Opinion
June Term, 1848
C. O'Conor, for the plaintiffs in error.
D. Lord, for the defendants in error.
This is an action to recover from the plaintiff in error a note for $2785,05, executed to the Merchants' Mutual Insurance Company, in renewal of a note for $8000, given by them to said company, pursuant to the provisions of the twelfth section of the act of incorporation of said company, passed April 10, 1843. ( See Sess. Laws of 1843, ch. 95, p. 73.) The second section of the act provides that after having received approved applications for insurance to the amount of $500,000, the premiums on which shall have been actually paid in or secured to be paid, the company may be organized and commence its operations. No objection having been made on that ground, we are authorized to infer that all the requirements of the act, preliminary to the due organization of the company, were observed and fully complied with. The 12th section of the act provides that "the company, for the better security of its dealers, may receive notes for premiums in advance, of persons intending to receive its policies, and may negotiate such notes for the purpose of paying claims or otherwise in the course of its business," and authorizes a compensation not exceeding five per cent. per annum to be made to the signers of such notes on such portion thereof as may exceed the amount of premiums actually paid in by the several makers respectively.
The note in question was given for premiums in advance under the 12th section. The premiums on insurances actually taken amount to $790, and to that extent the validity of the note is not denied. But the concession that the note is so far valid, it seems to me, virtually admits that it is good for the whole amount. It is not like an ordinary commercial note, where a partial failure of consideration may be set up as between the original parties. I look upon this note as a statutory security, the validity of which may be rested entirely upon the statute authorizing it to be taken, and does not at all depend upon any question of consideration. And in this view the security, if good for any amount, is valid and effectual for the whole. If, however, a consideration should be deemed essential to its validity, then the agreement signed by the plaintiff with others, interested as associates in this company, to give their notes respectively, and to share severally the liabilities, and enjoy the advantages of The Merchants' Mutual Insurance Company, as secured by its charter, and the fact also that dividends of the profits on the excess of the notes so given, over and above the amount of premiums on actual insurance, were also provided for by the charter, and to be annually distributed to the several makers of notes, constitute a consideration valid and sufficient to uphold this note.
It was alleged on the part of the plaintiffs below, on the argument, and the fact was not at all controverted, that the note in question to its full amount with, the notes of other persons given in advance for premiums, was, by the commissioners, included with the premium notes on actual applications, and used to make the amount of $500,000 required by the 2d section of the act as a prerequisite to the organization and commencement of operations of the company.
It may be questionable, perhaps, whether under the provisions of the charter these notes were thus applicable, and whether they could be made legally available as the basis on which alone the organization of the company was authorized by the legislature. But this question was not raised. The objection of the plaintiff in error does not extend to the legality of the company's organization, nor to the collectability of that part of the note amounting to the premium on insurance actually made; but the objection and the only question submitted for our consideration is, whether this note, as to the balance beyond the actual insurance, can be collected. Of that I have no doubt. Admitting what I deem is conceded by the plaintiff in error, that the company was duly organized, and that the note was taken in the exercise of its legitimate powers, and is valid in part and collectible to the amount of $790, and there remains not a doubt of the validity and collectability of this note to its entire amount, and the application thereof by the company to the purposes authorized by its charter.
It was not the intention of the legislature, nor is it necessary to the validity of these notes to their full amount, that insurance by the company shall, at the time, or subsequently, be actually made to the persons making the notes, to such an amount as that the premium thereon shall in amount be equal to the amount of the notes. That is not at all important or necessary. The object of this note and all similar notes taken by the company, and the purposes for which they were designed by the legislature, are for the better security of the dealers with the company; and if losses have been or shall at any time be sustained by those dealers, these notes to the entire amount thereof are legally as well as equitably applicable to the payment and liquidation of those losses. By the great fire in New-York in 1845, this company incurred liabilities on account of insurances to an extent exceeding altogether its means, and was rendered utterly insolvent; and justice requires, therefore, that all its available means shall be collected and faithfully appropriated to meet the losses of its dealers and creditors. It would be a palpable perversion of the object and design of the legislature, and a gross fraud upon the dealers and creditors of the company, to hold that these notes and securities, upon the basis of which the community has been induced to deal with the company, are void and uncollectable wholly, or available only to the extent of the actual insurance made thereon.
I am of opinion that the judgment of the superior court should be affirmed.
Judgment affirmed.