U.S. Supreme Court Korn & Wisemiller v. Mutual Assurance Society, 10 U.S. 6 Cranch 192 192 (1810)
Korn & Wisemiller v. Mutual Assurance Society Against
Fire on Buildings of the State of Virginia
10 U.S. (6 Cranch) 192
ERROR TO THE CIRCUIT COURT OF THE
DISTRICT OF COLUMBIA SITTING AT ALEXANDRIA
In this case it was decided:
The separation of Alexandria from Virginia did not affect existing contracts between individuals. The insurance upon buildings in Alexandria did not cease by the separation, although the company could only insure houses in Virginia.
The obligation of the insured to contribute does not cease in consequence of his forfeiture of his own insurance by his own neglect.
All the members of the company are bound by the act of the majority. No member can divest himself of his obligations as such but according to the rules of the society.
This was a motion in the court below, in the name of the principal agent of the Mutual Assurance Society for judgment against Korn & Wisemiller for $116, "being the amount due from them for a half quota under a declaration for insurance made to the society with 6 percent, interest thereon from 1 June, 1805."
The court below gave judgment according to the motion, and the defendants brought their writ of error.
This society was incorporated by the Legislature of Virginia by an act passed on 22 December, 1794, entitled "An act for establishing a Mutual Assurance Society against fire on buildings in this state."
The principles of the society are declared to be
"That the citizens of this state may insure their buildings against the losses and damages occasioned accidentally by fire, and that the insured pay the losses and expenses, each his share according to the sum insured. "
The act provides that the rules and regulations which should be concluded upon by a majority of the subscribers at the first meeting should be binding on all those who should insure their property in that society, and that a majority of the society might at any time alter and amend the rules and regulations as they should judge necessary. That certain premiums should be agreed upon to be paid by the insured to constitute a fund to pay losses. And that if that fund should not be sufficient, a "repartition" among the insured should be made, and each should pay on demand of the cashier his share according to the sum insured and the rate of hazard. It also provides that the property insured should be bound for the payment, and for that purpose might be sold. That such quotas, when called for, should be advertised, and when any person should neglect to pay his quota, his insurance should cease until it should be paid. If the property should be sold, the purchaser was to become a subscriber in lieu of the vendor. The subscribers might be compelled to pay the premiums on request of the cashier, with 6 percent interest to the day of payment.
By a subsequent act passed in December, 1795, it was enacted
"That the said subscribers, a majority of them in person or by deputation being present or a majority of the sum subscribed, when any meeting shall be held, being there represented, shall have power and authority to proceed and act in all matters and things in the first recited act mentioned, in as full, absolute, and unlimited a manner as they might or could do if all and every of the said subscribers were actually present and attending at any such meeting."
By an Act passed 12 January, 1799, it is enacted
"That the said mutual insurance society shall have full power to recover the whole or any part of such premiums or quotas as are or may hereafter become due from any delinquent subscriber or member under his subscription or declaration for insurance made to the said society, on motion of the cashier of the society before the court of the county or the court of the district wherein such delinquent may reside, ten
days' notice of such motion being previously given, and such court shall have full jurisdiction to hear and determine such motion and to cause their judgment to be enforced with costs by any legal executions, saving to any person against whom a motion shall be made the right of a trial by jury if he shall desire it."
By an Act passed 27 January, 1803, it is enacted
"That the said society may insure buildings in the County of Alexandria, provided Congress shall pass a law subjecting those who declare for insurance in that society to the provisions and regulations of the laws of Virginia which are already or may hereafter be passed concerning the said society. The act to commence and be in force as soon as Congress shall pass a law subjecting the citizens of the County of Alexandria who shall hereafter subscribe for insurance in the said society to the same mode of recovery in the Court of the County of Alexandria as is now allowed and granted by the laws of this commonwealth against defaulting subscribers residing within this state."
On 3 March, 1803, Congress passed such an act as was contemplated by the Legislature of Virginia.
