CASTAGNINO et al. v. MUTUAL RESERVE FUND LIFE ASS'N et al., 157 F. 29

RICHARDS, Circuit Judge (after stating the facts as above). If the cas,es cited by the court below were decided rightly, the demurrer was properly sustained, and the judgment should be affirmed,, The present case therefore turns upon the strength of the rule promulgated in those cases. The leading ones, the Clark, from the District of Columbia, the Condon from Maryland, the Taylor from Virginia, and the Howard from North Carolina, were all decided about the same time, in 1899, following the decision in the Clark Case.

Two other cases, the Gault and the Gaines Cases, were decided by the United States district judges in Tennessee, and appeared to have no original force. They simply followed the others.

The leading cases referred to .were all attempts, by suits in equity, to enjoin the collection of illegal assessments, and to recover them back, and relief was denied on the ground that the court of a state other than the state of the insurance company could not exercise jurisdiction to inquire into the internal management and administration' of a mutual life insurance company, because that was beyond its reach, and it could not make its order effective in the way of punishing or correcting either the officers of the corporation or the corporation itself, if it should find there had been a dereliction of duty.

Later than these are the cases of Strauss, Ebert, and Benjamin. Strauss v. Mutual Reserve, etc., Ass’n, 126 N. C. 971, 36 S. E. 352, 54 L. R. A. 605, 83 Am. St. Rep. 699; Ebert v. Mutual Reserve, etc., Ass’n, 81 Minn. 116, 83 N. W. 506, 834, 84 N. W. 457; and Benjamin v. Mutual Reserve, etc., Ass’n, 146 Cal. 34, 79 Pac. 517. The Strauss and Ebert Cases were suits to recover damages for the wrongful cancellation of certain policies of this company. The Benjamin Case was a suit to recover back certain illegal assessments which were made and collected. The cases were not different essentially from that at bar.

In each the court was required to construe the constitution, by-laws, and policy, the fundamental law of the association, and determine therefrom whether certain assessments were or were not valid. That is what the plaintiffs below seek, and that is what the court below held they could not secure, except in New York. Some of the courts which declined to take jurisdiction seemed alarmed at the possibility of confusion if every state in which the insurance company did business should entertain suits to construe and enforce its policies.

It seems to us, however, it would be easier for the faraway litigants to have that matter handled at their homes, rather than take a trip to New York and hire a lawyer there for the same purpose. A citizen who takes a policy in Tennessee in a New York company, after the company had agreed that service of process in Tennessee might be made upon the insurance commissioner of that state, has reason to believe that he or his beneficiaries, if the company fails to treat them rightfully, will have a ready resort to the courts of Tennessee for redress.

It is not necessary to take the view that, in order to construe and enforce a policy, there must be an interference with the internal management of the company. The internal management will go on as before, and there will be no interference with the constitution and by-laws or with the lawful authority of the officers of the corporation. In construing a policy it is not necessary to interfere with the proper discretion of the officers.

Where there is discretion, the officers will be allowed full range; it is only where there is no discretion, and the act is clearly unauthorized and wrong, that the law will interfere. In the cases to which we have referred, one in North Carolina, one in Minnesota, and one in California, it was necessary to construe the policy in connection with what the company had done, as shown by the insurance reports of New York. But the matter was entirely simple. There was no attempt to entrench upon the rights or the authority of the officers.

What they did was plain, and the law was plain, and there was no reason why the court of the state where the policy holder lived and the insurance was written and the contract made should not take jurisdiction of the suits that resulted. If all this applies to the courts of the states, much more does it apply to the courts of the United States. The judgment is reversed, and the case remanded for further proceedings.