73 P. 79 | Kan. | 1903
The opinion of the court was delivered by
Leathie P. Crawford sought to recover from the Bankers’ Union of the World. Its demurrer to her petition was overruled. Did the court err in so doing ? The material portions of her petition are substantially as follows: The National Aid Association is a fraternal insurance or beneficiary corporation, organized under the laws of Kansas ; W. A. S. Bird is receiver of this association, and as such receiver has the custody, control and possession of all its records and assets; the Bankers’ Union of the World is a fraternal insurance corporation organized under the laws of the state of Nebraska, and doing
“This certificate of membership witnesseth, that in consideration of the representations made by William H. Crawford in his application for membership in said National Aid Association, which is hereby made a part of this contract, said member further complying with the by-laws, rules and regulations governing said National Aid Association, then and in that case the said National Aid Association hereby promises and binds itself that, upon satisfactory evidence, in accordance with its by-laws, of the death of William H. Crawford, the person named and described in the application for which this certificate is issued, to pay to his wife, Leathie P. Crawford, the beneficiary mentioned in said application, the sum of $1000, or such a sum as shall be derived from the benefit fund upon an assessment made,for said death on all its members, as provided in its by-laws, less the amount which has been paid to said member on account of loss of eye or limb or the old-age benefit; and said sum, not to exceed the amount of $1000, shall be received by said beneficiary in full of all claims against the said National Aid Association by virtue of this certificate.”
It was further alleged that the said William H. Crawford died in good standing in said National Aid Association on the 5th of October, 1901, the plaintiff being his beneficiary named in said certificate; that due and timely proof of his death was made; that afterward, no amount having been paid on the certificate, the officers of the National Aid Association became convinced that on account of the low rate of assessment and the slow growth of the National Aid Association, for the protection of its membership and to guarantee the payment of its
“Liabilities of which the National Aid has official notice, not exceeding $27,330 uncontested, and $7000 contested, to be assumed and agreed to be paid by the Bankers’ Union of the World and Spinney” (its president), “according to the constitution and bylaws of the National Aid.”
Afterward this memorandum was put in a more formal shape and this contract of assumption appears therein as follows :
“5. The said E. C. Spinney and the Bankers’ Union of the World, upon the consummation of said consolidation and as a part of said consolidation, shall agree to assume and agree to pay all the just and lawful claims for death losses against the said association of which the said association has official notice, not exceeding $27,380 uncontested liabilities and $7000 contested*453 liabilities. By the term ‘uncontested liabilities’ is meant such liabilities as are not known to be spurious or fraudulent, but the said The Bankers’ Union of the World and E. C. Spinney reserve the right to contest any of said liabilities for any reasons which may be deemed sufficient by competent and reliable counsel. The said officers of the said association, or either of them, shall preclude the said E. C. Spinney and the Bankers’ Union of the World from their right of contest as aforesaid.
“By the term ‘contested liabilities’ is meant such claims against said association as the officers thereof may deem to be and have classified as spurious and illegal, and such claims shall not be deemed to be liabilities of said association until established to be such by judgment of court. Said liabilities to be assumed and paid by said E. C. Spinney and the said Bankers’ Union of the World according to the constitution and by-laws of the National Aid Association.”
This contract provided that the general officers of the National Aid Association should do all they could to secure a transfer of the management of that association to the Bankers’ Union, and to accomplish the same should resign from their respective positions, and procure persons selected by the Bankers’ Union to be elected officers of the National Aid Association; that they should devote their time until the 1st of January, 1903, to the consummation of such consolidation, by procuring members of the National Aid Association to become members of the Bankers’ Union, and for their services they were to receive the sum of $2500, if consolidation should be consummated, and a less sum if through no fault of theirs it should not be; that they should receive the further sum of $10,000 which was evidenced by notes given, and payable at intervals commencing on the 1st of November, 1901; that when consolidation should be accomplished, the National Aid Association should
The petition further alleged that all of the conditions of this agreement were complied with by both parties thereto, the National Aid Association officers resigning their offices and procuring the selection of officers indicated by the Bankers’ Union to fill the same, and all of the business of the former to be placed under the control of officers so selected by the Bankers’ Union, which paid to the retiring officers the sum of $2500 as agreed ; that by reason of such consolidation the Bankers’ Union obtained an increase in its membership of about 4000, who paid into the treasury the sum of $4000 per month; that this plan and its consummation received the approval of the insurance commissioner of the state of Kansas.
