A life insurance company which has several hundred thousand
policyholders is in its nature a public institution, and where
there is no apprehension as to its solvency, a court of equity will
consider all the facts as to the relative advantages and
disadvantages of a receivership or accounting before granting
relief of that nature in the suit of an individual policyholder
even if jurisdiction to grant such relief exists.
Page 213 U. S. 26
The fact that stockholders claim the surplus of an insurance
company and the officers of the company do not actively deny the
claim gives no ground for a receivership at the suit of a
policyholder claiming that the surplus belongs to the
policyholders.
A demurrer only admit facts well pleaded in the pleading
demurred to; it does not admit the pleader's conclusions of law or
the correctness of his opinions as to future results.
The construction of a general act and a charter granted
thereunder pertain to the state court just as if the charter were
granted by a special act, and in a suit by the holder of a policy,
executed at the home office, the meaning and construction of the
charter as held by the state court will be binding on the federal
courts, and, in the absence of any federal question, the
construction of the contract by the state court will be of most
persuasive influence even if not of binding force.
The wrongdoing of former officers of an insurance company, and
their continuance in power, in the absence of any trust relation,
gives no jurisdiction for an accounting in equity in a suit in
which the company is the only defendant as between a simple debtor
and creditor.
The Equitable Life Assurance Society is not a trustee of its
policyholders under its charter and policies as the same have been
construed by the highest courts of the New York.
As the charter and contract have been construed by the highest
court of New York, a policyholder in the Equitable Life Assurance
Society can only participate in the surplus of the society
according to the terms of the policy, and a discretion rests with
the officers of the society as to what amount of surplus shall be
retained and distributed, and when the distribution shall be
made.
While wrongdoing, waste, and misapplication of funds reducing
the surplus of an insurance company before distribution might give
ground of action to a policyholder, it would not necessarily, where
there is no allegation of insolvency, give ground for equitable
action.
Where the bill avers solvency of defendant at present, a
prediction of insolvency in the future on account of inability to
meet claims of policyholders by reason of mismanagement is a mere
conclusion of law, and not a fact which is admitted by demurrer or
on which a court can grant equitable relief.
Where a suit for accounting by a policyholder against an
insurance company as sole defendant avers that the stockholders
claim to own the surplus, no decree can be made as to such
ownership without the presence of the stockholders as parties.
Equity does not now take jurisdiction in cases of fraud where
the relief properly obtainable on that ground can be obtained in a
court of
Page 213 U. S. 27
law, and where, so far as necessary, discovery may be obtained
as well as in equity. Rev.Stat., § 724;
United States v.
Bitter Root Co., 200 U. S. 451. A
complainant who can obtain all the relief to which he is entitled
in a single suit cannot invoke the interference of a court of
equity on the ground that defendant may be saved a multiplicity of
suits against it by others situated similarly to himself.
151 F. 1 reversed.
This case comes here on writ of certiorari, which brings up the
record from the Circuit Court of Appeals of the Second Circuit,
reversing the decree of the Circuit Court for the Southern District
of New York, which sustained the petitioner's demurrer to the
plaintiff's bill and dismissed the same. The opinion of the circuit
court is reported in 142 F. 835, and that of the circuit court of
appeals, 151 F. 1.
The bill was filed against the defendant (the petitioner above
named) sometime in August, 1905, and is one of extreme length, and
makes allegations in great detail relating to the conduct of the
business of the defendant by its board of directors and by its
officers and agents for many years prior to the filing of the bill.
It will not be necessary to repeat all of them in order to
understand the case as made. The following facts, among many others
of a similar nature, appear in the bill:
The complainant is a citizen of the State of Maryland and brings
this suit in behalf of himself, as well as all the policyholders
and annuitants of the company defendant who may choose to come in
and join therein; the defendant is a citizen of the State of New
York and an inhabitant of the southern district thereof.
