167 A. 300 | Pa. | 1933
Argued May 22, 1933. The question is whether appellant was engaged in the insurance business, as the Commonwealth contends. Incorporated under the law of Delaware for the purpose of engaging in the real estate business, it registered in this state, May 1, 1930, as a foreign corporation, so engaged. It admits that it "is not authorized by its charter to operate as an insurance company . . . . . . in the state of its incorporation or . . . . . . elsewhere, and that it has not been licensed to do business in this Commonwealth in accordance with . . . . . . the Act of May 17, 1921, P. L. 682, and the Act of May 17, 1921, P. L. 789," regulating insurance. Jury trial was waived.
The learned court below concluded that appellant was engaged in insurance, and entered judgment for the Commonwealth. The judgment must be affirmed.
It is not without interest to note that, since these proceedings began, appellant has eliminated the word assurance from its corporate title by changing its name from Fidelity Land Value Assurance Company to National Realty Valuation Corporation.
Property insurance is a contract against loss governed by principles of indemnity: Com. Insurance Co. v. Sennett, Barr
Co.,
Appellant was engaged in selling what the evidence designates as repurchase bonds or contracts, of which several different forms appear in the record. They are too long for quotation here, but, one of them provides that, on demand, after a given period (generally ten years), appellant will purchase from the holder for a specified price certain real estate. The holder agrees to execute a warranty deed and deliver with it a policy of title insurance insuring a clear title. The bond provides that it shall not "vest any right, title, lien, interest or option to or in favor of any of the parties hereto in or against said property . . . . . . nor . . . . . . constitute an incumbrance or restriction against said land, or cloud in any manner or degree whatsoever the title hereto, or restrict the sale and transfer thereof or the consideration to be received therefor, but said property may be, by any holder thereof, sold and transferred as freely in all respects as though this certificate or bond had never been issued, and the privilege of so selling and conveying said property to this company or its order at the date of maturity as herein above mentioned; and accepting the aforesaid sum of money in payment therefor, or of retaining and keeping the said lot or tract of land, free and clear of any liens or claims whatsoever of the company, shall be entirely optional with the person, firm or corporation who shall at the said time of maturity, be the lawful owner of the said property covered hereby, and the registered or otherwise lawful owner hereof."
There is evidence that, one, conducting a real estate development (for example) and wishing to sell lots, may apply to respondent "to use your Fidelity Land Value Assurance Certificates in connection with the sale of our development. . . . . ." If such application is accepted, the developer and appellant make a contract, pursuant to which, for a premium paid by the developer, appellant issues its repurchase bonds to purchasers of lots from the developer. In one of the contracts, the premium *428 payable by the developer is fixed at 6% of the selling price of the lot. Such bonds in the total amount of $100,000.00 have been issued. To obtain business, appellant circulated advertisements which indicated what it considered the nature of its business. From those in evidence, as stating advantages to the purchaser, and also indicating the character of its contract, the following, from much of the same sort, is quoted: "2. The risk of depreciation is entirely eliminated. Your lot may enhance in value without any limit but you are safeguarded against loss." "3. Fidelity Land Value Repurchase Contracts have made land buying a safe investment." "5. [Such contract] provides an opportunity to participate in the speculative profits of land developments without any risk to the principal."
