Neale v. Head

VAN DYKE, J.

The appeal is taken from the judgment and also from the order denying defendant’s motion for a new trial.

The action was brought in the superior court of the city and county of San Francisco, by one Joseph E. Shain, for whom the present plaintiff was substituted as plaintiff at the trial. The action is founded upon a promissory note of the defendant, constituting one of the so-called guaranty notes, of which the following is a copy:-—

“ Office of the California Mutual Life Insurance Company. “$5,000. San Francisco, Jan. 6,1868. “ Five days after actual demand, for value received, I promise to pay to the order of the California Mutual Life Insurance Company the sum of five thousand dollars, in United States gold coin, with interest at the then legal rate from and after such demand. A. E. Head.”

The case was heard in the court below on the second amended complaint, filed by the original plaintiff, and the answer thereto, and the supplemental complaint, substituting the present plaintiff.

The California Mutual Life Insurance Company was incorporated in the year 1867, under an act of the legislature of this state, entitled “ An act to provide for incorporation of mutual insurance companies for the insurance of life and health and against accident. Approved April 2, 1866.” (Stats. 1865-66, p. 752.) After obtaining the guaranty fund as provided by said act, the said insurance company engaged in business, and carried on the same during the years 1868, 1869, 1870, 1871,

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and 1872. In the year 1873 it sold out its business to the Republic Life Insurance Company of Chicago, an Illinois corporation, and ceased to do further business. In 1885, said insurance company being insolvent, proceedings in involuntary insolvency were, on the 7th of March of that year, commenced against it, and thereafter it was adjudicated insolvent, and the court decreed, among other things, that the assets of the insolvent, including the notes constituting the guaranty fund, should be sold, and in pursuance of said decree said notes were, by the assignee, sold; the note of the defendant being sold to one James H. Dobinson for three hundred dollars, who, as alleged in the second amended complaint, transferred and assigned the same to the original plaintiff; and, September 22,1888, on demand being made on defendant, and refusal to pay, the action was commenced in 1891; and the original plaintiff, before the trial, transferred the claim to the present plaintiff. By the act under which the company was organized and operating, a guaranty fund of not less than two hundred and fifty thousand dollars is required, which “ shall consist of the notes of solvent parties, approved by the board of directors and by each other,” which notes so given by any one person should not exceed the sum of five thousand dollars, exclusive of interest. It is also provided that when the fixed capital of the company shall have been obtained, a sworn declaration of the amount and nature of the same shall be filed with the original certificate of incorporation, and “ until such time no guaranty note shall be withdrawn from the fund, unless another note of equal solvency shall be substituted therefor, and unless with the unanimous approval of the board of directors then in office, and of all of the other parties liable on the rest of the notes comprising the guaranty fund.” In this case there were fifty notes of five thousand dollars each. There is no averment in the complaint of compliance with any of these requirements. The contrary, however, is expressly alleged in defendant’s answer, and the findings substantially support the allegations of the answer. The findings show that five of the guaranty notes were, during the existence of the company, surrendered to the makers of the same, and withdrawn from the said guaranty fund, without any substitution or attempt at substitution of other securities, and without the knowledge, approval, or consent of the defendant. It is also found that eight of the makers of said guaranty notes had died, and had left solvent