(143 Md. 303,

$7,941.35; "taxes," $3,804.94; "heat and light," $361.74; "insurance," $1,500; "Bluefield office," $26.21.

In the receivers' schedule are found the following items, which do not appear in the claimant's schedule: "Power," $528.58; "telephone and telegraph," $552.50; "salesmen's salaries," $7,100; "depreciation," $3,954.50.

And in the claimant's schedules are found these items, which do not appear in the receivers' schedule: "Interest," $1,598.13; "miscella"miscellaneous expenses," $1,703.57; "postage," $422.91; "repairs," $660.28; "traveling expenses," $8,545.54.

The difference in the aggregate of the two schedules is $1,383.50, and the difference in the daily average is $9.32.

No doubt the "miscellaneous expenses" found in the claimant's schedule include some of the items found in the receivers' schedule; as there is no item of "salesmen's salaries" found in the claimant's schedule, it is most probable that such item is included in the item "traveling expenses" found in the claimant's schedule.

Reference has been made to these schedules to show that the parties, the claimant and receivers, did not at that time differ so widely in what they regarded as "fixed charges," and also to show that in the receivers' schedule is found the item "depreciation," which under that name is not found in the claimant's schedule, although now the claimant contends that depreciation is a "fixed charge," while the receivers contend that it is not.

It is claimed by the claimant, and it would so seem from the record before us, that the item "depreciation," which was disallowed by the court below, was understood by it to mean depreciation in the value of manufactured articles, and not the -depreciation of depreciation of the product as fixed plant. If this be so,

charge.

the court was absolutely right in so holding. The depreciation in the value of the

122 Atl. 195.)

manufactured product or goods on hand was certainly not "fixed charges." As the policy does not define "fixed charges," what is meant thereby is left to us to decide.

Bassett on Accountancy, on page 244, cited by the receivers in their brief, defines "fixed charges" as those "charges which spread over the entire establishment, such as rent, insurance, taxes, mortgage interest, depreciation, and the like, according to whether the plant is leased or owned. 'Fixed charges' arise out of the very being of the plant, and continue whether or not the business is operated."

The only case to which our attention has been called, and the only one that we have been able to find after diligent research, in which "fixed charges" have been defined in an action brought upon an indemnity policy insured against loss of "fixed charges" caused by the strike, is the case of Buffalo Forge Co. v. Mutual Security Co. 83 Conn. 393, 76 Atl. 995. In that case the court approved of and adopted the trial court's definition that by "fixed charges" were meant "those expenses necessarily incurred in maintaining the organization in such a state of efficiency as would enable it to resume normal production without substantial delay after the strike was ended, or as the strike might be broken by a gradual return of employees."

-construction

words.

It is a well-settled rule of law that contracts of insurance, like all other contracts, are to be considered accord- meaning of ing to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous, these terms are to be taken and understood in their plain, ordinary, and popular sense. Mutual L. Ins. Co. v. Murray, 111 Md. 600, 75 Atl. 348; Palatine Ins. Co. v. O'Brien, 107 Md. 354, 16 L.R.A. (N.S.) 1055, 68 Atl. 484; First Nat. Bank v. Maryland Casualty Co. 142 Md. 454, 30 A.L.R. 618, 121 Atl. 379. But it is also "a prin

ciple of universal application that, in order to arrive at the intention of the parties, the contract itself must be read in the light of the circumstances under which it was entered into. General or indefinite terms employed in the contract may be thus explained or restricted in their meaning and application; and the contract must be so construed as to give it such effect, and none other, as the parties intended at the time it was made." First Nat. Bank v. Gerke, 68 Md. 456, 6 Am. St. Rep. 453, 13 Atl. 358.

The term "fixed charges" has, it seems, no well-defined meaning. Its meaning is more or less general and indefinite, depending somewhat upon the connection in which it is used, and the object and intention of the parties by whom it is employed.

When used in a contract like the one before us, it may have a different meaning from what it would have if used in a different connection, or with an entirely different object or purpose. The term was here used by the parties in a contract whereby it was their object, purpose, and intention to give to the insured indemnity against the loss therein mentioned, caused by strike. The insured was not insured against loss of the average daily net profits alone, but also against loss of average daily "fixed charges."

The insured, no doubt, had in its employment, at the time of the strike, officers and employees whose term of office or employment was of much longer duration than the usual period of the strike, and whose services the insured could not have dispensed with without loss to it, and without rendering it unable to resume promptly normal production at the end of the strike, or to continue the business during the period of partial production.

The salaries of such officials and employees should, we think, be included in the "fixed -wages as fixed charges" provided for in the policy. But the compensation paid to other employees who were hired by the

charges.

day, or the week, or by piecework, whose services went into the actual production of the article produced or manufactured, and whose services could have been dispensed with without impairing the efficiency of the organization by rendering it unable to resume normal production without substantial delay, or to continue the business through the period of partial production, should not, we think, be included among the "fixed charges."

