
    Joseph R. Swan, Plaintiff, v. The Mutual Reserve Fund Life Association, Defendant.
    (Supreme Court, Oneida Special Term,
    August, 1896.)
    1. Pleading — Demurrer.
    A count which contains many allegations and suggestions of complaint will be held sufficient' on demurrer if, amongst all such allegations,, it contains sufficient to state- and constitute a cause of action.
    2. Corporations — Pleading.
    A complaint in an action by a policyholder which alleges that by the terms of his policy the association was to form a. reserve fund . from its net profits and a percentage on assessments, to be invested for the benefit of the members; that on its reaching a certain amount . the interest should be paid as a dividend to members of five years’ standing, and that on its reaching a specified maximum sum all future sums set aside as reserve on assessments should be divided between the members; that the association had not properly, built up the fund; had paid over a large amount to the death fund, deposited large sums abroad, made no distribution of surplus, and was about to erect a large building, and asking for enforcement of the contract, sufficiently states a cause of action.
    3. Same — Parties. ' ‘
    ■ In such an action the officers or directors of the association are not necessary parties.
    4. Same — Demand upon officers to bring action.
    - Such an action is one to enforce the performance of a contract made with the plaintiff by the association, and does not require as a condition precedent any' demand upon the officers or directors to . bring action, or that any previous efforts for. relief within the associm tion should have, been made.
    5. Same -4- Laws 1890, chapter 400. j
    It is not necessary that such an action should be brought by the attorney-general, as chapter 400, Laws of 1890, does not apply to such ¿ case.. '
    Demurrer by defendant to plaintiff’s amended complaint upon the following grounds: . ■ • .
    First, that the said complaint does not. state facts sufficient to constitute a cause of action.
    
      Second, that it appears' on the face of the complaint that the plaintiff has not legal capacity to sue, in that the action is not brought by the attorney-general of the state of New York nor by a judgment creditor of the defendant corporation; and in that it does not appear that the plaintiff has sought any relief for his-* alleged grievances within said corporation, and in that it does not ■appear that he has requested any action to be brought by the offi-cers of the corporation or that they have refused to bring 'such action.
    Third, that it appears on the face of the complaint that there is a defect of parties defendant, in that the acts and omissions therein alleged were the acts and omissions of the officers and directors of the defendant corporation charged with the management of its affairs, and that none of such officers and directors were made-parties herein.
    Thomas S. Jones and W. T. B. ífilliken, for defendant.
    W. Neman, for plaintiff.
   Hiscook, J.

The first question presented is whether the complaint states facts sufficient to constitute a cause of action. Upon the argument of the demurrer counsel for plaintiff was somewhat uncertain about treating this as an equity action, but in the brief submitted by him it is treated- as such. There can be no doubt but what upon the complaint as framed the action must and should be treated as such an one. The framing of the complaint, not only in behalf of plaintiff, but in behalf of such other persons holding policies of .insurance as may desire to join in the prosecution of the action, the nature of the relief demanded and the form and nature of the action generally stamp it as one in equity.

Treating it as such an one, it seems to me that the complaint does state facts sufficient to constitute a cause of action,and. that it is. not defective in the respect alleged'by this ground of demurrer. ■