On 29 January, 1805, Virginia passed an act the preamble to which recites that it had been represented on the part of the society that such a change in its Constitution as would separate the interests of the inhabitants of the towns from the interests of the inhabitants of the country is essential to the "equalization" of the risks, and that the same had been agreed upon at a general annual meeting of the society. It therefore enacts that the funds should be divided between the towns and the country in proportion to the capital subscribed by the towns and country respectively, and that the town funds should be only liable for town losses and country funds for country losses. That during the year 1805, all the valuations of houses insured should be revised, and no loss paid but according to such revaluation subject to a deduction of one fifth thereof, "and where such revaluation shall exceed the former valuation, an additional premium shall be paid."
"It shall be lawful for any member of this society to withdraw from the same on giving six weeks' previous notice and upon paying all arrearages due at the time of withdrawing."
"That all debts due or to become due to the society may be sued for, prosecuted, and recovered in the name of the society in the same manner, in the same courts, and upon the same principles, as they may now be sued for, &c.;, except that the name of the cashier need not be used. That the agents, &c.;, shall perform the duties required from agents by the 19th article of the rules and regulations now in force."
By the 19th article of the rules and regulations of the society adopted and in force prior to the 29th of January, 1805, the duties of an agent were
"to act for the society agreeably to the Constitution, to apply to the houseowners of their respective counties, explain the plan to them, make out the declarations of insurance, procure the certificate of the majority of three respectable houseowners (of whom the county agent may be one) of the valuation of the buildings, transmit the declarations, properly executed, to the principal agent, and correspond with him on what may be necessary to be done."
The plaintiffs in error made their declaration for insurance in the usual form under seal, and thereby promised that they would
"abide by, observe, and adhere to the Constitution, rules, and regulations which were already established or might thereafter be established by a majority of the assured present in person or by representatives or by a majority of the property insured, represented either by the persons themselves or their proxy, duly authorized, or their deputy, as established by law, at any general meeting to be holden by the assurance society, or which were, or thereafter might be, established by the president and directors of the society."
In consequence of this declaration, the plaintiffs in error paid the original premium of insurance and obtained
a policy. The society demanded a half quota,
"that is to say, for the payment as it existed on 25 February, 1805, of a sum equal to one-half of the original premium, which half quota was required to be paid on 1 April, 1805, and is the sum for which judgment is now claimed."
By the 14th article of the original rules and regulations of the society it is provided that
"In every period of seven years from the commencement of this institution, there shall be new declarations and valuations for insurance upon buildings insured by this society, and whoever fails to renew his declarations and valuations for the space of three months from the expiration of each term of seven years shall cease to enjoy the benefits of his assurance till such new declarations are made; should the valuation be less than before, the assured shall have no right to demand of the society the difference of the premiums, but it shall remain for the benefit of the society, and in case of any loss the insured are always to be paid according to the last valuation."
Korn & Wisemiller did not, within three months after the expiration of the first term of seven years, renew their declaration and valuation, and thereby ceased to enjoy the benefit of their insurance.
The Town and County of Alexandria, in which these buildings were situated was, until 27 February, 1801, a part of the State of Virginia, since which day they have constituted a part of the District of Columbia. The plaintiffs have always been inhabitants of the Town of Alexandria ever since the year 1789.
On 25 December, 1795, the society commenced the operations of the institution.
In pursuance of the Act of Virginia of 29 January, 1805, a separation of the interests of the inhabitants of the towns from the interests of the inhabitants of the country has been made in the manner expressed in the 1st, 2d, 3d, 4th, 5th, and 6th sections.
The new Constitution in that act contained went into operation on 30 January, 1805.
The plaintiffs in error made a declaration of revaluation of the property insured by them, which declaration was under their seals, and was produced and made in consequence of the representations of the agent of the society, who stated that the plaintiffs in error were bound by their former declaration and by the rules and regulations of the society so to do.
JOHNSON, J. delivered the opinion of the Court as follows:
This cause comes up from the Circuit Court of Alexandria,
in which a summary judgment has been given for the recovery of a contribution demanded of the members of the mutual assurance society conformably to its bylaws.
The plaintiffs here contest their liability upon several grounds.
1. Because, by the separation of Alexandria from the State of Virginia, they virtually ceased to be members of the institution.
2. That by having omitted to revalue within seven years, they were no longer insured, and of consequence not liable to contribute.
3. That by the alteration of the charter in 1805, their security and liability became so materially changed as to discharge them from their contract.
