Ellerbe v. Barney

Martin (Special Ridge).

This is an action brought by the superintendent of the insurance department of the state, as receiver of the Masonic Mutual Benefit Society of Missouri (a mutual insurance organization),to recover the amount of certain assessments levied upon the members of the association to pay death losses. The defendant was a member of the organization. Shortly before the receiver took charge, the directors of the company regularly levied against defendant assessments amounting to' $140.80, which assessments he refused to pay. The regularity of the assessments is admitted. The suit was originally before a justice of the peace, where judgment was rendered against defendant, who then appealed to the circuit court.. There an amended statement was filed to which appellant demurred for the reason that it did not set forth a cause of action. The demurrer was overruled, and defendant declined to plead further, but appeared at the trial and demurred to plaintiff’s evidence. The court gave judgment for plaintiff. After unsuccessfully moving for a new trial, defendant appealed to the supreme court. The case is, in effect, an agreed one, as all the facts are conceded.

Defendant became a member of the society in 1885, accepting two certificates (one in division B, the other in division C) in the nature of policies, the material parts of which follow, viz.:

“This certificate of membership witnesseth that *636the Masonic Mutual Benefit Society of Missouri, in consideration of the representations made to it in his application for membership, and the sum of $6 to be paid by Charles E. Barney, of St. Louis,. state of Missouri, and the further sum to be paid by him to this society, within twenty days after the notice, duly mailed or delivered to him,, of a death occurring in the membership of Division C, of this society, of $1.60 for each such death, as assessments therefor may be made, so long as he may be a member thereof, promises and agrees to and with the said Charles E. Barney well and truly to pay or cause to be paid to his children within sixty days after due notice and satisfactory proof of the death of said Charles E. Barney have been filed in the office of the secretary of the society, for every member in good standing in said division of this society as follows, for each member in said division of the first class seventy cents, of the second class seventy-five "cents, of the third class eighty-five cents, of the fourth class ninety-five cents, of the fifth class $1.05, of the sixth class $1.20, of the seventh class $1.40, and of the eighth class $1.50. Provided, however, that the aggregate amount of the sum so paid shall in no case exceed the sum of $3,000.

“Upon this condition, however, that if the said Charles E. Barney shall fail to pay any assessment when the same becomes due and payable by him according to the by-laws of this society and the terms of this certificate, then this contract and agreement shall be null and void, and of no effect, and the said Charles E. Barney and the beneficiary therein shall forfeit all rights accruing under this certificate.

“This certificate is issued by the society and accepted by the holder and beneficiary therein upon the following express conditions and agreements:

‘First. That the same is issued and accepted sub*637ject to the provisions of the articles"of association and by-laws of this society/” etc.

The certificates were duly executed by the president and secretary of the society. No question as to their form is raised. Afterwards the name of the company was changed to “United Masonic Benefit Association of Missouri,” and its internal laws were amended so as to fix the sum to be paid on each certificate at $2,000, and the amount of assessment, for each death of a member, at $6.40.

The by-laws of the society bearing on the present controversy provide that, “upon the death of a member, or as soon thereafter as ordered by the executive committee, each member of the association, at the time such death occurred, may be assessed, and shall pay to the secretary of the association” the regular amount of the assessment above indicated. The by-laws then immediately proceed to declare it the duty of the secretary to notify by mail, each member of each» assessment upon his certificate, and then recite that “any member failing to pay such assessment within twenty days after the date of such notice shall have been served upon, sent or given to him, shall forfeit his membership in the association and all benefits and interests therefrom and therein; provided, that any payment of assessments after such forfeiture, or any notice to pay or subsequent assessment by the association, shall not have the effect to restore the person notified or paying, to membership or to any rights under his certificates until his application for reinstate ment shall be presented and approved by the executive committee.”

The defendant paid assessments until those now in dispute were called. The latter were regularly made by the proper officers of the society to pay the amounts due upon- deaths of members in good standing, holding *638valid certificates. Defendant was duly notified of these assessments. Afterwards the insurance commissioner, now plaintiff, took possession of the assets of the concern, under the laws of Missouri, because of the insolvency of the company, and now seeks to compel payment of these assessments as assets, for the benefit of those properly entitled to share therein.

I. It is apparent from the foregoing statement, which was prepared by Judge Barclay, that the issue in this case is one of law, to be determined by a construction of the contract disclosed in the record.

On the part of the appellant it is contended that he never became indebted for the assessments levied against him, but that he had the option of forfeiting his rights under the ■ certificate by declining to pay them; which forfeiture left the company without any right to collect them. If this is a proper construction of the contract, the judgment will have to be reversed. If, however, these assessments constituted a liability of the appellant from the date of their levy, payable after notice given according to the by-laws, then the action of the lower coui’t will have to be affirmed.

