Capital City Mutual Fire Ins. v. Boggs

Opinion by Willard, J., There are eighteen assignments of error in this case, sixteen of which in no way conform to Rule XYI. of this court. A consideration of the seventeenth and eighteenth assignments, however, will enable us to dispose of tbe case. We have carefully considered the findings of fact and law and all the testimony, in order to here enter a proper judgment, but the testimony is so incomplete and unsatisfactory that this cannot be done, and tbe case must be remanded for further proceedings under the submission. Judgment was entered for the defendant by the learned trial judge, his reasons therefor being, first, that the appellee never was a member of the company, because lie was induced to enter into the contract by the false and fraudulent representations of the company through its agent, S. S. Woods; second, that no equities of other parties intervened after tbe date of his policy; third, that tbe assessment covers losses incurred by the company prior to the membership of the appellee; fourth, that there were no valid losses because they were adjusted by the company without allowing suits to be brought oil each claim, or compelling suits to be brought by each member whose property was destroyed by fire, within six months after the date of the loss. Upon the first question the judge in his third finding, designated under the head of findings of fact, finds as -follows : “That the plaintiff company, through its agent S. S. Woods, induced the defendant to sign the application and accept the — 399 — policy by falsely and fraudulently representing to him at the time that the company was a first class company, in good financial standing, and that the assessments could not exceed ninety cents on the one hundred dollars for any one year, and that there would be no other assessment until the expiration of the year, and that be paid seven dollars and fifty cents as his proportion of any loss, or contemplated loss, that might occur during that year, and that no equities in other parties have intervened.” This finding of fact was based solely upon the testimony of the appellee which is here inserted. “ Q. State what recommendations he made to you at the time. A. He came to me at my place of business and asked me if I didn’t want to take that insurance; he had made representations in regard to the company being a good company, cheaper than other companies, and I asked about rates and he told me that the assessments would not exceed over fifteen dollars each year. I says to him, that looks very cheap; he says the company is responsible and a good company. Q. .Did he speak about it being good financially? A. Good financially! He said they were good substantial men, and considered the company was a good company financially. Q. What did he say about not making any assessment upon you for the first year ? A. My understanding was that with what I had paid on application would carry it for a year. Q. How much did you pay ? A, The amount paid was seven dollars and fifty cents. Q. Was it agreed and understood that that should be for the period of one year? A. That year. Q. There should be no other? A. Should not pay any assessments until next year. Q. What if anything did the agent say to you about the assessment not exceeding ninety cents on one hundred dollars for one year ? A. I have no recollection about the ninety cents. It was in regard to the fifteen dollars. He made two propositions. The former proposition I didn’t think much of. I mind there were two propositions made, and I took the one at fifteen dollars a year.” After the conversation with the agent, the appellee signed the application and agreed as fellows: “ For value received and in consideration of a policy of insurance to be issued to me by the Capital City Mutual Fire Ins. Co. upon the approval of my application for insurance in said company of this date, I promise to pay the said company such sum or sums of money, — 400 — and at such time or times as the Board of Directors of said company may require and assess, and if any such assessment be not paid to the company at its office in Harrisburg or to a duly authorized agent, within thirty days after notice of the same, to pay twenty-five per cent thereon for expenses of collection to H. C. Boggs.” This application was forwarded to the company and the policy was issued under date of May 29,1891. The policy recites the application which was printed in full on the back thereof and became part thereof by its terms. The policy also contained the following: “ The assured by virtue of this policy becomes a, member of the Capital City Mutual Fire Ins. Co. and is entitled to participate in its earnings as may be declared by the board of directors in accordance with the provisions of its bylaws. “It is expressly understood and agreed that this policy is made and accepted subject to and in reference to all the terms and conditions contained therein and to the articles of incorporation and by-laws of this compan}?, which are to be used and resorted to, to explain and ascertain the rights of the parties hereto in all cases not herein otherwise provided for.” The finding of fact is not supported by the testimony. The witness denied that anything was said about a ninety cent per one hundred dollar assessment. He did say that he considered the company financially good, but there is no evidence that it was not at that time good, nor is there evidence that he said the company was a first-class company. What he said about future assessments was but his opinion and the appellee could not have been misled thereby. He knew by the terms of the agreement he signed that he was liable to pay such assessments as the board of directors should make; that he was liable to a penalty of twenty-five per centum for nonpayment. Further than that he received and retained the policy with the application printed upon it, and if he found on examination that he had been defrauded it was his duty to promptly repudiate the transaction. This he never did, and we cannot agree with the learned trial judge that the nonpayment of assessments was a rescission of the contract. If obligations can be successfully repudiated and set aside by nonpayment on demand, an easy way of payment and discharge from liability is thereby afforded. • — 401 — In Insurance Co. v. Woodworth, 83 Pa. 223, the agent stated to the applicant that the company was a purely mutual one, issued no stock policies, insured