Fowler v. Camp

• Decision Date: 16 May 1921
• Docket Number: 21811
• Parties: CHARLES E. FOWLER ET AL., APPELLANTS, v. SOVEREIGN CAMP, WOODMEN OF THE WORLD, APPELLEE
• Court: Nebraska Supreme Court

183 N.W. 550

106 Neb. 192

CHARLES E. FOWLER ET AL., APPELLANTS, v. SOVEREIGN CAMP, WOODMEN OF THE WORLD, APPELLEE

No. 21811

Supreme Court of Nebraska

May 16, 1921

APPEAL from the district court for Otoe county: FREDERICK W. BUTTON JUDGE. Affirmed.

AFFIRMED.

D. W Livingston, Wilkerson & Barnett, Wilfley, Williams, McIntyre Hensley & Nelson, for appellants.

William F. Moran, W. B. Price, Nelson C. Pratt, F. H. Gaines and D. E. Bradshaw, contra.

OPINION

LETTON, J.

Plaintiffs are members and certificate holders of the defendant, which is a fraternal beneficiary association incorporated under the laws of the state of Nebraska. The purpose of the action is to have the court declare that certain provisions of the constitution and by-laws of the order in force in 1917 are still in full force and effect, and that the constitution and by-laws claimed to have been adopted by the Sovereign Camp of the defendant at its session in Chicago in July, 1919, be declared unlawfully adopted; that sections 60 and 61 of said constitution and by-laws be declared unreasonable and discriminatory between members and classes of members, ultra vires, and void; and that defendant be perpetually enjoined from enforcing or attempting to enforce the provisions of said sections, or from collecting rates on any different basis than that provided in the laws of 1917; that it be enjoined from declaring or enforcing any lien upon the benefit certificates of its members, and from dissipating or disbursing its emergency funds by apportioning its accumulated funds among the members or permitting them to withdraw any portion of the same. From a decree refusing the relief prayed, the plaintiffs appeal.

At the outset of the argument it was conceded by the appellants that under the decision of this court in Funk v. Stevens, 102 Neb. 681, 169 N.W. 6, a fraternal beneficiary association whose members had agreed in advance to any changes in the by-laws and constitution thereafter made has power to amend the same so as to increase the rates to be paid by its members, if the increase was reasonably necessary for the preservation of the order, or the successful carrying on of the purposes and objects of the association. It is also conceded that if the changes made by the amendments of the constitution or by-laws are unreasonable or confiscatory, and operate unjustly and wrongfully to deprive a member of the benefits of the insurance contract, or place undue and unreasonable burdens on one class of members from which others are exempt, such changes in the by-laws or constitution are beyond the power of the association to make without the consent of the persons affected and will be held void.

These principles being established, the questions left for determination are mainly questions of fact.

Appellants insist that the 1919 constitution and by-laws were not legally adopted, for the reason that section 164 of the constitution and by-laws then in effect provides that the same shall not be altered, "(a) unless the alterations or amendments are proposed in writing through Head Camps, and such proposals are received by the Sovereign Clerk at least 15 days prior to the next regular meeting of the Sovereign Camp, or recommendations by the Sovereign officers or members of the committee on legislation, which may be proposed at the session of the committee;" that such committee shall meet "(b) at least five days prior to the time of meeting of the Sovereign Camp to consider such proposed alterations and amendments. Such committee shall transmit them, together with its recommendations thereon in writing, and all other alterations and amendments which it may deem to be for the interest of this society, to the next regular meeting of the Sovereign Camp on the first day of its session. (c) The committee shall have its report printed in sufficient numbers to furnish a copy thereof to each officer and delegate of the Sovereign Camp on the first day of its session. (d) No other alterations or amendments to the constitution and laws shall be submitted to or considered by the Sovereign Camp, except by a two-thirds vote of all the members at a regular meeting thereof, unless presented in the manner hereinbefore provided. And the constitution and laws of the Sovereign Camp shall not be altered or amended except by a two-thirds vote of all the members constituting the same at a regular meeting thereof, except as hereinbefore provided in this constitution and laws."

