35 Pa. Super. 142 | Pa. Super. Ct. | 1908
Opinion by
In this action the plaintiff bases his right to recover on a written contract or certificate dated May 12, 1892. The due execution and delivery of the contract are not denied nor is it alleged that the plaintiff has failed, in any respect, to discharge every obligation imposed on him therein or thereby. The defendant is a beneficial society or fraternal union and was duly incorporated on April 13,1892, for the purpose of maintaining “a society for the payment of periodical benefits to its members in the cases of sickness or disability, from funds contributed by the members; and also from funds contributed in like manner to pay benefits to those who have been members for a continuous fixed period, and to pay benefits to heirs of deceased members.”
The constitution and by-laws duly adopted by the corporation provide for four classes of beneficiaries, the members of each class receiving pecuniary benefits for the same causes and
The plaintiff, as already stated, having complied with every obligation imposed on him by the terms of his certificate for the full period of ten years and ninety days, demanded the benefits secured to him thereby, and his deihand being refused, brought tins action. The association resists the payment of the full amount that would admittedly be due, according to the plain terms of the contract as it was actually executed, on the ground, first: that by an amendment to the constitution and by-laws of the society adopted in 1894, about two years after the date of the plaintiff’s certificate, its liability under such certificate was so changed and reduced that it would amount to but $390. It was not alleged that the plaintiff, as one of two parties to a contract, ever assented to such change, but it is contended that as the amendment was regularly adopted in the manner provided by the original constitution, it became binding on the plaintiff as well -as every other member of the society. And this contention is especially urged
It must be conceded that the defendant, like every other corporation, possessed the inherent power of self government. Its by-laws are the channels through which this power is exerted and declare the corporate will as to the manner in which the corporate functions are to be exercised and such other mátters as to which it may properly and lawfully legislate. Of course the power to make such laws carries with it the power to alter and amend them in the manner prescribed. Voluntary acceptance of membership in such corporation necessarily involves and implies the assent of each member to every amendment to the by-laws the substance of which is the proper subject of such law, and which has been formally and regularly adopted. It is difficult to see how an express declaration by an applicant of his willingness to be bound by existing by-laws and future amendments thereto can add anything to the like obligation necessarily assumed in the act of becoming a member.
But such a corporation also has the power to enter into contracts in furtherance of the objects for which it was created and it may lawfully assume such contractual relations with one of its members as well as with a stranger. With the' issue of the certificate on which this action is founded the defendant society undoubtedly entered into a contract to which the plaintiff became the other contracting party. That the defendant society, in the exercise of its undoubted right to amend its own by-laws, could, without the assent of the plaintiff, lessen its contractual obligation thus assumed, we are not asked to say. But it is urged upon us that the plaintiff, by virtue of the stipulation quoted from his application, did in fact assent, not only to the amendment of 1894, but to any other like ones that might be'adopted during the life of his certificate; so that such amendments, even if they finally resulted in extinguishing
Of course it must be conceded that the parties to a forward contract may agree therein that one of them could, thereafter, at pleasure, modify its terms, reduce its obligations or cancel it altogether, even after it had been partially performed by the other. But surely a court would incline to such a construction of a contract, giving to one party such an advantage over the other, only when impelled to do so by the presence, in the contract itself, of language unmistakably evincing the consent of the latter to the inequality that would follow. Words of merely doubtful import or expressions indicative as well of some different intent would not suffice to support such a construction. Can we then fairly conclude that because this plaintiff expressed his willingness to abide by the by-laws existing when his contract was made and the amendments thereto that might subsequently be adopted, he intended to agree that, after he had partially performed, the defendant could, at its pleasure, or as often as it deemed its welfare would •be promoted thereby, adopt an amendment to its by-laws reducing the amount secured to the plaintiff by his contract and hold him bound thereby? The answer to this question is enveloped in some obscurity because the decisions of the courts of the different states on the subject are not in harmony. But, after a somewhat exhaustive review of them, we are led to the conclusion that if we follow the sounder reasoning and more •potent authority we must answer the question in the negative. This results in the first place from a consideration of the nature and character of a by-law. This term has been often defined “A by-law is a rule or law adopted by a corporation or association for the regulation of its own action and concerns, and of the rights and duties of its members among themselves.” Am. & Eng. Ency. of Law, Yol. 5, p. 87. This term (by-law) has a peculiar and limited signification, being used to designate the orders and regulations which a corporation, as one of its legal
Again the by-laws, rules and regulations of a corporation or society are essentially legislative in their character. Like all other legislative acts they are affected by the presumption that they áre never intended to be retroactive unless such intent be clearly expressed. “A member may know that certain amendments to the by-laws have been passed, or he may even vote for them, but it does not follow from this that he consents that they may have a retroactive force, and may modify a contract which he holds with the society.” Niblack on Benef. Soc. 61. This principle is strongly stated in Indemnity Co. v. Jarman (U. S. Circuit Court of Appeals), 104 Fed. Repr. 638, and indeed is so universally recognized that a citation of authorities to support it is needless. In the present case the amendment of 1894 contains no language necessarily indica
Furthermore it seems unreasonable to draw, from the general terms of the application, the conclusion that the plaintiff, having the option to purchase indemnity in any one of four classes, selected that one apparently securing to him the largest fund at the end of ten years and obligating him to pay the highest assessment, and at the same moment and in the same act deliberately consented that the society might, at any time before the actual maturity of his certificate, reduce the amount thereof ter any extent it might deem advisable.
