White v. Woodmen of the World
| Citation | 87 Utah 477,50 P.2d 422 |
| Decision Date | 21 October 1935 |
| Docket Number | 5617 |
| Court | Supreme Court of Utah |
| Parties | WHITE v. WOODMEN OF THE WORLD |
Petition for Rehearing Denied January 16, 1936.
Appeal from District Court, Third District, Salt Lake County; Roger I. McDonough, Judge.
Action by Lucy White against the Woodmen of the World. From a judgment for defendant, plaintiff appeals.
AFFIRMED.
E. A Walton and Walter C. Hurd, both of Salt Lake City, for appellant.
Dan B Shields, of Salt Lake City, and John L. Schweigert, of Denver, Colo., for respondent.
WOLFE, J., being disqualified, did not participate.
By this action the plaintiff, Lucy White, seeks to recover the value of a death benefit certificate issued by the defendant, a fraternal benefit association, to her deceased husband, Ernest C. White, who died September 29, 1932. In her complaint she alleged payment by the deceased of all lawful premiums, dues, and assessments levied and charged against him as required by his contract of insurance and by the constitution and laws of the defendant; that the defendant had levied unlawful and wrongful assessments, carrying higher rates, and if the amount paid by the deceased were insufficient to carry him until the time of death, his failure to pay a greater amount was wholly due to the wrongful act of the defendant in demanding and trying to exact an illegal and greater amount than was due; and that defendant is estopped from claiming the said deceased should have paid more during his lifetime.
The defendant in a lengthy answer, wherein it set up in detail the circumstances and conditions of its affairs and the change of policy made necessary thereby, admitted that Ernest C. White was a member of defendant association and had issued to him certificate No. 48004 by the terms of which the association agreed to pay his beneficiary the sum of $ 3,000 on his death, which payment it alleged was conditioned wholly and entirely on full compliance on the part of the insured with the terms and conditions of the certificate, application for membership, constitution, and by-laws, rules, and regulations of the subordinate camp or lodge, and by payment of the stipulated dues and assessments. That in the year 1929, White became delinquent and was suspended from membership and at no time thereafter, notwithstanding repeated opportunities afforded him, did he ever reinstate his membership. After a trial before a jury and at the close of all the evidence, plaintiff and defendant each moved the court for a directed verdict. The plaintiff in her motion announced that if her motion be denied, she still asked to go to the jury on all issues of fact with certain stated exception. The court granted defendant's motion and directed a verdict of no cause of action.
To better afford an understanding of the issues, a more detailed statement of facts is necessary. The defendant corporation is a fraternal benefit society, or association, not for profit, organized under and by virtue of the statutes of the state of Colorado, authorized to do business and doing business continuously since January 20, 1891, in the nine western states of Colorado, California, Oregon, Washington, Utah, Idaho, Montana, Wyoming, and Nevada. By its articles of incorporation, the association has at all times expressly reserved the right to "alter, modify, or change the constitution, by-laws, rules and regulations at will." It has a representative form of government with supreme authority vested in and exercised by a representative body known as the Head Camp Session. A major purpose of the association is the payment of death benefits to beneficiaries of deceased members through monthly assessment dues, single or multiple, as experience requires, called from and payable by its members.
During the earlier years of its existence, the association was able to meet its monthly obligations and to accumulate a substantial surplus fund. During these years its membership consisted mainly of men in the lower brackets of age. The assessment system did not require the setting up of reserves, as that term is understood in life insurance parlance, since death claims were paid out of the monthly assessments which would be single or multiple, dependent upon the number of death claims payable each month. As time passed, the average age of the membership became higher, resulting in a higher rate of mortality. The surplus which had been accumulated began to diminish. By 1928, the association had reached a crisis when it had a certificate liability of $ 220,000,000 with a fund of only $ 9,000,000 on hand. The insurance commissioners of the states in which the defendant operates met in special conference and by resolution required the association to readjust its rates upon adequate approved and standard bases of life insurance operation, otherwise the association would not be permitted to continue doing business. In an effort to meet the demands of the insurance commissioners, the regular Head Camp Session of defendant held at Oakland, Cal., in June of 1928, undertook to adopt appropriate amendments to its constitution and by-laws to place the organization on a financially sound basis. These amendments provided a new plan, which included the creation of what was termed a "Reserve Division," effective on and after September 1, 1928. Steps were then taken by personal solicitation to have the members change their benefit certificates under the assessment plan to the new certificates in the Reserve Division. This they were permitted to do without medical examination, but upon payment of increased rates, under the American Experience Tables of Mortality, applicable to their attained ages. Exchange was not compulsory, but those members who failed or refused to effect an exchange of the old certificates for the new were permitted to continue under the assessment plan and would be required to pay sufficient extra or multiple assessments from month to month to meet the death claims arising among them. That is, the membership was divided into two classes, those in the Reserve Division paying a higher fixed rate and those retaining the old certificates still subject to the assessment plan. The husband of plaintiff refused to exchange his certificate and chose to remain in the second group. He paid the regular single assessments to and including June of 1929, but failed to pay certain multiple assessments levied in May and June. He tendered payment of merely the regular single assessment for July or August of 1929, which tender was refused. No other assessments were paid by him or on his behalf up to the date of his death in September, 1932, a period of more than three years, although both single and multiple assessments had been levied. He thereupon stood suspended from membership for failure to pay dues and assessments.
The business of exchange was actively prosecuted resulting in many thousands of members accepting new certificates on surrender of the old, when in May, 1929, a suit in equity was filed in the district court in and for the City and County of Denver, Colo., by eight members of the association, entitled "John J. McCue et al. v. Woodmen of the World et al." The defendants were the defendant association in this case and the head officers of such association. By this suit it was sought to have the amendments creating the Reserve Division declared invalid and the officers enjoined from levying extra or multiple assessments against those who had failed or refused to make the change to the Reserve Division. After a trial, the district court declared the amendments objected to had not been legally adopted and entered an injunctive decree against defendants. An appeal was taken to the Supreme Court of that state, which court limited its consideration to two questions only: (1) Did plaintiffs have capacity to sue? and (2) Were the amendments legally adopted? The first question was answered in the affirmative and the second in the negative. Woodmen of the World v. McCue, 88 Colo. 209, 294 P. 947, 954. The constitution of the association provided that the constitution and by-laws may be amended by "two-thirds of the votes of any regular or special Head Camp Session." The vote taken in the Oakland Head Camp Session in 1928 was merely viva voce and not by roll call. The record failed to show that two-thirds of the votes were cast for the amendment. Because of this condition of the record, the court held the constitutional requirement of a two-thirds vote had not been complied with and the amendments had not been legally adopted. The court said:
Promptly after such decision, a special Head Camp Session was called and held January 12 to 16, 1931, at Denver, Colo., at which the identical legislation acted on in 1928 was presented and adopted by legal vote. A curative or retrospective provision was adopted making the new plan effective on and after September 1, 1928. Certain option and privilege provisions were also made applicable to default members of the society who had been members prior to September 1, 1928 but who had failed or refused to pay the extra or multiple assessments. Such suspended members were recognized as entitled to retain membership in the association by acceptance of one of four options which were thereupon extended to them. These options were available to Ernest C. White. By such options, had he exercised...
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