({nrnjU Ham &tl)onl Eibrarg Cornell University Library KF1175.B121904 V.I A treatise on the law of benefit societi 3 1924 019 346 893 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019346893 A TREATISE OE" THE LAW BENEFIT SOCIETIES LIFE INSURANCE: VOLUNTARY ASSOCIATIONS, REGULAR LIFE, BENEFICIARY AND ACCIDENT INSURANCE. BY FEEDERICK H. BACON, Of the St. Louis Bar. THIRD EDITION. VOL. 1. ST. LOUIS: THE F. H. THOMAS LAW BOOK CO, 1904. 'B7?2g^ Entered according to Act o£ Congress, in the year 1888, by FEEDEEICK H. BACON, In the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1894, by I-EEDEEICK H. BACO-N, In the Office of the Librarian of Congress, at Washington. Entered according to Act of Congress, in the year 1904, by FEEDEEICK H. BACON, in the Office of the Librarian of Congress, at Washington. PRESS OF NIXON-JONE^: /■JBINTINQ CO., 216 PIKE STREET. THESE VOLUMES ARE INSCEIBBD, IN COMMEMOEATION OP A FRIENDSHIP OP NEARLT THIKTT TEARS, TO JOHN E. MCKEIGHAN OP ST. LOUIS; AN ABLE AND LEARNED LAWYER, A TRUSTED AND HONORED CITIZEN, "INTEGER VITAB, SCBLERI8QUE PURUS." F. H. B. (Hi) PEEFACB TO THIRD EDITION. Ten ycai's have passed siuce the publication of the second edition of this work. During this period more than three thousand cases, relating to principles herein con- sidered, have been decided by appellate courts. These adjudications have not so much changed the law as they have added to it. It was necessarj% therefore, that a new edition be prepared, incorporating all these cases. This has been done to the best of the abihty of the author, who has given much time and thought to the work. Where new features have been considered, free quota- tions have been made from the opinions, on the same general plan of previous editions, which seems to have met with the favor of the profession. An effort has been made to make all references accurate, having alone in view the practical use of the book by acti\'e practitioners. A large number of new sections have been added which have made clearer many of the principles of this branch of the law. In addition to the law of voluntary and fraternal benefi- ciary associations the subjeuis of regular life and accident insurance have been carefully and exhaustively I'e viewed in all particulars, even more so than in former editions, so that in this respect the work will, it is believed, be found satisfactory. The author is grateful for the kind appreciation his work has received from bench and bar, and trusts that this new edition will meet with continued confidence' and favor. Frederick H. Bacon. St. Louis, October, 1904. V PEEFACE TO SECOND EDITION. When the first edition of this work appeared the law of beneficiary insurance was in its infanc3\ During the six- years that have elapsed since its publication numerous new decisions have been rendered, sometimes modifying or changing, but more frequently adding to, the principles there laid down. The importance of these new cases, as well in regard to life insurance proper, as beneficiary indemnity, or questions arising in cases involving the acts of voluntary associations, or clubs, imperatively demanded their incorporation in a new edition. The text has therefore been carefully revised incorporat- ing all the cases bearing on the subjects herein treated of up to October 1st, 1894. In this work of revision five hundred pages of new matter and twelve hundred cases not cited in the first edition have been added. A chapter on accident insurance in all its phases Las been included, as that branch of business has increased enormously during the last ten years. The subject of regular life insurance was fully treated in the first edition and is now still more carefully and thoroughly considered. It is believed that all the Cases ou this subject decided by courts of last resort have been cited. In the revision the plan of quoting liberally from the opinions of the courts has been adhered to, because in this way the reasons for conclusions are shown, and the work vii PREFACE TO SECOND EDITION. gains an added value to those who either have not access to full law libraries, or wish to be relieved from the neces- sity of consulting the authorities cited. The conscientious effort has been made to be fair in all respects, giving the law as it is found in the adjudications of the courts, and to avoid, as far as possible, the expression of personal views. If the question has been decided differently by different courts the reasoning on both sides has been given, leaving the reader to decide which is most sound. The author desires to express his gratitude for the flat- tering and generous reception given his work by the pro- fession and the many kind words spoken in its behalf. He hopes that the new edition will merit continued favor and success. Frederick H. Bacon. St. Louis, October, 1894. viii PEEFACB TO FIRST EDITION. The secret benevolent and beueficiaiy orders, or bene- ficiary societies, which are both social clubs and life insur- ance companies, have multiplied amazingly during the last twenty years. Branches of these organizations are now found in nearly every village in the land and in the larger cities lodges are numbered by scores and even hundreds. They have characteristics in common with ordinary clubs and the familiar fraternities, the Masons and Odd-Fellows. The litigation connected with these societies is novel and important. It embraces two classes of cases; the first in- volving the discipline of members and their personal lia- bility for the community debts ; the second includes the still more important questions relating to the rights of ben- eficiaries, the decision of which often requires an applica- tion of the principles of the law of life insurance. The numerous cases, decided during the last ten years, by the courts of last resort of the several States and the Federal courts, are not collected or discussed in any legal text- book, consequently they are unfamiliar to most lawyers, who do not realize their extent and value. Cases that have arisen in my own practice have convinced me of the need of a treatise on the subject, one in which the rights and liabilities of members of the beneficiary orders and of their beneficiaries should be considered in close connection with the law of life insurance proper. This need I have tried to suppl3^ The work covers the entire subject of life insurance and includes all cases de- cided up to date. ix PREFACE TO FIRST EDITION. The extent to which I have succeeded must be determined by the profession. Although I make public the results of my labors with diffidence, I am content to do so without apology other than this brief explanation. My \^ork must speak for itself — its value must be measured by the merit its use may develop, its faults could not be lessened or ex- cused by anything I here might say. I have generally cited the cases, in addition to a reference to the regular reports, by the volume or page of the Amer- ican Decisions, American Eeports and the National and Co- operative Systems of Reporters, if re-reported. I have not, however, given all of these references each time the case is referred to. The full citations may be found by consulting the table of cases which precedes the text. I wish to here acknowledge my obligations to P. Wm. Provenchere, Esq., of the St. Louis bar, who carefully reatl tjie work in manuscript and materially aided nie with valu- able suggestions. Frederick H. Bacon. St. Louis, October, 1888. X TABLE OF CONTENTS. CHAPTER I. INTRODUCTORY. DEFINITION, HISTORY AND EXTENT OF BENEFIT SOCIETIES: ORIGIN AND GROWTH OF LIFE INSURANCE. Pages. 1. Subjects to be Considered ..... 2 la. Nature of B nefit Societies ..... 3 2. They are Social Cubs ...... 4 3. They i re Business Organizations .... 4 i. Kindred Societies ...... 5 5. Ancient Origin of Benefit Societies .... 5 6. History of Gu Ids ...... 6 7. Decay of Guilds, their Successors . ... 10 8. Hi tory of Clubs ...... 10 9. Analogies between Ancient and Modern Clubs . . 18 10. The English Friendly Societies . . . .14 11. The AmeiiCan Beneficiary Orders . . . .17 12. The Secret Fraternities ..... 19 13. Allied Organizations . . . . . .20 13a. Trade Unions ....... 21 14. Characteristics in Common ..... 25 15. Definitions of Life Insurance ..... 26 16. The English Definitions ..... 26 17. American Di-finitions ...... 27 18. Various Classes of Life Insurance ;. . , .28 19. Assurance and Insurance ..... 30 20. Historyot Life Insurance ..... 31 21. An Early English Case ..... 33 21a. First American Case ...... 33 22. Method of Conuucting Business . . . .35 23. Analogies between Benefit Societies and Insurance Com- panies ........ 36 24. Early Beneficiary Life Insurance Cases m the United States 37 25. Definition of Terms Used in Insurance , 83 xi TABLE OF CONTENTS. CHAPTEE II. ORGANIZATION POWERS AND LIABILITIES: DISSOLUTION. Tages 26. Benefit Societies may be Voluntary Associations or Corpo- rations . . . », . 27. Legal Status of Voluntary Associations Uncertain . 28. Members Voluntary As.-oclations sometimes not Partners 29. When Societies are Partnerstiips 30. Cases where no Partnership was Held to Exist 31. The Case of Ash v. Guie .... 32. Cases where Associations were Held to be Partnerships 33. The Declaation of Collyer on Partnership . 84. The Principle Stated by Another Writer 35. A General Rale ...... 36. Liability and Status of Members: Dissolution 87. The Effect of Artie es of Association . 38. Powers of Voluntary Associations and of the Members 38a. The same Subject: Rights of Members in Property an Funds ...... 39. Jurisdiction of Equity in Regard to Members of Voluntary Association ...... 40. Voluntary Association may be Estopped from Showing its True Nature ...... 41. Defective Organization of Corporation 42. Benefit Societies Incorporated Under Special Acts . 43. General Incorporation Laws .... 44. Benefit Societies as Charities .... 45. English Friendly Societies not Charities, nor Assurance Com- panies ...... 46. Incorporating Under General Laws . 47. Corporate Powers ..... 48. The Charter the Source of Corporate Powers 48(1. Right to Corporate Name .... 49. The Modern Idea of Corporations 50. Exemption of Benevolent Societies from Insurance Laws 61. Status of Benefit Societies Considered by the Courts 51a. Distinction Between Benefit Societies and Lite Insurance Corporations ...... 52. Conclusion : Benefit Societies are Insurance Organizations 63. Exempting Statutes ..... 54. Liberality of Exemption in some States xii 41 41 42 45 46 47 49 50 50 51 52 54 64 65 66 67 6S 68 72 76 77 78 79 81 81 93 96 97 98 TABLE OF CONTENTS. PAGES. 55. Limitations on Easiness in Certain States . . .100 56. Life Insurance Business as now Conducted in tbe United States and Canada . . . . . .102 66a. State Regulation — Powers of Insurance Commissioner . 103 56&. Classification of Insurance Companies . . . 106 57. Dissolution of Voluntary Associations . . .108 58. Dissolution of Incorporated Societies . . HI 59. When Equity will Interfere . . . . .112 60. Forfeiture of Corporate Franchises .... 115 CHAPTER III. GOVERNMENT AND MEMBERSHIP: BY-LAWS. 61. Plan of Organization of Benefit Societies . . . 117 61a. Element of Property Rights of Members . . . 118 62. Common Characteristics ot Corporations and Voluntary Associations . . . . . . .119 63. Membership Goverued by Articles of Association or Charter 119 638. Admission to MembRrship, Formalities Required . .121 636. Liability for Injuries received during Initiation . . 124 64. Majority can Bind Minority ..... 126 65. Limitations on Action of Majority .... 127 66. Must act at Properly Called Meeting .... 127 67. Meetings of Association or Corporation : Notice of . 128 67a. The Same Subject, Special Meetings . . . 130 68. Jurisdictionjof Grand and Supreme Lodges . . . 131 69. Articles of Association, or Constitution and By-Laws, Regu- late Rights and Powers of Officers and Members . . 132 70. An Early Masonic Case . . . . . 1 33 71. The Odd-fellows' Case, Austin v. Searing: Power of Grand Lodge of Voluntary Association over Subordinate Lodges 134 72. Other Cases Involving same Question : The Element of In- corporation . . . . . . .141 73. Distinction Between Social Organizations and those Fur- nishing Insurance Indemnity . . . H5 74. Supreme, Grand and Subordinate Lodges a Single Organiza- tion ........ 146 75. Rights of Minority ...... 150 76. Analogy Between Lodges and Churches . . .154 77. Property Rights of Religious Societies, how Determined . 1S5 xili TABLE OF CONTENTS. Pages. § 78. Benefit Societies doing a Life Insurance Business are like ottier Life Insurance Corporations . . .156 158 155 160 162 163 164 165 170 79. By-laws: D' finition of ; How Proved 80. By Wliom and Iiow Made .... 81. Binding upon all Members: All are Presumed to Know Tliem 82. Requisites of Valid By-laws .... 83. Must be Consistent witli Charter 84. Must not be contrary to Common or Statute Law . 85. Must be Beasonable ..... 86. Construction of By-laws Question for tlie Court 87. What is Bad as a By-law may be Good as a Contract Exception ....... 171 88. Enforcement of By-laws . . • . . 173 89. Distinction Betweeen Voluntary Associations, where no Property Right is Involved, and Corporations in regard to By-laws . . . . . . .174 90. Socie ies have a Right to the Service of their Members . 175 91. The Articles of Association, or Charter, Forms a Contract Between the Society and the Members . . .176 91a. Amendment or Repeal of By-laws .... 178 92. By-laws Relating to Sick Benefits . . . .179 93. Construction of By-laws ..... 183 94. Proceedings to obtain Sick Benefits: Right of Members to Resort to Civil Courts . . . . .184 96. Expulsion of Members . . . . . .190 96. Same Rules Apply to Incorporated and Unincorporated Societies ....... I9i 97. Power of Corporation to Expel Members where Charter is Silent: Grounds for Expulsion .... 19l 98. English Rule as to Voluntary Associations . .- . 192 99. When no Power to Expel Exists . . . .193 100. Power to Expel belongs to Body Generally: Cannot be Delegated . . . . . . .193 101. Procedure for Expulsion: Notice • . . . . 195 102. Procedure Continued : Charges : Trial . , . igg 103. Charges must be SuflScient ..... 204 104. Expulsion of Members of Subordinate Lodges of a Benefi- ciary Order ....... 2O6 104a. Acquittal: Appeal ...... 214 105. Courts will not Interfere if no Property Right Is Involved 215 106. Courts will not Inquire into Merits of Expulsion . . 216 107. When Injured Member can Resort to Courts . . . 217 108. The Jurisdiction of Equity . . . . .219 109. Th" Remedy of mandamus: What the Court will Consider . 224 xiv TABLE OF CONTENTS. PAGES. 110. Presumption of RHgularity of Expulsion ProceediDgs 225 111. Withdrawal of Mumber of Voluntary Association . 226 112. Personal Liability of Members of Unincorporated Society 227 113. Feisonal Liability of Members, liow Avoided . . 232 114. Individual Liability for Sick or Funeral Benefits . . 232 115. Liability of Person Contracting in name of Voluntary Asso- ciation ...... . 233 116. Summary of Principles Stated in this Chapter . . 234 CHAPTER IV. OFFICEES AND AGENTS. : 117. Associations and Corporations Act through Agents 118. Su ordin ite Lodges both Principals and Agents 119. Gi-neral Princiiiles of I a"? oi Agen y. 120. When General linijageiiients of Ciubs are binding on their Members ...... 121. Offi.ers and Committees are Ager ts . 122. Presumptions of Law Concerijing Members . 123. When Judicial Powt-rs cannot be Coiiterred . 123a. Election of Offi t-rs . 124. Power of Amotion of ofBc rs, who has 125. A thor ty 1 f Offi' ers and Agents 126. Agen sof Co'poralions . . ■ . 127. Officers of Corporaiious are Special Agents . 128. Agents Conir.cting m Namw of Irr sponsiole Principal 129. Agent Actins; in Excess of his Autho' ty 130. Char er or Article - of As.-ociation Fountain of Authoi i y of Officers, Agents and Committees 131. Fiduciary Relation of Officers and Directors 132. Discretionary Powers cannot be Delegated . 133. Offi ei sand Agents of Benedt Societies 134. Powi-rs and Authority of Directors 135. Foiffliilities to be Observed by Agents 136. Dislinciion as to Matters Relating to Internal Management 137. Execution of Insurance Contracts 138. Acts and Meetings of Directors and Committees 139. Record of Proceedings of Meetings of Directors need not be Kept ....... 140. Powers of President ..... 141. Of Vice President ..... XV 237 238 238 239 239 240 240 242 242 243 245 246 247 248 250 251 262 263 264 253 254 254 265 257 258 260 TABLE OF COJiTEJ."T8. Pa&es. § 142. Of Secretary . . ... 261 143. Of Treasurer ....... 262 143a. Trustees ....... 266 144. Dual Capacity of Subordinate Lodges of an Order . . 272 145. Officers and Committees of Benefit Societies are Special Agents ........ 273 146. B' neflt Societies in Law are Mutual Life Insurance Com- panies . . . . . . . . 274 147. Dfference between Powers of Agents of Stock and those of Mutual Companies . . . . ,274 148. Authority of Subordinate Lodge when Acting for Grand or Supreme Lodges .... ... 278 § 149. Have Subordinate Lodges the Characteristics of Ordinary Life Insurance Agents . . . . . 2S1 150. To what Extent can Local or Subordinate Lodges Bind the Superior Body . . . . . .282 151. General Bules of Agency Apply to Agents of all Kinds of Companies ....... 283 152. Authority of Life Insurance Agents .... 284 153. The Modern Doctrine . . . . . 286 154. The Contrary View . . . . . .292 155. The Gentral Rule Unimpaired .... 292 156. Dealing with Asents of Mutual Companies . . 293 157. Members of Mu ual Benefit Societies must Know Limita- tions on Powers of Ofllcers ..... 294 158. The Correct Doctrine as to the Authority of Insurance Agents Stated in Certain Cases .... 295 159. How far Knowledge of Agent Binds Principal: Fraud of Agent . . . . • . . . . 297 160. Notice to Agents . . . .300 160a. Kelations between Agent and Company . . 302 CHAPTEE y. NATDBE AND SUBJECT-MATTER OF CONTRACT: AFTER EN- ACTED LAWS. § 161. Contract of Benefit Society with Members, where Found . 304 161a. The same Subject: Change in Contract . . . 308 1616. Societies Incorporated in Two States, Schism . 313 162. Is one of Insurance ...... 316 163. A Life Insurance Contract is not Strictly one of Indemnity. 320 XV i TABLE or CONTENTS. '' 164. Is Executory and Personal .... 165. Is Aleatory ...... 166 Life Insurance Policies are Valu'd Policies . 166a. Peculiar Nature of Life Insurance Contract 167. Endowment Insurance is Life Insurance 167a. Parties to Insurance Contracts: Minors: Consent of Insured ...... 1676. Tontine Policies: Eights of Policy-holder to Dividends or Profits ....... 167c. Reinsurance ...... 168. Benefit Societies Restricted as to Beneficiaries 169. When Contract is Executed, Society may be Estopped 170. Liberality of Cimstruction of Charter by some Courts 171. Contracts of Mutual Companies where a By law has been Violated ...... 172. Insurance Contract Need not be in Writing . 173. What Constitutes Perfect Parol Contract of Insurance 174. Informal Execution ..... 175. Lex loci and Lex fori ..... 176. Stipulation in Policy cannot Avoid Operation of Statne 177. Interpret tion of Contracts of Insurance 178. Interpretation of Contracts of Bi-nefit Societies 179. Construction when Language is Ambiguous . 180. Contracts of Mutual and Stock Companies Construed Alike 181. Other Papers part of Contract, when . 182. The Same Subject: Othi-r Illustrations 183. Reference in Policy to other Papers must be Plain to r-ake them a part of it . 184. What Constitutes the Contract of Insurance 185. After Enacted Laws of Benefit Societies Generally Bind their Members ...... 186. The Same Subject: Leading Cases 187. After Enacted Laws Must not Affect Vested Rights . 188. The Subject Discussed by the Supreme Court of Alabama 188a. The Same Subject — Conclusion PAGES. 322 323 '323 324 325 32S 33? 337 338 340 341 342 344 345 346 348 352 354 o58 358 362 363 366 367 369 369 373 378 384 387 CHAP TEE YI. APPLICATION, WARRANTY, REPRESENTATION AND CONCEAL- MENT. § 190. Insurance Contract Result of Proposal and Acceptance . .S91 191. Difficulties in Construing Language of the Policy Referring to the Application ...... 392 xvii TABLE OP CONTENTS. Pages- I 19Ia. The Proposal or Application ■ . . . . 392 192. Early Inti rpretation Contrasted with Modern Construction. 394 193. Statutes on the Subject . . . . .396 193a. Do these Statutes Apply to Benefit Societies? . . 399 194. Warranty Defined ...... 402 195. Difficulty of Determinine; what Amonnts to Warranty . 403 196. Differenci- B' tw en Warrauty and R' presei.tatlon . . 405 197. Bnach of Warranty Avoids the Contract . , . 407 198. Warrantiesnot Favori-d atLaw; Strict Construction . 408 199. Warranty Ntver Creaieii by CDnstrnction . . . 4U 200. Must be Express ...... 412 201. Affirmative and Promissory Warrantii s . . . 413 .202. Construction of Warranties Must he Reasonable . .414 203. Review of Rules of Construction .... 416 204. Where Partial or no A iswers are Made to Questions . 422 205. Where Answers are Not Re.sponsive .... 425 2r5a. Q<>alified Answers ...... 426 206 Representations ...... 428 2(7. Material and Immaterial Representations . . . 429 208. Afflrma'ive and Promissory R^ presentations . . 429 209. False Representations Avoid Contract Only Whrn Material 433 210. Immaterial Whether False Representation is Intentional or Accidental ....... 434 211. Materiality of Representation Question of F ^ct . . 436 212. Answers to Specific Questions Always Miterial . . 437 213. Representations to be Maierial need uot always be of Facts Relating Directly to the Risk .... 440 214. Representations Need Only be Substantially True: Good Faith of Applicant. ...... 443 215. UndiTStandiiig of Applicant as to Effect of False An.<>wers 450 216. AnsW' rs to Questions in Applications for Membership in Benefit Societies Generally not Warranties but Represen tations ....... 216a. The Same Subject Continued .... 217 Concealment ...... 2' 8. Concealment of Material Fact will Avoid the Contract 219. Questions of Knowledge, Intent and Materiality are for Jury 463 220. No Concealment when Facts are Unknown to Applicant Difference between Representation and Concealment 221. Error or Fraud of Agent in preparing Application . 222. When Authority of Agent is known to Applicant 223. Answers to Referee: to Medical Examiner: Position of Latter ....... 224. Rules of Construction in Particular Cases xviii 450 455 461 463 469 470 473 479 484 TABLE OF CONTENTS. FA.GBS. 485 486 488 489 492 497 225. Age ....... 2^6. Whether Applicant is Harried or Single 2*27. Residence ...... 228. Occupation ...... 229. The Dwlght Case ..... 8.S0. Answers in Regard to Parents, Relatiyes, etc. 230a. Family Physician: Medical Attendant — Consaltiug a Physician 498 231. Habits: Use of Intoxicants, Liquor, Opium, etc. . 504 232. Good Health 608 233. Latent Diseases Unknown to Applicant . . .511 234. Disease ....... 512 235. Acci mt or Seriou-< Injury ..... 517 235a. Other Ins-urauie ...... 520 2356. Limitation ou Time Within which Difense Can be Made . 523 CHAPTER VII. DESIGNATION OF BENEFICIARY: INSURABLE INTEREST. § 2.36. Benefit of Ben flciary Association i Paid to a P.'rson Des- ignated by tlie M mb r, or by the Laws of the Society . 525 237. Membt-r bus no Property in Benefit, but only Power to Des if;nat>- B^ nt-ficiary ...... 526 238. TnisPower mm he General or Special . . . 531 239. Execution of Pnwc r must be in Compliance with Terms of Icisirument Creatina; it . . . . .531 240. Equity So netimes Adds Defectiv • Execution . . 531 241. Consequences of Failure to Ex< cute Power . . . 533 242. Designation ■ f Beneficiary is not Condition Precedent of Society's Liaiiility ...... 514 243. When De-ignation of Beneficiary Lapses . . . 538 243(1. The Same Subject Continued: Resulting Trust: Death in C mmon Calamity ...... 545 2i?b. Revoca'ion of Designation ..... 553 243c. If Designatt d Beneficiary Die in Lifetime of Member, Benefit will be Disposed of According to Laws of Society 553 244. Limitations of Power; Restricting the Designation to Cer- tain Classes ....... 557 244a. The Sime Subject: Examples of Construction ; Creditors . 563 246. The same Subject: A More Liberal View . . . 599 246. Unless Contract or Statute Forbids, Choice of Beneficiary is Unlimited ....... 573 xix TABLE OP CONTENTS. PAGES. § 247. Liberal Construction of Charter and By-laws: Lex loci . 574 248. Insurable Interest .... . 575 248a. The Same Subject: Opposing Views . . 578 249. The Same Subject : Wagering Policies . . . 579 249a. The Same Subject: Meritorious Object . . . 584 250. The Same Subject: Relatives: Creditors . . . .585 25 a. The Same Subject: Creditors . . . .590 2506. Want of Insurable Interest doe» not make Policy Void, but Payee is a Trustee ..... 592 251. General Rule ....... 593 252. The Doctrine of Insurable Interest as Applied to Contracts of Benefit Societies ...... 594 253. Policy or Designation of Beneficiary Valid in its Inception Remains so ...... . 595 254. Lawfulness of Designation of Beneficiary a Question of Con- struction ....... 597 255. Rulesof Construction in Cases of Designation of Beneficiary 5:'9 256. Family ........ 602 257. Children • . . . . . . .68 258. Orphans ........ 614 259. Widow ........ 615 260. Heirs ........ 616 260a. Relatives ....... 620 261. Dependents ..... .623 2610. Affianced Husband or Affianced Wife . . .629 262. Legal Representatives : Devisee; Legatee . . . 631 263. Ambiguous Designation: "Estate" .... 633 264. Several Beneficiaries : Construction .... 636 265. Incorporated and Unincorporated Benefit Societies: Ultra Vires ........ 639 CHAP TEE VIII. CONSUMMATION OF CONTRACT: INCOMPLETE CONTRACTS: JURISDICTION OF EQUITY TO REFORM OR CANCEL. § 266. To Complete Contract of Insurance Negotiations must be Concluded ....... 643 267. Application must be accepted to make a Contract . . 645 268. Proposal may be withdrawn at any Time Bsfore Acceptance 646 268a. Death of Applicant Before Proposal is Accepted is With- drawal of Proposition ..... 648 XX TABLE OF CONTENTS. Faobs. § 269. If the Policy be Difeerent from that Applied for It is not Bioding upon the Company until Accepted by the Appli- cant ... .... 660 269a. Where the Policy, or Certificate, differs, as to Payee, or otherwise, from Application .... 652 270. Delay in Acting upon an Application will not Amount to Acceptance : Company not Bound to Accept . . 633 271. Company may be Bound, although Application has been Rejected or not Acted on . . . . . 666 272. When Contract of Insurance becomes Complete . . 656 273. The Same Subject : Contract may be C mplete without De- livery of the Policy . . . . . .663 273a. The Same Subject: When Contract of Benefit Society be- comes Complete ...... 666 274. Fraudulent Delivery of Policy . . . . .668 275. After Contract is Complete Changes in Risk Immaterial . 669 276. There May be a Conditional Delivery of Po ii-y . . 670 277. Unconditional Delivery of Policy by Agent in Violation of Instructions ...... 672 277a. Rescission ....... 674 678 679 683 687 6:^8 688 2776. Abandonment ...... 378. Court of Equity can Correct Mistakes in Insurance Policies 279 When Equity will Relieve if Agent his Acted in Bad Faith 280. Or if the Policy does not Conform to the Application 281. Or if the Errors are Manifest .... 282. Reasons for Refu.sal to Interfere 283. No Relief when Legal Effect of Plain Terms was Misunder- stood ........ 690 284. Application of foregoing Principles to Benefit Societies . 691 285. Jurisdiction of Equity to Decree Cancellation . . 692 286. The Same Sub]' ct: Application to Benefi Societies . 698 287. The Same Subject: Cancellation After Loss . . . 699 288. General Doctrine as to Interference of Equity Stated • 701 CHAPTER IX. CHANGE OF BENEFICIARY: ASSIGNMENT. 289. The Subject of this Chapter ... .703 290. Appointments under Powi rs, when Revocable . . 704 291. Designation of Beneficiary is an Act Testamentary in its Character ....... 705 xxi TABLE OF CONTENTS. FAOB3. 291a. Beneficiaries Have no Property in B nefit but a, Mere Ex prctancy ....... "^"^ 291&. Subject to Certaia Limitations, Life Insurance Policies can be Assigned like other Chosea in Action . . 70i> 292. Vested Rights of Payees in Life Insurance Policies . . 707 293. Dpposing Authorities, when the Beuiflclary of Lite Policies can be Chang d ..... . 710 29i. Wile's Policv 7U 294o. The Same Subject.: Kiuhts of Husband's Creditors . 716 295. When the Policy cauuot be Assigned or the Beneficiary Changed ....... 719 296. When the Policy has not Passed out of Control of Party EHeciing it . . . . . . .721 297. Assmnability of Life lusuraiice Policies . . 723 298. Ansent of Insurer to As4!;nmeiit .... 725 299. Effect of A-sianment ..... 727 800. Assiunment After Loss . , . . . .729 301. A signmeiit bv Wife of Policy cii Husharid's Life: When Wlfi) Di s before th>- llusbaud: B gbts of Creditors of Wif« ........ 7£0 302. The Question of Insurable Inter' st as Affecting the Validity ol A ^igiJmenIS of Life Policl s . . . . 7cii 303. Viliiiity of Assiiiumeiits how Determined, Amount of Ee- covi ly by Creditors aui) Assisnee .... 743 304. Dlstiuciion. beiweea Cerliflcat.s of Beoeflciary So' ieries a id Policies of Life Insurance in Respect to Assignment or Change of Beneficiary ..... 746 305. Developmi lit of the Law Concerning hange of Beneficiary 749 30t). Present Doctrine ...... 752 3 iia. Member May be Es'opped from Changing Beneficiary . 75s; 307. Cliange of Beneficiary must be in Way Prescribed by the Laws of 1 he Socie y ...... 75;) 308. Tlie Society may Waive Requiremeuls of its Laws as to Chi.nge ot Beneficiary . . . . . 7Ci 308a Where no Foi mantles are Required Change may be made in any Way Inuicaiing the Intention of the Member . 769 309. When an Attempted Change of Beneficiary becomes Com- plete ........ 771 3i(i. Ju isfiiction of Equity in Aid of Impei feet Change of Beu- flciary ........ ^^L 310a. nummary of Law Regarding Change ot Beneficiary . 77si 3 06. Interpleader and Questions Arising In such Proceedings . 784 310c. Ef£"Ot of Ilegal or Incomplete Change of Beneficiary on fi St Designation ...... 7g9 xxii TABLE OF CONTENTS. Pages. § 311. Change of Designation Governed by same Rules inBespect to Bentflciaiy as Original Appointment . . . 791 312. Rights of Creditors in Benefit . . . -793 CHAPTEE X. CONDITIONS WHICH AVOID THE EIGHT: SUICIDE, INTEM- PERANCE, ETC. § 320. Liability of Insurer under an Int-urance Contract may be CoDdition»l ....... 321. Contracts of Benefit Socii ties anl Ordinary Life Insurance C7. Payment to Agent ...... 909 367a. Statutes against Discrimination and Rebates . .913 368. When the Day of Payment falls on Sunday . . . 917 369. Premiums Need not always be Paid in Money: What Amounts to Payment . , . . . .918 370. Payment of Premium after Death of Insured : Days of Grace ........ 922 371. When Note is Taken for Premium .... d>3 372. The Same Subject: Premium Notes Proper . . . 926 373. Non- Forfeitable and Paid-up Policies . . . 9'.>8 373a. Damages for Breach of Contract to Issue Paid-up Policy 932 xxiv » TABLE OF CONTENTS. Pages. 374. The Massachusetts Non- forfeiture Law . . . 933 375. Stranger may become Liable for Premium . . . 937 376. When the Company Wrongfully Declares a Forteiture of the Policy ....... 939 377. Assessments in Benefit Societies must be made in Exact Accordance with their Laws : Strict Construction . 939 378. Who Liable for Assessments . . . . .946 379. Notice of Assessments ...... 948 380. The Same Subject: Contents of Notice . . 951 381. The Same Subject: Service of Notice . . .953 382. From what Time Period Allowed for Payment of Assess- ments Dates ....... 957 383. Manner of Paying Assessments .... 958 384. What does not Excuse Non-Payment . . . 960 385. Consequences of Non-Payment: Suspension . .961 38Ba. Suspension of Subordinate Lodge for Failure to Bemit Assessments Collected from Members . . 965 3856. Reinstatement ...... 967 385c. The Same Subject: Conditions of Reinstatement . 970 386. To whom Money Collected on an Assessment Belongs 972 387. Power to Accumulate Surplus from Assessments . . 974 388. Power of Subordinate Lodges to Waive Requirements of Laws of the Order as to Assessments . . . 970 389. Dues ........ 977 CHAPTER XII. MATURITY OF CONTRACT: PROOFS OF LOSS: GOOD STANDING. § 395. Maturity of Life Insurance Contract: Amount to be Re- covered ....... 984 395a. Permanent Disability: Accident .... 988 396. Who Entitled to Receive Amount of Insurance . . 990 396a. The Same Subject: Examples of Construction . . 994 397. Rights of Creditors when Payees in Policies . .995 397a. The Same Subject . . . . . .1001 398. Liens on Insurance Money ..... 1002 398a. The Same Subject: Payment of Premiums with Stolen Money ....... 1004 399. Creditors as Beneficiaries of Members of Benefit Societies . 1005 400. Compliance with Terms of Policy as to Payment Relieves Insurer ....... 1007 XXV TABLE OF CONTENTS. i 400o. Tribunal Created by Society to Pass on Claims, Provision that Decision of Tribunal sha 1 be final . . . lOOS 4006. Wrongfully Obtaining Release of Policy . . 1017 4UI. Conditions Precedent to Recovery to be Performid after Loss ........ 1018 402. No Liability civiliter at Common Law for Destruction of Human Life ....... 1020 408, ConditiouN as to Notice and Proofs of Loss . . 1020 404. Substantial Compliance with Conditions Sufficient . . 1022 40.) . Notice of Loss . . . . . . .1023 41 16. Proofs of Loss, by whom Made .... 1026 407. Form and Contents of Proofs . . . . 1028 408. To Whom and at what Place Prools muft be Furnished . 103L 409. When Company Refu-es to Furnish Blanl: Forms . . 103S 410. Fffect of Failur.- to Furnii-h Proofs .... 1034 411. Oil Receipt cf Proofs of Loss, Insurer muRt Point out De- fects, if any Exist, Within a Reasonable Time . . 1034: 412. Objections to Proofs must be Specific: Insurer must not Mislead Assured ...... 1036 413. When Proofs are Unnecessary . .... 1037 414. Good Standing ....... 103S 414a. Good Standing in a Benefit Society Cuntiogent on Good Stauding in some other Organization ■ . . 1043 CHAPTEE XIII. WAIVER AND ESTOPPEL. 420. Definitions of Waiver and Estoppel .... 104S 421. In Insurance Law Waiver and Estoppel much the Same Thing 1050 422. Waiver m^yt)e Parol though Ri-quired by the Contract to be in Writing ....... ]052 423. Waiver must be Intentional and with Knowledge . . 1058 424. No Estoppel When Contract is lilt gal, nor When Parties made a Mutual Mi^talse, nor When Party has not been Misled: Estoppel When Contract is Executed . . lOsa 425. Estoppel from Representations .... i05i 426. Waiver or Estoppel by Acts of Officers or Agents . . 1065 426a. The Same Subject — Cases Illustrative of Conflicting Views 1062 427. Esi oppel in Matters Relating to Application . . . i06(i 428. The Same Subject: Knowledge, Mistakes or Fraud of Agents 1071. 429. Estoppel in Matters Relating to the Policy or Certificate . 1073 xxvi TABLE OF CONTENTS. Paobb I 429a. When Performance of dindition is Impossible . . 1077 1296. Waiver or Estoppel of Benefit Society in Matters Belatlug to Application ...... 1078 430. Waiver or Estoppel in Matters Relating to Assignment or Change of Beneficiary ..... 107!) 431. Waiver or Etoppel by Keceipt of Premium or Assessments 1081 4310. The Sami Subject: Estoppel bv Cu-itom or Promise of Agent: Payment of Premium after Death of Insured . 1087 432. The Same Subject: Notices of Premium or Assessments . 1104 433. The Same Sutjjec : General Rule .... 1107 434. General Rules of the Law of Waiver or Estoppel Apply to Insurance Contracts ...... 1108 434o. Waiver or Estoppel by Acts of Officers of Subordinate Lodges; Waiver by Members .... 1109 435. Calling fur Proofs of Loss Waives Breach of Conditions . 1116 436. Other Acts of Insur r in R ganl to Proofs of Loss Amount- ing to Waiver of Particu'ar R. qnirements . . 1118 437. When In>urer is Precluded from Ceriala Defenses . . 1121 CHAP TEE XIV. REMEDIES, PRACTICE, PLEADING AND EVIDENCE, i, 440. Concerning the Subject of this Chapter . . . 1124 441. Parties and Forms of Action in Suits by or against Volun- tary Associations ...... 1I25 442. Remedies of Members of Benefit Societies, Unlawfully Ex- pelled: Jurisdiction of Equity: Mandamus: Action for Damages . . . . . . .1129 443. Limitations in Policies on Time Within which Action must be Brought Thereon, or as to Place of Bringing Suit, or as to Issue of Execution ..... 1135 444. When the Statute of Limitations Applies . . . 1139 445. When the Limitations do not Attach: Waiver: Excuses for not Bringing Suit . . . .1141 446. When Time of Limitation begins to Run . . .1143 447. Condition of Limitation, how taken Advantage of . .1145 448. Condition of Limitation as to time of Bringing Suit not Usual in Life Insurance Policies: Construction . . 1145 -449. Conditions Concerning Arbitration Seldom found in Life Insurance Policies .....; 1146 xxvii TABLE PF CONTENTS. 450. Agreements to Kefer to Future Arbitratioa when and to what Extent Valid ...... 450a. Exhausting Remedies Within the Order 431. Pleading in Actions on Insurance Contracts , 452. Parties to Actions on Insurance Contracts 453. Actions on Benefit Certificates and Against Benefit So- .cieties for Benefits : Measure of Damages in Actions at Law . . . . * . 453a. Service of Process on Foreign Corporation 454. Declaration or Petition 455. Pleas, or Answers: Replications 466. Evidence in Actions on Insurance Contracts . 457. Presumptions ..... 458. Admissibility of Parol Evidence to Explain or Modify Answers of Assured in Application . 459. Declarations of Agent .... 460. Declarations of Assured 461. Evidence of Physician as to Knowledge Acquired in Course of his Employment .... 462. Opinion Evidence .... 463. Offering Application in Evidence as Part of Contract 464. Evidence of Preliminary Negotiations or Agreements 465. When Parol Evidence Admissible 466. Canvassing Documents, Prospectuses, Rules, etc. 467. Evidence of Usage .... 468. ConstrnctioQ of Insurance Policies 469. Barden of Proof .... 469a. Evidence of Age .... 470. Evidence of Death .... 471. Proofs of Loss as Evidence 472. Foreign Insurance Companies can Remove Causes to Fed eral Courts ..... 473. Retaliatory Legislation 474. Insurance Companies Subject to Insolvency and Bankruptcy Laws Like Other Corporations .... 475. Winding up by Insurance Commissioner: Special Deposit with State; Insolvency of Mutual Company: Effect of Charter Provisions ...... 476. Attachments of Company's Property by Policy Holders 477. Receivers of Insurance Companies . . . . '478. Insolvent Life Insurance Companies: Status of Policy Holders ....... 479. Insolvent Benefit Societies ..... xxviii 1146 1151 1152 1153 1155 1160 1162 1167 1168 1170 1172 1175 1175 1178 1180 1183 1184 1185 1187 1187 1189 1192 1194 1197 1280 1200 1201 1202 1204 1205 1206 1207 1209 TABLE OF CONTENTS. § 4-79a. The Same Subject: Receivers of Insolvent Benefit So- cieties ........ 1209 480. On Dissolution of Mutual Insurance Company Surplus Assets, After Creditors are Paid, Vests In State . .1213 CHAPTER XV. ACCIDENT INSURANCE. § i81. Accident Insurance Governed by the Same General Prin- ciples as Other Insurance .... 482. Definition of Accident .... 483. External, Violent and Accidental Means : Accident or Dis ease ....... 484. Same Subject: Drowning .... 485. Same Subject: Herjiia .... 486. External, Violent and Accidental Means: Examples of More Strict Construction .... 487. Same Subject: Sunstroke .... 488. External and Visible Signs .... 489. Same Subject: Gas ... 490. Proximate Cause ..... 491. More Hazardous Occupation .... 492. Voluntary Exposure to Unnecessary Danger: Obvious Risli — Due Diligence to Avoid Danger 493. Poison: Gas ...... 494. Intentional Injuries: Assault, Fighting 495. Intoxicants ...... 496. Suicide: Self-inflicted Injuries 497. The Same Subject: Evidence in Cases of Suicide . 498. Injuries Received While Traveling, or while a Passenger by a Public Conveyance .... 4980. Injuries Received While Entering or Leaving a Moving Conveyance ...... 4986. Injuries Received while Violating Rule of Company 498c. Injuries Received while Walking or Being on Railway Track or Roadbed ..... 499. Unlawful Act : Violation of Law 500. Employers' Liability Insurance : Risks Covered 601. Disability: Amount of Recovery* 502. The Same Subject: Loss of Eyes or Limbs 503. Commencement and Duration of Risk xxix 1215 1215 1216 1223 1226 1227 1230 1231 1234 1239 1247 1254 1265 1270 1276 1279 1298 1300 1306 1309 1313 1315 1320 1322 1330 1337 TABLE OF CONTENTS. Pages. § 504. Payment of Premium ...... 1339 505, Maturity of Contract: Notice and Proof of Loss . . 1345 506a. Examination of Person or Body .... 1352 506 Waiver and Estoppel ..... 1353 507. Pleading, Evidence, etc. ..... 1353 Mortality Tables ....... 1357 Compound Interest Tables ... . 1362 Compound Discount Tables ..... 1364 Table of Cases . . . . . . .1367 Index ......... THE LAW OF BENEFIT SOCIETIES AND LIFE INSURANCE. VOLUNTARY ASSOCIATIONS, REGULAR LIFE, BENE- FICIARY AND ACCIDENT INSURANCE. CHAPTEK I. INTRODUCTORY. Definition, History and Extent of Benefit Socibties: Orioin AND Growth of Life Insurance. § 1. Subjects to be Considered Herein, la. Nature of Benefit Societies. 2. They are Social Clubs. 3. They are Business Organizations. i. Kindred Societies. 5. Ancient Origin of Benefit Societies. 6. History of Guilds. 7. Decay of Guilds : their Successors. 8. History of Clubs. 9. Analogies between Ancient and Modern Clubs. 10. The English Friendly Societies. 11. The American Beneficiary Orders. 12. The Secret Fraternities. 13. Allied Organizations. 13a. Trades Unions. 14. Characteristics in Common. 15. Definitions of Life Insurance. 16. The English Definitions. 17. American Definition. § 1 INTRODUCTOKT. § 18. Various Classes of Life Insurance. 19. Assurance and Insurance. 20. History of Life Insurance. 21. An Early English Case. 21a. First American Case. 22. Method of Conducting-Business. 23. Analogies between Benefit Societies and Life Insurance Companies. 24. Early Beneficiary Life Insurance Cases in the United States. 25. Definition of Terms used In Insurance. § 1. Subjects to be Considered Herein. — We propose in the succeeding sections of this worli to not ofily con- sider the law of benefit societies, or associations, either voluntary or incorporated, which pay to their members benefits in time of sickness, or, upon their death, to their designated beneficiaries, but also of regular life and acci- dent insurance, conducted by corporations engaged in that business exclusively. In the course of this discussion it will be necessary to review the principles of law applicable as well to voluntary associations for social purposes, such as clubs, political committees and trades unions, as to those for beneficial purposes, which are now known by their statutory name of " Fraternal Beneficiary Associa- tions " and are usually incorporated. These benefit so- cieties have increased to such an extent and their business is of such magnitude that it is important to know the rules of law by which their contracts are governed. It is not possible to make the discussion thorough without also in- cluding the contracts entered into by the ordinary life and accident insurance companies. As we shall see, their undertakings are similar in being contracts of life insur- ance, and the same rules govern in both cases although dissimilarities exist and, in many cases, different principles apply, because of essential differences in organization and government and on account of the dual nature of benefit societies. 2 INTRODUCTORY. § la § la. Nature of Benefit Societies. — The modern mu- tual benefit life insurance organizations, generally called benefit societies, have come prominently into public view only during the last thirty-five years. From this fact we are not to conclude that they are wholly a modern institu- tion ; on the contrary, they are the composite results of the experience of many generations, and even centuries, they represent what is best and most useful of the multitude of social associations of all kinds that have existed in all times in every land. They seem to have sprung suddenly into the strength of mature life, yet, in fact, they have been, developing for hundreds of years. Benefit societies have a dual nature and in determining their responsibilities, powers and rights and those of their members this fact must never be lost sight of. Very different conclusions will be reached as we consider one class of characteristics or the other. 1 ^ Mulroy v. Knights of Honor, 28 Mo. App. 463; Wist v. Grand Lodge &c., 22 Oreg. 271; 39 Pac. E. 610. The statutes of many of the States, define what a fraternal beneficiary society is. The definition given by the statutes of Missouri, Revised Statutes 1899, § 1408, which is similar to that found in the laws of other States, is as follows: " A fra- ternal beneficiary association is hereby declared to be a corporation, society or voluntary association, formed or organized and carried on for the sole benefit of its members and their beneficiaries, and not for profit. Each association shall have a lodge system, with ritualistic form of work and representative form of government, and shall make provision for the payment of benefits in case of death, and may make provision for the payment of benefits in case of sickness, temporary or permanent physical disability, either as the result of disease, accident or old age, provided the period in life at which payment of physical disability bene- fits on account of old age commences, shall not be under seventy (70) years, subject to their compliance with its constitution and laws. The fund from which the payment of such benefits shall be made, and the fund from which the expenses of such association shall be defrayed shall be derived from assessments or dues collected from its members. Pay- ments oi death benefits shall be to the families, heirs, blood relatives, affianced husband or affianced wife of, or to persons dependent upon the member. Such associations shall be governed by this act, and shall be 3 § 3 INTRODUCTORY. § 2. They are Social Clubs. — They are, in the first place, social organizations, or clubs of congenial associates, bound together by secret obligations, mystic signs and fraternal pledges. They have generally initiatory rites and ceremonials and a more or less elaborate ritual ; their members are pledged to fraternity and mutual assistance in times of distress and need. Usually the organization is made up of local lodges, or societies, with higher, grand or supreme lodges, the latter being fountains of law for the whole association and the corporate entities of the confed- erations.! Considered as clubs, questions may arise as to their power over their members, or, if unincorporated, the personal liability of the latter to creditors of the association. In set- tling these external and internal controversies the princi- ples of the law of agency apply; 2 ov mandamus is resorted to for the restoration of members wrongfully expelled, ^ or courts of equity interfere to wind up the societies and dis- tribute their assets, or exercise other supervisory powers.* § 3. They are Business Organizations. — They are also business corporations and derive their name of benefit societies from this fact. All of them collect, monthly or oftener, from their members certain contributions or assess- ments, in consideration of which they agree to pay to the member, if sick or disabled, an agreed amount, or upon his exempt from the provisions of the insurance laws of this State, and shall not pay a corporation or other tax, and no law hereafter passed shall apply to them unless they be expressly designated therein. And such fraternal beneficial association may create, maintain, disburse and apply a reserve or emergency fund in accordance with its constitution or by-laws." 1 See post, §11. » Post, §§ 35, 36. 3 Post, § 442. *■ Post, §§ 69, 108, 442. 4 INTRODUCTORY. § 5 death to pay to his designated beneficiary a specified sum, or an amount equal to the aggregate of one assessment not exceeding a certain sum. In most cases these beneficiaries must be of the family of the deceased or those dependent upon him in some way for support. In token of these rights certificates of membership are generally issued. These societies are the poor man's life insurance com- panies, for they furnish to those of moderate incomes a cheap and simple substitute for life insurance. The assess- ments are comparatively small, are called as occasion re- quires, but as a rule every month, and the benefit paid is from five hundred to five thousand dollars. Litigation often arises over these contracts, and, as we shall see,i involves the application of the principles of the law of life insurance. Disputes are also frequent concern- ing the rights of living members. This litigation is increasing in volume and often presents complicated and interesting questions of law. § 4. Kindred Societies. — There are also organizations which are benefit societies only in name, but are similar to them in having their insurance feature. Such are the asso- ciations collateral to the great secret societies, the Free- masons, Odd-fellows and Knights of Pythias. While their membership is drawn from the orders, whose names they respectively bear, the insurance feature is the one object of the organizations and they are practically mutual life insurance companies, having a different plan from the older regular life insurance companies. Of these societies we shall speak later.2 §5. Ancieut Origin of Benefit Societies. — Benefit societies, as now known, are the legitimate successors of 1 Post, § 61. 2 Post, § 13. § 6 INTRODUCTOEY. the clubs and guilds that have existed from ancient times in all countries. By the processes of increasing and ex- tending civilization with its new needs and greater knowl- edge, each succeeding generation has improved upon the customs and resources of its predecessors, and so, through the centuries, we can trace the gregarious habit and co- operative idea, until from the numerous sodalities and secret societies of remote periods it leads to the formation of the social and industrial associations of the present cen- tury, — to the friendly societies of Great Britain and the co-operative life insurance and fraternal bodies of the last half century in this country. § 6. History of Guilds. — Men are social beings and their instincts and needs have, from the earliest times, caused them to unite with each other for the pleasures of mutual enjoyment or for the attainment of a common purpose. They have sought the power of numbers for resisting oppression, or mutual assistance in times of need, and again, their affinities for those having similar occupa- tions and interests have led to the formation of societies or guilds. The Eranoi of Greece and the Collegia of Rome were the earliest of these associations and they continued in various forms through the decline of the empire, reviving and gain- ing new vigor as the guilds of the middle ages. " The es- sential principle of the guild is the banding together for mutual help, mutual enjoyment and mutual encouragement in good endeavor." These societies were numerous in the palmy days of Rome, when most of them were trade cor- porations devoted to the interests of their crafts, while some were formed for good fellowship, to promote religion and to provide for burial of members. Persons of the highest rank were often glad to belong to them and many were ex- ceedingly rich and influential. The plan of organization 6 INTRODUCTORY. § 6 was simple; they chose their own officers, made rules for self-government, collected contributions for a common fund and met and feasted together at stated times. In the middle ages social guilds sprang up all over Europe, but chiefly in England and Germany and one or more was found in every village. Their objects, says an authority ,i included " not only devotions and orisons, but also every exercise of Christian charity, and, therefore, above all things, mutual assistance of the guild brothers in every exigency — especially in old age, in sickness, and in cases of impoverishment, — if not brought on by their own folly, — and of wrongful imprisonment, in losses by fire, water or shipwreck, aid by loans, provision of work, and lastly the burial of the dead. It included further the assistance of the poor and sick, and the visitation and comfort of pris- oners not belonging to the guild." In England many of these guilds numbered among their members men and women of all ranks and were rich and powerful, so that kings and princes did not disdain to be- come guild brethren. Henry IV. and Henry VI. were members of one organization and Henry VIII. of another. The work done by these societies was humane and charita- ble; they furthered public and benevolent objects and founded schools and colleges ; they assisted in the construc- tion of municipal works and were a valued adjunct in the proceedings of the important cities. Their social features were popular and highly appreciated in their communities. When the Reformation came the guilds in most Protestant countries were abolished under pretense of their being su- perstitious foundations. In contradistinction from the social were the trade guilds, or merchant-guilds and craft-guilds, which attracted more attention because of their wealth and importance. Returns 1 Brentano; " History and Development of Guilds." § 6 INTEODUCTOKT. of all guilds were made into chancery in 1389, and the bor- ough records of England and Scotland show the influence and power of the trade associations. " The guild-merchant arose in this way: the same men who, in the growth of towns became citizens by reason of possessing town lands, frequently were also traders ; the uncertain state of society in early times naturally caused them to unite for protection of their trade interests in a gilda mercatoria, which made internal laws akin to those of other guilds; the success of these private interests enlarged their importance; and when the towns and boroughs obtained confirmation of their municipal life by charter, they took care to have it included that the men of the place should also have their guild- merchant. Thus these guilds obtained the recognition of the State; in their origin they had been as other guilds, partaking especially of the character of peace-guilds, but now the citizens and the guild became identical, and what was guild-law often became the law of the town. In great cities, such as London and Florence, we do not hear of merchant-guilds ; i there the separate occupations or crafts early asserted their associating power and independence, and the craft-guilds gradually took a place in the organiza- tion of the town government. Many craft-guilds, the heads of which were concerned in the government of the commune, are found in Italy between the ninth and twelfth centuries.2 But in England and the north of Europe the guilds-merchant during this period, having grown rich and tyrannical, excluded the landless men of the handicrafts; these then uniting among themselves, there arose every- where by the side of the guilds-merchant the craft-guilds, which gained the upper hand on the Continent in the struggle 1 Norton's Commentaries on the History of London. 2 Perren's Hist, de Florence. 8 INTEODTJCTOKT. § 6 for liberty in the thirteenth and fourteenth centuries. In England these companies usually existed side by side with the old town or merchant-guild, until at length their increasing importance caused the decay of the old guilds, and the adop- tion of these crafts as part of the constitution of the towns (thirteenth to fifteenth century). The separation of the richer, and perhaps the older, from the poorer of the com- panies occurred, and thus arose the paramount influence of a few, — as the twelve great companies of London, the Arti Majori of Florence, and others. " The constitution of the trade-guilds was formed on the , model of other guilds: they appointed a master, or alder- man, and other officers, made ordinances, including pro- visions for religious observances, mutual help and burial; the town ordinances yet remaining of many places, as of Berwick, Southampton and Worcester, show traces of the trade laws of the old guild-merchant. As their principal objects, ' the craft-guildmen provided for the maintenance of the customs of their craft, framed further ordinances for its regulation (including care against fraudulent workman- ship), saw these ordinances properly executed, and pun- ished tlie guild-brothers who infringed them. Though the craft-guilds, as voluntary associations, did not need con- firmation by the authorities at their birth, yet this confirm- ation became afterwards of the greatest importance, when these guilds wanted to be recognized as special and inde- pendent associations, which were thenceforth to regulate the trade instead of the authorities of the town.' i Hence obtained the practice of procuring a charter in confirmation and recognition of their laws, in return for which certain taxes were paid to the king or other authority. It is there- fore erroneous to state, as is sometimes done, that these 1 Brentano ; History and Development of Guilds. § 8 INTEODUCTORT. companies owe their origin to royal charter, or that they required a license." i § 7. Decay of Guilds, their Successors. — Under the influence of the refinements of civilization and the new necessities of commerce, as well as the strong arm of the Reformation and changing human tastes and recreations, the social, merchant and craft guilds practically lost their popularity and power, and even their very being, though a few of the latter may yet be in existence. The social guilds were succeeded by the modern friendly societies, and social and literary clubs, and probably also in part by the great secret fraternities like the Freemasons and Odd- fellows. The merchant guilds gradually disappeared, although some still survive, and our present Boards of Trade and Chambers of Commerce grew up. The craft guilds may be looked upon as in one sense the parents of the Trade Unions of to-day. Of these clubs, secret frater- nities and the English friendly societies, we shall speak in the order named. § 8. History of Clubs. — Clubs have been said to be the natural and necessary off-shoot of men's gregarious and social nature, and the records of nations show that they have flourished in all countries from the beginnings of history. They were particularly numerous in the prosper- ous days of Greece and Eome, and interesting statements are made of their workings and influence. They were religious, commercial, political or merely social, according to the class of people who were members, though the most of them were either a species of craft guilds, or formed for religious purposes. All, undoubtedly, com- bined pleasure with business, or worship, and frequently met for social relaxation. 1 L. Toulmin Smith ia Encyclopsedla Britannica; article " Guild." 10 INTRODUCTOBT. § 8 In ancient times the State did not always countenance the worship of strange gods, so that the devotees of new deities associated together in clubs and met in secret. Little, however, is known of their rites or ceremonies. The great secret organizations, like the Pythagoreans, Essenes, Carmathites and Fedavi, or the grosser Baccha- nalians are described in history, and their philosophical teachings have been the subject for multitudes of essays and ponderous tomes. It is not to our purpose to enter into a prolonged discussion of the work of these dead and buried institutions, we can merely refer to them. There were, in the early days before the Christian era, or shortly afterwards, many clubs organized for private advantage. " There was nothing in the functions of these clubs to obtain for them a place in the page of history. The evidence, therefore, of their existence and constitu- tion is but scanty. Monumental inscriptions, however, tell us of clubs of Roman citizens in some of the cities of Spain, of a club of strangers from Asia resident in Malaga, of Phoenician residents at Pozzuoli, and of other strangers elsewhere. These all were probably devised as remedies against that sense of ennui and isolation which is apt to come over a number of foreigners residing at a distance from their native country. Something of the same kind of feeling may have led to the toleration of a club con- sisting of old soldiers who had been in the armies of Au- gustus ; these were allowed to meet and fight their battles over again spite of the legal prohibition of military clubs. Another military club of a different kind existed among the officers of a regiment engaged in the foreign service in Africa. Its existence can have been no secret, for its rules were engraved on pillars which were set up near the headquarters of the general, where they have lately been found in the ruins of the camp. The contribution of each member on admission scarcely fell short of £25, and 11 § 8 mTKODUCTOEY. two-thirds of this sum were to be paid to an heir or representative on the occasion of his death, or he might himself recover this proportion of his original subscription on retirement from military service. The peculiarity, how- ever, of this aristocratic collegium was this, that it pro- vided that a portion of the funds might also be spent for other useful purposes, e. g., for*foreign traveling. It is to be presumed that a member who had availed himself of this privilege thereby forfeited all claim to be buried at the expense of his club." ^ The extent of the clubs of the middle ages is not accu- rately known, for the difference in those countries between these clubs and the guilds of various kinds was slight. In the early part of the eighteenth century the lodges of Odd- fellows and Freemasons appeared, tracing their ancestry back to the remote ages of -antiquity, and perpetuating to some extent the ancient rituals of very old secret organiza- tions. The true precursors of the Masons were probably the mediaeval building organizations, for example, the stone-masons of Germany, who had religious ceremonies, oaths, benefits, burial funds and registers, and officers by whom they were instructed in secret. Such associations existed in Gaul and Britain for centuries and as early as the twelfth century the Bauhutten had a general associa- tion, secret signs and ritual, and graded divisions or de- grees. The word lodge first occurs in 1491 in a statute governing the Masons at Edinburg.2 The Freemasons and Odd-fellows, and later the Knights of Pythias, had their mystic signs of recognition, secret initiatory rites and ceremonies, various grades of dignity and honor, and performed extensive social and benevolent work. They now number their members by millions. 