Dey v. The Knights and Ladies of Security

• Decision Date: 10 March 1923
• Docket Number: 24,215
• Parties: J. S. DEY, Appellee, v. THE KNIGHTS AND LADIES OF SECURITY, alias THE SECURITY BENEFIT ASSOCIATION, Appellant
• Court: Kansas Supreme Court

213 P. 1066

113 Kan. 86

J. S. DEY, Appellee, v. THE KNIGHTS AND LADIES OF SECURITY, alias THE SECURITY BENEFIT ASSOCIATION, Appellant

No. 24,215

Supreme Court of Kansas

March 10, 1923

Decided January, 1923.

Appeal from Sumner district court; OLIVER P. FULLER, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. FRATERNAL INSURANCE--Terms of Certificate--May Be Changed and Modified--Change Binding Upon Members. In 1895 an incorporated fraternal beneficiary association issued a certificate to a member, one provision of which was that on reaching 69 years of age he should be entitled to receive $ 900, to be deducted from the amount of the death benefit. The certificate recited that it was issued upon the express condition that he should in every particular comply with all the laws, rules and regulations of the order. One of its laws in force at the time empowered its National Council "to amend the Constitution, Ritual, Laws and Rules of Discipline." In 1898 the laws of the association were amended so that they no longer contained a provision for such a $ 900 payment, but did provide for annual payments of $ 300 after a member holding a $ 3,000 certificate should reach the age of 70 years and become physically disabled. In 1899 a statute was enacted for the regulation of such associations which expressly forbade the payment of any disability benefits at a younger age than 70 years, and by implication prohibited any payments because of age unless accompanied by disability. In an action brought by the holder of the certificate for the recovery of $ 900 on the ground of having reached the age of 69 years it is held that he was bound by after-enacted laws changing the rates and benefits; that the amendment of the laws of the order and the enactment of the statute referred to cut off his right to recover on the ground of having reached a particular age, no disability being claimed. And it is further held that the action of the association in raising the amount of his monthly assessment from $ 3 to $ 3.60 was valid.

2. PLEADING AND PRACTICE--Effect of Overruling Demurrer to Petition. Where upon the overruling of a demurrer to a petition the defendant answers and goes to trial, taking no appeal from that ruling, the decision upon the legal questions involved does not become the law of the case, and he is entitled to whatever judgment the established facts warrant.

George R. Allen, of Kansas City, and Ed T. Hackney, of Wellington for the appellant; A. W. Fulton, of Chicago, Ill., of counsel.

James Lawrence, W. H. Staffelbach, both of Wellington, for the appellee.

J. S. DEY, of Wellington, pro se.

OPINION

MASON J.:

In 1895 J. S. Dey became a member of the Knights and Ladies of Security, a fraternal beneficiary association incorporated in this state, known since its merger with a similar organization as the Security Benefit Association. His certificate contemplated the payment of $ 3,000 to his beneficiaries upon his death, and contained a provision to the effect that if he kept it in force and lived to be 69 years old he should then receive $ 900, to be credited upon the death benefit. He reached that age February 12, 1919. On March 1, 1920, he made a formal demand for the payment of the $ 900, accompanied by a showing of the facts. Payment was refused on these grounds among others: That in 1898 a change had been made in the by-laws under which instead of receiving a payment of $ 900 upon attaining the age of 69 a member in his situation upon becoming 70 years old and being physically disabled should be entitled to $ 300 a year for ten years if he lived that long, otherwise the unpaid part of the $ 3,000 to go to the beneficiaries; that such change was continued in effect by subsequent laws of the association; and that by a Kansas statute of 1899 such association as the defendant were forbidden to pay benefits to their members except in case of sickness or disability. He sued the association for its refusal to pay him the $ 900, complaining also of the increase of his monthly assessments from $ 3 to $ 3.60. Judgment was rendered awarding him $ 900, and an additional sum as reimbursement for the additional 60 cents he had paid on a number of assessments, with an injunction against its further collection. The defendant appeals.

