McClement v. Supreme Court, I.O.F.

• Decision Date: 12 February 1918
• Citation: 222 N.Y. 470,119 N.E. 99
• Parties: McCLEMENT v. SUPREME COURT, I. O. F.
• Court: New York Court of Appeals Court of Appeals

222 N.Y. 470

119 N.E. 99

McCLEMENT

v.SUPREME COURT, I. O. F.

Court of Appeals of New York.

Feb. 12, 1918.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Henry C. McClement against the Supreme Court of the Independent Order of Foresters to set aside an extraordinary assessment charged by defendant on plaintiff's certificate of insurance and to remove the lien thereof from such certificate. From a judgment of the Appellate Division (169 App. Div. 77,154 N. Y. Supp. 700), reversing a judgment of the Jefferson County Trial Term for plaintiff (88 Misc. Rep. 475,152 N. Y. Supp. 136), and dismissing the complaint, plaintiff appeals. Affirmed.

See, also, 171 App. Div. 890,155 N. Y. Supp. 1121.

John Conboy, of Watertown, for appellant.

Elliott G. Stevenson, of Detroit, Mich., for respondent.

CHASE, J.

The only question involved on this appeal is the power of the defendant to charge an extraordinary assessment of $520 against the certificate of insurance held by the plaintiff as a member of the society. The defendant is a fraternal benefit society. A declaration of incorporation of the society or order was filed in the office of the provincial register of the province of Ontario on the 23d day of July, 1881, pursuant to Revised Statutes of Ontario 1877, c. 187. It was reincorporated by an act of the Parliament of the Dominion of Canada entitled ‘An act to incorporate the Supreme Court of the Independent Order of Foresters,’ assented to May 2, 1889, and known as 52 Victoria, c. 104. It expressly therein provided:

‘Nothing herein contained shall be held to exempt the society from the effect of any legislation hereafter passed by the Parliament of Canada in respect to any insurance powers exercised by friendly societies.’

The society has since 1881 maintained its principal office in the city of Toronto. Further acts amending the act of incorporation were passed by said Dominion Parliament in 1896 and 1901. In the act of 1896 it was expressly provided:

‘The society shall be bound forthwith and from time to time to make assessments to an amount adequate with its other available funds to pay all obligations created under every such certificate or policy heretofore issued or hereafter to be issued without deduction or abatement.’

And:

‘Nothing herein contained shall be held to exempt the society from the effect of any legislation hereafter passed by the Parliament of Canada in respect to assessment or other insurance.’

The supreme governing body of the society is a supreme court or lodge, constituted of representatives from other courts or lodges formed and governed pursuant to the terms of its charter and the constitution and by-laws adopted by the society. In 1892 the society applied for and obtained permission to do business in the state of New York, which permission still continues. On December 29, 1892, a subordinate court was organized in the city of Watertown, known as ‘Court Watertown.’ On that day the plaintiff, then nearing his thirty-sixth birthday, made application for membership therein, and on January 7, 1893, the defendant issued to him a certificate of insurance of $2,000. The contract between the parties consists of the application for membership and insurance, the certificate of insurance, and the constitution and by-laws of the society. All, however, are subject and subordinate to the defendant's charter powers.

The monthly rate of assessment on the plaintiff's certificate as then provided by the defendant's by-laws was $1.60 per month, or 80 cents per month per $1,000 of insurance. The certificate provided that upon the plaintiff's reaching his seventieth birthday the defendant would pay him an annuity benefit of $200 and the same amount on each subsequent birthday until the full sum of $2,000 was paid less any sum paid on account of total and permanent disability benefit. It also provided for payment upon total and permanent disability and for payment to a beneficiary named, in case of death. The by-laws among other things provided (section 237) that the plaintiff ‘shall pay the same rate of assessment thereafter as long as he remains continuously in good standing in the order and in the same class.’ There was also a special agreement indorsed on the back of the certificate which was signed by the plaintiff as follows:

‘I agree that the constitution and laws enacted by the Supreme Court, Independent Order of Foresters, as well as any and all amendments thereto which may be adopted from time to time by the said Supreme Court shall be part of this contract.’

