Finnell v. Franklin

• Citation: 55 Colo. 156,134 P. 122
• Parties: FINNELL et al. v. FRANKLIN et al.
• Decision Date: 02 June 1913
• Court: Supreme Court of Colorado

134 P. 122

55 Colo. 156

FINNELL et al. v. FRANKLIN et al.

Supreme Court of Colorado

June 2, 1913

Error to District Court, City and County of Denver; George W Allen, Judge.

Action by James B. Finnell and others against Charles W. Franklin as executor of John O. Finnell, deceased, and others. Judgment for defendants, and plaintiffs bring error. Reversed and remanded, with directions.

Thomas M. Morrow, of Denver, for plaintiffs in error.

L. M Goddard, of Denver, Harry B. Tedrow, of Boulder, and Hugh McLean, of Denver, for defendants in error.

WHITE J.

This action involves the disposition of a sum of money paid into court by the Locomotive Engineers' Mutual Life & Accident Insurance Association, being the proceeds of two policies of insurance issued by it upon the life of one John O. Finnell. The record discloses that in 1894 the association was incorporated under the laws of the state of Ohio, not for profit, but for the purpose, as stated in its charter following the language of the statute, 'to transact the business of life and accident insurance on the assessment plan, for the purpose of mutual protection and relief of its members, and for the payment of stipulated sums of money to the families, heirs, executors, administrators, or assigns of deceased members of said association.' In 1896 the General Assembly of Ohio enacted a statute known as 'House Bill No. 370,' entitled 'An act regulating fraternal beneficiary societies, orders, and associations' (92 Ohio Laws, p. 360). By the terms of this statute any corporation, society, or voluntary association, without capital stock, formed or organized and carried on for the sole benefit of its members and their beneficiaries, and not for profit, and having a lodge system with ritualistic form of work and representative form of government, and which shall make provision for the payment of death benefits, is declared to be a fraternal beneficiary association to be governed by that act, and limited in the payment of death benefits 'to the families, heirs, blood relatives, affianced husband or affianced wife of, or to persons dependent upon, the members.' The act authorized associations of the character of those defined therein to continue their business, provided they complied with the provisions of the act. Thereafter, on September 24, 1896, the board of directors of the Locomotive Engineers' Mutual Life & Accident Insurance Association passed and adopted a resolution bringing the association under the provisions of the act, and applied for and was granted, by the proper authorities, a license to transact its business thereunder. It has since continued to operate under the provisions of that statute and of amendatory legislation, and has been treated at all times by the insurance department of the state of Ohio as classified properly and exclusively thereunder, and comes clearly within the description of those corporations and societies which the act classifies as fraternal beneficial associations.

The policies upon the life of Finnell were taken out long subsequent to the act of 1896. The language designating the beneficiary in each policy is as follows: 'All payments or benefits that may accrue or become due to the heirs of the person insured by virtue of this policy will be payable to W. S. Finnell, father, or his lawful heirs.' W. S. Finnell predeceased John O. Finnell, leaving the latter as his sole heir at law. John O. Finnell died July 17, 1905, leaving, of the required class of beneficiaries prescribed by the statute, only an uncle and some cousins, who are the plaintiffs in error herein, and who would have been the lawful heirs of W. S. Finnell had he outlived John O. Finnell. At the date the policies were issued article 1 of the by-laws of the association defined its purposes in the language of the original charter, notwithstanding the limitations imposed by the act of 1896, supra, whereby executors, administrators, and assigns were eliminated from the class of persons that might be named beneficiaries in insurance policies issued by the association. In May, 1904, this by-law was amended so as to conform to the provisions of a later statute substantially the same in that regard, however, as the act of 1896, supra. The sections of the by-laws defining the manner of changing beneficiaries, in force at the date the policies were issued, continued and remained the same until after the death of John O. Finnell. They are as follows:

'Sec. 23. A policy holder of this association, having designated his beneficiary or beneficiaries, may change the same at his pleasure, without notice to or consent of the beneficiary or beneficiaries by returning through the division secretary of the division to which he belongs former certificate issued to the home office, and informing the president and general secretary-treasurer of changes desired; provided, however, that the new beneficiaries shall come within the class named in article 1, for which a fee of twenty-five (25) cents will be charged. Any person or persons named as beneficiary or beneficiaries, accepting any interest in a policy or certificate issued by this association, do so upon the express terms or conditions contained in this article.