Finally, we conclude that the position of the present plaintiff is supported by the clear weight of authority. In Indemnity Co. v. Jarman, supra, a case in which the application contained language precisely similar to the one now before us, the court said: “ In the second place, we observe that it is not a reasonable interpretation of the clause above quoted from the application that the applicant intended in advance to assent to any changes in its constitution and by-laws which the company saw fit to make, even if they reduced the amount of indemnity which the company had promised to pay in the event of his death, and thereby lessened the value of hi's policy. He was to occupy a dual relation to the company — first as one of its members, and second, as any other individual having a contract with it,” etc. Many cases are cited supporting the conclusion there reached.
In Newhall v. Legion of Honor, 181 Mass. 111, Holmes, C. J., construing an express stipulation that the member should comply with all by-laws “now existing or hereafter adopted,” said: “But the plaintiff’s rights do not stand on the by-laws alone. They stand also upon express contract. . . . Compliance in this connection means doing what the by-laws may require'the member to' do, not submission to seeing his only inducement to do it destroyed. . . . Whatever compliance with the by
In Hale v. Equitable Aid Union, 168 Pa. 377, the exact question came before our own Supreme Court. In her. application the plaintiff there had declared, “I further agree to accept said beneficiary certificate subject to such laws, rules and regulations as now exist or may hereafter be adopted,” etc. By an amendment to the by-laws adopted some years after the issue of her certificate the society undertook, not indeed to reduce the sum secured to her in her contract, but to change the times and terms of payment. The court declared that such an amendment could not in any way affect her rights under her contract, and expressly adopted and approved the following language used by the trial court, vizA contract between an association, such as the defendant, and one of its members cannot be impaired or altered by either of the parties thereto, except so far as the power to do so is reserved. The benefit certificate was accepted by plaintiff, subject to the right of the corporation to amend its by-laws and to change the contract in so far as the by-laws make it, but not in-so far as the contract is made by the benefit certificate itself.” In the case now before us the whole of the contract on which the plaintiff sues is contained in the certificate itself. It needs not the aid of any by-law to support it. The case just cited must therefore be decisive of the question we have been considering. It has been recognized as the settled law of this state by the U. S. Circuit Court of Appeals for the Eastern District of Pennsylvania in Legion of Honor v. Getz, 112 Fed. Repr. 119, in which the precise question here involved was disposed of in harmony with and on the authority of Hale v. Equitable Aid Union. But, it is argued, the binding force of that decision has been weakened by the later utterance of the same court in Chambers v. Knights of Maccabees, 200 Pa. 244. We do not think so. In the later case the opinion of the lower court, adopted by the Supreme Court, declares that the case is
But payment of this sum is further resisted by the defendant for the reason that “the certificate, at the time of its issuance and until May 25,1893, the time when the defendant corporation accepted the provisions of the Act of April 6,1893, P. L. 10, was null and void and of no effect, the issuance of the same by the defendant corporation being forbidden by law.” This contention is based on the proposition that the contract evidenced by the certificate in this case, was, in essence and substance, a contract of insurance, and that by the Act of April 4, 1873, P. L. 20, entitled “An Act to establish an Insurance Department,” it was made “unlawful for any person, company or corporation to negotiate, any contract of insurance, or to effect an insurance .... without complying fully with the provisions of this (said) act.” To allege that the defendant, a beneficial society, may not lawfully engage in the business of insurance, is only another way of stating >the general proposition that every corporation must confine its operations within the limits of the purposes for which it was created. But to assert that the defendant has no power to enter into a contract, which, if made by an insurance company, could be properly designated a con
Whilst, therefore, it cannot be denied that, in many practical aspects, the work of a beneficial society, engaged in “protecting” its members from the injurious consequences of some of the ills that befall suffering humanity, closely resembles that of an insurance company “indemnifying” against the same consequences, yet, in the eye of law, the two bodies are fundamentally different, and there is abundant reason for holding, under the cases cited, that the certificate of the plaintiff in this case was not an insurance policy or a contract of insurance within the meaning of the act of 1873. It was not, therefore, forbidden by that act, which intended only to deal with the business of insurance, technically so known and called, but was a valid contract expressly authorized by the very terms of defendant’s charter.
It is true that the legislature, in 1893, enacted a general law “regulating the organization and incorporation of secret fraternal beneficial societies .... and protecting the rights of members therein.” We cannot discover, either in its title or the preamble reciting the mischief it designed to cure, any evidence that this act intended to authorize beneficial societies to become insurance companies, or to conduct the business of insurance. It did not deal with the business of insurance or legislate for companies engaged in it. The two classes of companies remained as distinct after the passage of that act as before it. Whilst it permitted any beneficial society theretofore incorporated to bring itself within the provisions of the act by filing a formal declaration of its acceptance thereof, it was in no sense retroactive. So much has been expressly decided. Wolpert v. Grand Lodge, 2 Pa. Superior Ct. 564; Thomeuf v. Knights of Birmingham, 12 Pa. Superior Ct. 195.
We think, therefore, the learned trial court should have affirmed the plaintiff’s first point and directed the entry of judgment for $1,000 with interest from August 12,1902.
Judgment reversed and a venire facias de novo awarded.