Uhl v. The Life & Annuity Association

• Citation: 155 P. 926,97 Kan. 422
• Decision Date: 11 March 1916
• Docket Number: 19,939
• Court: Kansas Supreme Court
• Parties: LEONARD C. UHL, Appellee, v. THE LIFE & ANNUITY ASSOCIATION, Appellant

155 P. 926

97 Kan. 422

LEONARD C. UHL, Appellee, v. THE LIFE & ANNUITY ASSOCIATION, Appellant

No. 19,939

Supreme Court of Kansas

March 11, 1916

Decided, January, 1916.

Appeal from Smith district court; RICHARD M. PICKLER, judge.

Cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. FRATERNAL INSURANCE -- Amendments to Laws -- Must be Fair and Reasonable. Where a member of a fraternal beneficiary society agrees to be bound by future amendments to its laws a reservation is implied that the changes are to be fair and reasonable.

2. SAME. In order to be deemed necessary to the purposes of a fraternal beneficiary society a change in its by-laws need not be indispensable to that end. If it is reasonably adapted thereto the requirement is met.

3. SAME--Changes in By-laws--Reasonableness for Court. Whether changes made in the by-laws which affect the rights of a member in such an association are fair and reasonable is ordinarily a question of law, where the detailed facts are not in controversy.

4. SAME. The rates of a fraternal beneficiary society as fixed by a change in the by-laws held not to be unreasonably high.

5. SAME--Change in By-laws--Beneficiary Entitled to Paid-up Certificate. Where the certificate held by a member of a fraternal beneficiary society provides that after a certain time it shall be nonforfeitable, and that he shall be entitled to a paid-up certificate in proportion to the number of payments he has made, a change is unreasonable which denies him, unless he shall make further payments, any benefit whatever from his admitted present share of a reserve fund which has already accumulated.

A. R Lamb, of Coffeyville, and Otis S. Allen, of Topeka, for the appellant.

L. C. Uhl, L. C. Uhl, jr., E. S. Rice, and A. W. Relihan, all of Smith Center, for the appellee.

OPINION

MASON, J.:

Leonard C. Uhl held a certificate in the Life & Annuity Association of Hiawatha, Kan., issued March 30, 1898. The association by a change in its by-laws made July 23, 1913, undertook to readjust rates and benefits, and notified him in November of that year of a number of options that were open to him under the new rules. He declined to accept any of them and brought an action for damages on account of a breach of the contract. He recovered a judgment and the association appeals.

(1) The plaintiff in his application for membership agreed that his contract should be subject to future amendments in the laws of the association. It is, however, an implied condition of such an agreement that the changes shall be reasonable. (29 Cyc. 75; Niblack, Benefit Societies and Accident Insurance, 2d ed., § 25; Bacon, Benefit Societies and Life Insurance, 2d ed., § 91a; Note, 8 L. R. A., n. s., 521.)

(2) It has already been determined that the contract between the plaintiff and the defendant was such as to permit the association to make the very changes here involved, provided they were reasonable and necessary to the accomplishment of its purposes. (Moore v. Annuity Association, 95 Kan. 591, 148 P. 981. Recent cases illustrating the conflict of authority on the subject are collected in a note to Thomas v. Knights of Maccabees, 85 Wash. 665, 149 P. 7, in L. R. A. 1916 A, 762.) "Necessary" is a word the force of which depends upon the context. (McCulloch v. Maryland, 17 U.S. 316, 414, 4 L.Ed. 579.) Here it is not used as the equivalent of "indispensable." If some change in the association's methods was required to enable it to continue business, and while acting in good faith it effected a readjustment by means reasonably adapted to the end sought, its action must be regarded as necessary, although some other plan might also have been available. The requirement that a change in the rules shall be reasonable fairly implies that it shall be necessary in this sense, so that the former decisions of this court may be said to have determined that under its contract with the plaintiff the defendant had authority to make the changes in its by-laws now in controversy, provided they were reasonable.

(3) Here the court submitted to the jury the question whether the changes made were reasonable, in the sense indicated, and a negative answer was returned. By the original terms of the plaintiff's certificate the sum of $ 2000 was to be paid at his death to the beneficiary named; he was to pay $ 2.80 a month for twenty years, at which time his payments were to end; he had the right, after three years, to cease payment and receive a paid-up certificate for as many twentieths of $ 2000 as he had made annual payments. By the changes in the laws referred to, as interpreted by the association and applied to the plaintiff's situation, he was required to submit to an increase either in the amount of each monthly payment, or in the period for which they were to be made, as to which he was offered an election. If the original amount of monthly payment were unchanged he was required to continue such payments so long as he should remain a member. If payments were to stop, as originally contemplated, at the end of twenty years, the amount of the monthly payment was to be increased from $ 2.80 to $ 20.78. Several other options, the details of which are not now important, were offered him. Of the monthly payment of $ 2.80 provided by the original plan, thirty cents went to the local secretary, twenty cents into the expense fund of the association, and the remaining $ 2.30 into the reserve fund, which was set apart for the payment of certificates as deaths should occur.

The evidence upon the question of the reasonableness of the changes that were made was meager. It was shown that the defendant had advertised that it had the "largest per capita of any fraternal organization in the United States," a statement which had at one time been true but was no longer so. This could be of little or no weight in determining the question. The secretary of the association, called as a witness by the plaintiff, testified that at the time of the change in the by-laws the plaintiff's share of the reserve fund (taking account of interest earned on the one hand and losses paid on the other) was about $ 280. No effort was made to controvert this. The defendant used the deposition of the actuary upon whose computations the changes had been based. He stated that the rates in force prior to the change were grossly inadequate to mature the certificates in twenty years. He computed the plaintiff's exact proportion of the reserve fund to be $ 278.65. Making allowance for this, he estimated the amount necessary to be collected each month until the end of the original twenty-year period, to justify the association in issuing a paid-up certificate, to be $ 20.78, the figures adopted by the association. His estimates were based upon the National Fraternal Congress table of mortality, and an assumption that the reserve fund would yield four per cent interest. On March 19, 1913, a statute took effect authorizing fraternal beneficiary societies to issue paid-up certificates, provided they...