4. That their revaluation in 1805 ought not to be obligatory upon them, because they were deluded into it by false or incorrect suggestions.
5. That they are not liable, under the description of persons who had insured prior to 1804, as they ought to be considered only as having insured at the time of their revaluation.
On the first of these points, the Court is of opinion that the separation of Alexandria from the State of Virginia could have no effect upon existing contracts of individuals. Such divisions of territory are entirely political; a separation of jurisdiction takes place, but private interests and private contracts remain unaffected, and every individual relation continues the same, except that of being associated under the same government. The circumstance that the law of Virginia has limited the company to the bounds of the state in performing its functions could only prevent it from making new contracts subsequent to the separation, and until it had received additional powers,
but could not release it from its liability to individuals with whom it had previously contracted. Nor can the circumstance of the members of the legislature being authorized to represent their respective counties affect the case, for although the Alexandria property could no longer be represented in that mode, there was nothing to prevent their appearing in person, or by proxy, at the meetings of the company.
The Court is further of opinion that all the other grounds assumed by the plaintiffs are equally untenable. Although at the first view it would appear reasonable that he who is not insured is not bound to contribute, yet there may exist strong reasons why, under the peculiar organization of this company, a different rule should be adopted, and certain it is that the individual may, by his own act, subject himself to such a state of things. The liability of the members of this institution is of a twofold nature. It results both from an obligation to conform to the laws of their own making as members of the body politic and from a particular assumption or declaration which every individual signs on becoming a member. The latter is remarkably comprehensive.
"We will abide by, observe, and adhere to the Constitution, rules, and regulations which are already established or may hereafter be established by a majority of the insured present in person, or by representatives, or by the majority of the property insured, represented either by the persons themselves, or their proxy, duly authorized, or their deputy, as established by law, at any general meeting to be held by the said assurance society, or which are or may hereafter be established by the president and directors of the society."
It would be difficult to find words of more extensive signification than these, or better calculated to aid, explain, and enforce the general principle that the majority of a corporate body must have power to bind its individuals. It is true that the words of this declaration, as well as the general power of a corporate body, must be restricted by the nature and object of its institution, but apply this rule to the case before us, and it cannot avail the plaintiffs, for both the rule which suspends the security
and the alteration made in its constitution under a vote of the majority are strictly conformable to the general objects for which the company was instituted.
We are of opinion that whilst Korn & Wisemiller continued members of the society, they remain subject to the general liability which that state imposes, and that after becoming members, their ceasing to be so must be determined by the rules of the society, which rules, as far as we are at present advised, admit of only two cases -- one is where the house insured is consumed by fire, and the other upon giving the notice and conforming to the other regulations imposed by the bylaws.
It is observable that the rule which imposes the necessity of a septennial valuation of the property insured does not contemplate a total rescission or annihilation of the contract; on the contrary, it is express in declaring that upon a revaluation's being made, the party shall continue insured by virtue of his former policy. We therefore consider this suspension of his security merely as a penalty imposed upon the member for neglecting to conform to a rule of the society. And it is certainly much more reasonable that he should be subject to a loss or inconvenience for his own neglect than that he should be released from his liability to the society in consequence of it.
As to what is contended to be a material alteration in their charter, we consider it merely as a new arrangement or distribution of their funds and whether just or unjust, reasonable or unreasonable, beneficial or otherwise, to all concerned, was certainly a mere matter of speculation, proper for the consideration of the society, and which no individual is at liberty to complain of, as he is bound to consider it as his own individual act. Every member, in fact, stands in the peculiar situation of being party of both sides, insurer and insured. Certainly the general submission which they have signed will cover their liability to submit to this alteration.
The view which we have taken of this subject affords an answer to the fifth ground, and in a great measure to the fourth.
We consider the insured, upon every revaluation, as in under his former right of membership, and, of consequence, that the plaintiffs come under the description of persons who had insured before 1804, and for the same reason the representation of Scot (could any effect at all be given to the circumstances to which he testifies) was true as to the membership of the plaintiffs, and as to their liability in that capacity. They must have known it was a question of law on which Scot possessed no power to commit the society and on which the plaintiffs themselves ought to have been as well informed as any other individual.