Hall v. Supreme Lodge, Knights of Honor

• Decision Date: 09 July 1885
• Citation: 24 F. 450
• Parties: HALL and others v. SUPREME LODGE KNIGHTS OF HONOR.
• Court: U.S. District Court — Eastern District of Arkansas

24 F. 450

HALL and others v. SUPREME LODGE KNIGHTS OF HONOR.

United States District Court, E.D. Arkansas.

July 9, 1885

At Law. Plaintiffs sue as the heirs of Joseph Hall, who was, in 1880 a member of Harrisburg lodge, No. 1,714, of the Knights of Honor, and claim the sum of $2,000 as a benefit. The case was tried before the court, which found these facts: (1) That in July, 1879, Joseph Hall was duly admitted as a member of Harrisburg lodge, No. 1,714, Knights of Honor. (2) That said Hall died on the second day of July, 1880, and before his death directed his benefit certificate to be made payable to the plaintiffs, who are his heirs at law. (3) That assessment No. 65, called January 1, 1880, was paid by the lodge to the supreme treasurer in apt time, and that Hall paid his share of said assessment to his lodge in apt time. (4) That assessment No. 66, called January 31, 1880, was forwarded by Harrisburg lodge to the supreme treasurer in apt time, and was received by said treasurer, who returned the same saying, contrary to the fact, that the lodge was in arrears for assessment No. 65. Hereupon the lodge again forwarded assessment No. 66, with proof of payment of No. 65. The supreme treasurer again returned assessment No. 66 reiterating the erroneous statement that No. 65 had not been paid; and on March 15, 1880, the supreme reporter, without previous citation or notice, suspended Harrisburg lodge for non-payment of assessment No. 65. Hall paid to his lodge assessment No. 66 in apt time. (5) Assessments were called in by the proper officer of the supreme lodge subsequent to No 66, and before Hall's death, as follows: March 1st, No. 67; April 1st, No. 68; May 3d, No. 69; and June 12th, No. 70; but no notice of these assessments was sent to Harrisburg lodge, and neither that lodge nor Hall had any notice of said assessments or calls prior to Hall's death. (6) There was some correspondence between the officers of Harrisburg lodge and the officers of the Supreme lodge in relation to assessment No. 65, and the controversy was continued up to the time of Hall's death. Subsequent to Hall's death, Harrisburg lodge, by surrender or abandonment of its charter, ceased to exist. It was agreed that the plan upon which the benefit feature of the order is conducted is as follows:

'A fund called the 'Widows' and Orphans' Benefit Fund' is raised by contributions paid in by the members in response to assessments made upon them, and this fund is scrupulously and exclusively devoted to the payment of death benefits to the person directed and named by the deceased member as his beneficiary. All the current expenses of conducting this and all other departments of the order are paid out of another fund called the 'General Fund.' Upon due notice by any subordinate lodge, with proof of death of a member in good standing, the Supreme lodge draws an order on the W. & O. B. fund for the payment of the benefit of $2,000 to the beneficiary. So long as the amount of money in that fund, not subject to and covered by such orders, exceeds the sum of $2,000, no further assessments are made upon the members. When that amount falls below that sum, an assessment is made upon all the members, each member being called upon to pay the same sum as previously stipulated; and the aggregate of these contributions, when collected, is again devoted to the payment of death benefits as before. The W. & O. B. fund is realized alone by the means here stated. Each member pays one assessment when he becomes a third degree member, but this assessment remains in the subordinate lodge treasury until the time arrives when the amount in the supreme treasury to the credit of the W. & O. B. fund, not covered by orders drawn to pay on deaths according before the time such member took the third degree, falls below $2,000, and a new assessment is called, and thus the first assessment thus paid in by such new member receives its proper consecutive number, and is forwarded to the supreme treasurer with other contributions on the same assessment, and thus goes into the W. & O. B. fund; and the new member is called to pay his second assessment when the exigencies of the W. & O. B. fund require a new general assessment under the plan above stated.'