3 1 Canon J. S. Northcote in Encyclopaedia Britannica. s Encyclopsedi a Britannica, art. "Freemasons." s In 1881 ia Great Britain there were 10,000 lodges of Freemasons 12 INTEODUCTOEY. § 9 The modern clubs of Europe, organized for literary and political, as well as for social objects, are numerous and wealthy and in London especially some are flourishing whose names are known throughout the world. The courts were at an early period called upon to adjudicate concerning the individual liability of the members of these clubs for the debts of the association as well as the reme- dies of members unjustly expelled. i' In America clubs are increasing rapidly, hold large amounts of property and are constantly gaining in membership and influence, and few cities of any size can be found where they do not exist, while lodges of the great secret fraternities are in every village, and have been and are immensely popular. § 9. Analogies between Ancient and Modern Clubs. — Many analogies can be traced between ancient and modern clubs and the ecclesiastical, political and secret societies of recent times. Viewed from a legal stand-point, they are all formed upon essentially the same principles. Generally, they are unincorporated voluntary associations, but in probably every State they may incorporate under acts of the legislatures regulating the formation of corporations for benevolent, charitable and educational purposes. By the provisions of these statutes they are allowed special privileges, while in most States churches are further recog- nized and given exemption from taxation, because of their conserving and helpful influence over the people, and the absence of any objects of pecuniary advantage to their members. In many, if not a majority, of States, statutes exist authorizing the incorporation of " Fraternal Beneficiary with 1,000,000 members or more, and over 600,000 Odd-fellows. In America the membership of these combined societies is probably as large. In 1881 the British Odd-fellows had a capital of over five million pounds sterling. Encyc. Brit. 1 See ante, § 2. 13 § 10 INTRODUCTORY. Associations " and regulating the business which they can do. Under these statutes the societies are required to annually report to the insurance department the details of their business and are under State supervision although exempted from the laws governing the regular life insur- ance companies. 1 Although numerous cases are found in the courts relating to the rights, privileges and responsibilities of ecclesiastical organizations and their members, we shall not refer to them, except incidentally and by way of illustration, for ecclesiastical law is a subject worthy of its own individual treatises, and learned authors have considered its authori- ties and principles with great research and ability. § 10. The English Friendly Societies. — In the law which now regulates Friendly Societies in Great Britain,^ they are defined as " societies established to provide by voluntary subscriptions of the members thereof, with or without the aid of donations, for the relief or maintenance of the members, their husbands, wives, children, fathers, mothers, brothers or sisters, nephews or nieces, or wards being orphans, during sickness or other infirmity, whether bodily or mental, in old age or in widowhood, or for the relief or maintenance of the orphan children of members during minority ; for insuring money to be paid on the birth of a member's child, or on the death of a member, or for the funeral expenses of the husband, wife, or child of a member, or of the widow of a deceased member; or, as respects persons of the Jewish persuasion, for the payment of a sum of money during the period of confined mourn- ing ; for the relief or maintenance of the members when on travel in search of employment, or when in distressed cir- 1 Post, §51 etseq. 2 33 & 39 Vic, c. 60, amended 39 & 40 Vic, c. 32. Tiiese acts and amendments were consolidated In 1887. 50 & 51 Vic, c. 56. 14 INTKODUCTORT. § 10 cumstances, or in case of shipwreck, or loss or damage of or to boats or nets ; for the endowment of members or nominees of members at any age ; for the insurance against fire to any amount not exceeding £15 of the tools or im- plements of the trade or calling of the members." They are limited in their contracts for assurance of annuities to £50, and for insurance of a gross sum to £200. These organizations have been more briedy defined to be " the mutual assurance societies of the poorer classes, by which they seek to aid each other in the emergencies arising from sickness and death and other cause of distress." The friendly societies of the present time are in one sense the successors of the ancient guilds and some of them are very old, tracing their foundation back as early as 1634. They are supposed by some to have their origin in the burial clubs of early English history, when the desire of the poor to have respectable burial led to the formation of associations, whereby through the co-operation and period- ical contributions of many, a fund was established for the purpose of burying their deceased members. The organi- zation of these societies is more complex than that of any of the associations which they have succeeded and they proceed on a different principle, though the modern may be the natural results of the improvements of each suc- cessive generation over the methods of that preceding. In all there is the common provision for a contingent event by a joint contribution; but the friendly society has attempted ' ' to define with precision what is the risk against which it intends to provide, and what should be the contributions of the members to meet that risk." In the eighteenth century these societies were numerous, and in 1793 their existence was recognized by what is known as Sir George Rose's Act, by which they were styled " societies of good fellowship " and given encouragement by special privileges. The benefits offered by this statute 15 § 10 INTKODUOTORY. were eagerly received and in the county of Middlesex alone nearly a thousand societies were enrolled in a few years after the passage of this act. This prosperity was suc- ceeded by depression and failure of many societies and general mistrust. For the purpose of encouraging greater confidence in these organizations and affording " further facilities and additional security to persons who' may be willing to unite in appropriating small sums from time to time to a common fund," the act of 18191 ^as passed. By this statute a friendly society was defined as "an institution, whereby it is intended to provide, by contribu- tion, on the principle of mutual insurance, for the mainte- nance or assistance of the contributors thereto, their wives or children, in sickness, infancy, advanced age, widowhood, or any other natural state or contingency, whereof the occurrence is susceptible of calculation by way of average." The act of 1829 2 was a great improvement over the one it displaced and by it the law relating to these organizations was entirely reconstructed. The various acts of 1834 ^ and 1846 * were still further improvements, and by the latter the present office of ' ' Eegistrar of Friendly Societies ' ' was established. In 1850 ^ and 1855 6 the law was again changed and this was succeeded by the law passed in 1875,7 and amended in 1876,^ and again amended in 1887.9 It will be seen, therefore, that the English Friendly So- cieties have long been recognized by the government as organizations beneficial to society and deserving the sup- 1 69 George III., c. 128. 2 10 Geo. IV., c. 66. 3 4&5Wm. IV.,c. 40. * 9 & 10 Vic, c. 27. 5 13 & 14 Vic, c 115. « 18 & 19 Vic, c. 63. ' 38 & 39 Vic, c 60. 8 39 & 40 Vic, c. 32. 9 50 & 51 Vic, c 6U. 16 INTRODUCTORY. § 11 port and encouragement of the community. They are now under a careful supervision, as much so as the more pre- tentious life insurance companies, and they are required to make regular returns to the chief registrar ; special pro- visions are also made by the laws for the restraining power of the courts and the winding up of the societies when insolvent . i § 11. The American Beneficiary Orders. — The Ameri- can benefit societies or orders, resemble in many respects the English friendly societies, although they have many of the characteristic features of the great secret orders like 1 For most of these facts we are indebted to a very full and carefully prepared article in the last edition of the Encyclopsedia Britannica by E. W. Brabrook. From that essay it seems that these societies are divided by the registrar into thirteen classes, ranging from the affiliated societies, or " orders," to cattle insurance societies. There are also " general societies," of which 8 in London have 60,000 members ; county societies with 30,000 members; local town societies; "collecting societies," of which 329 have over 680,000 members and £203,777 of funds; "annuity societies;" female societies; workingmen's clubs, etc. In the period between 1793 and 1856 it is stated that 26,031 societies registered under the various acts. In 1876, 11,282 furnished returns, though 26,087 were presumed to be in existence, and these had 3,404,187 members and £9,336,946 funds, Twenty-two returned over 10,000 members each, and nine over 30,000 members. From the report of the Registrar of Friendly Societies, etc., for 1892, it appears that the Friendly Societies proper, collecting societies, various miscellaneous societies, including industrial and provident societies, building societies, loan societies, trades unions and railway savings banks are all under the charge of one bureau. The registered Friendly Societies proper in the United King- dom at the end of 1891 numbered 28,384, with 4,203,601 members and funds amounting to the sum of 22,695,039 pounds. These so-called Friendly Societies are divided into two classes, what are called affiliated orders, or societies having subordinate branches, and the independent societies, composed of various lodges, or branches, which contribute a certain amount annually for the purpose of keeping up a central organ- ization yet are really independent organizations. The affliated orders are centralized bodies having various subordinate lodges, for whose dealings they are in a measure responsible. In the statistics of the number of societies, subordinate lodges are Included. The two largest 2 17 § 11 INTRODUCTORY. the Freemasons and Odd-fellows. Most of them have a secret organization and ritual , with mystic signs and pass- words, are oath-bound and have grades or degrees of honor. The local lodges are generally under the super- vision of grand lodges, composed of delegates from the local bodies, and these in turn acknowledge the supremacy of a supreme lodge, made up of representatives from the grand lodges. The benefits paid are of two kinds, those to sick members for which the local lodges are responsible, and a specific sum to be paid on the decease of a member to his bene- ficiary, designated as such in accordance with the rules of the order. This death benefit is paid by the highest body in the order, which is usually incorporated, and, in evidence of the affiliated orders are the Ancient Order of Foresters with 830,720 members and the Independent Order of Odd- Fellows, Manchester Unity, with 769,503 members. The registrar estimates the annual contribu- tions of the members of the independent societies at 1,707,000 pounds and the other receipts at 1,410,000 pounds, making a total of 2,117,000 pounds. The affiliated orders are estimated to annually receive 3,024, - 000 pounds in contributions. The total income of the tw* classes, that is of the Independent societies and the affiliated orders with branches, is estimated to be: contributions, 4,731,000 pounds, other receipts, 941,000 pounds; or a total annual income of 5,672,000 pounds. The yearly benefits paid are estimated at 4,277,000 pounds ; expenses, 644,000 pounds, leaving as anaccumulated saving, 751,000 pounds. These figures exclude the collecting societies, the various provident societies, working men's clubs and trades unions, as well as savings banks. In his testimony before a parliamentary committee the registrar estimated that the unregistered societies are nearly as numerous as the registered societies and with as large a membership. This would give the Friendly Societies of Great Britain, not including the collecting societies and the other numerous industrial and provident societies, a membership of over eight millions and accumulated funds on hand of about forty-five million pounds sterling. This report also gives statistics of the societies in the colonies and in France and Switzerland. For example, in Australia are seventy-one societies with, in round numbers, 2,300 lodges and 186,000 members, and accumulated funds of nearly two million pounds. 18 INTKODUCTOEY. § 12 of the right of the member to have this benefit paid, a cer- tificate is issued to him by this supreme or grand lodge. The amount thus paid in each case ranges from $500 to $5,000, and the fund from which it is disbursed is col- lected by assessments, generally of a definite sum, from one to five dollars, called monthly, or oftener as occasion requires, or as needed when a death occurs. The local lodges act as agents of the grand or supreme lodge, in re- ceiving new members, and, to some extent, unless otherwise provided, in collecting assessments. The local lodges are supported by monthly or quar- terly calls or dues, which are levied and collected by the lodge direct and used as prescribed by the by-laws of each body. The sick benefits are paid out of this lodge fund. These local lodges enroll the new members, or receive them by a secret ceremonial, but before initiation the applicants must pass a medical examination, the report of which must be usually approved by a supervising medical authority, after which they are initiated in due form and become full- fledged members.! § 12. The Secret Fraternities. — Closely allied to the beneficiary, or mutual aid life insurance organizations, are ^jlike secret ritualistic societies and charitable fraternities, whose characteristic features are good-fellowship, social 1 The oldest of the leading beneficiary orders, with the life insurance feature, in the United States, is the Ancient Order of United Workmen. It was organized in Pennsylvania la 1868 and now has lodges in nearly every State and its total membership is about 400,000. The next oldest order is the Knights of Honor, organized soon after the A. O. U. W. The various beneficiary orders have organized a Fraternal Congress which meets annually. About sixty of these societies are represented, with in 1903 a membership of nearly four millions and outstanding obli- gations of $6,642,442,256. The orders range from the Modern Woodmen With a membership of about 676,000 to those with less than 10,000. The benefits paid during 1902 amounted to $52,599,198 and since their organi- zation to upwards of $500,000,000. 19 § 13 INTRODUCTOKT. enjoymentand benevolence. The Freemasons, Odd-fellows and Knights of Pythias are examples. These numerous societies are secret in their organization and work, use a ritual and have initiatory ceremonies and their members are pledged to secrecy. They are organized on the plan of local assemblies or lodges under the government and con- trol of grand or supreme lodges. Some, like the Masons, make no promise of financial aid to members, but are charitable, only donating when necessity requires. Others, such as the Odd -fellows, expressly agree to pay stated amounts to their members in sickness or disability and at death a certain sum for funeral expenses, and also to look after the widow and orphan. These societies have no life insurance feature. ^ It is not often that legal complications arise in these bodies, necessitating a resort to the courts, though some cases are found to which they are parties. § 13. Allied Organizations. — In connection with the Masonic, Pythian and Odd-fellows' orders are in many 1 The Independent Order of Odd-fellows was the first fraternal society in America to guarantee to its members a certain amount of money in event of sickness and for a funeral benefit. It was founded in this country in 1819, and now has about 7,000 lodges and 750,000 mem- bers, and during its existence has disbursed to its beneficiaries upwards of fifty million dollars. The largest secret fraternal society is the Masonic Order, which now has a membership in this country of about 800,000 members, and has expended millions of dollars in unostentatious charity. The Knights of Pythias, which was originated within the last half century, has a membership of probably 470,000. On principle, a distinction should be made between the mutual aid or beneficiary orders proper, having a life insurance feature, and the purely charitable and fraternal societies, whose donations are more strictly charities, but this cannot always be done. In nearly every large city, there are local orders not known away from the vicinity, and throughout the United States are numerous Hebrew, Scottish, English and other organizations deriving their membership from some one nationality, creed or religious sect. These societies are too numerous to mention and the number is constantly increasing. 20 INTKODUCTOKT. § 1305 States associations formed for mutual life insurance, whose membership is drawn exclusively from the societies in aid of which they are organized. These organizations are dis- tinct and separate from the orders, are strict business com- panies and are life insurance companies, operating on the assessment plan instead of on the principles underlying the scientific theory of life insurance. There are also in this country a number of regular cor- porations, formed for the conduct of the business of life insurance on the plan of the benefit societies, — the collec- tion of frequent periodical assessments as required to meet death losses. The business of these companies is regular life insurance conducted upon a new theory, for, except in this respect, they do not differ from the regular life in- surance companies with which all are familiar. These organizations are known as assessment companies, or life insurance companies doing business on the assessment plan and in some States the business is regulated by statute. i § 13a. Trades Unions. — In Great Britain trades unions are required to report to the Registrar of Friendly Socie- ties and are under the superintendence of that bureau. ^ In America they are usually unincorporated voluntary asso- ciations and partake of the nature both of clubs and benefit societies, often paying the members stipulated or arbitrary sums for relief in times of sickness, although it is probable that a majority of such associations are organized more for social advantages and purpose of profit to the members of the association in times of differences with employers. In treating of voluntary associations, both clubs and benefit societies, it will be necessary to consider many cases where different branches of trades unions have been interested and no distinction can be made between trades unions and 1 Revised Statutes of Mo, 1899, § 7901 et seq. ; post, § 566. 2 Ante, Sec. 10. 21 § 13a INTRODUCTORY. other clubs or associations, whether corporate or incorpo- rate, so far as the governing principles of law are concerned. It has been said that ' ' Labor organizations are lawful and generally laudable associations, but they have no legal status or authority, and stand before men and the law on no better footing than other social organizations, and it is preposterous that they should attempt to issue orders that free men are bound to obey ; and no man can stand in a court of justice and shelter himself behind any such organ- ization from the consequences of his own unlawful acts." 1 And it is not unlawful for the members of an as- sociation to combine together for the purpose of securing the control of the work connected with their trade and endeavor to affect such purpose by peaceable means. 2 There is no reason why trades unions should not be in- corporated under general incorporation laws if their pur- poses fall within their purview. In one State, at least, associations of farmers are specially authorized to become corporations by adoption of the act of the legislature con- ferring the authority. 3 Statutes also exist authorizing the formation of trades unions, but such law does not sanction the making of war on the non-union laboring man, or illegally interfering with his rights and privileges.* In order to prove the character of a club as a voluntary association a witness can testify that he had been elected president and had acted in such capacity .& 1 In re Hjggins (C. C), 27 Fed. R. 443. 2 Mayer v. Journeyman Stone Cutters Association, 47 N. J. Eq. 519 ; 20 Atl. R. 492; Longshore Printing &c. Co. v. Howell, 26 Ore. 527; 38 Pac. Rep. 547; 28 L. R. A. 464, and note. 3 Durham Fertilizer Co. v. Clute, 112 N. C. 440; 17 S. E. R. 419. * Lucke V. Clothing Cutters &c. Assembly, 77 Md. 396; 26 Atl. R. 505; 19 L. R. A. 408. « Lavretta v. Holcombe, 98 Ala. 503; 12 Sou. Rep. 789. 22 INTRODUCTOEY. § 13a Like other associations the members of trades unions are bound by the constitution or articles of association. i A union may prescribe qualifications for its membership. It may make it as exclusive as it sees fit. It may make the restriction on the line of citizenship, nationality, age, creed, or profession, as well as numbers. This power is incident to its character as a voluntary association, and can- not be inquired into, except on behalf of some person who has acquired some right in the organization, and to protect such right. 2 But a by-law of a trade union, providing for the expulsion of a member for taking the place of a brother member who has been discharged for upholding the laws of a society, is void against public policy. ^ A person who has secured membership in a trades union by feigning qualifications which did not exist, and persists in retaining membership after such disqualifications have been established, can be expelled, and where no by-laws or regulations appear in the record and the proceedings appear to have been reasonably fair the court will not interfere.* But a court of equity has no jurisdiction to compel the admission to an association of a person not elected to mem- bership in such union according to its rules and by-laws . ^ Where a labor organization refused to admit a non-union man to membership and informed his employers that in case he was any longer retained by them it would be com- pelled to notify the other organizations in the city that 1 ConnifE v. Jamour, 65 N. r. Supp. 317; 31 Misc. 729. 2 Mayer v. Journeyman Stonecutters Ass'n, 47 N. J. Eq. 519; 20 Atl. 492. 3 People V. N. Y. Ben. Society, 3 Hun, 361; 6 Thomp. & C. 85. + Beesley v. Chicago Journeymen Plumbers &c. Ass'n, 44 III. App. 278. 5 Mayer v. Journeymen Stone Cutters Ass'n, 47 N. J. E. 519; 20 Atl. R. 492. See also McKane v. Democratic General Comiliittee, 123 N. Y. 609; 25 N. E. R. 1057. 23 § 1305 INTEODUCTOKY. their house was a non-union house, in consequence of which act such non-union man was discharged, it was held,i that the association was guilty of a wrongful act and such a non-union man could maintain an action against it for damages that he had suffered in consequence of such discharge. 2 The promise to reinstate an expelled member, if a claim for damages is released, is without consideration.^ But the union is liable for damages for a wrongful expulsion of a member.* The member, on withdrawal from his union, is not entitled to share in its funds. ^ Generally an injunction will lie to restrain persons from attempting by force, menaces and threats to prevent working men from working on such terms as they make with their employers. ^ In England an injunction has been granted to restrain the secretary of a trades union committee from publish- ing false and injurious statements concerning the plaintiff. '^ Injunctions have also been granted to prevent the interference with interstate commerce by combinations of laborers. 8 1 Lucke 9. Clothing Cutters &c. Assembly/77 Md. 396; 26 Atl. E. 505; 19 L. E. A. 408. 2 See also Bowen v. Hall, 6 Q. B. Div. 338; Chipley o. Atkinson, 23 Fla. 206; 1 So. Eep. 934. In this latter case the cases bearing upon the liability of persons for procuring the discharge of an employee are exhaustively reviewed. 3 Connell v. Stalker^ 48 N. T. Supp. 77; 21 Misc. 609. « Connell v. Stalker, 21 Misc. E. 423; 45 N. Y. Supp. 1048. ^ Local Union v. Barrett, 19 E. I. 663 ; 36 Atl. E. 5. 6 Murdock v. Walker, 152 Pa. St. 595; 26 Atl. E. 492; Coear d'Alene Consolidated &c. v. Miners' Union, 51 Fed. E. 260. ' Collard v. Marshall, 1 Ch. 571. 8 Toledo &c. Ey. Co. v. Pennsylvania Co., 54 Fed. E. 730; 19 L. E. A. 387. 24 INTRODUCTORY. § 14 It is not, however, germane to the subject of this work to pursue this line of discussion further.i Where a trades union association has a common label for the use of all of its members a bill to restrain the unau- thorized use of such label will not lie on the part of subor- dinate lodges of such association, the right of action, if any, being in the parent association. 2 A provision of the constitution and by-laws of the Knights of Labor providing that on suspension of a local assembly its property shall be forfeited to the general assembly is void,^ and after revocation by the general executive board of the charter of the local assembly such assembly still has the right to sue for and collect debts due to it.* Where several local lodges purchased a hall to be used for their joint benefit, the title to which was taken in the name of a committee in trust for such lodge, and subse- quently the lodges organized themselves into a corporation to administer the property, it was held that the committee would be compelled to transfer the property to such corpo- ration and account for the rents and profits, although the different local lodges never formally requested the com- mittee to make the transfer .5 § 14. Characteristics In Common. — As we have pro- gressed with the consideration of these social, benevolent mutual aid societies as well as other organizations for the 1 For discussion of principles governing the granting of injunctions against strikers, see note 28 L. B. A. 464. 2 McVey v. Brendel, 144 Pa. St. 235; 22 Atl. E. 912; 13 L. E. A. 377. See also McKay v. Goodfellow, 133 N. Y. 89; 61 Hun, 619. 3 Wicks V. Monihan, 130 N. Y. 232; 29 N. E. E. 139; 14 L. E, A. 243; see also i)os{, § 71. * Wells V. Moniban, 129 N. Y. 161; 29 N. E. E. 232, 6 Organized Labor Hall v. Gebert, 48 N. J. E. 393 ; 22 Atl. E. 578. See, as to fines, Meurer v. Detroit Musicians &c. Ass'n, 95 Mich, 451 ; 54 25 § 16 INTRODUCTORY. mutual assistance of their members, in their field of work, we have found that, while all fraternal associations have the characteristic features of the regular clubs which have often figured in the courts, many have the additional fea- ture of agreeing to pay a certain sum on the death of a member to his designated beneficiaries ; and these have the dual nature of which we spoke at first, l and are business companies as well as social fraternities. This business we shall see2 is, legally speaking, life insurance in form and substance, although in a philosophical sense it is not tech- nical and scientific life insurance. In discussing the ques- tions that have arisen and are likely to arise in the conduct of these societies, it will be necessary to consider the law of life insurance as laid down by the courts of this and other countries. § 15. Definitions of Life Insurance. — The definitions of life insurance are numerous, but they do not differ ex- cept in the form of expressions. Without attempting to coin a new one we will refer to some given by the English courts and then state that now most approved of in the United States. § 16. The English Definitions. — In the great case of Dalby v. India and London Life Assurance Company ,3 in explaining the difference between the contract of life assur- N. W. R. 954. As to assignment of funds by members in good standing, Brown v. Stoerlsel, 74 Micii. 269; 41 N. W. B. 921; 3 L. R. A. 430. For discussion of the riglits of trade unions to protect labels, trade - marks and forms of advertising, see Scbmalz ». Wooley, 57 N. J. Eq. 303; 41 Atl, R. 939; 43 L. B. A. 86; Perkins ». Heert, 158 N. Y. 306; 53 N. E. R. 18; 43 L. R. A. 858 ; State v. Bishop, 128 Mo. 373 ; 31 S. W. R. 9 ; 29 L. R. A, 200; Tracy v. Banker, 170 Mass. 266; 49 N. B. B. 308; 39 L. R. A. 508. 1 Ante, § la. 2 Post, § 51. 3 15 C. B.366; 3 C. L. B. 61; 24 L. J. C. P. 2; 18 Jur. (Ex. Ch.) 1024. 26 INTRODUCTORY. § 17. ance and that of fire or marine insurance, holding that the former is not lilse the latter, a contract of indemnity, Baron Parke, said: "The contract commonly called life assurance, when properly considered, is a mere contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his life, — the amount of the annuity being calculated, in the first instance, according to the probable duration of the life; and, when once fixed, it is constant and invariable. The stipulated amount of annuity is to be uniformly paid on one side, and the sum to be paid in the event of death is always (except when bonuses have been given by pros- perous offices) the same, on the other. This species of insurance in no way resembles a contract of indemnity." Bunyon, the English insurance writer, after quoting the definition of Chief Justice Tindal,! that it is a contract in which a sum of money is paid as a premium in consideration of the insurers incurring the risk of paying a larger sum upon a given contingency, adds: "The contract of life insurance may be further defined to be that in which one party agrees to pay a given sum, upon the happening of a particular event, contingent upon the duration of human life, in consideration of the immediate payment of a smaller sum, or certain equivalent periodical payments by another." 2 § 17. American DeflnitioD. — The American definition most generally approved is that of Justice Gray of the Supreme Court of Massachusetts, as follows: ^ — " A contract of insurance is an agreement, by which one party, for a consideration (which is usually paid in money, 1 Patterson v. Powell, 9 Bing. 320. 2 Bunyon on Ins. 1 . s Commonwealth v. Wetherbee, 105 Maes. 149. See also State v. Beardsley, 88 Minn. 20 ; 92 N. W. E. 472. 27 § 18 INTRODUCTOET. either in one sum, or at different times during the contin- uance of the risk), promises to make a certain payment of money upon the destruction or injury of something in which the other party has an interest. In fire insurance and ma- rine insurance, the thing insured is property; in life or accident insurance, it is the Ufe or health of a person. In either case neither the times and amounts of payments by the assured, nor the modes of estimating or securing the payment of the sum to be paid by the insurer, affect the question whether the agreement between them is a contract of insurance. All that is requisite to constitute such a contract is the payment of the consideration by the one, and the promise of the other to pay the amount of the in- surance upon the happening of injury to the subject by a contingency contemplated in the contract." l § 18. Various Classes of Life Insurance. — There are two principal classes of life insurance, each consisting of several varieties. The first class are those in which the sum insured is certain to become payable, provided only the insurance is duly kept in force ; the second are those which are of a temporary or contingent character, so that the sum insured may or may not become payable, accord- ing to circumstances. To the first class belong the great bulk of the transac- tions of life insurance companies, namely : — (a.) W7iole Term Assurances on Single Lives. — These are contracts to simply pay a certain sum, with or without dividends, on the death of the person named in the policy whenever that may occur. Usually the premium, or con- sideration for the policy, is an annual sum payable during the whole continuance of the policy. It may, however, be arranged differently, as by a single payment at the begin- 1 See post, § 61; New York L. Ins. Co. v. Statham, 93 U. S. 24. 28 INTRODUCTORY. § 18 ning of the transaction ; or a limited number of contribu- tions, each larger than the annual premium for the whole of life ; or by a modified rate during a limited period and thereafter a correspondingly higher rate. (6.) Endowment Assurances. — In these the sum in- sured is payable to the assured if he should survive a cer- tain period, or attain a specified age, or to his representa- tives at his death, if that should occur before such period has expired. (c.) Insurances on Joint Lives. — Here two or more lives are included in the policy and the sum insured is pay- able when either or any one of them dies. {d.) Longest Life Assurances or Lisurance on Last Sur-vivor. — These cover two or more lives, but mature on the death of the last survivor instead of upon the death of any one of the parties. There are two varieties of the second class named above : (a.) Temporary or Short Period Insurances. — These are affected for short periods to cover special contingencies, the sum insured becoming payable only if death should occur during the time specified in the policy, just as poli- cies of fire insurance. These may be upon one or more lives, payable on the end of one, or of both, or if one should fail before the other as in the next variety. (5.) Survivorship Insurances, or on One Life Against Another. — In these the sum insured is payable at the death of A. if that should happen in the life-time of B., but not otherwise. Should B. die before A. the transac- tion fails.l 1 G. M. Low, Actuary, in Encyclopaedia Britannica, art. " Insurance — Life." A popular form of life insurance at the present time is tontine endowment, or where the profits from lapses and dividends are allowed to accumulate for a specified period and at the end of such period divided among the holders of the policies then in force. These profits are large because none inure to the benefit of the policies terminated by death or 29 § 19 INTKODUCTOKT. § 19. Assurance and Insurance. — The words "insur- ance " and " assurance " are synonymous ^ and are used in- discriminately. One of the earliest English writers,^ how- ever, says: "The terms insurance and assurance have been used indiscriminately for contracts relative to life, fire and shipping. As custom has rather more frequently employed the latter term for those relative to life, I have in this vol- ume entirely restricted the word assurance to that sense. If this distinction be admitted, assurance will signify a con- tract dependent on the duration of life, which must either happen or fail, and insurance will mean a contract relating to any other uncertain event, which may partly happen or partly fail. Thus, in adjusting the price for insurance on houses and ships, regard is always had to the chance of salvage arising from partial destruction." Other writers have sought to establish fanciful distinctions, as that a per- son, insures his life, his house or his ship, and the com- pany assures to him in each of these cases a sum of money payable upon their injury or destruction. Another is that assurance represents the principle, and insurance the practice. Were we to discriminate we would say that, in life in- surance contracts, if the policy is payable to the person whose life is covered, or his legal representatives, he is the insured, while if it is payable to some one else, such person is the assured. In other words, the party whose death determines the contract is the insured, while he for whose benefit it is made and to whom it is payable is the assured. Strictly speaking, however, there is no differ- ence in the meaning of the two words.^ lapse during the tontine period. For a discussion of tontine insurance see post, § 1676. 1 Bouvier L. Die. ' Babbage on Assurance of Lives (1826;. ' For a discussion of these terms see Rowe v. Brooklyn Life Ins Co 30 INTEODUCTOEY. § 20 Where a policy of life insurance shows upon its face that it was applied for and the premium paid by another person and that it was issued for his benefit, the words "the assured " in the policy apply to the person for whose benefit the policy was effected, and not to the party whose life was insured. i § 20. History of Life Insurance. — The business of life, as was the case with marine and fire, insurance was origi- nally carried on by individual underwriters, who, in con- junction or alone, underwrote certain amounts on acceptable risks. One of the earliest cases reported is Whittingham V. Thornburgh,2 where a policy of life insurance ob- tained by fraud was cancelled. The first regular life in- surance company was probably ' ' The Amicable Society for a Perpetual Assurance Office," founded in London in 1706 by royal charter. The scheme was simply to raise a fixed contribution from each member, and from the proceeds to distribute a certain sum each year among the representa- tives of those who died during the year. None could be admitted under the age of twelve nor above fifty-five (afterwards altered to forty-five) and all paid the same rate of contribution. In 1734 arrangements were made by the society for guarantying that the dividend for each de- ceased member should not be less than £100. In 1807 the company began to rate members according to their age and received a new charter. Soon afterwards charters were granted to the Royal Exchange and the London Assurance companies, which included life insurance among their schemes and have continued in business until now. The 38 N. y. Supp. 621; 16 Misc. K. 323; Boston M. I. Co. v. Scales, 101 Tenn. 628; 49 S. W. R. 743. 1 Conn. Mut. L. Ins. Co. v. Luchs, 108 U. S. 498; Cyrenius v. Mut. L. Ins. Co., 26 N. Y. Supp. 248. 2 2 Vern. 206; 24 Eng. Reprint, 11. 31 § 20 INTRODUCTOKT. latter part of the eighteenth century saw the development of the theory of life contingencies, and the Northampton tables supplied what was believed to be a sound basis for calculations on the duration of life. In 1762 " The Soci- ety for Equitable Assurances on Lives and Survivorships " began business and its success further encouraged the new enterprise. The nineteenth cefttury began with eight life assurance offices in existence in Great Britain, one of which, the Pelican, founded in 1797, is still in a flourishing con- dition. In 1844 the first insurance law was passed by Parliament, and after various amendments was succeeded in 1870 by the Life Assurance Companies Act, by the terms of which a deposit with the Court of Chancery was required and frequent reports were to be made to the Board of Trade. The business of life insurance in Great Britain has attained enormous, proportions, and at present nearly one hundred companies are doing business in that country, all apparently prosperous. The first life insurance organization in America was organized in 1769, jn Pennsylvania, under the name of " Corporation for the Relief of the Widows and Children of Clergymen of the Communion of the Church of En- gland and America," although that society was intended more to provide for an annuity than for a fixed amount payable at death. In 1812 the Pennsylvania company was organized for the insurance of life exclusively, with a capi- tal of $500,000. The Massachusetts Hospital Life Insur- ance Company was organized in 1818. The first of the present great life insurance corporations of the United States, the Mutual Life Insurance Company of New York, was incorporated in 1842, as apurely mutual company, and has, owing to good management, met with continued suc- cess, and now has assets of more than four hundred million dollars, and insurance in force amounting to $1,445,228,- 32 INTRODUOTOEY. § 21a 681. About the same time other of the present great life insurance companies were organized, among which we name the New England Mutual of Boston, finally organized in 1843; the State Mutual Life in 1849, which afterwards became the New York Life Insurance Company ; the Mutual Benefit of Newark, organized in 1845 ; the Connecticut Mutual of Hartford, Connecticut, in 1846; the Penn Mutual Life in 1847, and the Equitable organized in 1859.. Of these companies the Mutual Life, the New York Life and the Equitable are the largest, and their operations extend throughout the world. They are subject to a rigid State supervision, and their experience has been such as to create confidence on the part of the people, has resulted in definite knowledge as to what may be expected in the way of mortality, and has demonstrated the necessity of life insurance.! § 21. An Early English Case. — One of the earliest life insurance cases in England was the famous one of Godsall V. Boldero,2 decided in 1807, where an assurance had been effected by the plaintiffs on the life of Hon. William Pitt. In this case Lord Ellenborough held that a contract of life insurance was one of indemnity and, though a creditor may insure the life of his debtor to the extent of his debt, yet if, after the death of the debtor, his executors pay the debt to the creditor, the latter cannot afterwards recover upon the policy, although the debtor died insolvent and the execu- tors were furnished the means of payment by a third party. The doctrine of this case was afterwards overruled. 3 § 21a. First American Case. — The first life insurance 1 See article Insurance of Life in Enc. Brit, and " Les Assurances," by Chanf ton, Paris, 1884. 2 9 Bast, 72. 8 Dalby v. India & Loudon Life Assurance Co., 15 C. B. 365, supra. 3 33 § 21a INTRODUCTORY. case in the United States was that of Lord v. Dall,i decided in 1815 by the Supreme Court of Massachusetts. Here an insurance for $5,000 had been effected for seven months on the life of one Jabez Lord, who was bound on a voyage to South America. Of this amount the defendant had under- written five hundred dollars or one-tenth, thus showing that the business was carried on by individual underwriters. Three defenses were interposed to the action, want of insurable interest, concealment of material facts, and the illegality of the transaction, the insured being bound on a voyage for the purpose of procuring slaves. In deciding the case on all points in favor of plaintiff the court referred to the newness of the business and the doubts of its legality, but held that it was legal, using this lan- guage: " It is true that no precedent has been produced from our own records of an action upon a policy of this nature. But whether this has happened from the infre- quency of disputes which have arisen, it being a subject of much less doubt and difficulty than marine insurances ; or from the infrequency of such contracts, it is not possible for us to decide. By the common principles of law, how- ever, all contracts fairly made, upon a valuable consideration, which infringe no law, and are not repugnant to the general policy of the laws, or to good morals, are valid and may be enforced, or damages recovered for the breach of them. It seems that these insurances are not favored in any of the commercial nations of Europe except England ; several of them having expressly forbidden them, for what reasons, however, does not, appear, unless the reason given in France is the prevailing one, viz. : ' That it is indecorous to set a price upon the life of man, and especially a free- man, which, they say, is above all price.' It is not a little singular that such a reason should be advanced for prohib- 1 12 Mass. 115; 7 Am. Dec. 38. 34 INTRODUCTORY. § 22 iting these policies in France, where freedom has never been known to exist, and that it never should have been thought' of in England, which, for several centuries, has been the country of established and regulated liberty. This is a contract fairly made ; the premium is a sufficient considera- tion ; there is nothing on the face of it which leads to the violation of law ; nor anything objectionable on the score of policy ©r morals. It must then be valid to support an action until something is shown by the party refusing to perform it, in excuse of his non-performance." § 22. Method of Conducting Business. — The common practice of life insurance companies is to only issue policies upon healthy lives and, before the policy is issued, the applicant is required to answer numerous questions in regard to his family, health, business, age, condition and personal history, and undergo a physical examination by a physician. If these preliminaries are satisfactory to the company the contract is consummated. The consideration is the payment of certain sums periodically during the term of the insur- ance, as annually, semi-annually or quarterly; or the con- sideration may be paid at one time or in a certain number of payments. This consideration, or premium, varies according to the age of the applicant and is based upon the probable duration of human life, ascertained by experi- ence and shown in certain tables or compilations of statis- tics. There are many of these compilations, of which the best known are the Northampton, Carlisle, and the American Experience Tables of Mortality. l • Several very old tables exist which are now obsolete, such as those of Halley, DeParcieus and others. The first reliable compilation was the Northampton Table. This was constructed by Dr. Thomas Price from the registers kept in the parish of All Saints, Northampton, for the forty-six years, 1735 to 1780. It is said that this table gives the chances of death too high at the younger ages and too low at later ages, but for many years it was the basis of all life contingency calculations 35 § 23 INTRODUCTORY. § 23. Analogies between Benefit Societies and liife In- surance Companies. — From what has been said it already appears that the modern benefit societies are engaged in furnishing to their members substantially life insurance. Like the first life insurance corporation, some of them have a fixed and uniform payment, or assessment, for all ages, while others have graded assessments for different ages. The predominating feature of both benefit societies and life insurance companies is the payment of a specific sum on the death of the person, who is a member of the organiza- tion or whose life is insured. In the societies^.he fund is obtained by a periodical tax upon the members, at stated intervals or as required, sufficient to meet the demand. In and even now is still in use. The Carlisle Table was constructed by Joshua Milne from materials furnished by Dr. John Heysham. These materials comprised two enumerations of the population of the parishes of St. Mary and St. Cuthbert, Carlisle, in 1780 and 1787 (the numbers being in the former year 7,677 and in the latter 8,677) and the abridged bills of mortality of these two parishes for the nine years, 1779 to 1787, daring which period the total number of deaths was 1,810. The care and dexterity with which these tables were compiled made them popular and the figures there given have generally agreed with the experience of the life companies. These two tables are of all lives in a certain district and the mortality in the earlier ages is consequently greater than that of selected lives. Other tables are in use by life insurance companies in England, such as the Equitable Experience, the Seventeen Offices' experience, which were made from statistics, covering 83,905 policies, and the English Life Tables. In America the table generally used, and the one frequently prescribed by law for use by the State insurance departments, is the American Experience Tables, compiled by Mr. Sheppard Homans from the statistics of the Mutual Life Insurance Company of New York City. A still later table and one which is supplanting others is the Actuaries or Combined Experience table. We give in the Appendix these tables of mortality. It is not germane to this work to examine into the science of life in- surance or its processes, except as adjudicated by the courts. For a full and interesting review and explanation of the business the reader is referred to the article, Insurance, in the last edition of the Encyclopaedia Britannica, an authority generally accessible. 36 INTEODUCTORY. § 24 the companies the principle is based upon the probable duration of human life and the estimate that a certain num- ber of men can, by a comparatively speaking small period- ical contribution, which is carefully improved at compound interest, pay in, during their aggregate lives, enough to give a specified amount to the beneficiaries of each upon his death. Both companies and societies have the same careful med- ical examination and certificates, and the contracts of both are avoided by the violation of certain agreed conditions, or by misrepresentations prior to entering into the contract. As we continue with the discussion these analogies will become clearer. Numerous life insurance companies operating on the assessment plan of the benefit societies, although they are mere business corporations, exist and have become strong and popular owing to the comparative lightness of the cost because of small but frequent payments. § 24. Early Beneficiary Life Insurance Cases in the United States. — Probably the earliest case in the United States involving questions of benefit society life insurance was that of Wetmore v. Mutual Aid and Benevolent Asso- ciation of Louisiana, decided in 1871.2 This was an action on a policy, issued by defendant, and the defense was breach of a condition, relating to the payment of an assess- ment. The contract was that certain assessments were to be paid by the assured within thirty days after being noti- fied thereof by publication in one daily newspaper for five consecutive days. The company contended that the thirty days began to run from the day of the first publication, but the court held that it began to run from the last day of publication. 1 Seeposf, § 51. : 23 La. Ann. 770. 37 § 25 INTEODUCTORY. The next case was that of Maryland Mut. Benev. Society, etc. V. Clendinen, in 1875,i where the Court of Appeals of Maryland held that the rights of a member of a benefit society in the sum to be paid upon his death was a mere power to designate the beneficiary, which lapsed if not ex- ercised, and that the benefit was not assets recoverable by his administrator. In 1876 came the case of Arthur v. Oddfellows' Beneficial Assn., 2 in which the Supreme Court of Ohio decided that the laws and regulations of the society determined the rights of its members, and also that the rights of the member in the benefit was only a power to designate a beneficiary in accordance with such laws. 3 Since these cases the number relating to benefit societies has steadily increased each year, and bids fair to become still larger as time passes. The newness of the business and doubts as to the proper construction of the contract have caused frequent questions to be submitted to the courts and these questions are still constantly arising. The courts have taken the position that the beneficiary societies are to be encouraged because of their kindly and helpful influence and have construed their laws liberally so as to further these purposes. § 25. Definition of Terms used in Insurance. — The terms ordinarily used in insurance law are thus defined by Phillips : * " The party undertaking to make the indemnity is called the insurer or underwriter : the party to be indem- nified, the assured or insured. The agreed consideration is called a premium ; the instrument by which the contract is made, a policy; the events and causes of loss insured against, risks or perils ; and the property or rights of the 1 44 Md. 429; 22 Am. Bep. 52. 2 29 Ohio St. 557. 3 Post, chap, VII. ^ Phillips on Insurance, § ?. b8 INTRODUCTORY. § 25 assured, in respect to which he is liable to loss, the subject or insurable interest." In respect to the terms applicable to the contracts of benefit societies the organizations are the insurers, and the power to designate recipients of the benefits is in the members. These recipients are called the beneficiaries; the consideration, assessments, or assess- ments and dues ; ^ and the instrument evidencing the con- tract, the certificate. 1 Post, chap. XI. 39 CHAPTEE II. ORGANIZATION, POWERS AND LIABILITIES; DISSOLUTION. i 26. Benefit Societies may be Voluntary Associations or Corporations . 27. Legal Status of Voluntary Associations Uncertain. ■ 28. Members of Voluntary Associations sometimes not Partners. 29. When Societies are Partnerships. 30. Cases where no Partnership was held to Exist. 31. The Case of Ash 0. Guie. 32. Cases where Associations were held to be Partnerships. 33. The Declaration of Collyer on Partnership. 34. The Principle stated by Another Writer. 35. A General Bule. 36. Liability and Status of Members : Dissolution. 37. The Effect of Articles of Association. 38. Powers of Voluntary Associations and of Members. 38o. The Same Subject continued : Bights of Members In Property and Funds. 39. Jurisdiction of Equity in regard to Members of Voluntary Associ- ations. 40. Voluntary Association may be Estopped from showing its True Nature. 41. Defective Organization of Corporation. 42. Benefit Societies Incorporated under Special Acts. 43. General Incorporation Laws. 44. Benefit Societies as Charities. 45. English Friendly Societies not Charities, nor Assurance Compa- nies. 46. Incorporating under General Laws. 47. Corporate Powers. 48. The Charter the source of Corporate Powers. 48a, Bight to Corporate Name, 49. The Modern Idea of Corporations. 60. Exemption of Benevolent Societies from Insurance Laws. 61. Status of Benefit Societies considered by the Courts. Sla. Distinction between Benefit Societies and Life Insurance Com- panies. 52. Conclusion: Benefit Societies are Insurance Organizations. 53. Exempting Statutes. 40 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 27 § 64. Liberality of Exemptioa in some States. 66. Limitations on Business in Certain States. 66. Life Insurance Business as now conducted in the United States and Canada. 56o. State Begulation — Powers of Insurance Commissioner. 565. Classification of Insurance Companies. 67. Dissolution of Voluntary Associations. 58. Dissolution of Incorporated Societies. 59. When Equity will Interfere. 60. Forfeiture of Corporate Franchises. § 26. Benefit Societies may be Voluntary Associations or Corporations ^Benefit societies, like other associations of persons for agreed and lawful purposes, may be simply voluntary associations, or they may become incorporated, either by special act of the legislature in that behalf, or by compliance with the provisions of the general laws author- izing the incorporation of such organizations. It will be seen, however, as we proceed, that the courts make a dis- tinction between clubs and societies for social enjoyment and those where through the membership a property right is involved. 1 § 27. Legal Status of Voluntary Associations Uncer- tain. — The legal status of unincorporated societies, whether formed for religious, social, benevolent or benefit purposes, has never been satisfactorily determined. The adjudicated cases are not in harmony and the courts have differed in their declarations. As a learned writer ^ has said: " The language of many authorities (particularly those where the peculiar rules applicable to voluntary associations do not seem to have been brought to the attention of the court), proceeds upon the idea that every organization must be either a corporation or a partnership. Many of the cases in the books have been decided upon this principle : Is this 1 Post, §§ 104, 108, 187-237-442. ' Abbott's note to Ebbinghausen v. Worth Club, 4 Abb. N. C. 300. 41 § 28 OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. society a corporation? No. Then it must be a partnership. But this is not'the only alternative. There may be a joint or a common tenancy in property — there maybe a mutual or reciprocal agency in transactions for a specified purpose, — and there may be a well-defined organization of the owners of such property, or the actors in such transactions, or both, — an organization even having articles (like a part- nership) or having a constitution and by-laws (like the charter and by-laws of a corporation), yet the organization may be in the eye of the law, neither a partnership nor a corporation." The question is not so much one of defini- tion as of application of well-known principles of law to determine the jurisdiction of courts and liabilities of mem- bers. As in other cases, more depends upon the nature of the liability sought to be enforced and the varying facts of the different cases than upon mere abstract doctrines. Under certain conditions the members of a voluntary asso- ciation may be considered partners, while in a different forum and under other circumstances the same organiza- tion will be deemed something else.l § 28. Members of Voluntary Associations Sometimes not Partners. — In many cases it has been held that if a number of persons associate themselves together for pur- poses of charity, benevolence, pleasure, or any other lawful object not trade, or business, or profits, they are generally not to be regarded as among themselves, as partners. 2 1 For discussion of the status of voluntary associations see 1 Beach on Priv. Corp., §169eJse3. Daly's Club Law : Club Law, 27 Alb. L. J. 326 ; Leache's Club Cases. 2 Thomas v. EUmaker, 1 Pars. Sel. Cases, 98 ; White v. Brownell, 3 Abb. Pr. (n. s.) 326; i Abb. Pr. (N. s.) 162 ; McMahon v. Rauhr, 47 N. Y. 67; Lafond at al. v. Deems, 81 N. Y. 5U ; Leech ». Harris, 2 Brewst. 571 ; Tyrell ». Washburn, 6 Allen, 466; Smith «. Virgin, 33 Me. 148; Kuhlu. Meyer, 35 Mo. App. 206; Richmond v. Judy, 6 Mo. App. 465; Burt V, Lathrop, 52 Mich. 106; Edgerly v. Gardner, 9 Neb. 109; and as to 42 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 28 In a case in Michigan l the members in good standing of a lodge of the Knights of Labor voted an assign- ment of the funds to plaintiff. In holding that he was entitled to recover in an action against the persons in possession of the money the court said: "The parties who originally joined the Local Assembly No. 8104, might in a certain sense be said to be ' interested ' in the funds belonging to the assembly, because it is provided by the rules of the order that they can at any time, by paying their arrearages of dues, resume their rights as members. This would reinvest them with the rights in the funds of the association, and in the moneys sought to be collected in this suit, but until they pay their dues, and while they were in arrears and suspended, they had no rights or legal interest in the moneys of the assembly. They had per- haps while suspended a contingent interest, depending upon their regaining their rights, but not such an interest as made them necessary parties to the assignment. The jury must have had reference to this contingent interest in their answer to the second question. But the defendants claim that the judgment of the court is right, because, under all evidence, the plaintiff was not entitled to recover, and the jury should have been so instructed in the first place. This claim is based upon the proposition that this voluntary unincorporated association, consisting of many members contributing to a fund for the joint benefit of all, is a copartnership, and therefore the respective rights and duties of the members with regard to their common property, can only be settled in a court of equity ; that the rights of the individual members are entitled to as much respect in the courts as are the rights of any number of members of mutual insurance companies, Krug v. Lycoming F. Ins. Co.j77Pa. St. 15. 1 Brown v. Stoerkel, 74 Mich. 269; 41 N. W. E. 921 ; see also note to this case in 3 L. E. A. 430. 43 § 28 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. associates less than the whole ; and it would be manifestly improper for the court to permit 38 members, out of any great number, to recover for themselves that which belongs to all the members. This association was in no sense a copartnership. There was no business carried on by it, and nothing involving loss or profit in a business sense. i It was purely a benevolent and social organization having also in view the protection, benefit and welfare of its members in their various employments. It must now be considered as well settled that persons have a right to enter into such associations, and to bind them- selves as to their membership and rights in such societies, and the funds of the same by the constitution and by-laws of the association which they adopt, or subscribe to after adoption. Such an organization may be neither a partner- ship nor a corporation. The articles of agreement of such an association whether called a ' constitution,' ' charter,' ' by-laws,' or any other name, constitute a contract between the members which the courts will enforce, if not immoral or contrary to public policy or the law of the iand.2 The only persons having control of these funds were the members in good standing in the local assembly, by the agreement of all the members as shown by the constitution and by-laws of the Knights of Labor, which constitution and by-laws in this respect were known to all the members when they paid in their money, as found by the jury under the charge of the court. Not only did the assembly in regular lodge meeting vote this assignment to plaintiff, but in pursuance of that vote, all the members of the assembly in good standing executed an assignment to plaintiff of their right, title and interest in » Burto. Lathrop, 52 Mich. 106; 17 N. W. E. 716. 