Mutual Fire Insurance v. Miller Lodge

Alvey, J., delivered the opinion of the Court. This action was brought by the appellee against the appellants, on a policy of insurance against loss by fire; and recovery was had for the amount of the insurance. By the prayers offered in the Court below for instruction to the jury, two principal questions were presented; — 469 — 1st. whether the insurance to the appellee was suspended, prior to and at the time of the occurrence of the loss by fire, by reason of default by the appellee in making the annual payment of interest on the premium or deposit note, according to the requirement of the policy and the express terms of the charter and by-laws of the appellants; and, 2ndly, whether, if the policy was not so suspended, the right of recovery was lost to the appellee by reason of failure to give the appellants the required notice of the loss, within the time prescribed. The appellants are a mutual insurance company, chartered by the Act of 1845, ch. 249. Both by the charter and the by-laws of the company, the first Saturday of August in each and every year is the day fixed upon which the members of the company are required to convene, at some convenient place to be previously fixed, for the purpose of electing managers, and for the transaction of any other Misiness that may be found necessary. Of this meeting previous notice, by publication, is required to be given, for at least twenty days before the day of meeting. It is not pretended that the regular annual August meeting for the year 1878 was not held, or that due notice thereof was not given. By the terms of the charter (sec. 5,) all such persons as are insured in the company “shall be deemed and taken as members thereof, during the period they shall remain so insured, and no longer.” And by the 6th section; all parties insuring are required to deposit with the secretary of the company, Ms or her promissory note, payable in part or in whole, at any time when the managers shall deem the same requisite for the payment of losses or damage by fire, or for such incidental expenses as may be necessary for the transaction of the business of the company, for a sum equal to one and a half per cent., or, by the 2nd section of the Act of 1846, ch. 200, at higher rates if deeme.d proper, on the amount of Ms or her property insured; and — 470 — shall thereupon receive a policy, etc., to be signed by the officers of the company and by the party insured. It, further provides, that for the purpose of raising a contingent fund for the payment of losses or other necessary expenses, it shall be lawful for the company to exact of' its members, interest at a rate not exceeding six per cent, per annum, on such premium or deposit note, as long as in the judgment of the managers the interest of the company may require it,—and “such interest shall be paid, to the treasurer, on the day of each annual meeting ; and every payment of interest so made, shall be entered to the credit of the proper person on the books of the corporation, and be applicable, as far as the same may go, to-the liability of the individual with the corporation, and of the corporation for loss or damage by fire, or other legal and proper charges.” The 9th and 10th sections of the charter provide for levying and collecting assessments upon the premium notes of the members to pay losses; and by the 11th section it is provided that if any member of the corporation shall neglect or refuse to pay the interest on his deposit note, on the day of the annual meeting of the members, as provided by the 6th section of the charter, such member shall thereby be debarred from any benefit or advantage from his or her insurance, until the same is paid, and in case any loss or damage by fire is sustained-by such delinquent member, between the time said interest is payable and -the payment thereof, such loss or damage shall not be remunerated by the said company, but the operation and effect of said delinquent member’s policy shall be suspended until all arrears of interest are duly paid.” By the 11th by-law of the company, it is provided that “all interest on premium notes or obligations shall be paid annually, in advance, and the rule shall be peremptory that said payment must be made on or before the day of the annual meeting.” There is no-provision, either in the charter or the by-laws of the — 471 — appellants, requiring special notice to be given the members of the amount of interest to be paid on the premium note, and the time when payable; though it is otherwise in respect to special assessments upon such premium notes. The policy was issued by the appellants to the appellee on the first day of August, 1863, for three thousand dollars insurance on the Odd Fellows’ Hall, at Easton, Talbot county, Maryland; the premium note being $150. The interest on this premium note was regularly paid, until that due for the year ending on the first Saturday of August, 1878. The interest due on the last mentioned day was not paid, and it remained unpaid at the time of the loss by fire, which occurred on the morning of the first of October, 1878; and, for aught that appears, it never has, to this day, been paid or tendered. The policy expressly declares, that it was made and accepted subject to, and upon the terms and conditions mentioned in the charter and by-laws of the appellants; and the principle is an established one, that when a party