Supreme Conclave v. Rehan

Burke, J., delivered the opinion of the Court. On the 10th day of November, 1898, the Supreme Conclave of the Improved Order of Heptasophs, a fraternal beneficiary association (a corporation duly organized and doing business in this State), issued its certificate of membership of John P. Behan. The certificate provided for the payment from the benefit fund of the association, under certain conditions hereafter mentioned, of one thousand dollars to his wife, Annie Behan, the plaintiff in this case and the appellee on this record. The certificate was issued upon the condition, among others, “that the said member complies in the future with the laws, rules and regulations now governing said conclave and fund, or that may be hereafter enacted, by the Supreme Conclave to govern said Conclave and. fund.” In 1903 the association enacted the following law: “Sec. 251.

No benefit shall be paid to the beneficiary or beneficiaries of any member committing suicide (sane or insane). Provided, however, that where such suicide has completed one year of membership (although the Supreme Conclave shall by his act be released from all claims represented by the benefit certificate), his beneficary or beneficiaries shall, nevertheless, receive from the Supreme Conclave a sum of money in full discharge of all demands, which he, she or they might otherwise have upon said Supreme Conclave, equal to an equitable proportion of the total benefit, such equity to be determined by the number of years the suicide was a mem ⁹⁴ her of the order, as related to his expectancy of life when admitted.” In the absence of anything to the contrary appearing in the record, we will assume that the law was regularly and properly passed conformably to the Constitution and Laws of the association. John P. Eehan died on the 6th day of September, 1911. The benefit was not paid, and this action was brought to recover the amount named in the certificate.

The case was tried in the Court of Common Pleas, and resulted in a verdict and judgment for the plaintiff for one thousand dollars, and from this judgment the defendant has appealed. When this certificate was issued and accepted, there was no suicide law of the association in force. The defence relied on was that John P. Eehan committed suicide, and that the law we have transcribed governed the case, and that under that law the plaintiff was entitled to receive only the sum of four hundred and seventy-one dollars, which amount the defendant tendered itself ready to pay. The plaintiff, however, contends that this after enacted law is not binding upon her, and does not affect her rights under the certificate.

The precise questions presented, which were raised by demurrer to the defendant’s fourth and fifth pleas and by the plaintiff’s demurrer to the defendant’s rejoinder to the replication to the third plea, are these: Eirst: Was it within the power of the defendant by the enactment of this law to reduce the amount payable to her as expressed in the certificate? Secondly: If the by-law is valid and binding upon her, do the defendant’s pleadings disclose a defense within its terms? This is a narrow question, and is one which has not heretofore been passed upon by this Court. It is an important . question both to societies of this character "and to their members.

The trial Court sustained the demurrers, and held that the defendant’s pleadings did not disclose a good defense to ⁹⁵ the suit. It, however, granted leave to the defendant to plead over within ten days. The defendant declined to plead further, and judgment was entered upon the demurrers in favor of the plaintiff. There appears to he a general concurrence of authority in support of these two propositions.

Eirst, that a general power to amend the laws reserved either by the Constitution or By-Laws of a fraternal benefit society does not authorize an amendment which impairs the vested rights of the members. Secondly, that where a member of a fraternal benefit society agrees in his application for membership to be bound by the rules, or laws then in force, or which might be thereafter adopted, the society, after he has become a member, may enact reasonable rules and amendments, and bind him to their observance. Brown v. Grand Fountain, Etc., 28 App. Cases (D. C. 200); Strang v. Camden Lodge, 64 Atl. Rep. 93 ; Lange v. Royal Highlanders, 106 N. W. Rep. 224 ; Fraternal Union of America v. Zeigler, 145 Ala. 287 ; Court of Honor v. Hutchens, 79 N. E. Rep. 409; Zimmerman v. Supreme Tent, 122 Mo.

App. 591 ; Ayres v. Grand Lodge, 188 N. Y. 280 ; Sautler v. Supreme Conclave, 72 N. J. L. 325; Olsen et al. v. Court of Honor, 100 Minn. 117 ; Mathieu v. Mathieu, 112 Md. 625 . In Lange v. Royal Highlanders, supra, the Court said that a member of a fraternal benefit society “who agrees in his application, or has the agreement incorporated in his policy or benefit certificate, that he will comply with the by-laws of the company then in force or thereafter to be adopted, is bound by subsequent by-laws the same as those in force at the time his certificate was issued; provided that such subsequent by-laws are reasonable in theii nature and are properly adopted in conformity of the rules of the order, and the statutes governing such association.” In Ayres v. Grand Lodge, supra, the Court said: “An amendment of by-laws which formed part of a contract is an ⁹⁶ amendment of the contract itself, and when such a power is reserved in general terms the parties do not mean, as the Courts hold, that the contract is subject to change in any essential particular at the election of the one in whose favor the reservation is made. It would be not reasonable, and hence not within their contemplation, at least in the absence of stipulations clearly specifying the subjects to be affected, that one party should have the right to make a.radical ciiange in the contract, or one that would reduce its pecuniary value to the other. A contract which authorizes one party to change it in any respect that he chooses would in effect be binding1 upon the other party only, and would leave him at the mercy of the former, and we have said that human language is not strong enough to place a person in that situation.” The two cases from which we have quoted express the practically unanimous view of the Courts upon the two propositions stated.

