State ex rel. Sheets v. Pittsburgh, Cincinnati, Chicago & St. Louis Railway Co.

We assume that the relator commenced the action in the circuit court against the defendant railway company under favor of Section 6761, Revised Statutes, which is:

“A like action (quo warranto) may be brought against a corporation: (1) When it has offended against a provision of an act for its creation or renewal, or an act altering or amending such acts. (2) When it has forfeited its privileges and franchises by non-user. (3) When it has committed or omitted an act which amounts to a surrender of it's corporate rights, privileges and franchises. (4) When it has misused a franchise, privilege or right conferred upon it by law, or when it claims or holds by contract or otherwise, or has- exercised a franchise, privilege or right in the contravention of law.”

Inasmuch as neither “the voluntary relief department,” so called in the statement of the case, or its members, are parties to the suit, it would seem that the right to the remedy, is not under clause three of Section 6760, but under clause four of Section 6761, just quoted. And the prayer of the petition is:

“That the defendant be ousted from further continuing said business of insurance by means of its said relief department or in any other manner whatever, and asks such other relief as the nature of the case may require.”

So, it is the complaint ’against the railway company, that under its charter and franchise as a railway company, it is conducting an insurance business in contravention of law, from which it should be ousted.

The answer denies that the defendant company transacts an insurance business, and in the circuit court certain facts were agreed upon in the trial and submission of the issue, some of which appear in the statement of the case.

But there are some additional facts contained in the agreement, which are necessary to be noticed in the determination of the important controversy, for it is not contended that the defendant openly, and in the usual manner, conducts insurance, and holds itself out to the public as an insurance company, and clearly such is not the fact in the case before us.

It is claimed by the relator, however, that the business done under the name of “the voluntary relief department” and in the *59manner and by the means employed, amounts in substance to an insurance business, and which exceeds the charter powers of the company. A proper determination of this question, necessarily requires of us something more than a casual examination of the plans, structure and operation of the machinery by which the business in question is advanced and carried forward.

It no doubt is true that the organization of the so-called relief department, was in the first instance projected by the defendant and other railway companies, under the control and management of the Pennsylvania Co., and perhaps the plan may have emanated from the latter company, but this is not important in this ease, for the record discloses that the defendant, having a relief department, such as is now under criticism, in November, 1890, by written contract, with a number of other railway companies, who had leased their respective lines to the Pennsylvania Co., associated themselves in the administration of their respective relief departments, and they are denominated “The Pennsylvania Lines west of Pittsburgh/-’

They adopted certain regulations, and it is cited that one of the objects of the association is to “secure uniformity and economy;” that to accomplish this they “associated themselves” for the purpose of a joint administration and regulation of said respective relief departments under one common organization to be known as “The voluntary relief department of the Pennsylvania Lines west of Pittsburgh.”

It further appears that prior to November, 1890, the Pennsylvania Co. and the defendant company had “each respectively established a relief department for the benefit- of its service and employes,” and any other companies owning lines west of Pittsburgh which were being -operated by the Pennsylvania Co., and which had adopted or would adopt similar relief departments, might associate with the former companies for the joint administration of the relief departments.

This brief history explains the character and form of the application for membership which is found in the record, and may give some color to the other features of the case. .But the defendant, as did each of the other companies so associated, no doubt, continued its own separate relief department, with a subordinate, or, separate advisory board, partly composed of men ^elected by *60the contributing members and partly of men selected by the boards of directors of the constituent companies.

With this understanding of the general outlines of the origin, purpose and character of the relief department connected with the-defendant, is it guilty of conducting an insurance business in contravention of law? This question suggests another: What is insurance business ?

Various definitions have been given -in brief of counsel, but we are content with the summary given in Bouvier’s Law Dictionary (Rawle’s Revision), 1068: “A contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a specified subject by specified perils.”

In another form, on the same page, it is said: “An insurance in relation to property is a contract whereby the insurer becomes bound, for a definite consideration, to indemnify the insured against loss or damage to a certain property named in the policy, by reason of certain perils to which it may be exposed.”