The defendant was incorporated in May, 1859, under a general law
of the State of New York, passed June 24, 1853, providing for the
incorporation of life and health insurance companies. In accordance
with this act there was filed by the incorporators a declaration,
in the nature of a charter, from which it appears that the capital
of the defendant was $100,000 in cash, divided into 1,000 shares of
$100 each, and the corporate
Page 213 U. S. 28
powers of the company were vested in a board of directors. The
insurance business was to be conducted upon the mutual plan. The
holders of the capital stock were, by the declaration, to have the
right
"to receive a semiannual dividend on the stock so held by them,
not to exceed three and one-half percent of the same, such
dividends to be paid at the times and in the manner designated by
said directors of the company. The earnings and receipts of said
company, over and above the dividends, losses, and expenses, shall
be accumulated."
The officers were to strike a balance every five years from
December 31, 1859, which was to exhibit its assets and liabilities
and also the net surplus, after deducting a sufficient amount to
cover all outstanding risks and other obligations. Each
policyholder was to be credited with an equitable share of the
surplus, which was to be applied to the purchase of an additional
amount of insurance for each policyholder, or, if any policyholder
should so direct, such equitable share of the surplus should be
applied in his case to the purchase of an annuity.
The complainant took out a policy in the company on the
twenty-eighth of December, 1867, for $25,000, in the form of an
ordinary life policy, which was subsequently, and on the twelfth of
January, 1876, changed to another ordinary life policy, payable to
his wife upon his death, and, if his wife were not then living,
then to the children of complainant, and, if there were no
children, then to the complainant's executors, administrators, or
assigns. The policy was also issued and accepted upon certain
conditions printed on its back, which were accepted as a part of
the contract, among which provisions is the following:
"6. This policy, during its continuance, shall be entitled to
participate in the distribution of the surplus of this society, by
way of increase to the amount insured, according to such principles
and methods as may, from time to time, be adopted by this society
for such distribution, which principles and methods are hereby
ratified and accepted by and for every person who shall have or
claim any interest under this contract; but the society may at any
time before a forfeiture, upon the request
Page 213 U. S. 29
of the person holding the absolute legal title to this policy,
substitute a cash payment, to be fixed by said society, in lieu of
the said increase to the amount insured, and such payment may be
made by reduction of subsequent premiums, if said policyholder
shall so elect."
The complainant elected to receive his share of the surplus, as
ascertained from time to time, in the reduction of the premium, and
the company was notified of that election, and ratified and
accepted the same; and, since the date of the issuing of the
policy, the complainant has regularly paid the premiums thereon as
they severally accrued, after deducting the sums which at each
period, the officers of the defendant stated to be the entire
amount applicable in reduction of the premiums as complainant's
equitable share in the surplus. Although the complainant has been
entitled to have his full share of the lawfully ascertained and
true surplus profits of the defendant applied in reduction of his
premium, yet the amounts allowed by the officers of the defendant
in reduction of his premium have not been the real amounts of
complainant's equitable share in the true surplus, but, by means of
the abuse of discretion, wrongs, and the inequitable and fraudulent
conduct of the defendant, its officers and agents, the company, its
officers and stockholders, have wrongfully retained, and, to the
extent of a large sum, fraudulently wasted and misappropriated to
themselves, a large portion of complainant's share in said surplus;
that he has accepted such reductions of premium as have been from
time to time assigned to him solely because of his belief that the
officers of the defendant were acting in a just and lawful manner,
and in reliance upon the representations of the officers of the
defendant thereto, stating that he was receiving his lawful share
of the true surplus, which representations were untrue and
fraudulent, and without knowledge by complainant that they were
untrue, or of the facts thereafter stated in the bill.
The defendant has, at the expiration of each year since the
defendant's incorporation, ascertained and entered upon its books a
sum alleged to be the "net surplus" earned by the
Page 213 U. S. 30
defendant during the preceding year, which surplus has been
reported annually for many years to the insurance department of the
State of New York as the fund which belonged to the policyholders
exclusively, and one in which the stockholders were without any
interest whatever, while, on the other hand, the defendant now
claims that such surplus belongs to its stockholders.
