Allen v. Mutual Fire Insurance

Ecclestox, J., delivered the opinion of the court. This suit was instituted upon a policy, dated the 6th of January 1845, in which the defendants contracted to insure the plaintiff against all loss or damage by fire, that might happen to a “store and frame” grist mill, valued at $850, ¹¹⁶ and a saw mill with a chair shop, and small sitting room attached, valued at $200. The plaintiff gave his promissory note for the premium, as required by the company; and regularly paid the interest thereon. On the night of the 21st of April 1847, the grist mill was accidently destroyed by fire.

Due notice of which was given; and the defendants refusing to pay the loss, this action was commenced. At the trial, the plaintiff’s claim was resisted on two grounds, which are to be found in two instructions, granted by the court, at the instance of the defendants. 1st, If the jury should believe the evidence, then the plaintiff had no such title in the said mills and premises, as would enable him to enter into said policy, or contract of insurance, and therefore, could not recover. 2nd. If the jury should find from the evidence, that after the policy sued on was underwritten, and before the fire, the plaintiff caused certain improvements, or alterations, to be made on the property insured; and should further find, that such improvements, or alterations, either in themselves, or during their progress of completion, occasioned any additional increase of risk to the property insured, then the plaintiff was not entitled to recover, he not having shown, that the permission, provided for by the terms of the eighth condition of the policy, had been first given. In the argument upon the first instruction, it was urged on the part of the defendants, that this institution is unlike an ordinary fire insurance company, where the capital consists of money paid in by the insured, and invested by the company.

The one under consideration, is a kind of partnership, in which the members mutually insure each others buildings, at certain estimated values. And the property thus insured must stand pledged to secure the payment of such sum or sumá, as the owners may be required to pay, according to the regulations of the company, for the purpose of making good any losses which may occur from time to time. And as the second section of the original act of incorporation makes the ¹¹⁷ premium notes, liens upon real estate only, it is contended, that this company cannot insure personal property, but is confined to such real estate, as the assured can create a valid lien upon, to the extent of the obligation imposed on him by his premium note. In aid of this view of the subject, reference has been made to the supplement of 1843, ch. 225, and to the 3rd and 6th sections of the supplement of 1849, ch. 173.

The first provides, that any guardian of an infant may insure, under the original act, any houses or buildings owned by the ward or wards of such guardian; and that the insurance shall be a lien, with the same effect as if the minors were of full age, and had made the insurance themselves. The 3rd section of the latter supplement, is, “that it shall and may be lawful for any person, possessed of a life estate in real property, or any person holding such property, in trust, to insure the same in said company; and that the premium note, given for such insurance, shall be a lien upon such property.” The 6th section referred to, makes provision, that a feme covert, with the consent of her husband, may insure her real estate, and the premium note given by them jointly, shall be a lien on the same. These acts were not resorted to, for the purpose of showing that any powers or authority, given in the charter, have been abridged or reduced by them. But they were used as legislative authority, for the construction claimed by the appellees.

Experience, however, has taught us to believe, that legislative construction of a prior statute, is not always to be relied upon as a safe guide. And on the present occasion it is by no means certain, that the appellees aie right, in the belief, that the legislative interpretation of the original act, as manifested by the supplements, is the same which they insist upon. When the charter declared, that premium notes should be liens upon real estate, it cannot be supposed, that a lien should exist, in any case, where the title of the party would not enable him to create one by deed or otherwise. These supplements were passed, with a view of authorising certain ¹¹⁸ classes of persons to create liens for insurance purposes, who previously, had no such power, or who, it is presumed, the legislature supposed, had not the power.

This seems to have been their chief design. And as the charter gave liens upon real estate only, the subsequent acts were also confined to the same species of property. If it be supposed, that because it is said in the supplements, the persons named may insure, they, therefore, had no such right previously, this is certainly a mistake ip one instance, at least, if not in more. A tenant for life surely had the right; even according to the construction of the charter, claimed by the appellees.

His life estate being a freehold, is reality, and his premium note would have been a lien to that extent. How far this last act extends the lien in such a case, it is not necessary now to decide. But even assuming that the supplements were passed, under the impression that the construction of the original act, contended for by the appellees, is correct, w7e cannot yield our assent to its correctness. For we consider it in direct conflict with the plain and obvious meaning of the first section, which is not contradicted or controlled by any subsequent clause or section.

