Lake v. Minnesota Masonic Relief Ass'n

MITCHELL, J. This action was brought upon a certificate of membership issued by defendant to plaintiff’s husband, James H. Lake, since deceased. The complaint alleged that by the terms of this certificate the defendant promised to pay to her, as beneficiary,, within 90 days after proof of the death of James H. Lake, a sum-equal to $1 for each member of the association at the date of his; death, not exceeding $2,000, and that the membership at that date was 1,624. The defendant, by. its answer, alleged, in substance1,, that it only agreed to make an assessment on its members, in accordance with its by-laws, to pay the death loss, and to pay plaintiff the amount realized therefrom, not exceeding $2,000; that it had made such assessment; that the amount realized therefrom was only $680.90, which it offered to pay. It appears that the defendant is a corporation organized under [98] the laws of this state in 1873. Its purpose, as expressed in its articles of association, is “to provide for the payment to the widow, children, or mother (or to such person or persons as may have been duly designated to receive the same) of any member of such society as may from time to time decease, of such sum as the bylaws of such society may from time to time prescribe; the said sum to be raised by voluntary contribution to the same by the members of said society of such dues as such by-laws may from time to time prescribe, * * * and said sum so to be paid * * * in no case to exceed the total sum of such dues remaining in the treasury of said society.” The only portions of the bylaws which are here material are sections 3 to 6, inclusive, of article 10. Section 3 provides that at the death of a- member each surviving member shall be assessed (payable bimonthly) at certain specified rates, ranging, according to the age of the member when he joined the association, from 70 cents to $1.50 per each $1,000 of insurance carried by the member. Section 4 provides that 80 per cent, of all moneys received in payment of assessments shall be designated as “mortuary funds”; that all other moneys received by the association shall be credited to the “contingent fund,” and may be used (1) to defray expenses; (2) to pay benefits before assessments therefor are actually collected, provided that any money so paid out shall be replaced by the assessments made for such benefits; (3) to pay benefits without an assessment whenever the directors are of the opinion that it can be done consistently with the interests, of the association; (4) to be invested in securities, if deemed expedient by the directors. Section 5 provides for the creation of a “reserve fund,” not exceeding $25,000, by appropriating to that purpose the excess of the contingent fund over $2,000. This reserve fund may be deposited or invested, the interest to be placed to the credit of the contingent fund, but the principal never to be drawn upon except in payment of extraordinary death losses, when deemed by the directors for the best interest of the association to do so. Section 6, which is the only part of the bylaws providing for the amount to be paid the beneficiary on the death of a member, expressly provides that the amount to be paid shall be “one dollar for each member,” not exceeding the limit of the benefit, which in the present case was $2,000. Upon the back [99] of Lake’s certificate was indorsed the following extract from the by-laws: “At the death of a member, his widow or designated heirs shall receive a sum equal to one dollar for each member; said sum, however, not to exceed two thousand dollars, which amount shall be paid within sixty days from the time at which satisfactory evidence of death shall have been received.” It was admitted that the number of members of the association at the date of Lake’s death was 1,624. The defendant introduced evidence from which it appeared that after notice of Lake’s death it made a bimonthly assessment for this and nine other death losses; that, 1,553 members paid the assessment; that the total amount realized therefrom was $7,943.80, of which only $756.55, including the 20 per cent, (reduced to 10 per cent, by the directors) applicable to the contingent fund, was on account of the death of Lake. It Is also fairly inferable from the evidence that the defendant has no reserve fund; and it does not appear that it has any contingent fund, unless it be the 20.(or 10) per cent, of the amount realized from the assessments on account of these 10 deaths. On this evidence the court ordered judgment against the defendant for $1,-624. It is clear to us that, whatever more its name may imply, the defendant is merely a mutual life insurance company proceeding on the assessment plan, and hence its contracts are to be construed according to the same rules as those of any other mutual life insurance company. Conceding, as we must, that the articles of association are the supreme law of every contract between the association and its members, and that their provisions, as well as those of the by-laws, not inconsistent with the articles, enter into and form a part of every such contract, and giving them their full effect, we are clearly of the opinion that the contract of the defendant was not merely to make an assessment on its members for plaintiff’s benefit, nor to pay out of a special fund, but to pay her the sum stipulated, not exceeding the amount realized from an assessment for the death loss made pursuant to the by-laws. The word “remaining,” used in the articles of association, must be construed as meaning “received” or “realized.” There was an' implied, if not an express, obligation upon the defendant, upon proof of the death of Lake, to make an assessment, .to the full extent author [100] ized by the by-laws, to raise funds to pay the benefit. If it had appeared that defendant had done this, then plaintiff’s recovery would have been limited to the amount realized from such assessment. But the burden of proving this was on the defendant. All the authorities, so far as we are aware, are agreed that in the case of a contract like this, if the company refuses or neglects to make the proper assessment, the beneficiary may maintain an action at law on the contract, and that the company cannot defeat a recovery by showing that it has not made an assessment. To permit it to do so would be to allow it to take advantage of its own wrong. There is, however, some difference of opinion as to the proper form of pleading in such cases. Rome cases hold that an action in the nature of assumpsit will lie, declaring on the contract as one to pay the limit of the insurance, leaving it to the company to plead, as well as prove, any facts which would reduce the recovery below that amount, while others hold that the action should be in the nature of one for damages for breach of the contract, in failing to make an assessment. See Elkhart Ass’n v. Houghton, 103 Ind. 286, 2 N. E. 763; Lueders’ Ex’r v. Hartford Ins. Co., 4 McCrary, 149, 12 Fed. 465; Freeman v. National Benefit Soc., 42 Hun, 252. Also, Curtis v. Mutual Benefit L. Co., 48 Conn. 98; Earnshaw v. Sun Mut. Aid Soc., 68 Md. 465, 12 Atl. 884. In view of the issues tendered by the answer, and the way in W'hich the action was tried, any question of pleading was waived in this case, and hence it is unnecessary to consider which is the proper form; for even under the latter the proper rule of evidence, and the one sustained by the great weight of authority, is that the limit of the insurance is prima facie the measure of the plaintiff’s damages, and the burden is on the defendant to prove any facts that would reduce them below that amount. The fact that all these matters are peculiarly within the knowledge of the company, and presumably are not within the knowledge of the beneficiary, is sufficient reason for adopting this rule as to the burden of proof. In' this case the defendant failed to prove that it had made an assessment as provided by the by-laws. It does not appear at what rate it assessed its members. The assessment must have been purely arbitrary, and at a less rate than authorized by the by-laws, because, if every member carried only $1,000 insurance, and paid [101] only the lowest raté, of 70 cents, the amount realized on the assessment for the 10 deaths would have been $10,871, instead of $7,943.80. Therefore the defendant failed to prove any facts to reduce plaintiff’s recovery below $1,624. We have not considered whether the defendant sufficiently excused its omission to introduce in evidence the amendment to section 6, art. 10, of the by-laws, because, if introduced, it would not have aided the defendant. Order affirmed.