The Presbyterian Mutual Assurance Fund v. Allen

• Decision Date: 05 June 1886
• Docket Number: 12,484
• Citation: 7 N.E. 317,106 Ind. 593
• Parties: The Presbyterian Mutual Assurance Fund v. Allen
• Court: Indiana Supreme Court

7 N.E. 317

106 Ind. 593

The Presbyterian Mutual Assurance Fund v. Allen

No. 12,484

Supreme Court of Indiana

June 5, 1886

From the Floyd Circuit Court.

Judgment reversed, with instructions to grant appellant a new trial.

A Dowling, for appellant.

J. H Stotsenburg, D. W. Lafollette and W. W. Tuley, for appellee.

OPINION

Elliott, J.

The appellant is a mutual benefit association incorporated by the Legislature of Kentucky. Its object, as the charter declares is "to create and provide a beneficiary fund for the families or relations of deceased members, or for the benefit of members in sickness." The appellee's complaint is based upon a certificate of membership procured from the corporation by William G. Allen in his lifetime.

The certificate, although issued by a mutual benefit association, is, in legal contemplation, a policy of insurance, and is in most respects governed by the general rules of law which apply to insurance contracts. Bauer v. Samson Lodge, 102 Ind. 262, 1 N.E. 571; Elkhart M. Aid Ass'n v. Houghton, 98 Ind. 149; Supreme Lodge K. of P. v. Schmidt, 98 Ind. 374. There are, as we shall hereafter see, some essential differences between such contracts as that evidenced by this certificate and ordinary contracts of insurance, but those differences do not affect the questions arising on the pleadings, which first require our attention.

Statements made by the insured in his application for insurance are not deemed warranties unless they are incorporated in the policy, or, in some appropriate method, referred to in that instrument. Commonwealth Ins. Co. v. Monninger, 18 Ind. 352; Mutual Benefit, etc., Co. v. Miller, 39 Ind. 475; 3 Kent Com. 373; May Ins., section 156; Bliss Life Ins., section 34.

The statements by the insured in his application are not set forth in the policy, nor in any way is reference made to them, and they can not be considered warranties. The second paragraph of appellant's answer is based on the erroneous theory that they were warranties, and as this theory is untenable the answer is bad.

The provision in the policy issued by the appellant respecting the designation of the beneficiaries, is, in substance, that a sum not exceeding two thousand dollars shall be paid "to such person or persons as he," the insured, "may designate by will or upon the books of this corporation." The insured in his application directed that the amount of the insurance should be paid to his sons Oscar and William Allen, but subsequently the insured, with the consent of the appellant, but without the consent of the original beneficiaries, designated on its books Mary E. Allen, whom he had married, as the beneficiary. The charter of the association granted by the Legislature of Kentucky provides, among other things, that "Upon the decease of any member of this association the fund to which his family is entitled shall be paid as may be designated in the application for membership; this being changed by death, or otherwise impossible, it shall go: 1st. To the widow and infant children. 2d. To his mother and sister. 3d. To his father and brothers. 4th. To his grand-children. 5th. To his legal heirs."

The appellant contends that the designation of the beneficiaries in the application so fixed their rights that they could not be changed without their consent. If this were an ordinary policy of insurance, issued by an ordinary insurance company, this contention would prevail. Hutson v. Merrifield, 51 Ind. 24 (19 Am. R. 722); Pence v. Makepeace, 65 Ind. 345; Godfrey v. Wilson, 70 Ind. 50; Wilburn v. Wilburn, 83 Ind. 55; Harley v. Heist, 86 Ind. 196 (44 Am. R. 285); Damron v. Penn M. L. Ins. Co., 99 Ind. 478; Penn M. L. Ins. Co. v. Wiler, 100 Ind. 92 (50 Am. R. 769); Chapin v. Fellowes, 36 Conn. 132 (4 Am. R. 49); Glanz v. Gloeckler, 104 Ill. 573 (44 Am. R. 94); Manhattan Life Ins. Co. v. Smith, 5 N.E. 417; Bliss Life Ins. (2d ed.) 540.

These cases are representatives of a large class, declaring that in ordinary cases of life insurance the beneficiary designated can not be changed without his consent. There is, however, much diversity of opinion upon the question as to the applicability of this principle to policies like the one before us, issued by associations of the class to which appellant belongs. McClure v. Johnson, 56 Iowa 620, 10 N.W. 217; Tennessee Lodge v. Ladd, 5 Lea, 716; Durian v. Central Verein, 7 Daly 168; Richmond v. Johnson, 28 Minn. 447, 10 N.W. 596; S. C., 11 Ins. Law Journal, 215; Swift v. R. P. & T. C. Benefit Ass'n, 96 Ill. 309; Ballou v. Gile, 50 Wis. 614, 7 N.W. 561; Kentucky Mas. Mut. L. Ins. Co. v. Miller, 13 Bush 489; Catholic Ben. Ass'n v. Priest, 46 Mich. 429; Expressmen's Aid Society v. Lewis, 9 Mo.App. 412; Maryland M. B. Soc. v. Clendinen, 44 Md. 429 (22 Am. R. 52).

The weight of authority, as will appear from an examination of the cases cited, is in favor of the general doctrine that beneficiaries may be changed in cases where policies like the one before us are issued by such associations as the present, and that in this respect such policies are not governed by the general rule which governs ordinary insurance contracts. But granting that this is the general rule, still it can not prevail if the charter of the association prohibits a change in the beneficiary first agreed upon and designated. It is firmly settled that a contract must be made in the mode prescribed by the corporate charter, and must be one authorized by it. Ohio Ins. Co. v. Nunnemacher, 15 Ind. 294; Leonard v. American Ins. Co., 97 Ind. 299; Ashbury, etc., Co. v. Riche, L. R., 7 H. L. 653; Head v. Providence Ins. Co., 2 Cranch 127, 2 L.Ed. 229. Of the provisions of the charter and by-laws of the corporation, all who become members are chargeable with knowledge. Bauer v. Samson Lodge, supra.

Whatever may be the rule where the charter does not provide a mode of exercising corporate power, it is quite clear that where the charter does prescribe the mode it must be followed, even though it requires a procedure different from the one prescribed by a general rule of law. Hence it is here of controlling importance to rightly ascertain and decide whether the mode of exercising the corporate power is prescribed, and whether the mode prescribed inhibits the changing of beneficiaries after they have been once designated. The provisions of the charter, as we read them, do prohibit a change of beneficiaries by the act of the insured and insurer, for they declare that the benefit "shall be paid as may be designated in the application," and that, "this being changed by death, or otherwise impossible, it shall go" in the mode which is specifically provided. We can see no way to avoid the conclusion that this charter provision requires the benefit to be paid to the person named in the...