The defendant, through its officers, has been crediting and
paying to its policyholders, from time to time, only a portion of
the surplus admitted to exist by the defendant, and to the whole
amount of which complainant and the other policyholders are
entitled in equitable proportion, and the officers, contrary to the
rights of the policyholders, and in fraud of their rights, have not
credited the policyholders with their equitable share of the
surplus, although such surplus has been duly ascertained from their
books, nor have they paid policyholders whose policies matured from
time to time their just and equitable share of such surplus to
which they were entitled, and the stockholders now claim and
threaten to appropriate all the surplus as a dividend, or earning,
upon the shares of stock of the company, in direct disregard of the
representations made by the defendant to the superintendent of
insurance of the state and in disregard of the rights of the
policyholders.
From the books it appears that there were in 1904 over 500,000
policyholders; over $1,495,000,000 of insurance risks; over
$413,000,000 of assets; liabilities over $333,000,000, and a
surplus of over $80,000,000. That there are over $10,000,000 of the
surplus in which the stockholders can have no interest and which
are still claimed by them. The retention of the surplus has been
wrongful and for the fraudulent purpose to pile up a fund under the
control of the defendant and its officers, by the use of which they
could secure illegal and personal gain, and out of which they could
distribute large sums to and among themselves under pretense of
payment of salaries and expenses, by improper and extravagant
disbursements, and
Page 213 U. S. 31
that in fact they have distributed to themselves improper and
extravagant salaries, commissions, and expenses from the fund or
surplus which belonged to the policyholders. Great waste and
extravagance are alleged to have been committed by the defendant
through its officers in many ways. The officers of defendant have
failed to properly invest and reinvest the funds of the company,
but have willfully and negligently misappropriated and fraudulently
mismanaged them.
About January, 1905, dissensions among the officers and board of
directors occurred, and in consequence a committee of the defendant
was appointed for the purpose of investigating its affairs and
condition, and the superintendent of insurance also conducted an
investigation, and the results showed the facts above stated in
very great detail. A committee of the legislature also investigated
the condition of the defendant during the fall of 1905 and reported
to the legislature in 1906, showing the same facts.
Mr. Thomas F. Ryan in the meantime had become the owner of 502
shares of the stock of the defendant (a majority thereof), with a
par value of $50,200, which were purchased by him for $2,500,000,
and thereupon he executed a deed of trust to three trustees, with
power to vote the stock as stated in the deed, and since that time
Ryan has been the managing spirit in the defendant. Twenty
directors have been elected to fill vacancies in the board of
directors, and are serving thereon, but the right to do so is
denied by the complainant and the minority stockholders, and until
such questions are settled by the determination of a court of final
jurisdiction there does and will exist absolute confusion and
corporate anarchy in the management of the affairs of the
defendant.
If properly conducted, the defendant has sufficient assets to
provide for and liquidate every outstanding policy, and to insure
the performance of every contract made by the defendant with its
annuitants. It is subsequently averred that the defendant is
insolvent, because it is responsible to the policyholders for the
excessive sums paid in the way of salaries and
Page 213 U. S. 32
fees, and also for all sums of money lost consequent upon fraud
and waste, and such amounts are said to be more than the defendant
will have funds to meet when proved and demanded. (This by way of
opinion and prediction.)
The defendant is still in the control of the stockholders, whose
representatives have been guilty of misappropriation, and its
business is at a standstill. The interests of the policyholders are
to place the assets in the hands of a receiver, in order to wind up
the affairs of the defendant, which is the only way to safeguard
the policyholders' interests. An action at law is inadequate to
afford proper relief, and there would result, if such actions were
necessary, a multiplicity of suits.