2 Hyde v. Woods, 94 U. 8. 523; 2 Sawy. 655; post, §§ 37, 91 and 116; Subd. 1 Austin Abbott's note to Ebbingliausen v. Worth Club, i Abb. N. C. 300, 301. 44 ORGANIZATION, POWEES, LIABILITIES; DISSOLUTION. § 29 this money to plaintiff. He was tiiereby under the law of the order and of the land, entitled to sue and recover the money in the hands of the defendants, if it belonged to the assembly, as the jury found it did. The defendants divided this money up between themselves and Hemison relying upon difficulties and technicalities in the law as they supposed it to be to keep it. It is not to be regretted that they were mistaken in the law, and therefore deprived of the fruits of at least an attempted moral larceny." § 29. When Societies are Partnerships. — But in the settlement of disputes among the members, in the division of property, in determining the liabilities of members to creditors, in winding up the societies, and generally in all equitable proceedings, the courts will generally treat the members as ordinary partners, and the associations as partnerships, yet as far as possible giving effect to the articles of association of the members. ^ No liability at- taches to members from the mere fact of membership but must be determined by the principles of the law of agency. 2 These differences will more fully appear from 1 Gorman v. Russell, 14 Cal. 537; Protchett w. Schaefer et al., 11 Phila, 166; Bullard v. Kinney, 10 Cal. 60; Butterfleld v. Beardsley, 28 Mich. 412; Beaumontc. Meredith, 3 V. & B. 180; Pearce v. Piper, 17 Ves. 15; Carlton «. Southern Mut. Ins. Co., 72 Ga. 371; Reeve v. Parkins, 2 Jac. & W. 390; Ellison v. Reynolds, 2 Jac. & W. 511; Cockburn v. Thompson, 16 Vt. 321 ; Wallworth v. Holt, 4 Myl. & Cr. 619; Adkyns v. Hunt, 14 N. H. 205; Womersley v. Merritt, L. E. 4. Eq. Cas. 695; Rich- ardson ». Hastings, 7 Beav. 323; Whitman v. Porter, 107 Mass. 622; Taf t «. Ward, 106 Mass. 618; Harper v. Raymond, 3 Bos. 29; Mann v. Butler, 2 Barb. Ch. 362; Townsend v. Goewey, 19 Wend. 424; Bur- gan V. Lyell, 2 Mich. 102; Claggett v. Kilbourne, 1 Black, 346; Brown v. Curtis, 6 Mason, 421; Brown i7. Gilman, 4 Wheat. 255; Brown v. Dale, L. R. 9 Ch. D. 78; Adams' Eq. 247-239-240; Story Eq. Jur., §§ 1243, 1535,1256. 2 In re St. James Club, 16 Jur. 1075; Volger ». Ray, 131 Mass. 439; Flemyng v. Hector, 2 Mees. & W. 172; 1 Beach on Priv. Corp., § 169 . 45 § 30 ORGANIZATION, POWEES, LIABILITIES; DISSOLUTION. the examination of some of the authorities bearing upon the subject. § 30. Cases where no Partnership was held to Exist. — The Court of Appeals of New York, in passing upon a case where several members of an unincorporated lodge of a benevolent society, called "The Independent Order of Eechabites," brought suit against the others, alleging mis- management, and seeking to dissolve the lodge and wind up its affairs and distribute its property among the members, said;! " Associations of this description are not usually partnerships. There is no power to compel payment of dues, and the right of the member ceases when he fails to meet his annual subscription. This, certainly, is not a part- nership, and the rights of the copartners as such are not fully recognized. The purpose is not business, trade or profit, but the benefit and protection of its members, as provided for in its constitution and by-laws. In accord- ance with well established rules no partnership exists under such circumstances. " In Caldicott v. Griffiths, 2 the court said: " The rules do not create a partnership between the members of the society. The question is, whether this is a scheme where certain persons enter into a partnership or gwasi-partnership, or whether they are like members to a hospital or club. The solution of the question is not to be found by examining the cases with reference to the lia- bility of committeemen or shareholders, but by looking at the rules of the society to see what liabilities they create." In riemyng v. Hector, 3 an action brought by a trades- man against one of the members of a club, the court said: " This is an action brought against the defendant on a contract, and the plaintiff must prove that the defendant, 1 Lafond et al. v. Deems et al., 81 N. Y. 614. » 22 Eng, L. & E. 529; 8 Ex. 898; 1 C. L. E. 715; 23 L. J. Ex. 54. s 2 M. & W. 171. 46 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 31 either by himself or his agent, has entered into that con- tract. That should always be borne in mind in cases of this class, for on most questions of this kind the real ground of liability is very apt to be lost sight of. As the defendant did not enter into the contract personally, it is quite clear that the plaintiff cannot recover against the defendant, unless he shows that the person making the con- tract was the agent of the defendant, and by him authorized to enter into the contract on his behalf. * « * Jt; is said in this case that the order was given by the committee, and that they were the agents of the members generally ; but the question is, whether there was any sufficient evi- dence to go to the jury that they were authorized by the defendants to enter into and make these particular con- tracts in their behalf. * * * These cases resolve themselves into questions of construction as to the meaning of the original rules of the club." In this case the mem- bers were held, under the rules, not to be liable for debts contracted by the managing committee. § 31. The Case of Ash v. Guie. — In Ash v. Guie,l a case where creditors sought to charge the members of a Masonic lodge for debts incurred in erecting a building, the court said: "A benevolent and social society has rarely, if ever, been considered a partnership. In Lloyd V. Loaring,3 the point was not made, but Lord Elden thought the bill would lie on the ground of joint owner- ship of the personal property in the members of a Masonic lodge; there was no intimation that they were part- ners. Where a society of Odd-fellows, an association of persons for purposes of mutual benevolence, erected a building, which was afterwards sold at sheriff's sale in sat- 1 97 Pa. St. 493; 39 Am. Eep. 818. See also Wood v. Finch, 2 Fos. & Fin. 447. 2 6 Ves. 773. 47 § 31 OEGANIZATION, POWEES, LIABILITIES; DISSOLUTION. isf action of mechanics' liens, in distribution of tlie proceeds, it was said that, as respects third persons, the members were partners, and that lien creditors, who were not mem, bers, were entitled to preference as against the liens of members.l Had the members been called joint tenants of the real estate the same principle in the distribution would have applied. * * * A mutual beneficial society par- takes more of the character of a club than a trading associa- tion. Every partner is agent for the partnership, and as concerns himself he is a principal, and he may bind the other by contract, though it be against an agreement between himself and his partners. A joint tenant has not the same power, by virtue of the relation, to bind his co- tenant. Thus one of several co-adventurers in a mine has not, as such, any authority to pledge the credit of the gen- eral body for the purposes of the concern. And the fact of his having the general management of the mine makes no difference, in the absence of evidence from which an implied authority for that purpose can be inferred. ^ " Here there is no evidence to warrant an inference that when a person joined the lodge he bound himself as a part- ner in the business of purchasing real estate and erecting buildings, or as a partner so that the other members could borrow money on his credit. The proof fails to show that the officers, or committee, or any number of the members, had a right to contract debts for the building of a temple, which would be valid against every member from the mere fact that he was a member of the lodge. But those who engaged in the enterprise are liable for the debts they con- tracted, and all are included in such liability who assented to the undertaking or subsequently ratified it. Those who participated in the erection of the building, by voting for 1 Babb V. Reed, 5 Rawle, 151 ; 28 Am. Dec. 650. a Eicketts v. Bennett, 4 M. G. & S. 686 ; 66 E. C. L. 48 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 32 and advising it, are bound the same as the committee who had it in charge, and so with reference to borrowing money. A member who subsequently approved the erection or bor- rowing could be held on the ground of ratification of the agent's acts. We are of the opinion that all the members so assenting were liable as partners in their relation to third p&rsons in the same manner as individuals associated for the purpose of carrying on a trade." § 32. Cases where Associations were Held to be Part- nerships. — In Park v. Spaulding,! also an action brought by a creditor to charge as individuals certain members of a voluntary association called " The Worth Club," the court said : " Its members remained at all times in that nebulous and inchoate condition in which an aggregation of individ- uals, assuming a name under which they incur liability, are held personally liable for the benefit of creditors by the application of common law principles. * * « Where such a body of gentlemen join themselves together for social intercourse and pleasure, and assume a name under which they commence to incur liabilities, by opening an account, they become jointly liable for any indebtedness thus in- curred ; and if either of them wishes to avoid his personal responsibility by withdrawal from the body, it is his duty to notify the creditors of such withdrawal. ' ' The Supreme Court of New York,2 lays down this rule: "Personal responsibility to the full extent of the indebtedness to third parties can only be avoided by persons constituting any 1 10 Hun, 128. 2 Wells v. Gates, 18 Barb. 554. The question also arose in the follow- ing cases where a member of the association was held liable for its debt. Murray v. Walker, 83 la. 202; 48 N. W. E. 1075; McFadden v. Leeka,48 Ohio St. 513; 28 N. E. R. 874. The principles were also fully discussed in Burtu. Oneida Community, 61 Hun, 626; 16 N. Y. Supp. 289, where among others the following cases were cited: Hyde o. Woods, 94 U. S. 523; Belton o. Hatch, 109 N. Y. 593; 17 N. B. E. 225, 4 49 § 34 OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION, association where they become a corporation or quasi-e,OT- poration. Companies or societies, which are not sanctioned expressly by the legislature, pursuant to some general or special law, are nothing more than ordinary partnerships and the laws respecting them are the same." The prin- ciple has been well stated as follows :l "Where parties unite in a voluntary unincorporated association and for con- venience contract under an associate name, the acts of the association, it not being a legally responsible body, are the acts of the members who instigate and sanction the same. ' ' 2 § 33. The Declaration of CoUyer on Partnership, — The following strong declaration is from Coll3'er or Part- nership: 3 " Societies and clubs, the object of which is not to share profits, are not partnerships in any sense. *■ * * It is a mere abuse of words to call such associations part- nerships ; and if liabilities are to be fastened on any of their members it must be by reason of the acts of those members themselves, or by reason of the acts of their agents; and the agency must be made out by him who relies on it, for none is implied by the mere act of association." § 34. The Principle stated by Another Writer. — A careful writer thus states the result of his investigations : * " The true principle is, and upon this view the apparent discordance in the cases may be nearly reconciled, that the 1 Winona Lumber Co, v. Church, 6 S. Dak. 498; 62 N. W. R. 107. s So of a member of a college class which sanctioned a publication. Wilcox V. Arnold, 162 Mass. 677; 39 N. E. 414. Of a press association. United Press v. Abell, 84 N. Y. Supp, 426. Of an exposition, Jenne v. Matlacb, 19 Ky. 503; 41 S. W. E. 11. But see Homberger o. Orchard, 39 Neb. 639; 58 N. W. E. 425; and MIdwood u. Wholesale Grocers, 20 E. I. 162; 37 Atl. E. 946. The subject is discussed in Cheney v. Good- win, 88 Me. 563; 84 Atl. E. 420. See also McKenney v. Bowie, 94 Me. 397; 47 Atl. E. 918. 8 Wood's edition, 1878, § 29, * Abbott Digest of Corp., tit.. Associations. 50 ORGANIZATION, POWBES, LIABILITIES; DISSOLUTION. §35 law allows associates to imitate the organization and methods of corporations so far as their rights between themselves is involved, and will enforce their articles. of agreement (nothing illegal or unconscientious appearing) as between the parties to th^em. But the public and creditors have a right to invoke the application of the law of partnership to the dealings of any trading association, unless such associa- tion has the shield of incorporation. Thus, if the contro- versy is between members of the association, and relates to such objects as the mode of acquiring membership, tenure of the property, division of the profits, transfer of shares, voting, expulsion, dissolution, or the like, the courts may deal with the association by analogy to the law of corpo- rations, so far as the compact between the members con- templates. But if the question is between the association, or its members, and third parties, and relates to such points as in what name the association may sue, whether members are individually liable to the creditors for debts, etc., a mere compact of association cannot vary the rights of strangers to it, but the associates must submit to the gen- eral rules of law applicable to the questions raised." § 35. A G-eneral Rule. — The general rule seems to be that the articles of association, or rules, or if there are no such articles of association or rules, then the customs and usages of the members, are to be looked to in order to determine whether the associated individuals are a partner- ship or not, and to adjust the rights of these individuals among themselves.! The questions involved are of con- struction and of fact. So far as creditors are concerned and outsiders generally their rights are governed by the law of agency, and in each case it will be necessary to ask whether the agents of the association were authorized to 1 Brown v. Stoerkel, 71 Mich. 269, and ante, § 28. 51 § 36 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. contract the obligation, and if so, whether it was contracted in behalf of all the members of the association, or some of them only.l Necessarily the facts in each particular case will decide whether any liability attaches and also its extent. 2 § 36. Liability and Status of Members : Dissolution. — If one or more members order work done or supplies furnished he or they are personally liable unless credit was given to the association. 3 If an officer of a volun- tary association signs a note in his official capacity for money lent the association he binds all his associates, 1 McCabe v. Goodfellow, 133 N. Y. 89; 30 N. E. R. 728; 17 L. B. A. 204; cited in Hosman ». Kinneallyj 86 N. Y. Supp. 263 ; Winona Lum- ber Co. ■». Church, 6 S. D. 498; 62 N. W. R. 107; Bennett v. Lathrop, 71 Conn. 613; 42 Atl. B. 635; Pelton v. Place, 71 Vt. 430; 46 Atl. E. 63. 2 Ash V. Guie, 97 Pa. St. 498; Flemyng v. Hector, 2 M. & W. 171 Caldicott «. Griffiths, 22 Eng. L. & E. 529; Cutler v. Thomas, 25 Vt. 73 Hill V. Beach, 12 N. J. Eq. 31; Carlew v. Drury, 1 Ves. & B. 157 Keasly v. Codd, 2 Car. & P. 408; Harrison v. Heathome, 6 M. & G. 81 Pipe V. Bateman, 1 la. 369 ; Babb v. Eeed, 5 Rawle, 151 ; Carlton v. South- ern M. Ins. Co., 72 Ga. 371; Waller v. Thomas, 42 How. Pr. 337; Foley V. Tovey, 64 Pa. St. 190; Payne v. Snow, 12 Cush. 443; Gorman v. Rus- sell, 14 Cal. 533; Hess v. Wertz, 4 Serg. & R. 356; Pearce v. Piper, 17 Ves. 15; Puller v. Rowe, 67 N. Y. 23; Protchett ». Schaefer, 11 Phila. 166 ; Leech v. Harris, 2 Brewst. 571 ; Koehler r. Brown, 2 Daly, 78 ; Rich- mond V. Judy, 6 Mo. App. 465; Ferris v. Thaw, 5 Mo. App. 279; s. c. 72 Mo. 450; De Voss v. Gray, 22 Ohio St. 159; Heath v. Goslin, 80 Mo. 310; Sproat V. Porter, 9 Mass. 300 ; Kuhl v. Meyer, supra, and 1 Beach on Priv. Corp., § 168 et seq. Some recent cases illustrating this principle are : Castner v. Rlnne (Colo.), 72 Pac. B. 1052 ; McKinnie v. Postles (Del.), 54 Atl. R. 798; Associazione &c. v. Gobbi, 82 App. D. 635; 81 N. Y. Supp. 354; Comfort v. Graham, 87 la. 295; 64 N. W. R. 242. As to evidence of membership, Lanheim v. Green, 64 N. Y. Supp. 146; 25 Misc. R. 757, and Bennett v. Lathrop, supra. See also as to liabilities of members, i)os«, §§112, 113, 115. 8 Wells V. Turner, 16 Md. 133; Heath v. Goslin, 80 Mo. 310; Lewis «• Tiltou, 64 la. 220 ; s. c. 62 Am. Bep. 436 ; Hutchinson v. Wheeler, 3 Allen, 667. 52 OEQANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 36 including himself.i Tlie liability of members attaches when they sign the articles of association, 2 although such signing is not a prerequisite of membership ,3 and continues until notice of withdrawal is given ; * and the law of the place where the association was formed and did business determines such liability .^ If the relation of partnership exists one member cannot sue the others at law ; ^ nor can a member sue an unincorporated association for negli- gence ; "^ nor can the majority bind the minority except by consent, or by acting under the articles of association. ^ If the court is satisfied that the association is a bubble and cannot answer the purpose of its creation it will wind it up;^ and, if necessary, restrain operations by injunc- tion. ^^ Where an " unauthorized corporation "or " private society " was organized for the purpose of providing a common fund and erecting tombs for its members, and the latter by its rules are to receive, in return for dues and fees, relief and medical treatment during illness, burial at 1 Kierstead v. Bennett, 93 Me. 328 ; 45 Atl. R. 42. And so of directors. Pelton V. Place, 71 Vt. 430; 46 Atl. R. 63. See also Detroit &c. Band v. First Michigan Ind. Infantry (Midi.), 96 N. W. R. 934. 2 Dennis v. Kennedy, 19 Barb. 517. 3 United Hebrew &c. v. Benshimol, 130 Mass. 325; Tyrrell v. Wash- burn, 6 Allen, 466. * Tenney v. N. E. Protective Union, 37 Vt. 64 ; Park v. Spaulding, 10 Hun, 128. A member is not liable if he withdraws before the transac- tion. Rhoads ». Fitz Gibbon (Central &c. Assn.), 166 Pa. St. 294; 31 Atl. R. 79. » Cutler V. Thomas, 22 Vt. 73; Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Rep. 826. But see Taft v. Ward, 106 Mass. 618, where It is held that members of a joint-stock company under the laws of New York are liable to third parties as partners. « BuUardo. Kinney, 10 Cal. 60; McMahon v. Rauhr, 47 N. Y. 67; Holms V. Higgins, 1 B. & C. 74. ' Martin v. Northern Pacific & Assn., 68 Minn. 521; 71 N. W. R. 701. * Livingston v. Lynch, 4 Johns. Ch. 594; Torreyi). Baker, 1 Allen, 120, * Buckley w. Cater, stated 17 Ves. 15; Pearce v. Piper, 17 Ves, 1; Ellison V. Blgnold, 2 Jac. & Walk. 511. But see post, §§ 57 and 59. w Reeve v. Parkins, 2 Jac. & Walk. 390 ; Gorman v. Russell, 14 Cal. 538. 53 § 37 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. death, and certain specified assistance to their widows and orphans when left in necessitous circumstances; it was held that the death of any member does not dissolve the association ; that the interest in the assets of a member of the association does not pass to his heirs but lapses in favor of his associates. ^ It wa^ held that where under a statute a certain amount was deducted from the pay of police officers to create a special fund the discharge of an officer forfeited his rights to any part of the fund, he having no vested rights in the matter. 2 § 37. The Effect of Articles of Association. — We shall discuss this question of status of unincorporated voluntary associations further when we come to consider the rights and liabilities of members to each other. It is always true, however, as said in Protchettv. Schaefer et al.,^ that " the articles of association are doubtless to be considered in the light of an agreement, between the members, ex- tending or limiting any general obligation, which binds them to each other as members of the partnership." " The members have established a law to themselves."* This fundamental compact is generally called the constitu- tion and is analogous to the charter of a corporation.^ The incorporation of an unincorporated benefit association is an amendment of its constitution and is not binding on the 1 Sociedad Union Espanola v. Docurro, 1 McRloin (La.), 218. See also Mason v. Atlanta Fire Co., 70 Ga. 604; 48 Am. Rep. 585; Social Union No. 1 ». Barrett, 19 E. I. 663; 36 Atl. R. 6. 2 Clarke v. Eels, 87 Cal. 543; 25 Pac. R. 759, citing Pennie ». Eels, 80 Cal. 269; 23 Pac. R. 176; 132 U. S. 471: 10 S. C. R. 149. s 11 Phila. 166. * Leech v. Harris, 2 Brewst. 571 ; Tyrrell v. Wasliburn, 6 AUeUj 466 ; Hyde ». Woods, 2 Sawyer, 655, affd. 94 U. S. 523; Liederkranz Singing Soc. B. Germania Turn Verein, 163 Pa. St. 265 ; 29 Atl. R. 918. « Bray v. Farrell, 81 N. Y. 660; Hyde v. Woods, 94 U. S. 523; 2 Sawy. 655; Bergman v. St. Paul Mut. &c., 29 Minn. 275, also cases cited next section. 54 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. §38 subordinate lodges unless the provisions of its constitution in regard to amendments thereof are folio wed. i § 38. Powers of Voluntary Associations and of the Members. — An unincorporated voluntary association may do any legal act within the scope of its articles of as- sociation or constitution and by-laws, which articles, con- stitution and by-laws form the contract of the members and fix the powers of their agents, the officers. There can however be no judgment against such an association as such unless some statute permits. 2 The principles and rules of partnership and agency determine the right and liabilities of these associations and their members and the questions which arise concerning them are to be adjusted accordingly .3 An unincorporated voluntary association is at common law capable of taking as a beneficiary in a trust,* and the specific performance of a trust by which a fund was transferred will be enforced. ^ If the members know- ingly acquiesce in or consent to a departure from the re- quirements of the laws of the society evidence of this fact is admissible to determine the liability. 6 The associa- tion cannot change the purposes for which it was 1 National Grand Lodge &c. v. Good Samaritan Lodge &c., 176 Pa. St. 241; 34 Atl. E. 602; see also § 41. 2 O'Connell v. Lamb, 63 111. App. 652 ; Hajek v. Bohemian &c. Soc. 66 Mo. App. 566. 3 Bullard v. Kinnea, 10 Cal. 60; Gorman v. Russell, 14 Cal. 637; White V. Brownell, 3 Abb. Pr. (jn. s.) 318; Leech v. Harris, 2 Brewst. 571; Ridgley v. Dobson, 3 Watts & S. 118; Wells v. Gates, 18 Barb. 554; Protchett v. Schaefer et al., 11 Phila. 166,- Kobinson v, Robinson, 10 Me. 240; Dow v. Moore, 47 N. H. 419; Flemyng v. Hector, 2 M. & W. 171 ; Rosenberger v. Washington Mut. &c., 87 Pa. St. 207. * White V. Rice, 112 Mich. 403: 70 N. W. R. 1024; In re Winchester's Est., 133 Cal. 271; 65 Pac. R. 475. A deed to a voluntary association as such is void. Miller v. Oliver, 65 Mo. App. 435. ^ Associate Alumni &c. v. General Theologicial Seminary &c., 163 N. Y. 417; 57 N. E. R. 626. « Henry v. Jackson, 37 Vt. 431; Dow v. Moore, 47 N. H. 419. 55 § 38 ORGANIZATION, POWEKS, LIABILITIES; DISSOLUTION. organized, as specified in its articles of association, without the consent of all the members ; l nor does the withdrawal of two-thirds of the membership destroy the iden- tity of the association, 2 and although aminority, present at a meeting where money is disposed of for a purpose different from that prescribed in the articles of association, are bound unless they then and there dissent, the vote does not bind those not present. ^ A part of the members cannot bmd the others without their consent before the act which it is claimed binds them is done, or they, with knowledge of the facts, ratify and adopt it; although, if the act is clearly in furtherance of the object for which the associa- tion is organized, all will be presumptively bound by it.* The executive board of a voluntary association connot con- vert it into a corporation unless the power is conferred upon it by the constitution and by-laws or an express reso- lution of the association, 5 nor can the dissatisfied members of an association by incorporating themselves deprive the voluntary association of the right of using its own name.^ The Supreme Court of Michigan has held 7 that a Masonic lodge which was in existence before the organization of a corporation of the same name, and which had never by ' Morton v. Smith, 5 Bush, 467; Zabriskie v. Hackensack, etc., 18 N. J. Bq. 178; Marston ». Durgin, 54 N. H. 347; Hochreiter's Appeal, 93 Pa. St. 479; Torrey u. Bakpr, 1 Allen, 120; Kalbltzer v. Goodhue, 63 W. Va. 435; 44 S. E. E. 264. See as to incorporation of voluntary associa- tion, National Grand Lodge &c. v. Good Samaritan Lodge &c., 175 Pa. St. 241; 34 Atl. R. 602. 2 Schiller Commandery v. Jaennichen, 116 Mich. 129; 74 N. W. K. 458. " Abels ». McKeen, 16 N. J. Eq. 462; Ray v. Powell, 134 Mass. 22; Keen v. Johnson, 9 N. J. £q. 401. * Sizer v. Daniels et al., 66 Barb. 426; Richmond v. Judy, 6 Mo. App. 465; Carter u. Stratford Savings Bank, TON. H. 456; 48 Atl. R. 1083. 6 Rudolph V. Southern Benef. League, 7 N. Y. Supp. 135. ^ Association b. Munday, 21 App. N. C. 99. ' Mason v. Finch, 28 Mich. 282. 56 ORGANIZATION, POWEES, LIABILITIES; DISSOLUTION. § 38 any action authorized or recognized the corporation as formed in the same behalf, and where each had been dis- tinct in meetings, officers, property and other incidents, and not even identical in membership, was not merged in the corporation. The court said: "There is nothing but unanimous consent which can bind any member of an unin- corporated company by any action not within the terms of the association. In joint enterprises, matters within the proposed scheme are usually left to be determined by such agencies or such votes as are agreed upon. Outside of the agreement, no one can be bound without his assent." ^ But where an unincorporated mutual benefit society pro- cures a charter and its members are continued as members of the corporation it is a mere continuation of the original contract and a contract entered into by it which is invalid under the original articles of association remains so, 2 and it has been held that the fact that officers and members of an unincorporated society as individuals unite with an association of a similar character does not vacate their offices nor forfeit their membership in the absence of a provision of the constitution of the first society to the con- trary, although the constitution of the second society forbids its members to join any other similar organization. ^ A voluntarj' association cannot hold real estate as such ; * nor 1 Mears v. Moulton, 30 Md. 142. 2 Swett V. Citizens M. Belief Soc, 78 Me. 541; 7 Atl, 394. 3 Farrell ». Cook, 5 N. Y. Supp. 727; Farrell v. Dalzell, 5 N. Y. Supp. 729. See also National Grand Lodge &c. ■». Good Samaritan Lodge &c., 175 Pa. St. 241; 34 Atl. 602. ^ Baptist Assn. v. Hart, 4 Wheat. 1; Kaln v. Gibbv/ney, 101 U. S. 362; Douthitt V. Stlnson, 73 Mo. 199; Ea st Haddam &C..B. Bast Haddam &c. 44 Conn. 259. But see Byau v. Bickford, 140 Mass. 31; Inglis v. Sailors Snug Harbor, 3 Pet. 99; Vldal B. Girard, 2 How. 127; Perin v. Carey, 24 How. 465; Quid v. Washington Foundling Hosp., 95 U. S. 303; Russell V. Allen, 107 U. S. 163. A discussion of the rights of members of an un- incorporated association to hold real estate will be found in Crawford v. § 38a OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. take a bequest. i The members must exercise good faith towards each other ; 2 and they have the right to insist upon a literal carrying out of the provisions of the articles of association in regard to property, though it may not be for the interests of the concern or may be against the will of the majority. 3 If the decision of a committee of a volun- tary association transferring property and affecting pecu- niary interests operates injuriously as to any members the enforcement of the decision will be enjoined.* And an action lies on behalf of an unincorporated association to enjoin part of its members from procuring the incorpora- tion of a society under the same name.^ While an asso- ciation can dispose of its property to pay its debts such disposal must be fair and not give a part of the members an undue advantage. ^ § 38a. The same subject coutinued, Rights of Mem- bers in Property and Funds of Society. — Where property belongs to an association organized for purposes other than profit and the possession of such property is a mere incident to the social or other purposes of the organization, a mem- ber has neither any proprietary interest in it nor right to any proportional part of it, either during his continuance in membership or upon his withdrawal. He has merely Cross, 140 Pa. St. 297; 21 Atl. 356. See also 1 Beach on Priv. Corp., § 379. 1 Sherwood v. Am. Bible Soc, i Abb. App. Dec. 227; Betts v. Betts, i Abb. N. Cas. 317; also authorities last cited. See also Swift's Execu- tors V. Easton Ben. Soc, 73 Pa. St. 362; Blenon's Estate, Brightly, 338; Miller v. Oliver, 65 Mo. App. 435. 2 Densmore Oil Co. v. Densmore, 64 Pa. St. 43; Getty». Devlin, 54 N. Y. 403; Sizer ». Daniels^ 66 Barb. 426. 3 Mann v. Butler, 2 Barb. Ch. 362; Torrey m. Baker, 1 Allen, 120. * Rudolph V. Southern Benef. League, supra. See also National Grand Lodge v. Good Samaritan Lodge, supra. 5 McGlyun v. Post, 31 Abb. N. C. 97. 6 Blais V. Brazeau, 25 R. I. 417; 56 Atl. R. 186. 58 OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 38a the use and enjoyment of it wjiile a member, the property belonging to and remaining with the society. But when the society ceases to exist, those who may then be mem- bers may become entitled to their share of the assets.! The contributors to a fund raised and placed in the hands of trustees for a specific purpose have the right to compel repayment to them proportionately of any sur- plus not needed for the object, 2 and to require the fund to be applied to the objects for which it was raised, ^ or to recover a contribution where the funds are still on hand and the objects and purposes for which the contribution were made have failed.* But seceding members cannot maintain a suit for the recovery of a debt due the society from which they have seceded,^ and where members of a lodge withdrew from the jurisdiction of the grand lodge and surrendered the charter but certain other members remained true in their allegiance the latter are entitled to the charter and property of the original lodge. ^ Other- wise if practically all the members unite in the act of 1 White V. Brownell, 3 Daly, 329; Brown v. Stoerkel, 74 Mich, 269; 41 N. W. B. 921 ; In re St. James Club, 13 Eng. L. & Eq. 592. As to real estate, Brown v. Dale, 25 Moak Eng. R. 776; Crawford v. Gross, 140 Pa. St. 297; 21 Atl. E. 356; Local Union No. 1 v. Barrett, 19 R. I. 663; 36 All. R. 5; Sommers v. Reynolds, 103 Mich. 307; 61 N. W. R. 501; O'Brien v. Musical &c. Union, 64 N. J. Eq. 525; 54 Atl. R. 150. See also anU, § 28. 2 Abels V. McKeen, 18 N. J. Eq. 462. s Morton v. Smith, 5 Bush (Ky.), 467; Ostrom v. Greene, 161 N. Y. 353; 55N. E. R. 919; Bachman v. Hoffman, 104 III. App. 159; Gormon V. O'Conner, 165 Pa. St. 239; Schiller Commandery v. Jaennichen, 116 Mich. 129; 74 N. W. R. 458. ^ Kuehler v. Brown, 2 Daly, 78. 5 Smith u. Smith, 3 Desau (S. C), 557. 8 Altman ». Benz, 27 N. J. Eq. 331; see also Goodman v. Jedidjah Lodge, 67 Md. 117; 9 Atl. R. 13; Thomas v. Ellmaker, 1 Par. Sel. Cas. 98; Livingston o. Lynch, 4 Johns. Ch. 573; Stadler v. District Gr. L. I. O. B. B., 3 Am. L. Rec. 589; Red Jacket Tribe, etc., v. Gibson, 70 Cal. 128. 59 § 38a ORGANIZATION, POWEE8, LIABILITIES; DISSOLUTION. severance, in which case the few cannot claim to be the society.! Certain societies or communities of a quasi- religious character exist where, upon joining, a member surrenders his property and receives certain rights a s to support. Interesting questions have often arisen concern- ing the rights of the members of these associations. 2 One of these cases is Burt v. Oneida Community ,3 where a member of the Oneida Community, voluntarily and against the rules, left the community and afterwards brought an action to recover compensation for his services and to share in the community property. In the course of the discussion the court said : ' ' Plaintiff, having assented to the practices, customs, agreements, and covenants exist- ing among the members of the community, may reasonably be held bound by the tenor and terms thereof. The United States Supreme Court in Goessele v. Bimeler,* had occasion to examine an organization not wholly unlike the one now before us. In that case, ' the articles of association or constitutions of 1819 and 1824 contained a renunciation of individual property,' and it was held ' the heirs of one of the members who signed these conditions, and died in 1827 cannot maintain a bill of partition.' Also it was further held, viz. : ' The ancestor of these heirs renounced all right of individual property when he signed the articles, and did so upon the consideration that the soci- ety would support him in sickness and in health ; and this 1 Union Benev. Soc. &c. v. Martin (Ky.), 76 S. W. R, 1098; 25 Ky. L. Eep. 1039. 2 Grosvenor v. United Society, 118 Mass. 78 (right of expelled Shaker); Waite v. Merrill, 4 Me. 102; Bnrt v. Oneida Community, 61 Hun, 626; 16 N. Y. Supp. 298; Goessele v. Bimeler, 14 How. 589; Nachtrieb v. Harmony, etc., 3 Wall. Jr. 66; Lennix v. same, 3 Wall. Jr. 87. s 61 Hun, 626; 16 N. T. Supp. 289; affirmed 137 N. Y. 346; 33 N. E. K. 307; 19 L. K. A. 297. < 14 How. 589. 60 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 38a was deemed by him an adequate compensation for his labor and property, contributed to the common stock. The principles of the association were that land and other prop- erty were to be acquired by the members but they were not to be vested with the fee of the land. Hence, at the death of one of them, no right of property descended to his heirs. There is no legal objection to such a partnership ; nor can it be considered a forfeiture of individual rights for the community to succeed to his share, because it was a matter of voluntary contract. Nor do the articles of association constitute a perpetuity. The society exists at the will of its members, a majority of whom may, at any time, order a sale of the property, and break up the asso- ciation.' In the course of the opinion of Judge McLean it.is said of the plaintiff's ancestor, viz. : 'He then signed the first articles, which, like the amended articles, re- nounced individual ownership of property, and an agree- ment was made to labor for the community, in common with others for their comfortable maintenance. All indi- vidual right of property became merged in the general right of the association. He had no individual right and could transmit none to his heirs. It is strange that the complain- ants should ask a partition through their ancestor, when, by the terms of his contract, he could have no divisible interest. They who now enjoy the property enjoy it under his express contract.' And again he says: ' As a general rule chancery may not enforce a forfeiture; but will it relieve an individual from his contract, entered into fairly and for a valuable consideration? What is there in either of these articles that is contrary to good morals, or that is opposed to the policy of the laws? An association of in- dividuals is formed under a religious influence, who are in a destitute condition, having little to rely on for their sup- port but their industry ; and they agree to labor in common for the good of the society, and a comfortable mainten- 61 § 38a ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. ance for each individual ; and whatever shall be acquired beyond this shall go to the common stock. This contract provides for every member of the community, in sickness and in health, and under whatsoever misfortune may occur ; and this is equal to the independence and comforts ordinarily enjoyed. The ancestor of the complainants entered into the contract fairly and with a full understand- ing of its conditions. The consideration of his comfort- able maintenance, under all circumstances, was deemed by him an adequate compensation for his labor and property contributed to the common stock. ' Again he says : ' If members separate themselves from the society, their in- terest in the property ceases and new members that may be admitted, under the articles, enjoy the advantages common to all.' In that case the bill in equity was denied ' on a deliberate consideration of all the facts in the case,' the opinion concluding that ' there is no ground to au- thorize the relief prayed for by the complainants.' In Hyde v. Woods.i the question arose as to the property riffhts of a member of the San Francisco Stock and Ex- change Board which was a voluntary association for busi- ness purposes, and it was held that a rule of the association was binding upon a member, and the court observed: ' Though we have said it is property, it is incumbered with conditions, when purchased, without which it could not be obtained. It never was free from the conditions of article 15 neither when Fenn bought nor at any time before or since. That rule entered into and became an incident of the property when it was created and remains a part of it into whose hands soever it may come.' In Belton v. Hatch,2 a question arose as to the relation to each of the other members composing the association of the New York 1 94 U. S. 523. « 109 N. Y. 693: 17 N. B. R. 225. 62 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 38a Stock Exchange, and the extent and the validity of the powers reserved by its constitution and by-laws. That was a voluntary association of individuals united without a charter in an organization for the purpose of affording to the members thereof certain facilities for the transaction of their business, and in the course of the opinion delivered it was said, viz. : ' It cannot be said to be strictly a copartner- ship for its objects do not come within the definition of one,' and it was further said that ' whatever a member acquires is subject to the self-imposed condition that his title and the rights which accrue from his membership are regulated by, and are dependent upon, the laws adopted by the association, and expressly consented to by him when he joined.' A similar case was expressed to the court in White V. Brownell,! and in that case it was held that the • open board of brokers in the city of New York is not a corporation, nor is it a joint-stock association ; nor is it, as respects questions relating to the continuance or termi- nation of membership in it, a partnership. That board is a voluntary association of persons who, for con- venience, have associated to provide, at the common expense, a common place for the transaction of their individual business as brokers. The agreement which the members of such an association have made upon the subject of membership and what shall be the terms on which it shall be acquired, and the grounds and proceed- ings upon which it shall be terminated, must determine the rights of parties on that subject. A court of justice must recognize and enforce these provisions of the compact. It cannot substitute another contract for the one which the parties have made.' In that case an injunction was dis- solved which restrained the board from interfering with the privilege of a member of the board, and the decision made 1 3 Abb. Pr. (n. s.) 318. 63 § 39 OKQANIZATION, POWEES, LIABILITIES; DISSOLUTION. at general term was affirmed.^ Daly, F. J. , said in the course of an elaborate opinion, viz. : ' Individuals who form them- selves together into a voluntary association -for a common object may agree to be governed by such rules as they think proper to adopt, if there is nothing in them to con- flict with the law of the land ; and those who become mem- bers of the body are presumed to know them, to have assented to them, and they are bound by them.' " 2 Simi- lar questions often arise in regard to religious associations, but it is not germane to the subject to here discuss the principles involved, and reference must be made to works on religious societies. ^ § 39. Jurisdiction of Equity in Regard to Members of Voluntary Associations. — The Supreme Court of Ver- mont has thus laid down the general rule as to the basis upon which a court of equity will act if it entertains juris- diction over these societies : * "If jurisdiction is enter- tained over them (voluntary associations) by a court of chancery, it appears to me that it will become necessary to examine their constitution or by-laws, or articles of associa- tion, in order to discover the object for which they were formed ; and every member contributing, and every one receiving donations, whether styled officer or not, must be considered as having regard to the articles of association, 1 4 Abb. Pr. (n. s.) 162. « Innes ». Wylie, 1 Car. & K. 262 ; Brancker v. Boberts, 7 Jnr. (n. s.) 1185; Hopkinson v. Marquis of Exeter (London Times, Dec. 31, 1867), L. K. 5 Eq. 63. 3 In 20 Am. & Eng. Encyc. of Law, p. 773, will be fonnd a carefully prepared article on Religious Societies. A recent case, Schwartz v. Dnss, 187 U. S. 8, affirming 103 Fed. E. 561, 43 C. C. A. 323, contains a full discussion of the nature and powers of such associations and what amounts to a dissolution. For further discussion of rights of members, see post, § 57. * Penfield v. Skinner, 11 Vt. 296. 64 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 40 whether they are called constitution or by-laws, and must proceed accordingly. And if it is so provided, the major- ity may control the minority by a vote, if such vote is for the purposes of the association and within its provisions. The court of chancery has power to see that such associ- ations are faithful trustees in the disposition of the chari- table fund, and will see that it is appropriated to the object designed, and will not suffer it to be diverted, unless with the consent of the contributors. If the object should entirely fail , probably each contributor would be entitled to have his money refunded, and might, or might not, accord- ing to the circumstances of the case, have a remedy there- for, either at law or in chancery."! Generally equity will exercise its powers to prevent diversion of funds, protect the rights of members of the associations, declaring and enforcing such rights, and will to that end even compel the delivery of a specific chattel, 2 or place the property in the custody of a receiver, ^ or order a sale of the property,* but it will not exercise this power unless the interests of justice so require .5 A court of equity will enforce an equitable lien against an unincorporated association upon a note in order to avoid a multitude of actions. ^ § 40. Voluntary Association may be ^stopped from Showing Its True Nature. — A voluntary association may, by holding itself out as a corporation, be estopped from 1 Duke V. Fuller, 9 N. H. 536; 32 Am. Dec. 392. See supra, § 38a. 2 Fello V. Bead, 8 Ves. Jr. 70, where a silver tobacco box was ordered to be delivered. 3 Hinkleyw. Blethen, 78 Me. 221; 3 Atl. E. 655; State v. Peoples, etc., 42 Ohio St. 679; McCarthy's App., 17 W. N. C. 182. * Clerks Investment Co. v. Syduor, 19 App. D. C. 89. « Bobbins v. Waldo Lodge, 78 Me. 565; 7 Atl. B. 540; Hinkley ». Blethen, supra. 6 Society of Shakers v. Watson at al., 15 C. C. A. 632; 68 Fed. R. 730; see also Schwartz v. Duss, 187 U. S. 8; aflg. 43 C C. A. 323; 103 Fed. E. 661. 5 65 § 41 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. denying its corporate capacity and thus, so far as third par- ties are concerned, be deemed a corporation. ^ If a partner- ship association, whose members are partners as between themselves, does business in a corporate name, any person dealing with the association in that name may hold the members liable as partners, altJiough he did not know the real character of the association at the time. The liability of the members of the association under these circum- stances arises from the fact that they are actually partners as between themselves. 2 § 41 . Defective Organization of Corporation . — The same rule applies to the members of an acting corporation, the organization of which, however, is defective, as to parties who have contracted with a corporation as such, and, after having received the benefit of the contract, seek to avoid it on the ground that it had no authority to con- tract in a corporate capacity ; the right of a member to pecuniary benefit from the association by virtue of his membership must stand upon the basis that it is a corpo- ration de facto. ^ Whether or not, in cases where the or- ganization of the corporation is defective and the require- ments of law have not been met, so that there is no legal corporation, the members are liable as partners, is one of those questions upon which there is an almost equal divi- sion of opinion, and the decisions are conflicting. A 1 Tarbell v. Page, 24 111. 46; Baker v. Backus, 32 III. 79; Independent Order Mut. Aid v. Paine, 122 111. 625; 14 N. East Rep. 42; Grand Lodge Brotberhood Locomotive Firemen v. Cramer, 60 III. App. 212. And so one who conveys by warranty deed property to a. company is estopped to deny the capacity of such grantee to take. Eeinhard v. Va. Lead Mining Co., 107 Mo. 616; Morawetz on Corp., § 752. 2 Morawetz on Corp., § 749, and cases cited. s Foster v. Moulton, .S5 Minn. 458; 29 N. W. Rep. 155; Independ- ent Order Mut. Aid u. Paine, 122 111. 625; 14 N. East. R. 42; Mora- wetz on Corp., § 750; Railroad Co. v. Gary, 26 N. Y. 76; Chubb «. Upton, 95 U. S. 666. 66 ORGANIZATION, POWERS, LIABILITIES ; DISSOLUTION. § 42 leading writer i has collected the various cases bearing on the subject and concludes that the weight of authority is in the favor of a rule that "if an association assumes to enter into a contract in a corporate capacity, and the party dealing with the association contracts with it as if it were a corporation, the individual members of such association cannot be charged as parties to the contract, either sever- ally or jointly, as partners. 2 Where the incorporation of a former association is illegal, because the provisions of the constitution are not followed, the incorporated associa- tion cannot compel allegiance to it from the subordinate lodges. 3 § 42. Benefit Societies Incorporated under Special Acts. — Benefit societies are often incorporated under special acts of the legislature, the charters in such cases forming contracts between them and their members to be construed like other contracts. Unless expressly forbidden by the constitution State legislatures can create corporations for any purpose.* Corporate powers, however, cannot be created by implication or extended by construction. ^ 1 Morawetz on Corp., § 748. 2 Blanchard v. KauU, H Cal. 440, See also Hudson o. Spalding, 6 N. Y. Supp. 877. 8 National Grand Lodge, etc., v. Good Samaritan Lodge, etc., 175 Pa. St. 241; 34 Atl. E. 602. As to question of identity see Adams v. Northwestern Endowment &c. Assn., 63 Minn. 184; 66 N. W. E. 360. As to recovery of money contributed for the purpose of incorporating, Meyer v. Bishop, 129 Cal. 204; 61 Pac. R. 919. In Moore v. Union. Frat. Ace. Assn., 103 la. 424; 72 N. W. E. 645, where it was sought to hold individual members of an association the subject is also dis- cussed. * United States Trust Co. v. Brady, 20 Barb. 119; Bishop v. Brainerd, 28 Conn, 289; Franklin Bridge Co. v. Wood, 14 Ga. 80; Aurora v. West, 9 Ind. 74. 6 Pennsylvania E. Co. v. Canal Commissioners, 21 Pa. St. 9; Stewart V. Father Matthew Soc, 41 Mich. 67. See § 47 et seq. 67 § 44 ORGANIZATION, POWERS , LIABILITIES; DISSOLUTION. § 43. Geueral Incorporation Laws. — The policy of the American States has been to encourage the formation of corporations and to this end, and to avoid any appear- ance of discrimination, general laws exist by compliance with the terms of which corporations may be organized for almost every imaginable purpose. ^ Benefit societies in practically all the States are not regarded as strictly char- itable and benevolent organizations, although they may become incorporated under the provisions of the laws pro- viding for the incorporation of such societies. It is an essential, however, that they have no capital stock and be not formed for pecuniary profit to the members .2 § 44. Benefit Societies as Cliaritles. — The extent to which these associations are to be regarded as charities has often been discussed. The Supreme Court of Indiana,^ has said " a corporation which promises to pay a certain sum as benefits during a member's illness in consideration of his payment of dues, is not a purely benevolent organ- ization ; it may be and doubtless is benevolent and charit- able in a great degree, but it is not a benevolent organization in the sense of dispensing benefits without consideration." In California, the Supreme Court* held, in a suit brought to dissolve the " Eiggers and Stevedore's Union Associa- tion," as follows: " This is a voluntary association, formed for the benefit of the members of it. It partakes o'f the nature of a partnership. We do not see why a number of persons, capable of contracting, may not associate and agree, as the basis and consideration of the association, that the funds raised by voluntary contribution, or otherwise, through the by-laws of the company , shall be appropriated 1 Morawetz on Corp., §§ 8, 9 and 10. 2 See post, § 46. 3 Bauer v. Sampson Lodge, 102 Ind. 262. * Gorman v. Eussell, 14 Cal. 635. 68 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 44 absolutely or in a given contingency, to the benefit of the individual members. This is such an agreement. A number of the members of a particular avocation meet for mutual benefit and protection, and prescribe rules for the govern- ment of the society thus organized. They agree that each shall contribute a certain fixed sum to the common treasury, and that this sum shall be applied in a certain event, as in sickness, etc., to the relief of the necessities or wants of the individual members or of their families. This is not a charity any more than an assurance society against fire, or upon life, is a charity. It is simply a fair and reciprocal contract among the members to pay certain amounts, in certain contingencies, to each other, out of a common fund," 1 Masonic lodges have been held to be charities, and as such exempted from taxation, 2 though as to this latter point the contrary has been held.^ In Alabama ^the Supreme Court held that it would take judicial notice that the grand and subordinate lodges of the Masonic society within that State constituted a charitable or eleemosynary corpora- tion. In a New Hampshire case,^ the plaintiff sued to recover his share of the funds of a Masonic lodge whose members had voted its dissolution and division of its property, and the court held that the action could not be maintained, as the society was for charitable purposes and the funds were in the custody of the lodge for charitable uses.^ As J See Goodman v. Jedidjah Lodge, 67 Md. 117; 9 Atl. Rep. 13; Miner V. Mich. Mut. Ben. Assn., 63 Mich. 338; 29 N. W. Kep. 852; dissenting opinion Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Eep. 478; Bauer v. Sampson Lodge, 102 Ind. 262. 2 Indianapolis v. Grand Master, 25 Ind. 518 ; Mayor, etc., ». Solomon's Lodge, 53 Ga. 93; State v. Addison, 2 S. C. 499. ' Morning Star, etc., v. Hayslip, 23 Ohio St. 144; Bangor v. Masonic Lodge, 73 Maine, 429. * Burdine v. Grand Lodge, 37 Ala. 478. 6 Duke V. Fuller, 9 N. H. 536; 32 Am. Dec. 392. 6 See also Spiller v. Maude, 10 Jar. (N. s.) 1089; 13 W. R. 69. 69 § 44 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. bearing on this question, whether benefit societies are to be considered charities, we may cite the test laid down by the Supreme Court of Pennsylvania : i " Private or indi- vidual gain, in a pecuniary sense, is not the sole lest. ' The true test is to be found in the objects of the institution.' ^Vhere these are to advance the interest of a party, of an association, of a private corporation, of a religious denomi- nation, and the like, however beneficial to the public their growth and success may be, there is a private object to gain; the institution is not unqualifiedly, public. In such case the purpose is wholly private or the private blends with the public? " In the same case on rehearing the court thus construed the word ' ' purely ' ' as used by statutes in refer- ence to benevolent and charitable organizations : ' ' As to the meaning of the word " purely " when used in this con- nection, we concur in ithe construction which was given by the Supreme Court of Ohio in the case of Gerkeu. Purcell,^ that ' when the charity is public, the exclusion of all idea of private gain or profit is equivalent in effect to the force of ' purely,' as applied to public charity in the constitu- tion.' "3 We shall refer to this subject again in discussing the relations of benefit societies to the insurance laws of the several States.* But it may be here said that " a charitable corporation is not an association of shareholders, like a business corporation or joint-stock company ; but is merely an agent or trustee for the administration of trust funds, and the beneficiaries of the trust or the donees of the char- ity, and not the members of the corporation." 5 This defi- nition sheds light on the subject for, tried by this test as 1 Burd Orphan Asylum v. School District, etc., 90 Pa. St. 29. 2 25 Ohio St. 229. 8 See note to Hennepin w. Brotherhood of Gethsemane, in 38 Am. Rep. 298 (same case 27 Minn. 460) and cases there cited. * Post, §§ 50 and 53. " Morawetz on Corp., § 34. 70 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 44 well as others, benefit societies are seldom, if ever, "char- ities " in the strict sense of the word. As the Supreme Court of Iowa said: ^ " But counsel for defendant insists that the system of insurance, to which the policy involved in this suit belongs, is ' purely benevolent,' and therefore ought not to be subject to the legislation applicable to other classes of insurance. We think the ' benevolence ' in the case is purchased for, at least, a fair, if not a liberal consideration, and rests upon a contract which must be re- garded and enforced by the law as any other contract." In Franta v. Bohemian &c. Union, ^ the court said: " These societies are sometimes referred to as organized for charitable purposes, but death losses on such benefit certificates are not to be classed under that head, for they are enforced according to the terms of the contract, and even sick benefits do not fill the legal meaning of the word ' charity,' because they are limited to the members of the society. An act to be charitable in a legal sense must be designed for ' some public benefit open to an indefinite and vague number; that is, the persons to be benefited must be vague, uncertain and indefinite, until they are selected or appointed to be the particular beneficiaries of the trust for the time being.' ' Money contributed by the members of a club to a common fund, to be applied to the relief and assistance of the particular members of the club when in sickness, want of employment, or other disability is not a charitable fund to be controlled by a court of equity,' ^ It is not charity to give to your friend because of friend- ship, nor to your associate in a society because of your duty imposed by the laws of that society. Charity in the legal sense has been illustrated by reference to the custom 1 McConnell v. Iowa M. Aid Assn., 79 la. 757; 43 N. W. R. 188. 2 164 Mo. 304; 63 S. W. Rep. 1100; 54 L. E. A. 723. 3 Perry on Trusts, Sec. 710. 71 § 46 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. of the ancient Jews, to leave at random a sheaf of corn here and there in the field for the poor gleaners who fol- lowed the harvesters, it being unknown who would get it. Therefore, there is nothing in the idea of a charitable ^ust to influence the decision in this case. If the plain- tiffs are entitled to recover it must be upon the theory that their father held a contractual relation with the defendant corporation at the time of his death which entitled him to membership therein and the benefits incident to such mem- bership." § 45. English Friendly Societies not Charities, nor Assurance Companies. — The English friendly societies are not regarded by the courts of that country as charita- ble institutions, and it has been held that where a bequest is made to such a society and the society is wound up the doctrine of cy pres will not apply. ^ Neither is such a friendly society an assurance company, within the meaning of a covenant contained in a marriage settlement, whereby the husband agreed that he would forthwith effect a policy of assurance upon his life with some respectable assurance company for a certain sum and assign the policy to trustees. A policy of assurance effected with a friendly society, if it be not assignable, or if it be less beneficial than a policy effected with an ordinary assurance company, it was said,''' is not within the meaning of such covenant. § 46. Incorporating Under General Laws. — Under the general corporation laws all persons who comply with the prescribed conditions may become a corporation. A sub- stantial compliance with all the terms of the law is a pre- requisite and, though in the first instance the secretary of State, or other person charged with the duty of filing 1 Re Clark, 1 L. R. Ch. D. 497;. L. J. Ch. 194; 24 W. K. 233. 2 Courtenay v. Courtenay, 3 Jones & La. T. 519. 72 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 46 articles of incorporation and issuing a certificate thereof, may decide whether the provisions of the statute have been complied with, the ultimate decision rests always with the courts. 1 A recent able writer on the subject has so concisely stated the law of organization of corporations under the general law that we cannot do better than to quote his words : « ' A substantial compliance with all the terms of a general incorporation law is a prerequisite of the right of forming a corporation under it. Thus, where it is provided that a certificate, or articles of association, setting forth the pur- poses of the corporation about to be formed, the amount of its capital and other details, shall be filed with some public officer, a performance of this requirement is essential; and until it has been performed, the association will have no right whatever to assume corporate franchises. So, under some statutes, a license or certificate must be issued by a specified public officer before the corporation can be legally formed. The articles of incorporation must contain every- thing in substance that the laws under which the corporation is organized prescribe. Thus, if it is prescribed that the number or the names of the first directors of the corporation shall be set forth, a compliance with this provision is 1 Morawetz on Corp., §§ 15 and 27. As to what must be stated in articles ot association see Moore v. Union Frat. Ace. Assn., 1031a. 424; 72 N. W. E. 645. As to powers of such corporation see International Frat. Alli- ance V. State, 86 Md. 550; 39 Atl. R. 512; 40 L. R. A. 187. In People v. Golden Gate Lodge, etc., 123 Cal. 257; 60 Pac. R. 865, the law of California relative to organization of fraternal corporations is discussed. As to reincorporation see People v. Payn, 59 N. Y. Supp. 851 ; 28 Misc. R. 275, where the right to reincorporate under the laws of New York is discussed. It is not enough to set forth the general objects ol the corporation but the means by which these objects are to be accomplished must also be set forth. In re Right Worthy Grand Court, etc., 8 Pa. Dist. R. 127. Or where the society is formed for " social enjoyment," the character of the social enjoyment must be particularly stated; In re Burger's Military Baud Association, 19 Pa. Co. Ct. R. 651 ; In re Americus Club, 20 Pa. Co. Ct. E. 237; 9 Pa. Dist. E. 760. 73 § 46 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. essential. A provision requiring the articles of incorpo- ration to set forth that a majority of the members of the association voted at the first election of directors is obli- gatory; and if the articles omit the required statement, proof cannot be admitted to show that a majority were in fact present and voted. Under a law requiring a certifi- cate to be filed showing the manner of carrying on the business of the association, it is not sufficient to state merely that the manner of carrying on the business shall be such as the association may, from time to time, prescribe by rules, regulations and by-laws. Any other conditions prec- edent imposed by the express terms of the law must, of course, be complied with before the corporators can law- fully form a corporation. Upon the same general principle it follows that a corporation cannot lawfully act in a foreign State and carry on business there until all conditions prec- edent, prescribed by the laws of such State, have been per- formed." * The Supreme Court of Ohio ^ held that where the certificate provided that the manner of carrying on the business should be such as the association should, " from time to time, prescribe by its rules and by-laws," not inconsistent with the State laws, it did not sufficiently comply with the statute requiring the certificate to specify " the manner of carrying on the business." Where the statute provides that a sworn statement shall be filed showing that at least 200 persons have made applica- tion in writing for membership in the association and subscribed in writing to be beneficiary members the latter requirement is as necessary as the first. ^ A general incor- poration act can never be extended by construction to cases not reasonably within its terms. Upon this point 1 Morawetz on Corp., §§27 and 28; also §§ 641, 645, 939, 2 State v. Central Ohio Relief Association, 29 Ohio St. 407. 