property onty in Pennsylvania, and never insured large amounts in one locality or in large cities, all of which was false. In Sunbury Fire Ins. Co. v. Humble, 100 Pa. 495, the general agent and officers of the company, through the local agent, by their express direction, represented to the applicant that the company had a paid up cash capital of 1200,000, was solvent, and had never levied an assessment, which statements were false. In Eichman v. Hersker, 170 Pa. 402, the agent represented to the applicant that there were five hundred and twenty-five policies in force in the company at the time of Hersker’s application, when in fact there were but twenty-five. In the above cases facts were falsely stated amounting to actual fraud. In this case no fact stated by the agent to the appellee was sufficient to warrant the judge in finding that the contract was induced by fraud. The falsity, of the agent’s opinion does not constitute such fraud as to warrant the learned judge in his finding on this point. If there was any conflict or any fact stated in the testimony to support the finding of fraud as a legal conclusion from the facts we would not disturb the finding of the trial judge, but he who charges fraud must prove it, and we are satisfied that the allegation of fraud is not sustained by the evidence. The capital of a mutual insurance company is made up of the obligations of its members agreeing to contribute in case of loss to a common fund to reimburse the. member sustaining the loss. The utmost good faith among the meanbers is absolutely necessary in order to successfully sustain this class of insurance. Oiré man becomes a member and gives his obligation on the faith of the membership and obligations of others, and iia case of loss he not only has an equitable but a legal claim upon his fellow members to which they are bound to respond, and the plea of misunderstandings with the agent, or even his fraud or the fraud of the company, will not prevail so as to defeat the just rights and equities of fellow members. To protect these rights the appellant, as an officer of the court, appointed for that purpose, instituted the action against the appellee. — 402 — The trial judge found as matter of fact that three hundred other persons became insured and took out policies of insurance in the company after the date of appellee’s contract, and the further fact that after that time members of the company sustained losses amounting to over $5,000. Have these parties no claim upon their fellow members ? Can this appellee escape the obligation of his policy and membership because he did not see fit to pay his assessments ? He retained his policy and membership without an attempt on his part to rescind. As we have before stated nonpayment of assessments is not rescission and the fact that he never paid an assessment does not help him. His status as a member was as fixed and certain as though he had paid any number of assessments. The rights of third parties have intervened since his membership and they are entitled through the appellant to call upon him to respond for his just proportion of the losses sustained during his membership: Dettra v. Kestner, 147 Pa. 566; Eichman v. Hersker, supra. The opinion of Mr. Justice Mitchell in Ins. Co. v. Boggs, 172 Pa. 91, is plain and explicit. ' It is there decided' that the decree of the court of Dauphin county is conclusive upon the validity and the amount of the assessment, and that said decree cannot be attacked in a collateral proceeding. But it is not conclusive upon the appellee so as to prevent him from showing that he never was a member of the company because his application was induced by the fraud of the agent; that no equities ■of other parties have intervened requiring him to be held, and that the losses for the payment of which the assessment was levied, occurred before the defendant’s policy was taken out. We have disposed of the first two defenses in their order. The bylaws of the company are not before us. In the absence of some stipulation to the contrary a member can only be held for losses accruing during his membership. The learned trial judge was right in so holding, but the amount of losses before and after the membership of the appellee are not specifically stated in the finding, and we have no correct basis on which to enter judgment. There is nothing in the findings of fact to affect the validity of the first assessment by the directors. Whether all the assessments covered losses accruing before the appellee’s membership can readily be ascertained on the retrial of the case, — 403 — and the exact amount for which he is liable ascertained and fixed. In making the first two assessments, the insolvency of members, the cost and expense of collection and other necessary incidental expenses were properly taken into consideration. Against excessive assessments the defendant has a right to defend under the rule laid down in Ins. Co. v. Gaekenbach, 115 Pa. 492, and Ins. Co. v. Dryfoos, 20 W. N. C. 33. Another ground for the entry of the judgment is based upon the fact that the policy requires certain things to be done by a member sustaining a loss within a certain period before the loss becomes fixed as a liability, and there was no evidence of compliance with the stipulation on the part of members sustaining losses for the payment of which the assessments were levied; and for the further reason that these members had brought no actions against the company to recover losses within six months after they occurred. It has repeatedly been held that these provisions are for the protection of the company and may be waived. Indeed it is of common experience that losses by fire are adjusted and the amount of loss ascertained between the parties without resort to or insisting upon the clause of the policy referred to by the learned trial judge, and to hold that the assessments were illegal because levied to pay losses unless the losses were ascertained in a certain way designated for the convenience of one party which it may waive is inexplicable. The fact was clearly found that losses were sustained during appellee’s membership amounting to over $5,000, and that is sufficient. Where the losses have been bona fide ascertained either by the officers of the company or the appellant acting for the company, the rule here invoked, which prevails in actions by members against the company, upon their policies, does not apply. The judgment is reversed and procedendo awarded.