Stamm v. Northwestern Mut. Ben. Ass'n
| Decision Date | 14 April 1887 |
| Citation | 65 Mich. 317,32 N.W. 710 |
| Parties | STAMM and others v. NORTHWESTERN MUT. BEN. ASS'N. |
| Court | Michigan Supreme Court |
Appeal from circuit court, Wayne county. In chancery.
F.A. Baker, for complainants.
Israel T. Cowles, (Isaac Marston, of counsel,) for defendants and appellants.
The bill of complaint states that the Northwestern Mutual Benefit Association is a corporation organized in April, 1879, under an act entitled "An act to provide for the incorporation of co-operative and mutual benefit associations," approved April 3, 1869; that complainants are members of said association, and each of them holds a certificate of membership in the second division, otherwise known as the "endowment division;" that all of their certificates were issued prior to the eighth day of June, 1883; that from assessments paid by them, and the other members of said endowment division, the association had collected, and on the eighth of June, 1883, had on hand to-wit, $60,000 and upwards, in money and securities, which sum constituted the "endowment fund" of the association, out of which complainants and other members of the second division were entitled to receive their respective endowments at the maturity thereof; that act No. 192 of the public acts of 1883 took effect June 8, 1883, and soon thereafter the said association applied to the commissioner of insurance for license thereunder, which he refused to grant, upon the ground that the endowment certificates issued by said association were not authorized by the act under which it was incorporated, and the amendments thereto; that after the refusal of the commissioner of insurance to issue a license, the officers, trustees, or managers of the association organized a new one by the same name, but leaving out the endowment features, and obtained for said new association from the commissioner a license to do business under the act of 1883; that upon the organization of the new association, to-wit, on the fifteenth day of February, 1884 James M. Barbour, the secretary of said association, by authority of the board of trustees thereof, issued and sent to complainants, and the other members of the endowment division, a printed circular, setting forth the failure to obtain license, and the cause thereof, and that the new association had been duly licensed; that there had been for some time a number of dissatisfied members in the old association, who had appointed a committee, who had met with the trustees of the association to arrange, if possible, the differences between them; that an arrangement was made by which the trustees agreed to pay for reinsurance in the new association whatever might be found to have been paid by each member beyond the actual cost of his insurance, or, in case he preferred to withdraw from both associations, to pay him in cash one-half that amount; that the complainants were not satisfied with the propositions, and they each refused to accept either of the offers therein made. They charge that it is the intention of the trustees and officers of the association to turn over and appropriate to themselves, or to the new association organized by them, the said endowment fund of $60,000; that they are informed and believe, and charge the fact to be, that it is the intention of said trustees and officers to retain, as the supposed actual cost of insurance, a large portion of said fund of $60,000, and to convert the same to their own use, or to the use of the new association so organized by them; that said association has no legal right, or color of right, to transact business, since it was refused a license; but that the trustees and officers thereof have not wound up its affairs, or instituted any proceedings for that purpose, nor have they rendered any account to the members of the disposition made by them of the funds of the association, or of the official management of its affairs. They assert that said endowment fund is the property of the members of said endowment division, the same having been voluntarily paid in by them in the belief that it was competent for said association to issue said endowment certificates.
The bill is filed for and in behalf of themselves, and all other members of said endowment division, and prays (1) that the affairs of the association may be wound up; (2) that said endowment fund may be apportioned and distributed among the members of said endowment division according to their respective rights and interests therein; (3) that said association, and the officers and agents in charge thereof, may be decreed and required to pay to complainants, and to each of them, the amount due them, respectively, from the funds of the association; (4) that a receiver may be appointed to take possession of the endowment fund, and all other assets of the association; (5) for general relief.
The defendants answered, denying that complainants are members of the Northwestern Mutual Benefit Association, or that they have any interest whatever therein, and allege that all of complainants except Allois Meyer have failed to pay assessments made against them by the association to pay death losses, and that their certificates of membership have become forfeited and lapsed, and that Allois Meyer has surrendered his certificate to the association. The deaths, assessments, notices thereof to complainants, and their neglect to pay, by which, under the policies and by-laws of the association, they ceased to be members, are fully set out in the answer. They admit that, from payments made by members of the association, and for the purpose of meeting the contracts of the association, a fund amounting to about $60,000 has been accumulated; and allege that it has been accumulated for the purpose of meeting outstanding contracts of insurance with the members of the association; that the contracts outstanding are still unmatured, and the funds of such association, together with such assessments as may be necessary, are required to meet such contracts as they mature, and death losses as they occur. They admit that the commissioner of insurance declined to grant said association a license upon the ground that the endowment certificates issued by said association are not within the scope of the law under which said association was organized, but deny that his decision was correct, and allege that all contracts made by the association are valid and binding upon it. They deny that the trustees of the association have any right to divert the funds paid in by members for the purpose of meeting its obligations from the purpose for which they were paid, or to distribute them among persons who are no longer members of said association. They aver that they have outstanding certificates of insurance held by members in several states and territories named, and in the District of Columbia; that there are 968 endowment certificates in force, which mature in from 10 to 20 years, and to meet which not only the fund on hand, but a much larger fund, will be needed. They admit the formation of a new association, leaving out the endowment feature, but deny that the same was organized by the officers, trustees, or managers of the old association, and allege that it was organized by a number of individuals acting for themselves, without reference to the old association, and that the same is in no way connected therewith. They admit the sending of the circular mentioned in the bill of complaint, and that the same was authorized by the board of trustees; and they set out the circumstances under which the same was prepared and sent to the members; that it was not the intention to force any member to settle his contract with the association, but simply to give him an alternative, if he desired to withdraw from the association, to do so, and provided for paying him as large a sum as could be done consistently with the reserve required to meet the outstanding obligations; that the trustees were able to make an arrangement with the new association by which the old members could, if they so desired, reinsure and secure substantially the same advantages for one-half the money as other persons insuring in said association, and hence made the alternative proposition mentioned in said circular. They deny that it is the purpose and intention of the trustees and officers of said association to turn over or appropriate to themselves, or to the new association organized as aforesaid, any portion of the endowment fund, or of any other fund belonging to said old association; and, on the contrary, allege that they regard said fund as a trust, and only consider themselves authorized to pay the same in discharging the obligations for which the same had been collected; and allege that no part of said funds had been in any way diverted from the purposes for which the same had been collected.
In 1869 the legislature enacted a law authorizing the incorporation of cooperative and mutual benefit associations, by section 1 of which it was provided that any number of persons not less than five might become a body corporate, for the purpose of securing to the families or heirs of any member, upon his death, a certain sum of money to be paid by such corporation either out of its fund, or by an assessment upon the members of such corporation, or upon the members of the class in such corporation to which such deceased member belonged, or for the purpose of securing, in the same manner, a certain sum of money, weekly or monthly, to any member disabled from attending to his ordinary duties by sickness or other disability. The persons incorporating were required to execute, under their hands and seals, and duly acknowledge, articles of agreement, which should contain, among other things, the name of the corporation,...
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