Bass v. Life & Annuity Ass'n

— 206 — The opinion of the court was delivered by Mason, J.: On April 29, 1898, the Life and Annuity Association, an incorporated fraternal beneficiary society, issued a certificate to A. Bass, undertaking to insure his life for $2000 in consideration of the monthly payment of $2.10. The certificate provided that if payments were maintained for twenty years it should become paid up; that at any time after three years the holder might receive in lieu of it a paid-up certificate for as many twentieths of $2000 as he had completed yearly payments. On May 29, 1913, having kept up his payments to that time, Bass asked for a paid-up certificate for $1500. His request was not granted. He brought action against the association for damages, and recovered a judgment for $873, from which it appeals. The plaintiff’s application for membership contained the same provisions as are set out in full in Moore v. Annuity Association, 95 Kan. 591, 148 Pac. 981, which upon the authority of that case rendered his contract subject to any changes that might be made in the by-laws or rules. On July 23, 1913, the association adopted a by-law requiring a'member who desired a paid-up certificate to pay a certain amount into the reserve fund. This amendment does not affect the rights of the plaintiff because they had already become fixed. When he made the request for a paid-up certificate it became the duty of the association (if he was then entitled to it) to issue it at once. It could not delay action and then impose a new condition upon the assertion of the right which had already accrued. (Hart v. Annuity Assoc., 86 Kan. 318, 120 Pac. 363.) The defendant complains of a ruling rejecting its offer to show that in 1900 a by-law which provided for the issuance of a paid-up certificate at any time after three years was amended by inserting a condition as to the time and manner of making application therefor, and that in 1910 it was repealed altogether. No point is made with reference to the amendment, which was not pleaded, and which seems to be referred to merely as showing the history of the by-law. But it is urged that the repeal of the by-law cut off the plaintiff’s right to obtain a paid-up certificate, which was not restored until 1913, when the condition of an additional payment was — 207 — attached. Conceding the power of the association to deprive the plaintiff of his right in this respect, a purpose to do so was not shown. The by-law on the subject was merely repealed. No affirmative action was taken indicating an intention to change the effect of any certificate already issued. No showing was offered of any conduct or circumstance suggesting such a design, and it is not readily to be inferred. (29 Cyc. 72; Note, Ann. Cas. 1913 C, 677.) The right of the plaintiff to a paid-up certificate was not based upon the existence of the by-law but upon the express terms of his contract. The matter was not referred to on the face of the certificate, but on the-back of that document were printed a number of statements regarding its conditions and effect. These constituted a part* of the contract. (25 Cyc. 744.) One of them purported to confer the right to a paid-up certificate, in the words of the by-law, but without reference to it. The plaintiff contends that by virtue of a rule in existence when he became a member no change could be made affecting his rights. This rule, designated as “law 52,” was not set out in any of the abstracts or briefs or otherwise called to the attention of the court in the Moore case. It concludes with the words: “No amendment made to these laws shall effect any certificate issued before said change is made.” The appellant’s abstract in the present case recites that an offer to show the repeal of such law was made and rejected, but this ruling is not open to review, for no evidence on the subject is shown to have been produced at the hearing of the motion for a new trial. (Civ. Code, § 307.) However, the argument based upon this law need not be considered, for we are persuaded that, assuming the existence of the power to cut off the right to a paid-up certificate, the mere repeal of the by-law on the subject did not have that effect. The defendant maintains that if the plaintiff’s contentions are otherwise sound, his remedy lies solely in requiring the issuance of a paid-up certificate — ¡that an action for damages is not maintainable, because owing to the character of the association it has no funds from which a money judgment could be paid, and no machinery by which such fund could be provided. There are decisions which support that theory, but the weight of authority is to the contrary. (Fort v. Iowa — 208 — Legion of Honor, 146 Iowa, 183, 199, 200, 123 N. W. 224.) The fact that the means have not been provided for enabling a corporation to respond to a money demand does not render it immune from liability. If the defendant in its corporate capacity perpetrates a wrong that imposes upon it a clear pecuniary obligation the character of its organization can not prevent a judgment being rendered thereon. In the present case another form of remedy happens to be possible, but that does not affect the question of jurisdiction. We conclude that the courts have authority to render a money j udgment in such circumstances. Whether it should be exercised here is a matter that will be considered later. The defendant seeks to invoke the protection of a clause in the plaintiff’s certificate to the effect that no action shall be maintained upon it until the claim thereunder had been submitted and determined as provided by the laws of the association. A by-law provides that the board of directors shall require all claims to be presented in writing, and that no claims shall be paid until approved by them. No issue regarding this matter was presented by the answer, which denied all liability. It is therefore clear that the presentation