255 Pa. 599 | Pa. | 1917
Opinion by
This was a bill in equity to secure an accounting filed by the National Life Insurance Company of the United States of America, a corporation of the State of Illinois, against James B. Haines, Jf., Thomas P. Jones and Louis C. Sands, trustees for the stockholders of the Pittsburgh Casualty Company, and numerous stockholders of the latter company individually. It was averred in the bill that, on July 3, 1912, the complainant entered into a contract with the defendant trustees for the purchase of all the capital stock of the Pittsburgh Casualty Company, a Pennsylvania corporation, upon certain terms set forth in a written agreement, which was annexed to and made part of the bill. It was further averred that, pursuant to the contract, complainant paid to the trustees the sum of $120,205.24, which was based on the amount of the admitted assets of the company as shown by an examination made, as of April 25,1912, by the Insurance Department of the State of Pennsylvania. íhis sum represented $100,000 capital, and $20,205.24 surplus, in the computation of which there was included unpaid losses estimated at $8,020.84. It was averred, however, that, in truth and fact, the net assets were $23,-935.70 less than the amount taken as the basis of payment. The difference was due largely to the fact that, when the unpaid losses could be accurately ascertained, it was found that they amounted to much more than the estimate. It was also provided in the agreement that complainant was to pay the trustees 25 per cent, of cer
In the answer it was admitted that the allegations of the bill in regard to the contract and the amount of the consideration paid were correct, but it was denied that the net surplus of the company was less than that which was reported to the Pennsylvania Department of Insurance, and upon which the amount paid by the purchaser was based. Defendants joined in the prayer for an accounting.
The court below was of opinion that an account could readily be stated without a reference, and it adjudged and decreed that there was due from complainant to defendant trustees the sum of $8,618.89. Complainant has appealed, and its counsel contend that, in stating the account, the court below erred in charging complainant with the amount of certain due bills and unpaid checks, which were turned over in the settlement. It is argued that even though these were afterwards paid, yet at the time of settlement they were “nonadmitted” assets, which, under the terms of sale, were to be delivered to the purchaser, in addition to the admitted assets. A similar claim is made with respect to an account upon the books of the company, representing a temporary loan to two' stockholders.
It is also alleged that the court below committed serious error in the exclusion of evidence tending to show that the liability for unpaid losses was in fact largely in excess of the amount at which they were estimated at
It clearly appears from the article of agreement that complainant purchased the capital stock of the casualty company, but did not purchase the assets as such. The price to be paid was,' however, based upon the expectation and belief, of both parties to the transaction, that the assets of the company would amount to a certain specified sum. The agreement recites that the parties expected and believed that “the assets” and “the net surplus based on admitted assets” were fully as much, and “the invested assets” were the same, as shown in the report of the company to the insurance commissioner as of date April 25,1912. In its offer to purchase the capital stock, the complainant expressly stipulated that the assets should also include “all nonadmitted assets and the goodwill of the company.” The evidence shows.that “admitted assets” of a casualty company are such investments as are authorized for such companies by the Act of June 1, 1911, P. L. 567, Secs. 19, 20, also cash, and certain other items which may be regarded as equivalent to cash. They are such assets as will be “admitted” by the insurance commissioner as legal investments of the capital and surplus of such a company in determining solvency. Any other property or investments which it may hold are termed “nonadmitted assets.” Due bills and unpaid checks, even though carried by the company as cash, are “nonadmitted assets.” On the settlement in this case, certain due bills and checks were turned over to complainant, which, while they may technically have been' nonadmitted assets, yet in fact were after-wards paid and converted iqto cash, with the exception of $268.04, for which credit was given by the court below. Counsel for appellant argue that, in addition to this
The most serious question raised by this appeal is, with respect to the liability of the casualty company as of the date of sale upon outstanding claims and losses not at the time fully ascertained and liquidated. By the report to the insurance department, which was made the basis of the settlement, the liabilities for losses and claims outstanding, whether adjusted or in the process
As to the suggestion that notice should have been given to defendants before the settlement of claims, and the payment of losses, we can find nothing in the agreement of sale requiring it. The claims were paid in conducting the business of the casualty company. They were adjusted and paid, so far as the record shows, in entire good faith, and the defendants are bound by such payments to the extent for which it was provided in the agreement that they should be used as an offset, unless they can show that the settlements were fraudulent, or were made with the intention of basing thereon an unjust claim against defendants. There is no allegation of that kind in the case. ■ In the offer of proof made by complainant, it is stated that the claims paid were over 300 in number, ranging from $1.50 to $3,268.75, but most of them for small amounts. If it had been intended that all these claims should be submitted to defendants to be approved by them before payment was made, instead of passing them in the usual way, and through the regular adjusters of- the company, the parties to the sale of the stock would certainly have made provision for it in the agreement. We think.the court below erred in rejecting evidence of the adjustments based on the proofs of loss, and evidence of the payments made pursuant to the contracts of insurance outstanding for legitimate claims which had accrued at the date of the purchase. And also in holding that complainant was bound to submit each claim to defendants before adjusting and paying it, in order to hold them to their agreement as to making
It is provided in the contract that the damages sustained by complainant by reason of the assets or net surplus based on admitted assets being less than the expectation and belief of the parties, shall be deducted from any future payments thereafter to be made by complainant to the stockholders or their trustees on account of premiums collected during the first year after the sale of the company. But it does not appear that there was any stipulation as to what should be done, in case the deficiency in the assets should exceed the amount of the payments which were to b¿ made by complainant to defendants. Counsel for appellant contend, however, that recovery may be had upon the ground that there was a mutual mistake of fact, and, further, that the contract amounted to a warranty upon the' part of defendants. It cannot be said with accuracy that there was a mistake of fact. The contract shows that both parties recognized a possibility that their expectation as to the amount of the net surplus might not be well founded, and they provided for a method of adjusting matters, if events showed it was not. Nor can one be held to warrant the truth of a statement, when he merely asserts his belief in it, and his expectation that it will prove to be true. Within the limits of the amount of future payments on account of premiums which were to be made by complainant, it was agreed that any deficiency of assets was to be set off, and applied thereon. But beyond this, the contract does not go. Evidently neither party contemplated the probability of a deficiency greater than the amount of defendants’ share of the future premiums, and no provision for that contingency was made. The accounting must be made in accordance with the terms of the contract. The question, however, of complainant’s right to recover for the amount of a deficiency in assets greater than the amount
We agree with the contention of counsel for appellant that evidence of the existence and payment of claims and losses to which the casualty company was liable at the date of the sale, in excess of the sum reported by the company to the insurance commissioner, was admissible under the pleadings. Both parties asked for an accounting, and the court awarded it. In order to state the account properly, all the transactions between the parties growing legitimately out of the contract, and the facts bearing upon them, should be taken into consideration.
The fortieth assignment of error is specifically sustained, and without referring to the numerous other assignments in detail, we sustain such of them as specify rulings of the court below which are not in harmony with the views herein expressed.
The decree of the court below is reversed, and the record is remitted for further proceedings in accordance with this opinion. The costs of this appeal to be borne by appellees.