The demurrer contained several grounds, the most meritorious ones being that the agreement counted upon was ultra vires as to both associations, and that the petition did not state facts sufficient to constitute a cause of action.
It will be observed that the plaintiff below sought to recover against the Bankers’ Union, not by virtue of a contract which it had made with her or her husband, but by virtue of a contract' which had been made with the National Aid Association, and the fulfillment of which, as was claimed, had been assumed by the Bankers’ Union, so that the questions, as logically presented, are : (1) Has the agreement entered into by these associations any force or binding effect upon the Bankers’ Union, so far as it requires a payment to Mrs. Crawford? Or, put in another form, was the agreement, so far as it concerned her, within the power of these associations, and is the Bankers’
Taking up the question of power, we suggest that the statutes of Nebraska are not pleaded; hence the presumption is that they are the same as found in Kansas. That they are so in fact is admitted by the attorneys for both parties. We need take small space in the discussion of the universally recognized rule that a corporation has only such power as is conferred upon it by its charter, either expressly or by implication, to enable it to carry out the objects of its creation, and that the exercise of powers outside and beyond these is an act ultra vires and not binding upon the corporation. The implication authorizing the exercise of a power must be one necessarily arising from a granted power, as distinguished from what might be convenient or desirable. It is not sufficient to authorize a corporation to act that no limitation is found in the law forbidding the act. The right to act must be conferred expressly or by necessary implication, or it does not exist.
We have searched the statute in vain to find adequate warrant therein for a transaction such as is stated in plaintiff’s petition. It is claimed that section 3575 of the General Statutes of 1901, relating to fraternal beneficiary societies, which authorizes such societies to make and enforce contracts in relation to their business, implies the right to make the contract in question. It is suggested that the increase of members is the chief object of the existence of these beneficiary associations ; hence an agreement made to promote that end would be one in relation to the business of the corporation. While, of course, no
These associations are not permitted to go out and engage generally in the business of furnishing -indemnity. Their distinct characteristics and charter life would be destroyed in so doing. The agreement counted upon in the case at bar contemplates the payment of money to one not a member of the Bankers’ Union from moneys not received from the association of which plaintiff is not a beneficiary. Such a transaction is wholly outside the letter and spirit of the charter act and in excess of any power conferred upon
The contract upon which plaintiff counts, as she claims it to be, is entirely different from that which she had with the National Aid Association. That was one to pay the proceeds of one assessment, up to $1000; this is to pay $1000 absolutely. It is, however, granted by the defendant in error that, while the Bankers’ Union would not be permitted to collect money from an assessment upon its members for the purpose of paying the death loss of one who had never been a member, yet it is competent for it to pay this death loss out of the expense fund which the association is authorized to accumulate; that the obtaining of members of any association costs approximately ten dollars apiece, and that by this arrangement a large number of members were added without expense, so that the payment of this claim, which is in fact a mortuary one, might be made out of the expense fund in lieu of paying a canvasser or deputy for accomplishing the same result. We are not disposed to give this suggestion serious consideration. To permit that to be accomplished indirectly which cannot be done directly is to encourage indirect and reprehensible 'means rather than open and fair dealing. Besides this, we find no allegations in the petition upon which to base this claim.
It is further suggested that, even though this contract be ultra vires, still the Bankers’ Union is estopped from so pleading. Authorities are cited supporting the proposition that a corporation may be es-topped from pleading the invalidity of its contracts as against one who has made part performance of such contract. We are free to grant the correctness bf the principle, but find no opportunity fbr its appli
The case of Twiss v. Guaranty Life Ass’n, 87 Iowa, 733, 55 N. W. 8, 43 Am. St. Rep. 418, was very like the one at bar. The court, discussing the questions of ulra vires and estoppel, used the following language (p.736) :
“That the making of the contract was in excess of the power of the appellant there should be no question. We need not set out the articles of incorporation or the by-laws. It is enough to say that the contract, so far as it attempts to bind the appellant, is contrary to the whole scope and purpose of the corporation. The payment of these losses would be a*459 diversion of trust funds to' other objects than those authorized by the charter, and would be a crime. Code, section 1072. Both of these companies were organized upon the assessment plan. The assessments were made quarterly, and a fixed amount was required to be paid. A certain amount was set aside for an expense fund, and the remainder was designated as the mortuary fund. The articles of the association explicitly provide as to the disposition to be made of these several funds. There is not one word in the whole record which, by the remotest implication can be construed as authorizing the secretary, or even the board of directors, to use any part of the proceeds of these quarterly payments for such" a purpose as paying the death losses of any other insurance company. It is unnecessary to further discuss this question. It appears to us that the undertaking to pay the losses of the Guaranty company is plainly in excess of the power of the appellant or any o.f its officers. The facts of the case bring it within the rules announced in Lucas v. White Line Transfer Co., 70 Iowa 542 [30 N. W. 771, 59 Am. Rep. 449] ; Davis v. Old Colony Railway Co., 131 Mass. 258 [41 Am. Rep. 221]. And see, also, 2 Morawetz on Private Corporations, sections 580, 581, 591, 607, 609.
