Willson v. Woodmen of the World

• Decision Date: 26 January 1937
• Docket Number: 7609.
• Citation: 64 P.2d 1064,104 Mont. 31
• Parties: WILLSON et al. v. WOODMEN OF THE WORLD.
• Court: Montana Supreme Court

64 P.2d 1064

104 Mont. 31

WILLSON et al. v. WOODMEN OF THE WORLD.

No. 7609.

Supreme Court of Montana

January 26, 1937

Appeal from District Court, Gallatin County; R. E. McHugh, Judge.

Action by Edith Emogene Pease Willson and others against the Woodmen of the World, a corporation. From a judgment for the defendant, the plaintiffs appeal.

Affirmed.

MORRIS J., dissenting.

George Y. Patten, of Bozeman, for appellants.

I. W Choate, of Miles City, for respondent.

ANGSTMAN Justice.

Plaintiffs as beneficiaries of a benefit certificate in the sum of $3,000 issued by defendant on the life of George D. Pease, now deceased, brought this action to recover the benefits provided therein. The cause was tried to the court sitting without a jury on an agreed statement of facts, Hon. R. E. McHugh, judge presiding. The issue between the parties was whether Mr. Pease was in good standing as a member of the association at the time of his death on October 25, 1934. The district court found in favor of the defendant, and the plaintiffs appealed from the judgment. The essential facts are these:

The defendant was incorporated as a nonprofit fraternal mutual benefit society in the state of Colorado on January 20, 1891. The certificate in question was issued in 1900 and Mr. Pease admittedly continued in good standing until June 1, 1929. The certificate contained a clause to the effect that it should not be in effect at any time when the member stood suspended and was not in good standing pursuant to the constitution and by-laws, then in force or thereafter regularly adopted and in force at the time of death. Under its constitution death claims were paid from a benefit fund maintained by assessments. The constitution at all times authorized the levying of multiple assessments when the funds available in the benefit fund were insufficient to pay all death claims. Members were required to pay monthly lodge dues to their local lodges, and, in addition, regular monthly assessments to pay death claims. The regular monthly assessment chargeable to Mr. Pease was $2.35, plus local camp dues.

In April, 1928, the insurance commissioners of eight of the nine western states in which the defendant operates, including Montana, met in Boise, Idaho, and notified defendant that examination "disclosed a condition threatening perpetuation" of the association for which "there was urgent necessity for remedy," and recommended that suitable action be taken to place the society on an adequate rate basis under the American Experience or National Fraternal Congress Table of Mortality with interest assumption at not to exceed 4 per cent. per annum by placing all new members in a separate class under such rate basis, and granting all present members the opportunity to transfer to such class without medical examination, upon such rate basis applied to their attained ages, and separating the funds of such separate class. The society, acting on the direction of the insurance commissioners at its head camp session held in Oakland, Cal., in 1928, attempted to amend its constitution and by-laws. By this amendment it created what was known as the reserve division among its members. The new members admitted after September 1, 1928, would be issued benefit certificates in the reserve division with rates based on the American Experience Table of Mortality at attained ages upon admission. All existing members were permitted upon application to become members of the reserve division upon rates applicable at attained ages. All members who failed to transfer to the reserve division would remain in what was called the assessment division, and would be required to pay all death claims accruing among them as a group by extra or multiple monthly assessments. At the time of this purported amendment to its constitution and by-laws the society had about 135,000 members in good standing. It had outstanding liabilities represented by benefit certificates of about $220,000,000, and had a reserve fund of approximately $9,000,000. It was estimated at the Oakland camp session that between 80 and 85 per cent. of the total membership would transfer into the reserve division. The society accordingly transferred for the benefit of members of that division approximately 82 1/2 per cent. of the $9,000,000 in the reserve fund, leaving the balance to be applied to the benefit of members who remained in the assessment division. Between the time of the Oakland camp session and May, 1929, nearly 82,000 members of the association transferred into the reserve division. In May, 1929, an action was commenced in the district court of Denver, Colo., entitled John J. McCue et al. v. Woodmen of the World et al., to challenge the validity of the proceedings resulting in the purported change of the constitution and by-laws. In that action it was determined that the proceedings were ineffectual to change the constitution and by-laws for want of a showing that they were adopted by a two-thirds vote. On appeal to the Supreme Court of Colorado that court reached the same conclusion and affirmed the decree of the lower court in part (Woodmen of the World v. McCue, 88 Colo. 209, 294 P. 947). A petition for rehearing was filed requesting that the judgment be affirmed in toto, but this was denied.