3 In re Schmltt, 67 Hun, 590; 10 N. Y. Supp. 683. 74 OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 46 the Supreme Court of Michigan has said: i " The present association was probably incorporated under the act in question, not as being precisely applicable, but as coming nearer to the purposes sought than any other statute. But it must always be remembered that no act for creating cor- porations can ever be extended by construction to cases not reasonably covered by its terms. It can never be assumed that incorporation will be allowed until the attention of the legislature has been given to each subject meant to be covered. The determination of the powers and conditions of corporate existence is peculiarly a matter of policy and not of law and requires legislative judgment. There are many lawful purposes for which no corporate powers have been granted, and there is much difference between the terms of such corporation laws as have been enacted." The duties of the superintendent of insurance in deter- mining whether the requirements of a statute have been complied with are judicial in their nature and a decision that membership was not entered into in good faith will not be interfered with and mandamus will not lie. ^ Where the charter has been improvidently granted by the court under a statute and the scheme is found fraudulent such charter can be revoked by the same court, since having been granted without authority it is void ab initio.^ A statute enlarging the powers of a beneficiary association takes effect without formal adoption by the association and when, after such legislation, an application for membership is accepted, it cannot be said, in the absence of any express determination on the part of the association, that it was 1 Stewarts. Father Matthew Society, 41 Mich. 67. 2 In re Schmitt, supra; citing People v, Chapin, 104 N. Y. 369; 11 N. E. R. 383; People v. Barces, 114 N. Y. 317; 20 N. E. R. 609, and 21 N. E. R. 739; People v. Common Council, 78 N. Y. 33. 3 In re National Indemnity and Endowment Co., 142 Pa. St. 450; 21 Atl. R. 879. 75 § 47 OEGANIZATION, POWEKS, LIABILITIES; DISSOLUTION. exercising the more limited powers under the earlier statute.^ § 47. Corporate Powers. — It is a well-settled principle that a corporation has no other powers than such as are specifically granted ; or such as are necessary for the pur- pose of carrying into effect the powers expressly granted. ^ "A corporation and an individual," says a standard authority,'* " stand upon a very different footing. The latter, existing for the good of society, may do all acts, and make all contracts which are not in the eye of the law inconsistent with this great purpose of his creation ; whereas, the former, having been created for a specific purpose, not only can make no contract forbidden by its charter, which is, as it were, the law of its nature, but in general can make no contract which is not necessary either directly or incidentally, to enable it to answer that pur- pose." A corporation cannot by combining one purpose with others, if any one is forbidden by statute, destroy or subvert the conditions and limitations attaching by law, and where the statute limited the amount of a policy to be issued by a co-operative assessment association to $1,000, it could not issue policies for larger amounts because its charter provided not only for insurance but also for social and fraternal beneficial purposes.* An incorporated society is not liable for policies issued before incorporation.^ Nor can the directors, in the absence of legislative au- "O' 1 Mass. Catholic Order, etc., v. Callahaiij 146 Mass. 391; 16 N. East. Rep. 14; Marsh v. Supreme Council A. L. H., 144 Mass. 512; 21 N. E. K. 1070; 4 L. E. A. 382 and note; Grand Lodge A. O. U. W. v. McKinstry, 67 Mo. App. 82. ^ Ang. & Ames on Corp., § 111. 3 Ang. & Ames on Corp., § 256. * International Fraternal Alliances. State, 86 Md. 550; 39 Atl. E. 572; 40 L. E. A. 187. See § 265 for discussion of question of ultra vires. 6 Montgomery v. Whitbeck (N. D.)., 96 N. W. E. 327. 76 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 48 thority, and without any previous action of the members, transfer the entire property and membership of the asso- ciation to another corporation. ^ § 48. The Charter the Source of Corporate Powers. — The charter, therefore, or the articles of association, is the fountain of authority for the corporation. It contains the agreement and contract on the part of the corporators and the State which specifies the terms of association, and the limits and bounds in which the associated body can act.^ And it is a settled rule that a person who deals with a cor- poration must, at his peril, take notice of its charter or articles of association. The rule applies to both foreign and domestic corporations and rests on the necessities of the case. All persons having transactions with corporate bodies must not only notice the terms of their charters, but also all the general legislation of the State creating them, by which business with- corporations is affected.' Members of an incorporated society must also take notice that the charter is subject to amendment.* Charters of corporations and articles of association of unincorporated societies are construed like other written instruments. The object is to discover the intention of the parties, and to this end, and to carry out the objects of the organ- ization, a liberal policy has been generally adopted.^ A corporation chartered for " benevolent or protective purposes to its members from funds collected therein ' ' cannot extend its operations by means of agents and so- 1 Temperance Mut. B. Assn. v. Home Friendly Soc, 187 Pa. St. 38; 40 Atl. E. 1100. 2 Morawetz on Corp., §§ 642 and 318, and cases cited. 8 Montgomery v. Wliitbeck, N. D. ; 96 N. W. R. 327 ; Morawetz on Corp., §§ 691, 692. * Park V. Modern Woodmen, 181 111. 214; 54 N. E. K. 932, » Morawetz on Corp., §§ 316-338 Inc. 77 § 48a OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. called ' ' subordinate lodges ' ' throughout a State for the pecuniary advantage of its officers and managers of the concern, assessing members of subordinate lodges who are excluded from membership in the central corporation.'^ But the fact that some of the rules of a society are illegal does not make the society such»^ § 48a. Right to Corporate Name. — In a well consid- ered case,' the court said: "It seems to be well settled that the name of a corporation, while not a part of its fran- chise, is, to a certain extent, property; and that it will be protected in a proper case on principles somewhat analogous to those which are applied to trade-marks."* It has also been said,^ that : " When there are no statute provisions as to the choice of name, and parties organize a corporation under general laws, it may be that they choose a name at their peril ; and that, if they take one so like that of au existing corporation as to" be misleading and thereby to injure its business, they may be enjoined, if there is no language in the statute to the contrary." "Where a faction 1 Commonwealth ». Order of Vesta (Pa. Com. P.), 12 Pa. Co. Ct. R. 481; 2 Pa. Dist. E. 254. See also Fogg v. Sup. L. Order Golden Lion, 156 Mass. 431 ; 31 N. E. R. 289. 2 Swaine v. Wilson, L. R. 26 Q. B. Div. 252; 31 Am. & Eng. Corp. Cas. 164; Collins v. Locke, 4 App. Cas. 674. In the case of Park v. Modem "Woodmen, 181 111. 216; 64 N. E. R. 932, it was held that the legislature may validate corporate acts, that a corporation is not liable on a con- tract made by its promoters before incorporation unless it ratifies it and that the head office can be changed by amending its constitution. This case distinguishes Bastian v. Modern Woodmen, 166 111. 595; 46 N. E. R. 1090. s Grand Lodge A. O. U. W. v. Graham, 96 la. 592; 65 N. W. R. 837; 31 L. R. A. 133. * Newby v. Oregon Central R. E., 18 Fed.;Cas. 38; Deady, 609; Am. & Eng. Enc. of Law, 268 (old ed.;. " American Order of Scottish Clans v, Merrill, 151 Mass. 558; 24 N. E. R. 918; 8 L. R. A. 320, and a case in point is St. Patrick's Alliance ». Byrne, 69 N. J. Eq. 26; 44 Atl. R. 716. 78 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 49 of an Order of the Knights of Pythias separated from the main body and adopted the name of " Improved Order of Knights of Pythias," it was held,i that the test is whether by the use of the name by the new corporation the order will be damaged by depriving it of members who would otherwise join it. The right to enjoin a rival concern may be lost by laches.2 It has been held^ that, under the statute, a State officer may be invested with the power of determining whether the name of a proposed corporation conflicts with any other, in which case his decision is final ; but it has also been held that the certificate of the State officer as to the right of a corporation to a name is not binding upon another body claiming the right to such name.* The right of a corporation to use its name is a part of its franchise and cannot be annulled or taken away at the suit of the mem- bers of a voluntary association who claim adversely.^ If the statute does not require the name of the corporation to be in English a charter cannot be refused because the name is in a foreign language.® § 49. The Modern Idea of Corporations. — The modern and most approved doctrine concerning the nature of a cor- 1 Supreme Lodge K. of P. v. Improved Order K. of P., 113 Mich. 140; 71 N. W. E. 473; 38 L. E. A. 658. 2 Grand Lodge A. O. U. W. o. Graham, supra. Great Hive L. O. M. V. Supreme Hive L. O. M., 129 Mich. 324; 97 N. W. E. 779; 99 N. W. E. 26. See also Same v. Same, 129 Mich. 324; 88 N. W. E. 882. 3 American Order Scottish Clans v. Merrill, supra. * Grand Lodge A. O. TJ. W. v. Graham, 96 la. 592; 31 L. E. A. 133. Exhaustive briefs on the subject of this section will be found in 31 L. B. A. 133 and 38 L. E. A. 668. « Paulino v. Portuguese Ben. Assn., 18 E. I. 165; 26 Atl. E. 36; 20 L. E. A. 272. See also High Court of Wisconsin etc., v. Commissioner of Insurance, 98 Wis. 94; 73 N. W. E. 326. 8 In re Bentsch Amerikanischer, etc., Verein, 200 Pa. St. 143; 149 Atl. E. 949. 79 § 49 ORGANIZATION, POWERS, LIABILITIES ; DISSOLUTION. poration is that it is simply a voluntary association of per- sons, endowed by the law with certain special privileges, conferred by the general acts concerning corporations or the special charter, chief among which is always that of a distinct entity, by which it is known and in which the personalities of its members or. stockholders are merged. Often the law goes behind this artificial entity and deals with the corporators or members as an association of indi- viduals, or partnership. A corporation is nothing more or less than a peculiar kind of partnership. The corporate entity, as an association, or partnership, acts through a.nd by its agents. The charter and articles of association are supposed to be known to all persons dealing with a corpora- tion and the authority of the agents is determined by this source of authority. The laws of agency are constantly referred to in testing the validity of corporate acts. While acts in excess of corporate authority are generally void, as being what is technically known as ultra vires, it must always be remembered that what may be beyond the powers of a corporation under some circumstances will not be so considered under different circumstances. When a con- tract of a corporation has not been executed it will not be enforced specifically if in excess of corporate authority, but if executed a different rule is generally applied and the corporation is not allowed to take advantage of its own wrong. This subject of the validity of corporate acts, or ultra vires, is one of the most perplexing, complicated and least understood in the domain of corporate law and from the mass of conflicting decisions we cannot attempt to deduce specific rules. Of all modern writers, Mr. Mora- wetz has most understandingly collated the authorities and evolved the governing principles, and to his work we must refer, for, when incorporated, benefit societies are not different in law from other corporations which have no 80 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. §51 capital stock and are not formed for the pecuniary profit of their stockholders. i § 50. Exemption of Benevolent Societies from Insur- ance Laws. — In a majority, if not all, of the United States, insurance companies, either home or foreign, are only allowed to do business upon compliance with specified con- ditions, the principal of which are the deposit with the in- surance department of approved securities or money to a certain amount and the furnishing of prescribed reports and financial statements, the object being to protect policy holders by means of the security of supervision and a money deposit and incidentally to obtain revenue for the State. It would be foreign to our purpose to examine or discuss these insurance laws. In order, however, to encourage the formation of benefit societies, the advantages of which have been appreciated by legislatures, there is express provision in all the States for the organization of benevolent, charita- ble and educational corporations, and in many States the laws further provide that all benevolent corporations may provide in their laws for the payment uponthe death of a member, to a designated person who is a relative or dependent of such member, of an agreed amount, and that such corporations shall be exempt from the general insurance laws of the State. 2 § 51. The Status of Benefit Societies Considered by the Courts. — The courts have frequently been called upon to determine whether or not certain acting corporations 1 Morawetz on Corp, chap. VIII., §§ 577 to 725. 2 la nearly all the States statutes exist regulating the business of Fraternal -Beneficial associations as well as providing for their incor- poration. Effort is being made to secure a uniform law in all the States. The proposed statute has been adopted in Ohio and Iowa. It would add unnecessarily to the bulk of this work to give any of these statutes and the reader must be referred to the laws of his own State. See post, § 53. 6 81 § 51 ORGANIZATION, POWEES, LIABILITIES; DISSOLUTION. were subject to the supervision of the State Insurance Departments ; or required to comply with provisions of laws regulating companies doing a life insurance business ; or whether the corporation was excepted as a benevolent organization within the meaning of the law. The courts have in many cases also considered the nature of benefit societies and in what respects'* they are to be considered life insurance companies and wherein they are different and sui generis. The questions have generally arisen in considering whether the associations were subject to the laws of the State regblating life insurance companies ; in determining the powers of persons or bodies acting for them, and in defining what is included in the term, " other insurance," used in application forms. We will consider some of the authorities here and others else where. ^ It was held by the Supreme Court of Minnesota,^ that an association, the purpose of which was to endow the wife of each member with a sum of money equal to as many dollars as there are members of the association, to be raised by assessments on them, was not a " benevolent society " within the meaning of the laws of that State, be- cause " it is clear from the plan of the association," says the court, " it was not intended to bestow any benefit or help without what was thought to be an equiva- lent. ' ' ^ The Supreme Court of Massachusetts early 1 As to powers of agents, see post, chap. IV. In matters relating to applications, post, § 235a. An elaborate and valuable discussion of this subject will be found in a note (38 L. R. A. 1) to the case of Penn. Mut. L. Ins. Co. V. Mechanics Savings Bank, etc., 37 U. S. App. 692; 43 U. S. App. 73; 72 Fed. R. 413. See also 40 L. E. A. 187,408, 418; 41 L. R. A. 194; 46 L. R. A. 264. 2 State V. Critchett, 37 Minn. 13; 32 N. W. Rep. 787; following Foster V. Moulton, 35 Minn. 458; 29 N. W. Eep. 155; and being followed in turn by State v. Trubey, 37 Minn. 97j 33 N. W. Rep. 554. 8 Somewhat of the same nature was the organization considered in Rockhold V. Canton Masonic, etc., Assn., 129 111. 440; 19 N. E. R. 710; 21N. E. R. 710. 82 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51 applied this rule when it declared:^ "The contract made between the Connecticut Mutual Benefit Com- pany and each of its members, by the certificates of membership issued according to its charter, does not differ in any essential particular of form or substance from any ordinary policy of mutual life insurance. The subject insured is the life of the member. The risk insured is death from any cause not excepted by the terms of the contract. The assured pays a sum fixed by the directors and not ex- ceeding ten dollars, at the inception of the contract, and assessments of two dollars each annually, and of one dollar each upon the death of any member of the division to which he belongs during the continuance of the risk. In case of the death of the assured by a peril insured against, the com- pany absolutely promises to pay to his representatives, in sixty days after receiving satisfactory notice and proof of his death, 'as many dollars as there are members in the same division, the number of which is limited to five thousand.' The payment of this sum is subject to no contingency but the insolvency of the corporation. The means of paying it are derived from the assessments collected upon his death from other members ; from the money received upon issu-, ing other certificates of membership, which the by-laws declare may, after payment of expenses, be ' used to cover losses caused by the delinquencies of members, ' and from the guaranty fund of one hundred thousand dollars, established by the corporation under its charter. This is not the less a contract of mutual insurance upon the life of the assured^ because the amount to be paid by the corporation is not a gross sum, but a sum graduated by the number of mem- bers holding similar contracts ; nor because a portion of the premiums is to be paid upon the uncertain periods of the deaths of such members; nor because, in case of non-pay- 1 Commonwealth v. Wetherbee, 105 Mass. 149. 83 § 51 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. ment of assessments by any member, the contract provides no means of enforcing payment thereof, but merely de- clares the contract to be at an end, and all moneys previously paid by the assured, and all dividends and credits accrued to him, to be forfeited to the company. The fact ojEfered to be proved by defendant, that, the object of the organ- ization was benevolent and not speculative, has no bearing upon the nature and effect of the business conducted and the contracts made by the corporation." The same court gives this general defihition: " A contract by which one party promises to make a certain payment upon the destruction or injury of something in which the other party has an interest, is a contract for insurance, what- ever may be the terms of payment of the consideration, or the mode of estimating or securing payment of the sum to be insured in case of loss."i This is a leading case on the subject and has been generally followed and approved.^ The St. Louis Court of Appeals in a somewhat similar case * shed additional light upon the subject stating the difference between mutual life insurance organizations and benefit societies. It said : "If, as we think, the contract of defendant with its members is a contract of insurance, then it would appear that the main, and indeed the only, object > Ante, § 50. 2 State V. Farmers', etc., Benev. Assn., 18 Neb. 276; 25N. W. Kep. 81; State ex rel., etc. v. Merchants' Exchange Benevolent, etc., 72 Mo. 146; States. Vigilant Ins. Co., 30 Kan. 685; State ». Citizens' Benef, Assn., 6 Mo. App. 163 ; Golden Rule v. People, 118 111. 492 ; 9 N. Bast. Kep. 342 ; State V. Bankers', etc., Assn., 23 Kan. 499; Bolton v. Bolton, 73 Me. 299; State V. Standard Life Assn., 38 Ohio St. 281 ; Farmer v. State, 69 Tex. 561; 7 S. W. Eep. 220; State v. National Assn., etc., 35 Kan. 51; 9 Pac. E. 956; Eensenhouse v. Seely, 72 Mich. 603; 40 N. W.E. 765; Daniher v. Grand Lodge, 10 Utah, 110; 37 Pac. K. 245; Supreme Lodge K. of H. v. Davis, 26 Colo. 252; 58 Pac. E. 596. 3 State V. Citizens' Benef. Assn., 6 Mo. App. 163. To the same effect is the case of National Union v. Marlow, 21 C. C. A. 89; 74 Fed. B. 776. Also Thassler v. German American, etc., Assn., 67 Mo. App. 505. 84 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51 of its existence is to do an insurance business. It is not a society bound together by any other common object, men of all races, creeds, professions and classes may belong to it; and it can in no respect be assimilated to organizations formed for religious, benevolent or literary purposes. Its one feature is life insurance ; its active officers are paid ; and it offers a premium for bringing in new risks. The only condition of membership is a certain condition of health and probability of duration of life. The case presented is not that of an organization whose primary object is social, literary, or benevolent, and to which a feature of mutual insurance is added for mutual aid. Such associations may exist which cannot be said to be carrying on the business of insurance, and with which we suppose it was not the inten- tion of the legislature to interfere." The Supreme Court of Iowa,i in passing directly on the question whether an organization, fraternal in its nature yet affording indemnity in the nature of life insurance, was subject to the provi- sions of the Iowa statutes relative to lif einsurance companies, said: " The association has assumed the characteristics of a fraternal organization, and also of a life insurance com- pany. The former, however, possibly predominate ; for it is true, we think, that many, if not all, fraternal associations dispense in some form pecuniary benefits, and that purely life insurance companies do not have what is called secret work, a pass-word, or anything of a moral or scientific character, which in any manner affects the organization. Nor do purely fraternal organizations require that the member should be in- surable. It is evident that the declared objects of the association should not alone be the controlling consideration, for they may be a mere pretense. To ascertain the primary purpose of this association, reference must be had to the 1 State V. Miller, 66 la. 26, followed and approved in State «. Nichols, 78ra.7475 41N. W. R. 4. 85 § 51 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. business conducted, the manner of conducting it, and wiiat provisions have been adopted for carrying into effect the several avowed objects of the organization. Doing this we find that the certificate of membership provides that upon the death of each member there shall be paid to such per- son as he may designate the sum ef $2,000 and that there- under he or his beneficiary is entitled to nothing more. Elaborate and stringent provisions are made in relation to the beneficiary fund payable on the death of a member and for collecting and enforcing the payment of such amounts as are assessed on each member; but we have been unable to discover any provision for enforcing any of the other declared objects of the association stated in the preamble to the constitution of the Supreme Lodge, in- cluding 'sick benefits.' If the provisions of a fraternal character be eliminated from the association, its primary and only purpose is that of a life insurance organization.^ We are satisfied, from an examination of the record, that the primary purpose of .the association of the Ancient Order of United Workmen is to provide a beneficiary fund to be paid upon the death of each member, and that the avowed fraternal character of the association is merely inci- dental thereto. In fact, we go farther than this, and from the record find that one of two things is true ; that is to say, either the fraternal objects of the association as avowed have been abandoned, or they never were intended to be enforced. We findno evidence of their enforcement, or that they ever were regarded as material by the members of the association; while, on the other hand, the provisions in relation to the beneficiary fund have been enforced, and tlie accumulation and payment of such fund has been regarded 1 State V. Bankers and Merchants' Mut. B. A., 23 Kan. 499; Folmer's Appeal, 87 Pa. St. 133; 111. Masons' B. Soc. v. Winthrop, 85 111. 337; Same ». Baldwin, 86111. 479; State o. Cit, Ben. Assn., 6 Mo. App. 163; Bolton V. Bolton, 73 Me. 299. 86 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51 as the object and purpose of the association. Therefore, it must be regarded as a life insurance organization, and within the provisions of the statute, which provides that no foreign life insurance company, aid society, or asso- ciation for the insurance of the lives of its members, and doing business on the assessment plan, shall be allowed to do business in this State unless it has a guaranteed capital of not less than $100,000 in the State in whichit is organized.' " ^ The Supreme Court of Texas has also considered the question whether a corporation, the Masonic Mutual Benev- olent Association of Texas, organized to provide for its members during life and their families after death, and providing for the payment, to the beneficiaries of the member at his death, of a certain sum in consideration of a membership fee and certain future assessments, was an insurance company and subject to the insurance laws of the State. In its opinion the court says: ^ " What, then, are the purposes of the body under consideration ? Its charter makes its object to provide for its members during life, and their families after death. This is apparently a benevolent object; but how is this to be accomplished? The associa- tion makes a contract with each member when he joins it, that for the consideration of a certain sum of money paid in cash, and other sums to be paid in future, which he agrees to do, that they will, ninety days after proper proof of his death, pay to certain beneficiaries a certain sum, graduated in amount, according to the length of time he lives, and, 1 Code, § 1160. 2 Farmer v. State, 69 Tex. 561; 'z S. W. Eep. 220. This case was approved ia the subsequent case of Supreme Council &c. v. Larmour, 81 Tex. 71; 16 S. W. R. 633, jn ■which the American Legion of Honor is held to be an insurance company and the certificate issued by It a valid insur- ance policy yet exempted from certain requirements under the statute. In the case of Order of the International Alliance &c. v. State, 77 Md. 647; 26 Atl. E. 1040, the association was held to be doing an Insurance business within the statutes of that State. 87 § 51 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. of course, according to the amount of assessments he has paid into the treasury. Before any one can enter into such a contract, he must undergo a regular examination as to his health, habits, occupation, and as to his family, and how much insurance upon his life, etc. A physician must make an examination as to his bodily condition, and ac- cording as he is sufficiently sound and of a certain age, is he accepted into the fraternity. This contract has all the features of a life insurance policy. It is a contract by which one party, for a consideration, promises to make a certain payment of money upon the death of the other; and it is well settled that whatever may be the terms of payment of the consideration by the assured, or the mode of estimating or securing payment of the insurance money, it is still a contract of insurance, no matter by what name it may be called. ^ It is in effect the ordinary contract made by insurance companies with the assured, differing from it in no important respect. The terms of payment are some- what different, the amount being greater or less according as the member lives long or dies early ; still it is a payment to be made at his death. The assured cannot be forced bj^ suit to pay future premiums ; but he loses his membership if he defaults in this respect. It is a common provision in insurance policies that if the assured fails to perform some of the conditions of his contract, that his policy may be canceled, and the premiums paid shall, in that event, be- come forfeited to the company. The provision that mem- bership may be forfeited for non-payment of assessments is in effect the same thing ; for the assessments serve the purposes of premiums in an ordinary life policy. The ex- amination, too, which precedes admission into membership is the same as that which occurs before the issuance of a 1 Commonwealth v. Wetherbee, 103 Mass. 149; State v. Benevolent Assn., etc., 18 Neb. 281; 25 N. W. Eep. 81. 88 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51 policy, and is intended to secure the society against fraud or imposition ; to prevent an unsound person from becoming insured, and to reduce its risks of loss, and increase its chances of profit. It matters not that the member was entitled to benefits in case of sickness. Insurance can be effected upon the health as well as the life of an individual. These benefits, too, are incidental to the main object of the institution, and the certificates issued by it are nonetheless policies of insurance, though the insured derive sums of money from the contract other than those for which he has specially bargained. We are of the opinion, there- fore, that the appellants constituted an insurance company within the spirit and true meaning of that term, and not an association conducted in the interest of benevolence, as contemplated by title 20 of our Eevised Statutes." And the Supreme Court of Illinois says : ^ " But it is urged that the defendant in the present case is not an insurance company, within the meaning of the statute above men- tioned and cannot, therefore, be affected by its provisions. The object and purpose for which the defendant was incor- porated, as the bill alleges, and as the plea must be deemed to admit, was to furnish pecuniary aid to the widows, heirs, devisees, and representatives of the deceased members of the association ; and it is further alleged, by way of show- ing the modein which the proposed aid was to be furnished, that it was provided by the constitution and by-laws of the association that in case of the death of a member, on proof of such death, the association should assess and collect from each surviving member the sum of $2.50 for the ben- efit of the heirs or devisees of the deceased member, the same to be paid to him or them, to the amount of not ex- ceeding $2,500, within 30 days after the collection of the 1 Railway Passenger, etc., Asan. v. Bobinson, 147 111. 138; 35 N. E. 168. 89 § 51 ORGANIZATION, POWEKS, LIABILITIES; DISSOLUTION. assessment. There can be no doubt, we think, that the benefits provided for by the constitution and by-laws of the association are in the nature of life insurance, and that the contract between the association and the member, evi- denced by the constitution, by-laws, and membership cer- tificate, is, in substance, a policy of insurance upon the life of the member. See Eockhold v. Society,^ and cases cited. It is true the membership certificate bears upon its face no promise of indemnity, but it entitles the holder to membership in the association, and to all rights that apper- tain thereto, and it is to be construed in connection with the constitution and by-laws, the same as if all of those documents were combined in one. Taken together, they constitute an undertaking on the part of the association, subject, it is true, to certain conditions w hich will be here- after noticed, in case of the death of a member, on proper proof of his death to levy and collect an assessment of $2.50 on each surviving member, and to pay the same over, to an amount not exceeding $2,500 to a certain designated beneficiary or beneficiaries. This is clearly, in substance and effect, a contract of insurance, and an association organized for the purpose of entering into and performing contracts of that character is in reality an insurance com- pany. But it is said that the defendant is not an insur- ance company within the meaning of the act in relation to suits against such corporations, because the statute under which the defendant was organized declares that such asso- ciations and societies shall not be deemed insurance com- panies. Section 31 of the act concerning corporations, approved April 18, 1872, — that section being a part of the subdivision of the act relating to corporations not for pecuniary profit, — as amended May 22, 1883, provides that ' associations and societies which are intended to bene- 1 129 111. 440; 21 N. E. Rep. 794. 90 ORGANIZATION, POWEES, LIABILITIES; DISSOLUTION. § 51 iit the widows, orphans, heirs and devisees of deceased members thereof, and members who have received a per- manent disability, and where no annual dues or premiums are required, and where the members shall receive no money as profit or otherwise, except for permanent dis- ability, shall not be deemed insurance companies.' It may be noticed that the plea in this case fails, by proper averments, to bring the defendant within the provisions of this statute. There is no averment that no annual dues or premiums were required of its members, or that its members received no money as profit or otherwise, except for permanent disability. It is difficult to see how, without guch averments, the defendant can be held to be exempted by this statute from the character and status of an insur- ance company." The Supreme Court of Kansas ^ has held that a contract by an association to pay at stated periods of time certain sums of money as endowments to living members, or, in case of their death, to pay certain other sums of money as benefits to their beneficiaries, is life in- surance both as to the endowments and the benefits . The Supreme Court of Illinois ^ has decided that, where a cor- poration establishes a relief fund, to be raised and kept up by voluntary contributions of its members, from which it agrees, upon the death of a member, to pay a sum, not exceeding a certain amount, to a beneficiary named by such deceased member, and a sum not to exceed another certain amount, to the members holding certificates next in num- ber above and below that of the deceased, and upon the death of a member, notice is given to all other members, who are expected to contribute to the relief fund, such corporation will be liable to the charge of engaging in the business of life insurance and in addition its business is 1 Endowment & Benev. Assn. v. State, 36 Kin. 253; see also State v. National A.ssn., 35 Ean. 51. 2 Golden Eule v. Swigert, 118 111. 492. 91 § 51 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. illegal because ia the nature of wagering. It also held that, under the Illinois act of 1872, a corporation could be organized for any lawful purpose except (among others named), that of insurance. The court said: "By the last clause of section 31 of the act, it is provided that societies intended to benefit the widows, orphans, heirs and devisees of deceased members thereof, and members who have received a permanent disability, and where no annual dues or premiums are required, and where the members shall receive no money, as profit or otherwise, except for permanent disability, shall not be deemed insurance companies. Here is the strongest implication that a society doing such a business as the pleas pres- ent, is doing an insurance business, and that it is to be deemed an insurance company. Not to be deemed an insurance company under the act, it must be intended to benefit the widows, or orphans, heirs and devisees of de- ceased members, and members who have received a per- manent disability and where the members shall receive no money as profit or otherwise, except for permanent dis- ability. But here the declared object is the benefit of mem- bers, and the pecuniary benefits are enjoyed, not by the widows, etc., of deceased members, and by members who have received a permanent disability, but by the appointees of deceased members, the beneficiary named in the applica- tion, and by certain of the members generally and not members who had received a permanent disability." ^ In 1 But in New York (Supreme Council, etc., v. Fairman, 10 Abb. N. C. 162; 62 How. Pr. 386) It has been lield tbat an association formed to furnish aid to members in cases of physical disability was not an insur- ance company within the statute of that State. In Fawcett v. Supreme Sitting Order of Iron Hall, 64 Conn. 170; 29 Atl. E. 614; 24 L. R. A. 815, a concern whose scheme was obviously impracticable was held entitled to the exemption given fraternal associations by the laws of Maryland. To the contrary is Supreme Sitting Order Iron Hall v. Griggsby, 178 111. 57; 52 N. E. R. 956. 92 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51a another case ^ it was said : " It is further objected that the contract sued oa is acontractof Vdeinsurance SLud ultra vires because expressly prohibited by the charter of the Grand Grove, and not necessary to carry into effect the objects of the corporation. The charter of the Grand Grove names as one of the main objects of the corporation, ' aiding the families of deceased members.' The payment of a small stipend to the helpless children of a deceased member seems to be a very reasonable way of carrying out this provision; and though the last clause of section 1 of the charter pro- vides that the powers hereby granted shall not be used for banking or insurance purposes, it is clearly not the intent of that provision to prohibit the payment of money by the corporation to the surviving representatives of deceased members. The corporation is not to carry on an insur- ance business in the usual acceptation of the term in the commercial world." ^ § 51a. Difference Between a Fraternal Benefit Soci- ety and a Life Insurance Company. — The Supreme ' Barbaro v. Occidental Lodge, i Mo. App. 429. 2 See also Commonwealth v. National Mut. Aid, Assn., 94 Pa. St. 481 ; State V. Mut. Protective Soc, 26 Ohio St. 19 ; White v. Madison, 26 N. Y. 117. For other questions arising under statutes of the several States see Eailway Passenger, etc., Assn. v. Robinson, 147 111. 138; 36 N. E.E. 168, afEg. 38 111. App. Ill; State v. Whitmore, 75 Wis. 332; 43 N. W. E. 1133; State v. Taylor, 56 N. J. L. 49; 27 Atl. 797; Whitmore v. Supreme Lodge, etc., 100 Mo. 36; 13 N. W. E. 495; McConnell v. Iowa M. Aid Assn., 79 Iowa, 757; 43 N. W. E. 188; Eensenhouse v. Seeley, 72 Mich. J56O3; 40 N. W. E. 765; Eockhold v. Canton Masonic, etc., 129 III. 440; 19 N. E. E. 710; 21 N. E. 794; State v. Eoot, 83 Wis. 667; 64 N. W. E. 33; Dunlevy o. Supreme Lodge, etc., 49 Legal Intel. 145. The nature and privileges of such associations has also been considered in the fol- lowing cases which held that the business is practically life insurance: Home Forum Ben. Order v. Jones, 5 Okla. 598; 50 Pac. E. 165; Modern Woodmen v. Colman, 64 Neb. 162; 89 N. W. E. 641; on rehearing 64 Neb. 162; 94 N. W. E. 814, and 96 N. W. E. 154; Supreme Assembly Eoyal Soc. Good Fellows v. McDonald, 59 N. J. L. 248; 35 Atl. E. 1061. 93 § 51a ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. Court of Pennsylvania in a well considered case ^ thus points out the distinction between a fraternal society for " beneficial and protective purposes " and the regular life insurance companies : "The general object or purpose of an insurance company is to afford indemnity or security against loss. Its engagement is not founded in any phil- anthropic, benevolent, or chafitable principle. It is a merely business venture, in which one, for a stipulated con- sideration, or premium per cent, engages to makeup, or in a certain agreed amount, any specific loss which another may sustain; and it may apply to loss of property, to per- sonal injury, or to the loss of life. To grant indemnity or security against Iosh for a consideration is not only the design and purpose of an insurance company, but is also the dominant and characteristic feature, of the contract of insurance. What is known as a ' beneficial association,' however, has a wholly different object and purpose in view. The great underlying purpose of the organization is not to indemnify or secure against loss. Its design is to accumulate a fund from the contributions of its mem- bers ' for beneficial or protective purposes,' to be used in their own aid or relief in the misfortunes of sickness, in- jury or death. The benefits, although secured by contract, and for that reason to a limited extent assimilated to the proceeds of insurance, are not so considered. Such soci- ties are rather of a philanthropic or benevolent character. Their beneficial features may be of a narrow or re- stricted character. The motives of the members may be to some extent selfish, but the principle upon which they rest is founded in the considerations mentioned. These benefits by the rule of their organization are payable to A valuable note with a full review of the authorities Is found in 38 L. R. A. 1. 1 Commonwealth v. Equitable Beneflcial Assn., 137 Pa. St. 412; 18 Atl. 1112. 94 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 51a! their own. unfortunate, out of funds which the members have themselves contributed for the purpose, not as an indemnity or security against loss, but as a protective relief in case of sickness or injury, or to provide the means of a decent burial in the event of death. Such societies have no capital stock. They yield no profit, and their contracts, although beneficial and protective, altogether exclude the idea of insurance, or of indemnity, or of secu- rity against loss." ^ The subject has also been treated in another leading case,^ where Judge Caldwell said: " There are corporations in which the element of insurance is so mingled with benevolent, charitable, social or other ends that it is difficult to tell whether they should be classed as insurance companies or benevolent societies. But that difficulty does not arise in this case. It is apparent from an examination of its charter, and its methods of doing business, that the defendant is a mutual life insurance company on the assessment plan. Its business is insurance and nothing else. There is not a social, charitable or benevolent feature in its organization or the conduct of its business. It has no lodges, pays no sick dues and distrib- utes no aid, and gives no attention to members in distress or poverty. It deals with its members on the strictest busi- ness principles. * * * A popular or captivating name often performs a useful office as a business advertisement, but it goes for nothing in determining the legal character of the company adopting it." The fact that an association, paying a benefit in case of death, restricts its membership to certain persons, as for example, masons, does not make it a secret benevolent or fraternal society.^ An association 1 See also State v. Citizens Benef. Assn., 6 Mo. App. 163; Kniglits of Honor v. Oeters, 9B Va. 610; 29 S. E. R. 322; ante, § 51. 2 Berry v. Knights Templars, etc., 46 Fed. Rep. 439; affd. 1 C. C. A. 561; 50 Fed. R. 311. 2 Masonic Aid Assn. v. Taylor, 2 S. Dak. 324; 50 N. W. R. 93; also 95 § 52 OEGANIZATION, POWERS, LIABILITIES; DISSOLUTION. organized by a railroad company for its employees, which agrees to pay stated sums to its members or their beneficiaries in case a member is killed or injured in its service, the com- pany paying operating expenses and tnaking good deficiencies after assessments have been collected, is not an " insurance company." i Nor is the Grand Lodge I. O. O. F., which is organized mainly for reliel and benefits, other than financial.^ § 52. Conclusion: Benefit Societies are Insurance Organizations. — It follows from the foregoing adjudica- tions, that all benefit societies, whether corporations or mere voluntary associations, are, strictly speaking, insur- ance organizations whenever, in consideration of periodical contributions, they engage to pay the member, or his desig- nated beneficiary, a benefit upon the happening of a speci- fied contingency. Although they may also partake of the nature of clubs or fraternal societies, and although they are often technically not called insurance companies, we must admit that, whether the benefit be paid for sickness, or to provide burial, or to accumulate a fund out of which pay- ments aro to be made to beneficiaries of deceased members, the contract falls within the definition of an insurance con- tract, viz. : ' ' An agreement, by which one party for a con- sideration ( which is usually paid in money, either in one sum, or at different times during the continuance of the risk), promises to make a certain payment of money upon the destruction or injury of something in which the other party has an interest." ^ It may be also asserted as a gen-- Berry v. Knights Templars, etc., supra; but see State v. Whitmore, 75 Wis. 332; 43 N. W. K. 1183. 1 Donald ». C. B. & Q. Ey. Co., 93 la. 284; 33 L. E. A. 492; 61 N. W. E. 971; Johnson v. E. E. Co., 163 Pa. St. 127; 29 Atl. R. 854. 2 Anthony v. Carl, 68 N. T. Supp. 1084; 28 Misc. E. 200. 8 Commonwealths. Wetherbee, 105 Mass. 149; Franklin Ben. Assn. V. Commonwealth, 10 Pa. St. 357; ante, § 51. 96 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 53 eral principle that wherever or whenever a benefit society, paying a benefit to the beneficiaries of its deceased mem- bers, claims to be exempt from the operation of certain laws applicable to persons or companies doing a life insur- ance business, it can only safely base such claim upon ex- press provisions of its charter or of the statutes exempting similar organizations from such liability. The association may be benevolent and charitable, and only incidentally provide benefits for its members or their beneficiaries, but nevertheless, when it contracts to pay a certain sum to the appointees of its members upontheir decease, while in good standing, in consideration of certain contributions made by such members while living, it is doing a life insurance busi- ness. We shall find, as we proceed further to discuss the questions concerning the contracts and liabilities of benefit societies, that many of the principles of the law of life in- surance are applied to these societies because they are in some respects simply life insurance companies doing busi- ness on a plan only partially different from that of regular life insurance organizations. § 53. exempting^ Statutes. — The legislatures of most of the States have exempted certain classes of organizations from the rigid requirements of the laws applicable to regu- lar life insurance corporations, but the reasons arise more probably from public policy than from any exceptional na- tureof the business transacted. These exempting statutes, while differing from each other to a great extent, are in the main alike. Any number of persons are authorized to be- come incorporated for benevolent, charitable, educational, or social purposes and in their laws to provide for the pay- ment to the widows, children, relatives, heirs and depend- ents of their deceased members of an agreed amount to be raised by assessments upon the survivors in the associa- tion. The language may be in some cases even broader 7 97 § 54 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. and authorize such associations to pay to any one designa- ted by the member the stipulated amount. The question is one of construction of the statutes of the several States and of individual charters and no uniform rule can be laid down that shall apply to all cases. ^ § 54. liiberality of Exemption ia Certaia States. — In some States the field is practically unlimited, as in New York, where the Court of Appeals held,* that there was no restriction in the act of 1875 providing" for the incorpora- tion of societies or clubs for certain lawful purposes," which requires, where a society is organized under it for "mutual benefit" or "benevolent " purposes, that the benefits or benevolence be confined to members or the families of members. " There is nothing," said the court, ' ' in the by-laws which requires that the beneficiaries named in the certificate should be niembers of the family of the deceased member, and if no beneficiaries are designated the payment is to be made to his legal representatives. The power of the company to create a. fund for the insurance of the lives of its members is not questioned on this appeal, and we do not, therefore, discuss it. The act of 1875 authorizes the incorporation of societies for purposes of ' mutual benefit,' and it must be under this head that the power is claimed, to contract for the application of the joint contributions of the members to the payment of a gross sum to the legal representatives of each member, or to such beneficiary as he may designate to receive it upon his death. " There is nothing in the act which restricts the objects of the societies formed under it to the relief of families of ' Ante, § 50; Barbaro v. Occidental, etc., i Mo. App. 429; Sup. Council V. Fairman, 62 How. Pr. 386; 10 Abb. N, C. 162; Common- wealth V. Keystone Ben. Assn., 171 Pa. St. 465; 32 Atl. E. 1027. See also, § 566, post. ' Massey v. Mutual Relief Soc, 102 N. Y. 523. 98 OKGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 54 their members. They maybe formed for general purposes of benevolence and for many other objects, such as social, political, athletic, sporting, etc. Neither does the certificate of association of the defendant restrict the application of its funds to the relief of a member or his family except where such relief is to be extended during the life of the member." The statutes of Illinois are almost as broad. The Supreme Court of that State says : ^ " The first section of the act under which the defendant is organized, in express terms authorizes the organization of such associations for the purpose of furnishing life indemnity or pecuniary ben- efits to devisees or legatees. If, as is plain from the lan- guage of the statute, a person may take out a policy on his own life, and devise such policy to a stranger, what princi- ple of public policy would be violated by a provision in the policy making it payable to a stranger, in lieu of doing the same thing by will ? If the policy may be made payable to a stranger whb has no insurable interest in the life of the assured, as it may be by statute, we perceive no reason which will prevent the same thing being done by a 6lause the insured may have inserted in the pohcy at the time the insurance is procured. * « « "yyTg qq^ come to the second question. Section 1, of the act under which the defendant is incorporated, is as follows : ' That corpora- tions, associations, or societies, for the purpose of furnish- ing life indemnity or pecuniary benefits to the widows, orphans, heirs or relatives, by consanguinity or afiinity, devisees or legatees, of deceased members, or accident or permanent disability indemnity to members thereof, and where members shall receive no money as profit, and where funds for the payment of such benefits shall be secured, in whole or in part, by assessment upon the surviving mem- bers, may be organized, subject to the conditions herein- ' Bloomiagton Mut. Benefit Assn. v. Blue, 120 111. 121 99 § 55 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. after provided. ' It is contended that all persons not named in the act are prohibited from becoming beneficiaries. It will be observed that the contract involved is not absolutely prohibited by statute. ■ All that can properly be claimed is, that it was not expressly authorized by the statute." ^ § 55. Limitation on Business in Certain States. — The rule seems to be, as is said in a well-considered case: * " Incorporated associations, or societies of the class to which the defendant order belongs, are creations of the statute, incapable of exercising any power which is not therein either expressed or clearly implied." A fraternal beneficiary association cannot do an endowment insurance business.^ The Supreme Court of Ohio has repeatedly held,* that the corporate powers of mutual relief as- sociations, incorporated and organized under the stat- ute of that State authorizing the formation of such societies " for the mutual protection and relief of their members, and for the payment of stipulated sums of money to the families or heirs of the de- ceased members of such associations," are limited to the carrying into effect of the purposes thus declared. " The 1 Lamont v. Hotel Men's Mut. Ben. Assn., 30 Fed. Rep. 817; Lamont •». Iowa Legion ■ of Honor, 31 Fed. Bep. 177; Maneely u. Knights Bir- mingham, 115 Pa. St. 305; 9 Atl. Eep. 41. See also Walter v. Odd- fellows M. B. Soc.,43 Minn. 204; 44 N. W. E. 57, and State v. Whit- more, 75 Wis. 332; 43 N. W. K. 1133. 2 Ferbrache v. Grand Lodge A. O. U. W., 81 Mo. App. 268. In this case the Missouri cases are all cited and reviewed. s Walker v. Giddings, 103 Mich. 344; 61 N. W. R. 512; Dishong v. Iowa Life and End. Assn., 92 la. 163; 60 N. W. R. 505; State ex rel., etc., V. Drear, 144 Mo. 157; Preferred Mas. Mut. L. Ins. Co. w. Giddings, 112 Mich. 401; 70 N. W. K. 1026. * State V. Mutual Protection Assn., etc., 26 Ohio St. 19; State v. Cen- tral Ohio Mutual Relief Assn., etc., 29 Ohio St. 399; State v. Standard Life Assn., 38 Ohio St. 281; State v. People's Ben. Assn., 42 Ohio St. 579 ; National Mutual Aid Assn. v. Gonser, 43 Ohio St. I ; I N. East Bep. 11. 100 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 55 only beneficiaries for whom it has power to provide are the 'families or heirs of deceased members.' " ^ In that State foreign benefit societies cannot do business if they issue certificates payable to other persons than those of the families or heirs of the deceased members. The court says: ^ " The law of comity which the relator invokes in support of his application, is fully satisfied where foreign companies are permitted to do business in this State upon the terms prescribed for domestic companies." The Mas- sachusetts statute^ provides that certain benevolent asso- ciations may "for the purpose of assisting the widows, orphans, or other persons dependent upon deceased mem- bers, provide in its by-laws for the payment by each mem- ber of a fixed sum to be held by such association until the death of a member occurs, and then to be forthwith paid to the person or persons entitled thereto." In construing this statute the Supreme Court of that State * has held that associations organized under its provisions have no power to create a fund for other persons than of the classes named.^ The contract made by a benevolent corporation in conformity with its charter will be enforced through comity in another State where such contract would have been contrary to the statutes of such State.® In the case cited the court says; " It is a part of the common law that a corporation may carry on business in foreign jurisdic- 1 See post, § 244. 2 state V. Moore, 38 Ohio St. 7. » Stat. 1874, chap. 375; Amended Stat. 1877, chap. 204, re-enacted Pub. Stat. 1882, chap. 115; amended 1882, ch. 175, § 2. * American Legion of Honor «. Perry, 140 Mass. 680. « Elsey V. Odd-fellows Assn., 142 Mass. 244; Mass. Catholic Order Foresters v. Callahan, 146 Mass. 413; 16 N. Bast Rep. 14; Commercial League v. The People, 90 111. 166; Benefit Society v. Dugre, 11 Kevue Legale (Queb.) 344. See, for further discussion of this subject, post, §§ 247 to 265. • Hysinger v. Supreme Lodge K. & L. of H., 42 Mo. App. 627. 101 § 56 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. tions, and it is under this law of comity, which is also a part of the common law, that foreign courts lend their aid to the enforcement of its contracts, provided the contract itself is not' expressly prohibited by a local statute and is not repugnant to the settled adjudications of the courts of the State or to the general policy of its laws. The statute of this State which confines the beneficiaries in such societies to the members of the family of the member, or to some person or persons dependent upon him, has reference solely to domestic corporations. We think it would be a wrong and improper application of the law of comity to say that, by reason of this statute, the courts of this State ought not to enforce the collection of the amount due under this certificate on the ground that such a contract is repugnant to the general policy of the law of the State." * § 56. Life Insurance Business as Now Conducted in the United States and Canada. — As at present conducted in the United States and Canada the business of life insur- ance is divided between regular life insurance companies, which far a certain consideration or premium, paid at one time, annually or oftener, agree to pay a specified amount at an agreed time, or sooner in case of the death of the party insured, or simply upon the death of the assured ; other companies which promise to pay a definite amount, or the proceeds of certain assessments not to exceed a cer- tain amount, upon a specified contingency, either death, disability or expiration of a certain period, the considera- tion of which agreement is the promise of the assured to 1 The following cases will be found instructive : As to exemption in Cali- fornia, Marshall v. Grand Lodge A. O. U. W., 133 Cal. 686; 66 Pac. K. 25; in New Hampshire, Brotherhood Ace. Co. v. Linehan, 71 N. H. 7; 51 Atl. R. 266; In South Dakota, Ancient Order, etc., v. Shober, S. D. .; 94 N. W. R. 405 ; In Missouri, Kern v. American Legion of Honor, 167 Mo. 471; 67 S. W. K. 252; Toomey v. Knights of Pythias, 74 M. A, 507; affirmed 147 Mo. 129; 48 S. W. K. 936. 102 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 56a pay certain assessments as called by the company; and fraternal bodies organized into lodges, or sections, gov- erned by a grand or supreme lodge, or both. All these various organizations have much in common and are all doing, either directly, or incidentally to other purposes, an insurance business ; the same principles also often apply to all three classes. We shall treat of the relative dependence and government of the subordinate, grand and supreme lodges under the title " Government and Membership." i § 56a. State Regulation of the Business of Insurance — Powers of Insurance Commissioner. — In most, if not all, of the States the business of insurance is regulated by statute. The reasons have been well stated as follows: ^ " Insurance in its early existence, when the nature of the risks were few and the amount of business small, was done chiefly, if not entirely, by individuals. But in more recent times it has been extended until it embraces almost every kind of a risk and has grown to such proportions that it enters into every department of business and affects all classes of people and their property ; and has in conse- quence everywhere become the subject of legislative regu- lation and control. The several States have enacted laws designed to place the business within their limits on such substantial basis as will afford adequate protection to the citizens and their property. There can be no doubt of the power of the State to do so nor that the power extends to the enactment of such laws as its legislative body may deem wise and proper for the purpose, not in conflict with the fundamental law, and, therefore, within the legitimate exercise of that power, foreign companies may be excluded altogether from doing business in the State or admitted on 1 See next chapter. 2 State V. Ackerman, 51 Ohio St. 163; 37 N. E. E. 828; 24 L. R. A. 298 and note. \ 103 § 56a ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. ► their compliance with such terms and conditions as its leg- islature chooses to impose." If individuals attempt to do an insurance business which the statute provides shall be done only by corporations they will be enjoined. ^ If the statute does not forbid in express terms the trans- action of such business by individuals, they are free to engage in it, and the same rule, applies to corporations.^ Only the State is concerned in the right of a corporation to do business and no suit lies on the part of third parties to determine whether such corporation shall be licensed.^ The real character of the contract and the acts to be per- formed under it cannot be concealed or changed by the use or absence of words in the contract itself. It is immaterial that such a contract does not on its face pur- poi't to be one of insurance.* The right of a State to regulate the business of insurance is undoubted.^ The companies are usually required to file with the insurance department certain reports and submit, if required, to an examination by the superintendent of the department, or as he is generally styled, insurance commissioner. What the powers of such officers are of course depends upon the' language of the statute. He may have almost unlimited powers.* In the two cases of Metropolitan L. 1 State u. Ackerman, supra; State v. Stone, 118 Mo. 388; 24 S. W. K. 164; 25 L. E. A. 243. 