1. Hall was not, at his death, a member of the order in good standing. 'Good standing,' in the sense of the laws of the order, has a definite and well-understood meaning. To be in good standing, the member must have paid every assessment to date within 30 days after it was called for, all regular dues for the particular period, and all fines that may have been imposed. Good standing is lost by the failure of the member to pay assessments. McMurry v. Supreme Lodge, 18 Cent.Law J. 372; S.C. 20 F. 107; Madeira v. Mutual Ben. Soc, 16 F. 749; Benevolent Soc. v. Baldwin, 86 Ill. 479. It is lost by a suspension in regular form not appealed from. Karcher v. Supreme Lodge, 19 Cent.Law J. 152; S.C. 137 Mass. 368.

2. Hall was not, at his death, a contributing member to the W. & O. B. fund. It is a fundamental feature of the beneficiary department of this order that the duty of contributing to the benefit fund, and the right of sharing therein, are reciprocal. The plan on which this department operates is fully set out in evidence in the stipulation of counsel. It will be seen that the only fund provided for the payment of death benefits is raised by contributions, and that the insurance is in force as to each member during only the time his contributions are in hand. When the contributions made in response to any one assessment are exhausted, the insurance thereby effected has expired. With a new set of contributions a new insurance is effected, to exist until these contributions are in turn exhausted. This is 'current' or 'term' life insurance, in the strictest sense. It is the cheapest possible insurance, viz., insurance at actual cost. In this and some other respects, the order differs from an ordinary life insurance company. It has no capital stock, no reserve funds, no corporate property. It has no funds of any sort out of which to pay death benefits except the contributions of the members, which it is commanded to and does distribute specifically. So, also, the contract is substantially different from the common form of life insurance contract. The order did not make a positive and unconditional contract with the member to pay in any event. It did not receive any adequate consideration for such a contract. If such a contract had been made, it would have been ultra vires. Nor did the order make any contract positive in form, but on conditions for its benefit, which it had the power to waive. No doctrine of waiver of hard conditions can be here applied to. Nor did the order receive any consideration for a contract which should allow the member any 'surrender value,' or any other interest of any kind beyond the day when his contributions should be exhausted. The character of contract actually made is shown by the constitutions and laws of the order, the general plan of operations of the W. & O. B. fund, and form of benefit certificate in use. It was a contract to receive Joseph Hall's contributions, and to insure, as long as such contributions remain unexhausted by distribution, the beneficiaries of Hall and each of his fellow-members who should die during such limited period.

The money collected on each assessment by the subordinate lodges is to be forwarded by them to the Supreme lodge. There it is subject to drafts or orders for the payment of benefits on deaths due notice of which has been received.

No member can be called on to contribute to pay for deaths occurring prior to the date when he himself became a beneficial member. No new assessment can be ordered forward while there remains in the W. & O. B. fund a sum sufficient to pay the next death benefit. When that sum proves insufficient, the lodges are to forward the assessment then held by them, and call in a new one. That small balance remaining on hand is of course exhausted by the payment of the first death benefit after the call for the new assessment. Thus a limit is fixed, at the beginning as well as at the ending of the distribution of every particular assessment, by which the officers can ascertain the persons who are to share in such distribution. There is no place or opportunity allowed for sharing in any distribution by the beneficiary of any member who was not a contributor to the fund at the time of his death. Contributions and distribution are reciprocal.

The legality or fairness of this contract cannot be questioned. It was a contract for insurance at absolute and exact cost. This could be obtained in no other way. In some old-style life insurance companies, broader rights and privileges might be secured, but at greater cost. To obtain a term life insurance at its exact cost, nothing else than term life insurance, in exact form, can be expected. Hall took this cheapest of all forms of life insurance, and he might have preserved it by continuing to pay for it, but not otherwise. 'Payment of the assessments by the members is essential to the successful operation of the Widows' and Orphans' Benefit fund of the order, as the plan of the same is exhibited in the constitution and laws of the order ' McMurry v. Supreme Lodge, 18 Cent.Law J. 372; S.C. 20 F. 107. 'The obligatory part of...