed for the purpose of paying claims, are enforceable against the signers, whether the plaintiffs are solvent or insolvent. Howard v. Palmer, 64 Maine, 86.

The policies for which notes under § 9 are given, are open policies. The makers of the notes have a right to have the amount paid for premiums indorsed on their notes; but their liability continues for the balance. Merchants M. M. Co. v. Leeds, 1 Sandf. S. C. 188. Maine M. M. Ins. Co. v. Blunt, 64 Maine, 95. So in case of renewals, they in like manner may be held liable for the security of the company, as on the notes originally given, and of which they are the renewals, when given under § 9. Howard v. Hinckley & Egery Co., 64 Maine, 93.

The plaintiff corporation having organized, and having obtained the requisite amount of notes proceeded to the transaction of business. It might transact any business legitimate to the purposes of its charter which is usual and customary for insurance companies. It might issue valued or open policies. If it issued to its customers open policies for which the insured gave their notes for the premiums, the makers would not be liable beyond the carped premiums. Nor indeed would they be bound to insure, but they might rescind at any time on paying the premiums written upon the policy and earned. Brouwer v. Hill, 1 Sandf. S. C. 629. Merchants Mutual Ins. Co. v. De Puga, 1 Sandf. S. C. 186. Elwell v. Crocker, 4 Bosw. 22. Lawrence v. McCready, 6 Bosw. 329.

The plaintiff might increase the number of its notes given for the security of its dealers, under § 9, and for which the makers would be entitled to the compensation provided under that section.

The note in suit was given after the organization of the plaintiff corporation, and after they had obtained notes under § 9, for the amount required by § 10, to authorize their issuing policies of insurance.

• Under the New York charters referred to in the cases cited from the 1st Sandford’s Reports, the twelfth section mentioned therein, corresponds to the ninth section of the plaintiff’s charter.

The presiding justice instructed the jury that if the note was given under the provisions of § 9, of the charter of the plaintiff corporation, the verdict should be for the plaintiff; but if the jury should iind it wTas not given under said section, then their verdict should be for the defendant.

This instruction is the only one to which exception has been taken; but it is in strict accordance with the authorities on the subject. In Merchants’ Mutual Marine Co. v. Rey, 1 Sandf. S. C. 185, Oakley, C. J., states the law as follows: “When premium notes are taken subsequent to the organization of the company, it is a matter'of fact, to be determined by tile character of tlie note and the evidence, whether it was given as a subscription note under the twelfth section, to form a part of the fund for the security of dealers, or was given for premiums in advance in the usual course of business of the company.”

The distinction between notes under § 9, which may properly be termed “subscription notes” and “premium notes,” on ordinary open policies issued by insurance companies, is fully recognized in Elwell v. Crocker, 4 Bosw. 22. The ruling of the court is fully sustained by a reference to the authorities cited.

• The question whether the note in suit was giyen under § 9, or was given as a premium note for an open policy merely, was submitted to the jury for their determination and their verdict is not so at variance with the testimony as to require us to set it aside.

Exceptions and motion overruled.

Walton, Diceerson, Barrows and Yirgin, NT., concurred. Peters, J., did not sit.