2 Fort«. State, 92 Ga. 8; 18 S. E. E. 14; 23 L. R. A. 86; Hoadley v. Purifoy, 107 Ala. 276; 18 Sou. R. 220; 30 L. R. A. 351; People v. Fidel- ity, etc., Co., 153 111. 25; 38 N. E. R. 752; 26 L. R. A. 295. 3 High Court, etc. v. Commissioner, 98 Wis. 94; 73 N. W. E. 326. See also ante, § 48a. * State V. Beardsley, 88 Minn. 20; 92 N. W. R. 472; Missouri, K. & T. Co. V. Krumsag, 23 C. C. A. 1; 77 Fed. R. 32; M. K. & T. Co. v. Mr,- Lachlan, 59 Minn. 468; 61 N. W. E. 560. " Orient Insurance Co.?). Daggs, 172 U. S. 557; affirming 136 Mo. 282; New York Life Ins. Co. v. Cravens, 178 U. S. 380. Practically all the authorities cited in this chapter sustaip this view. See also notes in 24 L. E. A. 298 and 26 L. E. A. 295. * Spruaace v. Farmers, etc., Ins. Co., 9 Colo. 73; 10 Pac. R. 285. 104 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 56a Ins. Co. V. McNall.i and Mutual Life Ins. Co. v. Boyle, ^ it was held that while the duties of an insurance commis- sioner were not of an entirely ministerial nature, but were largely discretionary, it was not to be inferred that there was no limit to discretionary powers. The commissioner could not therefore revoke a license and deprive a company of its right to do business merely because it disputed a claim and " to say that it must either forego its rights in that respect (to resort to the courts) and submit to pay all claims made against it or quit business in the State is arbitrary, unreasonable and dictatorial."* A corporation is subject to the prescribed penalties for abuse of its fran- chise or for wrongful acts.* An insurance company, authorized by its charter to do an employers' liability insurance business, may engage in that business in another State by comity although similar companies organized in such State may not have such power.' When a company does business in a State it is subject to 1 81 Fed. R. 888. 2 82 Fed. K. 705. » See also State v. Vorys, 69 Ohio, 56; 68 N. B. 580, where it was held that under the statate the commissioner had no discretion but to grant a license when the statutory requirements had been complied with. In addition to those cited the following deal with incidental questions relating to the powers of the commissioner and compliance with the laws of the State: State v. Mathews, 58 Ohio St. 1; 49 N. E. B. 10'6i; 10 L. B. A. 418 (defining what is an assessment company); Travelers Ins. Co. v. Fricke, 99 Wis. 367; 74 N. W. B. 872; 41 L. R. A. 557; State v. Fricke, 102 Wis. 117; 77 N. W. R. 734; People v. Payne, 161 N. Y. 229; 55 N. E. E. 49, affirming 60 N. Y. Supp. 1146; Rand «. Mass. B. L. Ass'n, 42N. Y. Supp. 26; 18 Misc. 336; Hayne u. Metro- politan Trust Co., 67 Minn. 245; 69 N. W. R. 916; Sparks «. National Masouic Ace. Ass'n, 100 la. 468; 69 N. W. R. 678; People v. Payne, 50 N. Y. Supp. 234; 26 App. Div. 584. * International Fraternal Alliance v. State, 86 Md. 550; 39 Atl. E. 512; 40 L. R. A. 187; Knowlton v. Bay State Ben. Ass'n, 171 Mass. 455; 50 N. E. R. 929; State v. Mathews, 58 Ohio St. 1; 40 L. R. A. 418; Con- tinental Ins. Co. V. Eiggen, 31 Ore. 336; 48 Pac. R. 476. « State V. Aetna LUe Ins. Co., 69 Ohio St. 317; 69 N. E. B. 608. 105 § 56S ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. the laws of the State whether it apphed for the privilege of doing business therein or not.^ The statutes in force at the time of the making of a contract enter into and become a part thereof as if copied therein.^ If any company 'claims to have immunity from any provisions of the insurance laws, " it must put its finger upon the law granting such immunity, otherwise that law applies."^ And the State has a right to require fraternal beneficiary societies to have a schedule of assessments not lower than one incorporated in the law.* Certain other matters which might be con- sidered here will be reviewed later. ^ § 566. Classiflcation of Insurance Companies — With the enactment of laws regulating tlie business of insurance and providing certain arbitrary conditions, as, for example, that suicide shall be no defense,' or that a misrepresenta- tion in the application shall not avoid the policy, unless it shall have contributed, to the event upon the happening of 1 Corley v. Travelers' Prot. Ass'n., 105 Fed. E. 854; Sparks v. National Masonic Ace. Ass'n., 73 Fed. R. 277. ' New York Life Ins. Co. v. Cravens, 178 TJ. S. 389; alBrming Cravens V. N. Y. Life Ins. Co., 148 Mo. 503; 53 L. E. A. 305; Knights Templar and Masons Life Indem. Co. v. Jarman, 187 U. S. 197, approving same case 44 C. C. A., 93; 104 Fed. E. 638; McCracken v. Hay ward, 2 How. 608: Smitli o. Mutual Ben. L. Ace. Ass'n, 173 Mo. 329; 78 S. W. E. 935. See also post, § 176. 3 Kern u. Supreme Council A. L. of H., 167 Mo. 471; 67 S. W. E. 262; Nielsen v. Provident Savings L. Ass. Soc, 139 Cal. 332; 73 Pac. E. 168. * State V. Fraternal Knights and Ladles, Wash. ; 77 Pac. E. 500. 5 As to computing reserve. Bankers Life Ins. Co. v. Fleetwood, Vt. ; 57 Atl. E. 239, and post, § 374. As to tax on premiums see Northwest, eru, etc., Assn. v. Waddell, 138 Mo. 628; 40 S. W, E. 648. As to power to make loans. Key 17. National Ins. Co., 107 la. 446; 78 N. W. E. 68. As to discrimination and rebates, see post, chap. XI. As to non -forfeiture laws, see post, § 374. As to service of process on commissioner, see post, § 453a. 6 Post, § 337a. 106 ORGANIZATION, POWERS, LIABILITIES ; DISSOLUTION. § 566 which the policy becomes payable,* and providing that cer- tain organizations shall be exempt from either of these conditions, or other provisions of the insurance laws of the State, the courts have often been called upon to determine the classification of insurance organizations. In con- struing the statute of Missouri providing for the exemption from certain requirements of insurance laws of companies doing business on the assessment plan, the court said: ^ "It is immaterial what name a company may adopt, its liability is determined by the character of its contracts of insurance and the law then places the company in its proper class." The fact that an insurance company is licensed to do business in the State as an assessment company does not make it such, nor in any way, nor any wise change its character or status.^ And the same court has also said:* " The calling of a contract of insurance, an accident, tontine or regular life policy, or, for that matter, by any other ap- pellation that may be adopted for business or conventional uses or classification, cannot make a policy containing an agreement to pay to another a sum of money designated upon the happening of an unknown or contingent event depending upon the existence of life, less a policy of in- surance on life." To constitute a life policy on the assessment plan, there must be a provision for an assess- ment and a personal liability on the members to pay it, as well as a right given to a beneficiary to have the assess- ment made.^ In a case in Ohio, although there was a provision in the contract for extra assessments in case of emergency, but a fixed schedule of rates was provided for, 1 Post, § 193. 2 Toomey v. Supreme Lodge K. of P., 147 Mo. 129; 48 S. W. E. 936; afflrming 74 M. A. 507. 3 Aloe V. Fidelity Mut. Life Ass'n, 164 Mo. 675; 55 S. W. E. 993. * Logan v. Fidelity & Casual Co., 146 Mo. 114; 47 S. W. R. 948. 6 Folkensw. N. W. National L. Ins. Co., 98 M. A. 480; 72 S. W. R. 720. 107 § 57 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. the Supreme Court said: "The ordinary, regular, and chief source of revenue open to the relator is the fixed periodical payments named in the policy, and, in our opinion, for the purpose of admission into the State, they characterize the method of insurance which the company pursues. The possibility that some grave and unforeseen calamity may call into operation an authority vested in the trustees to call for an additional and uncertain sum should not be regarded as sufficient to assign the company to that class which transacts the business of insurance on the assessment plan." ^ The question whether a given society is a fraternal benefit association is to be determined alone by its charter and the law under which it is operated.^ § 57. Dissolution of Voluntary Associations. — Benefit societies, if incorporated, may be dissolved and ended by consent of the members. The existence of a voluntary association may also be terminated by implied abandon- ment because of failure to hold meetings for a protracted > state V. Mathews, 58 Ohio St. 1; 49 N. E. K. 1034; 40 L. R. A. 418. See also Morton v. Koyal Tribe of Joseph, 93 Mo. App. 78. Other cases, where the nature and privileges of assessment com- panies are considered, are: Aloe v. Mat. Reserve L. Assn., 147 Mo. 561; 49 S. W. R. 553; Hanford v. Mass. Ben. Assn., 122 Mo. 50; 26 S. W. R. 680; Haynie v. Knights Templars and Masons Indem., 139 Mo. 416; 41 S. W. E. 461; Elliott v. Des Moines L. Assn., 168 Mo. 132; 63 S. W. R. 400; Jicobs v. Omaha L. Assn., 142 Mo. 49; 43 S. "W. R. 375; Grimes v. N. W. L. ol H., 97 Iowa, 315; 64 N. W. R. 806; People v. In- dustrial, etc., Assn., 92 Hun, 31; 36 N. Y. Supp. 963; Shotlife v. Mod. Woodmen, 100 Mo. App. 138; 73 S. W. R. 326. 2 Baltzell V. Mod. Woodmen, 98 Mo. App. 163; 71 S. W. R. 1071. But see Morton v. Royal Tribe of Joseph, 93 Mo. App. 78; and ShotlifE ». Modern Woodmen, supra. The Supreme Court of Missouri, In Franta V. Bohemian, etc., Union, 164 Mo. 304; 63 S. W. R. 1100; 54 L. R. A. 723 ; considers also the characteristics and definition of a fraternal beneficiary association, which views are somewhat opposed to those expressed in National Union v. Marlow, 21 C. C. A. 89; 74 Fed. Rep. 775. The question is also considered in Kern v. Supreme Council A. L. of H., 167 Mo. 471 ; 67 S. W. R. 252. See also ante, § 61a. 108 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 57 period.^ Where a voluntary association ceased to do busi- ness for eight years after which some of the shareholders organized a new association in the name of the olyl it was held that such new association was a distinct organization from the old and did not succeed to the property of the latter and a conveyance of such property by the new asso- ciation was void. 2 Generally where the objects of an asso- ciation have been abandoned or when it appears that the power to resume business does not exist, a legal dissolution will be decreed.^ It has been held* that a voluntary associa- tion cannot go out of business while its contracts or obliga- tions are outstanding so as to prevent the service of process on an " officer ' ' of such society. But where by unanimous consent the society decides to incorporate, the former organ- ization is dissolved.^ A society cannot, however, be dis- solved on account of loss of members if enough remain to fill vacancies and continue the succession.^ It has been held ' that a court will not enjoin a, society from dissolv- ing itself where a great majority of the members agree to such dissolution, notwithstanding a rule that "if three agree to hold the society it shall not be dis- solved." A court will not, however, in these cases make mere declarations of right,* nor interfere in the conten- tions and quarrels of an association where the government 1 Strickland v. Pritchard, 37 Vt. 324; Penfield v. Skinner, 11 Vt. 296. 2 Allen o. Long, 80 Tex. 261; 16 S. W. R. 43. A contrary view under the facts is held In Monroe County, Alliance ». Owens, Miss. ; 25 Sou. E. 876, and see also Marcoux o. Society, etc., 91 Me. 250; 39 Atl. R. 1027, as to reorganization. 8 Kuehl ®. Meyer, 50 Mo. App. 648; s. c. 42 M. A. 474. *■ Camden, etc., Co. o. Guarantors of Pa., 59 N. J. L. 328; 35 Atl. R. 796. » Red Polled Cattle Club v. Red Polled Cattle Club, 108 la. 105; 78 N. W. E. 803. 6 St. Mary's Ben. Assn. v. Lynch, 64 N. H. 213; 9 Atl. 98; see also State B. Society Republicaine, 9 Mo. App. 114. ' Waterhouse v. Margatroyd, 9 L. J. Ch. 272. 3 Cloughc. Ratcliff, 1 DeG. & Sm. 164; 16 L. J. Ch. 476. 109 § 57 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. is fairly and honestly administered. ^ Whenever the objects of the society are impracticable, or the organization is in the nature of a fraud, it will be dissolved and the fund distributed as on the winding up of a partnership, ^ and wrongful exclusion of a member is cause for dissolution.^ It is safe to assume that courts of equity will always in- terfere with all voluntary associations wherever necessary in the interests of their members, or society, or to prevent injustice, imposition or fraud, and will act on the same general principles invoked and practiced in partnership cases.* Where the funds on an attempted dissolution have been misappropriated a court of equity will compel a res- toration and a member may institute proceedings for that purpose without demand on the trustees-.^ Where a com- mittee was formed to erect a monument and abandoned the project, but afterwards a member of the committee com- pleted the monument, using for the purpose in part what had previously been collected, it was held that the other members of the committee who subsequently undertook to 1 LafondH. Deems, 81 N. Y. 508. 2 Beaumont/ v. Meredith, 3 Ves. & Bea. 181; Reeve v. Parkins, 2 Jac. & Walk. 390; Ellison v. Blgnold, Id. 511 ; Pearce v. Piper, 17 Ves. 1. 3 Gorman v. Russell, 14 Cal. 537. * Lowry et al. v. Stotzer et al., 7 Phila. 397; Toram v. Howard Assn., 4 Barr, 519. Calkins ». Bump, 120 Micli. 335, 79 N. W. R. 491, is in point. 5 Asliton V. Dashaway Assn., 84Cali 61; 22 Pac. Rep. 660; State Coun- cil, etc., V. Sharp, 38 N. J. Eq. 24. In many other cases courts have exer- cised supervision over societies for the purposes of justice to prevent misappropriation and compel restoration. Stadler o. District Grand Lodge, etc., 3 Am. L. Rec. 689; Red Jacket Tribe, etc., «. Gibson, 70 Cal. 188; Bailey v. Lewis, 3 Day (Conn,;, 450; Munn v. Burgess, 70 111. 604; Miller v. Lebanon Lodge, 88 Ind. 286; Brovyn v. Griffin, 14 W. N. C. 358; BushB. Sherman, 80111. 160; Birmingham u. Gallagher,etc., 112 Mass. 190. See also Blais u. Brazeau, 25 R. L 417; 56 Atl. R. 186. The members cannot sue the treasurer of an association for money paid in in pursu- ance of an agreement, although the money vyas disbursed by such treas- urer without obtaining the desired results. Meyer o. Bishop, 129 Cal. 204; 61 Pac. R. 919. 110 OKGAA'IZATION, POWERS, LIABILITIES; DISSOLUTION. § 58 carry out the project could not call him to account. i The same rules apply in such cases so far as practicable as in the case of corporations.^ A society, however, cannot be ad- ministered by a court in pei'petuity by continued collection of dues, but the funds must be distributed and the society wound up.^ In like manner, wherever a trust, express or implied, is violated, equity will interfere. The general rules of equity jurisprudence and partnership apply.* It is unnecessary to enter more into detail at this place or refer to the well-known works of eminent writers on the subject.* § 58. Dissolution of Incorporated Societies. — Like other corporations, benefit societies, if incorporated, may be dissolved and their existence wholly terminated by either of the following contingencies : — First. By expiration of charter. Second. By dissolution and surrender of the franchises with the consent of the State. Third. By legislative enactment, if no constitutional provision be violated. Fourth. By forfeiture of the franchises and judgment of dissolution obtained in a proper judicial proceeding.' 1 Doyle V. Eeld, 33 App. Div. 631; 53 N. Y. Supp. 365. 2 Kuhl V. Meyer, 50 M. A. 648. For a case where an action at law by the assignee of the members was allowed, see Brown v. Stoerkel, 74 Mich. 269; 41 N. W. R. 921; ante, § 28. 3 Collier v. Steamboat Captains, etc., Assn., 1 Cin. L. B. 18. * Gorman ». Eussell, 14 Cal. 531. AH the trustees of an unincorpo- rated association must be served in an action to wind it up. Wall v. Thomas, 41 Fed. R. 620, citing Barney v. Baltimore City, 6 Wall. 280- 285. Where under an impracticable scheme of an association which afterwards failed, a member received a sum grossly disproportionate to what he had paid in, but nevertheless in accordance with his contract, he is not liable as for a trust fund to a receiver of such concern. Calkins v. Green,'130 Mich. 57; 89 N. W. R. 587. 5 See ante, §§ 36, 39 and 39a. 6 Morawetz on Corp., § 1004. Ill § 59 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. The rule is laid down by the standard writers on the sub- ject that there is a broad and fundamental distinction be- tween the dissolution of a corporation and the loss of its franchise or legal right to exist. An association may still be a corporation de facto though not de jure and vice versa. ^ § 59. When Equity will Interfere. — Upon sufficient cause shown a court of equity will always interfere to prevent a misuse of corporate franchises or abuse of the rights of members and will wind up the association if it is manifest that it cannot accomplish the purposes of its organization. The comprehensive and flexible rules of equitable jurisprudence apply to all kinds of corporations and courts of equity are always open to those who are wronged or aggrieved by the tortious acts or the mismanage- ment of the officers or members of these associations. Where the scheme of a beneficiary organization is unjust and fraudulent in its workings, and where the officers have been guilty of illegal conduct, an injunction will be granted to protect the assets from further illegal management. In a case of this kind the New Jersey Court of Chancery says:^ " Unquestionably the act of the legislature should be liberally construed. Nothing can be clearer than that its purpose is to enable numbers of citizens to unite in order that they may support and maintain those of their number who perchance become unfortunate; and yet the answer expressly admits, that upon the basis upon which this union is formed, it cannot be at all successful, unless a very large proportion of its members forfeit their right to 1 The subject of dissolution o£ corporations is fully considered in a note to Chicago Mut. L. Ind. Co. v. Hunt (127 111. 257), In 2 L. K. A. 5490; Morawetz on Corp., § 1002 . 2 Pelz V. Supreme Chamber Order of Financial Union, N. J. ; 19 Atl. R. 668. 112 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 59 membership by failing or refusing to comply with all the terms or conditions of the constitution and by-laws . It will be observed, therefore, that in all probability the great majority of those who need the protection of such an institution are not only deprived of its benefits, but by forfeiting the right, contribute to the benefit of those who are not in such need, and who have not been unfortunate. It is admitted that at least 33^ per cent of the members of such institu- tions forfeit their membership by failing to comply with all the conditions ; and during the progress of the cause I became convinced that there was every probability that this union if continued for any length of time, would show a much larger percentage of forfeitures. I was not a little surprised at what seemed to be the boast of the officers of the defendant company, that the very foundation of their scheme rested upon the unsuccessful efforts of such large numbers to continue their membership. I find it very diffi- cult to conclude that a scheme based upon such acknowl- edged weakness, misfortune, or disability of large numbers of citizens is at all within the true spirit or meaning of the act. A calculation based upon the theory of these officers shows that instead of the possibility of a member in full standing ever receiving $1,000 for $260 paid in he can only receive about $450, and this only after making allowance for the immense numbers of forfeitures above spoken of. How can it be said that the legislature ever intended to allow the learned and skillful and financially able to make profit under the guise of benevolence and charity out of the unlearned, unskilled, and those who are so unfortunate as to suffer from financial disability? After the fullest and most careful reflection, I am unable to discover any method or principle of law by which this scheme can be sustained under the act. With all due respect for the learned coun- sel who presented the case for the defendant, it seems to me that the scheme presented by the constitution and by- 8 113 § 59 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. laws in this case lias more the appearance of a lottery than of a charity. It is not necessary for me to say that any such result was intended, it being enough to find that the scheme has culminated in disaster. The cases which sup- port the jurisdiction of the court, and also show the extent to which courts of equity have gone in winding up such institutions, are hereby referred to in part." ^ Where an association departs from the business authorized by its charter, as by employing paid agents and paying endowments, the court will appoint a receiver. The members may also sue to recover back assessments paid.^ In a recent case,^ the Supreme Court of Michigan said: " Although a court of equity may not decree a dis- solution of the corporation, yet in virtue of its general jurisdiction over trusts, and to afford remedies in cases where courts of law are inadequate to grant relief, it has jurisdiction to grant relief against a corporation upon the same terms it might against an individual under similar cir- cumstances."* And a corporation which by its articles of association is to continue a certain number of years cannot dissolve itself until that period has expired unless all the shareholders consent.^ 1 Pearce c. Piper, 17Ves. I, 16, 19 and notes; St. Louis, etc., Min. Co. V. Sandoval, etc., Min. Co., 116 111. 170; 5 N. E. B. 370; Bac. Ben. Soc, §§ 51-54, 57-59; Stamm v. Association, 65 Mich. 317; 32 N. W. E. 710; Slee ». Bloom, 19 Johns. 456. 2 Fogg V. Order Golden Lion, 156 Mass. 431; 31 N. E. E. 289; Chicago Mnt., etc., Assn. v. Hunt, 127 111. 257; 20 N. E. E. 56, where numerous questions of what constitutes mismanagement are discussed. 8 Stamm v. Northwestern Mutual Benefit Assn., 65 Mich. 317; 32 N. W. Eep. 710. * Cramer v. Bird, L. E. 6 Eq. 143; Be Suburban Hotel Co., L. B. 2 Ch. App, 737-743-750; Marr v. Union Bank, 4 Coldw. 484; Bradt v. Bene- dict, 17 N. Y. 93; Slee v. Bloom, 19 Johns. 456; 10 Am. Dec. 273. But see State v.- Equitable Indemnity Assn., 18 Wash. 614; 62 Pac. E. 234. * Barton v. Enterprise B. & L. Assn., 114 Ind. 226; 16 N. East. Eep. 486; VoQ Schmidt v. Huntington, 1 Cal. 55, 73. 114 § 60 ORGANIZATION, POWERS, LIABILITIES; DISSOLUTION. § 60. Forfeiture of Corporate Franchises. — Only the State can claim the forfeiture of corporate franchises for wrongful acts of omission or commission. l The Supreme Court of California 2 has thus laid down the general rule: " There is a broad and obvious distinction between such acts as are declared necessary steps in the process of incor- poration, and such as are required of the individuals seek- ing to become incorporated, but which are not made prerequisites to the assumption of corporate powers. In respect to the former any material omission will be fatal to the existence of the corporation, and may be taken ad- vantage of collaterally in any form in which the fact of incorporation can properly be called in question. In re- respect to the latter, the corporation is responsible only to the government, and in a direct proceeding to forfeit its charter." ^ 1 Morawetz on Corp., § 1015. ' Mokelumae Miaiag Co. v. Woodbury, 14 Cal. 424, 426; 23 Am. Dec. 658. 3 Morawetz on Corp., § 31 and cases cited. 115 CHAPTEE III. GOVERNMENT AND MEMBERSHIP : BY-LAWS. § 61. Plan of Organization of Benefit Societies. 61a. Element of Property Eights of Members. 62. Common Characteristics of Corporations and Voluntary Associa- tions, 63. Membership Governed by Articles of Association or Charter. 63a. Admission to Membership, Formalities Required. 636. Liability for Injuries Received during Initiation. 64. Majority can Bind Minority. 65. Limitations on Action of Majority. 66. Must act at Properly called Meeting. 67. Meetings of Association or Corporation, Notice of. 67a. The same Subject — Special Meetings. 68. Jurisdiction of Grand and Supreme Lodges. 69. Articles of Association, or Constitution and By-Laws, Regulate Rights and Powers of Officers and Members. 70. An Early Masonic Case. 71. The Odd-fellows' Case, Austin v. Searing; Power of Grand Lodge of Voluntary Association over Subordinate Lodges. 72. Other Cases Involving same Question : the Element of Incorpo- ration. 73. Distinction between Social Organizations and those Furnishing Insurance Indemnity. 74. Supreme, Grand and Subordinate Lodges a Single Organization. 75. Rights of Minority. 76. Analogy between Lodges and Churches. 77. Property Rights of Religious Societies, how Determined. 78. Benefit Societies doing a Life Insurance Business are like other Lite Insurance Corporations. 79. By-Laws: Definition of: How proved. ^ 80. By Whom and How Made. 81. Binding upon all Members: All are Presumed to Know Them. 82. Requisites of Valid By-Laws. 83. Must be Consistent with Charter. 84. Must not be Contrary to Common or Statute Law. 85. Must be Reasonable. 86. Construction of By-Laws Question for Court. 116 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 61 § 87. What is Bad as a By-Law may be Good as a Contract: Excep- tions. 88. Enforcement of By-Laws. 89. Distinction between Voluntary Associations, where no Property Eight is Involved, and Corporations in Begard to By-Laws. 90. Societies have a Bight to the Service of their Members. 91. The Articles of Association, or Charter, forms a contract between the Society and the Members. 91a. Amendment or Bepeal of By-Laws. 92. By-Laws Relating to Sick Benefits. 93. Construction of Same. 94. Proceedings to Obtain Sick Benefits; Rights of Members to Resort to Civil Courts. 96. Expulsion of Members. 96. Same Rules Apply to Incorporated and Unincorporated Societies. 97. Power of Corporation to Expel Members when Charter 4s Silent: Grounds for Expulsion, 98. English Rule as to Voluntary Associations, 99. When no Power to Expel Exists. 100. Power to Expel belongs to Body Generally: Cannot be Delegated. 101. Procedure for Expulsion: Notice. 102. Procedure Continued: Charges: Trial. 103. Charges must be Sufficient. 104. Expulsion of Members of Subordinate Lodges of a Beneficiary Order. 104a. Acquittal: Appeal. 105. Courts will not Interfere if no Property Bight is Involved. 106. Courts will not Inquire into Merits of Expulsion. 107. When Injured Member can Resort to the Courts. 108. The Jurisdiction of Equity. 109. The Bemedy of Mandamus : What the Court will Consider. 110. Presumption of Begularity of Expulsion Proceedings. 111. Withdrawal of Member of Voluntary Association. 112. Personal Liability of Members of Unincorporated Society. 113. Personal Liability of Members, how Avoided. 114. Individual Liability for Sick or Funeral Benefits. 115. Liability of Person Contracting in name of Voluntary Association. 116. Summary of Principles Stated in this Chapter. § 61, Plan of Organization of Benefit Societies. — A majority of benefit societies are fraternal and social in their organization and have secret meetings and rituals. Fre- quently the organization is composed of several distinct, but not entirely disconnected, judicatories or assemblies. 117 § 61a GOVERNMENT AND MEMBERSHIP: BY-LAWS. The subordinate lodges or associations, most numerous, are first; above these are State, or district, societies, or grand lodges, made up of representatives from the local lodges, and over all is sometimes a supreme or national governing body, composed of delegates from the State or district grand lodges. These various organizations are sometimes incorporated, often mere voluntary associations, and frequently the subordinate lodges or grand lodges are corporations while the governing authority, to which they acknowledge subjection, is a voluntary association. This complex situation gives rise to different rules applicable to the varying circumstances and at times renders it difficult to apply the preper legal principles to the various cases. i § 61a. Element of Property Rights of Members. — The law under some circumstances distinguishes between the societies which are incorporated and those that are mere vol- untary associations, and again between questions involving the property rights of members and those concerning disci- pline only or policy of government. In regard to the latter the Supreme Court of Indiana ^ has said : ' ' Claims for money due by virtue of an agreement are unlike mere matters of discipline, questions of doctrine, or of policy, and are not governed by the same rules. * » * One who asserts a claim to money due on a contract, occupies an essentially different position from one who presents a question of dis- cipline of policy, or of doctrine of the order or fraternity to which he belongs." Questions of discipline of members where the membership involves, or has connected with it property rights, are differently regarded from disputes concerning membership in mere social clubs when such 1 Ante, § 11. 2 Baner v. Sampson Lodge, etc., 102 Ind. 262; see also Wist v. Grand Lodge A. O. U. W., 22 Oreg. 271; 29 Pac. E. 610; Hogan v. Pacific Endowment L., 99 Cal. 248; 33 Pac. E. 924. 118 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 63 membership has no element of property connected with it. These differences will appear as the subject is further discussed. 1 § 62. Common Characteristics of Corporations and Voluntary Associations. — Eemembering that a corpora- tion is simply a voluntary association of persons for an agreed and lawful purpose, endowed by the State with an artificial entity or individuality, and also that " the real nature of a corporation, in every case, depends upon the charter under which it is formed and must be determined by reference thereto," 2 it follows that voluntary associa- tions of all kinds, whether partnerships, charities, corpo- rations or mere clubs or societies, have many characteris- tics and rules in common, the principal of which is that all rights of the members and their powers, as well as of the association or corporation, are derived from the original compact between them which is contained in the articles of association or charter. 3 § 63. Membership Governed by Articles of Association or Charter. — The articles of association, or charter, reg- ulate the admission of members of societies and define their qualifications. The rule is applicable to all associations, incorporated or voluntary, and if wrongfully admitted the member can be expelled ; nor is the society bound by the acts of its officers in admitting a person ineligible under its constitution so as to become liable to him for benefits.* It has been held that where a member of an association by statute has a voice in its management only adult persons 1 Post, §§ 105, 106, 107, 108, 237. 2 Morawetz on Corp., §§ 6, 7, 316, 580. 5 Leech o. Harris, 2 Brewst. 571; Commonwealth v. St. Patrick's Soc, 2 Binn. 441; 4 Am. Dec. 453; post, § 69. * Fitzgerald v. Burden Benev. Assn., 69 Hun, 532; 23 N. Y. Snpp. 647; Burbank v. Boston, etc., E. Assn., 144 Mass. 434; 11 N. E. K. 691, 119 § 63 GOVERNMENT AND MEMBERSHIP: BY-LAWS. are eligible to membership,! but in the absence ©f statu- tory prohibition it has also been held that minors are eligible. 2 The Supreme Court of Pennsylvania ^ has said : "It is true the power of admitting new members being incidental to a corporation aggregate, it is not necessary that such power be expressly gonf erred by the statute. Yet when the statute does limit and restrict the power, it erects a barrier beyond which no by-laws can pass." Where the statute required all practicing physicians to become members of the county medical society, and a physician so applying was rejected because of alleged un- professional acts in violation of the society's by-laws, the New York Court of Appeals held* that the code of medical ethics adopted by such a society was binding on members alone and its non-observance previous to membership fur- nishes no legal cause for either exclusion or expulsion. But in this case the party excluded had a clear presumptive title for admission to the exercise of a corporate franchise. ^ Where, however, the membership is recruited from a cer- tain class, as Masons or Odd-fellows, and the association is not for pecuniary gain, no person can compel the society to admit him. As has been said: ^ " Where the condition of membership is that the members shall all be of some particular religious denomination, or of some widespread 1 In re Globe Ben. Assn., 135 N. Y. 280; 32 N. E. R. 122; 17 L. E. A. 547; afEg. 17 N. Y. Supp. 852; State v. Central Ohio, etc., Asso., 29 Ohio St. 107. 2 Chicago Mut. h., etc., v. Hunt, 127 111. 257; 20 N. E. E. 55; 2 L. B. A. 549. See, as to insurance of minors and their powers to make insurance contracts, posJ, § 167ffi. 3 Diligent Fire Co. v. Commonwealth, 75 Pa. St, 291 ; Alsatian Ben. Soc.,35 Pa. St. 79. * People V. Erie Medical Society, 32 N. Y. 187. 5 Ex parte Paine, 1 Hill, 666; People v. Medical Society of Erie, 24 Barb. 577; Fawcett v. Charles, 13 Wend. 473; Bagg's Case, 11 Coke, 99. " State V. Odd-fellows Grand Lodge, 8 Mo. App. 148. 120 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 6B(l and well-known society, such as the Masons, the courts would not undertake to determine as to this member or that, — whether he is in fact a Baptist, a Methodist, a Presbyterian, or a Free Mason, — but would leave that to be determined by the peculiar rules and the judicial action of the proper members of such society, entirely re- gardless whether the charter of the particular religious society or the particular Masonic lodge gave, in express terms, such judicial power to these officers. * « * When men once associate themselves with others as organ- ized bands, professing certain religious views, or holding themselves out as having certain ethical and social objects, and subject thus to a common discipline, they have volun- tarily submitted themselves to the disciplinary body of which they are members, and it is for that society to know its own." 1 Where the membership is restricted to certain occupations false representation as to occupation avoids the membership.^ § 63a. Admissioa to Membership, Formalities Re- quired. — If the charter or articles of association prescribe the manner of electing and admitting new members these requirements must be observed or the election is invalid. If no form be prescribed for the election each candidate must be proposed singly and voted on as such. If a list of several be proposed the election will be void although the names were read several times and all consented, for it may be presumed that the members, instead of using their individual judgment on each candidate, compromised their opinion as to some in order to secure the admission of others.^ The election must be at a regular meeting or one 1 See also Franta ». Bohemian, etc., Union, 164 Mo. 304; 63 S. W. K. 1100; 54 L. R. A. 723. 2 Holland v. Supreme Council Chosen Friends, 54 N. J. L. 490; 25 Atl. R. 367. 3 Angell & Ames on Corp., § 126. 121 § 63a GOVERNMENT AND MEMBEKSHIP : BY-LAM'S. legally called. Where the by-laws of a society provided that new members must be approved by a vote of the society and that the object of a special meeting should be stated in the call, a warrant simply for a special meeting to " transact any other business that may legally come before said meeting" is not sufficient to make the meeting a legal one for the admission of membei's and the election of such persons is invalid. i Ordinarily an agreement by the members of a voluntary association to receive a person as a member and his acceptance consti- tutes him a member.^ Where a ceremony of initiation is required by the laws of a society a person though duly elected is not entitled to benefits unless regularly initiated, and it is immaterial that the ceremony is secret, such secrecy not being considered against public policy.^ In the case last cited * the court says : " The objects of this order as stated in the constitution, are not merely to establish a fund for purposes of insurance of members, ' who have complied with all its lawful requirements,' as stated in t^e constitution, but, as also declared in the same article and section, « to unite fraternally all acceptable white men of every profession, business and occupation,' and ' to give all possible moral and material aid in its power, to its members, and those depending on its members, by holding moral, in- structive and scientific lectures, by encouraging each other in business, and by assisting each other in obtaining employ- ment.' With these and other beneficial objects in view, it is not diflicult to see why there should not be a regular initiation into the order, and why members only can participate in its benefits. That the ceremony of initiation is secret does not affect it; it is doubtless intended to bind the members to a 1 Gray v. Christian Society, 137 Mass. 329. 2 Bennett c.Lathrop, 71 Conn. 613; 42 Atl. R. 634. 3 Matkin v. Supreme Lodge K. of H., 82 Tex. 301; 18 S. W. R. 306. * Matkin v. Supreme Lodge K. of 41., supra. 122 GOVERNMENT AND MEMBERSHIP: BY-LAWS. 63a performance of their duties in respect to the objects to be accomplished. We could not say that it is a useless and unreasonable requirement. The affiliation is close and confidential for good purposes so far as can be seen from the testimony. Were the ceremonies open, they could not be said to be unreasonable ; because they are secret does not make them so. The entire system, its existence and objects, are based upon initiation. We think there can be no membership without it, and no benefit, pecuniary or otherwise, without it. Matkin specially contracted in his application for membership, with reference to the initiation, that the payment of the ' proposition fee ' should not entitle him to any benefit, or constitute him a member, unless he was duly ' initiated according to the ritual and laws of the order.' * » * The stipulation in Matkin's contract making initiation necessary to membership, and the enjoyment of benefits attaching thereto, is not against law, or public policy, unreasonable, nor opposed to the good government and objects of the society. On the contrary it is reasonable and calculated to promote the objects and welfare of the order.' Where the statute requires frater- nal beneficiary associations to have a lodge system, it intends that no one can become a member without being initiated into one of the lodges, and until one has been initiated the association cannot rightfully issue a benefit certificate to him.i It has been held, however,^ that a fraternal order, after receipt of assessments from a person, and delivery to him of a benefit certificate, cannot question his member- ship though he were not initiated. The delivery of a bene- fit certificate is not essential if other requirements for admission have been complied with unless there is a provi- 1 Hiatt V. Fraternal Home, 99 Mo. App. 105; 72 S. W. R. 463. 2 Supreme Ruling'Frat. Mystic Circle v. Crawford (Tex. Civ. App.), 75 S. W. R. 845. 123 § 636 GOVERNMENT AND MEMBEESHIP: BY-LAWS. sionin the laws of the order to the contrary. i Where the society has two classes of members, social and beneficial, one who qualified as a social, but paid dues as a beneficial member, with the understanding that he was to pass an examination, which he did not do, is not entitled to the benefits of the beneficiary class. ^ The requirements of the by-laws as to formalities for admission of new members do not apply to charter members.^ § 636. Liability for Injuries Received During Initia- tion. — It has been held* that rules of discipline for all voluntary associations must conform with the laws ; and, when a member of such an association refused to submit to the ceremony of expulsion established by the same, which ceremony involved a battery, it could not lawfully be in- flicted, and those who participated were liable criminally for assault. In a case in Canada,^ it was held that, a lodge was liable to plaintiff for injuries, because of the rough usage of some of the members, received during his initiation as a member of the lodge, in the presence of its principal officers and a number of members, the meeting being considered a full and perfect one. It appeared that this and other proceedings were taken Avith the knowledge 1 Pledger v. Sovereign Camp Woodmen, etc., 17 Tex. Civ. A. 18; 42 S. W. E. 653; Supreme Council 0. C. F. v. Bailey, 21 Ky. 1627; 55 S. W. H. 889. The delivery of the certificate was held esssenlial in McLendon v. Woodmen of the World, 106 Tenn. 696; 64 S. W. K. 36; 52 L. K. A. 444; Logsden o. Supreme Lodge Frat. Union (Wash.), 76 Pac. 292; Wilcox v. Sovereign Camp Woodmen of the World, 76 Mo. App. 573. See also post, § 273a as to when the contract of a benefit society is complete. 2 Asselto V. Supreme Tent K. O. T. M., 192 Pa. St. 5; 48 Atl. E. 400. 3 Shackelford v. Supreme Conclave, etc., 98 Ga. 295; 26 S. E. B. 746. 4 State V. Williams, 75 N. C. 134. 6 Kinver v. Phoenix Lodge I. 0. 0. F., 7 Ont. Eep. 377. 124 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 636 of all those who were present, and that somewhat similar proceedings had happened on the occasion of other initia- tions, and that they were allowed and not checked, and it was considered that they must be taken to have been in- flicted with the consent of the corporate body. It has also been held,l that, where a fraternal order, which issues in- surance certificates to its members of a local camp, and having a sovereign camp which has been incorporated, such incorporation bearing relation to the business or insurance features of the order, and having also local camps which are authorized to initiate members into the order in ac- cordance with the ritual prescribed by the sovereign camp, that, in the absence of evidence showing further the relation between the sovereign and subordinate camps, the latter cannot be considered the servants or agents of the former in such sense as to hold it liable in its cor- porate capacity for a personal injury inflicted on an accepted candidate for membership by the members of a local camp during the ceremonies of initiation, the part of the ceremony which resulted in the injury not being prescribed by the ritual. On princi- ple, it seems that a distinction should be made between injuries received as a result of the negligence of the officers of the lodge conducting the initiation, according to a ritual prescribed by the superior body, and the torts of the indi- vidual members in inflicting injuries upon a candidate by doing something not prescribed by the ritual of the order. It might be held that, where a ritual is prescribed by a supreme body, and, in observing that ritual, the lodge, which is authorized to conduct the ceremony, is guilty of so negligently performing the duties enjoined upon them that injuries result to the candidate, the supreme body 1 Jumper v. Sovereign Camp Woodmen of the World [C. C. A.), 127 Fed. Eep. 635. Contra, MitoheU v. Leech (S. C), 48 S. E. R. 290, 125 § 64 GOVERNMENT AND MEMBERSHIP: BY-LAWS. could, under possible conditions, be liable; but, clearly, if the members of a lodge, on their own responsibility, indulge in horse play, or do some act not prescribed in the ritual, which results in injury, neither the supreme, nor sub- ordinate lodges, as such, would be liable for such injury, but only the members who participate in their individual capacity, either as actors or spectators. § 64. Majority can Bind Minority. — Another funda- mental rule applicable to all associations, partnerships and corporations is that, within the express or implied terms of the charter or partnership agreement, the majority has power to bind the entire membership.! The rule laid down in regard to partnerships and companies by Lindley,^ is : ' ' A corporation acts by a majority ; the will of the majority is the will of the corporation ; and whatever it is competent for the corporation to do can be done by a majority of its members against the will of the minority. » * * j^ appears: (1.) That within the limits set by the original constitution of a partnership or company, the voice of a majority must prevail. (2.) That it is not competent for any number of partners or shareholders, less than all, to pass beyond those limits. (3.) That it is competent for all to do so, unless they are bound together not only by agreement amongst themselves, but by some charter, let- ters-patent, or act of parliament." The general rule is also thus expressed: " The fundamental principle of every association for self-government, is, that no one shall be bound except with his own consent expressed by himself or his representatives ; but actual assent is immaterial, the assent of the majority being the assent of all ; for this is not only constructively true, but actually true ; for that the will of the majority shall in all cases be taken as the will 1 Morawetz on Corp., § 641. 2 2 Lindley on Part. 608. 126 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 66 of the whole, is an implied, but essential stipulation in all associations of this sort."i It has been held, however,^ that a voluntary association having adopted a constitution, or rules and by-laws, the same are to be considered in the light of a contract, and the " majority rule " in the gov- ernment of the association does not obtain unless it is so provided in the contract.' § 65. Liimitatlons on Action of Majority. — The ma- jority in order to bind the minority by its acts must com- ply with every formality which is prescribed by the company's, or association's, charter or articles of associ- ation, or by custom; must act within the objects of the articles of association or charter, and is bound in all trans- actions to the utmost fairness and good faith to the minority.* § 66. Must Act at Properly Called Meeting. — The majority can act only at a meeting .called together in a proper manner.* It is essential that every member be notified of a meeting before it is held. If notice to any one was omitted, those present at the meeting have no au- thority to act for the whole body of members, and the transactions at the meeting will not be binding as corporate 1 In re St. Mary's Church,? Serg. & R. 517; New Orleans ». Harris, 27 Miss. 537; Morawetz on Corp., §§ 641 and 474. But see Livingston v. Lynch, 4 Johns. Ch. 694, and Torrey v. Baker, 1 Allen, 120. 2 Kalbitzer». Goodhue, 52 W. Va. 435; 44 S. E. E. 264. » See Union Benev. Soc. u. Martin (Ky.), 76 S. W. E. 1C98; 25 Ky. L. Eep. 1037; Koerner Lodge K. of P. v. Grand Lodge, 146 Ind. 639; 45 N. E. E. 1103; Schiller Commandery, etc., v. Jaennichen, 116 Mich. 129; 74 N. W. E. 458. 4 State V. Ancker, 2 Eich. (S. C.) 245; Morawetz on Corp., §§ 475 and 477. See also Industrial Trust Co. v. Green, 17 E. I. 586; 23 Atl. E. 914; 17 L. E. A. 202, where the powers of officers and members of a volunteer association are considered. Kane v. Shields, 167 Mass. 392; 45 N. E. E. 768, is also in point. s Kuehl V. Meyer, 42 Mo. App. 474. 127 § 67 GOVEENMENT AND MEMBERSHIP: BY-LAWS. acts. If the charter or by-laws of aa association or com- pany fix the time and place at which regular meetings shall be held, this is itself sufficient notice to all the members and no further notice is necessary. Every reasonable pre- sumption is made in favor of the regularity of all meetings and the giving of proper notice will be presumed until the con- trary appears. 1 It has been held that members attending an illegal meeting are not estopped from setting up such illegality.^ In the absence of statute or a by-law provision a number less than one -half of the members do not consti- tute a quorum.^ § 67. Meeting's of Association or Corporation , Ifotiee of. — Meetings of the members of an association or corpo- ration are not binding unless called by competent authority, as where the meeting was called by a deposed president,* or unless all the members entitled to vote are present. If the by-laws or articles of association prescribe by whom meetings shall be called, these requirements must beobserved and if the ofEcers wrongfully refuse to c:dl a meeting they may generally be compelled to do their duty by vnandamus proceedings. In the absence of by-laws and constitution custom will be considered as governing the association so far as meetings are concerned.^ A distinction is made be- tween regular and special meetings. The former are those that are held atstated times according to the charter or rules of the association, while the latter are called at irresrular or unusual times under authority given by the charter or laws of the association. Notice of a meeting of the members of 1 Morawetz on Corp., § 479 and note; Sargent o. Webster, 13 Mete. 497. 2 Kuehl o. Meyer, supra; but see to the contrary Abels v. McKeen, 18. N. J. E. 401, and Fisher v. Raab, 67 How. Pr. 87. 8 Farmers' L. & T. Co. v. Aberle, 18 Misc. R. 257; 41 N. T. Supp. 638. * Industrial Trust Co. v. Greene, 17 R. I. 586; 23 Atl. R. 914. « Ostrome v. Greene, 20 Misc. E. 177; 45 N, T. Supp. 852. 128 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. § 67 an association or corporation must be given in tlie manner prescribed by tlie cliarter, if no way is laid down then such notice must fix the exact time and place of the meeting and generally indicate the nature of the business to be trans- acted.! a The time of meeting must be stated precisely; if a meeting is called to order, and business is transacted before the time set, the proceedings will not be valid. If the time of meeting is prescribed by the charter or a by- law, that is sufficient notice; and it has been held, that, if the time of meeting has been fixed by usage, or the tacit consent of the members or shareholders, no other notice is required. The meeting should be opened within a reason- able time after the hour indicated in the notice. The place of meeting must also be fixed. And if a meeting is held at a different place from that prescribed, it will not be valid. In case of an extraordinary or special meeting, the notice must indicate the nature of the business to be brought before it; but this is not necessary in case of a regular meeting for the transaction of ordinary business. The notice must be served upon each shareholder in person unless otherwise provided by the charter or a by-law and if the charter does not prescribe how long before a meeting notice must be served, a reasonable time is required." ^ It seems that meetings of a beneficiary society may lawfully be held on Sunday.^ While ordinarily meetings of a cor- peration outside of the territorial limits of the State in 1 St. Mary's Ben. Assn. v. Lynch, C4 N. IL 213; 9 Atl. Rep. 98. 2 Morawetz on Corp., §§ 478 to 483. As to proxies see Chicago, etc., Assn. V. Hunt, 127 Ills. 257; 20 N. E. R. 55. In the case of Appeal of Woolford, 126 Pa. St. 47; 17 Atl. R. 524, will be found a full considera- tion of the questions of legality of consolidation of lodges and the meeting held therefor. 2 McCabe v. Father Matthew, etc., 24 Hun, 149 ; Robinson v. Yates City Lodge, 86 111. 598; People v. Young Men's, etc., Soc, 65 Barb. 357; see also Society, etc. v. Commonwealth, 52 Pa. St. 125. 9 129 § 67a GOVERNMENT AND MBMBEESHIP : BY-LAWS. which it was incorporated areinvalid,! yet it has been said^ that, where the corporation constitutes the supreme legis- lative department of a benevolent order to be established by it, with power to organize subordinate bodies through- out the United States and Canada, authority to hold its meetings outside the State of incorporation arises by im- plication, because the general rule of public policy as to holding such meetings does not prevail and because it is contemplated that the greater part of the business will be transacted beyond the territory of the State where it has its origin.* Usually the laws of the States now provide for meetings of fraternal beneficiary corporations outside the State in which they are incorporated. § 67a. The same Subject, Special Meetings. — In a recent case,* the court reviews the law governing special meetings of corporations or voluntary associations, consid- ering incidentally the rights of the majority . The court through Judge Seymour D. Thompson said: " It is a long settled principle in the law of corporations that, in order to give validity to acts done at a special meeting, all the members must be notified.^ And it is a further principle equally well settled, that where the time or manner of giv- ing notice. is prescribed by statute, by charter, or by by- laws of the corporation, it is essential to the validity of the acts done, at the meeting, that the notice should be given as thus prescribed.^ But the prescribed notice may be 1 Angell & Ames on Corp., § 498. 2 Sovereign Camp W. O. W. v. Fraley, 94 Tex. 200; 59 S. W- K. 879; 51 L. R. A. 898. 8 See also Derry Council, etc., ». State Council J. O. TJ. Am. M., 197 Pa. St. 413; 47 Atl. E. 208. 4 Kuhl V. Meyer, 42 Mo. App. 474. 5 Smyth B. Darley, 2 House of Lord's Cases, 789; Commonwealths. Guardians, 6 Serg. & K. 41.9, 474; Knyaston v. Mayor of Shrewsbury, 2 Strange, 1051; Eex v. Liverpool, 2 Burr. 734. 8 Hunt V. School District, 14 Vt. 300; s. c. 39 Am. Dec. 99; Stock- holders, etc., V. Railroad, 12 Bash (Ky.), 62. 130 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 68 dispensed with by unanimous consent. If, therefore, not- withstanding that the meeting has not been properly notified, all the members appear and participate in its proceedings without objection, this will be a waiver by each member of any objection to the notice .1 But, if a single member having a right to be present and vote, is absent or refuses his assent to the acts done at the meet- ing, ifs proceedings will be illegal and void.^ In the case of unin corporated voluntary associations like the present, the rights affixed by their constitution and by-laws rest in contract ; but for reasons equally strong the mode of act- ing pointed out by those instruments must be pursued. ■* For the majority cannot breais the contract which they have made, any more than a minority could do it. They have raised a fund for certain purposes of mutual benefit, and placed it under the control of trustees for the purposes of the trust declared in their constating instruments. The majority cannot, by their irregular action, contrary to the rules by which all have agreed to abide, divert this fund from the purposes of the trust and distribute it among such of the members as may be willing to receive their propor- tionate shares of it." § 68. Jurisdiction of Grand and Supreme Lodges. — The jurisdiction of Supreme and Grand lodges over those that are subordinate is in many respects analogous to that of certain ecclesiastical bodies over the churches in a cer- tain territory. Upon this subject the Supreme Court of the United States has said : * " The right to organize volun- 1 Judah V. Ins. Co., 4 lad. 333; Jones v. Milton, etc., Co., 7 Ind. 647. 2 Angell and Ames on Corporations, 495; Rex v. Tlieodorick, 8 Bast, 543; Eex v. Gaborlan, 11 East, 77. 3 Coleman v. Kniglits of Honor, 18 Mo. App. 189; Grand Lodge v, Eisner, 26 Mo. App. 108 ; Mulroy v. Knights of Honor, 28 Mo. App. 471, 4 Watson V. Jones, 13 Wall, 679. 131 § 69 GOVERNMENT AND MEMBERSHIP: BY-LAWS. tary religious associations to assist in the expression and dissemination of any religious doctrine and to create tribu- nals for the decision of controverted questions of faith within the association and for the ecclesiastical government of all the individual members, congregrations and officers within the general association, is. unquestioned. All who unite themselves to such a body do so with an implied con- sent to this government, and are bound to submit to it. But it would be a vain consent and would lead to the total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them reversed. It is of the essence of these religious unions and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for. ' ' ^ The preponderance of authority is in favor of the doctrine that as to all questions of policy, dis- cipline, internal government and custom the legal tribunals must accept as binding the decision of the regularly con- stituted judicatories of the church, fraternity, association or society. The rule is different when property rights are involved. In such cases the civil courts are strict in assert- ing their powers.^ § 69. Articles of Association, or Constitution and By-laws, Regulate Rights and Powers of Officers and Members. — The rights and powers of the officers and members of the associations or lodges, superior or subor- dinate, are regulated by their articles of associations, or constitution and by-laws, which constitute the contractof the members with each other and by the provisions of which they > This opinion reviews all the cases bearing on the subject, but they are here omitted because they relate to ecclesiastical organizations only. 2 See also post, §§ 72, 74 and 7fi. 132 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 70 undertake to be bound . i In all cases of dispute as to rights or duties of the various bodies, their oflScers or members, the original compact is the measure by which a decision is to be reached.^ The opinions of the officers of the society, or its custom and usage in respect to the interpretation of terms used in the contract, are not admissible evidence in actions on the contract if the language used be not ambiguous.^ Courts will not undertake to direct or con- trol the internal policy of societies nor to decide questions relating to the discipline of its members but will leave the society free to carry out any lawful purpose in its own way in accordance with its own rules, but will protect property rights by injunction if necessary.^ § 70. An Early Masonic Case. — One of the earliest cases involving the rights of grand and subordinate lodges in respect to each other and the property of either was that of Smith et al. v. Smith et al. in 1813.^ It involved the right to a certain fund belonging to the incorporated Grand Lodge of Ancient York Masons and was brought by the plaintiffs in behalf of a voluntary association claiming to be the successor of the corporation under the name of Grand Lodge of South Carolina. Incidentally the dis- tinction between certain Masonic bodies and doctrines » Ante, § 62 and § 67. 2 Lowry V. Stotzer, 7 Phila. 397; Austin v. Searing, 16 N. Y. 112; Chamberlain o. Lincoln, 129 Mass. 70; Leech v. Harris, 2 Brews. 587 ; Grosvenor ». United Society, etc., 118 Mass. 78; Whiter. Brownell, 3 Abb.'Pr. (N. 8.) 318; Kuhlo. Meyer, 42 M. A. 628. ' Manson v. Grand Lodge, 30 Minn. 509; Davidson v. Knights of Pythias, 22 Mo. App. 263; Wiggin v. Knights of Pythias, 31 Fed. Eep. 122. * Reno Lodge I. O. 0. F. v. Grand Lodge, etc., 54 Kan. 73; 37 Pac. R. 1003; 26 L. R. A. 98; Supreme Lodge Order Golden Chain v. Sim- ering, 88 Md. 276; 40 Atl. R. 723; 41 L. R. A. 720. 5 3 Dessau, 557. Another case somewhat similar is Appeal of Wool - ford, 126 Pa, St. 47; 17 Atl. R. 524. 133 § 71 GOVERNMENT AND MEMBERSHIP: BY-LAWS. was discussed. The general rule laid down was that the Grand Lodge of Freemasons cannot make new regulatiens subversive of fundamental principles and landmarks with- out the clear consent of the stibordinate lodges ; nor can the officers of a corporation composed of several integral parts, dissolve the corporation without the full assent of the gceat body of the society. The dereliction of the charter by the heads of a corporation does not dissolve the cor- porate body, especially if the remaining members have the power of renovating the head. The seceding members of a chartered society, forming a new voluntary association, cannot sustain a suit for the recovery of debts due to the corporation.! § 71. The Odd-fellows' Case, Austin v. Searing : Power of Grand Lodge of "Voluntary Association over Subor- dinate Lodges. — The Court of Appeals of New York was early called upon to determine rights under the complex organization of the Odd-fellows' fraternity, where all the constituent bodies were unincorporated. In that case* Judge Selden said: "The complaint, upon which the questions in this case arise, sets out what appears to be a regular governmental organization, with its constitution and laws and powers legislative and judicial. The head of this organization is a congress of representatives, called the Grand Lodge of the United States, which not only legis- lates for all lodges in the several States, but also exer- cises judicial powers over them, for the complaint states that the grand lodges of the several States are subject at all times to the resolves, orders and decrees of the congress 1 Goodman v. Jedidjah Lodge, etc., 67 Md. 117; 9 Atl. 13; District Grand Lodge v. Jedidjah Lodge, 65 Md. 236; Court Mount Royal v. Boulton, Q. B. (Quebec) 1881; cited 2 Stephen's Digest, 106. But see Altmann v. Benz, 27 N. J. Eq. 331. 2 Austin V. Searing, 16 N. Y. 112; s, c, 69 Am. Dec. 665, where valuable note is appended. 