Stockley v. Benedict , 92 Md. 325 ( 1901 )

The appellant is the receiver of the Peoples Mutual Live Stock Insurance Company, a corporation, created under the laws of the State of Pennsylvania, and incorporated for the purpose of insuring its members against loss arising from the death of domestic animals by disease or accident, and for that purpose to assess upon and collect from its members such sums of money as may be necessary to carry on the business and to pay the losses incurred. The company continued to transact business until the second day of May, 1898, when, on application, it was declared by the Court of Common Pleas of Dauphin County, Pennsylvania, to be insolvent, and the appellant was duly appointed its receiver, who afterwards qualified as such.

The appellees are co-partners, doing business under the firm name of Benedict Brothers, in the city of Baltimore, and during the years 1896, 1897 and 1898, secured insurance upon certain horses, to cover which the company issued to them five policies or certificates of membership for a term of years and upon certain conditions mentioned in the policies.

Subsequently, on the 13th of September, 1898, the plaintiff was directed, as such receiver, by the Dauphin County Court, to levy an assessment upon the policies or certificates of membership of the company for the purpose of paying the liabilities incurred by the company while the parties upon whom such assessments were levied were members according to a schedule therein prescribed, and this suit is brought to recover the sum of $212.12-100, claimed to be the assessment due by the appellees upon the policies held by them.

The case was tried in the Baltimore City Court upon an agreed statement of facts and other evidence offered at the trial. At the conclusion of the evidence on both sides four prayers were offered by the appellant, all of which were rejected without being passed upon, the Court giving the following instruction: "The plaintiff has offered no evidence legally sufficient to show that the defendants were parties to the proceedings in the Court of Common Pleas of Dauphin County, Pennsylvania, or that they are bound by any assessment levied under the decree of said Court therein, and the verdict should be for the defendants."

The verdict and judgment being against the plaintiff, he has appealed, and the questions for our consideration arise upon an exception to the rejection of the plaintiff's prayers, and to the granting of the instruction given by the Court.

We do not deem it necessary for the purposes of this case to determine all of the questions presented by counsel in their briefs, and which were so ably argued at the hearing. The sole question we are now called upon to decide is whether the appellees in this case were members of the appellant's company at the time of the levy of the assessments, under the decrees of the Pennsylvania Court, and are as such liable to the receiver in this suit.

This question must be answered in the negative, because it is quite clear that, under the facts of the case, the policies held by the appellees had been forfeited, and were null and void by reason of the default in the non-payment of the assessment levied upon all the policies of the appellees, payable on or before April 1, 1898.

It will appear that by the express terms of the policies (Condition and Agreement 9), it was distinctly provided, if the policy shall become null and void by the non-payment of any assessment or dues levied upon the insured it can only be restored by the consent of the company in writing. The payment of the indebtedness existing at the time of annulment shall not bind the company to restore the policy, nor shall a receipt for the same be considered a reinstatement, nor shall the signing of any health certificate or application for reinstatement, nor the filling of the same with the company or its agent, bind the company to restore the policy. And it is conceded, as part of the facts of the case, that on or about the first day of March, 1898, the insurance company levied upon all the policies of the defendants, an assessment of eleven dollars and one cent, payable on or before April 1, 1898; that this assessment was the last one levied by the company; that it was paid on the 4th day of April, 1898, and the defendants made application for the reinstatement of their policies, but so far as could be ascertained, the company did not, between the date of the payment and the decrees of the Pennsylvania Court, reinstate in writing the policies which had been previously issued to the defendants.

It also appears that the conditional receipt, given by the agent of the company to the defendants for payment of the March assessment, contained this express condition which is provided by the policy. It is as follows:

PHILADELPHIA, April 4, 1898.

Received of Benedict Bros. eleven 11-100 dollars in full for March assessment: Condition. — The insurance upon which this payment is made and for which this receipt is given is null and void having been permitted to lapse, as provided for by condition number eight of the policy, and can only be reinstated as provided for by condition No. 9, of the policy, and upon signing the health certificate hereto attached and filing same at the home office of the company for its approval.

And the evidence further shows, that the notice of assessment sent out by the company to its policy-holders, contained a statement, that if the assessment was not paid on or before the date the insurance upon which the assessment was made will be forfeited and the amount due collected. If any claim for or right of forfeiture or any default on the part of the holder of the policies now exists, the company does not by this notice waive the same.

And it will further appear by reference to the eighth condition and agreement of the policies, that the insured agreed that a failure or neglect on their part to pay the dues or assessments within the time prescribed in the notice or assessment, shall render the policies null and void and that the company might retain the money that may have been paid thereon, and all indebtedness at the time of such annulment could be collected and no further notice or demand for dues or assessment, or receipt of the amount thereof by the company or its agents, shall be construed as a reinstatement or waiver of the annulment incurred by non-payment within the time.

It is insisted, however, upon the part of the appellant, that the payment by the appellees on the 4th of April, 1898, of the assessment and the acceptance by the company of such payment, operated as a distinct waiver of the condition of the policies and that they did not thereupon lapse and become null and void. But this contention cannot be sustained in the face of a plain and express condition and agreement, in the policy itself, that when a policy became null and void, it could only be restored by the consent of the company in writing; and in the face of the further stipulation that a subsequent payment of the assessment, nor the company's receipt, nor an application for reinstatement filed with the company will bind the company to restore the policy.

It would not only nullify the express terms of the contract of insurance as provided by the eighth condition and agreement of the policies that no receipt of an overdue assessment shall be construed as a reinstatement or waiver of the annulment incurred by non-payment within the time provided in the notice of assessment, but it would practically defeat the clearly expressed intention of the parties as stated in the receipt of the 4th of April, 1898, that the payment of the overdue assessment did not restore the policies and they could only be reinstated as provided by condition number nine (9) of the policy.

In the recent case of Gibson v. Megrew, 154 Ind. 273; 48 L.R.A. 366, the Supreme Court of Indiana in dealing with a somewhat similar certificate of insurance held that the question of forfeiture, under the circumstances, was not a matter merely within the option of the society, but necessarily followed from the force and effect of the constitution and by-laws. These were as binding and controlling upon the officers of the association as they were upon its members. It further held: "As a general rule under such contracts in the absence of anything to the contrary the insured has the right to elect whether he will continue to pay his premiums or assessments as they become due or forfeit the contract. He must make his election after notice of the assessment within the time fixed for the payment or suffer the loss of membership and thereby terminate his rights and the liability of the company or society under the contract of insurance, save and except as heretofore stated, the right of reinstatement, when the same is expressly reserved as in this case or except any other right which may have been expressly reserved from the effect of the forfeiture."

We, therefore, hold that as the policies held by the appellees in the Peoples' Mutual Live Stock Insurance Company of Pennsylvania had been forfeited prior to its adjudication in insolvency, they were not liable for the assessments levied under the decrees of the Pennsylvania Court and not being at that date members of the company, they cannot be held in this suit.

Finding no error in the ruling of the Court, its judgment will be affirmed.

Judgment affirmed with costs.

(Decided January 16, 1901.)