Wirtz v. Sovereign Camp, W. O. W.

• Decision Date: 12 January 1925
• Docket Number: (No. 4130.)
• Citation: 268 S.W. 438
• Parties: WIRTZ v. SOVEREIGN CAMP, W. O. W.
• Court: Texas Supreme Court

Page 438

268 S.W. 438

WIRTZ v. SOVEREIGN CAMP, W. O. W.

(No. 4130.)

Special Supreme Court of Texas.

January 12, 1925.

Error from Court of Civil Appeals of First Supreme Judicial District.

Action by Mrs. J. G. Wirtz against the Sovereign Camp, Woodmen of the World. Judgment for plaintiff was reformed and affirmed by the Court of Civil Appeals (254 S. W. 637), and plaintiff brings error. Affirmed.

Wurtbach, Wirtz & Weinert, of Seguin, for plaintiff in error.

Wolters, Storey, Blanchard & Battaile, of Houston, for defendant in error.

KITTRELL, Special C. J.

The facts upon which the original action was based are so tersely and clearly stated by the Court of Civil Appeals (vol. 254 S. W. 637) that we deem it unnecessary to restate them.

The plaintiff in the court below alleged every fact necessary to support her case, and the case was tried upon an agreed statement of facts which showed issuance of the certificate, payment of assessments, membership in good standing until the death of the insured, and the only question to be decided is whether the recovery should be for $2,100, or for $1,493.

We are of the opinion that the counsel for defendant in error correctly phrases the issues to be determined when they say there are but two: First, did the society have the right to increase the rate of assessment on the certificate in question? and, second, if it had such right, does the certificate stand charged with the lien asserted by the society?

The trial court held that it does not. That holding the Court of Civil Appeals did not agree with, and we are called upon to decide whether the latter court reached a correct conclusion or not.

These are certain questions relating to the powers, rights, and liabilities of fraternal associations, concerning which the law appears to have been definitely settled:

First. That the constitution and bylaws of the association become a part of the contract, and the insured is charged with notice thereof and is held to be bound and to abide by the same, as also by any prescribed rules and regulations which are not in conflict with the Constitution of the United States, or the laws of the state, or the charter of the association, or are not against public policy. This proposition is supported by the following authorities: West v. A. O. U. W., 14 Tex. Civ. App. 471, 37 S. W. 966; United Moderns v. Colligan, 34 Tex. Civ. App. 173, 77 S. W. 1032; Sovereign Camp, etc., v. Hicks, 37 Tex. Civ. App. 424, 84 S. W. 425; Modern Woodmen, etc., v. Lynch (Tex. Civ. App.) 141 S. W. 1058; Carter v. W. O. W. (Tex. Civ. App.) 220 S. W. 239; Stark v. W. O. W., 189 Ky. 719, 225 S. W. 1063; Miller v. National Council, etc., 69 Kan. 234, 76 P. 830.

The latter case holds also that the insured must examine the constitution and by-laws if such action be necessary in order for him to ascertain what the contract is, and holds also that he is bound by subsequently passed laws if they are reasonable.

Second. That fraternal associations have the power to change their constitutions and by-laws at will, so long as such changes do not violate the federal Constitution or the laws of the state, and that they may also increase rates to such extent that will enable them to pay their losses. This proposition is supported by the following authorities: Garretson v. W. O. W., 210 Mo. App. 539, 243 S. W. 257; Clarkson v. Supreme Lodge, 99 S. C. 134, 82 S. E. 1043; Wright v. Minnesota, etc., 193 U. S. 657, 24 S. Ct. 549, 48 L. Ed. 832; Supreme Lodge, etc., v. Mims, 241 U. S. 574, 36 S. Ct. 702, 60 L. Ed. 1179, L. R. A. 1916F, 919; Supreme Lodge, etc., v Smyth, 245 U. S. 702, 38 S. Ct. 210, 62 L. Ed. 492.

The decision in the latter case was based on and controlled by that of the preceding case — the Mims — in which it was held that a provision in the certificate that payments on a certain class of policies should remain fixed was not a contract, but a mere recital and a matter of regulation.

Third. That whether rates shall or shall not be raised is a matter to be determined by the governing body of the association having ultimate authority in that regard, and if they are reasonable the courts will not disturb them, and that to raise rates does not violate the contract. This proposition is supported by the Mims Case and by: Clarkson v. Supreme Lodge, 99 S. C. 134, 82 S. E. 1043; Sealy v. Sovereign Camp, etc., 27 Ga. App. 14, 107 S. E. 417; Supreme Lodge v. Ray (Tex. Civ. App.) 166 S. W. 46.