The salaries of those mentioned, with other necessary expenses, incurred in maintaining the efficiency of the insured's organization to the extent we have stated, including the charges specially mentioned in Bassett's definition of "fixed charges," are -what are fixed the "fixed charges" that were intended by the parties to be covered by the policy.

charges.

The next question is: When does the liability for loss end? The policy fixes the end of each of three periods as a time at which the liability of the insurer under it ceases.

First. For all loss suffered by the insured after the strike has lasted 300 working days, within the time for which the policy was issued.

Second. When the maximum amount named in the policy as payable thereunder has been paid to the insured.

Third. When, in case of total prevention of production, the average daily production thereafter becomes equal to 80 per cent of the average daily normal production; or, in case of partial prevention of production, when the average daily production of that part which was interrupted by the strike thereafter equals 80 per cent of the proportion so interrupted. In this case, we are concerned only in the third of these culminating periods.

The question is first presented, How is the average daily normal production during the strike period to be ascertained? The answer to this question is that such average daily production for that time may be ascertained by the method that

(143 Md. 303,

we have suggested should be em

-how return to normal ascertained.

ployed in estimating the average daily net profits during the same period; the period of comparison to be the same.

The next question asked is, How may it be ascertained when the average daily production, at any time during the strike, amounts to 80 per cent of the average normal daily production?

The liability of the insurer under the policy does not end when the daily production reaches 80 per cent of the average normal daily production, but when the average daily production reaches that point. Consequently the liability of the insurer does not end until a period is reached where the average daily production of that period is equal to 80 per cent of the average daily normal production. The period should be of sufficient duration to indicate that the strike in effect was abating, and that the business of the company would not again be diminished because of it.

122 Atl. 195.)

the loss sustained by the policyholder under its policy, if such loss exceeds the amount owing by the policyholder upon the assessment; or, if not, shall the policyholder be allowed to set off such loss against the amount owing by it upon the assessment.

It is said in 22 Cyc. page 1425: "The member [of a mutual insurance company] cannot set off as against his liability on a premium note any claim he may have against the company for a loss under his policy."

In support of this declaration of the law, the author cites Lawrence v. Nelson, 21 N. Y. 158. In that case, as in this, the question was, Could the defendants, policyholders of a mutual company, set off their loss under the policy against their premium note? The court said if they could, it was because it was equitable and just to do so, and no rights of third persons had intervened. The court then proceeded to say: "The party has entered voluntarily into engagements with others, modifying, or entirely changing, as between themselves, the effect or application of the general rules of law or equity in regard to set-off. In a company of mutual insurers, each sufferer is bound to make compensation, as well as to receive it. He occupies the double relation of debtor and creditor, and it would be inequitable to allow him, when the funds of the company are not adequate to pay all losses, to set off his entire demand; thereby getting more than his share of, and decreasing, a common fund to which all the creditors, pro rata, are entitled. Each member is interested in the premiums, as well as losses, of all the others; and the premium paid by each is saddled, as it were, with its proportionate share of the claims of all others. The premium, whether paid or secured to be paid, is withdrawn from his control in contemplation of law, and placed in a common fund, not subject to his claims only, but those of all others in the company; he in turn, having a sim

ilar claim on the premiums of his associates. The members of the association virtually agree to insure each other, and provide a common fund to indemnify in case of loss. As all have contributed to this fund they have a community of interest in it; and each member, having his proportionate share of the losses, is entitled to his proportionate share of the profits, if any are realized. It may be that one member may draw from the premiums paid by other members into the common fund, if the association be prosperous, not only the amount of his losses, but as large a proportional share of profits as those whose transactions with the company created no loss at all. In such a case, if insolvency eventually overtakes the association, it would be highly unjust to allow him to set off a loss against premiums that happened to be unpaid and that should be placed in the common fund. Indeed, when the assets of the company are inadequate to the payment of the losses of all its members, the effect of permitting a sufferer to set off his loss. in full against his premium notes (which are his contribution to the means of the company) is not only to confer a benefit without making compensation, but to take from the shares of his associate sufferers in the common fund; to which fund he and they are ratably entitled. Undoubtedly, a premium paid, or agreed to be paid, by a member of a company formed on the mutual principle, must bear its proportionate share of the losses of the company, and cannot be applied exclusively to the individual debt of the party owing or paying it. So long as the company be solvent no practical injury would result from setting off a loss against the premium, as no preference would be given to one member or creditor over the others, for all would be paid in full. But if the association were insolvent, to permit the set-off to be made would be to give an unjust preference to one creditor over the others."

