Supreme Council A. L. H. v. Black

• Decision Date: 16 June 1903
• Docket Number: 28.,27
• Citation: 123 F. 650
• Parties: SUPREME COUNCIL A.L.H. v. BLACK.
• Court: U.S. Court of Appeals — Third Circuit

123 F. 650

SUPREME COUNCIL A.L.H. v. BLACK.

Nos. 27, 28.

United States Court of Appeals, Third Circuit.

June 16, 1903

Frank P. Prichard, for plaintiff in error.

George Henderson and Charles H. Sayre, for defendant in error.

Before ACHESON and GRAY, Circuit Judges, and BUFFINGTON, District judge.

ACHESON Circuit Judge.

Hugh W Black, having become a member of Royal Oak Council American Legion of Honor, received from the Supreme Council American Legion of Honor, a corporation existing under the laws of the state of Massachusetts, a benefit certificate, dated March 31, 1888, showing the contract between him and the Supreme Council American Legion of Honor, and whereby the latter agreed to pay to Margaret A. Black, the wife of Hugh W Black, $5,000 upon satisfactory proof of his death, subject to certain specified conditions.

Black paid all the assessments (amounting to the sum of $3,692.40) called for under the contract, and otherwise complied with its terms, until the corporation, without his consent, in August, 1900, adopted, and on October 1, 1900, proceeded to put into effect, an amendment to its by-laws, providing as follows:

'Two thousand dollars shall be the highest amount paid by the Order on the death of a member, upon any benefit certificate heretofore or hereafter issued.'

On October 1, 1900, Black was officially notified in writing that an assessment (based upon the amended by-law) had been called, the notice on its face containing this memorandum 'Policy, two thousand dollars.' By letter of October 31, 1900, Black gave the corporation the following notice:

'I therefore notify you that as the amendment is illegal and violates the contract made by the Order with me and was made without my consent, I decline, for these reasons, to pay the assessment above mentioned; and shall consider that there has been a breach of the contract of insurance on the part of the Order.' On March 28, 1901, Black brought this action in the Circuit Court against the Supreme Council American Legion of Honor to recover the amount of the assessments paid by him to the defendant, with interest. Pursuant to a stipulation, the case was tried by the court, and the finding was in favor of the plaintiff for the moneys Black had paid to the defendant under the contract, with interest from the date of suit; and, accordingly, judgment was entered for the plaintiff for $4,053.03.

The counsel for the plaintiff in error in their brief assume that the assignments of error 'practically raise two questions,' which they state thus:

'First. Did the passage of the by-law of 1900, which under the decisions of this court was a void and unreasonable by-law and not binding on the members, constitute such an anticipatory breach of the plaintiff's contract that he could for that cause alone sue for money damages as upon a broken contract?

'Second. If the passage of the by-law of 1900 was such an anticipatory breach, was the plaintiff entitled to recover as damages therefor, not the value of the contract or the loss to plaintiff at the time of breach, but the consideration paid by plaintiff as if paid under a contract void ab initio?'

Before proceeding to a discussion of the law of the case, certain facts disclosed by this record are to be noted. More was done here than the mere passage of the amended by-law of 1900. The corporation put the amended by-law into operation. Calls for assessments were made upon the new basis. The official notification to Black treated his insurance as reduced from $5,000 to $2,000. Black had received no 'sick or disability benefits.' No payment of any nature had been made by the corporation on its certificate. Black had received nothing of value. The partial performance of the contract had been altogether on his part, to with, the payment by him to the corporation of assessments as called. The defendant was incorporated for the purpose, inter alia, of establishing 'a benefit fund from which, on the satisfactory evidence of the death of a member of the order, who has complied with all its lawful requirements, a sum not exceeding five thousand dollars shall be paid to the family, orphans, or dependents, as the member may direct. ' In addition to such 'benefit fund,' the defendant, by the statutes of Massachusetts, was authorized to 'create, collect, maintain, disburse and apply an emergency fund in accordance with its by-laws,' to be 'invested in securities in which insurance companies are allowed by law to invest their capital. ' On October 1, 1900, the date when the defendant's amended by-law was put into effect, the defendant's emergency fund amounted to the sum of $414,937.21. The defendant corporation, it will be perceived, carried on the business of a fraternal insurance society, and it had large assets for its general purposes.

Now, as was pointed out by the Circuit Court of Appeals for the Sixth Circuit in Supreme Council American Legion of Honor v. Orcutt, 119 Fed.682, 686, when this incorporated beneficial association 'enters into contract relations with its members, it assumes obligations which become subject to the rules and principles which govern contracts in general. ' Let us then turn to the decisions here apposite.

In Roehm v. Horst, 178 U.S.1, 13, 20 Sup.Ct. 780, 44 L.Ed. 953, the Supreme Court of the United States, upon a review of the cases, American and English, relating to anticipatory breaches of an executory contract by a refusal on the part of one party to it to perform it, approved as reasonable the rule laid down in Hochster v. De La Tour, 2 El. & Bl. 678, namely, that a party to an executory agreement may, before the time for executing it, break the agreement either by disabling himself from fulfilling it or by renouncing the contract, and that an action will lie for such breach before the time for the fulfillment of the agreement. In delivering the opinion of the Supreme Court, Chief Justice Fuller quoted with approval what was said in Johnstone v. Milling, L.R. 16 Q.B.Div.460, 467, by Lord Esher, Master of the Rolls, who put the principle thus:

'When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares his intention then and there to rescind the contract. Such a renunciation does not of course amount to a rescission of the contract because one party to a contract cannot by himself rescind it; but by wrongfully making such a renunciation of the contract he entitles the other party, if he pleases, to agree to the contract being put an end to, subject to the retention by him of his right to bring an action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation.'

We see no reason why this principle is not applicable to the present case. The renunciation by the defendant of its insurance contract was most clearly manifested, first, by the adoption of the amended by-law, and then by its subsequent course of conduct in putting the amended by-law into effect and undertaking to reduce Black's insurance. To escape the consequences of its deliberate and unequivocal repudiation of the contract, the defendant, when sued by Black, cannot be heard to assert its inability to annul the contract. Roehm v. Horst, supra; Moorhead v. Fry, 24 Pa. 37. In the latter case the court said:

'It will not do to aver the inability of Nelson to set

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