It is said in the Mims Case (supra):

"The corporation is simply the machine for collection and distribution. * * * The essence of the arrangement was that the members took the risk of events, and if the assessments levied * * * were insufficient to pay a benefit of a certain amount, whether from diminution of members or any other cause, either they must pay more or the beneficiary take less."

Fourth. That the judgment of the court of ultimate resort of the parent state of the association, construing its charter and determining its power with reference to raising rates, is binding upon the courts of all other states under the "full faith and credit" clause of the Constitution, whether the party resisting the raising of rates was a party to the cause which determined the question or not. This proposition is supported by the case of Supreme Council v. Green, 237 U. S. 531, 35 S. Ct. 724, 59 L. Ed. 1089, L. R. A. 1916A, 771.

In that case the trial court in New York held that the judgment of the court of another state was not controlling in that state, the same corporation being a party to the action in both states. The appellate Division under the New York system of procedure reversed that holding. The Court of Appeals — the court of last resort in New York — reversed the Appellate Division. The case was carried to the Supreme Court of the United States upon the ground that the Court of Appeals of New York erred in not holding that the "full faith and credit" clause of the Constitution applied, and the Supreme Court of the United States held that the Court of Appeals of New York had erred, and that the record of the Massachusetts court, where the same association and the same question were before it, was binding on the courts of New York. In view of the fact that this is a decision of the Supreme Court of the United States, there is no necessity to cite any other authority on the point.

Fifth. That in benevolent societies, such as the defendant in error, the beneficiary has no vested right in the certificate until the death of the member. He has a mere expectancy which may be divested by the member changing the beneficiary. This proposition is supported by the following authorities: Masonic, etc., v. Bunch, 109 Mo. 560, 19 S. W. 25; Westerman v. Supreme Lodge K. P., 196 Mo. 670, 94 S. W. 487, 5 L. R. A. (N. S.) 1114; Bills v. Bills (Tex. Civ. App.) 207 S. W. 614; Coleman v. Anderson, 98 Tex. 576, 86 S. W. 730.

Sixth. So far as fixing and maintaining rates is concerned, the policy of such a corporation is not a "contract" in the ordinary sense of that term, and assessments can be increased. This proposition is supported by the cases of Supreme Lodge v. Mims, 241 U. S. 574, 36 S. Ct. 702, 60 L. Ed. 1179, L. R. A. 1916F, 919, and Thomas v. Knights, etc., 85 Wash. 665, 149 P. 7.

Seventh. It may be stated, in view of the authorities, that the provision of the contract that the insured should be released from any obligation to pay any assessment after the lapse of 20 years, was ultra vires the association. This proposition is supported by the cases of Haner v. Grand Lodge, A. O. U. W., 102 Neb. 563, 168 N. W. 189, and Trapp v. W. O. W., 102 Neb. 562, 168 N. W. 191, both of which cases were decided by the Supreme Court of Nebraska, and under the holding of the Supreme Court of the United States in the Green Case (supra), the decisions in those cases are binding upon the courts of this state. This proposition is also supported by the case of Garretson v. W. O. W., 210 Mo. App. 539, 243 S. W. 257, a case very similar to this. In the Westerman Case, above cited, it is said that the law applying to paid-up policies is not applicable to fraternal and benevolent associations. The holding in the Haner and Trapp and Garretson and Westerman Cases, above cited, appears to us to be based on sound principle if, indeed, such holding was not demanded by the necessity of the situation.

No benevolent association is an insurance company in the ordinary acceptation of that term. The relation of certificate holders — as distinguished from "policy holders" — is essentially mutual and reciprocal. Each certificate holder is an insurer of the other and of all others who are members, and if it were permitted to exempt a certain part of the membership from the payment of dues, after they have been members a certain length of time, or after they have reached a certain age, that relationship of mutuality and reciprocity, which is the essence of the association, would be destroyed, and the burden of paying assessments sufficient to meet losses would be shifted from the whole to a part of the membership, with the inevitable result that the whole theory of organization of such associations would be violated, and the whole fabric — none too strong at best — which is built upon it, would fall into insolvency and ruin.

In Wright v. Minn., etc. (supra), the company changed from the assessment plan to the legal reserve, flat premium plan, and the contention was raised by plaintiff that there was a contract that the plan of insurance was never to be changed. Justice Day, speaking for the Supreme Court of the United States, says:

"Where the right of amendment is reserved in the statute or articles of association, it is because the right to make changes which the business may require is recognized, and the exercise of the privilege may be vested in the controlling body of the corporation. In such cases, where there is an exercise of the power in good faith,...