Supreme Council of Royal Arcanum v. Behrend

45 App. D.C. 260 | D.C. Cir. | 1916

Lead Opinion

Mr. Justice Robb

delivered the opinion of the Court on the rehearing:

The appellee, Sue B. Behrend, having filed a petition for a rehearing, it was allowed upon the following point: Had the beneficiary of the certificate a vested interest in the same, that could not be devested by the issue of a substitute certificate without the surrender of the original, and without the consent of the beneficiary named in the original certificate?

The so-called benefit certificate, which we have held to be in effect a policy of insuramce, was issued March 1, 1899. In it the appellant corporation promised to pay “to Sue B. Behrend (wife)" a sum not exceeding $3,000, “upon satisfactory evidence of the death of said member, and upon the surrender of this certificate; provided that said member is in good standing in this order at the time of his death, and provided also that this certificate shall not have been surrendered by said member and another certificate issued at his request, in accordance with the laws of this order.” Appended to the certificate was a “Form for Change of Beneficiary,” which apparently requires the surrender of the certificate as a condition to the issuance of another. In the affidavit of merit accompanying the declaration it is alleged that nothing was attached to or accompanied the certificate when it was issued; that Behrend, to whom it was issued, paid the first premium, and then delivered the certificate to his wife, the appellee, as a wedding present; that it since has been in her possession, and that she has “paid practically all of the premiums on the same out of her separate estate.” Attached to and made a part of the affidavit is a copy of a letter which she received from the company’s secretary, under date of September 4, 1913, and reading in part as follows:

“Madam: Your husband, Mr. Samuel K. Behrend, has made affidavit that Ms benefit certificate is held by you, and has furnished evidence which is satisfactory to me that it is beyond Ms control, and as provided in our law I have issued him a new benefit certificate, which canceled and rendered null and void any and all certificates previously issued to him.”

Appellant now seeks to avoid its liability upon the ground that under rule 336 of the order^*, quoted.in full in the former opinion, a member was authorized to obtain the issuance of a new certificate by satisfying the secretary that the old was beyond his control. But in maldng this contention appellant entirely overlooks our ruling that the business in which it was .engaged in this District was “a system of-assessment life insurance,” and that the laws, of the District applicable to business of that kind apply.

When this policy was issued, the act of January 26, 1887 (24 Stat. at L. 367, chap. 47), required each life insurance company doing business here to attach to every policy issued by it “a copy of the application made by the insured, so that the whole contract” might appear in said application and policy. Later this act was superseded by section 657 of the code [31 Stat. at L. 1294, chap. 854], but as the effect of these two provisions of law is the same, it is unnecessary for us to determine which applies here. The later enactment simply makes plainer the intent of the former, namely, that no defense to a policy should be permitted that was based upon something not contained therein or not attached thereto. Metropolitan L. Ins. Co. v. Hawkins, 31 App. D. C. 493, 14 Ann. Cas. 1092; Metropolitan L. Ins. Co. v. Burch, 39 App. D. C. 397. It follows, therefore, that we must look solely to the terms of the contract, that is, to the terms of this so-called benefit certificate, to determine the measure of the insured’s right to change the beneficiary.

The appellee, as previously stated, was the wife of Behrend at the time this policy was issued, and was named as the beneficiary therein. Not only this, but the policy was delivered to and subsequently held by her, and the second policy was issued without her consent. In our view, the rule laid down in Central Nat. Bank v. Hume, 128 U. S. 195, 32 L. ed. 310, 9 Sup. Ct. Rep. 41, is controlling here. In that case it was ruled that a married man may rightfully devote a moderate portion of his earnings to insure his life for the purpose of making reasonable provision for his family after his death, without being held to intend to hinder, delay, or defraud his creditors, provided that no such fraudulent intent is shown to exist, or must necessarily be inferred from the surrounding circumstances. After pointing out that the wife and children have an insurable interest in the life of the husband and father, the court said: “We think it cannot be doubted that in the instance of contracts of insurance with a wife or children, or both, upon their insurable interest in the life of the husband or father, the latter, while they are living, can exercise no power, of disposition over the same without their consent, nor has he any interest therein of which he can avail himself, nor upon his death have his personal representatives or his creditors any interest in the proceeds of such contracts, which belong to the beneficiaries to whom they are payable. It is indeed the general rule that a policy, and the money to become due under it, belong, the moment it is issued, to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance by any act of his, by deed or by will, to transfer to any other person the interest of the person named.” It was held that this rule applied “in respect to policies running to the person insured, but payable to another having a direct pecuniary interest in the life insured.” The court directed attention to the obvious distinction between the transfer of a policy taken out by a person upon the insurable interest in his own life and payable to himself or his legal representatives, and the obtaining of a policy upon the insurable interest of his wife and children and payable to them.

