Holt v. Supreme Lodge Knights of Pythias

• Decision Date: 18 July 1916
• Docket Number: 2126.
• Citation: 235 F. 885
• Parties: HOLT et al. v. SUPREME LODGE KNIGHTS OF PYTHIAS.
• Court: U.S. Court of Appeals — Seventh Circuit

235 F. 885

HOLT et al. v. SUPREME LODGE KNIGHTS OF PYTHIAS.

No. 2126.

United States Court of Appeals, Seventh Circuit.

July 18, 1916

Henry L. Lazarus, of New Orleans, La., for appellants.

Sol. H Esarey, of Indianapolis, Ind., for appellee.

The suit is an omnibus bill in equity on behalf of 20 named plaintiffs on behalf of themselves and all others similarly situated (155 in number), for an accounting of trust funds held for the insurance department to which plaintiffs belong and for a receiver, on the ground that the department (known as the fourth class) is insolvent; also, for a ratable distribution of such trust funds among the fourth class members.

The question is whether a fraternal beneficiary society has power to change a contract with an insured member that the rates shall not be changed, by doubling his monthly payments, and on his refusal to pay exclude him from all benefits.

Plaintiffs are citizens of Louisiana, and defendant was first organized under a general law of Congress entitled 'An act to provide for the creating of corporations in the District of Columbia by general law. ' Its charter expired in 1890. Continuing as a de facto corporation or voluntary association for a time it was reincorporated by the act of Congress of June 29, 1894. At that time it had organized the insurance department here in question, and had done business all over the country, so there can be no serious question of its power to act outside the District of Columbia, and where it was authorized to act by its charter of 1894. A later act of June 7, 1900 (c. 861, 31 Stat. 708) ratified meetings of its governing body held outside the District.

This suit was begun January 25, 1911, the jurisdiction depending on the fact that one of the parties is a federal corporation. In its facts the case is substantially the same as Knights of Pythias v. Mims, 241 U.S. 574, 36 Sup.Ct 702, 60 L.Ed. 1179, decided by the Supreme Court June 12, 1916; the only difference being in the form of the suit.

Plaintiffs' right to equitable relief depends entirely on the question whether the constitution of the Supreme Lodge, and its by-laws, in force when they respectively became members, constitute a contract which could not be changed by the defendant without plaintiffs' consent. It seems to be contended by the solicitors for plaintiffs that if defendant's constitution gave it no right to change the contracts, or impair the vested rights under them, such contracts may be regarded as still in force, and defendant compelled to perform them. But the bill itself goes only upon the theory that defendant has diverted trust funds in which plaintiffs are interested, and the only relief prayed for is the appointment of a receiver of such trust funds, with power to have an accounting thereof from defendant, in order that plaintiffs may receive their ratable shares. There is nothing in the bill seeking specific performance of the insurance certificates, or for a recovery of damages for the breach of plaintiffs' contracts; simply the enforcement of a trust relating to the funds on hand when the breach occurred, through payment to plaintiffs of their ratable shares in such trust funds. The case therefore turns on the question whether such a society has power, either under its constitution or otherwise, to change an impracticable or illusory insurance plan without accounting to dissenting members for trust funds belonging to them as such; even though such change may be necessary to the very life and preservation of the society.

The insurance afforded by the order is extended only to those who are members, the far greater proportion of the...