In connection with and in addition to certain other allegations, some of which seem to' be somewhat disconnected, and others of which seem to state conclusions of law rather than facts, the complaint which is demurred to does contain a line of allegations whereby plaintiff in substance alleges and complains: That on or-about February 15, 1881,. the defendant made, executed and delivered to him a certain policy of insurance; that under and by the terms of such policy it was amongst other things provided that the net earnings of the defendant, together with a certain percentage received from each assessment as a reserve, should constitute a fund which should be deposited with the Real Estate Trust Company 'of New York and be securely invested for the exclusive benefit of the members of the association, 'and the interest on the same as it accrued be paid by the said trustee to the treasurer of the associa- ■ tion; that when the said fund reached the sum of $100,000 it should be devoted to making up any deficiency in any assessment made for the purpose of paying a certificate.upon death; that when said reserve fund amounted, to $200,000 the interest on the same should be paid as a dividend to those who had been members for a period of five years .in proportion to the- rate fixed by the graduated assessment at each age of entry; that when said reserve fund amounted to $1-,000,000 — the limit -—■ all future sums set aside for the reserve on each assessment should be equitably divided among the members; that plaintiff, ever since the execution and delivery thereof as above stated, has been and at the time-of the commencement of this action was the owner and. holder of said ■policy of insurance and has paid all the assessments and performed all other covenants and conditions of. said policy to be done and performed, on his part, and said policy was a valid and existing claim against a liability'of said company; that said company has made various assessments upon its policyholders, and there has been paid to said company upon such assessments upward of'the. sum-■of- $18,590,000; that by the terms of said contract of insurance, of the sum received from such assessments said company agreed to set aside as- a reserve fund twenty-five cents -upon, each $1,000 'of insurance in force; that said company has not set aside twenty-five-cents upon each $1,000 of insurance in force, but a much less sum, the amount whereof plaintiff is unable to state; that in order to meet the‘demands caused by reckless and extravagant management off the concerns of the company, the officers of the company have been compelled to trench upon the reserve fund; that the total amount of the assessments made by said company up to the 17th day of March, 1893, was upward of $18,590,000, and .the amount to the credit of the reserve fund was about $3,410,000; that though since-about the year 1883 said reserve fund has amounted to upwards, of $200,000 and interest has been paid thereon to a large amount, no part of the sum has been paid as dividend, either to this plaintiff or to those who have been members for a period of five' years, but such interest, to the amount of $500,000, in violation of said contract, has been paid over and credited to the death or mortuary fund for the benefit of all the members of the association as .well those who. have been members for the period of five years as those who have been members for a shorter period;' that the amount of interest thus diverted from those who have been members for a period of five years, including this plaintiff, and paid over to the death or mortuary fund, is about $500,000; that no portion of the surplus of the reserve fund over and above the sum of $1,000,000 has been divided among the members, including this plaintiff, as provided and agreed in said policy and contract issued to plaintiff; ■ that in violation of said reserve fund defendant has recklessly scattered large sums on deposit in England and elsewhere, the amount thus diverted from the trust created for the policyholders to whom it belongs being $400,000; that in the course of their extravagant dealings with the property which should be held in trust for their policyholders, said company is proceeding to speculate with the same and has or is about to purchase a large amount of real estate and erect an enormous building in the city of New York; and said complaint asks judgment, amongst other things, that the defendant henceforth set aside for the said reserve fund from the amount of the assessments received twenty-five cents upon each $1,000 of insurance; that the sums diverted from said fund be' restored thereto; that the amount of said fund over and above the said sum of $1,000,000 be divided among the policyholders according to the terms of the contract between defendant and the policyholders, the total number of policyholders and the sum to be paid to each being properly ascertained, and that the portion of the reserve fund not distributed amongst policyholders be securely invested.

Still more briefly stated, these allegations amount to a complaint upon the part of plaintiff that defendant in and by its contract with him. agreed to build up in certain ways a reserve fund, and that when said fund exceeded a certain amount the surplus should be divided amongst him and other people entitled thereto; that defendant has so far violated its agreement as not to properly build up and maintain said reserve fund and has not divided the surplus thereof amongst plaintiff and others as agreed, and he asks judgment of this court that defendant be compelled to carry out its contract in these respects. Assuming, as upon the argument the court is bound to, the truth of these allegations, it would seem as if defendant had so violated an agreement with plaintiff as to entitle him to relief from a court of equity.

As heretofore stated, there are many allegations and suggestions of complaint against defendant outside of those above summarized. Very likely some of them may be such as are pertinent to this action and as may entitle plaintiff to relief herein, while others may not be material or furnish the basis for relief in this action. All of the .allegations, however, are contained in one count, and if that count, amongst all its allegations, contains sufficient to state and constitute a cause of action, then this ground of demurrer now being discussed should be overruled. Seaver v. Hodgkin, 63 How. Pr. 128; Price v. Brown, 10 Abb. N. C. 67, 71; Sage v. Culver, 147 N. Y. 241.

If I am correct in my views, there are sufficient allegations to state and constitute a cause of action, and plaintiff, assuming that he shall finally establish his complaint, would be entitled to relief within the principles .involved in the decisions of the following ' cases: Boardman v. Lake Shore, etc., R. R. Co., 84 N. Y. 157; Brown v. Buffalo, etc., R. R. Co., 27 Hun, 342; Jermain v. Lake Shore, etc., R. R. Co., 91 N. Y. 483.

