Rosenberger, Light & Co. v. Washington Fire Ins. Co.

• Decision Date: 10 June 1878
• Citation: 87 Pa. 207
• Court: Pennsylvania Supreme Court
• Parties: Rosenberger, Light & Co. <I>versus</I> Washington Mutual Fire Insurance Co.

87 Pa. 207

Rosenberger, Light & Co. versus Washington Mutual Fire Insurance Co.

Supreme Court of Pennsylvania.

May 23, 1878.

June 10, 1878.

May 23d 1878.

Before AGNEW, C. J., MERCUR, GORDON, PAXSON, WOODWARD and TRUNKEY, JJ. SHARSWOOD, J., absent

Error to the Court of Common Pleas of Lebanon county: Of May Term 1878, No. 127.

COPYRIGHT MATERIAL OMITTED

Wayne Mac Veagh and Josiah Funk, for plaintiffs in error.— The objects for which this company can levy assessments are clearly defined by law. It can only make them to meet legitimate expenses, and cover losses which have occurred, but cannot levy them in anticipation of losses. The plaintiffs agreed to pay assessments to pay losses, but under the express terms of the agreement. Such assessments were to be made only after the losses had occurred. This contract is binding on the company: Bliss on Life Insurance pl. 463; Insurance Co. v. Conner, 5 Harris 136; Columbia Ins. Co. v. Cooper, 14 Wright 340; Cumberland Valley Mutual Protection Co. v. Schell, 5 Casey 37; American Insurance Co. v. Schmidt, 19 Iowa 502; Flanders on Fire Insurance 18; May on Insurance, pl. 552.

Assessment No. 5 was illegal and void on the ground of its gross excessiveness. In Buckley & Co. v. Columbia Insurance Co., 2 Norris 303, Judge MERCUR says: "If the insured can show fraud, or clear mistake in making the assessment, it will constitute a defence, and refers to the following cases as illustrating the principle: Jones v. Sisson, 6 Gray 288: Peoples' Equitable Mutual Fire Ins. Co. v. Babbitt, 7 Allen 235; Traders' Mutual Fire Ins. Co. v. Stone, 9 Id. 483; Hummel & Co.'s Appeal, 28 P. F. Smith 320; York County Mutual Fire Ins. Co. v. Bowden, 57 Maine 286. In Sinnissippi Insurance Co. v. Taft, 26 Ind. 240, also a mutual company, the liabilities of the company amounted to $34,540.74. It had $17,755.91 available assets in hand. The indebtedness exceeded the assets by $16,724.83. An assessment was made, amounting in the aggregate to $22,521.26, overlapping the liabilities, after the assets on hand were deducted, only $5636.43; yet the court held the assessment to be illegal, and that the right of the company to make assessments was limited by the losses sustained and unpaid at the time of making the assessments. In the following cases the same principle was applied: Sands, Receiver, &c., v. Boutwell, 26 N. Y. 233; Bangs, Receiver, &c., v. Gray et al., 12 Id. 477. May on Insurance, pl. 557-8-9, lays down the same rule.

"In an action for an assessment it must affirmatively appear, not only that losses have occurred, but that the assessment has been legally made:" Bliss on Life Insurance, pl. 466; The American Ins. Co. v. Schmidt, 19 Iowa 502; Atlantic Mutual Fire Ins. Co. v. Fitzpatrick, 2 Gray 279; Marblehead Mutual Fire Ins. Co. v. Hayward, 3 Id. 208; Savage v. Medbury, 19 N. Y. 36; Bangs v. Gray, 12 Id. 477; Thomas v. Whallon, 31 Barb. Id. 177; Herkimer Co. Mutual Fire Ins. Co. v. Fuller, 14 Id. 373; Jackson v. Roberts, 31 N. Y. 310; Kelly v. Troy Fire Ins. Co., 3 Wis. 254.

A. R. Boughter, C. P. Miller and William M. Derr, for defendants in error.—An act of excessive assessment, without fraud or gross mistake evidencing hishonesty or collusion in the managers in the manner in performing their duties, does not make an assessment illegal or void. If an error in judgment as to the probable amount a certain rate of assessment may net, which depends upon so many unforeseen circumstances that no man can foretell; and there is no evidence of fraud, or gross mistake amounting to fraud, then the assessment is valid and binding upon all its members. An assessment may be made in anticipation of losses, as otherwise great delay would be experienced in adjusting and paying them: Kelley v. Troy Fire Ins. Co., 3 Wis. 254. The fraud or gross mistake intended by this court, in Hummel & Co.'s Appeal, 28 P. F. Smith 320, as also the words fraud and clear mistake in Buckley v. Columbia Ins. Co., 2 Norris 293, are to be understood as having relation, not to excessiveness of assessment, but to fraud or collusion among the directors, or gross mistake in the performance of their duties in making the assessment.

The cases cited by plaintiffs in error are decisions based upon particular statutes, which are totally different from our own, operating upon corporations unlike in their operations.

Mr. Justice TRUNKEY delivered the opinion of the court, June 10th 1878.

The plaintiffs, by taking the policy, became members of the corporation. Sect. 8, of the act of incorporation, Pamph. L. 1860, p. 770, declares, "That in case of loss by fire the managers shall have power to levy and assess the amount of said loss upon the persons insured in this corporation, pro rata, according to the amount or value of property insured by each respectively." Art. 14 of the by-laws directs that, "in all cases of loss or damage by fire to any member of this company, after the damage is ascertained, an equal and just assessment shall be laid upon every member of the company in proportion to the amount insured sufficient to cover said loss." The assured agreed "to pay the said company such sum or sums of money, and at such time or times as the board of managers of said company may, for the purposes of paying losses by fire and the necessary expenses of the said company, require, within sixty days after notice and demand."

Nothing can be more certain than that the managers had no authority to make assessments in anticipation of losses. The words of the charter and by-law need no interpretation; they are too explicit to admit of doubt, and the contract being consistent therewith is governed by them. Indeed the...