Farmers' Mut. Fire Ins. Co. v. Meyer

• Decision Date: 02 May 1932
• Parties: FARMERS MUTUAL FIRE INSURANCE COMPANY, APPELLANT, v. FRANK E. MEYER, RESPONDENT
• Court: Kansas Court of Appeals

49 S.W.2d 270

226 Mo.App. 1223

FARMERS MUTUAL FIRE INSURANCE COMPANY, APPELLANT, v. FRANK E. MEYER, RESPONDENT

Court of Appeals of Missouri, Kansas City

May 2, 1932

Appeal from Circuit Court of Chariton County.--Hon. Paul Van Osdol Judge.

AFFIRMED.

Judgment affirmed.

Collet & Son for appellant.

Gilbert Lamb and Sasse & Merrill for respondent.

OPINION

BLAND J.

This is a suit, in three counts, seeking to recover assessments made by the plaintiff insurance company on three several policies of insurance carried in said company by the defendant. The case was tried before the court without the aid of a jury, resulting in a judgment in favor of defendant.

The facts show that plaintiff is a Farmers' Mutual Fire Insurance Company, located in Chariton County. It was incorporated in the year 1895 under article 15, chapter 37, Revised Statutes 1929.

The policies of insurance on which the assessments were levied are exactly alike, except as to dates and amounts. Count One is the only one printed in the abstract. It prays judgment for the assessment made upon a policy issued to defendant on March 22, 1929, in the sum of $ 16,700. The policy was to run five years and provides that it was issued in consideration of the payment of a certain sum of money, which the evidence shows was a membership fee of two mills on each $ 100 of insurance, "and the agreement of insured to pay his ratio of losses by fire and lightning, and all assessments made . . . and a full compliance with the by-laws of the company." Plaintiff's constitution was incorporated in the policy and provides that those insured in the company shall remain members "during the term specified in their respective policies and their full compliance with the By-laws of this Company, according to the strict terms thereof." The written application for the policy provided: "I further agree to be governed by the Articles of Incorporation and By-laws now in force or hereafter made by said Company, and to pay all assessments made on me by the Company in accordance with the By-laws."

Section 8 of the By-laws provides as follows:

"It shall be the duty of the executive committee to audit annually, during the last week of September, in each year, the accounts of the Secretary and Treasurer, and at all times keep themselves fully advised of the assets and liabilities of the Company, so that prompt and satisfactory settlement of all claims and expenses can be made and contingent expenses and liabilities of the company provided for, and for this purpose, said executive committee shall have full power and authority to order at any time a special assessment upon all members of the company, which said assessment shall be known and described as special assessment and shall be numbered consecutively, and a full complete record thereof kept, and a full report of said special assessment made during each year and presented to the board of directors at each annual meeting."

Section 9 requires the secretary to give notice to each policy holder of the levy of any special assessments and the amount due from such policy holder. It also provides that it shall be the duty of the policy holder, within thirty days from the giving of the notice, to remit to the secretary the amount due and if payment is not made within that time the insurance should be suspended and, after sixty days from that date, the policy should be absolutely void.

Section 10 provides as follows:

"All members shall be liable for all assessments made by the executive committee for the payment of losses sustained and expenses accrued while their policies are in force."

Section 25 provides, in part, as follows:

"Any member wishing to withdraw from the company shall notify the secretary in writing of his intention to withdraw, and if there be no loss pending at the time, the withdrawal shall take place within five days, but if there has been a loss previous to receiving such notice and it is necessary to make an assessment, his withdrawal shall take place immediately after paying his share of such assessment." (Italics ours.)

The record shows that:

"On October 28, 1930, the committee ordered the secretary to call an assessment of four mills on the dollar on all insurance in force on the first day of November, 1930, up to and including December 31, 1930, notice of assessment to bear date of November 1, 1930, said assessment to be due and payable on the first day of January, 1931."

Pursuant to this order, the secretary on November 1, 1930, mailed to the defendant a notice thereof, reading in part as follows:

"You are hereby notified that by order of the Executive Committee, an assessment of four mills on the $ 1 is levied on all insurance in force up to and including December 31, 1930, to pay unpaid losses and expenses. Whatever is left will be used to pay future losses and expenses ." (Italics ours.)

Defendant wholly failed to pay this assessment and his policies were forfeited in due time. This suit was brought to recover the amount of the assessment in question.

The evidence shows that the assessment was made for the purpose of paying losses and expenses that occurred during the calendar year of 1930; that on September 30, 1930, at the annual meeting of the company, it had unpaid losses in the sum of $ 5,715.79; that from the 30th day of September to the 31st day of October, inclusive, of that year the expenses and losses of the company accruing amounted to $ 3,982.69. There is nothing in the record to show what were the losses and expenses sustained and accruing to October 28, 1930, the date of the assessment. The evidence shows that on the date of the annual meeting on September 30, 1930, plaintiff had on hand, in cash, the sum of $ 9,871.01, or enough to pay all of the losses and expenses up to and including October 31, 1930 (three days later than the date of the assessment), and to leave a balance in the treasury of the company in the sum of $ 172.53.

The evidence further shows that the assessment was calculated to raise the sum of approximately $ 31,000. Therefore, it would appear that the amount contemplated to be collected by the assessment was approximately $ 22,000 greater than the amount of the unpaid losses and expenses sustained and accruing to the date of the assessment. The evidence, however, shows that defendant's pro rata share of the losses and expenses of the company, for the whole period of time from the issuance of the policies to him to the date of their cancellation, was in excess of the amounts assessed against him, including the last assessment which he did not pay.

It appears that at the time the assessment in question was made the company had on hand funds more than sufficient to pay all of the losses sustained and expenses accrued and, unless there is something in the statute, or the constitution or the by-laws of the plaintiff, authorizing it to collect assessments for the purpose of creating or maintaining a reserve or surplus fund, then unquestionably the assessment was invalid and this suit cannot be maintained. [Johnson v. Hartford Ins. Co., 271 Mo. 562, 575, 576, 197 S.W. 132; Ibs v. Hartford Life Ins. Co., 121 Minn. 310, 141 N.W. 289; Mut. Windstorm Co. v. Goodrich, 225 Mich. 687, 691, 196 N.W. 612; Farmers' Mutual Fire Ins. Co. v. Knight, 162 Ill. 470, 44 N.E. 834; Ins. Co. v. Taft, 26 Ind. 240; Commonwealth v. Mass. Ins. Co., 119 Mass. 45; Rosenberger, Light & P. Co. v. Was. Mut. Fire Ins. Co., 87 Pa. 207; Clark v. Ia. St. F. M. Ass'n., 156 Iowa 201, 135 N.W. 1114; Bradford v. Mut. Fire Ins. Co., 112 Iowa 495, 84 N.W. 693.]

However, as we understand plaintiff's contention, there is sufficient in section 8 of its by-laws to provide for a reserve or surplus fund. Plaintiff contends that this section provides: "For the levying of special assessments to take care of unforeseen obligations and to keep the company on a cash or prompt paying basis." If plaintiff is right then there is a serious question as to whether the assessment is not unreasonably large for the purposes contemplated in section 8. However, plaintiff says that the assessment in controversy was not a special assessment under the provisions of section 8 but under the provisions of the policy and section 10 of the by-laws providing that defendant should be liable for the payment of his ratio of the losses by fire and lightning sustained and expenses accrued while his policy was in force, and that the assessment made in this case was a general assessment and not a special assessment.

It would seem that, if plaintiff's contention were well taken, the company, in calling the assessment and giving notice...