Order of the International Fraternal Alliance v. State

Roberts, J., delivered the opinion of the Court. The appellant was, on the 5th of January, 1889, incorporated under the provisions of Article twenty-three of the Code of Public General Laws of this State. By the second paragraph of its certificate of incorporation, it appears that the said corporation so formed is a corporation for social or fraternal beneficial purposes, or both, and to carry out which it shall enact a constitution and laws for its government, which shall prescribe- and define the duties of its officers, its mode of govern- ⁵⁴⁹ merit and methods of conduct, and the various moans whereby it may aim to improve and benefit its members, their families, or those having a legal interest therein. The members of said Order shall convene in assemblies (or local bodies) and shall conduct their operations by and according to the ritual of the Order aforesaid, and in ■conformity with the charter, constitution and laws of the Order at all times.” Upon its organization it adopted a constitution and code of general laws, which clearly outlined the character of business proposed to he conducted by it; section 2, of Article one, of the constitution declaring the object of the Order to he “to benefit, its members morally, intellectually and financially.” Section 4 of the same Article provides, that “one of the purposes of this organization shall be the establishment of a benefit fund for the relief of its members in sickness, •accident or distress, or for their families or heirs in case of their decease, and also to encourage habits of economy and frugality by a provision whereby those of the members of this Order who desire to, shall he allowed to pay into a common fund, which may be distributed at definite intervals succeeding the date of the certificate, which may be written in favor of said member, with this benefit provision or provisions thereon.” We have carefully examined the methods which have been adopted by the appellant to accomplish the purposes for which it became a body corporate, and we are ■convinced that no hotter estimate could be formed of the manner in which the appellant exercised its corporate powers than by giving in extenso copies of the two policies which it has been issuing to its members.

They •constitute, in connection with the terms and conditions thereon written, the ground of controversy in this cause, •and give practical illustration of the methods resorted to by the appellant to further its purposes. They furnish in themselves the evidence which must in great measure ⁵⁵⁰ control us in seeking to determine the character of business the appellant is conducting. They are as follows: UNITED STATES OF AMERICA. The International Fraternal Alliance oe Balto.

City. No. — ^— $-- Membership Policy in the Golden Oyele Glass. This policy is issued to-G-olden Cycle of-member of - Assembly No. - of- in the Order hereinafter named, on condition that all of the-written or printed statements made by said member, or contained in or on the application for membership, which is filed in the office of the cabinet of the Order, together with the provisions and conditions upon the back hereof, be made a part of this contract, and that said member (or the representatives of said member), complies with the constitution, laws and rules of government now governing or that may hereafter be enacted for the government of this class of the Order, and that this policy be in force when the benefit may accrue. In consideration whereof The Order of the International-Fraternal Alliance of Baltimore City, hereby agrees to-pay out of the beneficiary fund of said class, not exceeding the sum of-dollars, to-at its office in Baltimore, Maryland, itr accordance with and under the provisions of the laws governing said fund of said class, and the Order, upon satisfactory evidence to the officers of the cabinet of the Order, of the accruing of any benefit hereunder, and upon the surrender of this policy, or of a receipt therefor.

In testimony whereof, The Order of the International Fraternal Alliance of Baltimore City, have caused this policy to be signed by the president and secretary of its cabinet, and its official seal to be attached at its office in ⁵⁵¹ Baltimore, Maryland, this —- day of- A. D. eighteen hundred and-. [Seal.] - — -, Secretary of the Cabinet. President of the Cabinet. On the back is the following, to wit: Specific articles of laws and rules of the Order of the International Fraternal Alliance of Baltimore City, referred to herein. The Golden Cycle Class.

Memberships shall he paid according to the date of admission to this class. All benefits paid prior to the expiration of the seven year period shall he deducted at six per cent., compound interest, from the principal sum then due — or likewise in case of prior death. Assessments in the ratio of $1.25, shall be called by the cabinet of the Order as requisite for the benefits accruing due, and to be paid; provided, however, that for the first year each policy shall pay the sum of $2.25 monthly, and provided further, that all future sums due shall he collected monthly. After 77 days membership, any member will he entitled upon each policy, for any wholly disabling sickness or accident then accruing, to the sum of $7 each 7 days for not exceeding 77 days each 7 months from date benefits were in force or date of notice to Order.