Life and accident insurance is a contract whereby one party for a stipulated consideration, agrees to indemnify another against injuries by accident, or death from any 'cause not excepted in the contract.

In the parlance of the business of insurance, ordinarily the contract is called a policy; the consideration paid, the premium; and the/events insured against are called “risks and perils.” In case of injury or destruction of the property insured, or injury 'by accident, or liability for death, the liability is called a loss. Policies of this, character may be preceded by an application for the same..

In the .relief department practice under review, an application is made 'the basis for membership, and the applicant must be an employe of the company to which the department is attached.

• It is 'required to be addressed as follows: “Pennsylvania Lines west of Pittsburgh, voluntary relief department. Application for membership in the relief fund. To the superintendent of the relief department.” '

The applicant then states his name and residence, and the name of the company with which he is employed, the nature of the service engaged in, and that he has knowledge of and will be bound by the regulations of the relief department; and he- constitutes the proper agent of the railway company his agent to apply as a “vol*61untary contribution” to tlie relief fnncl, from his wages according to the rate of wages earned as graded in the regulations, for the purpose of securing the benefits provided for in the regulations for a member of the “relief fund,” and “additional death benefits,” stating his class, and name of the beneficiary in case of death.

The application contains the following stipulation, which will be discussed later in the opinion: “And I agree that the acceptance of benefits from the relief fund for injury or death, shall operate as a release of all claims for damages against said company, arising from such injury or death, which could be made by or through me, and that I or my legal representatives will execute such further instrument as may be necessary formally to evidence such acquittance.”

There are other statements in the application not material to our inquiry, and a certificate is issued in pursuance of the terms of such application, if it be approved.

Section 31 of the regulations provides, that: “The word 'contribution■ wherever used in the regulations, or in the organization adopted in connection therewith, shall bo held and construed to refer to such designated portion of the wages payable to an employe as be agrees to receive in the form of a right to benefits, in and through the relief fund; and the words ‘'contributors/ ‘contributing employes’ — and like words or phrases, — are descriptive of employes so agreeing.” It is stated in the third regulation, that: “The object of this department is the establishment and management of a fund to be known as ‘the relief fund/ for the payment of definite amounts ho employes contributing to the fund * * *

when they are disabled by accident or sickness, and in the ovenr-of their death, to the relatives or other beneficiaries specified in the application of such employes.” And by regulation four it is said, this fund is formed by voluntary contributions from employes; appropriations by the railroad company when necessary to make up a deficit, etc.

In regulation ten it is provided that: “The money received from the ‘relief fund’ shall be held by the company in trust for the relief department.” Investments made of the fund, if any, shall be in the name -of the company “in trust for the relief department.”

The railway company is the depository of the fund so raised and is responsible for its management and safekeeping, and agrees *62to make good any deficit in tlie fund, which becomes necessary to meet the proper demands on the relief department. This management is by the general manager of the company, and the advisory board, the latter being composed of persons mutually selected by members of the fund and the companies. Moreover, the railway company defrays all the expenses ‘of the management, and the emergency services of the surgeons are rendered free by the company surgeons. "Not a dollar of the fund ever belongs to the railway company, and it primarily is made up of a certain part of the wages of the employe retained for that purpose by his direction. The concern has no capital stock. The doors to membership in this fund are not open t'o the general public. While an employe is not required to become a member, none but employes can do so. "While it is true that the railroad company is the depository of the fund, and stands good -for its safekeeping and proper disbursement, it is, after all, but the custodian of a certain portion of wages, which the employe directs shall be retained to produce the benefit fund, from which he may draw in times of sickness or other disablement.

Is this an insurance business? It is not held out t'o be such. The objects stated in the organization and regulations are clearly otherwise. Neither the railway company nor its relief department advertises for, or in any other way solicits patronage. The members of the fund are volunteers.

