Appeal of the Susquehanna Mutual Fire Insurance, 105 Pa. 615

Appeal of the Susquehanna Mutual Fire Insurance

105 Pa. 615 | Pa. | 1884

Mr. Justice Green

delivered the opinion of the court, October 6, 1884.

The 34th section of the by-laws of the Insurance Company, áppellant, is in the following words:

“In case any buildings, goods or other property insured shall be burned or damaged by fire, the directors shall retain in the treasurer’s hands, the premium note given for the insurance of said .property, and also such amount remaining unpaid upon said note as the board of directors may deem a sufficient security for the payment of assessments .of the assured until *623the expiration of the policy; and upon such expiration the balance (if any) in the treasurer’s hands, shall be paid to the assured.”

Although the meaning of this section is not very accurately ' expressed, its import undoubtedly is, that in case of a loss upon a policy, the company shall retain out of.the money due to the insured for the loss, so much, not exceeding the amount unpaid upon the premium note, as the directors -may deem sufficient for the payment of possible future assessments during the continuance of the policy, that is, assessments to which the insured would be regularly subject under the policy. Such assessments would, under the contract of the parties, he for losses occurring during the term of the policy, whether they were actually made before or after the policy expired. This by-law was in force at and before the time when the policy to the appellee was issued. By one of the provisions of the policy it was agreed that the policy was made and accepted in reference to the by-laws of tlie company, and also the. application and conditions annexed, which are made a part of the policy, and to be used and resorted to, in order to explain the rights and obligations of the parties. By this provision the by-laws in existence at the date of the policy became part of the contract of the parties. There is a proviso annexed to the 34th section of the by-laws which more fully explains its meaning. It is as follows: “Provided, however, that should the assured give sufficient security for the payment of all future assessments on policies above referred to, and then, in that case, the whole amount of the claim shall be paid in full.” This clearly explains that the insured shall continue subject to all future assessments, although his own policy has practically expired by reason of the destruction of the property insured, and the clause authorizes a substitution of security for the payment of future assessments, in place of a retention of part of the money due on the policy for tlie loss sustained. By the second clause of the 31st section of the by-laws it is provided that “ All premium notes which have expired, and are not in force at the time such assessment is declared, shall nevertheless be liable to assessment for all unpaid losses which existed at the time of tlie expiration of such premium note or notes, pro rata with all other premium notes then in force.” Under this clause it is manifest that assessments may continue to he made upon premium notes which have expired, for all losses which occurred while the notes were in force. In addition to this tlie policy contains a provision that “ the insured has deposited a premium note subject to the payment of such assessments as may be made thereon for the purpose of paying losses and the necessary expenses of the company occurring during the term of this *624policy.” Whatever may be said-in reference to the reasonable or unreasonable character of a contract with such provisions, it is enough for the purposes of this case to know that the contract of these parties is of this character. We see nothing contrary to public policy in it, nor are we aware of any other consideration affecting its validity on this account, and therefore so far as' the courts are concerned they are bound to enforce it as they find it. If parties make such contracts they must be bound by them. It follows that assessments made upon the premium note given by the- appellee, after the loss sustained under his polic3r occurred, are not for that reason invalid assessments. Nor can we regard the circumstance that these assessments are of a large aggregate amount, as any reason against their validity. The possibility of assessments to such an amount as $1,Í59, upon a policy of only $3,000, would constitute a very good reason, for'not entering into a contract which could have such a result, but it will not avoid the contract. We know nothing as to the correctness of these assessments, and do not now decide them. That will be matter for future determination. But if they were correctly .made, to meet losses and expenses actuall}r incurred, and are not in excess of. the proportion which ought to be borne by the appellee, we know of no reason why he should not be subject to them to their full extent.

