Supreme Council, Catholic Benev. Legion v. Gallery

• Decision Date: 07 October 1921
• Docket Number: 2811.
• Parties: SUPREME COUNCIL, CATHOLIC BENEVOLENT LEGION, v. GALLERY. [1]
• Court: U.S. Court of Appeals — Seventh Circuit

278 F. 500

SUPREME COUNCIL, CATHOLIC BENEVOLENT LEGION, v. GALLERY. ^[1]

No. 2811.

United States Court of Appeals, Seventh Circuit.

October 7, 1921

Rehearing Denied November 18, 1921.

The action was upon a benefit certificate issued in 1884 to Wm J. Onahan by plaintiff in error, a fraternal benefit society chartered by the state of New York. The certificate provides for payment of $5,000 maximum to the beneficiary named upon death of the member. In 1904 the Legion found itself quite deeply in arrears for accrued benefits, and it set about to change its plan, not only to meet the deficiency, but to accumulate a reserve fund. Constitutional amendments were adopted whereby rates were radically increased, so that in Onahan's case his payments, which for 20 years theretofore had averaged a little more than $100 annually thereafter amounted to nearly $450 a year. In lieu of this increase it was provided that members desiring to continue paying their old rates might do so by agreeing to have charged against the face of the certificate the difference between the amount which the actuaries had computed the value of the insurance to have been. Had Onahan accepted this option, he would have continued paying the old rate, but would have reduced the face of his certificate between one-half and one-third. A few members chose this plan, but Onahan, with most of the others paid the increased rate. These were given the privilege of paying part of it in cash, the rest to remain a charge against the certificate; the member to pay 4 per cent. annual interest on amounts so charged. In 1908 the charging privilege was withdrawn, and thereafter the full amount was paid in cash. The total amount thus charged against Onahan's certificate was $814, on which he paid 4 per cent. interest annually until his death. Among the amendments adopted to the constitution in 1904 was

'Section 5. A reserve shall be accumulated and maintained upon the following basis, viz.: For each certificate in force on September 1, 1904, the net select and ultimate reserve thereon by the Catholic Benevolent Legion's experience table and interest at 4 per cent. per annum. Such reserves shall be sufficient by the aforesaid standards, together with the ultimate net premiums, fixed by the ages on September 1, 1904, for members on that date, if under age 70, and by age 70, if aged 70 or over, and fixed by ages last birthday upon admission for members admitted after September 1, 1904, to keep these rates level throughout life, and to assure the payment of all benefits. Each member must maintain to his credit a net balance at least equal to the reserve upon his certificate; any deficiency shall be a lien upon a member's insurance, accumulating at 4 per cent. interest, compounded annually, until the same is made good.'

Although the largely increased payments served to discharge the deficit existing in 1904 and to raise a very considerable benefit fund, it was not deemed that the reserve was sufficient according to the law of New York, and in 1917 it was for the first time undertaken to charge certificates with the estimated amount of the deficiency between the amount paid in and the value of the insurance to that time. This was done by resolution of the trustees, under supposed authority of section 5 of the amended constitution, and under direction of the state insurance department; and, assuming that section 5 was applicable only to certificates issued prior to 1904, the charge was made only against certificates issued prior to that year, and no charge whatever was made against the others. Onahan received notice from the Legion that pursuant to this action his certificate was charged with $2,877. His payments remained the same. He replied, protesting against this charge, and stating that payment of further assessments is not to be regarded as acquiescence therein. He continued paying the full rates and interest on the charged part of previous assessments, until his death, which occurred the following year.

The affidavit of merits filed with the plea of defendant stated that it had a defense to the entire action, but admitted there was due the plaintiff $1,079.91. On motion of the plaintiff the affidavit was stricken from the files, with leave to file a new affidavit, and judgment was given for the plaintiff in the action for $1,079.91 and interest, and at the same time leave was granted defendant to file instanter its affidavit of defense to the entire action, excepting $1,079.91 thereof, which was done. This judgment was satisfied, and thereafter by written stipulation jury was waived, the cause tried before the court, and judgment was rendered against the Legion for...