Gibbs v. Knights of Pythias

NOBTONI, J. —Tbis is a suit on a certificate of life insurance. Plaintiff recovered and defendant prosecutes the appeal. . Tbe principal question for consideration relates to tbe right of a personal representative of tbe injured, who is one not included within tbe class of beneficiaries authorized by our statute, to recover on tbe certificate, when it appears tbe insured fully performed all of tbe conditions on bis part and tbe contract is fully executed excepting its payment by defendant. Subsidiary to tbis are tbe questions: If tbe executor is allowed -to recover, may be do so in tbe interests of a legatee under tbe will, to whom tbe insured bequeathed tbe fund, or whom be nominated in the will as beneficiary thereof, when it appears such legatee or beneficiary is not one of tbe class denominated by our statute as competent to receive such benefits; or, shall the recovery be for tbe benefit of tbe estate of tbe insured and tbe fund turned into its corpus as available to all 'creditors; or, may be recover alone as in trust for tbe benefit of those persons contemplated by tbe statute as beneficiaries and pointed out by tbe bylaws of tbe order as tbe recipients of tbe fund when no designation of a beneficiary has been made ¶ The suit proceeds jointly on the same certificate of insurance against two incorporated fraternal societies, on tbe theory that, though one alone issued tbe certificate in tbe first instance, tbe other thereafter assumed its obligation and, by collecting all of tbe dues and assessments from tbe insured member, became liable to respond thereon in accordance with its terms. There is no controversy touching the facts, for they — 39 — are all set forth in an agreed statement, on which a general judgment was given for plaintiff executor, who is himself the sole legatee under the will of the insured. The certificate of life insurance was issued to the insured, James Williams, on September 30, 1892, by defendant “Supreme Lodge Knights of Pythias of North and South America, Europe, Asia and Africa,” a fraternal beneficiary association, incorporated and with headquarters in the District of Columbia. It appears that this company never qualified as a fraternal beneficiary association under the Missouri statutes and was therefore not licensed to do the business of life insurance as such in this State at the time the certificate in suit was issued. Notwithstanding this fact, the Supreme Lodge Knights of Pythias of North and South America, Europe, Asia and Africa established subordinate lodges here, one of which was Mound City Lodge No. 4, located in the city of St. Louis. The insured affiliated with this lodge, and, as before said, on September 30, 1892, received through it the certificate of life insurance payable at his death in the amount of $300 to his “legal representative or representatives. ’ ’ He paid all assessments and dues on the certificate and as a member of the order as they accrued and were levied, to the Supreme Lodge which had issued it, until, by an arrangement with all of its members, that order, acting through the Supreme. Lodge, organized and incorporated as subordinate thereto the defendant Grand Lodge Knights of Pythias of the State of Missouri: And thereupon and thereafter the insured paid all assessments and dues to the latter. It appears that in 1893, or about one year after the certificate was issued by the Supreme Lodge, the Grand Lodge Knights of Pythias of Missouri was incorporated in this State and under our statute authorizing such societies, as subordinate to the Supreme Lodge with headquarters in the District of Columbia, and succeeded to all of the affairs of the Supreme — 40 — Lodge in Missouri. In September, 1893, the Supreme Lodge Knights of Pythias of North and South America, Europe, Asia and Africa withdrew entirely from further operations in the State of Missouri and the Grand Lodge Knights of Pythias of Missouri assumed full and complete jurisdiction over the various subordinate lodges of the order in Missouri, among which was Mound City Lodge No. 4, of which the insured was then a member, and assumed, too, the obligations of the Supreme Lodge to its members on certificates of insurance, and all of the» members, among them the insured, Jaimes Williams, agreed to this arrangement. Thereafter the insured paid all of his assessments and dues on his certificate, as a member of the order, to the Grand Lodge of the State of Missouri, so incorporated and operating under our statutes, and performed all the conditions imposed by the contract on his part until the date of his death, which occurred November 7,1909. During all of those years the insured retained his original certificate of insurance issued to him by the Supreme Lodge in 1892 and at no time surrendered it to or requested a new certificate in lieu thereof from the Grand Lodge of the State