“But it is claimed in behalf of the appellee that the contract is executed, and that the appellant is estopped from questioning its validity. As we have said, where an ,ultra vires contract is made and performed on one side, the other party cannot be permitted to enjoy the benefits received, but will be required in a proper action to account; in other words, the doctrine of a want of power to contract cannot be invoked to aid a party to perpetrate wrong and injustice. But this case presents no-such features. It is conceded that the Guarantee company was bankrupt when the contract in question was made. Complaint had been made to the state auditor that it was not paying its death losses promptly, and it was unable to obtain a certificate authorizing it to continue in business. It is said by counsel for the*460 appellee, in argument, that for.the payment of these death losses the Guaranty-had no means whatsoever, except its annual premiums, payable in quarterly instalments. It had no certificate authorizing it to do business after March, 1889. The death losses had been such as to require the proceeds of the mortuary calls to meet the claim, and, in addition, had used up the reserve fund. It was in this condition when the insured, David M. Twiss, died, and the claim of the plaintiff accrued.
“ It is urged with apparent confidence that, as there were some 567 members of the Guaranty company when it failed, the appellant should be required to pay its death losses upon the ground that by the contract it acquired some 400 new members. We have already said that the appellant was not authorized to buy members in this way and on any such terms. Let us see whether there is any ground for the alleged estoppel. If there is any reason for such a claim it must be because the appellant, by seeking a transfer of the membership, put it out of the power of the plaintiff to compel payment by the Guaranty company. The wrong and injury to the plaintiff, if any, consists in taking away the membership, so that the members did not pay their quarterly dues to the Guaranty company, by the payment of which the plaintiff would have received the amount due on the policy. It appears to us that this is a most unwarranted assumption. It is based upon the theory that, if the contract had not been made, the 567 members would have continued to pay quarterly instalments to the Guaranty company until all of the death claims were satisfied and all other claims paid. That this would have occurred is not only not probable, but highly improbable. - Members of such organizations are not more likely to pay money for nothing than other people. The fact is, the record shows beyond all question, that if the contract had not been made between the two companies the plaintiff’s claim was absolutely worthless. That the position of the plaintiff was in any manner changed to her prejudice by the contract not*461 only does not appear, but the face of the transaction shows that it was not.”
Defendant in error insists that this case is not authority here, as it proceeds' upon the assumption of antecedent bankruptcy of the absorbed association. We think there is no fair ground for drawing this distinction. It appears that the National Aid Association had forty-four uncontested and unpaid losses, amounting to $44,350, and nine contested ones, amounting to $7000, at the time of the making of this agreement; and, in the language of the petition, the officers of the association had then “become convinced that on account of the low rate of assessment and the slow growth, . . . for the protection of its membership and to guarantee the payment of its death losses, it was necessary to combine with some other fraternal order; that it could not continue business and meet its death losses promptly.” If this does not plead bankruptcy it pleads what is equivalent; for an association of this sort to declare that it could not meet its death losses promptly was to announce its death. (Home Friendly Society v. Tyler, 9 Penn. Co. Ct. Rep. 617 ; Borgraefe v. Knights of Honor, 26 Mo. App. 218, 223.)
Taking up the second question propounded above, and admitting that the agreement is within the power of the Bankers’ Union to make, what would be Mrs. Crawford’s right thereunder ? It will be noted that the beneficiary certificate which is the basis of her claim does not provide for the absolute payment of the sum of $1000, but for only so much of it, up to that amount, as should be derived from an assessment made upon the members of the National Aid Association as provided in its by-laws. These by-laws are not pleaded, but we shall assume, however, that they
The judgment of the court below will be reversed, with direction to sustain the demurrer to the petition.