of a written demand would have been fruitless, and its omission is not important, even if, as seems doubtful, the clause referred to was intended to apply in such a situation as that here presented. Evidence was given that a paid-up policy for $1500 in an old-line life insurance company would have cost the plaintiff $873.03, and this obviously controlled the verdict, as shown by its amount — $873. The defendant complains of this basis of recovery, and we think with justice. The ordinary measure of damages for the wrongful refusal to issue a paid-up policy is said to be the cost of just such a policy as was stipulated for, in a .responsible company. (Life Insurance Co. v. Kelso, 16 Kan. 481.) Here there was no showing that the policy of an old-line company referred to by the witness was substantially equivalent to the plaintiff’s certificate, and of course that is not the fact. The usual old-line policy confers a number of privileges mot enjoyed by'the holder of a beneficiary certificate — for instance, that of turning it in at any time and receiving its surrender value in cash, or of getting a — 209 — loan upon it. But more than that, the insurance policy is issued as a purely business contract, and is charged for on that basis, a presumably responsible concern undertaking to make stated payments under stated conditions. The literal keeping of the contract on its part is deemed to be almost certain., while the measure of' protection of a beneficiary certificate,issued by an association which can pay nothing except out of the contributions of its members, will be affected by a number of considerations, one of the most important being the good judgment with which its collections are adjusted to its prospective liabilities. Doubtless one party to a contract can not. ordinarily be heard to suggest his own inability to perform his agreement, in mitigation of damages for its breach. But a practical view must be taken of the present situation, and the question for determination is, What loss has the plaintiff actually suffered by the refusal of the defendant to issue him a paid-up certificate. If the problem is to be solved by determining what it would cost him to obtain a substitute, the substitute considered should be something of the same value as the thing denied him, not something of far greater worth. Evidence of the cost of an old-line policy may be of some utility in attempting to estimate the worth of a certificate in an assessment association, but it clearly can not determine it. The degree of probability of ultimate payment is an important factor. It is difficult to form a judgment on that subject, and still more difficult to give it expression in terms of dollars and cents. But doubtless in case of necessity some sort of reasonable estimate can be made as to the value of any particular insurance contract, taking all the circumstances into account. Recurring to the question as to the form of plaintiff’s remedy, the ordinary rule is that where an insurance company violates its agreement to issue a paid-up policy the person aggrieved has the option to enforce specific performance or to exact compensation in damages, the choice lying with the innocent party, and not with the wrongdoer. (Life Insurance Co. v. Kelso, 16 Kan. 481.) But some modification of the rigor of this rule is permissible in the present case. The defendant is a cooperative association, having no capital stock, which made the mistake of writing certificates upon too liberal terms. In refusing to issue a paid-up certificate to the plain — 210 — tiff it no doubt acted in good faith, and the grounds upon which its action was based are not wanting in plausibility. The plaintiff carried his certificate for fifteen years, and therefore had paid upon the basis of the original contract $378. If he had died during this time his beneficiary would presumably have been paid the full amount named — $2000. So that he has had the benefit of insurance for that period. If he were now to receive the amount of his judgment — $873—the transaction would be a most profitable one to him. If he were to be repaid the amount he has actually expended, with interest, less the value of the insurance he has had, he would be nothing out of pocket,, and would lose only the advantage he may be supposed to' have derived from having made a good bargain. He is entitled to require the association to perform the contract, so far as possible, however improvident its terms. But the defendant did not promise to pay the plaintiff $873, or any other sum. It undertook to give him a paid-up certificate, and if it were still to do that, he would have exactly what he bargained for. Such a certificate, if issued, might never be paid, but that is a possibility inherent in the nature of the original contract. The plaintiff has no superior equities over other members. He is in no respect a preferred creditor. In view of the character of the association, of the good faith of its conduct, and of the great difficulty of estimating the value of any paid-up certificate it might have issued, we think justice will be best subserved by giving it the opportunity to perform its. contract specifically. The judgment is therefore modified and the cause remanded for these further proceedings: If within thirty days after the mandate is spread of record in'the district court the defendant shall issue to the plaintiff a paid-up certificate for $1500, and reimburse him for several payments which he has made since requesting it, the case to be disposed of by a judgment against the defendant for the costs; otherwise a new trial to be had upon the sole issue of the amount of the plaintiff’s damages, measured by the value of a paid-up certificate for $1500 issued by the defendant on the date of his request, judgment to be rendered for the plaintiff for the amount so determined. The costs in this court will be divided equally between the parties.