Fogg v. Supreme Lodge of the Order of the Golden Lion

• Decision Date: 20 May 1892
• Citation: 31 N.E. 289,156 Mass. 431
• Parties: FOGG et al. v. SUPREME LODGE OF THE ORDER OF THE GOLDEN LION.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

156 Mass. 431

31 N.E. 289

FOGG et al.

v.SUPREME LODGE OF THE ORDER OF THE GOLDEN LION.

Supreme Judicial Court of Massachusetts, Suffolk.

May 20, 1892.

Report from supreme judicial court, Suffolk county; CHARLES ALLEN, Judge.

Suit by George Fogg and others against the Supreme Lodge of the Order of the Golden Lion for an injunction and appointment of a receiver. Judgment for plaintiffs appointing a receiver, and ordering a distribution of the funds held by defendant in the endowment benefit business. Reported to full bench. Affirmed.

G.W. Anderson, for plaintiffs.

H.N. Shepard, for defendant.

HOLMES, J.

This is a bill brought by certain certificate holders of the defendant corporation seeking for an injunction and a receiver.

The defendant is a Massachusetts corporation, incorporated “for the purpose of doing an insurance business, as provided in chapter four hundred and twenty-nine of the Acts of the year eighteen hundred and eighty-eight.” By section 8 of that statute, “any corporation duly organized as aforesaid, which does not employ paid agents in soliciting or procuring business other than in the preliminary organization of local branches, and which conducts its business as a fraternal society on the lodge system,” etc., may provide for weekly payments to a member during disability, “or pay a benefit to the member or his family at the end of such period of time as shall be fixed by said by-laws and written in the benefit certificate issued to said member.” The words last quoted authorize the issue of the species of certificate held by the plaintiff, and the language quoted from the charter of the defendant does not limit its power more narrowly. We read the words, “an insurance business as provided,” etc., as intended to express in a summary way the whole business provided for in the act referred to, or at least so much of it as to bring the defendant under the words, “any corporation duly organized as aforesaid,” in section 8.

The certificates issued to the plaintiffs purport to bind the defendant “to pay out of its benefit and reserve funds a sum not exceeding one hundred dollars, upon condition that the said member [i.e., of Boston Lodge No. 1, United Order of the Golden Lion,] complies with all the laws, rules, and regulations now governing said subordinate lodge and its funds.” The promise we read as a promise to pay as near to $100 as the corporation is able to pay from its reserve fund or by assessment. The condition, in an obscure way, subjects the certificate holder to assessments of two dollars each, not limited in number or frequency within a given time, except as the act limits them in section 8.

It is evident to any one of reasonable understanding and experience that such a contract can be performed only by assessing the certificate holder for the full amount to be paid to him, and something more for the expenses of the business, unless the membership increases considerably between the time of making the contract and the time of payment, which, of course, can happen only for a short time, or unless the available reserve funds are increased by other holders forfeiting their certificates and the sums already paid in by them. In view of the narrow limitation set by section 8 of the statute upon assessments up to within three months of the maturity of certificates, it is plain that when certificates are within three months of maturing assessments must begin to fall thick and fast, and that the poor people to whom this business particularly is addressed in many cases will find themselves compelled to forfeit all that they have paid in by their inability to make further payments. It is not in our power to declare the business contrary to public policy, and a fraud on an unprotected part of the community, since the legislature have authorized it, but it is well to understand with what kind of business we are dealing. No one who does understand it, we think, would hesitate to agree that all legislative conditions must be complied with strictly.

In the case at bar it appears that assessments of at least 90 or 95 per cent. of the sum to be received, and probably of an amount equal to more than the whole, will be necessary in order to enable the defendant to pay. It is found that many of the certificate holders are poor, and unable to understand the scheme of this business, if they should try to. It appears, too, that the officers of the company assumed to be men of experience, and gave strong assurances to the public that within a year they would get $100 for payments estimated not to exceed $39, and that people who took the certificates were misled. For all practical purposes, we have no doubt that many of them were deceived as truly as if they had been misled by the most specific statement of fact. Still we have not yet got far enough to warrant the issuing of an injunction and winding up this branch of the defendant's business as a whole. Many certificate holders, we cannot doubt, perfectly understood that their only chance of a profitable investment was that others might prove less able than themselves to stand frequent assessments, and so might forfeit their policies. Moreover, those who were misled were misled only by collateral expressions of prophecy, while the defendant's promise in the contract was conditioned in express terms, as we have said. The advertisements stated with great confidence that members...