[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 389
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 390 A person who insures in the Chenango Company becomes by that act a member of the corporation. When he alienates the property insured, he may surrender the policy, and is thereupon entitled to his deposit note, upon the payment of his proportion of all losses and expenses that have accrued prior to such surrender; and he then ceases to be a member of the corporation. (Stat. 1836, ch. 238, and p. 43, §§ 2, 7. And see Neely v.Onondaga Company, 7 Hill, 49.) Whether any losses or expenses have accrued prior to that time which have not been satisfied, and which the company has not got funds in hand to satisfy; and how much, if any thing, ought to be paid by the person insured, are matters to be adjusted between him and the company before the note is given up. When the parties have come to an agreement, and the policy and the note have been surrendered, the individual ceases to be a member of the company; and all right to make assessments or calls upon him, or upon the note, is at an end. The settlement and surrender of securities are acts authorized by law; and, like other lawful acts, they are binding upon both parties, unless they can be impeached on the ground of fraud or mistake.
It is true, that the statute does not say, in terms, that the parties may agree concerning the amount, if any thing, which should be paid to the company; but such must have been the intention of the legislature.
There is a provision of a similar kind for giving up the deposit note at the expiration of the term of insurance. (§ 6.) In that case, as well as in the other, the parties would be at liberty *Page 391 to agree whether any thing, and how much, ought to be paid by the maker of the note on account of losses and expenses which had occurred during the term; and if they should come to an agreement and the note should be delivered up, neither party could impeach the transaction without showing such a fraud in the other party, or such a mutual mistake about some matter of fact, as would be sufficient to set aside any other settlement of differences between parties having conflicting interests.
I agree with the supreme court, that the deposit or premium notes are to be regarded as capital for the security of those who may deal with the company. But they can only be regarded as capital so long as they remain in the hands of the company; and not after they have been given up to the makers in pursuance of the charter.
It is not pretended that the defendant is chargeable with any fraud upon the company in procuring the surrender of the note; nor has the transaction been successfully impeached on the ground of a mutual mistake of the parties about any matter of fact. If the defendant paid nothing at the time of the surrender, it was evidently for the reason that the parties supposed there were no valid claims upon the company towards the payment of which the defendant ought to contribute; or none beyond the amount of funds in hand. The receiver proved that when he was appointed there were several claims against the company for losses which happened between the making and the giving up of the note: but the claims were all contested; and it was not shown that the amount which had since been established exceeded the amount of money which was paid over to the receiver at the time of his appointment, by the treasurer of the company. And besides, it would not have been enough to show that the company made a bad bargain in giving up the note. So far as appears, the parties knew, at the time of the settlement, of all the claims upon the company for losses, and all the facts in relation to the claims, as fully as they do now; and if they made a mistake in judgment, either one way or the other, it would not invalidate the settlement. If they had come to the conclusion that some or all of the claims were valid, and *Page 392 the defendant had paid fifty dollars as his proportion of the supposed losses, proof that all the claims turned out to be unfounded would not enable him to recover back the money. And on the other hand, if the company could show that some or all of the claims which the parties had deemed invalid turned out to be well founded, it would not enable the company to disregard the settlement, and recover upon the note which had been given up. Proof that the parties were mistaken in judgment concerning the validity of the claims could not annul the adjustment.
The recovery in this case seems to have gone upon the ground that the receiver had greater rights than those which belonged to the company. But for most, if not for all purposes, he took the place, and stands as the representative of the company. He is as much bound by a settlement which the company was authorized to make, as was the company itself. It would be strange, indeed, if the legal acts of a corporation did not bind the receiver of its effects. If the rule were not so, no one would dare venture to deal with a corporation. This is not like Leavitt v. Palmer, (3 Comst. 19,) and Gillet v. Moody, (3 id. 479.) In each of those cases the act of the company which the receiver sought to avoid was forbidden by law. It was an illegal act. The case ofBrouwer v. Hill, (1 Sandf. Supr. Ct. 629,) stands on the same ground. The judge said, the company itself might have maintained the action. Here, the receiver attempts to repudiate a legal transaction of the company. I think it quite clear that such a thing can not be done.
If the settlement, though a lawful act in itself, had been made for an illegal purpose: if, for example, the parties had known that there were valid claims against the company to the payment of which the defendant ought to contribute, and yet the note was given up without consideration, for the purpose of defrauding either the creditors, or the other members of the corporation, the persons defrauded would undoubtedly have a remedy. But I do not see how the receiver could sue. It would be like the case of a conveyance of property made for the purpose of defrauding the creditors of the grantor; which, though void as against the persons intended to be defrauded, is nevertheless *Page 393 valid against the grantor, and all who represent him. A receiver of the effects of such a grantor could not avoid the grant. Neither can this receiver avoid a settlement which bound the corporation, though, in the supposed case, it was a fraud upon the creditors and other members of the company. The persons injured must sue. It is not necessary, however, to decide that question in this case; for there is no proof that the settlement was made with intent to defraud any one. At the most, the evidence only shows that the company made a bad bargain; and that is far enough from making out such a case as would enable creditors, or any one else, to set aside the transaction.
I am of opinion that the judgment is erroneous, and should be reversed.