It is further urged by the third ground of demurrer that there is a defect of parties defendant to this action; that the acts and omissions alleged were the acts and omissions of thé officers and directors of the defendant corporation, and that they should have been joined as parties.

• It does not seem to me that this is so in this action, at' least as to the cause of action above outlined. ' If' the action were brought by a stockholder of a corporation to compel performance by its directors of the duties which they owed that corporation, or to restrain the commission of 'acts by them which were in violation of obligations to the corporation, it would undoubtedly be necessary to make such directors parties to this action. The action in such a case would involve the relations between the directors and the corporation and the' former would be necessary parties. In this case, however, the complaint sets out as its cause of action a contract and obligation upon the part of the defendant with and to the plaintiff to perform certain acts. The contract and obligation is that of the defendant corporation to the plaintiff, and- a judgment, if obtained by him, requiring such corporation to perform its agreement will be sufficient, even though individual directors and officers were npt parties as such to the action.. They will be bound by the trial and judgment against the corporation of which they are officers and agents. They are. no more necessary as iñdividuals to an action to enforce the-contract than they were to the execution of the contract. Chase v. Vanderbilt, 62 N. Y. 307; Webb v. Vanderbilt, 39 N. Y. Super. Ct. 4; Boardman v. Lake Shore, etc., Ry. Co., 84 N. Y. 157; Jermain v. Lake Shore, etc., Ry. Co., 91 id. 483.

Finally, it is urged that plaintiff has not legal capacity to sue, and, in'the statement of the same ground of demurrer, that it does not appear that he has sought any relief for his alleged grievances within- the corporation, and has not requested any action to be brought by the officers of the corporation, etc.

So far as the latter suggestions are concerned, they would be more proper to that ground of demurrer already considered .which maintains that plaintiff’s complaint does not state a cause of action. If defendant was correct in its view that this was an action which should be properly brought against the officers of the corporation as distinguished from the corporation itself, there would be force in these suggestions now being considered. But taking the view already indicated by me, that this is an action by plaintiff against the defendant corporation to enforce a contract and obligation made by it to him, and that it is not an action in which it is necessary even to join the directors as defendants, I do not, of course, regard it as necessary that any demand should have been made upon the officers of the corporation or that any previous efforts for relief “ within the corporation,” as expressed by the demurrer, should have been made.

Taking up now the first part of this ground of demurrer, I find that it is based upon chapter 400 of the Laws of 1890, ‘which provides, in substance, that no order, judgment or decree providing for an accounting or enjoining, restraining or interfering with the "prosecution of the business of any life or casualty insurance company, association or society of this state, or appointing a temporary or permanent receiver thereof, shall be made or granted otherwise than upon the application óf the attorney-general on his own motion or after his approval on the request in writing of the superintendent of the insurance department, except in an action by a judgment creditor or in proceedings supplementary to execution. This act is broad in its terms and little or no light has been thrown upon its meaning by adjudications. Without attempting to determine all that it may or does mean and cover, I do not believe that it sustains defendant’s demurrer. Even assuming that this act, if applicable .to a case of this kind, would furnish the basis for this demurrer rather than present a question of defense to be raised in other ways, I do not believe that the act is applicable to this action brought by an individual to enforce a private contract. Ho case has been called to my attention construing- said act' as here claimed by defendant, and it has bteen ruled by the attorney-general in a case somewhat similar in its nature to this that the same was not applicable. In the Matter of the Application Touching the Contract of the Hew York Life Insurance Company with William H. Beers, Opinions Attorney-General, 1892, p. 167.

It was urged by defendant’s counsel upon the argument that plaintiff could not secure the relief claimed and desired by him in this case because the trustee to whom the custody of the reserve fund was committed was not a party, but that question is not presented by any of the grounds of demurrer.

In accordance with these views formal decision and interlocutory judgment may be prepared overruling defendant’s demurrer, with costs, with the usual provisions allowing defendant to otherwiste plead or defend herein.

Demurrer overruled, with costs, with leave to answer.  