As relief, the bill prayed for the production of all books,
papers, and records of the defendant, and that an accounting be had
of all the dealings and transactions of the defendant, its officers
and agents and stockholders, from the commencement of the business
of the defendant in 1859, or for such period as the court might
deem proper. Also, that a trust be adjudged and declared to exist
and imposed upon the assurance funds and surplus, as ascertained,
as against the defendant, its officers and stockholders, and that
it be adjudged that they, and each of them, hold the same as
trustees for such persons as shall be declared to have interests
therein under the decree to be entered in the cause. Such
accounting should also be taken for the purpose of ascertaining to
what extent the defendant is indebted to the surplus fund on
account of damage, loss, and depletion occasioned by the
negligence, misconduct, misappropriation, and other causes averred
in the bill. Also, that it be adjudged that the defendant pay into
such assurance fund the amount ascertained on such accounting to be
due from the defendant to such fund, and that the defendant, its
directors, officers, and agents, be enjoined from further retaining
the control of, or spending in any way, the said funds received
from the policyholders and annuitants, and constituting the
assurance fund and the so-called surplus of the company, and also
from doing any other act or thing in
Page 213 U. S. 33
connection with the funds of the defendant, except to transfer
the same to a receiver, and that a receiver be appointed to take
possession of all the funds held by the defendant, of every
character and description, and administer and distribute the same
as he may be directed by the court.
The defendant demurred to this bill (1) for want of equity; (2)
complainant has an adequate remedy at law; (3) complainant, under
the laws of New York, had not legal capacity to sue; (4)
complainant had no interest in the subject matter of the bill.
Other grounds were stated not specially material now to notice.
Page 213 U. S. 41
MR. JUSTICE PECKHAM, after making the foregoing statement,
delivered the opinion of the Court.
Even if a court of equity had jurisdiction in a case like this,
it is yet proper to consider the history of the defendant
subsequent to the filing of the bill by complainant, with reference
to the results which might and probably would follow a decree of
the court in accordance with the demand of the complainant. The
corporation is one of the largest in the world, with its more than
half million policyholders, its outstanding risks of an amount
almost impossible to appreciate, and with assets and liabilities
and surplus reaching into hundreds of millions of dollars in
amount. The defendant is, in its nature, a public institution, and
the interests of its policyholders are directly involved in any
proceeding looking towards its winding up, and indirectly the
interests of many hundreds of thousands of individuals connected
with the policyholders as objects of their bounty. The result of a
stopping of this institution and the winding up of its business
because, although not in necessary consequence, of the flagrant
wrongdoing of some of its former officers and directors would be
most disastrous to the great majority of the people interested in
its affairs. Taking all the averments of the bill together, there
is not any foundation for apprehension as to the entire solvency of
defendant. To place the institution in the hands of a receiver,
while it is paying promptly all its obligations, and with undoubted
resources to continue to pay them, and is daily engaged in taking
new business, under other and different management, would be a
premature and wholly unnecessary ending of the defendant, and one
which it would be mild to characterize as
Page 213 U. S. 42
ruinous to the interests of hundreds of thousands of people, and
really beneficial to none. The enormous and very likely necessary
expenses connected with a receivership, its certain failure to give
full satisfaction to all, and the very great delays that would
accompany the granting of the relief asked are strong reasons
against granting it in the case of a defendant which is paying all
its obligations as they are presented. In addition to all these
objections, it has happened that, since 1905, a new board of
directors has been chosen, new officers placed in command, and
probably an entirely new policy adopted and followed, although
these last-mentioned facts have happened since the filing of the
bill in 1905, nevertheless it is not improper to refer to them, as
they only constitute a history of the defendant since that time.
They are found in public documents in New York, filed and existing
of record in its insurance department, and they are the sworn
returns of the officers of the defendant, made since the change in
1906. They may be referred to not to contradict the averments of
the bill, but to show the officers now in control of the management
of the defendant, its present condition, and the fact that it is
now in full operation and in the daily discharge of all its
obligations as they are presented. The right to an accounting in
equity and the winding up of the defendant under these
circumstances would have to be most clearly made out before such
relief would be granted. A court of equity is bound to consider
these facts before it would grant relief of the nature demanded.