Although these general principles are well settled, there is a diversity of opinion as to what are reasonable changes or amendments. Confining our attention to the precise legal question first presented for consideration in this case, viz., the right of the defendant, by the after enacted law transcribed, to reduce the amount payable to the beneficiary named in the certificate — the plaintiff in this case — in the event the insured committed suicide “sane or insane”, we find some conflict in the authorities. In some jurisdictions it is held that a subsequent adopted amendment partially, or totally depriving the beneficiary of rights under the certificate in the event of suicide of the insured while sane or insane, is reasonable and valid. Other Courts hold that such an amendment is wholly ineffective as to outstanding certificates issued when there was no suicide law in force, notwithstanding the insured had agreed in the contract to be bound by after adopted laws.

In other jurisdictions it is held that such a retroactive law is valid so far as it relates to members committing ⁹⁷ suicide while sane; but is invalid so far as it attempts to affect the rights of the beneficiary where the member has taken his own life while insane. This is the position taken by the Mew York, Virginia, Minnesota and some other Courts, and is based upon reasons manifestly sound and just to both parties to the contract. The crucial question in all the cases has been one of construction — the Courts, however, differing upon the reasonableness vel non of the new law, and in deciding this question reference has always been had to the nature and purposes of the contract read in the light of the objects of the order. These contracts, like other contracts, confer vested rights and interests upon the member, and it would be most unreasonable and unjust to hold that, under a general reserved power to amend, or upon a general stipulation of the insured that the society might amend, one party to the contract had the power to destroy the rights of the other.

Such a construction would put the rights of one party to the contract wholly at the mercy of the other. In Olsen v. The Court of Honor. 100 Minn. 117, the insured in his application expressly agreed that he would' strictly comply with the constitution, laws' and rules in force or thereafter to be enacted or adopted. When the' certificate was issued and delivered a by-law of the association then in force provided that: “This order will not pay the benefits of members who commit suicide, whether sane or insane, except it be committed in delirium resulting froni illness, or while the member is under treatment for insanity^ or has been judicially declared to be insane; but in all cases' not within said exceptions the amount of money contributed to the benefit fund by such member shall be returned and' shall be paid to the beneficiary out of said fund in lieu of' the benefit. The application for membership contained this provision: ’ “I further understand and agree that the laws' of the order now in force, or hereafter enacted, enter into and become a. ⁹⁸ part of every contract of indemnity by and between tbe members of the order and govern all rights thereunder.” In the place of the original by-law the association after the issuance of the certificate adopted the following: “If a benefit member commits suicide, whether sane or insane, voluntary or involuntary, there shall be payable to the beneficiaries entitled thereto five (5) per cent, of the face of the certificate for each year he shall have been continuously a member of the society, and after twenty (20) years of continuous membership the certificate shall be payable in full.” The assured committed suicide, and suit was brought upon the certificate by the beneficiary.

The trial Court held that the by-law in force when the certificate was issued governed the case, and instructed the jury that the plaintiffs were -entitled to recover the full amount named in the certificate, unless the insured committed suicide; but if she did, then the defendant was entitled to a verdict, unless the jury further found that she was at the time under treatment for insanity. •' In passing upon this prayer the Court said: “It is the contention of the defendant that it was by virtue of the provisions of the original contract that the society might change its by-laws and that the members should be bound thereby. It is obvious that such a provision must receive a reasonable construction. It would be unreasonable to construe it as giving the society plenary power to change its by-laws in any manner it might elect; for, if such construction were to obtain, then the original contract would be simply one to the effect that the society would pay the beneficiary, in case of the death of a member, in accordance with the terms of the contract or in accordance with such new, other or further contract as it might elect thereafter to make for the parties. It seems clear that where the member-— that is, the insured — gives in advance the general consent to a change in the by-laws, and agrees in his certificate to abide by all the laws thereafter enacted by the society, he does not intend thereby that the society shall have the power to impair ⁹⁹ in essential particulars the contract for the payment of a specific sum to the beneficiary which it agreed by the certificate to pay; or, in other words, he docs not consent that the society may make, without consulting him, a new contract for the parties.

It has accordingly been held by this Court in accordance with the weight of judicial authority, that the general-consent and agreement of a member of a mutual benefit society in his application and certificate to be bound by any future changes in the constitution, by-laws and rules of the society that it may enact in the future are subject to the implied condition that they must be reasonable. * * * The precise question in this case is whether the change in by-laws of the society was. reasonable whereby it attempted to relieve itself from liability to pay the stipulated benefit when the death of the member resulted from suicide while .under treatment for insanity, which it contracted for by its certificate and original by-laws. There are a number of cases which hold, in effect, that a mutual benefit society may legally make such a change in its by-laws, where a general power to change its laws has been reserved. See Supreme Commandery, etc., v. Ainsworth, 71 Ala. 436 ; Hughes v. Wisconsin Odd Fellows Mutual Ins. Co., 98 Wis. 292 , and Daughtry v. Knights of Pythias, 48 La.

Ann. 1203 . The change, however, in the by-laws in the case at bar, is quite as fundamental as the respective changes of Thibert v. Supreme Lodge, 78 Minn. 448 , and Tebo v. Supreme Council, 93 N. W. 513 ; and unless we overrule those cases we must hold that the change in the by-laws in this case was also unreasonable.” This case and the case of Plumkett v. Supreme Conclave, 105 Va. 643 , supra, followed the cases of Shipman v. Protected Home Circle, 174 N. Y. 398 , and Weber v. Supreme Tent, etc., 172 N. Y. 490 . In the last cited case, one of the precise questions now under consideration was decided. Chief Justice Parker, speaking for the Court, stated the question and the reasons upon which the decision of the Court permitting a recovery ¹⁰⁰ was rested.

This case was directly approved in Shipman v.