No member shall he allowed more than 7 policies in this class, and according to the following Illustrative Table, or the expiration of policies and payment of benefits that shall accrue: ⁵⁵² ji ^ Number of 7|Amount payable Ages. p0ii0y year periods each 7 year period payable in. | or at death. 17 to 25 $ 4,900 25 ££ 32 4,200 32 ££ 39 3,500 39 ££ 46 2,800 46 ££ 53 2,100 53 ££ 60 1,400 60 ££ 67 700 7 6 5 4 3 2 1 $ 700 700 700 700 700 700 700 Loans may be made from surplus in this class to members of over 2 years standing, at the rate of $100 for each completed year for each policy. Siok Benefit Limitations. The Grolden Cycle Class shall grant sick benefits as follows: They shall not be paid for less than seven days actual confinement to bed from date of mailing of notice to the cabinet. The maximum number of days for which sickness shall be paid for, shall be seventy-seven in any seven consecutive months; provided that no person shall be entitled to said benefits until they shall have been members in good standing in the order for not less than seventy-seven days.

No sick benefits shall be paid for rheumatic, gouty or neuralgic complaints, venereal diseases, confinement, abuse of person, chronic diseases, diseases peculiar to women, those caused by reckless exposure, broils or intemperance. All claims for sick benefits shall be sworn to upon blanks furnished for that purpose by the Order. If the claim result by means of an accident rated above class 3 in the Order’s Accident Manual, $1 may be deducted for each class rated higher than class 3 in which the injury has oc ⁵⁵³ curred, this amount to he deducted weekly from each policy held by the,assured in this class. Death Benefit Limitation.

If the member shall reside or remain in any city, town or district after yellow fever, or any other contagious disease is epidemic in such city, town or district, and if death shall ensue from the effects thereof, or from yellow fever or other contagious disease, or if the member during the continuance of this policy shall engage in blasting, mining, submarine or mronautic operations, Arctic explorations, or the production of highly inflammable or explosive substances, in service upon any railroad train or in switching, or in coupling cars, or on a steam or other vessel, or military or naval service in time of war, and death shall ensue by or through violence, accident, or injuries received while engaged in such employment or operations, or in any other occupation equally prejudicial to health or longevity, then the beneficiary shall only receive from the cabinet of the Order from 25 to 75 per cent, of the face value of the within polic}, as the said cabinet, according to the hazard and circumstances, may determine. Maturity Benefits Only. This Order may issue in its Golden Oyele, to such persons as may desire to accept the same, policies of membership for maturity benefits only; said maturities to be at the expiration of the same periods and in the same amounts as is the usual custom in the said Golden Cycle Class. The Order may, at the option of its cabinet, provide a separate form of policy therefor, or it may stamp or endorse in a conspicuous place upon the face of the regular and usual form of policy of the said Golden Cycle Class, the words “the insured under this policy is ⁵⁵⁴ entitled to maturity benefits only.” In the latter event, then there shall not be due under any such policy either any disability or death benefit, should the insured thereunder become disabled or die during the continuance in force of any such stamped or endorsed policy, except as follows: In the event of the death of the insured under the said stamped or endorsed policy before the completion of any period of maturity, then all payments made on account of the said policy shall be repaid to the beneficiary of the said named, less an equitable portion of the same for expenses incurred thereupon by the Order, or the said beneficiary may carry the same until matured and receive the benefit then due.

The payments required and due under the said policies of membership for maturity benefits only, shall be. two dollars per month during the first year of membership thereunder of the insured, and one dollar per assessment thereafter during the continuance of the policy. The following is the form of policy hereinbefore referred to: United States oe America. THE INTERNATIONAL FRATERNAL ALLIANCE. Grade of Policy, Tioo No. -. $ - Membership Policy in the Golden Oyele Glass.