takes out a policy in a mutual insurance company, and the contract is complete, he at once becomes a member, and is bound by the rides and provisions of the charter and by-laws of the company, and he is presumed to have knowledge of them all. Mitchell vs. The Lycoming Mut. Ins. Co., 51 Penn. St., 402; Simeral vs. Dubuque Mut. Fire Ins. Co., 18 Iowa, 319; Coles vs. Iowa State Mut. Ins. Co., Id., 425; Walsh vs. Ætna Life Ins. Co., 30 Iowa, 133; May on Ins. (2nd Ed.) sec. 552. We do not understand this proposition to be denied. But it is contended for the appellee that, by the true construction of the charter of the appellants, before the insured could be considered as in default for the nonpayment of interest on its deposit note at any particular annual meeting, the board of managers must have determined what rate of interest the needs of the company — 472 — required, and that notice of such determination and demand of payment should have been given to the insured prior to such annual meeting, in order to put it in default and to suspend the operation of the policy. And this appears to have been the view taken by the Court below, and the jury were so instructed. But, upon careful consideration of the provisions of the charter and by-laws of the appellants, this Court is constrained to adopt a different conclusion. As will be observed, both the charter and by-laws are explicit in requiring payment of the interest on the deposit note at or before a fixed and definite time. The contract of insurance has reference to the time thus expressly designated, and the member is bound to take notice of it at his peril. There is nothing in either the charter or the by-laws that requires, or that in any way points to the construction, that notice should be given as a 'condition precedent to the right of the company to receive the annual interest on the premium notes. If such had been the intention, it would, doubtless, have been expressed. Notice by publication was required of the annual meeting of the members on the first Saturday of August; but as to any separate notice in regard to the payment of interest on the premium notes, we find no warrant in the terms of the charter or by-laws for saying that it was required. The day of the annual election of managers was fixed as the day of payment, and as all the members of the company were called together on that day, it was both convenient and appropriate. that that day should be the time when the interest should be due and payable ; as each and every member theú would have an opportunity of being informed of the operation and requirements of the company, and of the amount or rate of interest that he would be liable to pay. But a habit or usage of the company to give notice to the members, of the amount of-the annual interest and — 473 — the time of payment, has been set up and relied on by the appellee, as showing the understanding of the company and those connected with it, as to what was required of the latter, in order to fix the liability of its members for the annual interest on their premium notes. And it is contended that there was no default committed, and, consequently, that there was no suspension of the operation of the policy, by reason of the failure to pay the annual interest, because such notice was not given to the appellee in respect of the interest due in August, 1818. But to this contention we cannot accede. ' In order to maleo the contention good, it must he shown that there was an obligation on the part of the company to give the notice, and that the giving of such notice was a condition precedent to the right of the company to receive the interest on the premium note, according to the contract of insurance. But, as we have seen, this obligation is not created by the charter or by-laws of the company, and we think it clear that there is nothing in the habit or usage relied on that could impose such a duty upon the company, with such consequence of failure to perform it, as that contended for by the appellee. For if there was failure to give the notice, as contended, for payment at the particular day designated in the charter, the consequence would he, that the company would have to carry the risk for the ensuing year, without receipt of interest, according to the terms of the contract, or the means of compelling its payment, as provided by the charter and by-laws. This could never have been the design of the members of the company; and if it were declared that such duty was, by any means, imposed upon the company, it would most likely tend seriously to embarrass its operations. In the recent case of Thompson vs. The Knickerbocker Life Ins. Co., 104 U. S., 252, a similar question was presented; and in that case, it was held by the Supreme — 474 — Court of the United States, that an insurance company is not hound to send notices to the insured of the maturity of premiums, and that the failure of the company to send such notice does not excuse the insured from the consequences of failure to pay the premium at the time designated in the contract for payment, though it may have been the practice of the company to send such notices. That where the contract fixes the time for payment, as in this case, the Court held that the insured was hound to know, at his peril, when his premium was 'due and payable. In considering the question the Court said: “ The third replication sets up a usage, on the part of the