Hollingsworth v. Supreme Council of the Royal Arcanum

• Decision Date: 28 May 1918
• Docket Number: 512.
• Parties: HOLLINGSWORTH v. SUPREME COUNCIL OF THE ROYAL ARCANUM.
• Court: North Carolina Supreme Court

96 S.E. 81

175 N.C. 615

HOLLINGSWORTH v. SUPREME COUNCIL OF THE ROYAL ARCANUM.

No. 512.

Supreme Court of North Carolina

May 28, 1918

Appeal from Superior Court, Catawba County; Carter, Judge.

Action by J. W. Hollingsworth against the Supreme Council of the Royal Arcanum. Judgment for defendant, and plaintiff appeals. No error.

Member of fraternal benefit society who had free access to all books and by-laws could not recover assessments paid when society raised rates, on theory that in inducing him to become member, agent fraudulently represented that rates would not be raised, since the agent might honestly have believed so or might not have intended to deceive, and plaintiff could have informed himself from by-laws, etc., whether raise could be made.

Member of fraternal benefit society who had free access to all books and by-laws, could not recover assessments paid, when society raised rates, after many years' membership, on theory that it was falsely represented to him that the rates would not be raised, since his laches barred equitable relief.

The action was brought to recover the sum of $420, with interest it being the total of plaintiff's monthly dues, as a member of the defendant order, from May 30, 1902, until December 1, 1916, which were paid by him to it during said time.

Plaintiff based his right to recover upon the ground of fraud in procuring him to become a member of the order in 1902, the fraud consisting in the false representations of the defendant's soliciting agent as to the amount of dues to be paid by him each month during the continuance of his membership; and as a second ground of recovery that, if the contract between them is valid, the defendant has committed a breach of the same by increasing the rate of monthly payment from $2.40 to $4.65. The defendant denies the allegations of fraud, and avers as to the other ground of recovery that it had the lawful right to increase its rate of payment for each month, as will appear hereafter. These two questions will be considered in their reverse order, the first question now being the one in respect to the breach of the contract. The record is large, and we will only state, and as briefly as possible, the salient facts of the case.

Under the authority conferred by the general laws of Massachusetts to organize fraternal beneficiary corporations, in 1877 there was issued to designated persons a certificate of incorporation under the name of the Supreme Council of the Royal Arcanum. By the constitution and by-laws, referred to in the certificate, the corporation became what is known as a fraternal association under the lodge system. Its principal objects, as stated, were: (1) To unite fraternally all white men of sound bodily health and good moral character, who are socially acceptable and between 21 and 55 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 intellectually; also to assist the widows and orphans of deceased members; (4) to establish a fund for the relief of sick and distressed members; (5) to establish a widows' and orphans' benefit fund, from which, on satisfactory evidence of the death of a member of the order, who has complied with all its lawful requirements a sum not exceeding $3,000 shall be paid to his family, or those dependent on him, as he may direct.

There was power conferred by the constitution and by-laws to subsequently amend the same in the manner therein provided. The general governing power of the order was vested in the Supreme Council, and the administration of its affairs, under the supervision of such council, was intrusted to the officers named in the constitution. Authority was given to the Supreme Council to sanction the organization of local lodges or councils upon whom were conferred certain powers not in any way conflicting with the constitution and by-laws of the order, and the members of such local lodges or councils were required to be members of the order and were subject to the duties and responsibilities which resulted from that relation and enjoyed also the resulting benefits.

Pursuant to the Constitution, under due authority, there was organized in the state of North Carolina, at Louisburg, a local lodgor council, known as the Tar River Council No. 1875, of the Royal Arcanum. In 1901 James W. Hollingsworth, the plaintiff, first joined the local council as one of its original members; but the next year, that is, in 1902, he made application for another benefit certificate, increasing the amount of his insurance from $1,000 to $3,000.

The material terms of plaintiff's application for a benefit certificate were, as follows:

"I direct that in case of my decease all benefit to which I may be entitled under the Royal Arcanum be paid to Lula M. Hollingsworth, related to me as wife, subject to such future disposal of the benefit as I may in the future direct, in compliance with the laws of the order; * * * that I will and they (my beneficiaries) shall conform to and abide by the constitution, laws, rules and usages of said council or order, now in force or which may hereafter be adopted by the same."

Thereupon the benefit certificate, which has been sued on in this case, was issued to the plaintiff, and is known as Exhibit A in the record. Among other things, it provides as follows:

"This certificate is issued to James William Hollingsworth, a member of Tar River Council No. 1875, of the Royal Arcanum, located at Louisburg, N. C., on evidence received from said council that he is a contributor to the widows' and orphans' benefit fund of this order * * * and upon condition that such member comply in the future with the laws, rules and regulations now 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 the Royal Arcanum hereby promises and binds itself to pay out of its widows' and orphans' benefit fund to Lula M. Hollingsworth, wife, a sum not exceeding three thousand ($3,000) dollars, in accordance with and under the provisions of the laws governing said fund, * * * provided that said member is in good standing in this order at the time of his death."

At the bottom of this certificate was written the words:

"I accept this certificate on the conditions named therein. James W. Hollingsworth."

In plaintiff's application for membership and benefit certificate, there is no statement as to the amount of monthly assessments which the plaintiff was required to pay. Both the application for membership and the benefit certificate expressly provide that the member shall comply with all the laws of the order, and particularly "with the laws, rules and regulations now governing the said council and fund (widows' and orphans' benefit fund), or that may hereafter be enacted by the Supreme Council to govern said council and fund." The assessment rates were fixed by the general laws of the order, and the way a member ascertained what amount of assessment he was to pay was not by referring to his benefit certificate, but by examining section 430 of the general laws of the order, which governed the widows' and orphans' benefit fund, and which fixed the amount of assessment rates paid by the members of the order. As shown above, these general laws were expressly made a part of the contract.

The plaintiff in 1901 first applied for and received a certificate for $1,000, and the next year, on his further application, it was increased to $3,000, and his monthly assessment was accordingly fixed at $2.40, which was the proper amount for his then attained age. The rates of assessment were fixed by the general laws, and these laws were themselves subject to be changed or modified in the manner prescribed. By subsection 3 of section 430, which was in force at the time the plaintiff became a member, the general law prescribed that the applicant should pay the amount fixed for his age "and the same amount on each assessment thereafter whilst he is a member of the order." In other words, it was assumed at the time these rates were fixed, that they would be sufficient, and that the member would pay during his entire membership the same rate that he paid at the time of joining the order. But more of this hereafter.

Article 6 of the General Laws of the Royal Arcanum contains the laws applicable wholly to this widows' and orphans' benefit fund, and section 430 (it being the section fixing the rates of assessment), which was introduced in evidence by the plaintiff, is part of these general laws governing this fund. This widows' and orphans' benefit fund is diminished from time to time by payments to the widows and orphans upon the death of members, and the only way the fund can be replenished is by assessments upon the members. The amounts paid in as assessments were not allowed to be diverted to any other purpose, and the defendant order had no other assets out of which to meet the payment of these benefit certificates, except the aforesaid fund.

It appears that the salaries of officers and other expenses of the order are paid otherwise than from the widows' and orphans' fund, that is, by a system of per capita taxes having no connection with the widows' and orphans' fund, and it further appears that, in respect to its expenses, the affairs of the order have been prudently and economically administered. In 1905 it was found that the widows' and orphans' benefit fund would not be sufficient to pay the losses for which it was created, at the then rate of assessments fixed by the order, that is, estimated at the attained age of the member at the time of his entrance into the...