In his contention the appellant argues that the certificate held by him constituted a contract of life insurance; which, in a general sense, maybe conceded, inasmuch as it provides for payment of an ascertainable . sum upon the death of the holder. It is next argued that, being a contract of life insurance, it must necessarily possess the distinguishing features imputed to such a contract by the courts, in being a unilateral or one-sided undertaking of the assured as to all future payments required of him. If he chooses to pay them, the company is bound to continue the insurance. If he declines to make further payments, the insurance ends without imposing on him any liability on account of them.

*639I am sensible of the danger in construing contracts, of attaching undue importance to particular words and phrases as controlling the intention of the parties, and overriding the presence and effect of other parts. All contracts should be construed with reference to the general object and purpose for which they were entered into by the contracting parties, and a rational and harmonious effect given to all the parts if possible. The construction that this is a unilateral contract in like manner and effect as a policy of life insurance, I propose to consider briefly on principle, and not on the analogy of names. or accidental use of concurring phrases.

The unilateral feature contended for in this contract has been very generally imposed upon the contract of the regular old line premium-collecting life insurance companies. These companies were unable to commence business except upon capital paid in by the members or stockholders to be used in meeting death losses as they occurred. Until called for, the capital, along with all premiums not wanted for expenses, was required to be invested for profit and accumulation. The premiums were payable annually and invariably in advance. Upon payment of the first premium as a condition precedent, the assured received a policy covering him for one year, with the option to continue it by payment of other premiums. This payment constituted the full consideration of value to be paid during the year of insurance. Nothing in the shape of dues or assessments could be exacted from him for the period covered by the premium paid. If any of the old line companies should suddenly stop insuring and decline to issue another policy, every policy outstanding would be paid from the accumulated capital, as it matured. An inability to do so would put it out of line in the business of insurance, and indicate that it *640had not been conducted and managed according to the principles upon which it was founded.

II. The certificate in controversy differs materially from the premium-paying policies of the old capital stock companies. It is the undertaking of a corporation organized 'on an entirely different basis. The Masonic Mutual Benefit Society of Missouri belongs to that class of life insurance companies known among insurance men by the name of fraternal beneficiary associations. The prototype of these organizations is met with in the friendly benefit societies of England appearing more than a century ago, which made provision for the relief of members in sickness, and for'payment of a small sum at death, generally for defraying funeral expenses.

The organization of the modern fraternal beneficiary company consists of an association of members, who agree to assist each other and their families on occasions of disability and death by contributing money and means for aid and relief. On joining the association each member becomes bound to assist the others in the mode and for the object pointed out in the articles and by-laws of the association. The managing officers, whether incorporated or not, represent the association and discharge the function of enforcing and .carrying out the purposes of the compact. Hence the certificate of membership in such an organization is a contract with every member of it, to be enforced by the managing officers as representatives or trustees for all the members of the concern. When the member joins he pays the admission fee, which is used to defray necessary expenses, but which is altogether too small to constitute a fund or capital wherewith to satisfy death losses. No fund or capital is kept on hand or invested for such a purpose. Indeed the economy underlying the plan of the organization aims at doing away with *641the expense and loss incident to the management, investment and accumulation of capital. As a substitute therefor, each member promises to contribute an equal share with every other member upon occasion of every death in the membership, which is collected and paid over by the officers of the association to the wife or children of the deceased member, as the case may be. The ascertainment and declaration of death losses is left to the members of the association, and their action in that behalf is known as an assessment. They are bound to make these assessments on occasion of every death, and the wife or children of the deceased member or other beneficiary have the right to compel them to make and collect the assessments inuring to their benefit.

It is manifest that these assessments in their nature' bear a near resemblance to the dues incident to membership in a friendly society, and constitute a consideration for the promised insurance of the association materially differing from the annual premium stock companies. When considered in the light of society dues, it will be admitted that a person can not by discontinuing his membership escape the obligation of paying those dues which accrued before the termination of his membership. I am not aware of anything in. the organic structure of those organizations as' thus defined, and to which the one in question seems to belong, which could bring them in conflict with the policy of the law. On the contrary, it will be found that they have very generally merited the approbation of the public. It is only when they have substituted for their fraternity dues promises of endowment to living members, payable, irrespective of disability or death, that they have been justly subjected to the charge of departing from the principles upon which *642fraternal beneficiary associations can be safely conducted.

III. It is necessary next to consider whether or not the contract disclosed by the record in this case is m conformity with the avowed object of the association, to furnish aid and relief to the families of deceased members, and is sufficient in its phraseology and provisions to carry out that object and make it beneficially effective as to all of them. Of course the language of the certificate must be interpreted in connection with the by-laws and articles of association alluded to in its body. The certificate is expressly declared to be “issued and accepted subject to the provisions of the articles of association and by-laws of the society.”

Section 1 of article 7 of the by-laws provides that “upon the death of a member, or as soon thereafter as ordered by the executive committee, each member of the association at the time such death occurred may be assessed and shall pay to the secretary of the association a fixed sum, according to the class of which the assessed was a member at that time, based upon the aggregate-amount of benefit to which he or the beneficiary named therein or in section 1, article 6, of the by-laws is entitled under his certificate or certificates of membership.”