Such a court takes all the facts into consideration, and the
relative advantages and disadvantages of granting a relief which
lies largely, in cases of this nature, in the discretion of the
court, even if it be assumed that jurisdiction to grant the relief
existed at all.
Under these circumstances, we proceed to inquire as to the
jurisdiction of a court of equity in such a case as is presented by
the bill. It might be here added that the history of the
Lord case, which is referred to in the bill, is to be
found in 57 Misc. 417, and, on appeal, in 126 App.Div. 937,
Page 213 U. S. 43
and a still further appeal is pending in the New York Court of
Appeals. We do not regard the matter as material, as it only refers
to the claims of the stockholders to own the entire surplus in the
defendant, and to the alleged attitude of the defendant as to these
matters, in not denying their claims. This gives no ground for
equitable interference at the suit of a policyholder against the
defendant of the nature herein demanded.
As the questions in this case arise upon the defendant's
demurrer to the bill of the complainant, it is necessary to direct
attention to the effect of a demurrer as an admission. We are not
called upon to cite authorities for the statement that a demurrer
only admits facts well pleaded in the pleading demurred to. It does
not admit the pleader's conclusions of law, nor does it admit the
correctness of any opinion set forth in the bill; as, for instance,
in regard to the probable effect in the future of the continued
control of the defendant by the interests existing therein up to
1906. Hence, any construction placed by complainant upon the
charter of the defendant and the insurance policy issued by the
defendant to the complainant is not admitted, nor is the allegation
of the ownership of the surplus by the policyholders, as alleged by
the complainant, nor any opinion which is expressed in the bill as
to the ability of the defendant to continue business; nor is any
other opinion as to future happenings admitted by the demurrer.
Before discussing the merits of the case, it is also proper to
first decide what force is to be given the decisions of the highest
court of New York with reference to the construction of the charter
of the defendant and the policy of insurance issued by it.
Greeff v. Equitable &c., 160 N.Y. 19. Although the
charter was obtained under a general law of the State of New York
relating to the incorporation of insurance companies, yet the
construction to be given that act and the charter obtained in
pursuance of it pertains to the state courts just as if the charter
were granted by a special act of the legislature. Ever since its
incorporation under the general law of the State of New York, in
1859, the defendant has always done business
Page 213 U. S. 44
and had its general home office and its legal residence and
domicil in that state. The insurance policy owned by complainant
appears on its face to have been executed in New York, and there is
no averment to the contrary. The decisions of the highest court of
New York are therefore binding upon this Court as to the meaning
and effect of the charter of the defendant, and as it is a New York
company, and the contract is a New York contract, executed and to
be carried out therein, its meaning and construction, as held by
the highest court of the state, will be of most persuasive
influence, even if not of binding force, in the absence of any
federal question arising in the case. There is no such question
here.
Stone v. Wisconsin, 94 U. S.
181,
94 U. S. 183;
National Park Bank v. Remsen, 158 U.
S. 337-342;
Sioux City &c. Co. v. Trust
Co., 173 U. S. 99. This
principle has been so frequently decided that further reference to
adjudged cases need not be made.
The suit is brought by complainant for himself, as well as all
other policyholders and annuitants of the defendant who may choose
to come in and join in the suit, and the company is the sole
defendant. No officer of the company or stockholder therein, or any
alleged debtor to the company, is made a party, and consequently
any averment of the continuance in power of the same persons in the
board of directors or otherwise is immaterial as a reason for the
bringing of the action by the complainant in his own behalf, etc.,
to recover debts due the defendant, which the defendant will not
itself sue for. This is not an action of that nature, and there are
not present the necessary parties to maintain it if it were. The
purpose of the averment is probably to sustain the application for
a receiver, made necessary, as alleged, by the wrongdoing of some
of the former officers of the defendant. That, however, gives no
jurisdiction for an accounting in equity as between a simple debtor
and creditor, and in the absence of any trust relation between
them. A mere creditor, as such, has no right to that remedy.
