Conigland v. N. C. Mutual Life Insurance

The complainant alleged that the defendant was a Mutual Insurance Company chartered by the General Assembly, and that by its charter all who insured in it became members; that in 1853 he had taken out a policy upon his own life, agreeing to pay one-half of the annual premium in cash and the other by note; that he complied with his contract until and including 3 August, 1865, whereby he continued to be a member, according to the by-laws, "for the period of forty days after 3 August, 1866"; that in July, 1866, he received from the company notice to renew his annual premium, and also notice to pay a (342) certain assessment, declared in September, 1865, and payable 1 April, 1866, upon the amount of his note given for successive premiums (as above); that he declined to do either, upon the ground that the company was insolvent and unable to comply with its policy, adding that he intended to file a bill and have it wound up — and that the company responded by calling his attention to its own action of 6 August, 1866, and expressing a wish that he would not embarrass its action.

The bill charged that the company was insolvent hopelessly and largely, at the time of his refusal to pay as above; that in divers particulars specified it had been mismanaged, and that its action on 6 August, 1866, was a resolution to wind up and to close its existence; but that nevertheless suit had been brought against him for the amount assessed as above, etc. The prayer was for an account and an injunction.

The answer admitted that the complainant had been a member of the company, and had continued so until 1 April, 1866, but it insisted that the forfeiture of his membership, which was due upon the nonpayment of the assessment then payable, was waived by the company only upon condition, viz.: that he would pay the assessment by a subsequent day named by it (1 October, 1866); and that upon his failure so to pay, the forfeiture had taken place at the time first mentioned. It is also denied that it was insolvent before 6 August, 1866, except so far as made so by an inability to collect its resources, owing to a refusal by its members to pay, and to the stay-laws, etc. The charges of mismanagement were also denied, and the condition of the company was attributed entirely to the results of the recent war.

The answer also admitted that a resolution to wind up had (343) been passed upon 6 August, 1866. A buys of B ten bales of cotton, informing him that his purpose is to ship to Liverpool on speculation, pays one-half of the price in cash, and gives his note for balance; the cotton is lost on the voyage by the "perils of the sea." Would it enter into any man's head to conceive that A could in equity enjoin the collection of the note, upon the ground that the cotton was lost, that there was a total failure ofconsideration? Too much learning sometimes smothers the case and excludes a plain, common-sense view, upon which its merits depend.

How does our case differ from the cotton case? The plaintiff got what he bargained for — "a policy of insurance," which, as his counsel says, is a "thing of value." Did he expect or imagine that the company, of which he became a member, was bound to warrant to him and to all the other members its own solvency? That was a "peril of the sea," with which the vendor was in no wise concerned. The purchaser has lost his cotton; but how that can be a failure of consideration can not be conceived. He has the same right to recover back the money which he paid as a part of the price as to object to the payment of his note; and, in effect, it was the same as if he had paid the whole price in cash, and then borrowed one-half of the money, by giving his note on interest; so the notion of a failure of consideration is out of the question.

We also think the position taken by the defendant, that the plaintiff, by failing to pay the assessment of 20 per cent and by failing (344) to renew, has forfeited his policy, and, although bound to pay the promised note, is not any longer entitled to his policy, and has ceased by the forfeiture to be a member of the company, is not tenable. The truth is the defendant waived the right to insist upon the forfeiture; and the correspondence abundantly shows that, after the company found that the plaintiff could not be moved from the position he had taken and was determined to test the question, it concluded that it was the part of wisdom to give in to it, and accordingly, at the meeting, 6 August, 1866, it was resolved to wind up the affairs of the company; and thereupon all of its members, with one or two exceptions, declined to pay the assessment or to renew. The effect of which was to put the company in such a condition that it could not longer insist upon forfeitures. So we are satisfied that the plaintiff continued to be a member if the company, and as such entitled to raise the question as to whether he could be forced to pay the numerous notes. Indeed it seems to have been the purpose on both sides fairly to present the point as to a failure of consideration, for the determination of the court, as well as any other matter affecting the respective rights of the plaintiff and the company.

But while relieving the plaintiff from the effect of the supposed forfeiture, and conceding to him the right of still being a member of the company, we must impose on him the condition of treating the resolution of 6 August, 1866, to wind up the affairs of the company, as having the legal effect of an assessment of 100 per centum on the premium notes; in other words, as calling for the payment of the full amount, in order to carry into effect the resolution of the company, and enable it to meet its liabilities and divide its excess, if any.

But it was said for the plaintiff, in the second place, suppose the company has the right to collect the premium notes, the plaintiff (345) is entitled, by way of equitable set off, to have the value of his policy estimated, and the amount credited, so that he shall only be forced to pay the residue. Here an insuperable difficulty presents itself. How can the value of the plaintiff's policy be estimated? Under the rule "id certumest quod certum reddi potest," the value could be fixed by well known rules, provided the company was solvent — "There is the rub." If, according to the first position taken of a failure of consideration, the company be wholly insolvent, then the policy is of no value, and there is nothing to constitute an equitable set off; and whether the company be or be not wholly insolvent, can only be ascertained by allowing it to collect all of the individual notes, as they are termed, and all of the premium notes that can be made available. This fund will be first applicable to the discharge of the liabilities of the company. The excess, if any, will be applicable to the outstanding policies; and thereby the value of each policy, when the holder pays up (for of course all defaulting will be excluded), can be fixed. The subject can not be dealt with in any other manner.

It was said on the argument this mode of winding up the concern will give to those who are so fortunate as to have died an undue preference over those merely who are still living. The preference can in no sense be termed an undue one. In respect to them the contingency has happened — the debts are absolute, whereas those who are living have no debts, but a mere right to participate in the division of the excess of assets, should there be any after a payment of all debts and liabilities.

The idea of any particular hardship upon the living members rest on the fallacy that, while entering into the company with the expectation of mutual insurance in the event of death, they seem not to have had in view the possibility of mutual loss in the event of (346)insolvency.

PER CURIAM. Bill dismissed.

Cited: Insurance Company v. Powell, 71 N.C. 398.