Greene v. Walton ( 1891 )

Landon, J.

The policy provides that “the directors of this society, either individually or as a body, shall not assume any liabilities personally by reason of the issuance of this certificate.” The statute (section 8, c. 267, Laws 1875) provides that “the directors * * * shall be jointly or severally liable for all debts due from said society or corporation, contracted while they are trustees,” etc. The provision of the policy is repugnant to the provision of the statute, and is void upon grounds of public policy. The statute forms part of the charter of the corporation, and the corporation can make no contract which its charter forbids. Abbott v. Railroad Co., 80 N. Y. 27. The corporation has power to make contracts for itself in aid of its business, but it has no power to make contracts in behalf of its directors. Presumably, the directors are competent to make their own contracts. This contract is not for the benefit of the corporation, and it is not a contract between the plaintiffs and the defendants, nor is it one like Lawrence v. Fox, 20 N. Y. 268, in which the benefit which one party might secure-to himself, he can secure to another, for the corporation could not secure a like benefit for itself. Sound public policy requires that a corporation shall make no contract nullifying as to its directors the provisions of the organic, act as to their personal liability. Otherwise a corporation might do business, not under the conditions prescribed by the statute to secure upright dealing, but under opposite conditions, and thus put at naught the wholesome restraints imposed by the sovereign power. It is not necessary to decide that the directors could not, by direct contract with the plaintiffs, protect themselves from personal liability. This contract was made while the defendants were trustees, and although it did not mature until after their successors were appointed, yet, when it did mature, it was the debt which was contracted while defendants were trustees. The policy promised payment to plaintiffs of “the net proceeds of an assessment of one per cent., to be levied upon all, as members of class A, not to exceed the sum of $100, to be assessed for according to the constitution and by-laws.” No such “net proceeds of an assessment” have been paid. The reasonable construction of the policy is that such an assessment would produce something. The provision in the policy, “as this society is purely mutual, the payment of assessments is not obligatory, but is the voluntary contribution of its members, ” was not strictly true. Every policy-holder had to pay his assessment or forfeit his policy. Such a penalty for non-payment might prove adequate to procure payment. The plaintiffs were entitled to recover something. It appears that an assessment was made. If there is any error, it is that it was not shown that the net proceeds of the assessment amounted to $100. Whether that error affects the merits we do not know, and we ought not, in order to promote the success of a scheme of insurance like this, to be astute in inquiring; and hence, under the rule applicable to appeals from justices’ courts, we may affirm the judgment. Code Civil Proc. § 3063.

Mayham, J., concurs.