We come, then, to a careful analysis of the other averments
Page 213 U. S. 45
in the bill, and it is seen that it is largely founded upon the
theory of the existence of a trust in favor of the policyholders,
past and present, of the defendant as against the defendant, its
officers and stockholders, and it is asked that they, and each of
them, be decreed to hold the funds and surplus, as they may be
ascertained, as trustees for such persons as shall be declared to
have interests in such fund and surplus, under the decree of the
court to be entered in the case. The complainant alleges that this
so-called surplus of the defendant belongs entirely to the
policyholders, after making certain deductions, and the defendant
holds it, or at any rate, a large portion of it, in trust for them,
and that such is the proper construction of the charter and the
policy, and he also avers that defendant has not distributed it
from time to time to the policyholders, as intended by the charter
and the policy. The various allegations in regard to waste,
mismanagement, and improper investment and reinvestment of the
funds of the defendant, and also the alleged fraudulent conduct of
the officers guilty of such acts, do not show any inequitable or
improper actual distribution of the fund as among the policyholders
themselves. Although the effect of such conduct has plainly been to
prevent the growth of the surplus to greater proportions than it
has reached, there is still no averment anywhere in the bill that
the amount of the surplus that was, in fact distributed was not
fairly and equitably distributed to each of the policyholders,
according to the amount of his policy, and in strict accordance
with the rules and regulations theretofore adopted by the defendant
for such distribution, which rules had been accepted by the
complainant from time to time as such distribution was made. The
fact, as alleged, that the amounts were paid to the complainant and
accepted by him on the fraudulent representations of the officers
that such amounts were all that were due has no effect upon the
question of the equitable and proper distribution of the fund that
was, as a matter of fact, actually distributed. Nor does it give a
cause of action of an equitable nature. These averments only show
waste and misappropriation
Page 213 U. S. 46
of the moneys of the defendant before they ever reached the
surplus fund, and before any distribution of it was made. In other
words, they aver facts of mismanagement of the funds and wrongdoing
by others, upon which a cause of action might arise against the
officers and stockholders, or other persons guilty of such acts of
wrongdoing and waste, in favor of the company itself. They lay no
foundation for the jurisdiction of a court of equity in such a case
unless it appears that the relation between the policyholder and
the defendant is that the latter is the trustee of the former by
reason of the trust relation between them resulting from the
insurance policy. The complainant's contention, as above stated,
that there is such a trust in the fund mentioned has never been
regarded as the law in the State of New York (
Cohen v. New York
Life Insurance Company, 50 N.Y. 610;
People v. Security
Life &c. Co., 78 N.Y. 114;
Bewley v. Equitable Life
&c., 61 How.Pr. 344;
Uhlman v. New York Life Ins.
Co., 109 N.Y. 421; and, to the same effect,
Greeff v.
Equitable Life Assurance Society, 160 N.Y. 19), nor anywhere
else so far as any case has been cited on the subject.
In the
Uhlman case,
supra, the plaintiff was
the owner of a policy known as a ten-year dividend system policy,
otherwise a "tontine plan" policy, which, it was averred, gave to
the holder a special title to the funds derived from the payment of
premiums on policies of that kind and in the particular class to
which the policy belonged . The Court of Appeals of New York held
that such claim was not well founded;
"that it cannot be said that the defendant is, in any sense, a
trustee of any particular fund for the plaintiff, or that it acts
as to him and in relation to any such fund in a fiduciary capacity.
It has been held that the holder of a policy of insurance, even in
a mutual company was in no sense a partner of the corporation which
issued the policy, and that the relation between the policyholder
and the company was one of contract, measured by the terms of the
policy."
