Bohnert v. Ben Hur Life Ass'n

• Decision Date: 14 February 1936
• Docket Number: No. 23246.,23246.
• Citation: 200 N.E. 326,362 Ill. 403
• Parties: BOHNERT et al. v. BEN HUR LIFE ASS'N
• Court: Illinois Supreme Court

362 Ill. 403

200 N.E. 326

BOHNERT et al.

v.BEN HUR LIFE ASS'N

No. 23246.

Supreme Court of Illinois.

Feb. 14, 1936.

Suit by Mary Bohnert and others against the Ben Hur Life Association, wherein others intervened as coplaintiffs. From a decree dismissing the suit and from an order denying cross-motion to strike certain parts of defendant's motion to dismiss the complaint, plaintiffs appeal.

Order and decree affirmed.

Appeal from Circuit Court, Sangamon County; Victor Hemphill, judge.

George W. Kenney, of Springfield, for appellants.

William W. Kummings, of Crawfordsville, Ind., Doyle, Sampson & Giffin, of Springfield, and Sonnenschein, Berkson, Lautmann, Levinson & Morse, of Chicago (Herbert M. Lautmann, Henry S. Moser, and Homer Kripke, all of Chicago, of counsel), for appellee.

JONES, Justice.

This controversy grows out of a merger contract between two fraternal beneficiary societies, under which the Ben Hur Life Association of Indiana took over the membership, business, assets, and liabilities of the Loyal American Life Association of Illinois. For convenience the two societies will be respectively referred to as the Ben Hur and the Loyal American. Mary Bohnert, Manuel Roderick, and Minnie Wells, holders of certificates in the Loyal American, filed an amended complaint in the circuit court of Sangamon county against the Ben Hur praying for the construction of the contract, the issuance by defendant of assumption certificates, of the exact scope of such provisions of the contract as may be determined by the court to be legal, and for an injunction restraining the enforcement of the provisions which may be determined by the court to be illegal. The complaint as finally amended was adopted by other intervening coplaintiffs. Defendant filed a motion in the nature of a demurrer to dismiss the complaint and for judgment. A cross-motion by plaintiffs to strike certain parts of defendant's motion was denied. Defendant'smotion was sustained and a decree dismissing the suit was entered. Plaintiffs have appealed to this court from the decree and the order denying the cross-motion.

It appears from the complaint and exhibits hibits that the Loyal American was in financial straits. It had less than $21,000 cash with which to meet accrued death claims of more than $100,000 and other liabilities of almost an equal amount. It had over 7,000 members, with almost $7,000,000 of insurance in force. Of its assets, $306,900 in bonds had a market value of about $76,000, and about $390,000 of its other assets, at their book value, consisted of real estate and mortgages. Without detailing the condition of the Ben Hur, its gross assets were over $10,000,000, with a surplus of more than $750,000.

The merger contract provides that all the assets transferred are to be set aside for the use and benefit of all the members of the Loyal American and designated as the Loyal American fund. Because the assets of the Loyal American were not sufficient to pay the obligations assumed by the Ben Hur, a lien, similar to a certificate loan, was established against each Loyal Amercian certificate. It was initially fixed at the amount of the reserve required by the American Experience Table of Mortality, with interest at 4 per cent., according to what is known as the Illinois Standard Modification. Smith-Hurd Ann.St. c. 73, § 221; Ill.Rev.Stat.1935, c. 73, par. 331. Periodical adjustments of the amount of the lien are provided for, to be determined by annual revaluations of Loyal American assets and the application of profits and losses of that business. Unless previously discharged, the lien is to become fixed on December 31, 1948, at which time the Loyal American fund is to be merged in the general assets of the Ben Hur. A fiveyear moratorium on policy loans and surrenders was also provided. The Ben Hur agreed to pay all accrued death claims of the Loyal american within ninety days, from the Loyal American fund. For that purpose it was authorized to sell or buy for its own account, at not less than the market price shown on an attached schedule, the $306,900 in bonds, any profit above the listed values to accrue to the Loyal American fund. The contract was approved by the insurance departments of Illinois and Indiana.

The amended complaint charges that the contract contemplates a radical departure from the distinctive principles of fraternal beneficiary societies and adopts those which are attributes of old-line life insurance companies, particularly in the application of the American Experience Table and the Illinois Standard Modification for the creation of a legal reserve under individual trusts. It alleges that so-called legal reserves are applicable only to old-line insurance, whereas the reserve of a fraternal society is based on ‘percentage,’ which must be held as a general trust for the benefit of all. The complaint...