It is contended that the provision that a copy of the proposed amendments shall be placed in the hands of each delegate on the first day of the convention is mandatory and jurisdictional, and that this provision was not complied with, could not be waived, and hence the whole proceedings in this regard are void.

The evidence shows that the printed reports of the committee were distributed on the morning of the fifth day of the convention. The report was at once taken up by a committee of the whole house, which considered the same during the day. On the afternoon of the sixth day a roll-call was had on the adoption of the amendments to sections 60 and 61, which were carried by more than a two-thirds vote. Consideration of the other amendments proceeded daily until the eighth day of the session, when a resolution was offered that the constitution, laws, by-laws and rules, which had been considered section by section, should be adopted as the constitution and by-laws from and after December 31, 1919. A roll-call was had and the presiding officer announced that 212 votes had been cast for the adoption, that 12 Sovereigns were absent, and that the laws were unanimously adopted.

Since the amendments were not presented, nor the reports printed and distributed on the first day of the session, they evidently must fall under the class of "other alterations" provided for in subdivision "d."

The provision that "no other alteration or amendments" shall be submitted or considered, except by a two-thirds vote, "unless presented in the manner hereinbefore provided," seems to be confusing and self-contradictory. The Sovereign Camp construed this language to mean that such "other" amendments might be submitted and adopted by a two-thirds vote of all its members. This seems to be a reasonable construction of an ambiguous provision by the supreme legislative body of the association, which the court will follow, the more so as there seems to have been nothing surreptitious, fraudulent or unfair in the proceedings leading up to the adoption.

It is alleged that the plaintiffs and interveners were paying the rates of assessments provided by the constitution, laws and by-laws enacted by the Sovereign Camp in 1917, which are now in force, and it is asserted that the changes in the rates and plan alleged to have been adopted in July, 1919, are void:

"(a) Because the rates of contribution therein imposed upon plaintiffs and other members are not fair, reasonable or just, in that they are higher than is reasonably necessary for defendant to pay its promised benefits and the legitimate expenses of doing business.

"(b) Because there is the rates of contribution therein imposed upon plaintiffs and other members, there is discrimination against older members and the existing members of defendant.

"(c) Because said sections and the plan of apportionment referred to there, change the fundamental plan of defendant from assessment or mutual benefit insurance to legal reserve or old line insurance.

"(d) Because the provision of said sections for the withdrawal of accumulated funds by members constitutes endowment insurance which as to defendant is ultra vires.

"(e) Because the provision contained in sections for charging liens against the certificates of members is illegal."

The evidence shows that the defendant now has outstanding certificates of the face value of more than $ 1,173,000,000, and that there is a large deficiency between the assets and the present worth of the future contributions, and the present value of promised benefits. It is undisputed that the percentage of solvency on December 30, 1919, was about 58 per cent., and that an increase of rates is necessary if the defendant shall be able to pay its promised benefits.

While, in substance, conceding that a change of rates is necessary, the plan adopted is attacked and what is said to be a better and more equitable plan is suggested by appellants.

Desiring to make the association 100 per cent. solvent, the officers of the association called to their assistance Mr. Abb. Landis, an experienced actuary, as to whom it is stipulated by the parties: "That he has been employed by many fraternal societies and life insurance companies to make the valuation of their business, and that he has made such valuations, and that he has been employed by many fraternal beneficiary societies to construct for them mortality tables and to prepare tables of rates and plans of adjustment, and that he is competent to prepare a mortality table and rates, based thereon." And it is further stipulated that the defendant furnished Mr. Landis true records of its transactions for more than 20 years covering more than 100,000 lives, from which he prepared its mortality table, and also commutation and other tables. Mr. Landis, in conjunction with Mr. Macken, the actuary for defendant, and Sovereign Commander Fraser, after much investigation and deliberation, prepared and submitted to the Sovereign Camp of the order the amendments here attacked.

Mr Landis testifies that experience has shown that a step rate of annually increased rates is not a practical plan of insurance, for the reason that as the members become old it becomes prohibitory, and it was desired to have a level rate plan and at...