The holder of a policy of the nature of that referred to in the
Uhlman case would be certainly as much entitled to claim
that the company was a trustee for the holder as would be this
Page 213 U. S. 47
complainant. Indeed, the policyholder in the
Uhlman
case occupied a much stronger position for making the claim than
does this complainant, who is the holder of an ordinary life
policy, with rights to participate in the distribution of the
surplus according to methods, etc., adopted by the defendant, as
already mentioned. The claim was, however, denied by the state
court, following the decisions of the New York courts for many
years. To hold that a trust is proved in this case by virtue of the
charter and policy of insurance is to hold contrary to the
decisions of the highest court of the State of New York for a long
number of years past, without a single decision the other way in
all that time.
We also think there is no ground for the contention on the part
of the complainant that he, as a policyholder, had any right to an
accounting, and to compel the distribution of the surplus fund in
other manner, or at any other time, or in any other amounts than
that provided for in the contract of insurance. By that contract,
he was entitled to participate in the distribution of some part of
the surplus, according to principles and methods that might be
adopted from time to time by the defendant for such distribution,
which principles and methods were ratified and accepted by and for
every person who should have or claim any interest under the
policy. It has been held that, under such a policy, how much of the
surplus shall be distributed to the policyholder and how much shall
be held for the security of the defendant and its members is to be
decided by the officers and management of the defendant, in the
exercise of their discretion to distribute, having in mind the
present and future business, and, in the absence of any allegations
of wrongdoing or mistake by them, their determination must be
treated as proper, and their apportionment of the surplus is to be
regarded
prima facie as equitable.
Greeff v. Life
Insurance Co., supra. The court further held that manifestly a
discretion rests with the defendant in determining how much of the
surplus should be distributed to the policyholders and how much
should be retained for the security of the defendant and its
members,
Page 213 U. S. 48
having in view the present and future contingencies of the
business, and the court remarked that "there was no evidence or
allegation that the plaintiff had been inequitably treated by the
defendant as between himself and the other policyholders." The
frauds and mismanagement mentioned did not, in themselves, give a
policyholder any greater right to a distribution than is mentioned
in the contract, and the right depended upon the judgment and
discretion of the company as to time and amount.
Nor is there any possible reason for the appointment of a
receiver and a real, though not formal, dissolution of the company,
and the distribution of all its assets, because the fund is not as
large as it ought to have been owing to the misconduct of the
officers and because the defendant has not distributed as much of
the surplus as complainant thinks he is entitled to, because of
such frauds and misconduct. It is contended, however, that the New
York court of appeals has held that complainant is entitled to such
relief as is demanded herein, and he cites as authority the
Uhlman case,
supra, and urges that provided it
appear, by proper allegations (such as this bill contains) and
proof, that frauds, misappropriation of the funds, etc., have been
perpetrated by the officers or agents of the defendant, so as to
prevent the proper accumulation of the surplus, the court will
grant the relief demanded herein. We think that neither the
Uhlman nor the
Greeff case decides any such
principle as is asserted by the complainant. After holding, as
already stated, that there was no trust existing between a
policyholder and even a purely mutual company, reference was made
in the former case to the contention of the defendant that the
apportionment made by it, or under its direction, was absolutely
and at all events conclusive upon the policyholders; it was said in
the opinion that that was not an accurate statement, and that the
plaintiff and others similarly situated had the right, upon proper
allegations, of showing that the apportionment made by the
defendant was not equitable, or had been based upon erroneous
principles, and he had the right to a trial and to make proof
of
Page 213 U. S. 49
such allegations, and if true, the court could declare the
proper principles upon which the apportionment was to be made, so
as to become an equitable apportionment. The
Greeff case
simply adopted that statement in the course of the opinion, which
is chiefly devoted to the discussion of other matters.
There is nothing in either case to show that any other
wrongdoing or fraud was in contemplation of the court than that
above mentioned,
viz., that the proposed or actual
distribution of the money as between the policyholders themselves
was not equitable, or was based on erroneous principles.
Wrongdoing, waste, misapplication of funds, and actions of that
character, affecting the amount of the fund before distribution,
were not held to furnish a ground of equitable jurisdiction for an
accounting, and it was not held that even frauds in the
distribution itself as between policyholders, or the adoption of
wrong principles for such distribution, would be ground of
jurisdiction in equity. That question was not before the court, and
was not decided. It was simply stated that it would afford ground
of action, not necessarily ground for equitable jurisdiction.