This policy is issued to -, of Baltimore, Maryland; aged 22, a member of-Assembly, No.of Baltimore, Maryland, in the Order hereinafter named, on condition that all of the written or printed statements made by said member or contained in or on the application for membership, which is filed in the office of the cabinet of the Order, together with the provisions ⁵⁵⁵ and conditions upon the back hereof, be made a part of this contract, and that said member (or the representatives of said member,) complies with the constitution, laws and rules of government now governing or that may hereafter be enacted for the government of this class of the Order, and that this policy be in force, when the benefit may accrue. In consideration whereof The Order of the International Fraternal Alliance oe Baltimore City, hereby agrees to pay out of the beneficiary fund of said class, not exceeding the sum of seven hundred dollars (renewable in like amounts each 1 years as per illustrative table on the reverse side, to-.) (All benefits during life being payable to the member, unless otherwise stated in the application,) at its office in the city aforesaid, in accordance with and under the provisions of the laws governing said fund of said class, and of the Order, upon satisfactory evidence to the officers of the cabinet of the Order, of the accruing of any benefit hereunder, and upon surrender of this policy, or of a receipt therefor. In testimony whereof, the Order of the Internationa] Fraternal Alliance in the city aforesaid, have caused this policy to be signed by the president and secretary of its cabinet, and its official seal to he attached this -- day of-, A. 1)., eighteen hundred and ninety-one. President of the Cabinet. [ Seal. ] --- Secretary of the Cabinet.

It was asserted at the argument in this Court and not denied, that such had been the progress made by the appellant within a period of four years, that it now had ⁵⁵⁶ members exceeding eight thousand, and assets in excess of the sum of three hundred thousand dollars. Doubtless its very success called the attention of the State’s officers to it, and suggested an inquiry into its business methods. . At all events, the Attorney-General, by direction of the Governor, (acting under the provisions of sec. 255, of Art. 23 of the Code,) filed in the Supreme Court of Baltimore City, on the first of September, 1892, a petition in the name of the State against the appellant, praying a forfeiture of its charter, and the appointment of receivers, and assigning the following reasons therefor: 1st. “That from an examination of its constitution and general laws, it abundantly appears that said Order is not in any respect a ‘social organization,’ and that so far as its charter authorizes aud contemplates the organization and administration of a social corporation, the powers •conferred upon it have not been used or exercised at all. 2nd. “That the said corporation, as shown by said constitution and general laws, is not organized for ‘fraternal beneficial purposes, ’ and that in conducting the operations described im said constitution and general laws, it has been from the beginning and is now guilty of both abuser and misuser of its corporate functions, and is carrying on operations without due warrant of law. 3rd. “That the business carried on by said corporation is substantially in the nature of an insurance business, and is being conducted in violation of section 121 of Article 23 of the Code of Public General Laws of this State, title Corporations, and that so far from being operated for beneficial fraternal purposes, as authorized by its charter, its affairs are conducted with a view to profit by its officers and members. 4th. “That the scheme, as disclosed by its charter and general laws, and as practically administrated, is an endowment insurance on the assessment plan. ⁵⁵⁷ "Persons applying to be admitted as members are called on to pay: First, an admission fee, next, monthly dues to the several assemblies to which they respectively belong, and then from time to time assessments as the same are ordered, which are collected through the medium of the several assemblies, and transmitted to the Order to be applied to the payment of benefit certificate holders according to the plans detailed in the constitution and general laws. 5th. "That these certificates are practically and substantially policies of insurance, payable as the case may be, in the event of death or at the expiration of seven years, provided the holders shall not in the meantime have suffered the same to lapse and become forfeited by non-payment of monthly dues and assessments when the latter are called and payable. 6th.

"That the business of the corporation is accordingly not a benevolent or beneficial one for fraternal purposes only, but is a speculative one, involving hazard, losses and profits, and conducted with great risk, many contingencies, and without any substantial beneficial feature in it, apart from the element of insurance upon the assessment plan. 7th. "It makes loans of its assets, and buys real estate, and in short carries on business transactions for the pecuniary profit of the Order, its officers and members. 8th. "That it altogether transcends the powers conferred upon it by its charter, and is exercising corporate functions not authorized by law.” On the 12th of September, 1892, the appellant filed its answer to said petition, substantially denying all its material allegations, and claiming that it had strictly complied with the requirements of the law, and fully recognized and discharged its obligations to the State. The State then interposed a demurrer to the second and third paragraphs of the appellant’s answer, and ⁵⁵⁸ joined issue on the fourth and fifth, so far as the same deny the allegations of the petition, and demurred to the same so far as they might be taken to aver new matter.

In' this state of