134 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 71 of representatives and are amenable to its constitutional authority. The grand lodges of the several States and dis- tricts exercise similar powers. They grant, revoke and re- new charters, make by-laws, and pass judicially upon charges presented against subordinate lodges, expelling or rein- stating them at pleasure. These powers extend to the confiscation of the entire property of a subordinate lodge, whenever, in the opinion of the grand lodge, upon a case brought regularly before it, it shall satisfactorily appear that such subordinate lodge is guilty of insubordination. Now, all this is very well, so long as the lodges neither violate nor ask any aid .from the laws; but it may, with pro- priety, be doubted whether the judicial power of the State is to be invoked to uphold and enforce the decrees of these self -constituted judicatories. It is to be remarked that these lodges are charitable institutions, whose objects com- mend them extensively to public favor, and, that there are nearly four hundred of them in northern New York alone, and, being purely voluntary associations, there is, of course, no limit to the amount of property which they may acquire. If this suit can be maintained, then all this prop- erty, however vast, is ultimately controlled, not by any power within the State, but by the Grand Lodge of the United States; for, by the constitution of these lodges, as given in the complaint, it will be seen that on the expulsion of any subordinate lodge (which is a matter resting entirely in the will of the grand lodge of the State or district), the whole property of the lodge expelled is, ipso facto, vested in the grand lodge, which is under no obligation to reinstate the lodgg or restore the property; and, as the grand lodge of the State is bound to obey the decrees of the national lodge, the whole property is thus brought under the control of the latter. This is entirely unobjec- tionable, so long as submission to these decrees 'is merely voluntary; but the question is whether that submission is 135 § 71 GOVERNMENT AND MEMBEESHIP : BY-LAWS. to be legally andjudicially enforced. Let us see what a chancellor of England said about a case very similar to this. I refer to the case of Lloyd v. Loaring.l That was a bill filed by Evan Lloyd and two other persons to get pos- session of the dresses, decorations, books, papers, etc., of a lodge of Free Masons, called the Caledonian Chapter, No. 2. The plaintiff stated that this lodge was regularly organized under a charter from the grand or head chapter of Eoyal Arch Masons ; that they were its chief officers, and as such were entitled, by virtue of the rules of the society, to the charge and custody of the property, etc., which the defendants had forcibly removed. The defendants demurred there, as here, to the bill. The opinion of Lord Chancellor Eldon, in that case, is so precisely applicable to this that I will make one or two extracts from it. He said: 'A bill might be filed for a chattel, the plaintiffs stating themselves to be jointly interested in it with several other persons ; but it would be very dan- gerous to take notice of them as a society having any thing of a constitution in it. In this bill there is a great affectation of a corporate character. They speak of their laws and constitution, andthe original charter by which they were constituted. In Cullen v. The Duke of Queensbury,^ Lord Thurlow said he would convince the parties that they had no laws and constitution.' And again : ' That this court will hold jurisdiction to have a chattel delivered up, I have no doubt; but I am alarmed at the notion that these volun- tary societies are to be permitted to state all their laws, forms and constitutions upon the record, and then to tell the court they are individuals, etc. The bill states that they subsist under a charter granted by persons who are now dead ; and therefore, if this charter cannot be produced, the society is 1 6 Ves. 773. 2 1 Bro. C. C. 101. 136 GOVERNMENT AND MEMBEESHIP : BY-LAWS. § 71 gone. Upon principles of policy, the courts of tiiis country do not sit to determine upon charters granted by persons who have not the prerogative to grant charters.' This appears to me to be apt and sensible language in the case in which it was used, where the charter, constitution, etc., were barely referred to ; but with wliat increased force does it apply to the case before us, in which we have spread upon the record two formal constitutions, one of which contains fifteen distinct articles, the other eleven, each article being subdivided into a variety of sections, and altogether em- bracing a complete system of governmental polity. There is, however, no objection to all this, provided we apply to these articles the same rules as to ordinary agreements inter partes, and give to them no peculiar force as the constitution and laws of an organized body. Admitting then the action to be well brought, in the name of the treas- urer, under the act of April 7, 1849, about which I willnot stop to inquire, it is clear that the plaintiff can only recover by showing either a legal or equitable title to the property in question ia the lodge which he represents, that is in the associated members of that lodge. How does he show this? It is conceded by the complaint that the property origi- nally belonged to the lodge expelled, of which the defend- ants were members. The defendants, therefore, were tenants in common, with the plaintiff and his associates, of the property, and had an equal right with them to its cus- tody. It is incumbent on the plaintiff to show a legal transfer of this title. This he assumes to do by showing the expulsion by the grand lodge of the old Cayuga lodge, and the restoration of the new. The effect is supposed to be wrought through the operation of the constitutions of the two lodges. But it is obvious that these constitutions can have no binding force whatever, except what they derive from the assent of each individual member. That is, any member to be bound by them, must have personally as- 137 § 71 GOVERNMENT AND MEMBERSHIP: BY-LAWS. sented to their provisions. It isonly as contracts that these constitutions are in the least obligatory. The counsel for the plaintiff takes this view of the case in his printed argument. He says : ' The court is sitting to judge between individuals as to rights acquired by the contracts between them. It is immaterial whether such contracts are made in the form of subscriptions to general constitutions and by-laws, or to separate articles of agreement.' Viewed, then, as contracts, these constitutions must be subject to the same rules with all other contracts. It must be clearly shown that the de- fendants have assented to the written constitutions of these lodges. The complaint avers that the members of the present Cayuga lodge, ' have each and every one of them, in conformity with the usages and requirements of the order, subscribed to an article of association, denominated a con- stitution, a copy of which is hereunto annexed,' etc. There is also a general averment that the grand lodges in the sev- eral States have constitutions to which their members are obligated to subscribe, and do subscribe, and that one of these grand lodges is denominated the Grand Lodge of Northern New York, and that this lodge has public and printed articles of association, styled a constitution, a copy of which is thereunto annexed. But there is no averment that this constitution was ever in fact subscribed by any- body, nor does the complaint contain any direct averment that the defendants ever subscribed the constitution of any lodge, either grand or subordinate. The averment relied upon by the plaintiff upon the subject is this: after stating the existence of the original Cayuga lodge, and that the plaintiff and his associates and the defendants were all members of that lodge, the complaint proceeds thus: 'that, as such members and associates, they had, each and every one of them, covenanted with each other to observe, obey, conform to and abide by the constitu- tion, by-laws, rules and regulations of the said lodge, 138 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. § 71 and of said Grand Lodge of Northern New York.' Cov- enanted? How? Under their hands and seals? It is not so averred. There is neither profert nor offer to produce the covenant. Will this do in a legal pleading? I appre- hend not. It is altogether too vague. Again what con- stitution did they covenant to observe? The averment says: 'the constitution, by-laws, etc., of the Cayuga lodge and of said Grand Lodge of Northern New York,' but does not set forth the constitutions in this connection, nor give any reference by which they can be iden- tified or their provisions ascertained. We may con- jecture that the plaintiff means the same constitutions which are referred to elsewhere in the complaint, but it is not so averred. If we look at the whole complaint we shall see that it is not intended to be averred that the defendants ever subscribed the constitution of the grand lodge itself. It is difficult to see, therefore, how the provisions of that instrument are to be made obligatory on the defendants as a contract. There is nothing in the constitution of the expelled lodge (which probably was subscribed by the defendants, although that is not in terms averred) which adopts the constitution of the grand lodge. It is this latter constitution alone which confers the power by which the property in question is claimed to have been transferred. But were it distinctly averred that the defendants had sub- scribed the constitution of the grand as well as of the sub- ordinate lodge, I should still be of the opinion that public policy would not admit of parties binding themselves by such engagements. The effect of some of the provisions of these constitutions is to create a tribunal having power to adjudicate upon the rights of property of all the mem- bers of the subordinate lodges, and to transfer that prop- erty to others ; the members of this tribunal being liable to constant fluctuations, and not subject in any case to the selection or control of the parties upon whose rights they 139 § 71 GOVEKNMENT AND MEMBERSHIP: BY-LAWS. sit in judgment. To create a judicial tribunal is one of the functions of the sovereign power ; and although parties may always make such tribunal for themselves, in any specific case, by a submission to arbitration, yet the power is guarded by the most cautious rules. A contract that the parties will submit, confers no power upon the arbitrator; and even where there is an actual submission, it may be revoked at any time. The law allows the party up to the last moment to ascertain whether there is not some covert bias or prejudice on the part of the arbitrator chosen. It would hardly accord with this scrupulous care to secure fairness, in such cases, that parties should be held legally bound by the sort of engagement that exists here, by which the most extensive judicial powers are conferred upon bodies of men whose individual members are subject to con- tinual fluctuation." In the same case in a concurring opin- ion Judge Brown said : ' ' The by-laws and regulations of these voluntary associations may be all very well in their place and sphere and may command generally the obedience and submission of those upon wliom they are designed to act; they cannot, however, have the force of law, nor impair or effect the rights of property against the will of its real owners. So long as the members of these bodies yield their assent or concurrence, it is all very well; the law interposes no obstacle or objection. But when orders and decrees of the character of those referred to, are resisted, and the owners of property refuse to be deprived of it, then it will be found that property has rights, and the courts of justice have duties, of which the plaintiff in this action has an in- different conception. The courts of justice cannot be called upon to aid in enforcing -the decrees of these self- created judicatories. The confiscation and forfeiture of property is an act of sovereign power; and the aid of this or any other court wiU not be rendered to enforce such 140 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. § 72 proceedings, or to recognize legal, or supposed legal, rights founded upon them." ^ § 72. Other Cases Involving Same Question : the Ele- ment of Incorporation. — In a somewhat similar case in Maryland the Court of Appeals held 2 that, when the charter granted by the State to a lodge is still in force the lodge has the right to hold its substantial property or pecuniary rights under the corporate powers conferred by that charter, un- affected by the forfeiture of its conventional charter by the grand lodge. That "whatever powers the higher lodges in such an organization as this may have to make rules or laws for the government of the subordinate lodges and the discipline of their members, we think it is quite certain that the courts can never recognize as valid any rule or law so made, the effect of which is to confiscate property, or to arbitrarily take away property rights from one set of mem- bers and give them to another set ; nor will the courts allow or recognize the enforcement of any such rule when its enforcement will accomplish and is designed to accomplish such a result." Where the subordinate lodge was incor- porated it was held by the Supreme Court of Calif ornia,^ that an injunction would issue to protect its property although it was suspended by the grand lodge, although the laws of the order provided for a forfeiture of property in such cases to the grand lodge. The court says: " The ownership of the property draws to itself the right of pos- session and control. And since the plaintiff is a corporation it can only be dissolved in the manner prescribed by the 1 Iq Bauer v. Sampson Lodge, etc., 102 Ind. 262, and also in Wicks v. Monihan, 130 N. Y. 232; 14 L. E. A. 243, this case of Austin v. Searing was cited and approved, see joosi, § 72. 2 Goodman o. Jedidjah Lodge, etc., 67 Md. 117; 9 Atl. Eep. 13. 3 Merrill Lodge v. Ellsworth, 78 Cal. 166; 20 Pac. R. 399; 2 L. E. A. 841. 141 § 72 GOVERNMENT AND MEMBERSHIP: BY-LAWS. laws of California. The provision in the constitution of the grand lodge, that in certain contingencies the subordi- nate lodge ' shall be deemed an extinct lodge, and its char- ter shall be forfeited,' and the ' suspension ' by the grand lodge and the action taken by the grand chief templar, have not the slightest effect upon the legal existence of the cor- poration ; and as long as it exists its affairs must be man- aged by its duly elected officers as provided by law. If they misconduct themselves, appropriate proceedings to remove them must be resorted to . But the propriety of their conduct will not be inquired into in a suit by the cor- poration to protect its property."! The powers of a su- perior body are only such as the compact provides and the court will strictly scrutinize all disciplinary measures and hold the superior body to an accurate observance of all formalities. 2 In a recent case just cited ^ the New York Court of Appeals says, in regard to the prop- erty of a voluntary association: "Excelsior Assembly 4120 was composed of women. Their charter was re- voked for ' insubordination,' of which, very likely, they were guilty. The offense and its punishment ended their powers and privileges so far, and so far only, as they were derived from the rules and regulations of the Knights of Labor ; but could not destroy their rights as individuals, or as an unincorposated association, derived from the law 1 To the same effect are: Wells v. Monihan, 129 N. Y. 161 ; 29 N. E. R. 232; affg. 13 N. Y. Supp. 156; Wicks v. Monihan, 130 N. Y. 232; 29 N. E. R. 139; afEg. 8N. Y. Supp. 121. 2 Grand Grove U. A. O. D. ». Garibaldi Grove, etc., 130 Cal. 116; 62 Pdc. R. 486. In this case the method of procedure Is discussed. See also National Council, etc., v. State Council, etc. (N. J.), 43 Atl.'E. 1082; Swain v. Miller, 72 Mo. App. 446; St. Patrick's Alliance v^ Bjrne, 59 N. J. Eq. 26; 44 Atl. R. 716. So a subordinate lodge cannot' be suspended by the act of the secretary. Circus v. Independent Order, etc., 65 App. Div. 534; 67 N. Y. Supp. 342, 2 Wells V. Monihan, supra. 142 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 72 of the State. Under that law they could, as they did, asso- ciate for a common purpose, and choose officers, in whose name they could sue. These powers they had when their charter from the Knights was given, and retained when it was taken away. That event broke off their relations with the order, but not with their own treasury. That treasury they could control in their collective capacity until some superior power took it away or it disappeared in a final dis- tribution among: the members. The defendants have noth- ing to do with that question. They owe their debt to the association, of whom they borrowed the money, and which through its treasurer, seeks to recover it. It may be true that by their ' insurbordination ' and consequent expulsion from the society, and protection of the Knights, the mem- bers of the association have no longer the common purpose which brought them together. That may prove to be a reason for dissolving the association, but until dissolved it can exist to collect its debts and pay its creditors, and make distribution of its surplus. Even where the State destroys a corporation for violation of its charter, it does not free the debtors from the payment of their honest debts. What shall be done with the money when restored is sometimes a serious question, but it must first be collected. It does not belong to the debtors, in any event, and no rule of the Knights or law of the State allows them to confiscate it. The defendants do not assert any conflicting claim to the money. If they did they would still be obliged to pay to the true owner, and could not escape liability. That true owner is the association, which the Knights have not utterly destroyed. There has been a divorce but that is quite dif- ferent from a death." The superior body cannot recover on a bond executed by the treasurer of a subordinate lodge money which belongs to the latter. ^ In Michigan, 1 Independent Order Foresters v. Donahue, 91 111. App. 58j. Detroit Savings Bank v. Haines, 128 Mich. 38; 87 N. W. K. 66, is also in point. 143 § 72 GOVERNMENT AND MEMBERSHIP: BY-LAWS. in a case involving the right of an incorporated grand lodge to suspend a member for not paying an assessment ordered by the supreme lodge, superior in authority, but incorporated in a different State, the Supreme Court said: i "The relator is not liable to pay the assessment. It is not competent for the respondent to subject itself or its members to a foreign authority in this way. There is no law of the State permitting it, nor could there be any law of this State which would subject a cor- poration created and existing under the laws of this State to the jurisdiction and control of a body existing in another State and in no manner under the control of our law. The attempt of the respondent to do this is an attempt to set aside and ignore the very law of its being." 2 But in New Jersey the Court of Chancery held^ that, where certain members of a subordinate lodge of the order withdrew from the jurisdiction of the grand lodge of the State and surren- dered their charter, forming a new lodge under the same name, and the minority of the members continued steadfast in tlieir allegiance and the surrendered charter was redeliv- ered to them as the lodge, the body which continued true in its allegiance was entitled to the property of the society and was the true original lodge. In this case the analogy to religious associations was clearly considered, for the court refers to a decision of its own in a church dispute,* and members of a voluntary association who have withdrawn and incorporated themselves under the name of the association ' Lamphere v. Grand Lodge, 47 Mich, 429. 2 State ex rel., etc., v. Miller et al., 66 la. 26; Grand Lodge v. Stepp, 14 Pittsb. Leg. J. 164; 3 Penny, 45; Bauer v. Sampson Lodge, 102 Ind. 262; AUnntt v. High Court of Foresters, 62 Mich. 110; 28 N. W. Eep. 802. 2 Altmann v. Benz et al., 27 N. J. Eq. 331; see also Koerner ». Grand Lodge K. of P., 146 lad. 639; 45 N. E. R. 1103. * Hendrickson v. Shotwell, 1 N. J. Eq. 677 ; Yeates v. Roberts, 3 Drew,- 170; 1 Jur. (n. s.) 819; affd. 7 De G,, M. & G. 227. 144 GOVERNMENT AND MEMBERSHIP: BY-LA^yS. § 73 cannot thereby deprive the latter of the right to the name,^ and an injunction will lie to prevent such incorporation until the disputed question of authority can be determined. 2 Other cases fully support these principles. ^ And in a case in Mi'ssouri,* it was held that an incorporated lodge of Odd-fellows has the right, through its proper officers and in accordance with its established rules, to determine who are not members thereof, and the courts will leave that question to be determined by the lodge itself, through the judicial action of its proper officers, regardless of whether the charter of the lodge in which membership is claimed gives, in express terms, such power to these officers. But in this case no property right was involved. The sub- ordinate lodge, whose charter had been arrested and then restored, had, in voting for the members to whom such charter was to be restored, excluded the plaintiffs, who sought to be reinstated by mandamus. The court places Its decision on the ground of the assent of relators to what was done, and their further consent that they could have no vested right in what was called the property of the lodge. In this case also the analogy of fraternal societies to relig- ious associations was admitted.^ Mere breach of duty on the part of the officers will not justify the secession of a part of the members. ^ § 73. Distinction between social Organizations and those Furnishing Insurance Indemnity. — Late decisions 1 Black Rabbit Assn. v. Munday, 21 Abb. N. C. 99. 2 McGlynu v. Post, 21 Abb. N. C. 97. 3 Gorman v. O'Connor, 155 Pa. St. 239; 26 Atl. R. 379; McFadden v. Murphy, 149 Mass. 341 ; 21 N. E. R. 868. Another case involving the rights of subordinate bodies is Pfeifer v. Supreme Lodge Bohemian, etc., 37 Misc. R. 71; 74 N. Y. Supp. 720. * State V. Odd-fellows' Grand Lodge, 8 Mo. App. 148. 6 See post, § 76. « McCalllon v. Hibernia, etc., Soc, 12 Pac. 114; 70 Cal. 163. 10 145 § 74 GOVERNMENT AND MEMBERSHIP: BY-LAWS. show an inclination to distinguish between purely social or benevolent organizations and those which provide for a benefit in the nature of life insurance, and the cases quoted frouii expressly declare that if such organizations " choose to go into that kind of business, they must expect "courts will deal with and adjudicate ^the rights of the policy holders, upon the same principles of equity and justice that they apply in the usual and ordinary cases of life insurance contracts." 2 The further distinction is made, when the sub- ordinate organization is incorporated, that " a cause of for- feiture cannot be taken advantage of or enforced against a corporation collaterally, or incidentally, or in any other mode than by a direct proceeding for that purpose against the corporation ; and the government creating the corpora- tion can alone institute the proceeding ; and it can waive a forfeiture, and this it can do expressly, or by legislative acts recognizing the continued existence of the corpora- tion. ^ § 74. Supreiiie,Grand and Subordinate Lodges a Single Organization. — The various lodges, subordinate, superior and supreme, form, so far as most rights are concerned, but one organization or society, although each individual lodge or association has its own individuality and distinctive rights and liabilities.* A subordinate organization may 1 Goodman v. Jedidjah Lodge, etc., 67 Md. 117; 9 Atl. Rep. 13; Dis- trict Grand Lodge, etc., v. Jedidjah Lodge, 65 Md. 236; Supreme Coun- cil, etc. V. Garrigus, 104 Ind. 133; State v. Miller, 66 la. 26; Bauer v. Sampson Lodge, 102 Ind. 262; Mulroy v. Sup. L. Knights of Honor, 28 Mo. App. 463; Lamphere v. Grand Lodge, 47 Mich. 429; Alnutt v. High Court of Foresters, 62 Mich. 110; 28 N. W. Rep. 802. 2 Goodman v. Jedidjah Lodge, etc., 67 Md. 117; 9 Atl. Rep. 13. s In re N. Y. Elevated R. R. Co., 70 N. Y. 337; Morawetz on Corp., § 1015. * Watson V. Jones, 13 Wall. 679; Smith v. Smith, 3 Dessau, 657; Aus- tin V. Searing, 16 N. Y. 113; Poultney a. Bachmann, 62 How. Pr. 466; 146 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 74 often liave a dual existence ; first, as a corporation unaer the laws of the State of its residence, and second under its conventional charter granted by its fraternal or agreed superior body, and either of these charters maybe lost, sur- rendered or forfeited without affecting the other. i In a recent case 2 where the incorporated supreme governing body had issued an obligation to a member of one of the in- ferior, or subordinate, associations and the claim was made that sucli member was not a member of the corporation because it was made up of representatives from the grand lodge, which in turn was composed of representatives from the subordinate lodges, of one of which the obligee was a member, the court said: " There is, it must be admitted, a certain confusion resulting from the fact that the supreme council is sometimes treated in the certificate of incorpora- tion, constitution and by-laws, as the corporation, and some- times as only its governing body who directs its operations. It is to the body acting in the latter capacity, that the article in question refers. ' The section quoted contemplates dis- tinctly, by the use of terms referring to them, that there are other members of the order. An examination of the whole system will show that the association was established, among other things, for the purpose of affording mutual aid to its members, and also for the purpose of establishing what was termed a widows' and orphans' benefit fund, for the payment of specific sums to the widows, orphans, and other dependents of deceased members. It transacted its business mainly through the agency of grand councils com- posed from the subordinate councils in each State, and Lafond v. Deems, 81 N. Y. 507; Polish R. C. Union u. Warczak, 182 111. 27; 55 N. E. E. 64. 1 Goodman v. Jedidjah Lodge, 67 Md. 117; 9 Atl. Eep. 13; Mason v. Fincli, 28 Mich. 282; Smith ». Smith, 3 Dessau, 557; State v. Miller, 66 Iowa, 26; Gorman v. O'Connor, 155 Pa. St. 239; 26 Atl. R. 379; Wells v. Monihan, 129 N. Y. 161; 29 N. E. R. 232; Morawetz on Corp., § 1002. 2 SdUDders v. Robinson, 144 Mass. 306; 10 N. E. Eep. 815. 147 § 74 GOVEENMENT AND MEMBERSHIP: BY-LAWS. through the agency of their subordinate counoils ; both of which councils operated under charters granted by the su- preme council, and in accordance with rules prescribed in such charters. As Robinson became a member of a subor- dinate council, he was entitled to a voice in its representation in the supreme council as the governing body. When, in the certificate of incorporation, members of the supreme council of the Royal Arcanum are referred to as those for whose benefit the association is intended, those who consti- tute the body which administers its affairs are not alone included, but all who, through the subordinate councils, become members of the organization, or order, as it is termed." 1 If the constitution of a grand lodge provides for the suspension of a subordinate lodge for non-payment of an assessment without notice, a member of the latter is not entitled to notice of such suspension, ^ and if the laws of the order justify the power a grand lodge may reverse the action of a subordinate lodge suspending one of its members although no appeal has been prosecuted and the member is dead,^ and the supreme lodge may, where it appears to have unrestricted authority under its constitu- tion, expel a member,* and can adopt any method of trial it pleases provided it be fair. In this case the court said : ^ " By the constitution of the Supreme Council, this body had the power to make its own constitutions, rules of dis- cipline, and laws for the government of the order. It was the body to which all appeals were to be made on all mat- ters of importance emanating from grand and subordinate councils. It had power to alter or amend the constitutions ' See also Scheu v. Grand Lodge, etc., 17 Fed. Kep. 214. 2 Peetu. Great Camp K. of T. M., 83 Mich. 92; 47 N. W. R. 119. 3 Vivar v. Supreme Lodge K. of P., 62 N. J. L. 455; 20 Atl. R. 36. ■* Splllman v. Supreme Council Home Circle, 151 Mass. 128; 31 N. E.R. 776. * Spillman v. Sup. Counc, supra. 148 GOVEENMBNT AND MEMBEE8HIP : BY-LAWS. § 74 of grand or subordinate councils, and the laws of the supreme council. It was, in short, a body of the highest, and apparently unrestricted, authority. The trial of mem- bers or officers of grand or subordinate councils might be had before a special committee of one or more members of the order named by the supreme leader. This committee need not consist of members of the supreme council. The supreme council was a body whose will was a law unto itself . It was to have original jurisdiction in all cases of its own officers and members, but no mode of procedure was specified for their trial. It would seem, therefore, that it might adopt such mode of trial as it pleased subject only to the implied limitation that it must be fair.i In the present case there is no reason to doubt that plaintiff's trial was conducted with such substantial fairness as the nature of the case would admit of. Charges in writing were preferred against him and he had an oppor- tunity to be heard upon them. No inference of unfairness can be drawn from the report of the commitee, nor from its recommendations of expulsion. Assuming plaintiff's guilt, these were not unreasonable, though naturally dis- tasteful to himself. The plaintiff, however, contends that the charges against him were insufficient in form. But it was expressly provided in section 5 of law 11 that the charges shall be sufficient if they state clearly the accusa- tion, although not in technical terms. Taking the charges and specifications together they appear to have been suffi- ciently minute and specific to give him notice of the ground of complaint against him. On the whole the expulsion of the plaintiff appears to have been regular and valid ac- cording to the laws and usages to which he had voluntarily submitted himself." As a general rule, the constitutions and by-laws of grand and supreme lodges of the various ^ Gray v. Christian Society, 137 Mass. 329. 149 § 75 GOVERNMENT AND MEMBERSHIP: BY-LAWS. orders or societies are binding upon the members of sub- ordinate lodges, because by reference and adoption they arc made parts of the laws of the subordinate bodies, i and this, too, whether they are incorporated or not, except, possibly, when a property right is involved. 2 § 75. Rights of Minority, — It has been held, that, be- fore the aid of the civil courts can be invoked by agrieved members of a society, they must have exhausted the reme- dies prescribed by the constitution and laws of such society and its superior governing bodies. A minority of an unin- corporated society, formed for social and benevolent pur- poses, cannot maintain an action to have the property divided or sold, or to compel the majority to purchase their inter- est, while the property is being used for the purposes for which it was procured, although occupied or used by a dif- ferent lodge. 3 But a minority can generally insist upon a carrying out of the purposes of the society, at least so far as property is concerned.* The withdrawal of fwo-thirds of the members does not destroy the identity of a society and the minority will be entitled to the funds of the 1 ChamberlalQ v. Liacoln, 129 Mass. 70; Altmann v. Benz, 27 N. J. Eq. 331; Osceola Tribe v. Schmidt, 57 Md. 98; Hall v. Supreme Lodge 24 Fed. Rep. 450. A corporation cannot amend its laws or articles of association so as to allow a foreign body to participate in making laws for its guidance. In re Grand Lodge, etc., 110 Pa. St. 613; 1 Atl. K. 582; Lamphere v. Grand Lodge, 47 Mich. 429; Messer v. Ancient Order, etc., 180 Mass. 321; 62 N. E. R. 252. 2 Oliver u. Hopkins, 144 Mass. 175; 10 N. East. Rep. 776. See also Chamberlain v. Lincoln^ 129 Mass. 70; Grosvenor ». Society, etc., 118 Mass. 78. For further discussion of rights of supreme, grand and subordinate lodges see post, § 161o. 3 Robbins v. Waldo Lodge, 78 Me. 565; 7 Atl. Rep. 540; Hinkley V. Blethen, 78 Me. 221; 3 Atl. Rep. 656. ^ Mann v. Butler, 2 Barb. Ch. 362; Torrey v. Baker, 1 Allen, 120; McFadden v. Murphy, 149 Mass. 341; 21 N. E. R. 868; Ashton v. Dash- away Assn., 84 Cal. 61; 22 Pac. R. 660. 150 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 75 society .1 In a recent case in Pennsylvania 2 these prin- ciples were fully discussed. The report of the Master was approved by the court and applied the law as follows : — "The position, therefore, is that of a majority of the number of members present at the meeting constituting but a fraction of the entire membership, attempting to carry the whole body into secession against the will of the minority. The Master is unable to perceive any distinc- tion in principle between this and the cases, whereof many precedents occur in the reports, of members of a congrega- tion forming part of a general conference or synod, profess- ing a certain form of religious belief, attempting, against the will of a minority, to secede from the synod and carry the property of the congregation with them. The leading case in Pennsylvania on the subject is M'cGinnis v. Watson,^ followed by Sutter v. Trustees,* Winebrenner v. Colder,^ Schnorr's Appeal^ and others — wherein the right is per- sistently and emphatically denied. 'People join such associa'.ions,' says Judge Lowrie, in Sutter v. Trustees (page 511), ' for the sake of their benefits, and from faith that they will be conducted according to known principles, and not by mere whims of majorities. It is therefore of no sort of importance what may be the majority in such matters; it cannot weigh a feather in well-known law in affecting the rights of the minority. Before civil author- ity the question is not which party has the majority, but which is right according to the law by which the party has hitherto consented to be governed.' And in the appeal of 1 Schiller Commandery, etc. v. Jaennechen, 116 Mich. 129; 74 N. W. R. 458. 2 Gorman v. O'Connor, 155 Pa, St. 239; 26 Ml. R. 379. 3 41 Pa. St. 9. * 42 Pa. St. 503. 5 43 Pa. St. 244. « 67 Pa. St. 138. 151 § 75 GOVERNMENT AND MEMBERSHIP: BY-LAWS. First Methodist Protestant Church,i the court, ia the lan- guage of McGinnis v. Watson, says the ' title to church property adheres to that party which is in harmony with its own laws; and the ecclesiastical laws, usages, customs and principles which were accepted before the dispute arose are the standards for determining which party is right.' The act of the majority at the meeting, therefore, in sev- ering allegiance to the parent organization, cannot be in- terpreted as the act of the division, but only as the act of separate individuals composing the majority. Had the entire body seceded, the organization would have become extinct. What before existed as an organization would then have become a new organization pertaining to another body. The opposition of those who refused to follow the lead of the seceding body served to keep the organiza- tion alive, and the funds remained with them. In McFad- den V. Murphy ,2 where the facts were almost identical with those shown by the evidence, except that it directly appeared that a large majority of the members sought to transfer the division of an organized body to the new or- ganization, and took possession of the property of an old association as a division of the new society, the court held that the majority ceased to be members of the (old) asso- ciation, and that the proceedings of the minority who remained members were regular, and that the action of the majority in joining the new division was an evidence of their intention to withdraw from the old, and that by such action they ceased to be members of the society and divis- ion under the old constitution. The master holds that the principles laid down in that case fully applied to the case presented here for his determination, and confirm the conclusions at which he has arrived. 1 16 Wkly. Notes Cas. 245. » 149 Mass. 341; 21 N. E. Rep. 868. 152 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 75 " If it be asserted that the proceedings by which the minority sought to continue the organization were in them- selves irregular in violation of the provisions of the constitution, to use the words of the court in Schnorr's Appeal,! < it does not lie in the mouth of the defend- ants (plaintiffs here) to object in any way in this proceeding to the regularity of the election of the plain- tiffs (defendants here). The defendants are strangers. They made themselves so by their solemn act, throwing off their connection with the church. That they then seceded and withdrew from the church cannot be doubted.' Judge Williams, in concurring, clearly sets forth the state of the law when he says that ' those who adhere and sub- mit to the regular order of the church, local and general, though a minority, are the true congregation and corpora- tion, if incorporated.' 2 But it is a fact that the constitu- tion was violated by the minority in their subsequent pro- ceedings. Their first step subsequent to the meeting of January 7th, was the issue of a call of a special meeting of the organization, signed by the regular secretary and the four members who claimed allegiance to the old organiza- tion, which for convenience the master has termed the ' Cleveland Body.' The fact of this meeting being called, and its object, were known to all the members on both sides of the controversy. It was the only thing that the adherents of the Cleveland party could do, in order to preserve the entity of the division under the old order of things. The by-laws, it is true, do not specifically provide for a special meeting or for any method by which the body may be convened, but these by-laws were framed by the State convention, and by the terms of the constitution a division can frame its own laws, so far as consistent with 1 67 Pa. St. 138. 2 Citing Winebrenner v. Colder, supra, 153 § 76 GOVERNMENT AND MEMBERSHIP: BY-LAWS. the constitution. By the terms of the by-laws, also, a quorum of the division consists of five members, with the officers or their representatives. Now, the officers who sided with the New York party were the new president and the financial secretary. They refused or neglected to attend this meeting, and there is no intimation that a quorum of the old division did not assemble at the special meeting. Everything was done that could be done to sustain the life of the organization. If any subsequent action of this organization can, under any view, be construed as a depart- ure from its organic law so far as the filling of vacant offices is concerned, the defect was certainly cured at the next annual election; and inasmuch as no voice was raised againot the illegality of any such subsequent action under the constitution, and the division was always recognized in the national and State conventions as the only division No. 4, no rights seemed to be prejudiced by such action." The provisions of the articles of association must govern in all cases involving the rights of the members. i § 76. Analogy between Lodges and Churches. — It is not unreasonable to expect that in future, as in past, adjudi- cations the courts will to a greater or less extent adopt as applicable to fraternal, social, benevolentor benefit societies the rules laid down and now well settled by a long line of decisions in the United States, governing ecclesiastical or- ganizations, subject to the qualifications already established concerning attempts to forfeit the rights of one class of members and transfer them to another, and the forfeiture of the property rights of members .2 These rules have been 1 Penfleld». Skinner, llVt. 296; St. Mary's Ben. Assn. ». Lynch, 64 N. H. 213; 9 Atl. Kep. 98. 2 State V. Odd -fellows', etc., 8 Mo. App. 148; Gorman w. O'Connor, supra. 154 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 77 declared by the Supreme Court of the United States i sub- stantially as follows : — § 77. Property Rights of Religious Societies; liow Determined. — Controversies in the civil courts concern- ing property rights of religious societies are generally to be decided by a reference to one or more of three proposi- tions: (1) Was the property or fund which is in question devoted by the express terms of the gift, grant or sale by which it was acquired, to the support of any specific relig- ious doctrine or belief, or was it acquired for the general use of the society for religious puposes, with no other limi- tation? (2) Is the society which owned it of the strictly congregational or independent form of church government, owing no submission to any organization outside of the congregation? (3) Or is it one of a number of such societies, united to form a more general body of churches, with ecclesiastical control in the general association over the members and societies of which it is composed? In the first class of cases the court will, when necessary to protect the trust to which the property has been de- voted, inquire into the religious faith or practice of the parties claiming its use or control, and will see that it shall not be diverted from that trust. If the property was ac- quired in the ordinary way of purchase or gift, for the use of a religious society, the court willt'inquire who constitute that society, or its legitimate successors, and award to them the use of the property. In case of the independent order of the congregation, this is to be determined by the major- ity of the society, or by such organization of the society, as by its own rules constitute its government. In the class of cases in which property has been acquired in the same way by a society which constitutes a subordinate part of a 1 Watson V. Jones, 13 Wall. 679. 155 § 78 GOVERNMENT AND MEMBERSHIP: BY-LAWS. general religious organization, with established tribunals for ecclesiastical government, these tribunals must decide all questions of faith, discipline, rule, custom, or ecclesiastical government. In such cases where the right of property in the civil court is dependent on the question of doctrine, discipline, ecclesiastical law, rule or custom or church government, and that has been decided by the highest tribunal within the organization to which it has been car- ried, the civil court will accept that decision as conclusive and be governed by it in its application to the case before it.i § 78. Benefit Societies doing a Life Insurance Bus- iness are like other Life Insuranco Corporations. — So far as corporations, carrying on a life insurance business, either on the plan of annual, semi-annual or quarterly premiums and the accumulation of a reserve fund or upon the new assessment plan where calls are made as necessity requires, monthly, or less or more frequently, are con- cerned, it may be said that it is hard to conceive of any reason why such organization should be governed by any rules different from those regulating other corporations. The contracts of all alike must be judged by the laws appli- cable to all similar contracts of other corporations. The fundamental agreement of the members is contained in the charter, and their affairs are administered and contracts made under the rules and restrictions there and in the by- 1 Opinion cites: Miller v. Gable, 2 Denio, 492; Stiannon v. Frost, 3 B. Mon. 253; Smitti v. Nelson, 18 Vt. 511; Gibson i;. Armstrong, 7 B. Mon. 481; Harmon v. Dreher, 1 Speer's Eq. 87; Watson v. Avery, 2 Bush. 332; Jolin's Island Cburcli Case, 2 Rich. Eq. 215; Ferraria v. Vasconcelles, 23111. 456; Chase v. Cheney, 68111. 509; Watson v. Farris, 45 Mo. 183; German Eef. Ch. v. Seibert, 3 Barr, 291; McGinnis v. Watson, 41 Pa. St. 21. Contra, as to jurisdiction: Watson ». Avery, 2 Bush, 332. Watson v. Avery, 3 Bush, 636. See also Altmann v. Benz, 27 N. J. Eq. 331; Hendrickson v. Shotwell, 1 N. J. Eq. 577. 156 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 79 laws contained, subject to the usual qualifications arising out of the application of the law of agency and estoppel. ^ In the application, however, of the laws of agency, a sub- stantial difference is found to exist between the practical workings of benefit societies and those of the regular life insurance corporations, which will more fully appear when we come to discuss the agency of lodges. 2 § 79 By-Laws : Definition of : How Proved. — By- laws, according to all the authorities ^ are merely rules pre- scribed by the majority of the members of an association or corporation, under authority of the other members, for the regulation and management of their joint affairs. In both voluntary and incorporated associations the power depends upon the articles of association, or charter, which is the fundamental law.* In the case of a corporation the law " tacitly annexes to it the power of making by-laws or private statutes, for its government and support,"^ and it is implied in every charter that the majority shall have power to make needful by-laws for the regulation of the affairs of the corporation. Rules adopted for the govern- ment of an association which is incorporated are all by-laws, and that whether some of them are called such or not; what is often termed the " constitution " of a benefit society is merely a code of by laws under an inappropriate name. 6 By-laws properly adopted are as binding upon all the members of the association as a provision contained in ^ Morawetz on Corp., Chap. VII. 2 Post, § 149 et seq. 8 Morawetz oq Corp., § 491; Ang. & Ames on Corp., § 327; 1 Beach on Priv. Corp., § 308 et seq. * St. Mary's, etc., ». Burford's Admr., 70 Pa. St. 321. * Ang. &Ames on Corp., § 325. « Supreme Lodge K. of P., etc., v. Knight. 117 Ind. 489; 20 N. E. R. 479, p. 483; 3 L. K. A. 409; Mulroy v. Knights of Honor, 28 M. A. 463. 157 § 80 GOVERNMENT AND MEMBERSHIP: BY-LAWS. the charter itself. i By-laws when properly adopted, measure the duties, rights and liabilities of the members. 2 By-laws may be proved by officers or members who were present and saw them adopted, 3 or by production of the records or properly certified copies thereof. It has been said,* that the constitution and by-laws purporting to be pub- lished by the supreme council o*f the order and furnished the local lodge and used by it are admissible in evidence without further proof of their adoption. § 80. By Whom and how Made. — The * authority to make by-laws has been said to be incident to a grant of corporate existence, and associations, clubs and societies though not incorporated have the same power.^ Unless delegated to a select body by the articles of association or charter, the power to make by-laws resides in the body of members themselves and is to be exercised by the majority. ^ This power cannot be delegated.'^ If the charter, or the fundamental agreement of the members, prescribe the mode in which the by-laws shall be made and adopted, in order to insure their validity, that mode must be strictly 1 Morawetz on Corp., § 491. 2 Mo. Bottlers Ass'n v. Fennerty, 81 Mo. App. 625. 3 Masonic Mat. Ben. Assn. v. Severson, 71 Conn. 719; 43 Atl. B. 192; but see Lloyd v. Supreme Lodge K. of P., 98 Fed. R. 66; 38 C. C. A. 654. * Home Circle Soc. v. Skelton (Tex. Civ. A.), 81 S. W. R. 84. " In re Long Island R. Co., 19 Wend. 37; 32 Am. Dec. 429; Hodgin- son V. Exeter, L. R. 5 Eq. 63; Lyttleton v. Blackburn, 33 L. T. 641. This principle seems to be generally conceded, as appears in all the cases relating to enforcement of by-^aws. s Morawetz on Corp., § 491; Ang. & Ames on Corp., § 327; 1 Beach on Priv. Corp., § 311. ' Toomey v. Supreme Lodge K. of P., 74 Mo. App. 507; Supreme Lodge K. of H. V. Kutscher, 179 111. 340; 53 N. E. R, 620; reversing 72 111. App. 462; Supreme Lodge K. P. v. Stein, 75 Miss. 107; 21 So. R. 559 ; 37 L. R. A. 775. 158 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 80 pursued,! but if the charter is silent on this subject, the association may adopt by-laws " by its own acts and con- duct, and the acts and conduct of its officers, as by an express vote, or an adoption manifested in writing." 2 The rule has been thus stated: ^ " While the governing body of a corporation has no power to delegate the exer- cise of its judicial functions, it, itself, can exercise such powers in a plenary way, except as limited by the charter of the corporation, and when not thus restricted may adopt or enact a by-law in disregard of the procedure for so do- ing, contained in previous by-laws, and this too by a majority vote." And this rule is abundantly sustained by other authority.* In Domes v. Supreme Lodge K. of P.& it is said : " Any meeting could by a majority vote, modify or repeal the law of a previous meeting, and no meeting could bind a subsequent one by irrepealable acts or rules of procedure. The power to enact is a power to repeal; and a by-law requiring a two-thirds vote of members pres- ent to alter or amend the laws of the society may itself be altered, amended or repealed by the same power which enacted it."^ It has, however, been held*^ that where a society has expressly adopted a code of by-laws other by- 1 Duaston ■». Imperial Gas Co., 3 B. & Ad. 125. Statutory require- ments must of course be observed. Knights of Maccabees v. Nitsch (Mich.), 95 N. W. R. 626. 2 Ang. & Ames on Corp., § 328; Union Bank v. Eidgely, 1 Harr. & G. 324. s Toomey v. Supreme Lodge K. of P., supra. * Supreme Council A. L. H. v. Adams, 68 N. H. 236; 44 Atl. K. 380; Goulding V. Standish, 182 Mass. 401; 65 N. E. R. 803. 5 75 Miss. 466; 23 So. R. 191. 8 But to the contrary see Deuble v. Grand Lodge A. O. U. W., 72 N. Y. Supp. 755; 66 App. Div. 323; a£Brmedl72 N. Y. 665; 65 N. B. R. 1116; C iwan V. New York Caledonian Club, 61 N. Y. Supp. 714; 46 App. Div. 288. And also see as to burden of proof: United Brotherhood, etc., o. Forten, 107 111. App. 306. ^ District Grand Lodge v. Coha, 20 111. App. 335. 159 § 81 GOVERNMENT AND MEMBERSHIP: BT-LAWS. laws will not be implied from custom or usage. Still lodges often adopt resolutions in regard to matters which, if not, should be, covered by by-laws. Such resolutions, especially if brought to the knowledge of the members, might, on principle, have the effect of by-laws if legal otherwise. 1 Eleemosynary corporations as such have no incidental po^wer to make by-laws. ^ § 81. Binding upon All Members: All are Presumed to know Them. — The' by-laws of a society are binding upon all the members and all are conclusively presumed to know them. The Supreme Court of Indiana says : 3 " One who becomes a member of such an organization is charge- able with knowledge of its laws and rules and is bound by them. He cannot be ignorant of them, nor can he refuse obedience to them, unless, indeed, they are illegal, or require the performance of acts which the law forbids. By-laws not in themselves illegal and not requiring the per- formance of acts contrary to law, must, therefore, be deemed binding upon all persons who become members." * The reason of this rule is, that by becoming a member, one impliedly agrees to be bound by all legal acts of the majority 1 Miller v. Hillsborough, etc., Assn., 42 N. J. Eq. 459; Pflster v. Ger- Wick, 122 Ind. 567; 23 N. B. E. 1041; Domes v. Supreme Lodge K. of P., supra. It has been held that a decision interpreting the law made by the head officer if approved by the Grand Lodge and acted upon may have the effect of a by-law. State ex rel. u. Grand Lodge A. O. U. W., 70 Mo. App. 456. 2 Angell & Ames on Corp., § 330. s Bauer v. Sampson Lodge, 102 Ind. 262. ^ Fugure v. Mut. Soc. St. Joseph, 46 Vt. 368; Simeral v. Dubuque Mut. F. Ins. Co., 18 la. 319; Coles v. la. State Mut. F. Ins. Co., 18 la. 425; Coleman v. Knights of Honor, 18 Mo. App. 189; Mitchell ». Lycoming Mut. F. Ins. Co., 61 Pa. St. 402; People v. St. George Soc, 28 Mich. 261; Osceola Tribe v. Schmidt, 57 Md. 98; Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Bep. 478; Harvey v. Grand Lodge, 60 M. A. 472; Emmons V. Hope Lodge, etc., 1 Del. 187 ; 40 Atl. R. 966; Home Forum Ben. Order V. Jones, 6 Okl. 598; 50 Pac. B. 165. 160 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 81 under the compact of the articles of association.! And a member cannot question the validity of the by-laws under which he became a member. In a recent case 2 the Supreme Court of Indiana said : "A person who becomes a member of a mutual insurance company, assents to the by -laws under which he acquires a membership, and he cannot after- wards successfully assail their validity on the ground that they were not regularly adopted. Or, as Mr. Water- man states the rule : ' A person who has voluntarily become a member of a corporate body cannot object that the corporation had no power to make a by-law. '^ There is an essential difference between strangers and the members or stockholders of a corporation; for strangers are not always precluded from questioning the validity of by-laws, nor always bound to take notice of them, although there are instances in which they cannot question them, and wherein they are chargeable with notice of them. ^ One of the duties of a person who becomes a member of a mutual insurance company is to inform him- self of its by-laws, and he cannot escape their force although he may have had no actual knowledge of them. A very strong application of this rule was made in a mutual insur- ance company case in which Chief Justice Gibson declared that without such a rule mutual companies could not exist. ^ In the case of Miller v. Hillsborough Mut. Fire Assur. Co.,^ the general doctrine was carried very far, the court saying : ' But it is clear that a member of the company is chargeable with notice of all the by-laws of the company and of the conditions of insurance adopted by the company, whether contained in the by-laws or in resolutions.' " 1 Morawetz on Corp., § 500a; Ang. & Ames on Corp., § 359, 2 Pflsterc. Gerwig, 122 Ind. 567; 23 N. E. R. 1041. 3 1 Wat. Corp. 235. 1 Id. 273. 5 Insurance Co. v. Perrine, 7 Watts & S. 348. « 42 N. J. E. 459; 7 Atl. B. 895. 11 161 § 83 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 82. Kequisites of Valid By-laws. — All by-laws, to be valid, must have three essential and vital qualifications : (1) they must be consistent with the charter or articles of association; (2) they must not be in conflict with any pro- visions of statute or common law, and lastly (3) they must be reasonable. In the case of Kent v. Quicksilver Mining Co.,1 the New York Court of Appeals said: "All by-laws must be reasonable and consistent with the general prin- ciples of the law of the land, which are to be determined by the courts when a case is properly before them. A by- law may regulate or modify the constitution of a corpora- tion, but cannot alter it. The alteration of a by-law is but the making of another, on the same subject. If the first must be reasonable, and in accoi'd with the principles of law, so must that be which alters it. If, then, the power is reserved to alter, amend, or repeal, and that reservation enters into a contract, the power reserved is to pass reason- able by-laws agreeable to law." 2 § 83. Must be Consistent with Charter. — The prime essential of a valid by-law is that it be consistent with the charter or articles of association. Upon this subject the Supreme Court of Minnesota has said : ^ " These articles (of association) are its charter and, subject to the constitu- tion and general laws of the State, its fundamental and organic law. Among other things they fix the rights of stock- holders. They are in the nature of a fundamental contract, in form between the corporators, — a contract which, as in other cases, neither party is at liberty to violate. This can no more be done through the form of by-laws and resolutions of the stockholders adopted and acted upon, than it can in 1 78 N. Y. 159. 2 Morawetz on Corp., §§ 494, 496, 496. As to after enacted laws see post, § 91a. 3 Bergman u. St. Paul Mut. Bldg. Assn., 29 Minn. 278. 162 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 83 any other way. The authority to pass by-laws is, as a mat- ter of course, authority to pass such as are consistent with the articles of incorporation, and not a power to subvert the law of corporate existence. The by-laws of a corpora- tion are only rules and regulations as to the manner in which the corporate powers shall be exercised. Any at-^ tempt on the part of defendant, by by-laws or otherwise, to deprive an unconsenting stockholder of a right secured to him by the corporate articles, is in excess of corporate authority, or, in legal parlance, ultra vires. '^ ^ In the same line is the declaration of the Supreme Court of Pennsyl- vania 2 that " no corporation can make any valid by-law in conflict with its charter. That would enable the corpora- tion to make a new constitution for itself and thereby wholly defeat the object of the law which gave it birth." Upon analogy it follows that voluntary associations cannot pass beyond the limitations of their articles of association so as to bind members not thereto consenting, except by unanimous consent of all their members. By-laws in con- travention of the provisions of a charter are void. 3 In a case in New York * where the general purposes of the society as declared in the articles of association were declared to be the welfare of themselves and others, and particularly the mutual relief of the members in times of sickness and dis- tress, it was held that " the society could extend its benefits to the families of its members, and that such provision in favor of the widows of deceased members, was not only highly meritorious, but fairly within the scope of the gen- 1 Ang. & Ames on Corp., § 345. 2 Diligent Fire Co. v. Commonwealth, 75 Pa. St. 291. * Presb. Mut. Ass. Fund v. Allen, 106 Ind. 593 ; Raub v. Masonic Mat. Eel. Assn., 3 Mackey, 68; People ex rel. Stewart ». Father Matthew, etc., Soc, 41 Mich. 67; Ang. & Ames on Corp., § 345 and cases cited; Mora- wetz on Corp., § 494 and cases cited. < Gnndlach v. Germania Mech. Assn., 4 Hun, 339 ; 49 How. Pr. 190. 163 § 84 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. eral purposes of the organization. The constitution and laws should have a liberal interpretation, for the purpose of promoting the general objects of the society, and, as such a provision for the benefit of the families of the members is in no way hostile or opposed to the general plan of the organization, I am of the opinion it should be upheld as a proper exercise of the powers conferred upon the associa- tion." i § 84. Must not be Contrary to Comiuon or Statute Law. — The by-laws of all associations and corporations must not be contrary to either statute or common law. In the quaint language of Chief Justice Hobart:^ "For, as reason is given to the natural body for the governing of it, so the body corporate must have laws, as a politic reason to govern it ; but those laws must ever be subject to the general law of the realm, as subordinate to it." " If a cor- poration undertakes to make by-laws in contravention of the statute they are ultra vires and of no effect. "3 Jq State V. Williams * the Supreme Court of North Carolina, in passing upon a case where the ceremony of expulsion from a benevolent society involved a battery, held that it could not be lawfully inflicted. " It is not the less a battery because they were all members. " ^ So a by-law of a society compelling members to join in a "strike " is void,^ as is the 1 Sup. Council, etc., u. Fairman, 10 Abb. N. C. 162; 62 How. Pr. 386; Barbaro v. Occidental Lodge, 4 Mo. App, 429. 2 Norris v. Staps, Hob. 211. * Am. Legion of Honor ». Perry, 140 Mass. 580; Diligent Fire Co. v. Commonwealth, 75 Pa. St. 291; Briggs v. Earl, 139 Mass. 473; Kent v. Quicksilver Mining Co., 78 N. Y. 159; Nelson v. Gibson, 92111. App. 695; Brower o. Supreme Lodge Nat. Ees. Assn,, 74 Mo. App. 490. 4 75 N. C. 134. ' Bell V. Hansley, 3 Jones, 131. 6 People V. N. Y. Ben. Soc, 3 Hun, 361. Farrer v. Close, L. E. 4 Q. B. 602; Doyle v. Benev. Soc, 6 Thompson & C, 88. But see Snow v. Wheeler, 113 Mass. 179. 164 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 85 by-law of a labor organization requiring a war on " non- union " menl and a by-law of a voluntary association of fire underwriters prohibiting the employment of solicitors except under certain restrictions, 2 and a by-law of a supe- rior providing for forfeiture of property of a subordinate organization. 3 By-laws in restraint of trade are void.* The Supreme Court of Massachusetts has said concerning the construction of by-laws : 5 " The by-law should be con- strued with reference to the statute, and, if practicable, such a meaning should be given to it as will make the two consistent, for it is not to be assumed that the by-law is intended to go beyond the scope of the statute, and thus violate its provisions." ^ § 85. Must be Reasonable. — A third essential of all by-laws of every association is that they be reasonable. The power to make by-laws is upon the implied condition that it be exercised with discretion; itfollows that all rules which are unequal, vexatious, oppressive, or manifestly detrimental to the interests of the society are void.'^ A prime essential to by-laws is that they be uniform, apply- ing to all members alike. ^ What are to be deemed reason- able by-laws depends upon the objects and purpose of the 1 Lucke V. Clothing Cutters, etc., Assembly, 77 Md. 396; 26 Atl. R. 506. ' Huston V. Eeutlinger,91 Ky. 333; 15-S. W. K. 867. > Wicks o. Monahan, 130 N. Y. 282; 29 N. E. R. 139; affg. 8 N. Y. Supp. 121; Austin v. Searing, 16 N. Y. 112; Wells v. Monahan, 130 N. Y. 232; 29 N. E. R. 232; affg. 13 N. Y. Supp. 232. 4 Society of Gunmakers v. Fell, WiUis' R. 384. 5 Elsey V. Odd-fellows' Mut. Relief Assn., 142 Mass. 224. 6 See cases collected in Ang. & Ames on Corp., §§ 333-4-5 eJ seg., specifying particular by-laws which are against statute or common law and therefore void. See for further discussion, post, §§ 85 and 86. ' Ang. & Ames on Corp., § 347; Gosling v. Veley, 12 Q. B. 347; People B. Father Matthew, etc., 41 Mich. 67; Cartan v. Father Matthew, etc., 3 Daly, 21. 8 Supreme Council E. A. v. Brashears, 89 Md. 624- 43 Atl. R. 866. 