American Mutual Aid Society v. Helburn

JUDGE BENNETT delivered the opinion of the court. By an act of the Kentucky Legislature, approved January 9, 1880, appellant was created a body-politic for the purpose of providing financial aid to the widows, orphans, heirs, legatees and assigns of its deceased ■members. On the tenth day of August, 1881, Samuel Helburn became a member of appellant’s Society, and received a certificate of membership from appellant, in which appellant agreed to pay the appellees, sons of Samuel Helburn, in sixty days after satisfactory proof of the death of Samuel Helburn, the sum of money to which the beneficiaries might be entitled. — 5 — The eighth section of the act provides that the beneficiary of the deceased member shall receive a benefit, not to excéed three thousand dollars, payable within sixty days from the date of satisfactory proof of death, etc. On the twenty-fifth day of April, 1884, Samuel Helburn died, and the appellees presented to appellant proper proof of his death, and demanded the payment of the sum of three thousand dollars, which they alleged was due them according to the terms of said certificate and membership of Samuel Helburn. The appellant' refused to pay said sum or any part of it. Thereupon appellees brought suit in the Jefferson Court of Common Pleas against the appellant, by which they sought to recover judgment against the appellant for the sum of three thousand dollars. The appellant, by its answer, attempted to defend the action upon the ground that Samuel Helburn, in his lifetime, had failed to pay some assessments made against him by the appellant, to meet the payment of the policies of several members of said society who had died, and that he refused to pay said assessments, and by reason thereof he forfeited his membership in said society, and all benefits arising from his membership therein. The lower court sustained a demurrer to the answer. Appellant then amended its answer. A demurrer was sustained to the amended answer. The appellant again amended its answer. A demurrer was sustained to that also. Another amendment was offered, which the court rejected, and thereupon gave judgment for the appellees for the sum of three thousand dollars. So much of the answer as it is material to notice is as follows: “De — 6 — fendant says that on the first day of February, 1884, three assessments of $1.80 each were duly made by defendant against, and clue notice thereof given to Samuel Helburn, in accordance with the terms of said charter, upon the deaths of Mr. Moran, who died December 7, 1883, and Susan W. Harrison,' who died December 9, 1883, and E. T. Hamilton, who died December 11, 1883, who died members of said society; and payment of said assessments, which amounted to $5.40, was by it demanded of said Samuel Helburn, 'who failed and refused to pay the same,” etc. The third section of appellant’s charter provides that it shall be controlled by a Board of Directors. The thirteenth section provides that the Board of Directors may appoint an executive committee of three, to make assessments, etc. Section ten provides that “upon the death of any member of the Society, each surviving member may be assessed, and when assessed, shall pay to the secretary as follows: Members of the first class, 90 cents; members of the second class, 95 cents; members of the third class, $1.15; and members of the fourth class, $1.80.” Section eleven provides that “any member failing to pay his annual due or assessment within thirty days after notice has been served upon him or sent to him, shall forfeit his membership and all benefits arising therefrom,” etc. Section twelve provides for the raising of a permanent fund from-so much of the admission fees, annual dues and assessments not used in paying benefits and expenses. And if said permanent fund should, at any time, reach an amount sufficiently large, in the opinion of the directors, they may have the power to suspend the assess — 7 — ments and pay the benefits out of said fund, so long as they may think it safe to do so. The foregoing quotations from appellant’s charter show, first, that assessments to pay the benefits to the representatives of its deceased members must be made upon the surviving members of the Society by its Board of Directors, or that they may delegate that authority to an executive committee. Second, that by the direction of the Board of Directors, the benefits due to the representatives of the Society’s deceased members need not be raised by assessments on its surviving members, but may be paid out of the Society’s permanent fund. Thus, we see, that no assessment can be made on the surviving members of the Society to pay the benefits due the representatives of its deceased members, unless the assessments are made by the Board of Directors, or by an executive committee, appointed by them for that purpose. Also, that the Board of Directors may dispense with the assessments on the surviving members, and direct the payment of the benefits to be made out of the permanent fund. Under the charter no legal assessment can be made upon the surviving members of the Society to pay the benefits due the- representatives of its deceased members, except in the manner above indicated. Also, the Board of Directors have a discretion to dispense with said assessments, and direct the payment of the benefits out of the permanent fund. And no one but the Board of Directors has this power. The question then arises, before a member of the Society can be 'compelled to pay an assessment against him, or forfeit his membership and benefits arising therefrom by — 8 — reason of his failure to pay the assessment made against him, should it not appear affirmatively that the assessment was legally made, to-wit, by