In the act of 1842, ch. 214, which is the original charter, we find given to the company, in the first section, “full power and-authority to make insurances on any kind of property, against loss and damage by fire.” More ample powers to make insurances, could not well have been given. The language used, is abundantly7 comprehensive, to include both real and personal estate, and all such interests in either, as the well settled principles of law7 recognise to be insurable interests. The grant is without any express limitation, qualification, or restriction; and the subject legislated upon being that of insurance, the language must be construed according to the established rules of the insurance law, unless they are controlled by some other part of thjs charter. This, it has been contended, is done by the fourth section, which makes the -premium notes liens upon real estate only.

The portion of the section referred to, is: “ That all premium notes, notes of ¹¹⁹ hand, or other evidences of debt, held by the said company, which shall have been given thereto for premiums for insurance, or for any part or parts of said premiums, shall constitute and be deemed a lien on any real estate which may be insured, in consideration, or part consideration, of such notes or evidences of debt; which real estate shall be held liable for the full and just payment of such notes, or evidences of debt, either wholly or in part, at such time or times as the president and directors shall demand.” It is difficult to perceive, how this can aid the argument in defence. A lien on realty only, is created; but then it seems to provide for a case in which the insured may be indebted to the company, and may give his note for something besides an insurance on real estate, upon which a lien may be created by him. For the note is made a lien “on any real estate which may be insured in consideration, or pari consideration of such notes.” It is true, that this language might be applicable to a policy, including several parcels of real estate. But it would apply as well to a case where the note was given for premiums, under a policy of insurance, upon both personal and real estate.

And it may very justly be supposed, the legislature had such a case in contemplation, after having given, in the first section, unlimited power to insure any kind of property. Confining the liens to realty, affords an argument in favor of the belief, that the legislature certainly intended to authorise insurances upon personalty and realty both. If they had supposed that by creating a mutual fire insurance company, they were conferring power to insure real estate only, they would not have considered it necessary, when providing for liens, to confine them by express language to real estate. Under such circumstances, it would have been quite sufficient, and perfectly correct to have said, the notes shall be liens upon the property insured.

But under the supposition that they were giving authority to insure all kinds of property, and only designed making liens on realty, such language as that used in the fourth section, might well have been expected. In case of failure to pay any of the notes mentioned in the ¹²⁰ fourth section, when demanded, provision is made that “the said president and directors may proceed to collect the same, or any part thereof, in the same manner as in the foreclosure of a mortgage on real estate, the said notes or evidences of debt to beheld and deemed as a mortgage on such real estate.” Whenever a loss shall occur, the company are authorised, by the tenth- section-, to ascertain the proportion which each member is to pay, and after causing a statement thereof to be made, the members are to have notice of the same; and if at the expiration of sixty days from the date of such notice, any member shall fail to pay his contribution, the directors may file such statement in the office of the clerk of the county, and may “cause execution to issue for the said proportion, in- the same manner as if a judgment had been rendered for the same, together with all costs incident to such proceeding.” In this provision for a summary process of collection, the general and unrestricted language which includes all members of the corporation-, would include any premium notes not liens on real estate; and therefore this section is perfectly consistent with the general power in the first, to insure any kind of property. In truth; there is no part of the charter in which the language is not in harmony with the unlimited authority which we have conceived to be- granted in the first section. The exposition of this statute, as insisted upon by the appellees, requires us- to limit or restrict the meaning of the words “any kind of property,” so as to- include real estate only, and such real estate as the insured can bind by a valid lien.

This is clearly what is asked of us.- For they contend, that the present policy is void, because the appellant had not such a title to the property, included therein, as he could give a lien upon, the company having no authority to insure in such a case. To acquiesce in this view of the' statute, would violate one of the plainest, well settled, rules of construction. In 6 Bac. Ah., 380, title Statute, letter I, it is said: “Where words in a statute are express, plain and clear, the words ought to be understood according to their genuine and natural signification and import, unless by such exposition a eontra ¹²¹ diction or inconsistency would arise in the statute, by reason of some subsequent clause, from whence it might be inferred that the intent of the parliament was otherwise.” According to Jacobs’ Law Die., 5th vol.,p. 332, Property is, “ The highest right a man can have to anything; being used for that right which one hath to lands or tenements, goods or chattels, which no way depend on another man’s curtesy.” Surely, then, the words “any kind of property,” if construed “ according to their genuine and natural signification and import,” will include more than real estate, on which a party proposing to insure can create a lien.