165 § 85 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. society, and what might be proper in the case of a social club would be unreasonable if adopted by a benevolent organization.! Where the purpose of the society was to afford relief in sickness, and to provide for expenses of the funerals of deceased members and their families, it was held by the Supreme Court of Pennsylvania, ^ that a by-law providing that a widow of a member should not be entitled to benefits if the deceased came to his death because of intemperance was a reasonable regulation. In this case the court said : " An association of this kind is formed for the benefit of its members. Being a purely voluntary associa- tion, it may adopt such reasonable regulations as are conducive to their interests. Now, unless we deny that temperance and regularity of habits have much to do with health and long life, we must concede that the value of the benefits to be derived from such an association depends greatly on the good conduct of its members. Then clearly the members have not only a right to choose their asso- ciates, but to stipulate also for the power to prohibit their indulgence in those vices and crimes which multiply dis- ease and death among them and thus diminish the general fund. It is not the purpose of the charter to regulate conduct, and that must be left to divine and human laws. But this law strikes only at those acts which are the causes of disease and death. * * * The by-law therefore appears to be reasonable and to promote the well-being of all the associates collectively and individually." It has been held that a by-law restricting membership in a sick benefit society to those who should not belong to any other society is valid. ^ A by-law of a benevolent society providing ' Commonwealth v. St. Patrick's Benev. See, 2 Binn. 441. 2 St. Mary's Ben. Soo. v. Burford's Admr., 70 Pa. St. 321. " BretzlafE v. Evangelical Lutheran, etc., Soc, 125 Mich. 39; 83 N. W. R. 1000. In Screwmen's Benev. Assn. v. O'Donohoe, 25 Tex. Civ. A. 264; 60 S. W. R. 683, a by-law was considered which provided that 166 GOVEENMBNT AND MEMBERSHIP: BY-LAWS. § 85 that a member in arrears for three months dues " shall not be entitled to benefits until three months after sucb. arrear- ages shall have been paid ' ' is unreasonable and inopera- tive.l Such by-laws have, however, been upheld and the weight of authority is the other way.^ In Pennsylvania it was held,' that where a society was formed for mutual assistance in time of sickness or inability to labor, a by- law that "no soldier of a standing army, seaman or mariner shall be capable of admission " was held good, and also the further provision that if a member should enlist as a soldier or become a mariner he should forfeit his membership. By-laws compelling members to do what is absurd, or of no benefit to themselves or the society, are unreasonable,* and all by-laws conflicting with express statute law or public policy are void as unreasonable. A by-law, to be reasonable, must be adapted to the purposes of the society.^ A by-law to expel a member for vilifying another member is void.* In the case just cited, Chief membera should join In " labor day " parade but its validity was not expressly passed on. 1 Brady v. Coachmen's, etc., Assn., 39 N. Y. St. Eep. 181; 11 N. Y. Supp. 272 ; citing Cartan v. Society, 3 Daly, 21 ; Nelligan v. Typograph- ical Union, 2 City Ct. R. 263. See also Kennedy ■». Carpenters, etc. , Union, 75 App. Div. 243; 78 N. Y. Supp. 85; Skelly v. Society, etc., 13 Daly, 2. 2 Littleton v. Wells, etc., Council (Md.), 56 Atl. E. 798; Alters v. Journeymen's, etc., Assn., 43 W. N. C. 336; Jennings v. Chelsea Div., etc., 59 N. Y. Supp. 862; 28 Misc. R. 556; Dabura v. Sociedad de la Union (Tex Civ. A.), 59 S. W. R. 835; Hart v. Adams, etc., Assn., 69 App. Div. 578; 75 N. Y. Supp. 110; Boyd v. Gerant, 82 App. Div. 456; 81 N. Y. Supp. 835. 2 Franklin v. Commonwealth, 10 Pa. St. 359; see also In re David Mulholland Soc, 10 Phila. 19. * Ang. & Ames on Corp., § 348. " People V. Med. Soc. of Erie, 24 Barb. 570; Commonwealth «. German Soc, 15 Pa. St. 251; People v. Med. Soc, etc., 32 N. Y. 189; Dickenson V. Chamber of Commerce, etc., 29 "Wis. 49; Ellebre v. Faust, 119 Mo. 653; 25 S. W. R. 390; Lysaghti;. St. Louis Stone Masons, etc., 55 Mo. App. 538. « Commonwealth v. St. Patrick's Benev. Soc, 2 Binn. 441. 167 § 85 GOVBENMENT AND MEMBEKSHIP : BY-LAWS. Justice Tilghman said: " The offense of vilifying a mem- ber, or a private quarrel, is totally unconnected with the affairs of the society and therefore its punishment cannot be necessary for the good government of the corpora- tion." i A by-law must be equal in its operation and apply to all members alike; it cannot exempt certain members from its operations. ^ 'A by-law which provides for the expulsion of a member without notice is void, be- cause unreasonable ; ^ and so are provisions for forfeitures without notice or opportunity to be heard ; * and by-laws having a retroactive, or ex post facto effect,* A by-law providing that the trustees first elected shall hold office during life is void.® So is a by-law of a beneficiary society making an appeal of a member to the civil courts a cause for expulsion.' Or, limiting the time for bringing suit, to 1 Schmidt v. Abraham Lincoln Lodge, 84 Ky. 490; 2 S. West. Eep. 156; Mulroy v. Supreme Lodge Knights of Honor, 28 Mo. App- 463; Commonwealth v. German Soc, 15 Pa. St. 251; Evans v. Phila. Club, 50 Pa. St. 107; Brd v. Bavarian, etc., Assn., 67 Mich. 233; 34 N. "W. Rep. 556; Allnutt v. High Court of Foresters, 62 Mich. 110; 28 N. W. Eep. 802. 'People V. Father Matthevy, etc., 41 Mich, 67; Taylor ». Griswold, 14 N, J. L. 223. ' Pulford o. Fire Department, etc., 31 Mich. 458; Fritz v. Mucli, 62 How. Pr. 72; Wachtel v. Noah Widows', etc., 84 N. Y. 28; Common- wealth V. Penn. Ben. Assn., 2 Serg. & E. 141; Erd v. Bavarian, etc., Assn., 67 Mich. 233; 34 N, W. Eep. 555; Ttiibert B. Supreme Lodge K. of H., 78 Minn. 448; 81 N. W. E. 220; 47 L. E. A. 136. ^ Roehler». Mechanics' Aid Soc, 22 Mich. 89; Commonwealth©. Germ. Soc, 15 Pa. St. 251; Queen v. Saddlers' Co., 10 H. of L. Cas. 404; Pul- ford V. Fire Dept,, 31 Mich. 458; Butchers' Ben. Assn., Matter of, 38 Pa. St. 298; Green v. African, etc, Soc, 1 Serg. & E. 254. " Pulford V. Fire Dept,, 31 Mich. 458 ; Taylor v. Griswold, 14 N. J. L. 223; Phillips v. Wickham, 1 Paige, 590; Howard v. Savannah, etc, Cbarlt. (Ga.) 173;- Kent v. Quicksilver M. Co., 78 N. Y. 159; Graftstrom V. Frost Council, 43 N. Y. Supp. 266; 19 Misc. E. 180; Berlin v. Eureka Lodge, etc., 132 Cal. 294 ; 64 Pac. E. 254. « State V. Standard L. Assn., 38 Ohio St. 281. ' Sweeney v. Rev. Hugh McLaughlin Ben Soc, 14 W. N. C. 466. See 168 GOVBENMENT AND MEMBERSHIP: BY-LAWS. § 85 six months after the right accrued. ^ A by-law authorizing the board of directors to impose fines for specified offenses but prescribing no limit as to the amount of such fines is void.2 It has been held that a by-law providing that no length of absence or disappearance on the part of the member without proof of actual death shall entitle his beneficiary to recover is not repugnant to law or against public policy though setting aside a rule of evidence.^ A religious society may make its membership dependent upon good standing in some religious body or upon the member observing the sacraments of the church. As was said by the Supreme Court of Missouri:* "He (the member) expressly represented as a condition to his admission that he was a member of the Roman Catholic church, and that he observed its laws and would continue to do so while he remained a member of the corporation, and that if he should cease to conform to the laws of the church in the particular mentioned in the answer, he expressly agreed that the corporation might suspend or expel him and thereby exclude him from its benefits. Under the constitu- tion and laws of this State a man cannot be coerced into also State v. Merchants' Exch., 2 Mo. App. 96; State v. Chamber of Commerce, 20 Wis. 63; Supreme Council, etc., v. Forsinger, 125 Ind. 62; 25 N. E. R. 129. 1 Wagner v. Mut. Life Assn., 17 App. Div. 13; 44 N. Y. Supp. 862. 2 AlbersD. Merchants Exchange, 39 M ). App. 683; Huntsvillet?. Phelps, 27 Ala. 58; Piper ». Chappell, 14 Mees. & W. 624; Master Stevedores AssD. V. Walsh, 2 Daly, 14. 3 Kelly V. Supreme Council, etc., 46 App. Div. 79; 61 N. Y. Supp. 394. 4 Franta v. Bohemian E. C. Cent. Union, 164 Ms. 304; 63 S. W. E. 1100; 54 L. E. A. 723; and to the same effect is Hitter v. St. Aloysius Soc, 4 Ky. Law Eep. 871 ; 27 Alb. L. Jour. 401. The Supreme Court of Iowa In Matt v. Roman Cath. M. P. Soc, 70 la. 455, doubted whether a by-law providing that if a member should neglect his " Bister duties " he should thereby fcirfeit all his rights and Interest in the society was valid. See post, § 414a. 169 § 86 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. observing the sacraments of any church, and even if he should enter into a solemn contract to do so, he is free to break the contract and for breaking it, he cannot be deprived of any right that he has independent of it. But, if by contract a special benefit is created for him, he can- not break the contract and have the benefit too." A by- law providing for expulsion if the member joins any society not approved by the Catholic church is valid. i § 86. Gonstrnction of By-Laws Question for tlie Court. — The construction of by-laws is in all cases a ques- tion for the court. In construing by-laws courts will interpret them reasonably ; not scrutinizing their terms for the purpose of making them void, nor holding them invalid for slight or trivial reasons ; the unreasonableness should clearly appear.2 If associations are organized for benevo- lent purposes, courts will not construe their constitutions and by-laws so as to favor the forfeiture of the rights of the members or those dependent on them.^ By-laws will be construed in reference to the statutes so as to give them > Mazurkiewicz v. St. Adelbertus AidSoc, 137 Mich. 145; 86 N. W. R. 543; 54 L. E. A. 727. 2 Genest v. L. Union, etc., 141 Mass. 417 ; Faxon v. Sweet, 1 Green, 196; State v. Overton, 24 N. J. L. 440; Queen v. Saddlers' Co., 10 H. of L. Cas. 404; People v. Sailors' Snug Harbor, 5 Abb. Pr. (n. s.) 119; Butchers' Benef. Assn., 38 Pa. St, 298; People v. Med. Soc. Brie, 32 N. Y. 187; Fritz o. Muck, 62 How. Pr. 72; Commonwealth v. Worcester, 3 Pick. 462; St. Mary's Benef. Soc. v. Burford's Admr., 70 Pa. St. 321; Peoples. Father Mathew, etc., 41 Mich. 67; Pouitney v. Bachman, 62 How. Pr. 466 ; Pulford v. Fire Department, 31 Mich. 458 ; Supreme Lodge K. of P. V. Knight, 117 Ind. 489; 20 N. E. K. 479; Ang. & Ames on Corp., § 357. 3 Scbunck v. Gegenzeiten, etc., 44 Wis, 369; Erdmann v. Mut. Ins. Co., etc., 44 Wis. 376; Ballou v. Gile, 50 Wis. 614; Schillinger v. Boes, 9 Ky. L. Eep. 18. Indeed this principle is laid down in all cases bearing upon the valitlity of assessments and forfeiture for their non-payment. See post, § 377, et seq. 170 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 87 effect if possible. 1 In the absence of express provisions showing an intention to the contrary by-laws will be con- strued to operate prospectively only. As the Supreme Court of Iowa said:^ "The articles and by-laws as amended cannot be treated as retrospective in their oper- ation. Mere silence as to the effect of revision and amendment of the constitution and by-laws will not war- rant the inference that any change wrought will limit or extend the obligation heretofore created by the issuance of certificates of membership. Statutes are construed so as to give them a prospective operation, unless the intention that they operate retrospectively is clear and undoubted, and it is not perceived why the same canon of construction should not be applied to the rules adopted by a mutual in- surance association for the transaction of its business and the government of its members." The same principle is laid down in other cases. ^ A court will, as a rule, con- strue the by-laws as the members and officers or authorities of the order construe them.* The by-laws will be consid- ered as an entirety and a claim cannot be based on one section to the exclusion of another.^ § 87. What is Bad as a By-Law, May be Good as a Contract : Exceptioa. — What is bad as aby-law, as against ' Elsey V. Odd-fellows, 142 Mass. 224; Am. Legion of Honor v. Perry, 140 Mass. 580. 2 Carnes v. Iowa Traveling Men's Assn., 108 la. 281; 76 N. W. R. 683. 3 Knights Templars o. Masons, etc., Co.i). Jarman, 187 U. S. 197; Spen- cer V. Grand Lodge, 22 Misc. 147; 48 N. Y. Supp. 690; affirmed 65 N. Y. Supp. 1146; Grand Lodge, etc., v. Stumpf, 24 Tex. Civ. App. 309; 58 S. W. E. 840; Hobbs v. Association, 83 Iowa, 107; 47 N. W. E. 983; 11 L. E. A. 299; Sieverts v. Association, 95 Iowa, 710; 64 N. W. R. 671: Ben- ton V. Brotherhood, etc., 146 111. 590; 34 N. E. E. 939. ^ Kalinski v. Supreme Lodge, 57 Fed. R. 348 ; Supreme Lodge K. of P. V. Kalinski, 163 U. S. 289. 5 Badesch v. Congregation etc., 23 Misc. E. 160; .50 N. Y. Supp. 958j Thomas v. Societa Italiana, etc., 10 Misc. R. 746; 31 N. Y. Supp. 815. 171 § 87 GOVERNMENT AND MEMBBKSHIP : BY-LAWS. common right, may however be good as a contract, since, as a learned writer expresses it : i "A man may part with a common right voluntarily, of which it would be impolitic and unjust to deprive him by a by-law passed without his assent, or perhaps knowledge, by those who would not consult his individual interests."^ The unanimity of the vote of those present at a meeting will not bind or affect the rights of those absent where the vote is unauthorized.* A by-law may be invalid only in part, as, for example, one which provides for the expulsion of a member, without giving him the opportunity of defending himself against the charge upon which his expulsion is based, is nut alto- gether null and void but only so to the extent that it de- prives the member of a hearing from which he might derive a benefit possibly, and where it conclusively appears that no such result has followed its enforcement the ex- istence of such a provision in it will not invalidate the pro- ceedings taken under it.* Yet certain rights are esteemed SO sacred that they cannot even be parted with by contract, because to permit such action would be against public pol- icy. It has accordingly been held that a by-law prohibit- ing members from resorting to the courts, especially where a property right is involved, is void ; ^ and a by-law of a mutual beneficial society cannot oust the courts of jurisdic- tion to determine whether a member of it has been expelled 1 Ang. & Ames on Corp., § 842. 2 Austin V. Searing, 16 N. Y. 112; Goddard v. Merchants' Exchange, 79 Mo. 609; 9 Mo. App. 290; Purdy v. Bankers Life Assn., 101 Mo. App. 91; 74S. W. R. 486. 3 Stetson V. Eempton, 13 Mass. 282. ^ Berkhout v. Supreme Council Goyal Arcanum, 62 N. J. L, 103 ; 43 Atl. R. 1. • Supreme Council, etc., v. Garrigns, 104 Ind. 133; Bauer v. Sampson Lodge, 102 Ind. 262 ; Muiroy o. K. of H., 28 Mo. App. 463 ; Scott v. Avery, 5H. of li. Cas. 811; Insurance Co. v. Morse, 20 Wall. 445; Austin v. Searing, 16 N. T. 112; Supreme Council, etc., v. Forsinger, 125 Ind. 52; 25N. E.R. 129. 172 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 88 for sufficient cause. Neither can it make an appeal to the civil courts a cause of expulsion. ^ § 88. Enforcement of By-laws. — The power to make by-laws implies the right to enforce them by appropriate penalties. No general rule can be laid down as to what is a reasonable penalty, this must be determined by the nature of the offense. The courts in each case will determine the reasonableness of the penalty. Without going extensively into the subject, it may be said the penalty must be a sum certain ; the specification in the charter of one method of enforcing by-laws is an exclusion of other methods ; the offender cannot be imprisoned or his property forfeited for any violation of rules, nor can the offender be disfranchised. The penalty can only be given to the society whose regula- tions are infringed. In a Michigan case^ the Supreme Court of that State discussed the doctrines of the law on this subject somewhat elaborately and in the discussion said: " It is well settled that the right to levy burdens on the members is governed, to some extent, at least, by the occasion for them.^ As the original constitution contained no authority to forfeit membership, the power must be de- rived elsewhere. The charter contains no such power. It is held in Matter of Long Island E. E. Co.* that there can be no power to impose forfeitures unless granted by clear legislative enactment. No such power is consistent with ancient right and it cannot be obtained from anything but the sovereignty .° The only implied means for the enforce- ment of corporate charges and penalties is by action. 1 Sweeney v. Eev. Hugh McLaughlin Ben. Soc, 14 W. N. C. 466. 2 Pulford V. Fire Department, 31 Mich. 458. 3 London Pipe Co. v. Woodroffe, 7 B. & C. 838. * 19 Wend. 37. « Westcott V. Minnesota Mining Co., 23 Mich. 145; Kyd on Corp. 109; Ang. & Ames on Corp., § 360 and § 340. 173 § 89 GOVERNMENT AND MEMBERSHIP: BY-LAWS. Summary means and methods unknown to the common law must be authorized by express authority. And it would not be reasonable to enforce a pecuniary obligation or pen- alty by means disproportionate to its importance. The law of the land is made the test for analogies in cases where it affords analogies, asjs recognized in the case cited and elsewhere. It is equally abhorrent to all reason to allow a forfeiture to be enforced on an alleged default, without notice and hearing, or an opportunity to be heard. i If any expulsion could be had for such a cause the by-laws themselves expressly require that there shall be a trial before the trustees, who for this purpose act as a corpo- rate tribunal. But inasmuch as our general corporation law has always limited the penalties for violations of by- laws, expulsion cannot be allowed for any mere infraction of a by-law." ^ § 89. Distinction between Voluntary Associations where no Property Right is Involved, and Corporations in Kegard to By-Laws. — If no property right be involved a distinction is made, in respect to by-laws and regulations between incorporated societies and those which are volun- tary associations. In the former the by-laws must be rea- sonable, but in the latter the members are bound by their duly adopted by-laws and regulations, whether they be rea- sonable or not, provided, however, they are not in conflict with the law of the land, or public policy, and the courts will only examine whether they have been adopted in the way agreed on by the members.^ InKehlenbeck v. Loge- i Boehler v. Mechanics' Aid Soc, 22 Mich. 89; Commonwealth v. Germ. Soc, 15 Pa. St. 251; Queen v. Saddler's Co., 10 H. of L. Cas. 404; Com. V. Penn. Benev. Assn., 2 Serg. & R. 141. 2 Ang. & Ames on Corp., § 360; Erd v. Bavarian, etc., Assn., 67 Mich. 233; 34 N. W. Rep. 655; Otto v. Journeymen Tailors', etc., Union, 75 Cal. 308; 17 Pac. Rep. 217. 2 Elsas V. Alford, 1 City Ct. Bep. 123 ; Manning v. San Antonio Club, 63 Tex. 166; McDonald v. Eoss-Lewin, 29 Hun, 87. 174 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 90 man,i the court said: "It has been held ia this court upon more than one occasion in respect to' the by-laws of a voluntary association the court has no visitorial power and cannot determine whether they are reasonable or un- reasonable, and the only question which it can examine is whether they have been adopted in the way which has been agreed upon by the members of the association. « * * The association being a voluntary one, as has above been stated, this court has no power to pass upon the question as to whether such rules and regulations as they choose to adopt for the guidance of their own affairs are reasonable or unreasonable." ^ It is doubtful, however, if this rule applies in all cases, especially those in which property rights are involved or principles of public policy are violated. Agreements to refer any controversy to arbitrators have not always been upheld,^ especially when harsh or involv- ing forfeitures.* § 90. Societies have a Rigbt to the Service of their Members. — It is a general rule that all societies have the right to the service of all their members subject to the contract of the articles of association and the modifying circumstances of the case. The principle applies to cor- porations, and is thus laid down by an admitted authority : ® "A corporation has a right to the service of all its mem- 1 10 Daly, 447. 2 White V. Brownell, 2 Daly, 329; Hyde v. Woods, 2 Saw. 655; Innes V. Wylle, 1 Car. & K. 262 ; Fritz v. Muck, 62 How. Pr. 74 . s Heath©. N.Y. Gold Exch., 7 Abb. Pr. (n. s.) 251; i58 How. Pr. 168; Savannah Cotton Exchange v. State, 51 6a. 668. See post, § 450. * Bauer u. Sampson Lodge, 102 Ind. 262; Supreme Council v. Gar- rigus, 104 Ind. 133; Austin ». Searing, 16 N. Y. 112; Mulroy ». Supreme Lodge K. of H., 28 Mo App. 463; Goodman v. Jedidjah Lodge, 67 Md. 117; Grays- Christian Soc, 137 Mass. 329; s. c. 50 Am. Rep. 310. See post, § 450. 6 Ang. & Ames on Corp., § 352. 175 § 91 GOVERNMENT AND MEMBERSHIP : BY-LAWS. bers, and may make by-laws to enforce it. It may thus impose a penalty on members eligible to an office, who re- fuse to accept it; or who refuse to take the oath appointed by law, as a necessary qualification for holding it ; and on members who refuse to attend the corporate meetings. Nor, it would seem, is a by-law of this nature less valid, though it require that the person accepting the office shall pay a fee on his admission ; and the court will not scrutinize the reasonableness of the fee, since the members of the corporation have assented to the reasonableness of the amount ; which raises a presumption that under their pecu- liar circumstances it is reasonable, or, at least, that they deem it so. " § 91. The Articles of Association, or Charter, forms a Contract between the Society and the Members. — The rights of members of all societies, incorporated or not, de- pend upon the articles of association or charter to which the member assents upon becoming such. Practically, all the cases which relate to societies or corporations and which are cited in this work, recognize this fact and declare the doctrine. The Supreme Court of Pennsylvania says: ^ " Each member pledges himself to obey these laws as a condition of his membership, by an express undertaking in signing the constitution, and his promise to support the con- stitution and by-laws as a brotherly member. Nor is this pledge executed under the by-laws until he shall have answered on his word of truth that he is acquainted with the constitution and by-laws. * * * The association having the right under its charter to make the by-law for the well-being of the society and the proper regulation of 1 St. Mary's Benef. Soc. v. Barford's Admr., 70 Pa. St. 321; Kalbitzer V. Goodhue, 62 W. Va. 435; 44 S. E. R. 264. See also ante, § 28, and, as to imposition ol fines, Leahy v. Mooney, 39 Misc. E. 829; 81 N. Y. Supp. 360. 176 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 91 its affairs, the regulation being a reasonable and proper one, contributing to the value of membership, and the association, and the member having accepted the by-law in express terms in his entry into membership, the by-law constitutes a part of the terms of the contract." In Texas the Supreme Court of the State has said : ^ " When mem- bership in certain societies confers upon the individual important benefits, as in aid societies, benevolent societies, etc., or peculiar advantages in trade and business, as in chambers of commerce, these are important valuable rights which are protected by the law of the land, and are gen- erally secured in some way by the charter of incorpora- tion. * * * But ^e think it has been generally held that clubs or societies, whether religious, literary or social, have the right to make their own rules upon the subject of the admission or exclusion of members, and these rules may be considered as articles of agreement to which all who become members are parties. * * * The fact that a club or society is incorporated would not, we think, in any way affect its right to make its own rules, unless there was something in the charter or in the general law under which it was incorporated which controlled it in this respect." ^ 1 Manning v. San Antonio Club, 63 Tex. 166; s. c. 61 Am. Eep. 639. 2 Van Poucke v. Netherland Soc, 63 Mich. 378; 29 N. W. Rep. 863; Sperry's Appeal, 116 Pa. St. 391; 9 Atl. 478; McCabe o. Father Mathew, etc., 24 Hun, 149; Gooch ». Assn. Aged Females, 109 Mass. 658; Skelly V. Private Coachmen's Ben. Soc, 13 Daly, 2; Bauer v. Sampson Lodge K. of P., 102 Ind. 262; Harrington v. Workingmen's Assn., 70 Ga. 340; Black & Whitesmith's Soc. v. Vandyke, 2 Whart. 312; Osceola Tribe v. Schmidt, 67 Md. 98; Fleming v. Hector, 2 M. & W. 171; Innes v. Wylie, ICar. &K. 262; Braucker ». Roberts, 7 Jur. (n. s.) 1185; Ilopkinson ». Marquis of Exeter, L. R. 5 Eq. 63; Thompson v. Adams, 7 W. N. C. 281; Moxey's Appeal, 9 W. N. C, 441; Protchett u. Schaefer, 11 Phila. 166; Heath v. N. Y. Gold Exch., 38 How. Pr. 168; 7 Abb. Pr. (n. s.) 251 ; Kuhl v, Meyer, 42 M. A. 628. 12 177 § 91a GOVERNMENT AND MEMBERSHIP : BY-LAWS. § 91a. Amendment or Appeal of By-Laws. — Generally speaking the same body which can make by-laws has the power to amend or repeal them, subject to the additional restrictions and limitations of the by-laws themselves, as well as those of the articles of association or charter, and the implied conditions of being rgasonable and not contrary to law.^ Where the by-laws contained no provision for amendment it was held that a majority of the members could amend and the others by silence might acquiesce.^ The body of members at an annual meeting may adopt a rule in the nature of a by-law, which under the delegated power to the directors to make by-laws the latter would not have, even though it seems to impair vested rights.* Where the charter of a corporation expired in 1890 and was renewed in 1896 it was held that by-laws adopted in the interim were void.* A by-law of an unincorporated society is not repealed by the adoption of a new constitu- tion making no reference to the by-law.^ In order to be valid amendments must be adopted at a legal meeting of the association.^ The question of vested rights often arises in determining the validity of changes in by-laws ; while this question will be considered later on,' yet we may here say that although generally speaking it is true that no by-law can be amended or repealed so as to affect an existing cause of action or impair vested rights, and although a by-law that will disturb vested rights is unreasonable,* yet where 1 Morawetz on Corp., § i99; Ang. and Ames on Corp., § 329. 2 Kehlenbeck v. Norddeutcher Band, 10 Del. 447. 3 Borgards v. Farmers' Mat. Ins. Co., 79 Mich. 440; 44 N. W. R. 856. * Supreme Lodge K. of P. v. Weller, 93 Va.|eOo; 26 S. B. R. 891. 6 Herman u. Plummer, 20 Wash. 363; 56 Pac. R. 316. 8 Metropolitan, etc., Assn. v. Windover, 137 111. 417; 27 N. E. R. 538. ' Post, §§ 92 and 186. * Kent V. Quicksilver Mining Co., 78 N. Y. 159; Morrison !?. Wiscon- sin Odd-Fellows, etc., 69 Wis. 162; Gundlachu. Germanla Mech. Assn., 4 Hun, 339; 49 How. Pr. 190; Pellazino v. Germ. Catholic, etc, Soc.,16 178 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 92 the member agrees- to obey and conform to subsequently enacted laws, as well as those existing at the time, or the by-laws themselves contain provision for their alteration, a change regularly made and not unfair of itself will be valid and binding although it may seem to impair vested rights.^ Of course a member may expressly consent to be bound by the amendment, in which case he is estopped to dispute it.^ § 92. By-laws Relating to Sick Benefits. — Many ben- efit societies provide in their by-laws for a certain sum to be paid to a member in case of his sickness. The question has sometimes arisen as to the respective rights and liabili- ties of the member and the society in regard to these bene- fits. In all these cases it has been held that the laws of the society are to be considered in determining the right, and they are to govern unless contrary to municipal law. In St. Patrick's Male Soe. v. McVey,^ the Supreme Court of Pennsylvania held that a member of a beneficial society does not stand in the relation of a creditor to it, and can only claim such benefits as are prescribed by the by-laws existing at the time he applies for relief ; that it is wrong to treat the by-law, in existence when the plaintiff became a Cin. L. B. 27; Becker v. Berlin Ben. Soc, 144 Pa. St. 232; 22 Atl. R. 699; Hobbs v. Iowa Benefit Assn., 82 la. 107; 47 N. W. R. 983; Wist v. Grand Lodge A. O. U. W., 22 Oreg. 271; 29 Pac. B. 610; Thebert ». Supreme Lodge K. of H., 78 Minn. 448; 81 N. W. R. 220; 47 L. R. A. 136. 1 Poultney u. Bachman, 31 Hun, 49; reversing 62 How.Pr. 466; Stolir V. San Francisco Mus. F. Soc.,82Cal. 557; 22 Pac. K. 425; Pepec. City, etc., Soc, 3 R. Ch. 47; Davis v. Second Chatham, etc., Soc, 61 L. T. R. 80; Supreme Lodge, etc., v. Knight, 117 Ind. 489; 20 N. E. 483; Ellerbe B. Faust, 119 Mo. 653; 25 S. W. R. 390; 25 !■. R. A. 149; see post, § 185. As to notice see Warnehold v. Grand Lodge A. O. U. W., 83 la. 23; 48 N. W. R. 1067. As to proof of by-laws, Greenspan v. American Star Order, 20 N. Y. Supp. 945; and ante, § 79. 2 Penachio v. Saati Soc, 67 N. T. Supp. 140; 33 Misc. 751. 8 92 Pa. St. 510. 179 § 92 GOVEENMENT AND MEMBERSHIP: BY-LAWS. member, as part of a contract unalterable except with his consent. "It is manifest," said the court, "that the plaintiff ought not to have been allowed to recover under a by-law which had been repealed before he fell sick." In a case in New York,i it was held that in these societies the rights of the members may be t^ken away by an alteration of the constitution without notice unless the constitution provides for it. In thiscase the court said: " The plaintiff was bound by these changes. The charter gave no right of action. The constitution and by-laws were liable to change. The changes were made in the way pointed out by the constitution and laws. * * * No notice was re- quired jto be given to plaintiff. The by-laws provide for none, and they do provide for a change by resolution proposed one week before it could be passed. It was doubtless designed that this delay would operate to give notice to all persons interested. A notice to all the members would be a great burden." In the same case it was said that whatever contract there was between the parties arose under the charter, constitution and by-laws of the society. In a well-considered case ^ the Supreme Court of Califor- nia held that where both the laws of the State and the by- laws of the society, which was incorporated, gave the right to repeal, alter or amend the by-laws, it was not a breach of the contract to amend a by-law, which provided that a member in case of sickness should receive ten dollars per week by limiting such allowance to a certain number 1 McCabe v. Father Matthew, etc., Soc, 24 Hun, 149; see also Ponlt- ney v. Bachman, 31 Hun, 49, reversing 62 How. Pr. 466. 2 Stohr V. San Francisco Mus. Fund Soc, 82 Cal. 657; 22 Pac. E. 1125, also Bowie v. Grand Lodge, etc., 99 Cal. 392; 34 Pac. E. 103. See also EUerbe v. Faust, 119 Mo. 653; 25 S. W. E. 390; 25 L. E. A. 149 ; Berg V. Badenser, etc., Verein, 90 App. Div. 474; 86 N. Y. Supp. 429; Pain v. Societe St. Jean Baptiste, 172 Mass. 319; 52 N. £. E. 502. 180 GOVERNMENT AND MEMBEESHIP : BY-LAWS. § 92 of weeks thereafter though a member was sick at the time of such an amendment. In discussing the phrase " vested rights " the court says : " In view of this power to alter the contract, it cannot be said that the defendant could not alter its by-laws in any respect. The respondent argues., however, that it had no power to alter them so as to impair a vested right. This must be conceded, but we do not think that the new by-law purported to impair a vested right. The term ' vested right ' is often loosely used. In one sense every right is vested. If a man has a right at all, it must be vested in him; otherwise how could it be a right? The moment a contract is made a right is vested in each party to have it remain unaltered, and to have it performed. The term, however, is frequently used to designate a right which has become so fixed that it is not subject to be divested with- out the consent of the owner, as contradistinguished from rights which are subject to be divested without his consent. Now a right whether it be of such a fixed character or not, must be a right to something; and when a man talks vaguely of his vested right, it conduces to clearness to ask : ' A vested right to what? ' In the present case the plaintiff can have no right to have the contract remain unchanged, because, as we have seen, the contract itself provided that it may be changed. Nor has he a right to remain unaffected by any change that may be made; for, if such right be common to all the members, it is merely another way of saying that no change can be made ; and, if the right be not common to the other members, it would be to assert a privilege or superiority over them, of which there is no pretense. If the plaintiff has any right which is so fixed that it is not subject to change, we think it can only be to the fruits which ripened before the change was made ; in other words, to such sums as became due before the new by-law was adopted. To express it differently, the change could not be retroactive. This is all that we think can 181 § 92 GOVEENMENT AND MEMBERSHIP: BY-LAWS. be meant by ' vested right ' in a case like the present. Now, under the contract, nothing was due before the sickness actually took place. Benefits do not accrue for future sickness. The right of the plaintiff to benefits for future sickness is not different in its nature from the right of the well members to benefits for future sickness. In the one case the members have a right to future payment in case they become sick ; in the other the plaintiff, has a right to future payments in case he continues sick. And if there was no power to change the by-law in the one case, there was no power to change it in the other, which is equivalent to saying that there was no power to change it at all. The cases where a specific sum becomes due upon the happening of a certain event, as upon death, are not like the present. In such "cases an alteration in the con- tract cannot be made after the fact ; for that would be to make that not due which had already become due. We are inclined to think that the foregoing would apply if the by-law under consideration had specified that the weekly payments were to continue as long as the sickness con- tinued. But it does not so specify. The time during which the payments were to continue is left indefinite. The sub- stance of the contract is, in our opinion, that, in case of sickness, the member is to receive weekly payments for an indefinite period of sickness, subject to the power of the defendant to change the provision authorizing such pay- ments so far as future payments are concerned." But these views have not always been followed.' 1 Pellazzino v. Germ. Cath. Soc, 16 Cin. L. Bui. 27; Gundlach ». GermaQla Mech. Assn., 4 Hun, 339; Bauer v. Sampson Lodge, 102 Ind. 262; Kent v. Quicksilver Mining Co., 78 N. Y. 159: Becker v. Berlin Soc, 144 Pa. St. 232; 22 Atl. R. 699: Hobbs v. la. Ben. Assn., 82 la. 107; 47 N. W. R. 983; Wist v. Grand Lodge A. O. U. W., 22 Oreg. 271; 29 Pac. R. 610; State v. Monti (N. J.), 36 Atl. R. 666. For definition of paralysis see Yarborough v. National Ben. Soc, 88 Mo. App. 465. 182 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 93 § 93. Construction of Same. — Like other by-laws, those relating to benefits must have a reasonable construc- tion and, if possible, harmonize with the constitution of the society. 1 Thus, it was held^ that where the by-laws pro- vided that a member who " became incapable of working, in consequence of sickness or accident," should receive from the society a certain sum per week, the member by trying to resume work and working two days during the period of sickness did not debar himself from receiving benefits during the time, as it could not be said as a matter of law that he was not " incapable of working " within the meaning of the by-law. The word, " year, " refers to the period of a year, not a calendar year.' If possible the language of the by-laws will be construed so as to avoid a forfeiture.* A beneficial certificate insuring against sick- ness, and not extending to surgical treatment not necessi- tated by injury, does not exempt the association from liability for benefits accruing after a surgical operation which was necessitated as a means of curing the sickness and which did not cause any sickness distinct from that existing previously. Provisions for benefits in case of " sickness " do not extend to a case of bodily injury not affecting the general health of the person injured.^ But insanity has been held to be sickness and disease.' And so with blind- ness produced as the result of injuries. ^ ' Leahy v. Ancient Order, etc, 54 111. App. 108. 2 Genest v. L'Union St. Joseph, 141 Mass. 417. s TMbault«. St. Jean, etc, Assn., 21 B. I. 157; 42 Atl. R. 518. 4 Connelly v. Shamrock Benev. Soc, 43 Mo. App. 283; see also post, § 385. « Lord V. National Prot. Soc, 129 Mich. 335; 88 N. W. R. 876. 6 Kelly V. Ancient Order of Hibernians, 9 Daly, 289. ' Burton v. Eyden, 8 Q. B. 295; Kelly v. Ancient Order Hibernians, supra; McCuUough v. Expressmen's M. B. Assn., 133 Pa. St. 142; 19 Atl. R. 355; Kobillard v. Society St. Jean, etc., 21 K. I. 848; and 142 (Part 2) 43 Atl. E. 635; 45 L. R. A. 559. 8 Moge V. Societe, etc., 167 Mass. 298; 45 N. E. 'd. 749; 35 L. R. A. 736. 183 § 94 GOVEENMENT AND MEMBEESHIP: BY-LAWS. § 94. Proceedings to Obtain Sick Benefits : Kiglits of Members to Besort to Civil Courts. — A member of a benefit society must, in applying for benefits under its by- laws, follow the procedure therein prescribed.^ He is not excused from such compliance because of insanity.^ A local lodge cannot impose conditions in addition to those imposed by the general association.^ It is a well-established rule that before resorting to the civil courts for redress a member must exhaust all the remedies pro- vided by the society by appeal or otherwise.* It has been held however that this rule does not apply to a death claim. ^ And by affirming the action of its officers in rejecting a claim the right to require an appeal is waived.^ In a case in Georgia the Supreme Court of that State, in passing upon the question whether a member could bring an action for his benefits said: ^ " Among the objects of the organ- ization of this benevolent association, it is evident that the mutual aid to be rendered to the members thereof by the 1 Field V. National Council K. & L. of S., 64 Neb. 226; 89 N. W. E. 773; Smith ». Sovereign Camp, etc., 179 Mo. 119; 77 S. W. U. 286. To the same effect are the other cases cited to this section. 2 Walsh V. Consumnes Tribe, etc., 108 Cal. 496; 41 Pac. R. 418; Noel V, Modern Woodmen, 61 111. App. 696. 3 Taylor©. Pettee, 70 N. H. 38; 47 All. R. 733. * Poultney v. Bachman, 31 Hun, 49; Robinson v. Irish^ etc., Soc, 67 Cal. 135; Supreme Council v. Forsinger, 126 Ind. 52; 25 N. E. R. 129 Burns o. Bricklayers Union, 10 N. Y. Supp. 916; 14 N. Y. Supp. 361 Blumenfeldt ». Korschuck, 43 111. App. 434; Breneman v. Franklin Benef, Assn., 3 W. & S. 318; McMahon v. Supt. Counc. O. C. F., 54 M. A. 408 Brautenstein v. Accident Death Co., 1 Best & Smith, 182; Cin. Lodge v Littlebury, 6 Cin. L. B. 237; Peyre v. Mutual Relief Assn., 90 Cal. 240 27 Pac. R. 191. s Bukofzer v. U. S. Grand Lodge, 16 N. Y. Supp. 922; Railway Pas- senger, etc., Assn. o. Robinson, 147 111. 138; 35 N. E. R. 168; a£Eg. 38 111. App. 111. 6 McMahon v. Sup. Counc. O. C. F., 64 M. A. 468. ' Harrington u. Workiagmen's Benevolent, etc., 70 Ga. 340. See also Mullen v. Order of Foresters, 70 N. H. 327; 47 Atl. R. 267. 184 GOVERNMENT AND MEMBEESHIP : BY-LAWS. § 94 observance of self-imposed duties and obligations was among the most important. It was to be a brotherhood of work- ingmen; governed, managed and controlled by its own membership, under its own laws, without extrinsic compul- sion. Its operations for the execution of its benevolent designs were to be internal, and by persons of its own ap- pointment ; provision was made to accomplish all the ends in view ; there was nothing in any of its laws prohibited by statute or constitution ; hence, whosoever became a member could only avail himself of the rights to be enjoyed in that way and manner provided by its own rules." In an early case,i the Supreme Court of Pennsylvania held in a similar case that, when the committee or tribunal created by the lodge or society had passed on the matter, the civil courts had no jurisdiction to inquire into the regularity of the proceedings. The court said: "The matter here, how- ever, depends not merely on presumption of assent to a by-law, but on the charter to which the plaintiff expressly assented at his initiation ; and he is consequently bound by everything done in accordance with it.' In a very recent case,2 the Supreme Court of Michigan held that if the by- law of a mutual benefit and co-operative insurance society was reasonable and valid, not oppressive nor against public policy, it forms part of the contract entered into between each member and his fellow-members constituting the society; and all are bound by its terms. It is reasonable 1 Black and Whitesmith's Society v. Vandyke, 2 Whart. 309; 30 Am. Dec. 263. 2 Van Poucke v. Netherland, etc., Soc, 63 Mich. 378; 29 N. W. Kep. 863; followed in Canfleld v. Great Camp of the Maccabees, 87 Mich. 626; 49 N. W. E. 875; Hemhean v. Great Camp of the Maccabees, 101 Mich, 161; 59 N. W. B. 417; Grand Lodge Brotherhood, etc., u. Orrell, 97111. App. 246, and Grand Central Lodge v. Grogan, 44 111. App. 111. See post, § 400, where extracts from the opinions in these cases are given ; but see to the contrary Kinney v. B. & O. Employes' E, Assn., 36 W. Va. 383; 14 S. E. E. 8, and post, § 450. 185 § 94 GOVEKNMENT AND MEMBERSHIP: BY-LAWS. that the sick committee of such a society should be invested with authority to determine whether a member, claiming to be sick, is entitled to sick benefits, and when such benefits should cease. And further that a party can only recover sick benefits according to the terms prescribed in the by- laws ; and if they provide for a committee to determine the question for him, and he has referred it to a committee, he has made it a tribunal to determine the question, and the decision of such committee is final. In Maryland the Court of Appeals has held^ that one by becoming a member " as- sented to be governed by the tribe and council according to the regulations, it follows that he was bound by their applica- tion and construction in his own case. It is provided that the tribe shall determine matters of this kind, and the decision, on appeal, made final. These are private beneficial institu- tions operating on the members only, who for reasons of policy and convenience, affecting their welfare and, perhaps, their existence, adopt laws for their government, to be administered by themselves, to which every person who joins them assents. They require the surrender of no right that a man may not waive, and are obligatory on him only so long as he chooses to recognize their authority. In the present instance the party appears to have been sub- jected to the general laws and by-laws according to the usual course, and if the tribunal of his own choice has decided against him he ought not to complain." In all the cases it has been held that the same principles govern as those applying to arbitrations, and when the prescribed forms have been observed without fraud and in good faith, the decision of the committee or society is final. 2 If the 1 Anacosta Tribe v. Murbach, 13 Md. 91; 71 Am. Dec. 625. 2 Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Eep. 478; McAlees? ». Su- preme Sitting, etc. (Pa.), 13 Atl. Rep. 755; Woolsey ». Odd-Fellows, etc., 61 la. 429; Harrison v. Hoyle, 24 Ohio St. 254; Toram v. Howard Benef. See, 4 Pa. St. 519; Osceola Tribe ». Schmidt, 57 Md. 98; Beg. o. 186 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 94 by-law is unequal or vexatious then the court will not be bound by it.i Where the officer of the local body of the association refuses to certify to the claim, the member of that body is not bound to submit it to the physician of the association who under the laws of the latter can only act when the claim is so certified. 2 Nor can a member sue the physician for wrongfully refusing to certify to the bill of another physician for attendance during a member's illness as required by the by-laws. ^ Where a member invokes the tribunals of the society and they decide against him he is bound as by an award of arbitrators, although the laws contain no provision as to submission.* In the case first cited the Supreme Court of California says: 5 " It is not alleged that the defendant here has any provision in its by-laws, to the effect that the benefits which it agrees to pay to its members in case of sickness shall not be payable except upon the favorable report or recommen- dation of some committee of the order specially authorized by its constitution or by-laws to investigate such claims Evans, 3 El. & Bl. 363; 23 L. J. M. C. 100; Grinham v. Card, 7 Ex. 833; 21 L. J. Ex. 321; also Matron v. Wentworth, 4 Cia. L. B. 513. 1 Cartan v. The Father Matthew, etc., 3 Daly, 20; Bueckingv. Robert Blum Lodge, 1 City Ct. Hep. 51. 2 Supreme Sitting Iron Hall ». Stein, 120 Ind. 270; 22 N. E. E. 136; Ramell ». Duffy, 82 App. Div. 496; 81 N. Y. Supp. 600. Bat in Audette V. L'Union St. Joseph, 178 Mass. 113; 59 N. B. E. 668, it was held that the refusal of the physician to give the sworn certificate required by the by-laws did not excuse compliance. And see also McVoy v. Keller, 36 Misc. R. 803; 74 N. Y. Supp. 842. 3 Gleavy ». Walker, 22 E. I. 70; 46 Atl. R. 180. 4 Robinson v. Templar Lodge, etc., 97 Cal. 62; 31 Pac. R. 609; Valen- tine V. Valentine, 2 Barb. Ch. 430; Grand Central Lodge A. O. U. W. v. Grogan, 44 111. App. Ill But see Wuerthner v. Workingmen's Benev. Soc, 121 Mich. 90; 79 N. W. K. 921, where it is held that if the constitu- tion and by-laws do not make the decision final the member can resort to the civil courts. 8 Robinson v. Templar Lodge, etc., supra. 187 § 94 GOVERNMENT AND MEMBERSHIP: BY-LAWS. for benefits. But on the contrary it will be noticed that by the terms of the contract between plaintiff and de- fendant, as stated in the complaint, the plaintiff was under no obligation to resort in the first instance to the tribunals established by the laws of the order under which defend- ant was organized, or even to make any demand upon defendant for the benefits claimed, other than by the commencement of an action therefor in some court of competent jurisdiction. It is, however, alleged in the complaint, as we construe it, that plaintiff did voluntarily submit his claim against defendant to the decision of the tribunals of the order of which he became a member when he joined the defendant lodge, and that such tribunals < adjudged and determined ' that he was not entitled to the payment of the benefits now claimed, or to any part thereof. The question, therefore, is, what effect has this determination upon the right of plaintiff to maintain the action? It does not appear that plaintiff made any express agreement to be bound by the determination of the tribu- nals referred to, but we think that, when he voluntarily submitted to them for decision the differences which existed between himself and defendant, there was an implied agreement upon his part to be bound by their judgment or award, in the absence of any fraud or mistake or other cause which in equity would entitle him to avoid the same. ' Where a matter is submitted to arbitrators, it is not neces- sary that there should be any express agreement to abide by the award when made ; for the law implies such an agreement from the very fact of submission.'! It would seem from the allegations of the complaint that the tribunals whose jurisdiction plaintiff invoked, are established for the purpose of settling all matters of difference which may arise between a subordinate lodge and any of its members, 1 Valentine v. Valentine, 2 Barb. Ch. 430. 188 GOVERNMENT AND MEMBERSHIP: BT-LAWS. § 94 growing out of a refusal upon the part of the lodge to pay benefits claimed, if the member consents to submit such matter to them for settlement ; and it seems clear to us that plaintiff's voluntary submission of his claim for benefits to their decision was in the nature of a sub- mission to arbitration, and their decision in the nature of an award and should be considered equally conclusive. It is not alleged that there was any misconduct upon the part of those to whom he submitted the justice of his claims, or that there was any fraud or mistake in the award itself, or that, for any reason, the matters in difference between himself and defendant were not fully and fairly tried." If the by-laws provide for no tribunal to test the right to benefits, the member may have an immediate right of action,! a^j of course an action lies to enforce the award of the lodge or society tribunal. The courts lat- terly incline to adopt the rule that where a society agrees, in consideration of the payment of dues, to pay a certain sum as benefits during a member's illness, it may not deprive the member of his right to resort to the courts in the first instance ,2 the theory being that " agreements to submit a matter to arbitration are valid when made after the specific controversy has actually arisen, and not where made in advance, certainly not when the agreement provides that one of the interested parties shall be sole arbitrator. The ^ Dolan ». Court Good Samaritan, 128 Mass. 477; Smith v. Society, etc., 12 Phila. 380; Harriagton v. Workingmen's, etc., 70 Ga. 340; Wuerthner v. Workingmen's Benev. Assn., 121 Mich. 90; 79 N. K. 921 ; Gray v. Chapter, etc., 70 App. Div. 155; 75 N. Y. Supp. 267. 2 Bauer v. Sampson Lodge, 102 Ind. 262; Supreme Council, etc., ». Garrigus, 104 Ind. 133; Harrington ». Workingmen's, etc., 70 Ga. 340; Kigby V. Connol, 24 L. R. Ch. D. 482; Myers v. Jenkins, 63 Ohio St. 101; 57 N. E. R. 1089; Pepin v. Societe St. Jean Baptiste, 23 R. I. 81; 49 Atl. R. 387; 60 L. R. A. 626. And where the question is solely one of law the courts take jurisdiction in the first instance. Brown v. Supreme Court I. O. F., 34 Misc. 556; 70 N, Y. Supp. 396; Voluntary Relief Dept. Pa. Lines v. Spencer, 17 Ind. App. 123; 46 N. E. 477. 189 § 95 GOVERNMENT AND MEMBEKSHIP: BY-LAWS. weight of authority is very decidedly against the power of parties to bind themselves in advance that a controversy that may possibly arise shall be conclusively settled by an individual or a corporation." l But a by-law is valid pro- viding that what is a total disability shall be determined by a tribunal of the society. 2 A member cannot recover for benefits accruing after suit brought. ^ § 95. Expulsion of Members. — One of the most vital questions that arises in relation to the rights of members of societies and associations, whether incorporated or not, is that concerning the power of expulsion, and it becomes most important to inquire when and under what circum- stances a member can be expelled and what procedure must be observed in the exercise by a society of this power. At the beginning of the discussion we must remember that benefit societies have a dual existence ; they are social and fraternal in their nature, yet provide for their members, or their beneficiaries, certain pecuniary benefits, consequently, while expulsion in the case of a memer of a church or club, or fraternity purely social, might be well enough, if the proceedings were regular, the same offenses in the case of a mber of a benefit society could not be punished by expulsion having the consequences of a forfeiture of pecu- niary rights. This distinction will appear more clearly as we proceed with the discussion of the subject.* 1 Bauer v. Sampson Lodge, 102 Ind. 262, citing Kistler o. Indianapo- lis, etc., R. R. Co., 88 lad. 460; Insurance Co. v. Morse, 20 Wall. 445; Mentz V. Armenia F. Ins. Co., 79 Pa. St. 478; "Wood v. Humphrey, 114 Mass. 185; Austin v. Searing, 16 N.Y. 112. See also Railway Pas- senger, etc., Assn. v. Robinson, 147 111. 138; 35 N. E. R. 168, and post, § 107 and § 450. 2 Sanderson v. Brotherhood R. R. Trainmen, 204 Pa. St. 182; 53 Atl. R. 767. ^ B. & o. Employe's R. Assn. o. Post, 122 Pa. St. 579; 15 Atl. R. 885. ^ A valuable article on the expulsion of members of corporations and voluntary associations, from the pen of Hon. Seymour D. Ttiompson, 190 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 97 § 96. Same Rules Apply to Incorporated and Unin- corporated Societies. — The same rules apply to voluntary, unincorporated associations as to incorporated societies. Upon this subject the court in a Pennsylvania easel gays : " These associations have some elements in common with corporations, joint-stock companies and partnerships ; such as association and being governed by regulations, adopted by themselves for that purpose, * « » x have very little doubt, therefore, that the same rules of law and equity, so far as regards the control of them and the adju- dication of their reserved and inherent powers to regulate the conduct and to expel their members, apply to them as to corporations and joint-stock companies." 2 § 97. Power of Corporation to Expel Members when Charter is Silent : Grounds for Expulsion . — " When a corporation is duly organized," says the Supreme Court of Wisconsin, 3 " it has power to make by-laws and expel mem- bers, though the charter is silent upon the subject. If tlie power is expressly granted in general terms, it is conferred to enable the corporation to accomplish the objects of its creation, and is limited to such objects or purposes. It ap- pears to be well settled that where the charter of a corpo- ration is either silent upon the subject of expulsion, or grants the power in general terms, there are but three legal causes of disfranchisement." These three causes were will be found in 24 American Law Review, p. 537. A valuable note is* appended in 49 L. E. A. 353 to Ryan v. Cudahy, 157 111. 108; 41 N. B. R. 760, in which the authorities are exhaustively reviewed. ' Leech v. Harris, 2 Brewst. 671. 2 Gorman®. Russell, 14 Cal. 531; Loubat v. Leroy, 15 Abb. N. C. 1; Babb V. Reed, 5 Eawle, 158; 28 Am. Dec. 650; Otto v. Journeymen Tailor's, etc.. Union; 75 Cal. 308; 17 Pac. R. 217; Beaumont v. Meredith, 3 Ves. & B. 180; Lindley on Par. 66; Kuhl v. Meyer, 42 M. A. 474; Law- son i). Kernel], 118 Cal. 613; 50 Pac. R. 763; 49 L, R. A. 400. 3 State V. Chamber of Commerce, 20 Wis. 71. 191 § 98 GOVERNMENT AND MEMBERSHIP: BY-LAWS. stated by Lord Mansfield,! and are again recited by the Supreme Court of Pennsylvania 2 as follows: " There is a tacit condition annexed to the franchise of a member, which, if he breaks, he may be disfranchised. The cases in which this inherent power may be exercised are of three kinds: 1. When an offense is committed, which has no im- mediate relation to a member's corporate duty, but is of so infamous a nature as renders him unfit for the society of honest men. Such are the offenses of perjury, forgery, etc. But before an expulsion is made for a cause of this kind it is necsssary that there should be a previous convic- tion by a jury, according to the law of the land. 2. When the offense is against his duty as a corporator, and in that case he may be expelled on trial and conviction by the cor- poration. 3. The third is an offense of a mixed nature, against the member's duty as a corporator, and also indict- able by the law of the land."^ § 98. ^English Rule as to Voluntary Associations. — In England, however, it has been held that in the absence of any provision in the constitution or by-laws of an incor- porated voluntary association giving power of expulsion, there is no inherent power to expel a member, since it forms no part of the written contract by which the members are associated together.* ^ Rex V. Town of Liverpool, 2 Burr. 732. • 2 Commonwealths. St. Patrick's Benevolent Soc, 2 Binney, 441; 4 Am. Dec. 453. 3 People V. Medical Society, etc., 32 N. Y. 187; Dickenson v. Cham- ber of Commerce, etc., 29 Wis. 49; People v. Medical Society, 24 Barb. 577; Leech v. Harris, 2 Brewst. 571; Society u. Commonwealth, 62 Pa. St. 125; Loubat v. Leroy, 15 Abb. N. C. 1; Weiss v. Musical Prot. Union, 189 Pa. St. 446; 42 Atl. E. 118. See post, § 104. 4 Dawkins v. Antrobus, L. R. 17 Ch. D. 615; affirmed 44 L. T. Eep. (N. 8.) 557. 192 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 100 § 99. Wheu no Power to Expel Exists. — This power to disfranchise or expel members is incident to every cor- poration or society, except where formed primarily or ex- clusively for the purpose of gain, in which latter case such power cannot be exercised unless expressly granted by char- ter.! ^nd where the corporation or society owns property, a member cannot be expelled or deprived of his interest in the stock and general funds unless this power is contained in the charter. 2 But where the interest of a member in the property of the association is only incidental to his membership it will not prevent his expulsion. ^ And when expelled and therefore not a member all rights in the property of the association are lost.* § 100. Power to Expel Belongs to Body Generally: Cannot be Delegated. — The power of expulsion of mem- bers of a society, club or corporation belongs to the body at large,^ and, in the absence of the clearest authority in the constitution and by-laws, cannot be delegated to a com- mittee or officer. Says one case:^ "The transfer from 1 In re Long Island K. R. Co., 19 Wend. 37; 32 Am. Dec. 429; Evans v. Philadelphia Club, 50 Pa. St. 107; Purdy w. Bankers Life Assn., 101 Mo. App. 91; 74 S. W. R. 486. 2 Bagg's Case, 11 Co. 99; Davis v. Bank of England, 2 Bing. 393; Hopkiuson o. Marquis of Exeter, L. B. 5 Eq. 63; State o. Tudor, 5 Day, 329; Roehler v. Mechanics' Aid Society, 22 Mich. 86; Evans 9. Philadel- phia Club, 60 Pa. St. 107; Society v. Commonwealth, 52 Pa. St. 125. See also note in 63 Am. Dec. 772, to Hiss 0. Bartlett, 3 Gray, 468. 3 Lawsonc. Hewell, 118 Cal. 613 ; 50 Pac. E. 763; 49 L. K. A. 400- * Missouri Bottlers' Assn. o. Fennerty, 81 Mo. App. 626. See ante, § 38fl!. « Hassler y. Phila. Mus. Assn., 14 Phila. 233; Green «. African, etc.. Society, 1 Serg. & E. 254; Commonwealth v. Pennsylvania Benef. Assn., 2 Serg. & R. 141; Med. & Surg. Soc. v. Weatherly, 76 Ala. 248; Gray v. Christian Soc, 137 Mass. 329; s. c. .TO Am. Rep. 310. ^ Hassler ». Phila. Mus. Assn., 14 Phila. 233. And see Leahy «. Mooney, 39 Misc. R. 829; 81 N. Y. Supp. 360; and Peoples. Alpha Lodge, etc., 13 Misc. 677; 35 N. X. Supp. 214. In this case last cited the court 13 193 § 100 GOVERNMENT AND MEMBERSHIP: BX-LAWS. the body of the society, where it properly belongs, to a small fraction of its members, of so large and dangerous a power as that of expulsion, must appear, if it be claimed to exist, by the plainest language. It cannot be established by inference, or presumption, for no such presumption is to be made in derogation of the rights of the whole body, nor is it to be supposed, unless it appears by the most express and unambiguous language, that the members of the society have consented to hold their rights and membership by so frail a tenure as the judgment of a small portion of their own num- ber." But when the charter provides for expulsion and authorizes the regulation of the proceedings by by-laws the board of directors may expel a member in conformity with such by-laws. 1 The power to expel does not include the power to suspend. 2 In a case in Texas it was held that, where the by-laws provided for suspension for non-payment of assessments, the dictator or presiding officer of a lodge could not without a vote of the members declare a member suspended. 3 It has been held that the revision of member- ship lists by dropping certain names from the roll is equiva- lent to the expulsion of the members whose names are thus refers with disapproval to Spillman u. Supreme Council etc., 157 Mass. 128; 31 N. E. E. 778, and Green v. Board of Trade, 174 111. 685; 51 N. K. K. 599; 49 L. E. A, 365. 1 Commonwealth ». Union League Club, 135 Pa. St. 301; 19 Atl. E. 1030 ; Society v. Commonwealth, 52 Pa. St. 126 ; Pitcher v. Board, etc., 20 111. App. 319 ; Corrigan v. C jney Island Jockey Club, 20 N. Y. Supp. 437 ; Green v. Board of Trade, 174 111. 585; 51 N. E. E. 599; 49 L. E. A. 365; Brandenberger w. Jefferson Clnb, 88 Mo. App. 148; State v. St. Louis Med. Soc, 91 Mo. App. 76. 2 Schassberger v. Staendel, 9 W. N. C. 379. 3 Knights of Honor v. Wickser, 72 Tex. 257 ; 12 S. W. R. 175. This is evidently a case where the court confused the provisions of the laws of the order relative to suspension under the penal provisions of the laws with those of suspension ipso facto by the non-payment of assessments. So it is not sufficient simply to make an entry in the secretary's book. Tourville a. Brotherhood, etc., 54 III. App. 71. This subject, however, i-5 further treated in post, § 385. 194 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 101 stricken off. " The revision," says the Supreme Court of Alabama,! "of the roll of members must, in our judgment, be the act of the society itself, transacted, as any other order of corporate business, by the recorded vote of the body in its corporate capacity, showing the fact that the roll was revised by at least a majority of the members present and constituting a quorum, voting in the afBrm- ative," and further, "the clerical work of revision is, in one sense, the act of the secretary, inasmuch as the duty of striking off names and the preparation of a revised list are devolved upon him. But the corporate act of revision, which is a legal ratification of the act of the secretary, is an order of business judicial in its character, and of great importance in its nature and results, and for these reasons, as we have said, must be transacted by a vote of the mem- bers in their corporate capacity." 