Smith v. Mutual Reserve Fund Life Ass'n

Mr. Justice Smith delivered the opinion of the court. The record presents two questions, the decisions of which control the disposition of the case: First, did appellant have the right to deduct from the amount of the policy the excess mortality lien; and, second, was there an accord and satisfaction between the parties ? Upon the question of the validity of the excess mortality lien or assessment the record shows that the deceased in his lifetime agreed with the Northwestern Company in the certificate of lien signed by him and dated October 28, 1899, that the $1,519.70, with any additional loan or charge, should “be a lien on the policy until paid.” Further, it was provided in the policy itself that the reserve, according to the standard mentioned in the policy, should be maintained, either from premiums paid by the insured or a lien on the policy, and for that purpose the mortality element of the premium might be varied according to the mortality experience of the company. When the Northwestern Company transferred the insurance to appellant, the latter accepted the members of the Northwestern Company upon their original applications and certificates of membership or policies and the conditions thereof. Among these conditions was a provision that such members should continue their insurance “by paying the premium calls of said association in accordance with its calls, rules and bylaws now in force or hereafter to be established, and in accordance with the conditions of this agreement.” The other provisions of this contract material to the consideration of the question now before us are set out in the statement preceding this opinion. The contract between the companies was one which could be made only with the approval and ratification of the members of the Northwestern Company. (Section 16 of Assessment Insurance Act, Hurd’s Bevised Statutes 1905, p. 1219.) While the contract was made nominally between the companies, it was, in effect, made with the members of the Northwestern Company, on whose approval it became effective. Frederick M. Smith was therefore bound by it. The action of appellant, and the grounds therefor, in ordering the reserve deficiency assessment based upon its experience with the transferred members, was not attacked on the trial upon the ground that the facts did not warrant the measure, nor is it here claimed to be invalid on that ground. But its invalidity is urged on behalf of appellee upon the ground that the deceased was not bound by by-laws adopted subsequently to the issuance of Ms policy; and even where the member agrees to comply with all subsequently enacted by-laws, such laws which have the effect to reduce the amount payable at his death on his policy are not binding and operative, for want of power to enact laws which shall work any repudiation of the contract. With this contention of appellee we cannot concur. It is the settled law of this state that a member of an association who, like the deceased, agrees in Ms applir cation or policy to abide by and be bound by subsequently adopted by-laws, is bound by them, unless they are unreasonable. Scow v. Royal League, 223 Ill. 32, and cases there cited. We do not think that the bylaws of appellant or the action of its directors in ordering the reserve deficiency assessment and making it a lien against the insurance under each certificate or policy, with the provision that it might be paid in cash and cancelled at the election of the policy holder, were unreasonable, or had the necessary effect to work any repudiation of the contract of insurance. In our opinion, under the certificate or policy sued on, and the contract of reinsurance between the Northwestern Life Assurance Company and the appellant, the latter had the right and power to divide its members into classes and fix the amount and rate of premiums, assessments or periodical calls for each class without reference to any other class, and to change the same from time to time as its experience or that of any class so established might require, in accordance with the policies of insurance or certificates and by-laws then in force or that might be enacted thereafter; and to charge the so-called extra mortality lien against the policy of Frederick M. Smith to make up the deficiency in the payment of premiums or assessments paid by said Smith and the class of members to which he belonged. This lien was a valid charge against the policy, and there was therefore nothing due the appellee when this action was brought. This view of the law is sustained by the following authorities: Bolles v. Mutual Reserve, 220 Ill. 400; Scow v. Royal League, supra; Barrows v. Mutual Reserve, 151 Fed. Rep. 461; Gaut v. Mutual Reserve, 121 Fed. Rep. 406. In so far as the propositions of law held applicable to the case by the trial court were contrary to his view of the law, they were erroneous. The propositions of law requested by appellant, but refused by the court, which held that appellant had the right and power to charge the so-called extra mortality lien against said policy, should have been held as the law of the case. The material and substantial facts bearing upon the question of accord and satisfaction between the parties and the release of appellant from all liability on the policy in suit are set forth in the statement preceding this opinion. Assuming, for the sake of argument, that the excess mortality lien discussed above was not legally a charge against the policy, and that in the absence of the settlement made with appellant Novemher 17, 1902, appellee would have a right to recover the amount of such lien, we are of the opinion, upon the facts shown in the record, that the settlement of November 17, 1902, was a perfect accord and satisfaction between the parties and a release of appellant from all liability on the certificate of membership or policy in suit. There was an honest dispute between the parties as to the amount due on the policy. It cannot be said, under the provisions of.the policy, and the contract by which appellant took over and assumed the insurance in question, and under the by-laws of the appellant, and considering its experience with the insurance so taken over from the Northwestern Company, that the making of the excess mortality assessment, and claiming it as a lien against the amount due on the policy, was without foundation in the contract or in equity, and fraudulent against appellee. It was a matter of honest difference and discussion on both sides of the controversy. In the discussion and negotiations which arose between the parties, appellee had the benefit of the advice and services of legal counsel, and also the friendly advice and assistance of Mr. Gilman, deputy comptroller of New York, who, after investigating the matter, wrote to appellee’s counsel in Chicago, under date of November 11, 1902, and, after stating that the appellant was willing “to waive all other claims” and pay appellee $5,071.03 at once, further said: “From what I can see, the company is now doing all that was required of it under the contract entered into when they accepted these risks.” The claim which appellant was then insisting upon and appellee was objecting to was, to put it moderately, a fair matter of discussion possessing some basis in law and equity. Consequently, the result of a litigation over it was involved in doubt. It must be held, we think, that appellee acted with full knowledge of all the facts, and with the advice of counsel, and that the settlement was fairly and deliberately made without fraud on the part of appellant, either in misrepresentation of facts or concealment of the truth from appellee. What, then, was the legal effect of the transaction of November 17,1902? The draft accepted and cashed by appellee specified that the amount was “in full payment and settlement” of the policy. The receipt given by appellee at the time she received the draft says that the money was received “in full for all claims under policy." Appellee at the same time delivered to appellant the policy. These facts constitute, we think, a complete bar to any recovery on the policy. In Simmons v. American Legion of Honor, 178 N. Y. 263, the court, in deciding a case which does not differ in any essential element from the case before us, said: “Now it is the settled law of this state that if a debt or claim be disputed or contingent at the time of payment, the payment, when accepted, of a part of the whole debt, is a good satisfaction, and it matters not that there was no solid foundation for the dispute. The test in such cases is, Was the dispute honest or fraudulent? If honest, it affords the basis for an accord between the parties which the law favors, the execution of which is the satisfaction.” The rule of law stated in the above case is the settled rule in this state. Bingham v. Browning, 197 Ill. 122; Ostrander v. Scott, 161 id. 339; Canton Union Coal Co. v. Parlin, etc., Co., 215 id. 244. The surrender of the certificate of membership or policy by appellee to appellant at the time of the receipt by her of the draft in full settlement of all claims thereunder, operated as a release and discharge of the liability thereon. Draper v. Hitt, 43 Vt. 439; Larkin v. Hardenbrook, 90 N. Y. 333; Grand Lodge Ill. Ind. Or. Mut. Aid v. Peiffer, 129 Ill. App. 208. We think the court erred in refusing to hold the propositions of law requested by appellant upon this subject. The judgment is reversed, with a finding of fact. Reversed, with finding of fact.