Supreme Lodge Knights of Honor v. Bieler

• Decision Date: 20 May 1914
• Docket Number: No. 8259.,8259.
• Parties: SUPREME LODGE KNIGHTS OF HONOR v. BIELER.
• Court: Indiana Appellate Court

58 Ind.App. 550

105 N.E. 244

SUPREME LODGE KNIGHTS OF HONOR

v.BIELER.

No. 8259.

Appellate Court of Indiana, Division No. 2.

May 20, 1914.

Appeal from Circuit Court, Marion County; Charles Remster, Judge.

Action by Jacob L. Bieler, as executor, against the Supreme Lodge Knights of Honor. Judgment for the plaintiff, and defendant appeals. Reversed, with directions.Frederick H. Bacon, of St. Louis, Mo., John W. Hanan, of La Grange, Louis B. Ewbank, of Indianapolis, and J. Frank Hanan, of La Grange, for appellant. Guilford A. Deitch and Frank G. West, both of Indianapolis, for appellee.

IBACH, J.

On October 10, 1881, appellant, a fraternal beneficiary association, issued a benefit certificate for $2,000 to one of its members, Louis Thieme, payable “to persons named in will.” Appellee, as executor of the last will and testament of said member, brought this action to recover the amount specified in such certificate. The sufficiency of the sixth paragraph of complaint to withstand demurrer presents the only question for our consideration, and this paragraph contains, in addition to the foregoing, substantially the following averments: Louis Thieme died April 9, 1910, and his will was duly probated. By its terms the benefit certificate was bequeathed to Jacob L. Bieler, who was also named as executor, and who qualified as such. Defendant's by-laws limited the payment of benefits to the immediate family and blood relatives of the member, or persons dependent on him at the time of his death, and further provided, if any designation of beneficiaries should fail for illegality or otherwise, the payment should be made to insured's widow and children, each sharing equally; if no widow, to his children; if neither, then to his heirs. Plaintiff does not come within any of the classes specified. Decedent separated from his widow, whose whereabouts, if alive, are unknown to plaintiff, and left no children and no heirs in this country, but did leave heirs in Germany, the names of whom are unknown to plaintiff. Plaintiff sues as executor for the benefit of whomsoever of the heirs of decedent the Marion probate court shall decree is entitled to the proceeds of said insurance. Due notice of death was given to defendant and payment refused on the ground that deceased was not in good standing when he died; he having been suspended for nonpayment of the April, 1908, assessment. Defendant should be estopped to claim a forfeiture for nonpayment of said assessment for the reasons that said Thieme was 54 years old when the certificate in suit was issued, and at that time the by-laws of the society provided “each and every member upon presenting himself to receive the Third or Degree of Manhood shall pay to the financial reporter the following rates into the widows' and orphans' benefit fund, and the same amount on each assessment thereafter, while he is a member of this order, viz., between the ages of 53 and 54, $3.50.” Under and by the terms of said section, Louis Thieme, at the time he became a member of defendant order, was liable to pay, and upon obtaining membership did pay, $3.50 upon each assessment made against him. The by-laws of appellant were amended at various times, and under said amendments Louis Thieme paid $6 on each assessment from 1897 to August, 1899, $8 on each assessment from August, 1899, to September 30, 1905. The by-laws were amended in 1905 so as to require members then over 70 years of age to pay $15 on each assessment. Thieme paid such increased assessment until February, 1908. Again in March, 1907, the by-laws of the order were amended, and each member over 80 years of age was thereby required to pay $39.30 on each assessment. Thieme was over 80 years of age, and after the June, 1907, amendment, up to and including February 6, 1908, defendant continued to assess and collect from him $15 for each assessment. In March, 1908, defendant's financial reporter demanded of deceased the said sum of $39.50 for the March assessment and notified him that, if such assessment was not paid during the month of March, his insurance would be forfeited. This amount was paid by him under protest. Again in April, 1908, a demand for the same amount was made with the same declaration of forfeiture if it was not paid during that month. This sum he refused to pay, and offered to pay $15, which sum the financial reporter refused to accept, and the certificate sued on was marked by defendant as canceled and forfeited, and the name of Thieme was struck from its list of members. Plaintiff and Thieme performed all the conditions of the contract. A copy of the certificate is made a part of the complaint, and in it is a provision for the payment of the stipulated amount of insurance “upon condition that said member complies with the laws, rules, and regulations now governing this order or that may hereafter be enacted for its governments.” The trial court overruled appellant's demurrer to this paragraph of complaint, and, electing to stand upon its demurrerand refusing to plead further, judgment was rendered against it for $2,011.36.

