Swing v. Humbird

• Citation: 101 N.W. 938,94 Minn. 1
• Parties: SWING v. HUMBIRD et al.
• Decision Date: 23 December 1904
• Court: Supreme Court of Minnesota (US)

94 Minn. 1

101 N.W. 938

SWING

v.HUMBIRD et al.

Supreme Court of Minnesota.

Dec. 23, 1904.

Appeal from District Court, Ramsey County; William Louis Kelly, Judge.

Action by James B. Swing, trustee for the creditors and policy holders of the Union Mutual Fire Insurance Company of Cincinnati, Onio, against John A. Humbird and David Humbird. Judgment directed for defendants. From an order denying a new trial, plaintiff appeals. Affirmed.

Syllabus by the Court

Action to recover upon an assessment of the policy holders of an insolvent mutual insurance company, made by a court having jurisdiction to wind up its affairs. Held:

1. Such assessment is not conclusive upon any policy holder as to the question whether his relation to the company was such as to subject him to liability for an assessment. The judgment making the assessment is, however, conclusive as to matters relating to the necessity for, and the amount of, the assessment.

2. The evidence sustains the findings and decision of the trial court. William W. Fry and Patterson A. Reese, for appellant.

Stiles W. Burr, for respondents.

START, C. J.

This is an action by the trustee of the Union Mutual Fire Insurance Company of Cincinnati, Ohio, hereafter referred to as the company, to recover from the defendants the sum of $332.06, alleged to be due from the defendants for an assessment upon certain insurance policies issued by the company to them. The answer put in issue the allegations of the complaint as to the assessment, and alleged, in effect, that under their policy contract with the company they were not liable to assessment to pay its losses. The cause was tried by the court without a jury, and findings of fact favorable to the contention of the defendants made, and, as a conclusion of law, judgment directed for the defendants, dismissing the action on its merits. The plaintiff appealed from an order denying his motion for a new trial.

The facts found by the trial court are, so far as here material, substantially these:

The company was incorporated May 27, 1887, under the laws of the state of Ohio, as a mutual fire insurance company. Immediately after such incorporation the company adopted by-laws, a true copy of which is annexed to and made a part of the defendants' answer, which by-laws have never been changed. The company at the time of its organization was authorized by the statutes of the state of Ohio and its by-laws to issue two classes of policies, both mutual in character-one on the premium note plan, and the other on the cash deposit plan, which provided for a ‘short term participating policy.’ The first class of policies were to be issued for the full term of five years upon the insured giving a premium or deposit note in such amount as required by the board of directors, and paying one-fifth thereof in cash in advance; that is, the insured paid one-fifth of the premiums for five years in cash, and gave a deposit or premium note for the other four-fifths. All premium notes were subject to assessment for the losses and expenses of the company. The second class of policies were authorized to be issued for a less term than five years. The policy holder in this second class was not permitted to give a note for any part of the premium, but was required to deposit in cash the full premium for the full term for which his policy was issued. The by-laws of the company (article 11, sections 3 and 4) expressly provided that:

‘Sec. 3. All policies for less than five years shall be issued upon receipt by the company, in cash, of the premium for the term insured. Such policies shall be charged with their due proportion of all losses and expenses as shall accrue during the time they continue in force. At the expiration of the terms for which such policies are issued, or at their earlier cancellation by the assured, the policy holders shall be entitled to and shall receive a cash dividend of one-half the amount which shall remain unused of the premiums originally paid by them, the remaining half being deposited in the guarantee or reserve fund of the company.

‘Sec. 4. No mumber shall be liable for losses or expenses or for any indebtedness of the company in any amount except to the extent of the premium note given by him.’

The statutes of Ohio relating to mutual fire insurance companies were amended by an act approved April 14, 1888, to take effect July 1, 1888 (Laws 1888, p. 273). This amended statute contained, with others not here material, the following provisions: ‘Nor shall any company on the plan of mutual fire insurance be incorporated until not less than * * * have been subscribed and the premium thereon, for one year, paid in cash * * * each subscriber agreeing, in writing, to assume a liability to be named in the policy subject to call by the board of directors, in a sum not less than three nor more than five annual premiums. And the same liability shall also be agreed to in writing by each subsequent subscriber or applicant for insurance, who is not a merchant or manufacturer. * * * Any such company must in its bylaws, and must in its policies, fix by a uniform rule the contingent mutual liability of its members for the payment of losses and expenses; and such contingent liabilities shall not be less than three nor more than five annual cash premiums as written in the policy. * * * Every person who effects insurance in a mutual company, and continues to be insured, and his heirs, executors, administrators, and assigns shall thereby become members of the company during the period of insurance, shall be bound to pay for losses and such necessary expenses as accrue in and to the company in proportion to the original amount of his deposit note or contingent liability. * * * This act shall not affect companies now doing business on the premium note plan unless they elect to dispense with such notes and embody the dontingent liability in the policy as herein provided; and said original sections are hereby repealed. Provided that said sections shall remain in force as to all mutual companies now doing business which do not elect to reorganize under the said sections as amended by this act.’ The company never reorganized, or attempted so to do, under the statute as amended. But after it was so amended, and in September, 1889, the company issued to the defendants two policies of insurance, whereby it insured them against loss by fire of lumber owned by them for one year from October 1, 1889, in the sum of $1,500 and $5,000, respectively. Each of the policies was of the class known as ‘short term participating policies,’ as provided by the by-laws of the company. The defendants paid to and deposited with the company $100 for the larger policy, and $30 for the lesser one, in accordance with the by-laws and regulations of the company as recited...