The application for insurance was signed by the plaintiff in the state of New York and the policy was delivered to him in this state. In the year 1908 the defendant caused a valuation to be made of its assets and a statement of its liabilities, and it was found that the value of the existing certificates of insurance exceeded the accumulated mortuary fund on hand together with the then present value of future monthly assessments based upon a valuation according to the standard mortuary tables, in the sum of $55,000,000. After this valuation and statement the defendant amended its by-laws and increased its assessments of members. By the increase of assessments made at that time the plaintiff was required to pay a monthly assessment of $1.72 on each $1,000 of insurance, instead of 80 cents on each $1,000 of insurance as theretofore. The plaintiff has paid this increased monthly assessment, and no question is presented on this appeal relating thereto.

In 1912 the defendant caused a further valuation of its assets and statement of its liabilities to be made. The report thereof showed a deficiency of assets, affecting the members who had joined the society prior to 1899, amounting to $25,555,448. In 1913 the Parliament of the Dominion of Canada enacted a statute, entitled ‘An act to consolidate and amend the acts relating to the Supreme Court of the Independent Order of Foresters and to change its name to ‘The Independent Order of Foresters,” which took effect May 16, 1913. Chapter 113, Acts of 1913. The act recites the several acts relating to the order hereinbefore referred to and that the society--

‘has by its petition prayed that the said acts be consolidated and amended to * * * empower the said society to provide for any deficiency in the accumulated funds and to create a fraternal fund and department for the relief of its members and dependents.’

Among the other provisions of the act is one as follows:

‘4. The society shall ascertain as at the first day of October, 1913, the valuation deficiency in respect of all outstanding mortuary benefit certificates or policies of the members who entered the society under the constitution and laws from time to time in force prior to the first day of January, 1899, and shall apportion such valuation deficiency among the said members in proportion to the amount of the member's mortuary benefit certificates or policies: Provided that the share of the valuation deficiency so apportioned to any member shall not exceed the reserve proper to such member's mortuary benefit certificate or policy according to the Foresters' experience and four per cent. annual interest.

‘If the Supreme Court of the society at the session to be held pursuant to the provisions of section 12 of this act, by resolution so decides, the society may charge against each such mortuary benefit certificate or policy as an assessment, a sum not exceeding its proportion of the valuation deficiency aforesaid. Such assessment shall thereupon be payable to the society by the member on the first day of October, 1913, or if not so paid shall be a lien or debt against such member's mortuary benefit certificate or policy bearing interest until paid at the rate of four per cent. per annum compounded annually and together with the interest shall be deducted by the society out of the moneys or first moneys payable by the society under said mortuary benefit certificate or policy; provided that such interest may at the option of the member be payable in equal monthly installments with the monthly premium or assessments of such member.’

Provision was also made for other optional methods of paying such assessments.

The Supreme Court of the society met in regular session, as provided by the act of 1913, and accepted the act by more than a two-thirds vote, and pursuant to its terms the act came into force on the day on which such acceptancetook place, and notice and proof thereof was filed with the superintendent of insurance of the Dominion of Canada. Acting under the authority of the act of the said Dominion Parliament, the Supreme Court of the defendant at its convention commencing August 26, 1913, by resolution charged the deficiency aforesaid upon the members who had joined the society prior to 1899 and apportioned the same among said members according to the amount of their respective certificates. The amount so charged to the plaintiff was $520, and that amount was declared a lien and charge on his certificate, together with interest at the rate of 4 per cent. per annum from October 1, 1913, to be compounded semiannually. The plaintiff was given the option of paying the same in cash or in monthly assessments as by the act provided. The plaintiff refused to consent to said extraordinary assessment and this action was brought to set aside the lien and charge of said assessment upon his certificate of insurance.

[1][2] Rights that have become fully vested cannot be taken away by amendment to a corporate charter or to the constitution and by-laws of the corporation. Such rights are preserved by Constitution. Vested rights are not taken away, however, by increasing the amount of the assessments agreed upon by a fraternal benefit society at the time...