It sufficiently appears that appellant, for a consideration, paid, either by the developer of real estate, or, as was stated at bar, by any applicant to whom such a contract may be issued, insures against a well known risk, to which all landowners are subject, depreciation from the price paid. No matter what names are used to disguise the transaction, that is the ultimate fact. Under the police power, the conduct of insurance business has been subjected to regulation by the state: Act of 1921, supra; Com. v. Vrooman, supra; O'Gorman et al. v. Hartford Fire Ins. Co.,
Appellant contends that it makes contracts merely to buy real estate and that such contracts are not insurance; in the brief it is said "defendant's contracts are real estate options"; that appellant agrees to buy the land if the bondholder wishes to sell it; that insurance involves payment against a risk or contingency not under the control of the insured, which, it is said, is wanting here. If there were nothing more than an agreement to buy the land, it would of course not be insurance. But the avowed purpose of the parties is, as appellant advertises, to eliminate the "risk of depreciation," "to safeguard against loss," to avoid "any risk to the principal." An insurer guarantees against loss by an event that may or may not happen. The event specifically contemplated here, as appellant asserts, is depreciation in value of certain land below the price paid; the loss to be indemnified is the amount of that depreciation. In order that insurance may be practicable, it is necessary, in settling the terms on which a policy against property loss may be written, to determine how the amount of loss may be ascertained. In fire insurance, for example, the policy may state a maximum of insurance, leaving the burden of proof of loss on the insured, with recovery limited by the maximum. Or, a valued policy may be issued, generally subjecting the good faith of the valuation to challenge by the insurer if loss occur, unless otherwise limited by law (cf. Orient Insurance Co. v. Daggs,
Diversity of subject-matter necessarily creates differences in the practical conduct of insurance. Looking, now, at appellant's contracts, in the light of the nature of insurance and the illustrations suggested, it is first to be noticed, that ordinarily there must be obvious difficulty in determining, in advance, what rates of premium will prove adequate to raise a fund from which, on principles of average-experience, losses resulting from the great variety of causes producing land-value depreciation, may be paid. It is a new subject of insurance. In addition, account must be taken of the difficulties otherwise frequently arising in proving loss in market value of land or depreciation from price paid for land. As the amount to be paid and received depends on indemnity, the arrangement, which the parties would seek to make, would be such that the insured might not make a profit by the insurance. These difficulties, which would bear on both appellant and its bondholders, they have eliminated from the problem, by agreeing in advance that, on notice at maturity by the holder of a bond that the market value of property has fallen below the price paid for it, instead of requiring the insured to prove the amount of depreciation, the holder will convey the land to the insurer, who (for example, as the insurer in the case of abandonment after constructive loss in marine insurance) must take it, pay the amount agreed on, and, if he choose, salvage as best he may. We think this is insurance and not a mere obligation to buy ten years after date if the holder desires to sell.
In State v. Hogan,
In Claflin v. U.S. Credit System Company,
While differences in result in various states may follow from the application of varying statutory definitions of insurance the cases referred to support the conclusion we have reached, in the light of the general understanding of what insurance is in this state as illustrated in the cases cited above.
The Insurance Law of May 17, 1921, P. L. 682, in section 107, provides: "Except as herein provided, the doing of any insurance business in this commonwealth, as prescribed in this act, for insurance companies, by any private individual, association, or partnership, is prohibited. . . . . ."
Section 202 (e) provides: "Domestic stock and mutual insurance companies, other than life, and, if their charters permit, foreign companies, may transact any form of insurance not included in this section, if such insurance is not contrary to law, and is allied [to] or in harmony with the classes of insurance herein provided. Such additional insurance shall be transacted only on express license by the insurance commissioner and upon such terms and conditions as are from time to time prescribed by him."
As the statute contains no specific definition of insurance we must apply the word as generally understood in law of the state. In Commonwealth v. Beneficial Association, supra, it was said: "The general object or purpose of an insurance company is to afford indemnity against loss: its engagement is not founded in any philanthropic, *433 benevolent, or charitable principle; it is a purely business adventure, in which one, for a stipulated consideration or premium per cent, engages to make up, wholly or in part, or in a certain agreed amount, any specific loss which another may sustain; and it may apply to loss of property, to personal injury, or to loss of life. To grant indemnity or security against loss, for a consideration, is not only the design and purpose of an insurance company, but is also the dominant and characteristic feature of the contract of insurance."
As appellant was clearly engaged in the business of insurance without power by its charter to do so, the learned court below was right in entering judgment for the Commonwealth, entirely apart from appellant's failure to comply with the insurance law, which, of itself, would sustain the judgment, if appellant had possessed the power to engage in insurance.
Judgment affirmed, appellant for costs.