'Sec. 24. Any member wishing to change beneficiary in his policy or policies can do so by returning through the division secretary of the division to which he belongs the policy or policies in his possession. Being unable to return old policy or policies, new ones will be granted by members making affidavit of the facts on a form supplied by the home office, executed before an officer authorized by law to administer oaths, and waiving all benefits in former policy or policies held by him.'

John O. Finnell left a will which was duly probated on August 31, 1905. After making certain specific bequests he therein particularly mentioned the insurance policies in question, and directed his executor, Charles W. Franklin, the defendant in error herein, to collect and hold the proceeds, together with the remainder of his estate, in trust, and pay the same to certain persons therein designated, none of whom, however, with one exception, belong to the class that may be made beneficiaries under the terms of the statute of 1896, supra, and the charter of the association as amended thereby. To this person he directed that $500 be paid, but from no particular fund.

While it is conceded that no attempt was made in the manner and form prescribed by the by-laws to change the beneficiary designated in the policies, it is contended that the will constituted a change in that respect. We do not think so. It is true that the purposes and objects of fraternal or mutual insurance associations are vastly different from those of ordinary life insurance companies. Nevertheless, the assured, under the rule in this jurisdiction, has no greater power to change the beneficiary in one case than in the other, except as reserved to him by the law of the state under which the insurance was written, or by that of the association, or by the terms of the policy or certificate of insurance. Love v. Clune, 24 Colo. 237, 50 P. 34; Pittinger v. Pittinger, 28 Colo. 308, 64 P. 195, 89 Am.St.Rep. 193; Hill v. Groesbeck, 29 Colo. 161, 67 P. 167.

In either case the terms of the contract of insurance govern. The contract, however, is not limited in all cases to the express provisions contained in the insurance certificate or policy. Usually that entered into between a benefit association and a member thereof embodies, by necessary implication, the application for membership, the certificate of insurance, the charter and by-laws of the association, and the statutes of the state under which it is organized and the insurance is written. All these become a part of the contract to the same effect as if they had been expressly embodied therein by written words. Golden Star Fra. v. Martin, 59 N. J. Law, 207, 35 A. 908; Md. Mu. Benev. Soc., etc., v. Clendinen, 44 Md. 429, 22 Am.Rep. 52; Arthur v. Odd Fell., etc., 29 Ohio St. 557; Hellenberg v. Dist. No. 1, etc., 94 N.Y. 580.

And if their be a conflict between the stipulations in the policy and by-laws of the association issuing the same on the one hand, and the charter of the association and the statutory law regulating such associations on the other, the former must yield to the latter. Havens v. Fire Ins. Co., 123 Mo. 403, 417, 27 S.W. 718, 26 L.R.A. 107, 45 Am.St.Rep. 570; Sturges v. Sturges, 126 Ky. 80, 102 S.W. 884, 12 L.R.A. (N. S.) 1014.

At the time Finnell became a member of the association and the policies in question were written, the charter of the association and the rights of the parties must be determined as affected by the act of 1896, supra, notwithstanding the by-laws of the association. That act and the action of the association thereunder constituted an amendment of the original charter of the association. Therefore, policy contracts, entered into between it and its members after that event, must be conformed to that act. Sturges v. Sturges, supra, so rules in considering the original charter of this association and the effect of this legislative act thereon.

Guided by these rules, let us ascertain the terms of the insurance contracts in question existing on the life of John O. Finnell at the time of his death. The association obligated itself to pay the sums designated to W. S. Finnell, or his lawful heirs, upon the death of John O. Finnell, subject, however to the right of the latter, in a certain designated way, to have substituted in the contracts the name of a person or persons other than W. S. Finnell or his lawful heirs, to whom such payments should be made, provided, however, that the person or persons so designated should sustain a certain ...