Hagerling v. Pension Mut. Life Insurance

Opinion by Henderson, J., The learned judge of the trial court refused judgment for want of a sufficient affidavit of defense for the reason that the American Life and Annuity Society lacked authority to issue a benefit certificate containing a return value contract. It was not alleged that the laws of the society authorized such payment, nor did the certificate on its face make reference to such a contract. It was claimed that the liability arose by reason of a printed endorsement on the back of the policy of a mem [175] orandum showing the return value of the policy at stated annual periods. • It is asserted in the affidavit of defense that 318 of such certificates were issued and that there were about two thousand certificates issued on which there was no such endorsement. It is averred that no consideration was paid by the holders of such certificates because of such endorsement and the alleged contract arising therefrom, and it appears that the same rate of assessment was charged on all of the certificates issued by the association. If the policy is to be treated as a life insurance contract, as contended by the appellant, the Act of July 2, 1895, P. L. 130, prohibiting discrimination between insurance of the same class and equal expectations of life would seem to apply to the plaintiff’s policy. If the statute applies only to corporations which are strictly life insurance companies, the plaintiff must rely on the powers granted by the Act of April 6, 1893, P. L. 10, under which it was incorporated, and the rules and regulations adopted by it. The object of the organization as set forth in the chapter was to aid and assist its members by the payment of death benefits to the relatives or dependents of deceased members, and for that purpose to create a benefit fund; to issue certificates of insurance; to issue policies for the protection of its members in case of illness, old age, accident or total disability, and funeral benefits, and to inculcate among its members a fraternal feeling, and to assist members in need and distress. Neither in the charter nor in the rules and regulations is any provision made for the withdrawal by a member of the fund which he had paid into the order. But if it be conceded that the association had authority to issue certificates containing withdrawal value contracts, another view of the case supports the judgment of the court below: The plaintiff was a member of the organization issuing the certificate and therefore is charged with knowledge of its objects and its mode of business. It was not a corporation for profit but for [176] mutual aid as provided for in its charter. The assessments paid by the members were not paid to be held by the association for its own advantage or profit, but were to be paid out to persons entitled thereto under the obligations assumed by it. The beneficiary named in á certificate became a creditor of the corporation on the death of the insured, and liability arose from time to time in this way. It is averred in the affidavit of defense that the assets of the society were not sufficient to meet the liabilities on the 318 return value certificates if they are to be treated as valid contracts; as a result of which the creditors of-the association who are beneficiaries under certificates issued, would receive nothing or would be put on the same level with the members of the association who were withdrawing funds which they had paid in for the purpose of meeting the indebtedness of the society with respect to benefits to be paid to bene.ficiaries named in the certificates. In such a state of the case members holding certificates with the return value endorsement thereon could take from the creditors of the society a large proportion of the fund which was provided to be paid to them. It is averred in the affidavit, and the averment seems not to be disputed, that there was no fund set apart to meet a provision for a return of assessments paid to members. The assessments were not sufficient to meet the obligations of the society on the losses occurring from time to time, as a result of which it was unable to transact its business and entered into the trust contract set forth in the statement of claim. The undisputed showing in the affidavit of defense of the assets and liabilities of the society makes it evident that an insufficient sum was collected from the members to cover the policies having the return value endorsement and the liability arising under the other policies. In such circumstances a certificate holder would only be entitled to receive payment of his matured certificate when the assets are sufficient to pay it and to meet the obligations arising under other con [177] tracts issued by the society. It would be manifestly unjust to pay this member the full amount of his claim and leave the society without resources to meet its obligations tO' its numerous creditors. Whatever right the plaintiff may have under his contract, he is bound as a member of the association to aid in the performance of its contracts with other persons, and equity does not permit him to recover at the expense of the society’s creditors. Fraternal Guardian’s Assigned Est., 159 Pa. 594; Order of Tonti’s Assigned Est., 173 Pa. 464; Frowert v. Blank, 205 Pa. 299. The contract relied upon by the plaintiff was made with the defendant as trustee, and the funds received by it were to be administered in accordance with the obligations of the American Life and Annuity Society. As no fund was created for the payment to a member of the withdrawal value of a policy, nothing came into the hands of the trustee to meet such an obligation and the case is unlike Sheets v. Protected Home Circle, 256 Pa. 172, in this respect. In that case there was a fund for the payment of money to members who reached the age of permanent physical disability, and the organization bound itself to distribute this fund in accordance with the laws of the order and the rights of the claimant under the contract. We conclude, therefore, that the court was not in error in refusing judgment for want of a sufficient affidavit of defense. The judgment is affirmed.