The business transacted, while in part done by an officer of the company, aided by representatives of the members, is not mingled with the business and 'accounts of the railway company. It has no offices set' apart for an insurance business, and has- no agents to promote its interests. It does not undertake to insure or indemnify against either sickness, accident, or death. Such -is not the language or spirit of the relation between the member and the fund. On the contrary, in case of sickness or injury, the members may draw froan the relief fund what they mutually have created from a portion of their wages retained for that purpose, and the payment of the benefit, is not the payment of a loss on a risk named in a policy or other instrument of insurance.

This differs from an insurance business as commonly, and we might' say, universally conducted. It is organized on an insurance basis; advertised as such. It needs and uses agents to represent it, *63and it solicits from the general public. It has offices and current expenses, etc., and to protect the public, insurance laws have been enacted requiring publicity of its resources and methods of business, and in most cases periodical sworn statements of the condition and extent of the business being transacted. All this to prevent imposition upon the public, which might be misled by the representations of agents, or by published inducements for patronage. Another marked distinction between the relief department and insurance business is, that there is no profit to the railway company, and no profit, in the business or commercial sense, to the members of the fund, except' such increase of the fund ns may arise by way of interest on its investment, in case of a surplus. Those who organize or embark in insurance business have profit in view as a recompense for the industry, ability and capital invested, and it would be a strange insurance business that would omit this great incentive from its plans and purposes.

But it is said there is a resulting benefit to the railway company from the maintenance of the relief department, in the nature of profit, and that it consists in the. stipulation in the application for membership, releases the company from all liability to him or his beneficiary, for damages on account of injury or death. We have hereinbefore quoted that stipulation, but it must be i bserved that the member or beneficiary, after the injury, and all its facts and circumstances are fully known, has the right to elect as between the acceptance of benefits and a claim against the company for damages. He is not compelled to accept benefits or nothing; and he waives no right to proceed against the company until he has accepted the benefits provided for him. It- is true, that very many may accept the benefits, and release the company, but it is not every injury to the employe, and not every case of his death, from injury in the service, that furnishes a good cause of action against the company. Whatever benefit may accrue to the company, by the acceptance of benefits, cannot be called "profit" because it is but a remote or probable sequence to the membership of the employe. Indeed it seems that the liability of the railway .company is enlarged by the relief department It vouches for the payment of benefits if accepted, and independent of any right of action against it, and leaves open the option to accept benefits or decline them and claim damages of the railway company.

*64If it is said that the company expects to realize from the relief department, by reason of more loyal service, and increased confidence of the employe in his employer, we may reply that loyalty of service and reasonable confidence are dne the employer so long as he faithfully and honorably performs his contract and discharges all his duties to his employe. It seems difficult to figure out the relation that exists after and on account of this membership, the idea of profit to the company. If it breeds good will and contentment, the same is laudable, and we see nothing in the rules of the department that takes away or jeopardizes a single legal right of the employe. If sick, he may receive the aid. If injured in the service even through his own negligence, or in a service the risks and perils of which he assumed, he is entitled to his share of the fund. And if his injury is the fault of the company, he can elect to take the benefits provided or sue at law.

In one form or another the controversy we are dealing with has been before other courts of final resort, and the almost, if not altogether unanimous holding is, that managing and conducting-such a relief department is not insurance business, but on the contrary, a beneficial provision merely, for employes, which the railway company might aid in promoting. We will note but a few of such cases.

Commonwealth v. Equitable Beneficial Assn., 137 Pa. St., 412, is a case where there was a proceeding in quo toarrcmio to require tire defendant to show by what authority it claimed the right to make contracts of insurance and issue policies of insurance. The defendant answered the writ and denied making contracts of insurance, or issuing policies of insurance as alleged by the attorney-general. In the syllabus the Supreme Court of Pennsylvania say:

“1. A contract of insurance is purely a business adventure, not founded on any philanthropic or charitable privilege; and the design and purpose of an insurance company, 'and the dominant and characteristic feature of its contract, is the granting of an indemnity, or security against loss, for a stipulated consideration.

