Condon v. Mutual Reserve Fund Life Ass'n
| Decision Date | 15 March 1899 |
| Citation | 42 A. 944,89 Md. 99 |
| Parties | CONDON et al. v. MUTUAL RESERVE FUND LIFE ASS'N. |
| Court | Maryland Court of Appeals |
Appeal from circuit court of Baltimore city; Pere L. Wickes, Judge.
Bill in equity by Levi Z. Condon and others against the Mutual Reserve Fund Life Association. From a judgment sustaining a demurrer to the bill, complainants appeal. Affirmed.
Argued before MCSHERRY, C.J., and PAGE, PEARCE, FOWLER, ROBERTS BRISCOE, and SCHMUCKER, JJ.
E. H Gans, John P. Poe & Sons, and Alonzo M. Hurlock, for appellants. William Pinkney Whyte, Bernard Carter, and John M. Carter, for appellee.
The questions to be decided on this appeal arise on a demurrer interposed by the appellee to a bill in equity filed by the appellant in the circuit court of Baltimore city. The appellant is a resident of Maryland. The appellee is a corporation created under the laws of the state of New York, and having its principal office there, though transacting business in Maryland. It is a mutual insurance company, formed on and conducting the co-operative or assessment plan. The appellant is a member of the body corporate, and holds one of its certificates of membership, issued in 1884. By this certificate, it is provided that, "in consideration of the application for this certificate of membership," the application being expressly made a part of the contract, and in consideration of the payment of certain dues and designated mortuary assessments falling due in February April, June, August, October, and December of each year, "or from such other periods as the board of directors may from time to time determine," the mutual reserve association "does hereby receive Levi Z. Condon *** as a member of said association." It is then stipulated that the association will, upon the death of Condon, during the continuance of the certificate and upon certain conditions, pay to his legal representatives the sum of $10,000 "from the death fund of the association at the time of said death, or from any moneys that shall be realized to the said fund from the next assessment to be made." The certificate further declares: "If at such date as the board of directors of the association may, from time to time, fix or determine for making an assessment, the death fund is insufficient to meet existing claims by death, an assessment shall then be made upon every member whose certificate is in force at the date of the last death assessed for, and said assessment shall be made at such rates, according to the age of each member, as may be established by the said board of directors, and the net amount received from such assessment (less twenty-five per cent., to be set apart for the reserve fund) shall go into the death fund." It is also provided that "the net earnings of the association, together with the twenty-five per cent. of the net receipts from each assessment, shall constitute a reserve fund"; and that "after the expiration of each period of five years, during the continuance of this certificate of membership, a bond will be issued *** for an equitable proportion of the reserve fund, and the principal of said bond shall be available ten years from its date towards paying future dues and assessments under this certificate." It is likewise declared that the contract shall be subject to all the provisions and stipulations contained in the constitution and by-laws of the association, "with the amendments made, or that may hereafter be made, thereto." And it is agreed that "the entire contract contained in this certificate and said application, taken together, shall be governed by, subject to, and construed only according to, the constitution, by-laws, and regulations of said association, and the laws of the state of New York, the place of this contract being expressly agreed to be the home office of said association in the city of New York." Upon the back of the certificate there is printed a "Table of Rates," containing, among other things, a statement that "the basis of the assessment rate for each member, according to the age taken at the nearest birthday, on each $1,000 shall be as follows"; and then the various ages, from 25 to 65, are set forth, and the several sums payable at the respective ages are placed opposite. Condon's age upon entering the the association was 55, and the amount designated as the assessment upon each $1,000 at that age is $3.25. The appellant paid for some years six assessments annually, each of which amounted to $32.50. Subsequently the assessment was increased to $48.55, then raised to $49.10, and later on to $75.30. These sums were paid by Condon "with extreme reluctance." On February 1, 1898, mortuary call No. 96 was issued, and by it the appellant was required to pay, on or before March 3d, the sum of $130. He alleges that these assessments were enormously in excess of what he understood to be the meaning and effect of his contract with the appellee at the time he entered into it. By a written agreement, the time for the payment of the ninety-sixth assessment was extended, first, for 30 days from March 3d, and then for 30 days from April 2d. On the 29th of April, Condon filed a bill in equity against the appellee in the circuit court of Baltimore city, and on June 17th he filed an amended and supplemental bill. These are the bills now before us.
The bill, which was filed by Condon for himself and in behalf of others similarly situated, who might come in and make themselves parties to the proceedings, after setting forth the facts already alluded to, proceeds to charge that the levying of the assessments in excess of $3.25 per $1,000 of insurance, and in excess of six per annum, is a gross violation by the appellee of its contract with the appellant and is both fraudulent and illegal; that the validity of this action cannot be maintained upon the ground that, by a strained interpretation of some of the conditions of the policy, the levying of assessments is remitted to the discretion of the officers, because the discretion referred to means the honest discretion of the corporation and its officers; that these assessments were not levied bona fide, in the honest exercise of any discretion vested in the corporation or its officers, but were levied with the dishonest and fraudulent purpose of forcing the appellant, and others situated as he is, to allow their policies to lapse by a failure to pay illegal, ruinous, and fraudulent assessments. The bill further charges that these increased assessments cannot be defended by the suggestion that the same are "to any extent" needed in order to enable the corporation to meet its death claims, because, if the corporation is in the prosperous financial condition represented in its circulars, the levying of such assessments is a wanton abuse of the power it possesses, and "plainly proves" that the same are illegal, fraudulent, and ultra vires. The bill then sets forth clauses 2 and 3 of the policy. It is under these clauses that a reserve fund is created out of the net earnings, plus 25 per cent. of the net receipts from each assessment. By these clauses it is further provided that, after five years, a membership bond is to be issued to the policy holder for an equitable proportion of this reserve fund, and this bond is made available, after the expiration of 10 years, for the payment of future dues. The bill charges that the amount of the bonds issued to the appellant is greatly less than, according to the face of his policy, he was entitled to; that, in fact, the apportionment made was fraudulent; and that, upon a true accounting, it will be found that he is entitled to sums very much greater than those allowed him in the two bonds which had been issued to him. The bill also charges that the corporation is insolvent. The relief prayed is as follows: First, for a subpoena; second, that an injunction may be issued restraining the corporation from forfeiting the appellant's policy for the nonpayment of mortuary call No. 96, "and adjudging that the said assessment is fraudulent and void"; third, that, in the event of the policy being construed as conferring the right to make the assessments complained of, the policy may "be declared to have been obtained under such circumstances as demonstrated that there was no real meeting of minds," and that no contract was in fact executed, and therefore that the corporation may be decreed to refund to the appellant all the payments made by him to it from the beginning; fourth, that, if the court shall find that a binding contract was made, then that the contract, "as set out in said policy," in connection with the constitution and by-laws of the corporation, may be interpreted, and the true meaning and effect thereof determined, and that the power of the corporation "in respect of the levying of assessments may be settled and adjudicated"; fifth, that the corporation may be required to give a full and particular statement of its assets and liabilities; sixth, that a receiver may be appointed to take charge of the assets within the jurisdiction of the court, and to administer them under the direction of the court; seventh, and for general relief. Other persons holding like policies became parties plaintiffs. The defendant demurred to the bill and the amended bill, and assigned four grounds. The first, second, and third allege that the application for membership, and the constitution and by-laws of the association, forming parts of the contract of insurance, are not exhibited with the bill, and that it is therefore impossible for the court to correctly interpret the contract. The fourth ground is in these words: "For that it appears by the bill of complaint in this case that the acts complained of on the part of the defendant affect the plaintiffs...
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