franchise for the exercise of which a legislative grant must be shown.

§ 958. Franchises created by statute. Where by statute the legal exercise of a right which at common law was private, is made to depend upon compliance with conditions interposed for the security and protection of the public, the necessary inference is that it is no longer private, but has become a matter of public concern, that is a franchise the assumption and exercise of which, without complying with the condition prescribed, would be an usurpation of a public or sovereign function. In this case the legislature has done no more than was done by the court in the other instance, when it, from considerations of a public nature, declared as a principle of the common law, that facts brought to its notice or of which it then took judicial notice warranted the application of principles existing independently of a legislative declaration to the effect that the right claimed was matter of public and not exclusively of private concern.1

1 "The franchises of a railroad corporation are rights or privileges which are essential to the operations of the corporation, and without which its roads and work would be of little value, such as the franchise to run cars, to take tolls, to appropriate earth and gravel for the bed of its road, or water for its engines, and the like." Lawrence v. Morgan's Louisiana & T. R. & S. S. Co., 39 La. 427; 2 So. 69. An illustration of a privilege of common or private right at common law, but which by statutory recognition and regulation is made a franchise, is afforded in the case of life insurance. There was no class of business the transaction of which as a matter of private right was better recognized at common law than that of making contracts of insurance upon the lives of individuals.

But now by statute in almost if not quite all the states stringent requirements as to security of the persons dealing with them and the making and filing reports with public officers for public information are provided and must be strictly observed and complied with before any person, association or corporation may make any contract of life insurance.

The effect of such statute is to make that a franchise which previously had been a matter purely of private right. So when a state has prohibited by law foreign corporations from carrying on business within her territory, as may be

§ 959. Life insurance by beneficial societies.-Curious and instructive cases have arisen in several states with respect to the business done by certain corporations organized as benevolent and fraternal associations, ostensibly not to do the business of insurance for profit, but claiming to be for social, benevolent and religious objects, and as such exempted by statute from the requirements of the statutes concerning insurance companies in the matter of providing a guarantee fund, raising capital, and making periodical reports to insurance commissioners. Under color of the statutory exemption many such associations have engaged in a regular mutual insurance business under the specious guise and laudable pretext of benevolence and cooperation.1

It is plain, on principles often declared, that all such institutions are flagrantly usurping the functions of franchises and privileges of insurance companies, and that on proceedings against them by quo warranto no court would hesitate to forfeit their charters and mulct them in adequate fines.2

done, or has imposed conditions to the doing of business therein by foreign corporations and such prohibitions or conditions are disregarded, quo warranto will lie against them, not to forfeit the franchise of being a corporation but to forfeit and recover the statutory franchise of insuring life, health or property so usurped. State v. Railroad Co., 25 Vt. 433; State v. Fidelity and Casualty Ins. Co., 39 Minn. 538. See also, People v. College, 5 Wend. 211; State ex rel., etc., v. Fidelity & Cas. Ins. Co. (Iowa, 1889), 26 Am. & Eng. Cor. Cas. 22.

1 Many schemes of this character have been set on foot in New York and California, where extremely liberal exemptions have been construed by incorporators and voluntary associations to authorize reckless and indiscriminate mutual life insurance on the benefit assessment plan. A claim that a benevolent order was organized solely for social, benevolent and social purposes is not conclusive as to its character. State v Nichols (Iowa), 41 N. W. Rep. 4.

2 In a case before the Supreme Courts of Texas it appeared that individuals had organized in the name of the "Masonic Mutual Benevolent Association of Texas" and in that corporate name were issuing policies in the form of certificates of membership and of the dues exacted on these from time to time appropriated a large percentage to themselves as managers and officers in the shape of salaries. It was held that they were usurping the franchise and

§ 960. Statutory authority to exercise corporate powers an exemption from common law prohibition.-The formation of a corporation without sovereign sanction is prohibited by the common law, and what is called the franchise of forming a corporation is but a statutory exemption from the operation of a common law prohibition. But the legislature, when it dspenses with the operation of the common law rule, either by special

privileges of regular mutual insurance companies which had complied with the law as such and were subject to have their charter cancelled. Farmer v. State, 69 Tex. 561. In construing the statutes of Texas, which differ in no substantial respects from those of many other States on the subject under consideration, the court said: “If organized for profit the law did not intend to change their nature or declare that to be benevolent which was not so in reality. The statute was clearly aimed at associations that had obtained charters as benevolent institutions but were using their charters for purposes of gain to their officers, by requiring of all such societies to make a report of the character set forth in the statute. If such report was fairly made their true purpose could be ascertained; and if benevolent they might still exist free from the requirements of title 53; but if managed for the purposes of profit to their officers, they would be deemed insurance companies subject to the provisions of that chapter. The evil the statute (the statute requiring periodical reports) intended to remedy was the conducting of an insurance company for the profit of its officers under the guise of benevolence and in evasion of the insurance laws.