While it is unnecessary to determine what the rights of appellee would have been had we adopted appellant’s contention that it was merely a fraternal beneficial association, attention may be directed to the ruling in Supreme Lodge, K. L. H. v. Ulanowsky, 246 Pa. 591, 92 Atl. 711. There a member of a fraternal and beneficial society held a benefit certificate payable to his daughter. The rules of the organization permitted a change of the beneficiary at any time on the application of the member. Prior to his second marriage, this member entered into an agreement to give his intended wife the certificate upon their marriage, and this agreement was carried out. Thereafter the wife paid a large part of the dues of the society out of her earnings. The husband, without the consent of his wife, again made his daughter the beneficiary, and upon his death both claimed the proceeds of the certificate. The court held that upon delivery to the wife “she acquired a legal as well as an equitable right to the benefit of the certificate, which could not be taken away from her without her consent.” See also Lemon v. Phoenix Mut. L. Ins. Co. 38 Conn. 294.

In the present case the appellee had an insurable interest in the life of her husband, and when this certificate or policy was issued, naming her as the beneficiary, her interest therein became fixed and certain. It therefore is no defense to this action that a second certificate was issued in utter disregard of her rights. The judgment of the trial court therefore was correct, and is affirmed, with costs. Affirmed.

* See ante, page 264.

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Dissenting Opinion

Mr. Chief Justice Shepard

dissenting:

I am compelled to dissent from the opinion and judgment in this case.

It was tried upon affidavits on a motion for judgment under rule 73. The affidavit of defense sets out the constitution and laws of the Royal Arcanum. This constitution and laws show articles of incorporation filed and certified under the laws of Massachusetts.

■ Prom this it appears that the objects of the order are: Pirst, to unite fraternally all white men of sound bodily health-and good moral character, who are socially acceptable and between eighteen and fifty-five years of age. Second, to give all inoral and material aid in its power to its members and those dependent upon them. Third, to educate the members socially, morally, and intellectually; and to assist the widows and orphans of deceased members. Fourth, to establish a fund for the relief of distressed and sick members. Fifth, to establish a fund for the payment of disability and old-age benefits. Sixth, to establish a widows and orphans benefit fund, from which, on satisfactory evidence of the death of a member who has complied with all its lawful requirements, a sum not exceeding $3,000 shall be paid to the wife, children, relative of, or persons dependent upon, such member, as limited and described in the laws of said order.

The general laws provide that no persons shall be admitted to membership except between the ages of eighteen and fifty-five years, must be a man of sound health, of good moral character, believer in a Supreme Being, and competent to earn a livelihood for himself and family.

Certain occupations are proscribed. These include selling or serving’ intoxicating liquors at retail or wholesale, and certain railroad employees, enlisted men in the Army, enlisted men in the Navy, electric railway or light linemen, telegraph and telephone linemen, and other dangerous occupations.

Each applicant is required to sign an application for admission to membership, giving his birth, age, occupation, residence, and so forth, and the name, residence, and relationship or dependence of his proposed beneficiary. The application must be accompanied with a fee for a medical examination. The medical examiner is required to malee a careful examination and report. If rejected by the supervising medical examiner he shall be declared ineligible. If he refuses or neglects to undergo an examination within six weeks from the date of the secretary’s notice he shall be declared rejected. Each applicant on presenting himself shall sign the application to the order to pay to the widows and orphans benefit fund the assessment for the current month prescribed and fixed for his age at the time of receiving the degree. Each applicant receives a benefit certificate, and he shall enter upon his application the name or names, residence, relationship, or dependence of the person or persons of the classes entitled to whom he desires his benefit paid, and the .same shall be entered in the benefit certificate according to said direction. A list of the persons designated included members’ wives, children, parents, brothers, and sisters, and so forth.

Buie 333 of the order provides that a member may at any time, when in good standing, pay a fee of 50 cents, make a written surrender of bis benefit certificate, and direct that a new certificate be issued to him, payable to such beneficiary or beneficiaries as such member may designate, in accordance with tbe laws of tbe order.