of Missouri, under whose jurisdiction he had come and which had undertaken, with his consent, to assume the obligation of the Sm preme Lodge in that behalf. By his last will, the insured, James Williams, appointed the plaintiff, Abraham Gibbs, as his sole legatee thereunder and also nominated him as the executor of the will. It may be that it was competent for the insured to thus dispose of the benefit under the original certificate, but it is admitted that Gibbs, the recipient of the bounty as designated in the will, is not a member of the family of the insured nor related to him by blood or otherwise nor dependent upon him in any manner and is, therefore, not within the class of persons authorized to take such benefits under our statute. As before stated, the suit proceeds against both — 41 — the Supreme Lodge, incorporated in the District of Columbia, which originally issued the certificate, and the Grand Lodge, incorporated in- Missouri, 'as if it assumed its payment. Though both defendants were duly served, the Supreme Lodge did not appear but suffered judgment to go against it by default, and. the Grand Lodge, who prosecutes this appeal, defends alone on the ground that it is not competent for the personal representative to recover on such certificate and especially when the recovery is sought in behalf of a beneficiary not authorized under the Missouri statute. "We are not .concerned with the powers of the Supreme Lodge which originally issued the certificate of insurance under its charter in the District of Columbia, and,, indeed, as to that matter, the court is wholly' unadvised, for nothing was given in evidence touching it, except that it was a fraternal insurance society. But the statute of this State, under which the Grand Lodge Knights of Pythias of Missouri was incorporated in 1893, and which conferred all of the charter powers of that institution, authorized it to issue certificates only to provide for the relief and aid of its member and their families, widows, orphans or other kindred dependents. [See Sec. 2823, R. S. 1889.] Obviously this statute contemplates that such societies should accumulate a fund to be awarded as the bounty of the insured member as above suggested, and not to one, as here, who is not a member of the family of the insured nor related to him by blood or otherwise nor in any manner dependent upon him. But though such be true, it is argued for plaintiff that, as the Supreme Lodge, which issued the certificate, omitted to avail itself of the privilege of becoming a fraternal beneficiary association in this State through qualifying and receiving a license as such under the statutes of Missouri, it must be regarded as an insurance company .and the certificate so issued as a — 42 — policy of life insurance in the broad sense of that term,' wholly unrestrained by the provision's of our statute on fraternal beneficiary societies. The'proposition thus asserted are declared, but for another purpose, in the cases of Kern v. Legion of Honor, 167 Mo. 471, 67 S. W. 252; Toomey v. Sup. Lodge, K. of P., 74 Mo. App. 507; s. c., 147 Mo. 129, 48 S. W. 936. In view of the doctrine of these cases, it is said to have been entirely competent for the Supreme Lodge in 1892, to issue the certificate of insurance to James Williams, payable to his representative or representatives, for such is a proper insurance contract not within the influence of the fraternal beneficiary statute. Therefore, if the contract was valid when made, it continued so and it was competent for the insured to dispose of its benefits as he saw fit by his last will—that is, direct' the payment to an entire stranger. It may be conceded that the contract, when made, was valid and enforceable, but, for the argument to prevail here, it must have continued identical in its terms with respect to the designation of a competent beneficiary. No one can doubt—for it is the general rule—that a policy of life insurance or a designation of beneficiary, valid in its inception, remains so although the insurable interest or relationship of the beneficiary has ceased, but the rule obtains only in those cases where it is not otherwise stipulated in the contract. [See Bacon, Benefit Societies (3 Ed.), sec. 253; Connecticut Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457; McKee v. Phoenix Life Ins. Co., 28 Mo. 383, 75 Am. Dec. 129.] That a contract as originally made may be subsequently modified as to material terms by the parties to it and that thereafter the rights flowing from it are to be determined and enforced in accordance with the modified contract, is hot open to question. [See Lanitz v. King, 93 Mo. 513, 6 S. W. 263.] Though the contract here involved originally authorized the payment of the insurance vouchsafed to the personal represen — 43 — tative or representatives of the insured and probably , left him free to dispose of it by