New Haven Trust Co., Receiver v. Doherty , 74 Conn. 353 ( 1902 )

The defendants, in all dealings with Schmidt, acted for the company and as its sole representatives. They were its principal officers and were salaried. That they were inexperienced in the business of life insurance did not, if they undertook to conduct it for another, excuse them from exercising such care and skill as ordinarily prudent management might require. This was, in substance, the standard of diligence adopted by the trial court. It remained to apply it to the facts of the case. Unless these were such that no honest, fair-minded and capable men could reasonably come to the conclusion that they showed the defendants to have come short of attaining this standard, the judgment must stand; for it was a conclusion of fact drawn from competent evidence. Farrell v. Waterbury H.R. Co., 60 Conn. 239, 257. We have no doubt that it was one which might be fairly drawn.

Exception is taken to the finding that it did not appear how fully the board of directors was informed of the manner in which the defendants were managing matters with Schmidt. Had their conduct been fully known to and expressly ratified by the board, it would not have relieved the defendants from responsibility to the plaintiff. It might, in that case, have been able to maintain a suit against the assenting directors, for all would have become participants in the wrong to the company; but it could also have sought its remedy against the defendants alone. Torts are joint and several.

The charter of the Connecticut Life Insurance Company was such as to put the board of directors, at all times, in a fiduciary position as respects both the company and its policy-holders. There was no provision for a reinsurance reserve.Betts v. Connecticut Ind. Asso., 71 Conn. 751. The working capital was small. Assessments on policy-holders were relied on as a means for meeting death claims. The managers of such a corporation, as against its policy-holders or creditors, could not give away its rights by ratifying the negligent omissions of duty of the corporate officers. That there were such omissions is a matter of fact which was conclusively settled by the finding of the trial court.

Exception is taken to the finding that "the defendant Platt, as president, was acting manager of agencies" prior to the appointment of Doherty to that position. This, in the absence of any other appointment, was a reasonable deduction from the provision in the constitution that "the executive committee shall appoint a manager of agencies who shall be under their control, subject to the direction of the president," and the by-laws declaring that "the president shall be the recognized and responsible head of the association and shall have the general superintendence of its business," and "shall be recognized as the legal representative of the association."

Nor is there any merit in the claim that the finding that the defendants knew, early in the course of Schmidt's agency, the character of the policies written by him to be bad and the business which he brought unprofitable, was made against the evidence. Two letters, to refer to nothing else, of the defendant Platt, one to the defendant Doherty and the other to Schmidt, legitimately tend to support it.

Exception is taken to the refusal of the trial court to find that premium notes were accepted from Schmidt as cash on his assurance that they were good, and because the defendants knew that such had been the former custom of the company, and that it was also the custom of old, successful and well-established companies to accept notes in payment of premiums. If these are facts, they are not material ones. A custom of life insurance companies to accept notes in payment of premiums was no justification to these defendants for accepting from an agent, under a contract with him calling for cash remittances, notes as the equivalent of cash, although he might affirm that they were collectible.

The court was also justified in refusing to find that the character of the business written by Schmidt was on the average as good as the character of that written by the other agents of the company. If it was in fact bad, it did not tend to disprove the defendants' negligence that they accepted what was no better, from other sources.

Nor is there ground of complaint because it was not found that the percentage of losses on policies negotiated by him was no greater than that customary on policies negotiated by agents of older, well-established and successful companies. Apart from the question as to its competency or materiality, the testimony as to that point came solely from the defendants, whose knowledge as to the experience of other companies was confessedly limited.

The trial court also declined to make a finding that it was the custom of reliable and successful insurance companies to make cash advances to agents upon their renewal interest in business which they had secured, and that this custom was known to and acted on by the defendants. A custom of a strong company to make such advances to a responsible agent would be no guide to a weak company as to making them to an irresponsible agent, and proof of such a custom could be of no substantial importance, unless not only the character of the company pursuing it, but also that of the agent towards whom it was pursued, had been shown. No evidence of that nature was or could properly have been introduced.

The court properly refused to find that all money retained or received by Schmidt belonged to what the company called its "expense fund," which was recognized in all policies as entitled to the benefit of all the first year's premiums and a portion of all subsequent premiums, and that the indebtedness of Schmidt was really due to its shareholders and not to its policy-holders. All this was immaterial to the issues. The receiver stands both for the company and its creditors. Nor does labelling a fund in a particular way change its character. Whatever the company owned was subject to the claims of its creditors, and to be kept primarily for their benefit, except as to profits actually and in good faith divided among its shareholders.

Of the other exceptions to refusals to incorporate particular facts in the finding, there are none which merit discussion. They seem designed to invite a retrial of the whole cause upon its merits.

The appellants ask to have the assessment of damages reviewed. The contract with Schmidt made the company's ledger account with him conclusive as between him and the company at all times as to the amount of his indebtedness. The Superior Court correctly held that, in the absence of clear proof that some proper entry had been omitted, it was therefore conclusive in favor of the company as against the defendants, by whom its affairs were managed and under whose direction the account was kept. The balance which it showed to be due from Schmidt, and to have been lost by their negligence, would therefore have been justly due from them to the receiver, had there not been clear proof that Schmidt was entitled to a certain credit which had not been made. This credit was allowed in assessing the damages for which judgment was rendered.

There is no error.

In this opinion the other judges concurred.