Buie 336 provides that in case a benefit certificate is lost or beyond a member’s control, the member may, in writing, surrender all claim thereto, and direct that a new certificate be issued to him, payable to tbe same or a new beneficiary or beneficiaries in accordance with tbe laws of tbe order, and be entitled to such new certificate if, but not until, be shall furnish proofs of tbe facts in tbe case, by an affidavit or otherwise, to, and to tbe complete satisfaction of, tbe secretary, and shall pay tbe required fee of 50 cents.

Buie 337. Tbe change of beneficiary, if the new beneficiary is a person who would be a legal beneficiary, shall take effect upon tbe delivery of the benefit certificate, tbe written surrender, and direction for change as provided in tbe laws of tbe order; and in case tbe certificate is lost or beyond tbe control of tbe member tbe proof thereof, and the payment of the fee of 50 cents to tbe regent, secretary, and so forth.

Buie 338 provides tbe issuing of a new benefit certificate, in accordance with tbe laws of tbe order, shall cancel and render null and void any and all previous certificates issued to the member, but this provision shall not limit or affect any other law of tbe order rendering null and void such previous certificate, nor shall such issuance be a necessary condition precedent to such cancelation.

Other rules provided tables for assessing the payments on certificates adjusted to the ages of members, and these assessments shall be paid to the collector without notice, in twelve regular assessments in each calendar year.

The Boyal Arcanum was a beneficial association consisting of members, but was nevertheless engaged in insuring the lives of its members in the District of Columbia. It consisted of members who joined the order upon application, and to whom benefit certificates were issued upon payment of said assessment, which might be increased from time to time at the will of the order.

The member Behrend joined the order and received his benefit certificate March 1, 1899. This certificate is conditioned upon the member being in good standing a,t the time of his death, and that the certificate shall not have been surrendered by the member, and another issued, at his request, in accordance with the laws of the order, which permit the change of beneficiary.

The affidavit of defense shows that the beneficiary in this certificate had been changed by the member sometime before his death, in the manner prescribed by the constitution and laws. It is contended in support of the judgment that this action must be controlled by section 6 of an act of Congress regulating insurance in the District of Columbia, approved January 26, 1877.

This act of six sections relates to life and fire insurance in the District of Columbia, and section 6 was intended to remedy the effect of the decisions, which had established a rule to the effect that when an application was referred to in a policy of life insurance or fire insurance that a defense could be made upon the falsity of any warranty therein. Consequently the application was required to be attached to the policy, so that the insured might have in his possession the whole contract. The provision of section 6 is as follows: Each life insurance company doing business in the District of Columbia shall attach to each policy issued by such company a copy of the application made by the insured, so that the whole contract may appear in said application and policy.

This section was changed by section 657 of the Code of the District of Columbia [31 St-at. at L. 1294, chap. 854], which requires each life insurance company, benefit order, or association doing a life insurance business, to deliver with each policy a copy of the application made therefor, so that the whole contract may appear in said application and policy, in default of which no defense shall be allowed to such policy on account of anything contained in or omitted from such application.

The certificate was in force at the time this section was enacted, This section was intended to obviate the defect in the former one. It covered just such cases as this, where the application does not form any part of the contract, but the rules of the order enter into it.

The plaintiff had no vested interest that renders the laws of the order inoperative as to her. Berkeley v. Harper, 3 App. D. C. 308-313; Grand Lodge, A. O. U. W. v. Kohler, 106 Mich. 121, 63 N. W. 897; Holden v. Modern Brotherhood, 151 Iowa, 673-680, 132 N. W. 329; Lahey v. Lahey, 174 N. Y. 146, 61 L.R.A. 791, 95 Am. St. Rep. 554, 66 N. E. 670; Voigt. v. Kersten, 164 Ill. 314, 45 N. E. 543.

This section affected the remedy on contracts of insurance, and did not apply to a change in a contract.

Moreover, Congress is under no inhibition against the enactment of laws impairing the obligation of a contract.

The defense in this case is not based on anything set out or omitted from the application.

Admitting that the insured is a member in good standing, had paid all assessments, and that his certificate was valid, the defense is that as a member of this mutual association he accepted the certificate with the knowledge that he might change the beneficiary by complying with the laws of the order provided therefor. This change was made in due compliance with the laws. The certificate was issued, received, and held by the beneficiary subject to the right to change the beneficiary.

I am of the opinion that the judgment should be reversed.

The Supreme Court of the United States granted a writ of