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Andrews v. Equitable Life Assur. Soc. of United States

November 15, 1941


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Michael L. Igoe, Judge.

Author: Minton

Before EVANS, MAJOR, and MINTON, Circuit Judges.

MINTON, Circuit Judge.

Fifteen plaintiffs filed fifteen separate suits against fifteen mutual life insurance companies, each plaintiff claiming to represent in each suit all others who were similarly situated with respect to the defendant, and praying for an accounting and distribution of the proportionate shares of an alleged common interest in undistributed surplus funds held by the respective companies, which were accumulated during the plaintiff's memberships in said companies.

Motions to dismiss were filed by the defendant and sustained in the District Court, and each of the complaints was dismissed. The causes being similar and each plaintiff's complaint stating essentially the same cause of action, the fifteen suits were consolidated, and are before us as one appeal. Our decision in one case will therefore dispose of all, and in our opinion we shall therefore treat them as one case.

Plaintiff alleges he is a citizen and resident of Illinois, and the defendant is a non-resident; that the defendant is a mutual insurance company; that the plaintiff is a former policyholder and member of the company, and during the life of the policies issued to him by the defendant, the premiums were paid as long as the policies remained in force.

The plaintiff alleges that a surplus fund was accumulated by the defendant in excess of the legal reserve, and that this surplus belongs in equity to all the members who contributed to the same in proportion to their respective contributions, and the earnings thereon, during the time they were members of the defendant company, and that by the payment of premiums on the policies, the plaintiff contributed to this fund, which now amounts to several million dollars.

It is further alleged that other policyholders likewise paid premiums on their policies until they either lapsed, were cancelled, or were surrendered, and they likewise contributed to the surplus fund, and the plaintiff alleges that he brings the suit for himself and others in like situation.

He alleges that this fund is held by the defendant in trust for him and others he purports to represent. The complaint asks for an accounting, the appointment of a receiver, and the distribution of the funds according to the interests of the parties therein.

We are met at the threshold of this case with a challenge to the jurisdiction of this court. Defendant, by its motion to dismiss, raises the question of the right of the plaintiff to claim the size of the fund in question as the measure of the jurisdictional amount of $3,000. It is admitted that no plaintiff's claim of itself equals the jurisdictional amount or is even close to it. The plaintiff's position is that his claim when aggregated with the claims of thousands of other policy-holders into a common fund far exceeds the jurisdictional amount, and as this is a suit not only by the plaintiff but for others in a like situation, the jurisdictional amount is present.

The question therefore is: May the plaintiff aggregate his claim with the claims of others he purports to represent in order to make up the jurisdictional amount? We do not think so.

The right of the plaintiff and his alleged class to do so will depend upon the nature of their claim against this fund and not the size of the fund. The plaintiff contends that his right is joint with others in the alleged class, and grows out of a relationship that comes from their membership in a mutual company. In our opinion, the rights of the plaintiff and the persons he purports to represent all stem from their policies in the defendant company. A copy of one of the policies is filed with the complaint as an exhibit. It therefore becomes a part of the complaint and may be properly considered in determining sufficiency thereof. Pelelas v. Caterpillar Tractor Co., 7 Cir., 113 F.2d 629-631, 632. The policy provides that it and the application attached thereto constitute the whole contract between the parties. Whatever rights a member of a mutual company has are delineated by the terms of the contract, and come from it alone.

In Equitable Life Assurance Society v. Brown, 213 U.S. 25-47, 29 S. Ct. 404, 411, 53 L. Ed. 682, the Supreme Court said: "We also think there is no ground for the contention on the part of the complainant that he, as a policy holder, 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."

In Brown v. Equitable Life Assurance Society, 142 F. 835-839, which was the opinion affirmed by the Supreme Court in the case just cited above, the Circuit Court for the Southern District of New York said: "The rights and liabilities out of such a relationship spring entirely from the contract and are ...

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