“2. But the design of what are known as benevolent societies, which are purely of a philanthropic, or benevolent character is, not to indemnify, or secure against loss, but from the contnDa-tions of members, to accumulate a fund to be used in their own aid, or relief, in the misfortunes of sickness, injury or death.”

*65At the risk of being prolix we are tempted to adopt here a paragraph from the opinion of Justice Clark, on page 419 of that case:

“To grant indemnity or security against loss, for a consideration, is not only the design and purpose of an insurance company, but is also the dominant and characteristic feature of the contract of insurance. What is known as a beneficial association however, has a wholly different object and purpose in view. The great underlying purpose of the organization, is not to indemnify or secure against loss; its design is to accumulate a fund from the contributions of its members * * * to be used in their own aid and relief in the misfortunes of sickness, injury or death. * * * The motives of the members may be to some extent, selfish, but the principle upon which they rest is founded in the considerations intended. Their benefits, by the rule of their organization, are payable to their own unfortunate, out of funds which the members have themselves contributed for the purpose, not as an indemnity, or security against loss, but as a protective relief in case of sickness, or injury, or to provide the means of a decent burial in tire event of death. Such societies have no capital stock. They yield no profit, and their contracts, although beneficial and protective, altogether exclude the idea of insurance, or of indemnity, or of security against loss.”

The above case was quoted from with approval in Northwestern Masonic Aid Assn. of Chicago v. Jones et al, 154 Pa. St., 99.

More directly in point is Beck v. The Pennsylvania R. R. Co., (63 N. J. Law, 232.

The facts in th'at case show that it involved a relief department, organized precisely like the one under consideration. The opinion was by a unanimous court, and it held that the transaction was not an insurance contract within the meaning of insurance law. It also held that it was neither ultra vires, nor against public policy.

On page 241 of the opinion, Magie, Chief Justice, speaking of the relief department, says: “It is limited to such of the employes of the company as voluntarily apply for admission to the fund and are admitted. They agree with each other 'and the company to contribute a portion of their wages to create a fund out of which they shall be paid certain sums in case of sickness or injury, and out of which in case of death, certain sums shall be paid to the beneficiaries or next of kin. The sum so paid may save from want, but does not increase the estate of the employe. * * * I can perceive no reason why the establishment of such a fund and the agree*66ment of those who contribute to it as to it's distribution can be hekf to fall within the regulations of the insurance laws. Such association creates its own fund by voluntary action, and distributes it by an agreed-upon plan, and the contract between them is not of insurance but of beneficial relief. As they have neither sought nor obtained corporate powers for their purpose, they are not amenable to prohibitions against the use of corporate powers for that purpose, if any such exists. * * * ”

The question was also before the Supreme Court of Iowa in two different cases. In Donald v. C. B. & Q. Ry. Co., 98 Ia. 284, the character of a similar relief department was under review. One proposition of the syllabus is: "An association organized by a railroad company for its employes, which agrees to pay stated sums to members or their beneficiaries in case a member is killed or injured in the employment, tire company paying operating expenses nad making good deficiencies after assessment, is not an insurance company, but a beneficiary society.”

It was also decided in that case that the contract involved was not against public policy, and the reasons for the conclusions, we think are unassailable.

Again, in Maine v. The C., B. & Q. R. R. Co., 109 Ia., 260, the same holding was made. It is there decided also that a railroad company has implied power to make such contract.

The foregoing cases cite many others to support them, but we have no further room for their consideration. The cases form a uniform current of judicial opinion. We have not been cited t'o a single case holding a contrary view, and our research has not been awarded with one. We think the tide of judicial opinion is irresistible.

There is another reflection in this case. We have, to a reasonable extent, examined our statutes upon the subject of insurance and insurance companies. They provide carefully for their charter and organization; and for the deposit of the required amount of. money or securities before proceeding to business. Certain sworn statements, and annual reports are to be filed with the insurance department, etc.; but we find no section that makes a call upon such an association as this relief department. The Legislature thus far has not recognized its business as that of insurance. On the contrary there seems to be an express exception in favor of such associations.