1. A law of the order in force at the time the certificate was issued contained a provision that the National Council should have the power "to amend the Constitution, Ritual, Laws and Rules of Discipline." In June, 1898, that body adopted a new set of laws, one of which provided that a member holding a $ 3,000 certificate upon becoming 70 years of age and being physically disabled should receive $ 300 a year during such disability until the entire amount (less a certain deduction) had been paid. The only by-law which had previously existed relating to the payment of $ 900 upon a member's attaining the age of 69 was one setting out a form of certificate to which that issued to the plaintiff conformed, and this was repealed in the course of the revision referred to, which substituted a form corresponding to the change already indicated.

In 1899 a statute was passed for the regulation of fraternal beneficiary societies, containing a provision that they might "make provision for the payment of benefits in case of sickness, temporary or permanent disability, either as a result of disease, accident, or old age" (Laws 1898, Special Session, ch. 23, § 1), which has in substance been preserved in later legislation. (Gen. Stat. 1909, § 4303; Gen. Stat. 1915, § 5401; Laws 1917, ch. 208, § 1; Laws of 1919, ch. 216, § 1.) This has been held to prohibit a contract for the payment of benefits upon the mere arrival at a certain age, unless accompanied by actual disability. (Kirk v. Aid Association, 95 Kan. 707, 711, 149 P. 400; The State, ex rel., v. United Workmen, 97 Kan. 585, 155 P. 785.)

One of the two conclusions of law made by the trial court reads:

"When plaintiff's certificate was issued its provisions were in violation of no law; it was a valid contract. And since the plaintiff at the time did not agree to be subject to any thereafter enacted rules that would change the terms of his certificate, the state statute of 1898 [referring to the one enacted in 1899, at the special session begun in 1898] and subsequent acts in relation to fraternal insurance do not apply, nor can any rule of the defendant without the consent of the plaintiff relieve the defendant of its legal obligations to pay according to the terms of the original contract."

This court is fully committed to the proposition that where a member of a mutual benefit society agrees to obey by-laws subsequently to be adopted he thereby authorizes a change of rates and benefits (Moore v. Annuity Association, 95 Kan. 591, 148 P. 981, and cases already cited), and this is the view of a majority of the courts that have passed upon the question. (19 R. C. L. 1202, 1204; Notes, L. R. A. 1916 A 762; 11 A. L. R. 648.) The plaintiff's certificate recited that it was issued upon the express condition that he should comply with all the laws of the order, and the decision of the trial court as indicated by the language quoted appears to have been controlled by a belief that this agreement did not apply to a subsequently adopted law which changed the terms of the certificate. In Miller v. National Council, 69 Kan. 234, 76 P. 830, a certificate issued by the present defendant in substantially the same form as that here involved, under the same by-laws, was placed in the class of those the holder of which has made himself amenable to subsequent changes of rates, by reason of its containing a provision reading:

"This certificate is issued upon the express condition that the said insured shall in every particular, while a member of the order, comply with all the laws, rules and requirements thereof, and shall at his death be a member in good standing of said order." (p. 240.)

The scope of the decision is indicated by this extract from the opinion:

"The important question in this case is, Did the association, with the consent of plaintiff, reserve the power so to alter or amend its by-laws subsequently to the issuance of plaintiff's certificate as to increase the amount of his monthly assessments? . . . The condition in plaintiff's certificate that he should in every particular, while a member of the order, comply with all the laws, rules and requirements thereof, was a consent on his part not only to comply with the laws then in force, but also to comply with all reasonable rules and regulations that might be made thereafter in the interests of the association. Every person joining an association obligates himself, without so expressing it, to conform to, and comply with, all its existing laws; and, if the provision in the plaintiff's certificate means anything, it is that he agreed to comply with all laws then in force or subsequently to be enacted by the national council." (pp. 239, 241.)

The original decision in that case was to the contrary, holding the association to be without power to change its rates to the prejudice of those already holding certificates, three justices dissenting. (73 P. 88.) This circumstance makes it quite clear that the final unanimous conclusion of the court was not reached without a full appreciation of the force of the argument in favor of the other view. In the brief of the present plaintiff it is said of the Miller case: "The final decision was based on a misstatement of every material fact." In saying this the plaintiff appears to have had in mind that the court assumed that the contract as originally entered into provided for the payment of an assessment of a fixed amount each...