The benefits received (by the holders of membership certificates) are not gratuitous. They are due to the member on account of the money he pays into the society. It takes the risk of his continued existence and good health. If it be benevolence to pay out money under such circumstances, then every mutual life insurance company is acting in a benevolent manner toward the family of an insured member when it pays the policy it had issued them for a money consideration. It matters not what name the association may assume. The law looks to the real objects of the body and not to the name indicative of benevolence which it may have assumed. These views will be found supported by the following additional authorities: Comm. v. Weatherbee, 105 Mass. 149; State v. Farmer Benev. Asso., 18 Neb. 281; Bolton v. Bolton, 73 Me. 299; State v. Leithelt, 32 N. W. Rep. 787; May on Insurance, Sec. 550; State v. Citizens Asso., 6 Mo. App. 163; State v. Merchants, etc., Asso., 72 Mo. 146; People v. Wilson, 46 N. Y. 477; State v. Standard Life Asso., 38 Ohio St. 281. The legislature of California, of New York, and of several other states early realized the magnitude of the trust necessarily reposed by the people in certain corporations such as banking and insurance companies; and in order to prevent gross abuses of trust and confidence by them enacted stringent laws for their restriction and regulation. The evident intendment of these enactments taken as a whole is the protection of the people from imposition and loss at the hands of dishonest and irresponsible insurers, and incidentally the protection of legitimate solvent and responsible insurers which have complied with those restrictions and sub

charter or general law, usually annexes certain conditions to be performed in order to enjoy the benefits of the exemption; and in the absence of such performance the common law rule operates to make the assumption and exercise of corporate capacity the usurpation of a franchise.1

mitted to the burdens imposed by law, from unfair and unequal competition on the part of those of a different character who have not. It may therefore be stated as a fundamental principle that whatever has the effect of defeating either directly or indirectly this manifest purpose of the law is usurpation and a violation of its spirit. The usual modus operandi of "benevolent" insurers is for five or more individuals to sign, acknowledge, and file in the office of the county clerk articles of incorporation reciting that they do incorporate, not for profit but for benevolent objects, that is, "to guard its members against the ills of pecuniary want during life and especially during the period of infirm old age, and at death to make provision for their families and friends."

From a candid consideration of the character of business done by this class of associations it is easy to see that their business is not purely benevolent nor their motives entirely disinterested, whatever the character they give themselves, their articles and constitution. There are only two classes of motives which actuate human beings, selfish and unselfish. The individuals who conduct the business under consideration are prompted by motives belonging to one or the other of these classes, that is, they are pushed forward by philanthropic zeal or else the business yields them a profit. In the latter case it does not come within any of the usual exceptions contained in statutes how much soever it ostensibly partakes of their nature in the high sounding titles assumed by them. While the contracts made by most associations of this class are in form and substance life insurance policies, it borders on the libellous to designate the business done by them as life insurance. It is classing with a legitimate and honorable calling that which often turns out to be grand larceny on a petty scale and petty larceny on a grand scale. But as it takes the place of life insurance and is believed and accepted as such by many, and prevents insurance in regular companies, it practically defeats the salutary provisions of the insurance laws and must be dealt with to all practical intents and purposes as life insurance, legal or illegal. The articles of incorporation standing alone are without objection. It is in the conception and execution of benevolent designs that these benefactors of the race cause trouble.

But granting that their contracts are honestly and impartially carried, out let us ask, as a legal proposition, what privilege is exercised, what advantage enjoyed and what opportunity for profit furnished companies which have complied with the laws by providing the guarantee fund and making annual statements to State Insurance Commissioners that are not equally possessed, enjoyed and exercised by the class under consideration? And as the business of life accident and health insurance is as has been shown a franchise a quo warranto proceeding will lie to forfeit the franchises usurped by this class of companies. 1 The right to maintain a public ferry can only be acquired by a grant from the state Appeal of Douglas, 118 Pa. 65; 12 A. 834. See also, People v. Ander

Under a general law by which all persons are given equal right to form corporations for general purposes on express terms the franchise of being a corporation is not derived from the statute but from the act of the incorporators who by performing the prescribed acts take advantage of the repeal of the common law prohibition.

So we have franchises recognized as such at common law and hence not allowed to be exercised without a repeal of the common law prohibition; and we have franchises made such by legislative prescription.

To determine what privileges not prohibited by statute the usurpation of which will authorize a quo warranto proceeding to oust persons and corporations from their exercise, reference must be had to the common law as judicially declared from time to time, as well as to legislative enactments.

§ 961. Not every privilege a franchise. To determine whether the proceeding will lie against the exercise of privileges claimed to be established as matters of publici juris by statute, inquiry must be directed to two questions: 1. Has the legislature prohibited its exercise by citizens generally either with or without conditions and if it has; 2. Were the evils in view as a reason for the prohibition of a public or private character.

There are many prohibited acts which a person may do every day and thereby subject himself to severe penalties, the doing of which, however, will not authorize a quo warranto proceeding. This is so evident as

son, etc., Co., 80 Cal. 205; 18 P. 308, holding that a toll company which acquired its right to construct and maintain its toll road under an order of a county board made in pursuance of a special act providing that the board may grant a franchise "for any term not more than fifteen years from the date of said charter" has no right to collect tolls after the expiration of such 15 years.