Court Opinion

ID: 6410888
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:52:36.507862+00
Date Added: 2024-06-11T15:51:22.267822
License: Public Domain

Dewey, J.
In the cases heretofore decided by this court in actions to recover assessments in mutual fire insurance companies, some principles have been settled which may aid us in the present cases.
In Atlantic Mutual Fire Ins. Co. v. Fitzpatrick, 2 Gray, 279, it was held that, to maintain such an action, the burden was upon the plaintiffs to establish the fact of a legal assessment.
In Marblehead Mutual Fire Ins. Co. v. Hayward, 3 Gray, 208, the plaintiffs failed to maintain their action, because it appeared that, in making their assessment, they had designedly omitted various members of the company liable to be taxed, and thus increased the pro rata sum to be assessed upon the defendant.
In New England Mutual Fire Ins. Co. v. Belknap, 9 Cush. 140, the defence, that the assessment was not made literally forthwith after the loss, was not allowed to prevail; the court deeming it sufficient that there was an approximation to the time of the loss, and an assessment upon all liable at the time of the loss, as near as was practicable; and that' for every loss, however small, the company could not be required to make a separate assessment upon their members. But in that case the loss did in fact occur after the date of the defendant’s policy, and the assessments were made upon the deposit notes liable at the time of the loss.
In Marblehead Mutual Fire Ins. Co. v. Underwood, 3 Gray, 210, it was held that a reasonable time might properly be taken after the loss to make the assessment, and that small and unintentional errors in the list of assessments would not defeat the assessment; nor would the fact that some of the members, whose deposit notes were assessed, had paid smaller cash premiums and given larger notes than the defendant, render the assessment illegal, it not appearing that he had suffered thereby. B *82appeared in that case, as in the one last cited, that the assessments were upon the notes existing at the time of the loss, and upon the principle of including all such notes. In those two cases the plaintiffs recovered.
Giving full effect, in the present case, to the decisions of this court most favorable to maintaining an action to recover an assessment, yet the action against Houghton must fail as to that claim. Upon the principle of an assessment under the provisions of Rev. Sts. c. 37, § 31, this assessment was clearly bad. It failed entirely to comply with the rule, that assessments are to be substantially levied upon those who are members at the time of the loss. Here this principle was wholly disregarded, and we think that the assessment was thereby rendered invalid, and no action will lie to recover it.
The case of the other defendant, Hunt, stands in a different position, in this respect. Having become a member before the 8th of August 1850, he might properly be assessed for all losses and expenses after that date, and before the assessment was made. It is no objection, open to him, to the validity of the assessment, that individuals who had more recently become members were also assessed for these losses, for some of which they were not liable. He is not injured thereby, as his assessment is not increased, but diminished. He is therefore liable for the assessment;
2. The further question is upon the right of the plaintiffs to recover upon the deposit notes, treating them as notes which the directors have ordered to be collected as necessary to pay existing debts, arising from losses by fire and expenses of conducting the business of the company.
This involves the inquiry as to the precise character of these notes, and whether any greater liabilities arose thereon than upon the deposit notes usually given by members of mutual fire insurance companies, and which have been the subject of assessment in the cases usually before this court. Treating them as of that character, and as the basis of an assessment, rather than an absolute promise to be enforced independently of an assessment, they could only be collected by means of such *83assessment; and, for the reasons already stated, this assessment was invalid as to Houghton, and of course could not be recovered as against him.
The notes are payable “ in such portions and at such times as the directors may, agreeably to their by-laws, require.” This form does not differ materially from those ordinarily taken by mutual insurance companies.
The ground for taking this case out of the usual rules applicable to deposit notes is that arising from the peculiar provisions of the by-laws of the company under which these notes were given.
As already suggested, the form of these notes does not necessarily indicate that they are absolute funds, and to be paid irrespectively of any general assessment for losses ; but is consistent with the hypothesis that they are absolute funds, and may be collected at any time under the direction of the directors of the company, and, when thus collected, applied to the discharge of any debts and liabilities of the company.
In the opinion of the court, a proper construction of the bylaws requires us to give to these notes the character of absolute funds. All premiums and deposits paid in are denominated the absolute funds of the company. The assessments are, by art. 25, to be made in case the whole of the fund arising from the policies is absorbed by the payment of losses. The fund arising from policies clearly includes the premiums and deposits. The deposits, in case of personal estate insured, are paid in cash, and, in case of insurance on real estate, by notes like those now in suit. Irrespectively of the provisions of the revised statutes, it would seem very clear that these notes were subject to collection at any time, at the discretion of the directors, for the purpose of discharging the debts or liabilities of the company; and no necessity existed for enforcing them by any general assessment under the rules and requirements prescribed for assessments.
The further inquiry is, whether, supposing such to be the liability under the by-laws, such by-laws are inconsistent with tne provisions of the charter, and of the general laws regulating *84mutual insurance companies ? The act incorporating this company, St. 1848, c. 284, is one of those brief acts of incorporation that merely names certain individuals and their associates, giving to them the powers and privileges, and making them subject to the duties, liabilities and restrictions of cc. 37, 44 of Bev. Sts. Of c. 44, the only section material to the present question is § 1, authorizing the making of “ by-laws and regulations consistent with the laws of the Commonwealth.” The provision of c. 37, § 31, is this: “ If any member shall have a just claim on the corporation, founded on a policy issued by them, exceeding the amount of their then existing funds, exclusive of deposit notes given by the members, the directors shall forthwith assess such sum as may be necessary to pay the same upon the members, in proportion to the amount of their premiums and deposits.”
The point to be considered is, whether a by-law, declaring deposit notes taken by the company to be a part of the absolute funds of the company, collectable at the discretion of the directors, and applicable to the payment of any debts and liabilities of the company, conflicts with the provision contained in the section of the statute just quoted ? If this were to be taken to be a limitation on the powers of the company, and one excluding any other mode of holding or collecting notes to them, it might seem to follow that such notes were to be treated as the basis of proportional assessments, rather than as absolute funds to be collected, irrespectively of the statute. This has certainly been the more usual course of raising money to discharge the liabilities of mutual fire insurance companies. But there is nothing in the statute, limiting insurance companies to this course of proceeding. The leading purpose of this section of the statute clearly was, to make a provision for the security of those who had claims for losses on their policies, and to secure the prompt payment of the same. The statute enacts, that the directors shaH forthwith assess such sum as may be necessary to pay such losses ; and, upon their neglect to make such assessment, the directors are made personally liable upon the judgments recovered against the company for losses.
*85It is without doubt competent for mutual fire insurance companies to make by-laws and regulations as to the rates of premium, and whether the same shall be paid wholly in cash or partly in notes of hand, and to provide that, at the time of receiving a policy, the same amount as is paid in cash for the premium shall be secured by a note, and that both sums shall be applied generally in discharge of any debts and liabilities of the company. This would not be in conflict with the provisions contained in § 31. Its only effect would be to enable the directors to collect such notes as they would any other of their funds or deposits, and before making any assessment under the statute provisions. If. these funds were insufficient to meet the liabilities of the company for losses, the directors would be required, under the statute, to make an assessment.
We are of opinion that, under the by-laws of this company, the deposit notes are made a part of the absolute funds of the company, and, as such, may be collected by their order, and applied to the discharge of any debts or liabilities of the company, and that a by-law to that effect does not conflict with § 31 of c. 37 of the Rev. Sts. The result is therefore that an action for the recovery of the note may be sustained, and to this extent judgment is to be entered for the plaintiffs, in each case