And it will be a difficult task, to point out any subsequent clause of the act, contradictory to, or inconsistent with, such an exposition, as will justify an inference that the legislature had a different intent. The appellees’ interpretation has been pressed upon us, as necessary for the security and protection of the members of the company, and, indeed, to secure the very existence of the company itself. Assuming it to be vitally important, that such institutions should only insure where they can have their premium notes secured by liens on realty, where is the absolute necessity of having them thus restricted and limited in their' charters? They can at any time regulate the matter in their by-laws, or by the conditions annexed to their policies.

But how are they subject to any very great hazard, even whilst the kind of property to be’ insured is left discretionary? The officers have the privilege, in fact it is their duty, if not already fully informed on the subject, when application is made for an insurance, to inquire into and ascertain the circumstances of the party, the nature and amount of property to be insured, as also the title to the same. And if an insurance is effected on property, the premium note for which is not a lien, but the insured is considered perfectly good for the amount, being a man of large means, should it afterwards, at any time, be even suspected that the party is becoming, in any degree, less responsible than at first, the company, (this one at least, by express provision,) can revoke the contract. And if, in the mean time, a loss has occurred, rendering it ¹²² necessary to call upon the members for contribution, the tenth section of the charter affords an exceedingly prompt method of compelling payment.

Although it was contended' in argument, that from the very nature of mutual fire insurance companies, they must be confined to real estate only, and that no policy ought to be valid> unless accompanied -by an actual lien; and that such regulations are so necessarily inherent in institutions of this sort, as to demand a construction of the present charter accordingly, still we find a different doctrine held elsewhere. In Addison and Clendenin, vs. The Kentucky and Louisville Insurance Company, 7 B. Monroe, 470, there is a decision upon the charter of a mutual fire insurance company, in which they are authorised to insure real and personal property. The insurance was on a flour-mill. The assured Iheld a lien upon it fór a debt due to them,, and one question was, whether they had such an interest, as authorised them to effect an insurance?

It was held they had. There it appears to have been contended, that the owner of the mill, alone, could have it insured, and that a person merely holding a lien upon it, to secure the payment of a debt, could not effect an insurance on the property. But the court thought otherwise. The counsel for the appellees thinks it would be great injustice to the members of this company not to hold this policy void, for the reason, that they have pledged their real estate to secure the appellant against loss by fire, whilst he has pledged nothing to them in return, but his personal responsibility.

There is nothing, however, in the record tending to show that the facts are, as here stated, in regard to the pledges given. Speaking from the record, we are not authorised to say, whether there may or may not be many policies similar to the- present. If, as- has been suggested, the company would be subjected to much inconvenience, by considering such policies as this binding upon- them, a contrary decision would subject the assured to quite as great, if not much greater, inconvenience. In the latter view of the subject, it might very well happen ¹²³ that a wealthy man, well known to the company as such, should apply for an insurance upon property in which he had an interest, but not such a title as would enable him to create a lien on the same.

The company, having full confidence in the ability of the party to meet all his engagements, make no inquiry in regard to his title, and he says nothing on that subject. The insurance is effected. For many years in succession the interest on the premium note is regularly paid. And to satisfy losses by fire, it may be that the principal of the note has been paid several times.

Finally, the insured property is destroyed, and when the company are called on to make good the loss, they, for the first time, investigate the title, and finding it defective, refuse to pay, because the policy is void. Although, in fact, at the time of the insurance, the insured had not a full title to the property, he may have believed that he had, and there might not have been, in the mind of any one, the slightest suspicion of any defect in the title. But subsequently, such defect may have been discovered by the decision of a law suit, in which some nice and difficult question was settled, contrary to the previous impression of the legal profession. The argument, ab inconvenienti, therefore, is not so decidedly in favor of the appellees, as to justify such a construction of the charter, as will give to the words of the first section any other meaning than “their genuine and natural signification and import.” As the expression, “any kind of property,” must include personal as well as real estate, we are of the opinion, that this