the Board of Directors themselves, or by an executive committee duly appointed by them to make the assessment on the members of the Society. May on Insurance, section 557, says: “An assessment can only be valid when laid under the conditions-stated in the charter. A general vote of the directors to assess to a certain amount to pay the indebtedness of the company is no valid assessment. It must appear that such a state of affairs existed when the vote was passed as to authorize the vote itself, as that losses and expenses had actually been incurred beyond the available assets in hand, which could not be met but by an assessment. * * The liability of the assured is-conditional, and depends upon the contingency of the happening of losses and expenses to which he shall be-liable to contribute, which have been duly ascertained by the directors, and which make necessary a resort to an assessment thereon. It is a credit given for a part of the consideration of the contract. The promise of the insured is to pay upon such conditions, and the existence of these conditions must be established affirmatively before a call for payment * * can be en-enforced. * * And the assessment must be made in strict accordance with the authority given. Even a more equitable -mode than that provided by the charter cannot be adopted. Where the charter authorizes the directors to make an assessment, it can be made by them only.” In the case of Thomas v. Whallon, 31 Barbour, — 9 — 178, the court held that the promise of the assured is to pay upon certain conditions,' and the existence of those conditions must be shown to exist. “If the directors of the company, in making the assessment, acted judicially, the assessment itself perhaps would be evidence, at least prima facie, of the necessity; but they do not act judicially, but ministerially, and they have no arbitrary discretion in the matter; but they are controlled by the explicit provisions of the statute, and must, by proper averments and proof, bring themselves within the terms of those provisions before they can enforce the collection of the premium notes.” In the case of the Long Pond Mutual Fire Insurance Company v. Houghton & Hunt, 2 Gray, 279, it was. held that the burden was upon the plaintiff to establish the fact of a legal assessment. In the case-of the Pacific Mutual Insurance Company v. Guse, 49 Missouri, 332, the court held that it devolved upon the plaintiff to aver and prove that the contingency had happened upon which the defendant’s liability had become absolute. That there is no arbitrary discretion to make assessments by the directors, and that they do not act judicially, but ministerially, and assessments can not be made unless the necessity therefor properly and legally arises. In the case of Home Insurance Company v. Shideler, 36 Ind., 430, the court held that an assessment or apportionment was a condition precedent, necessary to be averred in the complaint, and is not complete and consummated until it is ascertained, fixed and determined, by carrying out upon the extension book the amount that each member is to pay. That the direct — 10 — ors of the company have no arbitrary discretion in making an assessment, bnt they are controlled by the explicit provisions of the statute, and must, by proper averments and proof, bring themselves within those terms and provisions,” etc. Thus, we see, that in making assessments by the appellant upon its members, it does not act in a judicial, but in a ministerial capacity. Therefore, no presumption can arise in favor of the regularity or legality of its assessments. That the appellant’s Board of Directors, or an executive committee appointed by them, are the only persons authorized by appellant’s charter to make assessments against its surviving members to pay the benefits due the representatives of its deceased members. That a deceased member of the Society should have died, and that his representative was entitled to a benefit arising from his death, and that an assessment upon all of the surviving members was actually made by the Board of Directors, or an executive committee appointed by them, for the purpose of paying said assessments, are conditions precedent to the right of the appellant to demand payment of an assessment from any of its members. And they are not bound-to pay any assessment until these things occur. Nor' do they forfeit their membership by reason of their failure to pay such assessments, unless these things have occurred. And when the Society relies upon the failure of any of its members to pay his assessment as a forfeiture of his membership and benefits under its charter, it must show affirmatively that the assessment was made in the manner indicated, other — 11 — wise the member cannot be said to be in default. The appellant’s answer, tested by these rules, is radically defective. There is no allegation in it, that the assessment was made by the Board of Directors, or by an executive committee appointed by the Board of Directors. The allegation is that “the assessment was duly made against Samuel Helburn by defendant in accordance with its charter.” The word “duly” preceding the word assessment, signifies nothing but the conclusion of the pleader. It asserts no fact. The word “assessment” does not mean that the appellant, by its Board of Directors or executive committee appointed by the Board of Directors, made the assessment. The words, “in accordance with its charter,” plead merely a conclusion of law. They assert no fact. (Ormsby v. Louisville, 79 Ky., 197.) Neither of the amendments filed by the appellant cured this defect, nor did the amendment offered by the appellant, and rejected by the court, cure it. For the foregoing reasons the judgment of the lower court is affirmed.