[1] Counsel for appellant contends that for several reasons this complaint is insufficient. The first of these is that it affirmatively appears therefrom that the insured had failed to pay the assessment made in April, 1907, and there is no averment tending in any way to show that the assessment provided for by the amended by-law and the amount demanded after such amendment was unauthorized or unreasonable, or that the society did not have the right to demand the payment of such assessment, except that portion of the pleading consisting of a copy of appellant's by-laws in force when the insured became a member, which fixed the amount of assessment of members of the same age at $3.50 for each assessment, and because he failed to pay the April, 1908, assessment, which was for a larger sum, appellee's decedent was not a member of the order in good standing at the time of his death, and therefore no cause of action existed in favor of any one on his certificate.

It is the evident theory of the pleader that, when Thieme became a member of appellant society, his rate of assessment was fixed by its by-laws, and that amount could not thereafter be increased, so as to affect him by any change in the by-laws. Broadly stated, the contention is that, having once fixed the rate of assessments required to be paid by him to remain in good standing in the order, no power existed in it to modify or change its by-laws so as to affect the vested rights of its pre-existing members without their consent. Such is generally held to be the correct rule in the absence of a provision either in the laws of the order or in the certificate issued to the member, permitting the increase of assessments. The question in this case is: What should be the rule when there is an express provision in the certificate of insurance by which the member agreed to abide by laws, rules, and regulations of the order after enacted.

This particular question has never been determined by the courts of this state, and an examination of the cases in other jurisdictions reveals the fact that they are not in harmony, but follow two lines of decisions, one holding that under a general reservation of the right to change by-laws, assessments may be raised, the other denying that power, as an infringement of the obligation of contracts. We believe, however, that the cases which support the right under such provisions to raise assessments are founded on the best reasoning and supported by the weight of authority.

Indeed, there are some cases which go so far as to hold that, when the purposes of an organization such as appellant are considered, the right to amend its by-laws by fair and reasonable increase of assessment rates to enable it to accumulate funds out of which its legitimate contracts may be paid is but one of the powers incident to its corporate existence. Else, it is reasoned, how can the life of such societies be preserved when it becomes evident that, by reason of the changing conditions of its membership, previous methods of raising funds, and at that time sufficient, have proved inadequate? Before there can be a fund out of which the death claims can be paid, there must be such a rate of assessment against the members as will produce such fund. A less amount can only result in a dissolution of the society and serious damage to all its members. So that in instances where the funds are insufficient under present rates of assessment to meet the death claims against it, although considered sufficient when made, there is an inherent power resting in such fraternal benefit societies to so amend their by-laws as to increase the rate of assessment for the purpose of maturing its contracts, so long as such rate of increase is reasonable and proportional, the young and old members contributing according to the risk assumed in carrying each, without arbitrary discrimination, and does not affect any vested rights possessed by any of such members. Whether this reasoning is strictly correct we need not decide, for here we have an objecting member, who on his own account has agreed not only to conform to the present laws of the order, but also to such future laws as may be from time to time enacted by the official body governing the same, and as to such contracts the better reasoned cases hold that assessments may be raised by such societies under such reserved power to amend by-laws. Fullenwider v. Supreme Council Royal League, 180 Ill. 621, 54 N. E. 485, 72 Am. St. Rep. 239;Messer v. Grand Lodge, A. O. U. W., 180 Mass. 321, 62 N. E. 252;Reynolds v. Supreme Council Royal Arcanum, 192 Mass. 150, 78 N. E. 129, 7 L. R. A. (N. S.) 1154, 7 Ann. Cas. 776;Ebert v. Mutual Reserve Fund Life Ass'n, 81 Minn. 116, 83 N. W. 506, 834, 84 N. W. 457;Wineland v. Knights of the Maccabees, 148 Mich. 608, 112 N. W. 696.

These cases and many others which might be...