However, this is no such case as the language used shows was
contemplated in the observations of the court in the
Uhlman case.
So far as the averments in the bill go as to the purchase of the
majority of the stock of the defendant by Mr. Ryan and the
execution by him of a deed of trust, we think those averments have
no tendency to prove the existence of facts material to the cause
of action attempted to be set forth in the bill.
There is no ground of jurisdiction in equity either for the
accounting prayed for or the appointment of a receiver to wind up
the affairs of the defendant on account of the alleged insolvency
of the defendant. The complainant at first avers defendant's
solvency, and that it is fully able to pay all demands from
policyholders, and to perform every contract made by the defendant.
The subsequent averment that the defendant is insolvent, because,
as a conclusion of law asserted by the pleader, it is responsible
to policyholders for excessive sums paid in the
Page 213 U. S. 50
way of salaries and fees, and also for sums of money lost
consequent upon the fraud and waste of the directors or officers of
the defendant, all of which are too large for the defendant to pay
when demanded, is not admitted by the demurrer, and is not accurate
as a conclusion of law. Whether such liability could be legally
maintained or whether the defendant would be unable to pay the
amount claimed from it when it was properly proved, and judgment
duly recovered against it in an action for that purpose, is a
mixture of a legal conclusion with a matter of opinion as to the
future ability of the defendant to pay such liabilities. And the
idea that the defendant itself is liable to policyholders for the
frauds or wrongdoing set out in the bill and committed by its
officers or members of its board of directors against the
defendant, and in their personal interests, we regard as without
foundation. Such a kind of future possible insolvency furnishes not
the slightest ground for present legal action adverse to the
defendant. Very likely the defendant could itself maintain an
action against those who have been guilty of fraudulent conduct
towards it, resulting in financial loss to it, and, of course,
those who are alleged to be guilty would have to be made parties.
No case is therefore made for an accounting or for a receiver,
based upon these allegations of the bill. Certainly the court could
not give any judgment that the policyholders are the owners of the
so-called surplus. It may be that they are. The bill itself avers
that the stockholders contend they are the owners of the surplus,
or at least, of some considerable part of it, and certainly no
decree could be made on the subject of such ownership and against
the claims of the stockholders, without their presence as
parties.
If it be held that there is no trust, then it follows that the
suit cannot be maintained in equity on the sole ground of fraud.
Such a ground for the maintenance of the suit (even if complainant
could otherwise maintain it) is a mere incident to the main ground
set forth in the bill. Equity does not now take jurisdiction in
cases of fraud where the relief properly obtainable on that ground
can be obtained in a court of law and
Page 213 U. S. 51
where, so far as necessary, discovery may be obtained as well as
in equity. Rev.Stat. § 724;
United States v. Bitter Root
Co., 200 U. S. 451, and
cases cited.
Complainant also claims jurisdiction in equity on the ground
that such an action will prevent a multiplicity of suits. But this
is not a case for the application of the doctrine. There can be no
claim that the complainant is saved from a multiplicity of suits by
the maintenance of this. A single action at law by him against the
company would give him all the relief to which he might be
entitled. If there are others similarly situated as to claims, they
can themselves commence an action. The defendant is not in court,
asking it to take jurisdiction of its suit against others in order
to prevent a multiplicity of suits against it or by it. It does not
rest with complainant to urge, as a foundation for his suit, that
the defendant may thereby be saved a multiplicity of suits by other
parties when the defendant raises no objection to such possible
suits, and urges no such ground for jurisdiction in equity of the
complainant's suit.
After a careful consideration of all the facts, we are of
opinion that no cause of action is alleged in the bill for an
accounting, or for the appointment of a receiver, or for other
equitable relief. The decree of the circuit court of appeals is
therefore
Reversed.
MR. JUSTICE DAY, not having heard the case, took no part in its
decision.