insurance company, of giving notice of the day of payment, and the reliance of the assured upon having such notice. This is no excuse for non-payment. The assured knew, or was hound to know, when his premium became due. The case of Insurance Company vs. Eggleston, 96 U. S., 572, is cited in support of this replication. But, in that case, the customary notice relied on was a notice designating the agent to whom payment was to he made, without which the assured could not make it, though he had the money ready. As soon as he ascertained the proper agent he tendered payment in due form. It is obvious that the present case is very different from that. The reason why the insurance company gives notice to its members of the time of payment of premiums is to aid their memory and to stimulate them to prompt payment. The company is under no obligation to give such notice, and assumes no responsibility by giving it. The duty of the assured to pay at the day is the same, whether notice he given or not. Banks often give notice to their customers of the approaching maturity of their promissory notes or hills of exchange ; hut they are not obliged to give such notice, and their neglect to do it would furnish no excuse for non-payment at the day.” — 475 — In this case, as matter of fact, the appellee did know of the time when the interest on the premium note was payable, and hence there was no surprise produced in the failure to receive the notice, either as to the time of payment, or the consequences of non-payment at the day. Eor Mr. Graham, the treasurer of the appellee, whose duty it was to pay the interest, and who was examined as a witness for the Lodge, expressly admits, that he had the general knowledge that the payment of the annual premium was due on the first Saturday in August annually; and it was his impression, he says, that the policy expired unless the premium was paid when due; but that he had nothing specially to call his attention to the matter during the montlxs referred to. But, to avoid the effect of non-payment of the annual interest on the premium note when due, there is still another position assumed by the appellee, and that is, that of the profits that had previously accrued upon the policy held by the appellee, there was an amount to its credit on the books of the appellants more than sufficient to pay the annual interest due on the first Saturday of August, 1878; and it is contended that such annual interest on the note should be considered as paid from the amount so remaining to the credit of the appellee. This proposition was made to the Court below and was rejected by it; and in so doing we think the Court was entirely correct. By the 11th by-law of the company, it is provided that “the profits accruing on each policy shall be calculated annually, and carried to the credit of the party insured thereby.” And by the 16th section of the charter, it is provided that “át every tenth annual meeting, it shall and may be lawful for the said board of managers to declare a dividend of the profits of the concern, if any, upon such basis as may be equal, according to the respective contributions of the several members thereto, and of — 476 — such an amount as shall meet the approbation of two-thirds of the members of the board, and of two-thirds of the members of the said company present, at such tenth annual meeting.” At the August meeting of 1874, such dividend of profits was .declared, and scrip of the company issued therefor, with interest coupons attached. The certificate was to be held by the insured, subject to future losses of the company, and to be cancelled, should losses require the use of the fund upon which it was issued. The animal interest upon the certificate issued to the appellee was only 87 cents. No subsequent dividend of profits has been declared, and, of course, there could be no claim to have any part of such profits applied to the payment of the annual interest on the premium note. Until the dividend is declared there is nothing due the policy holder that he can control and apply to the payment of his debts. But even if such dividend had been declared, unless expressly .made applicable to the payment of the annual interest on the premium note of the policy holder, the company would neither be bound nor justified, in the absence of the assent or request of the insured, in so applying the dividend. This point was expressly ruled in the recent case of Wheeler vs. Conn. Mutual Life Ins. Co., 82 N. Y., 543. In that case, as in the present, the position was taken, that in order to avoid a forfeiture for nonpayment of premium, the company should have applied unpaid dividends made to the insured; but the Court held, that when the premiums are not paid, the insurer is not bound, without demand or direction of the insured, to appty the dividends standing to the credit of the policy holder, to the payment of premiums due: Entertaining these views in regard to the first question presented, we think the Court below was in error in granting the first prayer offered by the appellee; and consequently, the judgment must be reversed. The second — 477 — question presented on this appeal, and which was fully-argued, it becomes unnecessary to decide. And as we can perceive no ground upon which the appellee could he entitled to recover, the judgment will he reversed without the award of a new trial. (Decided 11th July, 1882.) Judgment reversed.