In this cáse the question turns upon- the right of the appellant to take out of the fund in court an amount necessary to pay the' assessments upon the premium note given by the appellee. The fund is the money, found by a verdict and judgment in another case, to be due the appellee for a loss sustained under a policy written -by the appellant. • The premium note upon which the assessments in question were made, accompanied that policy. Notices of the assessments were not given to the insured, as they were made, and for that reason we have just held in another action, by the appellant against the appellee, they Cannot be recovered.' But in this ease a -very different question arises. It grows out of the 34th section of the by-laws above referred to, and is simply this, whether the appellant has a right to retain out of the money due for the loss, enough to pay the assessments made for the proportion due by the appellee- for losses and expenses which occurred during the' term of .his policy. The money was paid into court, by leave of the court, upon the petition of the appellant, in order to .avoid a sale of its property and franchises, upon execution issued on the judgment recovered by the appellee, in his action on the policy against the appellant. It is contended by the appellee, though not so decided by the court below, that the pa3rme-nt was voluntaiy, and the right *625of retention or Hen was therefore lost by the fact of payment. We do not think so. Had the money been paid to the sheriff In satisfaction of the execution, the point would have been well taken. But it was not so paid. On the contrary, it was paid into court for the very purpose of avoiding that effect, as we must suppose, and of having it distributed to the rightful owners. The petition under which the money was paid expressly recited that it was claimed by two attaching creditors, one of which was itself, and asked leave to pay it In, to abide the final determination of the attachments, and that the execution be stayed until the attachments are disposed of, or until all the said parties may Interplead, “ to determine who may be legally entitled to receive said money.” The money was received by the court in the manner in which it was tendered, -“there to abide the further orders of the court for distribution,” and “ to be awarded and divided as may hereafter be decreed.” At the same time the appellant presented a petition to the court, claiming to have distributed to it the sum of $1,159.12, being the amount of assessments levied upon the premium note of the appellee, for losses occurring during the term of his policy, by virtue of a lien under the provisions of the by-laws of the company. Tims it will be seen that the money was paid into, and accepted by the court, for the very purpose of determining the question of the right of the company to retain, or have paid to it out of the fund the amount of the assessments. In such circumstances, of course it cannot be said that in paying in the money the right to have the question at Issue determined was parted with. It was also claimed that the decision of the court below in the action to recover the assessments was an adjudication of the claim of lien. That action was necessarily based upon a strict legal right to recover the assessments upon the theory of a direct legal obligation to pay them. We have seen that such an obligation did not exist for the reason stated in our opinion in that case. This right of lien however, is a distinct and independent right existing by virtue of another and different provision in the contract, and hence the determination of the one question does not decide the other. The learned judge of the court below was of opinion, and so ruled, that the appellant was estopped from asserting its right of lien because it had made defence in the action on the policy by the assured, on the ground that certain acts and omissions of the assured had operated to avoid the policy. We find ourselves unable to agree with this view. The policy, notwithstanding the defence made, was adjudged to be of legal efficacy and a recovery was had, and the money now in court is the result of that recoveiy. Thus the appellee has had the full benefit of his contract, and *626the fruits of it have been realized'- But the company is a mutual one, and the means with which to pay losses are necessarily realized, only by assessments upon the premium notes given by the members. It is a part of the appellee’s contract that he will pay his proportion of the losses and expenses which may be incurred during the term of his policy, and as a means to accomplish that end he agrees that in case of a loss under his policy, the company may retain enough of the money coming to him for his loss, to pay future assessments. The money thus to be retained is needed to pay losses sustained by other members, and if it cannot be had, to that extent, such other members must be deprived of the means of obtaining payment for their losses. "We cannot perceive any sufficient reason for depriving them of this means of satisfaction simply because the company made defence against the action on the appellee’s policy. The defence was made peaceably and legally, through the instrumentalities provided by the law. The company had, or supposed they had, a just defence to the claim, for reasons stated. They certainly had a right to have the sufficiency of their defence determined judicially, and it seems to us it would be a very severe penalty to declare that a defence shall not be made, except upon peril of forfeiting all their rights under the contract, if the contract is sustained. We know of no principle in the law of estoppel which requires such a ruling. In the action on the policy the contract is set up, and its validity and efficacy are asserted. Against the latter certain reasons and matters are asserted which are finally, through the verdict of a jury and the resulting judgment of a court, determined to be insufficient as a defence, and the legal efficacy of the contract is declared. But if this be so, and the contract prevails and is therefore to be enforced, why shall it not be enforced according to its terms? Why shall the assured be permitted to have the benefit of a literal performance of the terms which are favorable to him, without being required to perform the terms favorable to the company ? The latter were the conditions upon which his terms were granted. Why shall he have performance except upon the expressed conditions ? We know of no reason. It is said the company should have defalked its claim in the action on the policy. But they could not do that since their defence was against any right of action, and if there was no right of action there was nothing to be defalked. Neither could they give notice of the assessments as they were made, because by so doing they would necessarily admit the contract to be in force and deprive themselves of the right to make defence against the policy. Unless the company absolutely forfeited the right to have the contract performed according to its terms if per*627formed at all, merely because they made defence against it, we can see no reason why they shall not be permitted to take from this fund- the amount necessary to pay the appellee’s portion of the amount required to pay the losses and expenses incurred during the term of his policy. We can see no reason for such forfeiture. In a bill for the specific performance of a contract, although defence is made and liability denied by the defendant, yet if performance is finally decreed, it is only in accordance with the terms of the contract. The defendant is not deprived of the benefit of Ms stipulations because he has made defence. In an action on a bond for the payment of money by instalments, there can be no recovery except in accordance with the terms of the condition. If but a single instalment is due, that only can be recovered, unless it is expressly stipulated that the whole shall fall due upon the non-payment of one. And generally a party to a contract who makes defence against an action upon it, does not thereby forfeit any rights under it, except such as are expressly forfeited by its terms. We think it unnecessary to prolong the discussion. It seems to us the appellant should be permitted to take out of the fund in court such sum as will suffice to pay the proportion which ought to be paid by the appellee, of the losses and expenses which were incurred during the whole period of his policy, that is, from October 2, 1876, to October 2, 1881, less such payments as he may have already made upon that account. If the assessments made correctly represent that proportion, their aggregate amount will represent the amount to be taken out. As there is no assignment of error which raises the question of the correctness of those assessments, we have no means of determining that subject. We therefore reverse the case and remand the record for further proceedings.

Decree reversed and record remitted for further proceedings, the fund to be distributed in accordance with the foregoing opinion, the costs of this appeal to be paid by the appellee.