will as he saw fit, it appears that it was materially modified in respect of this matter in 1893 when, with the insured’s consent, defendant Grand Lodge of Missouri became a party to it. Even under the rule of the Kern and Toomey cases, above cited, it cannot be successfully maintained that the Supreme Lodge was an ordinary insurance company so as to preclude it, when co-operating with the insured in organizing the Grand Lodge under the Missouri statute, from bringing the certificate of insurance to which it was a party within the purview of the charter of the Missouri Grand Lodge, that is, our fraternal insurance statute; for' obviously both the Supreme Lodge and the Grand Lodge with which the insured voluntarily affiliated were fraternal in character. The certificate itself and other revelations in the record touching their constitution and by-laws reveal this to be true beyond question. Therefore, whatever may be the rule of those cases as to whether the certificates issued by unlicensed foreign fraternal societies, circumstanced as the Supreme Lodge, are to bear or escape the burdens of our general insurance laws, the character -of the company is to be determined by reference to the substance rather than to sheer technical rules. To this extent the doctrine of those cases has surely been modified. [See Westerman v. Sup-Lodge K. of P., 196 Mo. 670, 94 S. W. 470; Schmidt v. Sup. Court Foresters, 228 Mo. 675, 706, et seq., 129 S. W. 653.] This being true, it appears that the arrangement between the Supreme Lodge and the insured, one of its members, along with others, was to the effect that the Grand Lodge should be organized in Missouri under the Missouri statutes; that the Grand Lodge in Missouri should assume complete jurisdiction over Mound City Lodge No. 4, of which the insured was a member, and should assume the obligation of fulfilling the office of the Supreme Lodge toward the — 44 — insured as a member of the order and a certificate bolder therein. Obviously the abstract rule relied upon is without influence, for the whole matter was one of contract between the parties as is always true with respect to the relations of such fraternal socie^ ties and their members, including, too, their insurance certificates, which are ever subject to the charter powr ers and constitution and by-laws of the order when expressly agreed to. [See Masonic Ben. Assn. v. Bunch, 109 Mo. 560, 19 S. W. 25; Lewine v. Sup. Lodge K. of P., 122 Mo. App. 547, 99 S. W. 821.]. Touching this matter, it appears that the Supreme Lodge, which issued the certificate but had never qualified in this State,’ withdrew entirely from the field and committed the whole matter of its business to the Grand Lodge organized in Missouri under our statute. The insured and all of the members consented to this arrangement and became affiliated with the Grand Lodge of Missouri under its Missouri charter, which undertook to employ its powers in effectuating the certificate of insurance and fulfilling the office of the Supreme Lodge as to the social side of the order. It is true the insured omitted to surrender his old certificate and to apply for a new one from the Missouri Grand Lodge, but be this as it may, he agreed to the arrangement whereby the Missouri Grand Lodge was to utilize its powers in executing the contract of the Supreme Lodge, and it is only by maintaining that such was consummated the suit can be sustained at all against the Missouri Grand Lodge on the certificate issued by the Supreme Lodge. Obviously this certificate must be taken and enforced cuon onere. There is no special contract of assumption as such in the case nor was any ever delivered to the members or annexed to the certificates. The right asserted here against the Missouri Grand Lodge arises solely from the arrangement whereby it came into being with the consent of — 45 — the insured and of the Supreme Lodge and through their co-operation for the purpose of accumulating a fund under its Missouri charter to effectuate the contracts of the Supreme Lodge then retiring from the State. The original contract was necessarily thereby modified with respect to the right of the insured to designate a beneficiary to take the fund, who was competent to receive it under the Missouri charter, for the Missouri Grand Lodge could accumulate a fund only in accordance therewith and for the purposes therein set forth. ■ By its charter (Sec. 2823, R. S. 1889) the Missouri Grand Lodge was empowered to provide for the relief and aid of its members and their families, widows, orphans or other kindred dependents of deceased members. While this statute does not expressly forbid the issuance- of a certificate payable to the personal representative of the insured, it does so by implication, and it is clear that it does not authorize the designation of a stranger, in no way related by blood or marriage nor in any