*67Section 3631a,, Revised Statutes, provides: “This act (viz. Sections 3630a to 3631) shall not apply to any association of religions or secret societies, or to any class of mechanics, express, telegraph or railroad employes, or ex-nnion soldiers, formed for the mutual benefit of the members thereof, and their families or blood relatives, exclusively, or for purely charitable purposes;” and then provides how such associations may incorporate.

See also Section 3631-23, Revised Statutes, where there is an exception of similar associations from the operation of insurance laws. We think it apparent from these and other sections that it has been the legislative intent to permit some of the plain and useful things of every da3 life to be attended to- without the wearing of a corporate charter.

It is also urged in argument for the relator, that the acts of the railroad company in promoting and managing the relief department, are ultra vires, and therefore the defendant should be ousted from performing them.

Some of the cases we have cited deny this proposition, and there are many others of the same tenor and import. For the purposes of this branch of the case, we need seek no further than a decision of this court, in Gas & Fuel Co. v. Dairy Co., 60 Ohio St., 96. The first section of the syllabus expressed the opinion of the entire court, and it declares: “The implied powers which a corporation has in order to- carry into effect those expressly granted, and accomplish the purpose of its creation, are not limited to such as are indispensable for these purposes, but comprise all that are membership, that the acceptance of benefits under the certificate of necessary in the sense of appropriate, convenient and suitable, including the right of reasonable choice of means to be employed.” The second section of the syllabus lacked the support' of but one member of the court, and it declares: “Acts of a corporation, which, if standing alone, or engaged in as a business, would be beyond its implied powers, are not necessarily ultra vires when they are incidental to, or form part of- an entire-transaction that in its general scope is within the corporate purpose. The validity of such 0 transaction is to be determined from its general character considered -as 'a whole, rather than by segregation into individual parts, and each regarded as distinct from the others.”

The most of the work of an employe of a railroad company is *68hazardous, and frequent injuries are sustained requiring surgical and medical attention. The company has its surgeons along its lines to respond in case of injury, and the more efficient the organization of this benefit .branch of the service, the better for both the master and servant. And yet the company should not be charged with conducting a medical or surgical school. If it should establish hospitals for its injured employes and equip them with everything conducing to comfort and speedy recovery, including surgical attention, its acts should not be regarded as ultra vires, in that it conducts hospitals.

It may, for the purposes of careful and successful management of its business as a railroad, establish telegraph and telephone facilities and install a proper number of competent operators, and yet it may not be charged with carrying on a telegraph and telephone business. It may establish hotels and eating rooms along its lines and not be in the hotel brisiness. All these things aro incidental to the main occupation and 'are within the implied powers conferred.

Again, it is said that the scheme adopted and the conditions of membership meet the condemnation of public policy. Some of the cases already cited consider this .question also. There are very many others, a few of which we cite: Otis v. Pennsylvania Co., 71 Fed. Rep., 136; P., C., C. & St. L. Ry. Co. v. Moore, Admr., 152 Ind., 345; Johnson v. Philadelphia & Reading R. R. Co., 163 Pa. St., 127; Beck v. Pennsylvania Co., supra; Hamilton v. St. L., K. & N. W. R. R. Co., 118 Fed. Rep., 92.

These cases cited many others to the same effect, and as on the first branch of this case, the 'authorities ¡Dresent a solid front.

We need not pursue this discussion further than to cite a leading case decided by this court: P., C., C. & St. L. Ry. Co. v. Cox, 55 Ohio St., 497. That case involved the same relief department developed in the present inquiry, and the certificate of membership is precisely like the form now in use by the defendant, and this' court held expressly that the contract between the members and the company is not contrary' to public policy. We are still satisfied with that decision, and believe it to be entirely sound.

The grounds for ousting the defendant have not been sustained. The circuit court correctly so held' and its judgment is affirmed.

Judgment affirmed.