Beaver State Merchants' Mut. Fire Ins. Ass'n v. Smith

• Decision Date: 19 October 1920
• Citation: Beaver State Merchants' Mut. Fire Ins. Ass'n v. Smith, 192 P. 798, 97 Or. 579 (Or. 1920)
• Parties: BEAVER STATE MERCHANTS' MUT. FIRE INS. ASS'N v. SMITH.
• Court: Oregon Supreme Court

192 P. 798

97 Or. 579

BEAVER STATE MERCHANTS' MUT. FIRE INS. ASS'N v. SMITH.

Supreme Court of Oregon

October 19, 1920

Department 2.

Appeal from Circuit Court, Multnomah County; George W. Stapleton Judge.

Action by the Beaver State Merchants' Mutual Fire Insurance Association, L. E. Thompson, receiver, against George S Smith, doing business under the name of Smith & Co. Judgment for defendant, and plaintiff appeals. Affirmed.

This is an action by the receiver of the Beaver State Merchants' Mutual Fire Insurance Association to collect an assessment from the defendant under the provisions of a fire insurance policy. The defendant is resisting payment on the ground that no assessment can be legally made against him under the policy, claiming that by the payment of a cash premium in advance, as shown in the policy, which is set out in full in the complaint, he was not liable to assessment. The cause was tried by the court without a jury. Findings of facts were made, and a judgment passed in favor of defendant, from which plaintiff appeals. The policy and the constitution and by-laws of plaintiff are admitted by defendant in the pleadings.

Frank Schlegel, of Portland (J. C. Veazie, of Portland on the brief), for appellant.

F. S Senn, of Portland (Senn, Ekwall & Recken, of Portland, on the brief), for respondent.

BEAN J.

The liability of defendant depends upon the construction of the policy, which contains the constitution and by-laws of the plaintiff association. The plaintiff corporation was organized as a mutual fire insurance company under the provisions of sections 4649-4672, L. O. L., as they were prior to the amendment contained in General Laws of Oregon 1917, p. 312. Chapter 226, p. 406, and chapter 175, p. 279, General Laws of Oregon 1911, were in force, and apply to the policy in controversy. The association becoming financially involved, a receiver was appointed for it. The receiver levied an assessment upon the policy holders to pay the losses sustained and meet the liabilities of the association. The defendant's policy was issued December 15, 1914, and conforms to chapter 175, § 1, which, with the exception of the proviso hereinafter mentioned, is printed in the policy, and constitutes article I of the by-laws, after which follows a copy of the remainder of the by-laws and the constitution of the association. The constitution of the association contains inter alia the following:

"Article II. Object. Section 1. Its object shall be the mutual protection of its members against loss by fire and it shall be conducted for the purpose of mutual protection and relief of its members only and not for profit."

On the first page of the policy appears the following:

"The premium charged by standard insurance companies on this risk for the same term would be $23.50, and said amount is the greatest contingent liability of the said member under this certificate (article II, section 5, of the by-laws)."

This premium was paid by defendant. Article II, section 5, of the by-laws provides:

"The mutual contingent liability of each member for premiums and all charges on one year certificates for the payment of losses and expenses shall not exceed one annual premium such as is charged by standard insurance companies on the same property; on three years certificates it shall not exceed two such annual premiums, and on shorter term certificates it shall not exceed the short term rates of the standard insurance companies under similar circumstances."

Article III, section 2, of the by-laws provides: "At the time of the renewal of any certificate of insurance there may be deducted from the premium otherwise chargeable thereon such an amount as the board of directors may fix and allow, not exceeding the fair and just proportion of the 'Reserve Fund,' accruing to said member on account of the premiums theretofore paid by him; or at the option of any member he may receive the same in cash upon making his application in writing therefor; provided, he has maintained his certificate during the full period of time for which the same was issued."

Under article I of by-laws, Statutory Provisions, appears the following:

"If this policy be made by the mutual or other company having special regulations lawfully applicable to its organization, membership, policies or contracts of insurance, such regulations shall apply to and form a part of this policy as the same may be written or printed upon, attached or appended hereto."

Article II, section 2, provides:

"Any member making application for membership and insurance must pay a premium on the insurance applied for equal to the premium which standard companies charge on the same property for the same time."

Article IV, section 1, read as follows:

"At the end of each fiscal year or oftener if the board of directors may choose, all unexpended portions of premium so charged and received, not exceeding in all fifteen per cent. of the premiums collected by the association, shall be set apart and shall be known as the 'Reserve Fund' of the association; provided, that such sum shall never exceed the standard annual rate of insurance on all property insured by this association."

The proviso contained in section 1, c. 175, Laws of 1911, which may have a bearing on this case, makes provision for other conditions and agreements not enumerated in the statute, and if the conditions restrict the rights of the assured under the policy each restrictive clause shall be placed on the first page of the policy and preceded by an explanatory title, "except that mutual companies may print their constitution and bylaws immediately following the provisions of this act."

Section 4650, L. O. L., directs that:

"No mutual insurance company hereafter organized shall transact any business until it has received subscriptions for insurance in the sum of $300,000, divided among at least three hundred subscribers; and the subscribers for such insurance must be residents of the state, and the property to be insured must be located in Oregon. * * *"

This provision was enlarged by section 23 of the act of 1917, so as to require "also contingent funds consisting of the liability of its members subject to assessment, in addition to advance assessments of same amount to be collected on delivery of policies, amounting to not less than five thousand dollars each, such liability to be shown in the signed application of its members."

Section 4653, L. O. L., prior to the amendments, directed that the...