The assessments in this case were at the rate of $6.40 each, in behalf of the beneficiaries of fifty-six members, who died while the appellant was a member of the association in good standing, amounting to the aggregate sum of $140.80. The beneficiaries of the deceased members must have acquired a right to these assessments intended for their relief; otherwise the primary object of the association as a society for the benefit of widows and orphans would fail. The assessment could have no value or meaning if they conferred no right on the beneficiaries to collect the amount so *643assessed, and a corresponding obligation on the part of the members to pay them. The principal, if not the only, fund provided for payment of them consisted in the obligation imposed by the by-laws of the members. Their liability took the place of capital and accumulated funds, and constituted substantially the only assets provided by the members for securing the aid and relief contemplated in the compact of association.

Thus we perceive that independent of the language of the certificate of membership the liability to pay assessments by the members was imposed by .the by-laws and articles of association, as a debt or burden incident to membership. This debt or burden, according to the by-laws recited, accrued as soon as the death occurred, and the assessment was declared. It was payable at once, but according to the third section of the same article of by-laws, the time for payment was extended to twenty days after notice. The time and manner of serving notice is definitely prescribed. It then proceeds to declare that£ ‘ any member failing to pay such assessments within twenty days after the date of such notice shall have been served upon, sent or given to him, shall forfeit his membership in the association, and all benefits and interests therefrom and therein.”

There is nothing whatever in this langüage, providing as it- does for the forfeiture of membership and discontinuance of the rights incident to it, which suggests or intimates a discharge from past society debts and dues. In the first section of the article the assessment is expressly declared to be binding as a demand which the members must pay. In the second section he forfeits his membership and rights by failure to pay after a notice of twenty days. 'A condition of forfeiture of rights is a well known feature added to many contracts, which does not in itself discharge the obligations which have already accrued under it. Such is *644the case of forfeitures in leases and in most of the policies of mutual fire insurance companies. The natural effect of the forfeiture is to cut off the possibility of future obligations, but not to disturb the validity of past indebtedness. Something very positive would have to appear either in the express declaration of the contract or as a necessary implication from its nature to give it a different effect. No such declaration appears, and I have endeavored to show that precisely the contrary is implied in the nature and purpose of the contract in question.

Right here I may add that the fact that the obligations, attempted to be enforced in this case, arise, independently of the provisions of the certificate of membership, from the constitution and by-laws of the association, goes a great way in my mind to clothe them with the features and character .of society dues, and to distinguish them from the premium of the old line insurance companies.

IY. In coming now to consider the language of the certificate itself, I think it will appear to be little else than a recital of the contract which we have found to be imposed on every member by the constitution and by-laws. It promises to pay to the children of the appellant, sixty days after notice of his death, a certain percentage on every member of the association in good standing, according to the class to which he belongs; provided that no payment of such percentage shall be permitted to exceed in the aggregate the sum $2,000.

As we have seen that the organic structure of the association did not contemplate that this percentage on the membership should be paid from the accumulated capital, but from assessments to meet death losses, it is natural to expect some allusion in the certificate to the prevailing method of raising funds with which to make *645good the promised benefits of the association. Accordingly we find it expressly provided in the certificate that the benefits inuring to the children of the appellant are agreed to be paid by the association “ in consideration” of the admission fee “originally paid in by appellant, and thefmther sum to be paid in by him to this society,” of the assessment made on him for every death oceuring in the membership of the division to which he belonged, “so long as he shall be a member thereof.”

It thus appears that the obligation imposed on him by the by-laws to pay the assessments against him, is expressly declared to be of the consideration for the benefits promised to his children by the certificate. The only way that he can make good the consideration for the certificate is to keep his obligation to pay the assessments. And I may repeat that these obligations constituted the principal resources placed at the command of the association, to enable it to pay the death losses.

It is true that the certificate repeats the provision in the by-laws which terminates membership by nonpayment of assessments. But it goes no further than te debar the appellant of his rights, thus leaving his liabilities as they existed at the date of the forfeiture. The declaration that the certificate, after forfeiture, shall be null and void, relates to its future, not its past effect.

Now it appeared from admitted facts that the appellant was in full possession of all the rights of membership at the date of these assessments and that he continued to hold them up to the instant of forfeiture by his failure to pay such assessments. If he had died after the assessments against him and before his failure to pay them, his children would have been entitled to the promised benefits of the certificate. Having, *646during all that time, had the benefits of the certificates upon consideration that he ¡would pay his assessments, -he is not in a position to withhold the consideration by refusing to keep his obligation. I am not prepared to approve the startling proposition that the appellant should have the privilege of paying or withholding at his pleasure the consideration promised for carrying a risk, after the risk had been carried. I do not regard this contract unilateral in the sense of relieving the-assured from liability for insurance carried and consideration earned. No unilateral contract has ever been permitted to accomplish such an unjust result. I am satisfied that the judgment of the lower court is without error and should be affirmed; and it is so ordered.

Barclay, G-antt and Sherwood, JJ., concurring; Black, C. J., Brace and Burgess, JJ., dissenting; Macearlane, J., not sitting.