See also Hillier v. Allegheny Coun

ty Mut. Ins. Co. 3 Pa. St. 470, 45 Am. Dec. 656; North Carolina Mut. L. Ins. Co. v. Powell, 71 N. C. 389; Stone v. New Jersey & H. River R. & Ferry Co. 75 N. J. L. 172, 66 Atl. 1072; Stone v. Old Colony Street R. Co. 212 Mass. 459, 99 N. E. 218, and other cases.

In Stone v. Old Colony Street R. Co. supra, the court said: “The assessments, when collected, form a fund for the benefit of all the policyholders, including the defendant, whose demands comprise a part of the indebtedness which made the assessment necessary. The defendant received the benefit of the insurance of the subsidiary companies as a party insured, while it also became an insurer for the protection and benefit of the other members. A set-off would confer upon it a preference to the disadvantage of other creditors and policyholders, and permit it to appropriate exclusively the amount claimed in partial payment of its own demands against the insolvent, and to this extent the defendant would be relieved from the obligations of an insurer."

The policyholder's right of set-off in cases against mutual companies has never been considered by this court, so far as we are able to recall. But the claimant contends that this question has been practically settled favorably to its contention by this court in the two cases of Colton v. Drovers' Perpetual Bldg. & L. Asso. 90 Md. 91, 46 L.R.A. 388, 78 Am. St. Rep. 431, 45 Atl. 23, and Cahill v. Original Big Gun Beneficial & Pleasure Asso. 94 Md. 353, 89 Am. St. Rep. 434, 50 Atl. 1044.

In the first of these cases in which the opinion of the court was delivered by Chief Judge Boyd, the appellants were appointed receivers of the South Baltimore Bank. At the time the bill asking for the appointment of receivers was filed, the bank held the appellee's promissory note for $1,000, and the appellee had a deposit with the bank, amounting to $457.25. At the maturity of the note, the appellee tendered the receivers $642.75, the difference be

(143 Md. 303, tween the amount of the note and the amount of its deposit, and demanded the note; but the receivers refused to receive the money and to surrender the note, claiming that the appellee could not set off the amount of its deposits against the note owed by it to the receivers.

The court held that the ordinary relation of debtor and creditor existed between the appellant and the appellee. The appellee was indebted to the receivers of the insolvent bank in the sum of $1,000 upon the note, and the receivers were indebted to the appellee to the extent of its deposit. The rights of others were in no wise involved therein.

In Cahill v. Original Big Gun Beneficial & Pleasure Asso. supra, the suit was brought by the appellee, a creditor of the South Baltimore Bank (the bank involved in Colton v. Drovers' Perpetual Bldg. & L. Asso. supra), against the appellant, who was both a stockholder and creditor of that bank. The charter of the bank contained a provision that its stockholders and directors should be liable to the amount of their respective shares of stock of the bank, for its debts and liabilities.

The question presented in that case was whether the stockholder of the insolvent corporation could set off the indebtedness of the corporation to him against his liability under the charter. The court, speaking through Judge Briscoe, said: "In the recent case of Colton v. Mayer, 90 Md. 711, 47 L.R.A. 617, 78 Am. St. Rep. 456, 45 Atl. 874, this court held, in construing the provisions of the charter of the South Baltimore Bank, that the statutory liability of its stockholders was directly to the creditors, and not to the receivers for the benefit of creditors, and that the fund arising from such liability is in no sense a corporate asset of the corporation, and the receivers have no interest in it. The liability of the stockholders, then, under the statute, having been settled as a debt due from the stockholder to the creditor, there can be

122 Atl. 195.)

no valid reason, it seems to us, why a stockholder who is also a creditor should not be entitled as a matter of equity to set up as an equitable defense the debt of the bank to him against his own liability. Mr. Cook, in his book on Corporations, vol. 1, § 225 (c), says that it has been held that where the statute creates a fund out of which the creditors are to be paid ratably, then the stockholder cannot set off an indebtedness of the corporation to him. He must pay in what the statute requires, and then prove his claim against the corporation like any other creditor. But where the shareholder's liability by statute is immediate and personal and several, and any creditor may sue any shareholder, then the shareholder may set off a debt owing to him from the corporation, when he is sued by a corporate creditor. In 1 Beach on Private Corporations, § 727, it is said: 'But if the statute imposes upon shareholders a personal liability to creditors, immediate and several, so that any creditor may institute an independent action against any shareholder for the enforcement of corporate debts, then a defendant shareholder may set off debts due from the company to himself.""

In the case just cited, Cahill was not indebted to the bank, but to the creditors of the bank, of whom he was one; and it was because of that fact that this court there held the defendant entitled "as a matter of equity to set up as an equitable defense the debt of the bank to him against his own liability."

That this was the reason for the court so holding is shown by its quoting with approval what is said in Cook on Corporations: "That where the statute [or the policy, as in the case before us] creates a fund out of which the creditors are to be paid ratably, then the stockholders [or policyholders in a mutual company] cannot set off an indebtedness of the corporation."

The two cases in this court, relied upon by the claimant in support of