In January, 1931, the defendant called a special meeting of the head camp to be held at Denver. The same delegates attended this session as attended the Oakland session. At this meeting the identical changes attempted to be made in the constitution and by-laws at the Oakland session were again re-enacted and made retroactive as of September 1, 1928. Mr. Pease had actual knowledge of all the proceedings taken at the January, 1931, meeting. Those members who had been issued certificates prior to September 1, 1928, and who had not surrendered them for reserve certificates were given four options, if exercised before May 31, 1931, namely: (1) To thereafter pay the increased monthly rate on such certificate, and thus maintain the same in force and effect for its full face amount; (2) to exchange the same for a certificate in the reserve division upon rates therefor at attained age under the American Experience Table of Mortality, with 4 per cent. interest assumption; or (3) to continue to pay the same monthly amounts as they had been paying under such certificate and have the face amount thereof reduced to such proportionate amount as such payments would carry on the basis of the increased rates; or (4) to continue to pay the same monthly amounts they had been paying under such certificate and have an interest-bearing lien or loan impressed on the face amount thereof, reducing and equalizing the same proportionately to requirements under the aforesaid increased rate.

George D. Pease did not elect to transfer into the reserve division but remained in the assessment division, and he did not take advantage of any one of the options given. Multiple assessments were levied on all members remaining in the assessment division in June, 1929, and thereafter. Mr. Pease did not pay or offer to pay any of the multiple assessments. In June, 1929, and thereafter, he regularly tendered to the defendant the single assessment of $2.35, plus the local camp dues, until the time of his death, but these were never accepted by the defendant. The multiple assessments were levied against those only who remained in the assessment division and did not apply to those who had transferred to the reserve division. Those who transferred to the reserve division were required to, and did, pay much more monthly in the way of premiums or assessments than a single assessment would have been had they remained in the assessment division. Other facts were agreed to, but in the view we take of the case they need not be alluded to.

The main issue in the case is whether George D. Pease continued to be a member of the defendant association in good standing up to the time of his death. Plaintiffs contend that he did, and in support of their contention assert that all of the proceedings taken at the Denver convention were null and void, because the delegates who purported to represent the defendant at this session were not qualified to do so, for the reason that they were not at that time members of the defendant association in good standing. Their contention is based largely upon the decree entered by the district court of Colorado in the McCue Case. That decree provided "that all new benefit certificates or insurance policies purporting to be issued by the Woodmen of the World under the alleged amendment alleged to have been adopted at said head camp session of the Woodmen of the World at Oakland, California, in June and July, 1928, are null and void and that there is in the Woodmen of the World no such class or division as the reserve division and that the members who have surrendered their old benefit certificates and received in exchange therefor new certificates or new insurance policies shall, if they desire to continue their membership, return said new certificates or new insurance policies and that there will be delivered back to them their former benefit certificates or duplicates."

Plaintiffs contend that since nearly all of the delegates who attended the Denver session were those who had transferred into the reserve division and had taken no steps as provided in the above decree to be reinstated as members of the association they were not in good standing nor entitled to participate as delegates. The trial judge sustained defendant's objection to the introduction in evidence of a copy of the decree of the district court of Colorado in the McCue Case. This is assigned as error by the plaintiffs. We shall not discuss the question whether this decree should have...