Rosenberger, Light & Co. v. Washington Mutual Fire Insurance

Mr. Justice Trúnkey delivered, the opinion of the court, The plaintiffs, by taking the policy, became members of the corporation. Sect. 8, of the act of incorporation, Pamph. L. 1860, p. 770, declares, “That in case of loss by fire the managers shall have power to levy and assess the amount of said loss upon the persons insured in this corporation, pro rata, according to the amount or value of property insured by each respectively.” Art. 14 of the by-laws directs that, “in all cases of loss or damage by fire to any member of this company, after the damage is ascertained, an equal and just assessment shall be laid upon every member of the company in proportion to the amount insured sufficient to cover said loss.” The assured agreed “to pay the said company such sum or sums of money, and at such time or times as the board of managers of said company may, for the purposes of paying losses by fire and the necessary expenses of the said company, require, within sixty days after notice and demand.” Nothing can be more certain than that the managers had no authority to make assessments in anticipation of losses. The words of the charter and by-law need no interpretation; they are too explicit to admit of doubt, and the contract being consistent [212] therewith is governed by them. Indeed the latter contains no more than is necessarily implied in the former, for the expenses of the company must be borne by its members. They are, as members, subject to liabilities and entitled to privileges. A member may participate in its benefits, is presumed to know its rules and regulations, its books are evidence against him, and he shall bear his proportion of burdens. His corporate rights may be subject to the control of the corporation, but his rights as a party insured rest on the contract. Assurer and insured alike are bound by the charter, and neither can do what it does not authorize; nor can either change a by-law so as to modify the contract without the other’s consent: Insurance Co. v. Conner, 5 Harris 136. Assessments must be limited to the objects declared in the charter and by-laws. The managers may exercise a reasonable discretion in fixing the amount to be raised, for the charter must be construed in reference to its practical working. The actual sum required can be ascertained; but as expense must be incurred in the collection and loss be sustained in consequence of insolvency of members, proper allowances may be made for failures likely to result from these and other causes, and if the allowances are reasonable in amount and consistent with good faith on the part of the managers, they will not vitiate the assessment. But if these reasonable limits are disregarded and transcended, purposely or by culpable carelessness, the assessment is illegal and void: Jones v. Sissor, 6 Gray 288; Peoples’ Eq. M. Fire Ins. Co. v. Babbitt, 7 Allen 235. In the latter case and in Traders’ M. Fire Ins. Co. v. Stone, 9 Allen 483, it was held that an addition to the debts and reasonable allowance, of one hundred per centum, was so unreasonable as to make the assessment void. In those cases there was no evidence tending to justify so large an addition or excess; and, in the absence of such evidence, so large an excess, in most cases, would be prima facie proof of fraud or gross negligence. By the terms of the charter the plaintiffs submitted themselves to the acts of the managers as representatives of all the members. They were bound by the assessment, unless they can show fraud or gross mistake. The presumption is that it was properly made : Hummel & Co. ’s Appeal, 28 P. F. Smith 320. To overcome that presumption, the plaintiffs called J. H. Miller, who testified that assessment No. 5 realized, after deducting expenses of collection, $4950.34; that the liability of the company at the time it was ordered was $2305.48; and that the difference, $2644.86, was in anticipation of future losses that might occur. That testimony should have been submitted to the jury, with instructions that if they found the addition to the sum actually needed, was levied by the managers for the purpose of accumulating a fund for payment of future losses, they exceeded their authority and no member was bound to pay the assessment. Were there no direct proof of actual [213] intent to violate the charter, the evidence showing the large sum netted, beyond that required and authorized, should have been submitted with proper instructions. A positive intent to violate is a fraud; and heedlessly levying a large and unreasonable sum in violation of the charter is a gross mistake, affecting the members as if a fraud. It is no part of the contract that members shall pay pro rata, into a fund for payment of losses when they shall occur, and which may not occur till after their membership ceases. The assured contracted to pay assessments for losses after they occur. Simple excess arising from error of judgment, where the managers acted honestly and prudently, wmuld not vitiate the assessment. To neglect payment of a fair assessment suspends the policy. If the assessment was invalid, the policy was not forfeited or suspended by neglect or refusal to pay it: Peoples’ M. F. Ins. Co., Petitioners, 9 Allen 319. From the foregoing it follow's that there was error in entering judgment in favor of defendant, non obstante veredicto, on the reserved question; and, also, in the reservation itself. Had Miller’s statements been admitted by defendant, judgment could now be rendered for plaintiffs upon the verdict. His testimony was uncontradieted and no reason appears for doubting it; yet without an admission, by a party, of its truth, oral testimony against him cannot be taken from the jury in a reserved point that rules the case. Judgment reversed, and venire facias de novo awarded.