Gaut v. Supreme Council A.L.H.

• Decision Date: 26 October 1901
• Parties: GAUT et ux. v. SUPREME COUNCIL A. L. H.
• Court: Tennessee Supreme Court

64 S.W. 1070

107 Tenn. 603

GAUT et ux. v. SUPREME COUNCIL A. L. H.

Supreme Court of Tennessee.

October 26, 1901

Appeal from chancery court, Knox county; Jos. W. Sneed, Chancellor.

Bill by J. W. Gaut and wife against the Supreme Council American Legion of Honor. From a decree sustaining the bill and reinstating complainants to membership, defendant appealed to the court of chancery appeals, which reversed the decree, and complainants appeal. Affirmed.

Chas Hays Brown, for appellants.

Wright & Frantz and Alfred J. Carr, for appellee.

McALISTER J.

The question presented for our decision upon the record is in respect of the right of a benefit association to reduce the amount of the insurance certificate issued to one of its members after the contract is executed. The defendant association having undertaken to enforce such a claim of right, complainant filed this bill to annul the by-law adopted by the association reducing the amount of his benefit certificate, and to have his status as a member of such association determined. The controversy grows out of the following facts, as found by the court of chancery appeals:

"The defendant is a fraternal, mutual, benevolent society, one of whose features is that of insurance to be paid by annual assessment. The society was organized under the laws of Massachusetts in the year 1878, and the purposes, as stated in its charter, are as follows: '(1) To unite fraternally all persons of sound bodily health and good moral character, who are socially acceptable, and between 18 and 65 years of age. (2) To give all moral and material aid in its power to its members and those dependent upon them. (3) To educate its members socially, morally, and intelligently. (4) To establish a benefit fund for the relief of sick and disabled members. (5) To establish a benefit fund, from which, on the satisfactory evidence of the death of a member of the order who has complied with all its lawful requirements, a sum not exceeding $5,000.00 shall be paid to the family, orphans, and dependents, as the members may direct.' The order is governed by what is known as the 'Supreme Council,' which is composed of its officers, elected biennially from its members, the representatives from grand council and districts, and past supreme commanders. The representatives from grand councils and districts are elected by these grand councils, and the grand councils are composed of representatives of subordinate councils elected by the members of the subordinate council. While the purposes of the order are set out as above shown in its charter, it is evident that the main purpose and object is that of mutual insurance, and it is with that particular feature of the order that this case deals. It further appears that complainant applied for membership in the order on March 14, 1882, and his application contained a clause as follows: 'I agree to make punctual payment of all dues and assessments for which I may become liable, and to conform in all respects to the laws, rules, and usages of the order now in force, or which may hereafter be adopted by the same.' At that time the law relative to the payment of death benefits appears to have been as follows 'Five thousand dollars shall be the highest amount paid by this order on the death of a member. This sum shall be paid on the death of every sixth degree member, and four thousand dollars on the death of every fifth degree member three thousand dollars on the death of every fourth degree member, two thousand dollars on the death of every third degree member, one thousand dollars on the death of every second degree member, and five hundred dollars on the death of every first degree member: provided, however, that, should a death occur when one assessment on each member would not amount to over five thousand dollars, then the sum paid shall be a proportionate amount of one assessment on each member in good standing in the order at the date of the death, according to the degree of the deceased member; and such amount shall be all that can be claimed by any one.' The application of the complainant was accepted, and he was elected a member of the order, and a certificate was issued as follows: 'This certificate is issued to companion James W. Gaut, a member of Pioneer Council, No. 34, A. L. H., located at Knoxville, Tennessee, upon evidence received from said council that said companion is a sixth degree contributor to the benefit fund of this order, and upon condition that the statements made by said companion in application for membership in said council and the statement certified by said companion to the medical examiner, both of which are filed in the supreme secretary's office, be made a part of this contract, and upon condition that the said companion complies in the future with the laws, rules, and regulations governing the said council and fund, or that may hereafter be enacted by the supreme council to govern said council and fund. These conditions being complied with, the Supreme Council of A. L. of H. hereby promises and binds itself to pay out of its benefits to James W. Gaut's son a sum not exceeding five thousand dollars, in accordance with and under the provisions of the laws governing said fund, upon satisfactory evidence of the death of said companion and upon the surrender of this certificate: provided, that said companion is in good standing in this order at the time of death: and provided, also, that this certificate shall not have been surrendered by said companion and another certificate issued in accordance with the laws of this order. In witness whereof, the Supreme Council of the American Legion of Honor has hereunto fixed the seal and caused this certificate to be signed by its supreme commander and attested and recorded by its supreme secretary at Boston, Massachusetts, this 15th day of April, 1882.' In November, 1894, the complainant J. W. Gaut made an application to the Supreme Council American Legion of Honor for a change of the beneficiary, and there was issued by the defendant on November 30, 1894, a benefit certificate for five thousand dollars, payable to his wife, Sarah J. Gaut. This certificate reads as follows: 'This is to certify that James W. Gaut having made application for membership to Pioneer Council, No. 34, A. L. of H., instituted and located at Knoxville, Tennessee, and passed the requisite medical examination, and been duly initiated into said council, and this certificate is issued to said companion as evidence of the facts in it contained and as a statement of the contract existing between said companion and the Supreme Council American Legion of Honor. In consideration of the full compliance with all of the by-laws of the Supreme Council, A. L. of H., now existing or hereafter adopted and the conditions herein contained, the Supreme Council A. L. of H. hereby agrees to pay Sarah J. Gaut, wife, five thousand dollars, upon satisfactory proof of the death, while in good standing upon the books of the supreme council, of the companion herein named, and a full receipt and surrender of this certificate, subject, however, to the conditions, restrictions and limitations following: (1) That all statements made by the companion in the application for membership, and all answers and questions contained in the medical examination, are in all respects true, and shall be deemed and taken to be express warrants. (2) That said companion shall have paid all assessments called within the time and in the manner required by the by-laws of the supreme council in force at the time of the issuance of this certificate, or as the same may be hereafter amended. (3) That all moneys which the supreme council may advance against this certificate by way of relief benefit to the companion named herein for sick and disability benefits under existing or hereafter enacted by-laws and regulations may be deducted at the death of the companion from the amount payable to the beneficiaries herein named. (4) That in case the companion shall die by his own hands within three years after admission to membership, whether sane or insane, the certificate shall be void, and no liabilities shall exist thereon. And if his death shall be by his own hand after three years, the recovery shall only be had for such fractional part of this certificate as the number of years the companion has been a member of the order bears to the whole number of years he would have been had he lived to be 70 years of age plus fifty per centum of the unpaid balance. If death shall occur either as the immediate or consequent cause of the excessive use of spirituous liquors, the same fractional rule shall apply. (5) That this benefit certificate is issued by the supreme council and accepted by the companion herein named for himself and beneficiary upon the express condition and agreement that in case of any false or fraudulent statement or misrepresentation or violations of any of the covenants herein contained the same shall be void. In witness whereof, the Supreme Council American Legion of Honor hereunto affixed its corporate seal and caused this certificate to be signed,' etc. The law of the order relative to death benefits at that time was as follows: 'No. 61. Three thousand dollars shall be the highest amount paid by the order on the death of a member. This sum shall be paid on the death of every member holding a certificate for three thousand dollars, and two thousand on the death of every member holding a certificate for that amount, and one thousand dollars on the death of every member holding a certificate for that amount: provided, however, that nothing herein contained shall be construed to in any wise impair the obligation of any benefit certificate heretofore issued for a larger or

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