manner dependent upon the member, as beneficiary. [See Bacon (3 Ed.), sec. 255; Grand Lodge v. Elsner, 26 Mo. App. 108.] Although the certificate as originally issued by the Supreme Lodge authorized payment to be made to the personal representative of the insured and even though the insured might bequeath and direct his personal representative to pay it to a stranger, such was not allowable on and after the modification of the contract through the arrangement whereby, with insured’s consent, he became a member of a subordinate lodge under, and accepted the obligation of, the Missouri Grand Lodge instead. Obviously this proceeding interposed the limitations of the charter of the Missouri company into the new contract as if an express provision to that effect obtained and operated to curtail the former right of designating the beneficiary and his disposition of the fund to the persons declared competent to take by the pro — 46 — visions of onr statute. [Bacon, Benefit Societies (3 Ed.), sec. 253.] But because these benefit certificates first speak with authority as to vested rights on the death of the insured member, they are said to be, and are viewed as, testamentary in character, for until then a new beneficiary may be designated by the insured at any time to receive the bounty, similar to the right of a testator in his last will, excepting only that the beneficiary must be a competent person within the charter provisions of the society. [Masonic Ben. Assn. v. Bunch, 109 Mo. 560, 580, 19 S. W. 25; Order Ry. Conductors v. Koster, 55 Mo. App. 186.] In view of this, we must look as well to the statute in force at the time of the insured’s death touching the same matter. By reference to that statute (Sec. 7109, R. S. 1909), it appears the plaintiff here is not qualified to take the benefit thereunder, for while the class has been enlarged so as to authorize a beneficiary who is an affianced wife or husband of and one merely dependent upon the member, no provision for one situate as is this plaintiff is made. Of course, if the insured could not make a valid designation of the plaintiff directly as his beneficiary in the certificate so as to enable him to take the fund, it would not be competent for him to do so indirectly as by will, for it is against the policy of the law because it infringes the principles of benevolence involved to permit the funds of these societies to be diverted to others than those contemplated in the statute authorizing their existence. [Am. Legion of Honor v. Perry, 140 Mass. 580.] But it appears that the insured paid all -of his dues and assessments and fully complied with all requirements on his part. In such circumstances it would be highly unjust to acquit the defendant of responsibility to the plaintiff executor on the certificate for the mere reason that he, as the sole legatee under the will, is not competent to receive the benefit, provided — 47 — the fund may be directed in its proper course to those truly entitled. In respect of this question, the case is to be viewed in charity, for it is not one of an immoral or illegal contract, in that the contract is expressly denounced or inhibited by the law, but rather it presents the features only, when we look to the certificate alone, of an unlimited authorization with respect to the designation of a beneficiary—that is, the cértificate is payable to the personal representative and this would seem to imply that the fund should go into the corpus of the estate of the deceased or might be disposed of by will as the insured sought to do. Touching this matter alone, the contract may be regarded as ultra vires, for it is valid in every other respect. [Bacon, Benefit Societies (3 Ed.), sec. 265; Shea v. Mass. Ben. Assn., 160 Mass. 289.] This being true, it is to be said, whatever may have been the prior course of decision on the subject, the later and better authorities all go to the effect that when the contract has been fully executed, as here, on the one part by the payment of all assessments and dues and the death of the insured, the society will not be.allowed to successfully assert, in defense, that the designation in the beneficiary certificate was one of a class of persons mot included in the enumeration in the charter of. those for whom benefits are to be provided. [See Bacon, Benefit Societies (3 Ed.), sec. 265.] We adverted to this doctrine in Armstrong v. Modern Brotherhood, 132 Mo. App. 171, 180, 112 S. W. 24, but predicated the judgment of the court on other grounds there. However, in the instant case, the precepts of natural justice invoke the full measure of the rule, for there ‘can be no question as to its relevancy. 'That it is both sound and just in its proper application- seems to be universally conceded. For authorities in point, see Benefit Assn. v. Blue, 120 Ill. 121; Edwards v. Am. Patriots, 162 Mo. App. 231, 144 S. W. 1117; Sergent v. Knights of Honor, 158 Mass. 557. — 48 — When a fund, such as this, is sought to be diverted from its proper purpose by will and the suit is by the executor, it is the duty of the court, if it appears the contract has been fully executed on the one part, to enforce the payment and direct its course to the proper recipient who is qualified as such under the charter. We say this because it is the purpose and the spirit of the law to award the bounties accumulated under benefit certificates to the persons for whom it is designed in the charter the fund should be accumulated, and for the further reason that the executor under the will, or the administrator of the insured, when the certificate so provides, is a proper party to prosecute the suit as his representative. But both from the obvious intent and spirit of the statute and an express provision to that effect, the benefit is free to the use of the parties designated and from attachment and execution or other claims of the creditors of decedent. [Sec. 7120, R. S. 1909; Beall v. Graham, 125 Mo. App. 38, 102 S. W. 636.] This being true, plaintiff executor is entitled to recover, but not to his own use as legatee under the will nor to the use of the estate of the insured, for the fund is not technically and strictly an asset of the estate of the insured, but rather special to the use contemplated in the charter. [Grand Lodge v. Dister, 77 Mo. App. 608; Bishop v. Grand Lodge E. O. of M. A., 112 N. Y. 627.] The recovery must, therefore, be had in trust, to the use of those for whom the benefit was accumulated under the charter and to whom it should be paid in accordance with the bylaws of the order when no proper designation of a beneficiary has been made. As a rule, the administrator and executor, of course, represent-the decedent generally, and, when he recovers in that capacity, recovers to the use of the estate and as available to all persons who have just claims against it. Because of this, it seems anomalous to permit a recovery by him in an action at law as in — 49 — trust for a special use not available to the estate and' the general claims of creditors. However this may be, by our statute (Sec. 7120, R. S. 1909) the fund is relieved of all liability for the debt of either the certificate holder or the beneficiary named therein or of any other person who may have a right thereunder, and in view of this the courts seem to have modified this general rule, to the end of effectuating the manifest purpose of the benevolent statutes. The thought is, that this statute qualifies the right of the decedent. Therefore, this court, on a prior occasion, authorized a recovery by the administrator of the beneficiary in the certificate, who died after the decease of the insured member, her husband, and before the certificate was paid, as in trust for her heirs and free from the claims of creditors against her estate. However, that case was one in equity and was, therefore, of course, within a jurisdiction.possessing complete powers as to trusts. But though such be' true, the principle it reflects is identical in so far as the present question is concerned, for it essentially curtailed the powers of the administrator as to a general recovery in virtue of his office. Upon consideration of the matter, we believe the trend of judicial thought is, that the courts should lightly concern themselves with this refinement in executing benefit contracts and administering relief in accordance with the beneficent spirit reflected in the statutes under which the societies are organized and exist, for they pursue the same course in actions at law—that is, sustain recoveries on such certificates by the administrator or executor as in trust to the use of the parties who are rightfully entitled to the fund. [See Shea v. Mass. Ben. Assn., 160 Mass. 289; Burns v. Grand Lodge A. O. U. W., 153 Mass. 173; Rindge v. New Eng. Mut. Aid Society, 146 Mass. 286.] We believe this to be especially true and the doctrine peculiarly appropriate in those cases where the certificate is payable to — 50 — the'personal representatives, as here, bnt for some inherent, valid reason the administrator himself may not recover for the benefit of the estate. [See Bishop v. Grand Lodge E. O. of M .A., 112 N. Y. 627.] Bnt it is not shown here as to whom the fund' should go in accordance with the constitution and bylaws of the order made under its charter in event no beneficiary is designated by the insured, and we are therefore unable to direct its disposition after payment to the plaintiff executor. The judgment will, therefore, be reversed and the cause remanded to the trial court with directions to ascertain the fact touching this matter and give judgment for the plaintiff thereon according to the views above expressed. It is so ordered. Allen, J., concurs; Reynolds, P. J., concurs in result in a separate opinion.