2 There may be a pro- vision for ipso facto expulsion, or forfeiture of rights by non-payment of assessments, or engaging in a forbidden occupation. Such provisions have been upheld by the courts. 3 § 101. Procedure for Expulsion: Notice. — All pro- ■ ceedings in the expulsion of members must be in substantial accordance with the letter of its rules.* While it has been 1 Medical & Surgical Soc. v. Weatherly, 75 Ala. 248. 2 Gray v. Christian Society, 137 Mass. 329; s. c. 50 Am. Rep. 310; State ex rel. Sibley v. Carteret Club, 40 N. J. L. 295; Delacy v. Neuse Elver Navigation Co., 1 Hawks, 274; 9 Am. Dec. 636; People o. American In- stitute, 44 How. Pr. 468; Loubat o. Leroy, 40 Hun, 546; People v. Mechanics' Aid Soc, 22 Mich. 86; Pulford v. Fire Dept., etc., 31 Mich. 458. 3 Moerschbaecher w. Supreme Council R. L., 188 111. 9; 59 N. E. R. 17; 52 L. R. A. 281; Langnecker ». Trustees Grand Lodge, etc., Ill Wis. 279; 87 N. W. R. 293 ; 55 L. R. A. 185. See also post, § 325. ^ Labouchere v. Earl of Wharncliff, L. R. 13 Ch. Div. 346; Common- wealth V. German Society, 15 Pa. St. 251 ; Wachtel v. Noah Widows' and Orphans', etc., 84 N. Y. 28; People v. Am. Institute, 44 How. Pr. 468; 195 § 101 GOVERNMENT AND MEMBEESHIP : BY-LAWS. held, that if the by-laws of the society provide for no notice, the member is not entitled to any notice, no prop- erty right being involved, ^ yet even in such case the pro- ceedings must be had at a regular meeting, for of only such is the member supposed to have knowledge. 2 It has often, however, been held that jjy-laws which provide for expulsion of a member without notice are void as being unreasonable.^ And it has also been held that where no notice is given the proceedings are void.* Expulsion, if a property right is involved, must always be on notice, and, if no other method of notice is prescribed by the by-laws, it must be served personally, and failure on the part of the member to give notice of a change of address as required by the laws of the society will not change the rule.^ Mere post- ing in the corporate premises is not a sufficient notice.^ Serv- Foster v. Harrison, cited 72 Law Times, 186; 15 Abb. N. C. 45; Boehler V. Mechanics' Aid Soc, 22 Mich. 87; White v, Brownell, 4 Abb. Pr. (N. s.) 162; Med. & Surg. Soc. v. Weatherly, 75 Ala. 248; Supreme Lodge K. of P. V. Eskholme, 69 N. J, L. 255; 35 Atl. R. 1066. ' Manning v. San Antonio Club, 63 Tex. 166; s. u. 61 Am. Eep. 639; McDonald v. Eoss-Lewin, 29 Hun, 87; People v. St. Franciscus, etc., 24 How. Pr. 216. 2 Medical & Surgical Soc. v. Weatherly, 75 Ala. 248. 3 Pulford V. Fire Dept., 31 Mich. 458; Fritz v. Muck, 62 How. Pr. 72; Erd w. Bavarian, etc., Assn., 67 Mich. 233; 34 N. W. Eep. 655. ■4 Slater v. Supreme Lodge K. & L. of H., 76 Mo. App. 387; Seehorn o. Supreme Council Catholic Knights, etc., 95 Mo. App. 233; 68 S. W. 949; Women's Cath. Order v. Haley, 86 111. App. 330. 6 Wachtel v. Noah Widows' and Orphans', etc., 84 N. Y. 28; People V. Medical Society, 32 N. Y. 187; Commonwealths. Penn. Ben. Assn., etc., 2 Serg. & E. 141; Innis v. Wylie, 1 C. & K. 257; Downing u. St. Columba's, etc., 10 Daly, 262; Pulford v. Fire Department, 31 Mich. 458; Commonwealth v. German Society, 16 Pa. St. 261; People b. Mu- sical, etc., Union, 1 N. Y. S. E. 770; 47 Hun, 273; People o, Hoboken Turtle Club, 14 N. Y. Supp. 76; Zangen v. Krakauer, etc., Assn., 26 Misc. R. 332; 56 N. Y. Supp. 1052; Dubach v. Grand Lodge, etc. (Wash.), 74Pac. E. 832. * State ex rel. Sibley v. Carteret Club, 40 N. J. 296. But it has been ) e'd that posting under a by-law may take the place of other notice. Rhule V. Diamond, etc., Assn., 5 Lack. Leg. N. 101. 196 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 101 ice of notice is not excused by a change of residence. ^ Nor by insanity of the member.^ Nor by appearing without notice and objecting to the hearing of the case in the absence of the prosecutor.^ This notice must contain a statement of the charges against the member.* The mem- ber need not request a hearing,^ nor does he waive notice by appearing and entering on his defense;® nor is notice waived by the member appearing at the time fixed for the hearing, and denying the right of the directors to proceed against him and refusing to answer the charges .' It is not necessary that the accused be actually present at the trial.^ In Fisher V. Keane,'it was held that in proceedings to expel a member the committee or society is a g'Masi-judicial tribunal and are bound in proceeding under their rules against a member for alleged misconduct, to act according to the ordinary principles of justice and are not to convict him of an offense warranting his expulsion without giving him due notice of the intention to proceed against him and affording him an opportunity of defending or palliat- ing his conduct.^" The power to expel must be exer- 1 Wachtel v. Noah Widows', etc., Soc, 84 N. Y. 28; Harmstead «. Washington Fire Co., 8 Phila. 331. " Supreme Lodge A. O. U. W. v. Zuhlke, 129 111. 298; 21 N.B. E. 789; Dnbach v. Grand Lodge, etc. (Wash.), 74 Pac. 832. 3 People V. Musical Protective Union, 118 N. Y. 680; 23 N. E. E. 129; afEg. 42 Hun, 656. * Murdock's Case, 7 Pick. 303; Murdock o. Phillips' Acad., 12 Pick. 244; People v. Musical Mut. Protective Union, 47 Hun, 273; Sleepers. Franklin Lyceum, 7 E. I. 523. 5 Loubat V. Leroy, 40 Hun, 546; Delacy o. Neuse Nav. Co., 1 Hawks (N. C), 274; 9 Am. Dec. 636; Loubat ». Leroy, 65 How. Pr. 138. 6 Downing v. St. Columba's, etc., 10 Daly, 265. But see Common- wealth V. Penn. Ben. Soc, 2 Serg. & E. 141; and § 102. ' People V. Musical & Protective Union, 47 Hun, 273. " Byram v. Sovereign Camp, etc., 108 la. 430; 79 N. W. E. 144. 9 11 L.E. Ch. D. 353; 49 L. J. Ch. 11; 41 L. T. 335. 11 Loubat V. Leroy, 40 Hun, 546; Gray v. Christ. Soc, 137 Mass. 329; 50 Am. Eep. 310; Med. & Surg. Soc. v. Weatherly, 75 Ala. 248. 197 § 102 GOVERNMENT AND MEMBERSHIP: BY-LAWS. cised bona fide and not capriciously or arbitrarily, or maliciously.^ § 102. Procedure Continued : Charges: Trial. — The methods of procedure prescribed by the by-laws of the association must be followed and,all their requirements ob- served.^ And a member can be expelled at a meeting held on Sunday if that is the regularly appointed day for the meetings of the association.^ If the by-laws so require, the charges against a member must be in writing and signed as required by the accuser, and the notice must specify the time of hearing,* but by appearing generally the mem- ber waives objections as to notice and the regularity of the appointment of the tribunal.^ The associationmust actfairly and in good faith and it will be held to a fair and honest administration of its rules. The accused must be allowed to be present to confront his accusers and cross-examine them, for " ordinary principles of justice and of right" 1 Otto o. Journeymen Tailors', etc., Assn., 75 Cal. 308; 17 Pac. Sep. 217; Hopkinson ». Marquis of Exeter, 37 L.J. Ch. 173; 5 L. E. Eq. 63; 16 W. K. 266; Lyttleton v. Blackbume, 45 L. J. Ch. 219; 33 L. T. (n. a.) 641; Dawkins v. Antrobus, 17 L. R. Ch. D. 615; 44 L. T. 657; 29 W. E. 511. 2 Green v. Board of Trade, 174 111. 586; 61 N. E. E. 599; 49 L. R. A. 365 and note; Woodmen of the World v. Gillilland tOkla.), 67 Pac. R. 485; Supreme Lodge, etc., v. Eskholme, 59 N. J. L. 255; 35 Atl. E. 1055. 3 Pepen v. Societe Jean Baptiste (B. I.), 54 Atl. R. 47; People v. Carrigan, 65 Barb. 357; McCabe o. Father Matthew Soc, 24 Hun, 149. As to various questions of procedure see Doljanin v. Austrian Benev. Soc, 137 Cal. 166; 69 Pac. 908. ^ Society, etc., v. Commonwealth, 52 Pa. St. 125; People ». Musical, etc., Union, 47 Hun, 273; People v. American Institute, etc., 44 How. Pr. 468. 6 Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Rep. 478; Burton u. St. George's Soc, 28 Mich. 261; Commonwealth o. Penn. Ben. Soc, 2 Serg. & E. 141; Austin v. Butcher, 66 App. Div. 393; 67 N. Y. Supp. 819; Moore ». National Council, etc., 65 Kan. 452; 70 Pac. R. 352; Durel v. Perseverance F. Co., 47 La. Ann. 1101; 17 Sou. R. 591. See § 101, anU. 198 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 102 require this to be done.^ But if after being regularly cited the member fail to appear he may be expelled as being in contempt if the by-laws so provide.^ In the case first cited ^ it was said, after a review of the authorities, that " the principle to be deduced from all these cases is, that in every proceeding before a club, society or association hav- ing for its object the expulsion of a member, the member is entitled to be fully and fairly informed of the charge and to be fully and fairly heard." The court further said: " Again, while these proceedings are not to be governed by the strict rules which apply to actions at law or suits in equity, or even, perhaps, by the rules which obtain in re- gard to arbitrations, there is, I think, a strong analogy between the principles which govern in arbitrations and those which relate to proceedings of this character. In the case of Sharpe v. Bickerdyke,* Lord Eldon said that, by the ' great principle of eternal justice which was prior to all these acts of sederunt regulations and proceedings of court, it was impossible an award could stand where the arbitrator heard one party and refused to hear the other ; and on this great principle , and on the fact that the arbitrator had not acted according to the principles upon which he himself thought he ought to have acted, even if he decided rightly he had not decided justly, and therefore the award could not stand.' In the matter of Plewst;. Middleton^ an award was set aside, because the three arbitrators, after having determined within a small amount the sum to be paid, agreed to examine a witness separately, and did so. Coleridge, J., in that case, says: ' To uphold this award * Hutchinson v. Lawrence, 67 How. Pr. 47; Otto c. Journeymen Tail- ors' Assn., 75 Cal. 308; 17 Pac. Rep. 217. 2 Levy V. Magnolia Lodge, etc., 110 Cal. 297; 42 Pac. R. 887. 3 Hutchinson v. Lawrence, supra. * SDow'sRep. 102. 5 6 A, & E. (N. s.) 845; 14 L. J. Q. B. 139; 9 Jur. 160. 199 § 102 GOVEKNMENT AND MEMBERSHIP: BY-LAWS. would be to authorize a proceeding contrary to the first principles of justice. The arbitrators here carried on ex- aminations apart from each other and from the parties to the reference, whereas it ought to have been conducted by the arbitrators and umpire jointly in the presence of the parties.' In Oswald v. Earl Grey,' it was held that no usage can justify the arbitrators in hearing one party and his witnesses only, in the absence of and without notice to the other party. ^ In Walker v. Frobisher,^ an award was set aside, the arbitrator having received_^ evidence after notice to the parties that he would receive no more, in which they acquiesced. In this .case Lord Eldon says: ' A judge must not take it upon himself to say whether evidence improperly admitted had or had not an effect upon his mind. The award may have done perfect justice, but upon general principles it cannot be supported.' * * * In Drew v. Leburn,* it was held ' that an arbitrator greatly errs, if he, in any of the minutest particulars, takes upon himself to listen to evidence behind the back of any of the parties to the submission.' " ^ " Hear- ing " means a right to have counsel and opportunity to ques- tion witnesses and offer evidence ; ^ " evidence " means les:al evidence,' and the trying body must be unprejudiced.^ If the method of procedure is prescribed, an expulsion on 1 24 L. J. Q. B. 69. 2 See In re Brook, 15 C. B. ^,N. s.) 403; 33 L. J. C. P. 246; 10 L. T.378. 3 6 Ves. 69. * 2 Macq. H. of L. Cas. 1. ' Fisher v. Keane, 11 L. R. Ch. D. 353; Dean v. Bennett, L. E. 6 Ch. 489; Innes v. Wylie, 1 Car. & K. 257, 263; Queen v. Saddlers' Co., 10 H. L. Cas. 404; State v. Adams, 44 Mo; 570; Wood v. Wood, L. E. 9 Exch. 190; Fuller ». Plalnfield Academy, 6 Conn. 532; Grayo. Christ. Soc, 137 Mass. 329. * Murdock V. Phillips Academy, 12 Pick. 244. ' Modern Woodmen v. Deters, 65 111. App. 368. 8 Smith v. Nelson, 18 Vt. 511. 200 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 102 motion is insufficient. ^ In a recent case ^ the Supreme Court of California thus reviewed the general principles applicable to these proceedings : ' ' The right of expul- sion from associations of this character may be based and upheld upon two grounds : First, a violation of such of the established rules of the association as have been sub- scribed or assented to by the members, and as provide expulsion- for such violation; second, ior such conduct as clearly violates the fundamental objects of the association, and, if persisted in and allowed, would thwart those ob- jects or bring the association into disrepute. We content ourselves with stating the propositions thus broadly, and, for the purposes of this case, need not refer to the numer- ous authorities defining and limiting the power. In the matter of expulsion the society acts in a g'tsasz-judicial char- acter, and, so far as it confines itself to the exercise of the powers vested in it, and in good faith pursues the methods prescribed by its laws, such laws not being in violation of the laws of the land, or any inalienable right of the mem- ber, its sentence is conclusive, like that of a judicial tribu- nal.^ The courts will, however, decide whether the ground for expulsion is well taken.* It has been held in reference to the expulsion of members from societies of this charac- ter, that the courts have no right to interfere with the de- cisions of the societies, except in the following cases : First. If the decision arrived at was contrary to natural justice, 1 Byram v. SovereigQ Camp, etc., 108 la. 430; 79 N. W. R. 144; Weiss V, Musicians' XJaion, 189 Pa. St. 446; 43 Atl. R. 118. 2 Otto V. Journeymen Tailors', etc.. Union, 75 Cal. 308; 17 Pac. Rep. 217. s Commonwealth v. Society, 8 Watts & S. 250; Burt v. Grand Lodge, 44 Mich. 208; 33 N. W. Rep. 13; Robinson «. Yates City Lodge, 86 111. 598; People v. Women's Catholic Order Foresters, 162 111. 78; 44 N. E, R. 401; Murray v. Supreme Hive Ladies, etc. (Tenn.), 80 S. W. R, 827. ^ Cotton Exchange v. State, 54 Ga. 668. 201 § 102 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. such as the member complained of not having an oppor- tunity to explain misconduct. Secondly. If the rules of the club have not been observed. Thirdly. If the action of the club was malicious and not bona-fide.^ Article 25 . of, the appellant's constitution provides as follows: ' If any member defrauds this union, he shall be dealt with as the central body may decide.' Beyond this no specific provi- sion appears in the constitution or by-laws under which members may be expelled. The contention of appellant is that the power of expulsion is inherent in every society, and that the offense of which plaintiff was found guilty was sufficient ground for expulsion, as matter of law, irre- spective of any provision of the constitution or by-laws. We subscribe' to that portion of the proposition which as- serts the inherent right of expulsion, subject, however, to the limitations hereinbefore expressed. For the purposes of this case we assume, also, without deciding. — First, that the charges and specifications against plaintiff were sufficient, upon being proven, to warrant his expulsion under the inherent right so to do mentioned ; Second, that the ' cen- tral body,' — that is to say, the board of delegates of shop societies, as contradistinguished from the entire body of members, may exercise the power of expulsion. Conced- ing these propositions, however (so far as the latter is concerned, we doubt if it can be maintained), the facts as found by the court still remain, that the plaintiff was really and in fact found guilty for no other offense than that for which he was expelled in the first instance, viz. : for work- ing for parties against whom a strike had been ordered ; that the expulsion was not in good faith, was not fair, and was contrary to natural justice ; that the charge of ' con- 1 Dawkins v. Antrobus, 17 L. R. Ch. D. 615; 41 L. T. 557; 29 W. E. 511; Lambert v. Addison, 46 L. T. 20. 202 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 102 spiracy to injure and destroy the union,' was in substance but a pretext to punish him for an offense only subjecting him to a fine, in a manner wholly different from the impo- sition of the penalty provided therefor, etc. We think, as before stated, that there was evidence from which the facts as found were fairly deducible. These facts raise the inevitable conclusion, that the trial and conviction of plaintiff was a travesty upon justice, and lacking in the essential elements of fairness, good faith and candor, which should characterize the action of men in passing upon the rights of their fellowmen. We are referred to the pro- vision of appellant's constitution which provides that 'any member having a grievance, shall have the right to lay his case before the central body, who shall take action thereon, and whose decision shall be final.' No doubt when action is properly taken in the manner indicated, it is final, and the courts will not interfere, but when, under the guise of remedying the grievance of a member, the central body acts 'in bad faith, and maliciously makes the subject of the grievance a pretext for oppression and wrong, its action may, however, to that extent, be the subject of review." It would seem from analogy at least that a record should be kept of the proceedings of the society or committee in acting upon accusations against a member, that the charges be specific and that the proof must correspond and be suffi- cient. " The facts must be stated as found after a formal investigation and not rest upon inference alone," and the findings must support the charge. ^ Although there may be irregularities in the procedure the accused by submit- ting his case and afterwards taking an appeal acknowledges the jurisdiction and cannot afterwards sue the association 1 Schweiger ». Society, 13 Phila. 113; Commonwealths. St. Patrick's Benevolent Society, 2 Binn. 441; Roehler ». Mechanic's Aid Society, 22 Mich. 86; State v, Adams, 44 Mo. 570. 203 § 103 GOVERNMENT AND MEMBERSHIP: BY-LAWS. for wrongful expulsion. ^ It has also been held^ that where a member has been wrongfully expelled from a pro- prietary club where the members have no right of prop- erty, he must obtain relief by a suit for damages not by injunction. In a proceeding to expel a member' a brother of the person who preferred the ^charges cannot sit on the trial committee. 3 § 103. Charges must be sufficient. — The charges must not be trivial in their nature or trifling. They must be definite and certain.* The following accusations have been held to be insufficient to justify expulsion or suspension : " Slander against the society ;"5 " talking against the so- ciety ; " 6 illegally drawing aid in time of sickness ; " 7 < ' de- frauding the society out of 50 cents ; " ^ " vilifying a member; "9 although a member can be expelled for slan- dering the society ; lo " doing business at less than the estab- lished tariff of the society; "^ " unprofessional conduct in advertising ; "12 < < disrespectful and contemptuous language 1 Peyre v. Mutual Relief Soc, 90 Cal. 240; 27 Pac. R. 191. 2 Baird v. Wells, L. K. 44 Ch. D. 661; 31 Am. &Eng. Corp. Cas. 240; post, § 108. 3 People V. Alpha Lodge, etc., 13 Misc. Rep. 677; 35 N. Y. Supp. 214. * Zangen v. Krakauer, etc., Assn., 26 Misc. Eep. 332; 56 N. Y. Supp. 1052. « Eoehler ?;. Mechanic's Aid Soc, 22 Mich. 86. In this case, although the charge was held insufficient, and the member restored, it was said that if a member of a society can be expelled for " slander against the society," the offense must be analogous to the common law offense of slander, as applicable to individuals. See Allnutt v. High Court of For- esters, 61 Mich. 110; 28 N. W. Rep. 802. 8 Eadice ». Italian, etc., Soc, 67 N. J. L. 196; 50 Atl. R. 691. ' Schwelger v. Society, 13 Phila. 113. ^ Commonwealth v. German Soc, 13 Pa. St. 251. 9 Commonwealth v. St. Patrick's Soc, 2 Binn. 441; 4 Am. Dec. 453; Mulroy v. Knights of Honor, 28 Mo. App. 463. i» People V. Alpha Lodge, etc., 13 Misc. R. 677; 35 N. Y. Supp. 214. u People V. Med. Soc, 24 Barb. 570. ^ People V. Medical Society, etc., 32 N. Y. 187. 204 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 103 to associates ; " l stating that the lodge would not pay and never intended to pay. 2 Guilty of " actions that may injure the association; "3 <« offense against law; "* " un- gentlemanly conduct," which consisted of a member of a medical society becoming surety on the bonds of colored citizens charged with disorderly conduct and riot.^ It is sufficient cause for expulsion from a trades union that membership was obtained by feigning a qualification which did not exist and such member persisted in remaining after such disqualification was established.^ Defamation by a member of the character of another member is, by common law, no cause of discipline.'^ Nor the exercise of a statutory right, as to file a lien.^ Fraud, such as representing himself in good health, when in fact he had an incurable disease, is a ground of expulsion, ^ and generally it may be said that violations of reasonable by- laws are sufficient to justify infliction of the penalty pre- scribed, whether it be suspension or expulsion. 10 Opening a letter addressed to the president authorizes expulsion from a club.^ The courts will look at the facts in each case and, construing the by-laws to be reasonable when they are calculated to carry out the objects of the associa- tion, and are not unjust under the circumstances, will sus- tain regular proceedings thereunder. 12 i Fuller V. Plainfield Academy, 6 Conn. 532. 2 Erd V. Bavarian, etc., Assn., 67 Mich. 233; 34 N. W. Kep. 565. 3 Butchers' Ben. Assn., 38 Pa. St. 298. < Beneficial Assn., 38 Pa. St. 299. 5 State V. Georgia Medical Soc, 38 Ga. 608. 8 Beesley v. Chicago Journeyman Plumbers', etc., Assn., 44 111. App. 478. » AUnuttu. High Court of Foresters, 61 Mich. 110; 28 N. W. Kep. 802. " Miller v. Building League, etc., 63 N. Y. Supp. 1016. » Durantaye v. Society St. Ignace, 13 L. C. J. 1; 1869. 10 See, however, Pulford v. Fire Department, 31 Mich. 458 ; and also following section. " People V. Manhattan Club, 23 Misc. E. 500; 52 N. Y. Supp. 726. 12 Dickenson v. Chamber of Commerce, etc., 29 Wis. 46; People o. 205 § 104 GOVERNMENT AND MEMBEESHIP : BY-LAWS. § 104. Expulsioa of Members of Subordinate Lodges of a Beneficiary Order. — The subordinate lodges of a benefit society are not only social clubs, generally unincor- porated, but are also constituent parts of the society of which the entity and head is an incorporated superior gov- erning body. In considering the rights of such surbordi- nate lodges and those of the sooiet}^ itself, in regard to the expulsion of members, this fact must be remembered. There may be an expulsion from membership in the subordinate lodge for violation of the penal provisions of its laws, which generally carries expulsion from the society itself with it, and there may be a conditional expulsion, or suspen- sion, for non-payment at the prescribed time of an assess- ment called by the superior incorporated body. In the first case the lodge may act as an independent body, in the latter as agent of the superior body, if any affirmative act is required to perfect the expulsion. Generally, if an assess- ment is not paid at the fixed time, the non-payment, by the laws of the order, works, ipso facto, a suspension, which in fact is an expulsion, although the member may be restored to membership by compliance with certain requirements of the laws of the order.i The rights of the members of these associations rest in contract and such rights therein secured can only be divested in the manner provided in the contract.2 The directors cannot expel a member of an Board of Trade, 45 111. 112 ; ' State v. Chamber of Commerce, 20 Wis. 63 ; Savannah Cotton Exchange w. State, 64 Ga. 668; People v. St. George's Soc, 28 Mich. 261; People u. Board of Trade, 80 III. 134; Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Eep. 478. As to revoking charter of a subordi- nate chapter of a college secret fraternity, see Heaton v. Hull, 64 N. Y. Supp. 279; 51 App. Div. 126; affirming 59 N. Y. Supp. 281; 28 Misc. 97. 1 Post, § 385. 2 McDonald v. Supreme Council Chosen Friends, 78 Cal. 49 ; 20 Pac. R. 41; Knights of Honor v. Wickser, 72 Tex. 257; 12 S. W. B. 175; High Court of Foresters v. Zak, 35 111. App. 613; Hoeffner v. Grand Lodge, etc., 41 M. A. 45, and Indeed all cases involving rights of mem- bers. 206 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 104 assessment company, although the by-laws provide for such expulsion.l A member cannot be expelled while insane when no notice has been given and the expulsion is based on his admissions.^ Nor can an insane member waive any- thing.^ Nor can liability for such benefits be avoided by expulsion.* The supreme governing b®dy may expel a member although the by-laws only provide for expulsion of members of subordinate lodges.® A suspended member must still pay dues.® In a case in the St. Louis Court of Appeals,' Judge Seymour D. Thompson considered the sub- ject of the expulsion of members of a subordinate lodge of a benefit society in a remarkably clear opinion. The lodge in that suit was a local lodge of the order of the Knights of Honor and under the control of a supreme lodge, by which assessments were levied, which the local lodge collected and remitted. The action was brought by the beneficiary of a deceased member, who had been ex- pelled by the local lodge, to recover the amount named in his certificate of membership. The other facts suffi- ciently appear in the opinion from which we take the follow- ing extract, although it is to some extent a repetition of what we have already said : ' ' The turning point in the case , therefore, is, whether James Mulroy was lawfully expelled from the order on the tenth of November, 1884. In de- termining this question, we must also lay out of view a 1 Purdy V. Bankers' Life Assn., 101 Mo. App. 91; 74 S. W. R. 486. 2 Supreme Lodge A. O. U. W. ». Zuhlke, 129 lU. 298; 21 N. E. R. 789. 3 Hoeffner ». Grand Lodge Harngari, 41 Mo. App. 359. 4 Wuerthner v. Workingmen's Benev. Soc, 121 Mich. 90; 79 N. W. R. 921. * Spillman v. Supreme Council Home Circle, 157 Mass. 128; 31 N. E, R. 776. 6 Palmetto Lodge v. Hubbell, 24 S. C. (2 Strob.) 457, ' Mulroy I). Supreme Lodge Knights of Honor, 28 Mo. App. 463. See also Slater v. Supreme Lodge K. and L. of H., 76 Mo. App. 387; 88 Mo. App. 177. 207 § 104 GOVERNMENT AND MEMBERSHIP: BY-LAWS. number of considerations which have been pressed upon us in argument, which either have no bearing upon it, or which it is not necessary to consider. In the first place, we concede that there is a great array of judicial authority in favor of the proposition, that where members are expelled from religious societies, social clubs, benevolent societies, and other voluntary organizations, incorporated or unin- corporated, the judicial courts will not interfere to rein- state them or to revise the judgment of expulsion, until the expelled member has exhausted all the remedies avail- able to him within the organization itself, by appealing to a higher judicatory, provided by the rules of the society or otherwise.! But all the cases which so hold, either expressly state or tacitly assume, that, in the action which the society took, and against which relief was sought, it acted within the scope of its powers, and in prosecuting their inquiries into the propriety of the action of such societies in the expulsion of members, or in the disposition of property or otherwise, courts have in general proceeded no further than to inquire whether the judicatory provided by the laws of the society, which acted, had jurisdiction in the particular case.^ It is true that the English courts and the Supreme Judicial Court of Massachusetts have, in deal- ing with social clubs, and even with mutual benefit and other societies, gone beyond this, and have said that there must not only be a power to expel the member, but that the 1 Karcher v. Supreme Lodge, 137 Mass. 368 ; Chamberlain v. Lincoln 129 Mass. 70; La Fond v. Deems, 81 N. Y. 607; White?). BrowneU, 2 Daly, 329; Harrington v. Workingmen's Benevolent Soc., 70 6a. 340; Loubat V. Leroy, 15 Abb. N. 0. 1. 2 State V. Farris, 43 Mo. 483; Commonwealth v. Green, 4 Whart. 631 ; Gibson v. Armstrong, 7 B. Mon. 481; Shannon v. Frost, 3 B. Men. 253; Robertson v. Bullions, 9 Barb. 134; Harmon v. Dreher, 1 Speer Eq. 87; German Reformed Church v. Seibert, 3 Pa. St. 282; Den v. Pilling, 4 Zab, (24 N. J. L.) 653; Commonwealth v. Pike Ben. Soc, 8 Watts & S. 247; Black & Whitesmith's Soc. v. Van Dyke, 2 Whart. 309. 208 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 104 power must be exercised in good faith — in other words, these courts will interfere either in the case of a want of jurisdiction, or of fraud in its exercise. i It follows from the preceding statements that the judicial courts will not, on the one hand, declare the expulsion of a member to be invalid because of mere irregularities in the steps which have led up to it; ^ and that they will, on the other hand, set aside or disregard the expulsion of a member which has been had without notice to him and an opportunity to defend against tlie charges preferred ; ^ or for offenses for which the society has no express power to expel, and whicJi are not injurious to the society or contrary to law.* In early cases the doctrine has been announced that corpora- tions have the same inherent power to expel members for reasonable causes, which they have to make by-laws, and that it is not necessary that the power should be found in the express language of their charters.^ The offenses for which corporations possess the inherent power of removing an officer or corporator were thus classified by Lord Mans- field : ' 1. Such as have no immediate relation to his office, 1 Karcher v. Supreme Lodge, 137 Mass. 368 ; Hopkins v. Marquis of Exeter, L. R. 5 Eq. 63; Dawliins v. Antrobus, 17 Ch. D. 615; lader- wicli V. Saell, 2 Mac. & G. 216, 221; Lambert o. Addison, 46 L. T. (n. s.) 20; Manby v. Life Ins. Soc, 29 Beavan, 439; 31 L. J. Ch. 94; Drummer V. Corp. of Chippenham, 14 Ves. 245, 262 ; Blisset o. Daniel, 10 Hare, 493. 2 Bouldin v. Alexander, 15 Wall. 131; Shannon v. Frost, 3 B. Mon. 263; German Eef. Ch. v. Seibert, 3 Pa. St. 282; State v. Farris, 45 Mo. 183. 8 Com. V. Germ. Soc, 15 Pa. St. 261; Dawkins v. Antrobus, 17 Ch. D. 615; Labouchere v. Earl of Wharncliff, 13 Ch. Div. 353; Wachtel v. Noah Widows', etc., Soc, 84 N. Y. 28; Bex o. Town of Liverpool, 2 Burr. 732. * People n. Medical Soc, 32 N. Y. 187; Com v. St. Patrick's Ben. Soc, 2 Binn. 441; Com. v. Germ. Soc, 15 Pa. St, 251; Green v. African Soc, 1 Serg. & R. 264. « Bruce's Case, 2 Strange, 819; Rex v. Richardson, 1 Burr. 619; Com. V. St. Patrick's Ben. Soc, 2 Binn. 441. 14 209 § 104 GOVERNMENT AND MEMBERSHIP: BY-LAWS. but are in themselves of so infamous a nature as to render the offender unfit to execute any public franchise. 2. Such as are only against his oath and the duty of his office as a corporator, and amount to a breach of the tacit conditions annexed to his franchise or office. 3. The third sort of offenses for which an officer or corporator may be displaced is of a mixed nature ; as being an offense not only against the duty of an office, but also a matter indictable at com- mon law.'i Mutual benefit societies, such as the one under consideration, are of a twofold character: 1. They are social organizations resembling religious societies and social clubs. 2. They are also mutual insurance companies. If the courts could deal with them in their character of mere social organizations, most of the forego- ing principles would be applicable. In such a case it might be that the courts of the present day, following the doc- trine laid down by Lord Mansfield and others, would hold that they possess an inherent power to expel members for offenses which injuriously affect the society, although such a power is not granted by their charter, or by the statute under which they are organized. It is not necessary for us, in this case, to express a definite opinion whether a court ought so to hold or not. We may say, for the pur- poses of this case, that, assuming the inherent power of expelling a member to exist, it cannot be exercised upon the mere ground that the member has uttered false and malicious charges against another member. It has been held, in a case where this inherent power of expulsion was conceded, that a by-law providing for the expulsion of a member for vilifying another member of the society was void.^ But in determining whether the expulsion of Mul- 1 Rex V. Bichardson, 1 Burr. 619; Rex v. Town of Liverpool, 2 Burr. 732. 2 Commonwealth v. St. Patrick's Ben. Soc, 2 Binn. 441. 210 GOVEENMENT AND MEMBERSHIP: BY-LAWS. § 104 roy was valid, so as to revoke his benefit certificate, we have to deal with this society primarily in its character of a mutual insurance association. In societies such as this, the members to whom benefit certificates are issued acquire property rights in the society of a very important charac- ter ; and in dealing with these rights it is highly essential that the courts should confine themselves strictly to the terms of the contract which the members have made among' themselves. 1 It would be a very dangerous doctrine to ap- ply to societies which, in addition to the character of social clubs, possess also the character of life insurance com- panies, and which undertake to insure the lives of their members for the benefit of their families, paying them a large sum in the event of the death of the member, the rule that they can expel their members, and thereby deprive their families of the benefits of this insurance, it may be, after the member has paid assessments for many years, and when, by reason of age or bad health, he has passed into such a state that new insurance upon his life cannot be procured — for causes not named in their constating instru- ments, or in the public statutes, but such as the members of the subordinate lodge may, in the excitement of the hour, deem a good ground of expulsion. We' hold in this case, as we haVe held in other cases of this kind, that the rights of the beneficiary in such a certificate are strictly a matter of contract; that this contract is to be found in the terms of the certificate itself, in the statutes of the society, and in the case of a society incorporated under the laws of this State, in the statutes of this State relating to such societies. Looking at these instruments we find no authority in them for the expulsion of a member of this society for the cause for which the lodge to which James Mulroy belonged under- 1 Grand Lodge v. Eisner, 26 Mo. App. 108; Coleman t). Knights of Honor, 18 Mo. App. 189. 211 § 104 GOVERNMENT AND MEMBEKSHIP : Br-LAWS. took to expel him. The cause for which he was tried and expelled was, according to the record which was read in evi- dence, ' making false and malicious charges against a mem- ber of this lodge,' and in another place, ' making false and malicious charges against Brother Tobin,' without specify- ing to whom the false and malicious charges were made. The constitution and statutes of the society, which were put in evidence, contain no grant of authority to a subor- dinate lodge to expel a member for such a cause. Article X. of the ' constitution governing subordinate lodges ' enu- merates eleven distinct offenses for which a member may be suspended or expelled, but none of them resemble the charge upon which James Mulroy was expelled in this case. The one which comes nearest to it is section 6, which re- cites that ' a member who shall be guilty of immoral con- duct shall, on conviction thereof, be suspended or expelled, as the lodge may determine.' But it would plainly be a misinterpretation of this provision to hold that it refers to the case of a member making false and malicious charges against another member. It manifestly refers to conduct involving the personal morals of the member, to such an extent as to render him unfit for fellowship with the other members. The succeeding article XI. relates entirely to trials and punishment. Then follows article XII., under which it would seem this prosecution and expulsion were had. Section one of this article reads : ' If a'member shall make to this lodge or to its dictator, any accusation against a member which shall prove to be false and malicious, he shall be suspended or expelled.' It is perceived that this section is a grant of authority to subordinate lodges to expel only in the case where a member shall make false and ma- licious accusations against another member, either to its lodge or to its dictator. It is not necessary for us to say whether or not such a regulation would be declared void as unreasonable. Although it is found in what is called the 212 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 104 ' constitution governing subordinate lodges,' it is in the nature of a by-law ; for the statute of this State under which this society is incorporated is its charter. But it nowhere appears in this record that James Mulroy was ever tried by his lodge, or expelled therefrom, for making false or malicious charges against a member, either to the lodge or its dictator. So far as the record discloses, he was tried and expelled for the mere offense of slandering a member, it may have been, for aught that appears, in another State, or even in a foreign country. It may have been while tes- tifying as a witness in a court of justice, while making a communication as a client to his counsel, or upon some other occasion which in law rendered it absolutely privi- leged. To allow the rights of a member in a society, which is in the nature of a mutual life insurance company, to be forfeited for such a cause, by such of his associates as hap- pen to compose a subordinate lodge or branch of the gen- eral society, would, we apprehend, be going further than any court has yet gone. It follows from these premises that the lodge to which James Mulroy belonged had no juris- diction whatever to try or expel him upon the charge above named ; that his expulsion was consequently null and void ; that, being merely void, it was not incumbent upon him to take steps to have it reversed in a higher judicatory of the society ; but that it left him clothed with the rights of mem- bership, at least in respect of the mutual benefit fund of the society to the same extent as though it had not taken place." In a subsequent case, however, ^ the same court, while generally approving the Mulroy case, qualified it to a decided degree. The court, after referring to the nature of beneficiary organizations and the duty of a member to his CO -contributors, and referring to the injustice of placing a suspended or expelled member in a better position than 1 Glardon v. Supreme Lodge Knights of Pythias, 50 Mo. App. 45. 213 § lOia GOVERNMENT AND MEMBBKSHIP : BY-LAWS. those paying, says: "We take the just rule to be that, even in the case of a void expulsion or suspension, the expelled or suspended member is under a duty to his co- contributors to affirm or disaffirm the act of expulsion or suspension within a reasonable time, and in some distinct manner under the circumstances | and that where he takes no steps of any kind to secure his reinstatement, allows dues which had accrued and were payable prior to the date of his expulsion to remain unpaid, and neither tenders such dues nor any subsequently accruing dues, he must be taken to have acquiesced in and consented to the sentence of ex- pulsion or suspension." By appealing to a higher judica- tory in a society a member acknowledges jurisdiction.! A member of a fraternal beneficiary association unjustly expelled can recover the assessments he has paid in.^ § 104a. Acquittal: Appeal. — If a member of a soci- ety is once acquitted on a trial upon charges preferred against him, as, for example, by the failure of a resolution or motion for expulsion to pass, by reason of its not re- ceiving the majority of votes required by the charter, or by-laws, he cannot be tried again for the same offense. A subsequent passage of the same resolution, or motion, by the requisite majority of votes, is a nullity.^ An appeal of a member of a subordinate lodge from a vote of expulsion does not abate by the death of such member during the pendency of the appeal ; * if on such appeal the judgment of the lodge is reversed the beneficiary of the member is entitled to recover the benefit agreed to be paid upon the 1 Peyre v. Mutual Relief Soc, 90 Cal. 240; 27 Pac. R. 191. 2 Slater v. Supreme Lodge K. & L. of H., 76 Mo. App. 387. 2 Commonwealth v. Guardians of the Poor, 6 Serg. & R. 469. < Marck». Supreme Lodge, K. of H.,29 Fed. Rep. 896; Green v. Wat- kins, 6 Wheat. 260; Berlin v. Eureka Lodge, etc., 132 Cal. 294; 64 Pac. B. 254. 214 GOVEKNMENT AND MEMBERSHIP: BY-LAWS. § 79 death. 1 An appeal is not necessary if the proceedings are void.^ § 105, Courts will oot Interfere if no Property Kight is Involved. — A distinction is to be made between cases in which the expulsion of members is for violation of the rules of the society, no property right being involved, in which case the courts decline jurisdiction, leaving the expelled member to bring a suit at law for damages,^ and cases in which the expulsion is virtually a forfeiture of property rights.* Where a member of the Masonic order was expelled for slandering the Grand Master the court refused to interfere.^ A distinction is also always to be made between a formal expulsion for an offense on the one hand and on the other an ipso facto, or conditional suspension, for non-compliance with the terms of the contract of membership, e. g., for non-payment at the agreed specified times of assessments or dues.^ 1 Marck ». Supreme Lodge, etc., supra. To the same effect is Con- nolly ». Masonic Benefit Assn., 68 Conn. 552; 20 Atl, R. 671. ' Longnecker v. Trustees Grand Lodge, etc., Ill Wis, 279; 87 N. W. B. 293; 55 L. R. A. 185. 8 People V. Board of Trade, 80 111. 134; State v. Odd-fellows', etc., 8 Mo. App. 148; Dawkins v. Antrobus, 17 L. E. Ch. D. 616; 44 L. T. 657; Rigby v. Connol, 14 L. R. Ch. D. 482; Hopkinson v. Marquis of Exeter, 37 L. J. Ch. 1 73 ; 5 L. R. Eq. 63 ; Baird v. Wells, L. R. 44 Ch. Div. 661 ; 31 Am. &Eng. Corp. Cas. 240; McKane'u. Democratic General Comm., 123 N. Y. 609; 25 N. E. R. 1057, affg. 4 N. Y. Supp. 401; Herschhiser v. Wil- liams (Ohio Com. PI.), 24 Weekly L. B. 314. Also authorities next cited, 4 Pulford V. Fire Department, 31 Mich. 458; Otto v. Journeymen Tailors', etc.. Union, 75 Cal. 308; 17 Pac. Rep. 217; Mulroy v. K. of H. Supreme Lodge, 28 Mo. App, 463; Thompson v. Soc. Tammany, 17 Hun, 305; Bauer o. S.impson Lodge, 102 Ind. 262; White v. Brownell, 2 Daly. 329; Austin v. Searing, 16 N. Y. 112; Olery v. Brown, 61 How. Pr. 92 j Supreme Council v. Garrigns, 104 Ind. 133; Schmidt v. A. Lincoln Lodge 84 Ky. 490; 2 S. W. Rep. 156. Seeposf, § 108. s Kopp V. White, 30 Civ, Prac. R. 352; 65 N. Y. Supp. 1017. See also Franklin v. Burnham, 40 Misc. R. 666; 82 N. Y. Supp. 882. 6 Palmetto Lodge v. Hubbell, 24 S, C (2 Strob.) 457. See Chap. XL, § 385, and ante, § 104. 215 § 106 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 106. Courts will not Inqaire into Merits of Expul- sion. — One of the earliest cases in the United States in which the right of a member of a society to resort to the courts after expulsion was considered is that of Black and Whitesmiths' Society v. Van Dyke,i where the court said: " Into the regularity of these proceedings, it is not per- mitted us to look. The sentence of the society, acting in a judicial capacity and with undoubted jurisdiction of the subject-matter, is not to be questioned collaterally, while it remains unreversed by superior authority. If the plaintiff has been expelled irregularly he has a remedy by manda- mus to restore him; but neither by m,andamus nor action, can the merits of his expulsion be re-examined. He stands convicted by the sentence of a tribunal of his own choice ; which, like an award of arbitrators, concludes him." In a later case in the Supreme Court of the same State, ^ it was further said: "The charter to the defendants below pro- vides for the offense, directs the mode of proceeding and authorizes the society, on conviction of the member, to expel him. This has been done, after a hearing and trial, according to the mode prescribed ; at least there is no alle- gation of the irregularity of the proceeding. Under these circumstances the sentence is conclusive on the merits, and cannot be inquired into collaterally either by mandamus or action, or in any other mode. It is like an award made by a tribunal of the party's own choosing; for he became a member under and subject to the articles and conditions of the charter, and, of course, to the provisions on this subject as well as others. The society acted judicial]}-, and its sentence is conclusive, like that of any other judicial tribunal. The courts entertain a jurisdiction to preserve 1 2 Whart. 309; 30 Am. Dec. 263. See also Murray v. Supreme Hive L. M. of W. (Tenn.), 80 S. W. K. 827. a Commonwealth v. Pike Beneficial Soc, 8 Watts & S. 247. 216 GOVERNMENT AND MEMBEESHIP : BT-LAWS. § 107 these tribunals in the line of order and to correct abuses, but they do not inquire into the merits of what has passed in rem judicatam in a regular course of proceedings." This doctrine has received general approval in this country and in England, as appears by a long list of adjudications, subject however to some important modifications, if not exceptions, where property rights are involved, which we will consider in course.i The court, if a property right is involved, will, however, look so far into the case as to sat- isfy itself that there was not a capricious or aibitrary exercise of the power. ^ § 107. When Injured Members can Resort to the Courts. — It has been held in many cases that before the member can resort to the courts he must first exhaust the remedies provided by the society of which he is a member.^ 1 Osceola Tribe v. Schmidt, 57 Md. 98; Sperry's Appeal, 116 Pa. St. 391; 9 Atl. Eep. 468; Anacosta Tribe v. Murbach, 13 Md. 91; Farms- worth V. Storrs, 5 Gush. 412; Burton s. St. George's Society, 28 Mich. 261; Grosvenor v. United Society, etc., 118 Mass. 78; Woolsey ». Inde- pendent Order, etc., 61 la. 492; Karcher v. Supreme Lodge, 137 Mass. 368; Loubat v. Leroy, 15 Abb. N. C. 1; White v. Brownell, 4 Abb. Pr. (N. 8.) 162; s. c. 2 Daly, 329; Dolan v. Court Good Samaritan, 128 Mass. 4,B7; Olery v. Brown, 51 How. Pr. 92; Laf ond u. Deems, 8 Abb. N. C. 388; s. c. 81 N. Y. 507; Hutchinson v. Lawrence, 67 How. Pr. 33; Jones V. National, etc., Assn. (Ky.), 2 S. W. Rep. 447; Hopkinson v. Marquis of Exeter, L. E. 5 Eq. 63; Dawkins v. Antrobus, L. E. 17 Ch. D. 615, affd. 44 L. T. Eep. (n. s.) 557. 2 Hopkinson ». Marquis of Exeter, 37 L. J. Ch. 173; 5 L. R. Eq. 63; Eichardson-Gardner v. Freemantle, 24 L. T. (sr. s ) 81; 19 W. R. 256; Dawkins o. Antrobus, 17 L. E. Ch. D.615; 44 L. T. 557; 29 W. R. 511; Otto V. Journeymen Tailors', etc., Union, 75 Cal. 303; 17 Pac. Rep. 217. 8 Karcher v. Supreme Lodge, etc., 137 Mass. 368; Chamberlain v. Lin- coln, 129 Mass. 70; Dolan o. Court Good Samaritan, 128 Mass. 437; Gros- venor V. United Society, etc., 118 Mass. 78; White v. Brownell, 4 Abb. Pr. (N. s.; 162: s.c. 2 Daly, 329; Lafond ». Deems, 8 Abb. N. C. 388; s.c. 81 N. y. 608; Poultney B. Bachmann, 31 Hun,49; Carlen ». Drury, 1 Ves. &B. 154; Harrington ». Workingmen's Assn., 70 Ga. 340; Lewis B. Wil- son, 2 N. Y. St. R. 806; Screwmen's Assn. v. Benson, 76 Tex. 552; 13 S. 217 § 107 GOVEENMENT AND MEMBERSHIP: BY-LAWS. as for example if he has been cited to appear before a com- mittee to show cause why he should not be expelled he must appear before such committee before he can resort to the courts ; ^ but a different rule prevails where property rights are involved. The courts are loth to adopt the rule that societies doing a life insurance business can expel a member for some infraction of a by-law regulating personal conduct and thereby cause him to forfeit his insurance for which he has perhaps paid for a long period, at a time too when possibly from ill health or other reasons he may not be able to replace the indemnity; ^ and, as was said by the Supreme Court of California : ^ " Courts will interfere for the purpose of protecting property rights of members of un- incorporated associations in all proper cases, and, when they take jurisdiction, will follow and enforce, as far as applica- ble, the rules applying to incorporated bodies of the same character." If the lodge tribunal had no jurisdiction its sentence is a nullity. Although the action of such a tri- bunal according to its rules, on a question which it had authority to decide, honestly taken, after the requisite notice to the members, cannot be collaterally reviewed by the courts,* yet, if the action of the lodge be a unsurpa- W. E. 379; Supreme Council, etc. v. Forslnger, 125 Ind. 52; 25 N. E. K. 129; Kobinson^. Irish-American, etc., Soc, 67 Cal. 135; Canfield v. Great Camp, etc, 86 Mich. 626; 48 N. W. R. 875; Levy ». Ma^'nolia Lodge, etc., 110 Cal. 297; 47 Pac. E. 887; Moore v. National Council, etc., 65 Kan. 452; 70 Pac. E. 352; Jeane v. Grand Lodge A. O. U. W., 86 Me. 434; 30Atl. E. 70; People v. Med. Soc, 84 Hun, 448; 32 N. Y. Supp.445; Eeno Lodge v. Grand Lodge, etc., 54 Kan. 73; 37 Pac E. 1003; 26 L. E. A. 98 ; ante, § 94. 1 Whiteside v. Noyac Cottage Assn., 68 Huu, 565; 23 N. Y. Supp. 63. 2 Austin V. Searing, 16 N. Y. 112; Bauer v. Sampson Lodge, 102 Ind. 262; Supreme Council o. Garrigus, 104 Ind. 138; Pulford u. Fire Dept., 31 Mich. 457; Olery v. Brown, 51 How. Pr. 92; Mulroy v. Knights of Honor, 28 Mo. App. 463. 3 Ottow. Journeymen Tailors', etc, Uaion, 75 Cal. 308, 17 Pac. Eep. 217. « Karcher v. Supreme Lodge, etc, 137 Mass. 368. 218 GOVBKNMENT AND MEMBERSHIP: BY-LAWS. § 108 tion, or without notice or authority, it cannot affect the legal rights or change the legal status of any one. " The obligation to appeal is not imposed when the judgment is void for want of jurisdiction. It may be likened to a judg- ment rendered by a court which has no jurisdiction of the subject-matter or the person. No appeal or writ of error is necessary to get rid of such a judgment ; it is void in all courts and places." i And the duty of an expelled mem- ber to exhaust, by appeals or otherwise, all the remedies within the organization, arises only where the association is acting strictly within the scope of its powers.^ Yet, by acquiescence in a wrongful expulsion the member may be considered as waiving his rights.^ A member is not bound to resort to the tribunals of the order if it would be useless.* § 108. The Jurisdiction of Equity. — In a late case before the Master of the Rolls in the Chancery Division,^ the grounds of the interference of court of equity in matters of this kind were thus discussed : " The first question that I will consider is, what is the jurisdiction of a court of equity as regards interfering at the instance of a member of a society to prevent his being improperly expelled therefrom ? I have no doubt whatever that the foundation of the juris- diction is the right of property vested in the member of the society and of which he is unjustly deprived by such unlawful expulsion. There is no such jurisdiction that I 1 Hall V. Supreme Lodge Knights of Honor, U. S. Cir. Ct. E. D. Ark., 24 Fed. Rep. 450. 2 Mulroy u. Supreme Lodge Knights of Honor, 28 Mo. App. 463; Blumenfeldt ». Rorschach, 43 111. App. 434; HoefEner v. Grand Lodge, etc., 41 M. A. 45. 3 Glardon v. Supreme Lodge K. of P., 50 M. A. 45; Lavin v. Grand Lodge Comm. (Mo. App.), 78 S. W. U. .S25. 4 State V. Grand Lodge, A. O. U. W., 70 Mo. App. 456. « Rigby 0. Connol, 14 L. E. Ch. D. 482. 219 § 108 GOVBENMENT AND MEMBERSHIP: BY-LAWS. am aware of reposed, in this country at least, in any of the, Queen's courts to decide upon the rights of persons to asso- ciate together when the association possesses no property. Persons, and many persons, do associate together without any property in common at all. A dozen people may agree to meet and play whist atjeach other's houses for a certain period, and if eleven of them refuse to associate with the twelfth any longer, I am not aware that there is any jurisdiction in any court of justice in this country to in- terfere. Or a dozen or a hundred scientific men may agree with each other in the same way to meet alternately at each other's houses, or at any place where there is a possibility of their meeting each other; but if the association has no property, and takes no subscriptions from its members, I cannot imagine that any court of justice could interfere with such an association, if some of the members declined to associate with some of the others. That is to say, the courts, as such, have never dreamt of enforcing agreements strictly personal in their nature, whether they are agree- ments of hiring and service, being the common relation of master and servant, or whether they are agreements for the purpose of pleasure, or for the purpose of scientific pur- suits, or for the purpose of charity or philanthropy — in such cases no court of justice can interfere so long as there is no property the right to which is taken away from the person complaining. If that is the foundation of the jurisdiction, the plaintiff, if he can succeed at all, must succeed on the ground that some right of property to which he is entitled has been taken away from him. That this is the foundation of the interference of the courts as regards clubs I think is quite clear. If we look at the Lord Chan- cellor's judgment in the case of In re St. James' CIub,i he says this : ' What, then, were the interests and liabilities of 1 2 D. M. & G. 383; 16 Jur. 1075. 220 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 108 a member? He had an interest in the general assets as long as he remained a member, and, if the club was broken up while he was a member, he might file a bill to have its assets administered in this court, and he would be entitled to share in the furniture and effects of the club.' So he puts it that the member has an interest in the assets. In the case of Hopkinson v. Marquis of Exeter ,i Lord Romilly says this : ' This is an application by the plaintiff asking a declaration that he is entitled to the enjoyment of the prop- erty and effects of the Conservative Club, and to partici- pate in its rights, privileges, and benefits, and also that the defendants, the committee of the club, may be re- strained by injunction from excluding him therefrom.' So that he starts with the enjoyment of property, and the subsequent cases have gone on the same ground." ■* In a recent case,^ the complainant had been expelled from a proprietary club and sought remedy by injunction. In holding that equity had no jurisdiction the court said : ^ " In all the cases of this nature in which up to the present time an injunction has been granted, the club has been one of the ordinary kind, i. e., it has been possessed of prop- erty (such as a freehold or leasehold house, furniture, books, pictures and money at a bank) which was vested in trustees upon trust to permit the members for the time being to have the personal use and enjoyment of the club-house and effects in and about it. But the interest of the mem- bers is not confined to that purely personal right. The members might, if they all agree, put an end to the club ; and in that case they would be entitled, after the debts and liabilities of the club were satisfied, to have the assets 1 L. E. 5 Eq. 63. 2 Ante, § 105; Van Houten v. Pine, 36 N. J. Eq. 133 and note; post, §442. s Baird v. Wells, L. R. 44 Ch. D. 661; 31 Am. & Eng. Corp. Cas. 240- 246. 221 § 108 GOVERNMENT AND MEMBERSHIP: BY-LAWS. divided among them. In the present case the club, as such, has no property. The club-house and furniture belong to the defendant Wells, and by him the subscriptions are taken. He is not a trustee but the owner of the property. If the club were dissolved at any moment there would be nothing whatever to divide among the members. Now the interference of the court in the cases which have hitherto occurred has been based on the rights of property of which the member had been improperly deprived. The general principle was laid down by Lord Cranworth in the case of Forbes V. Eden,l where he said:^ ' Save for the due dis- posal and administration of property there is no authority in the courts of either England or Scotland to take cogniz- ance of the rules of a voluntary society entered into merely for the regulation of its own affairs.' And the same prin- ciple was stated at great length by the late Master of the Eolls (Sir George Jessel) in the case of Rigby v. Connol.* In that case the plaintiff sought to restrain the defendant from excluding him from the benefits of a trades union of which he was a member. Sir George Jessel said : * ' The first question that I will consider is, what is the jurisdiction of a court of equity as regards interfering at the instance of a member of a society to prevent his being improperly expelled therefrom? I have no doubt whatever that the foundation of the jurisdiction is the right of property vested in the member of the society and of which he is unjustly deprived by such unlawful expulsion. There is no such jurisdiction that I am aware of reposed, in this country at least, in any of the Queen's courts to decide upon the rights of persons to associate together when the association possesses no property * * * j cannot imagine that any 1 Law Rep. 1 H. L., Sec. 568. » L. R. 1 H. L., Sec. 668. 8 14 Ch. D. 482. * 14 Ch. D. 487,488. 222 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 108 court of justice could interfere with such an association if some of the members declined to associate with some of the others. That is to say, the courts as such have never dreamt of enforcing agreements strictly personal in their nature * » * j^ such cases no court of justice can interfere so long as there is no property the right to which is taken away from the person complaining. If that is the foundation of the jurisdiction, the plaintiff, if he can succeed at all, must succeed on the ground that some right of property to which he is entitled has been taken away from him. That this is the foundation of the interference of the courts as regards clubs I think is quite clear.' Then his lordship referred to certain cases and came to the con- clusion that the plaintiff was not entitled to any relief. Here, as I have pointed out, there are no funds vested in trustees, or settled to be disposed of by the members of the Pelican Club in accordance with the rules of that associa- tion and the question is whether the plaintiff, as a member of that club, has any right of property for the protection of which the court will interfere by way of injunction, and in my judgment he has not. The position appears to me to be this : each member is entitled by contract with the defendant Wells to have the personal use and enjoyment of the club, in common with the other members, so long as he pays his subscription and is not excluded from the club under rule 17. That right is, as it seems to me, of a per- sonal nature such as, if infringed, may give rise to a claim for damages, but not such as the court will enforce byway of specific performance or injunction. The contract in its legal nature closely resembles contracts for providing board and lodging in a particular house, as when the head of a household admits a boarder into his family for a fixed period, or the proprietor of a private boarding house agrees to provide for a term, board and lodging for one boarder in 223 § 109 GOVERNMENT AND MEMBERSHIP: BY-LAWS. common with others ; as to which Wright v. Stavert,! may be referred to. The contracts in these cases fall, in my opinion, under the head of agreements strictly personal in their nature, and consequently in neither of them would the court interfere by way of injunction at the instance of the boarder. So, also, in niy judgmqjit, is it inthe present case. It was contended that damages might be an insufficient remedy by reason of a decision being given which affects the character and position in society of the plaintiff and does not satisfy the requirements of the law. In no case, so far as I am aware, has the existence of such circum- stances been treated as affording ground for the granting of an injunction to restrain the proceedings of a voluntary society, and indeed upon the principle laid down in the case of Forbes v. Eden,^ it might well happen that decisions which gravely affect some members of a voluntary society and do not satisfy the requirements of the law, might be arrived at by the committee or other like body without being open to be questioned in any civil court or giving rise to any right of action whatever." § 109. The Remedy o£ Mandamus: What the Court will Consider. — As a general rule, a member wrongfully expelled from a society, or when the proceedings are irreg- ular, may be restored by mandamus, and this is the proper remedy.'* However, the courts, in these actions or in applications to enjoin interference, will only examine to see if the proceedings were in accordance with the rules of the society, and not inherently against the principles of justice. The rule is thus laid down by the High Court of Appeal:* " The only question which a court can properly 1 2E. &B. 721. 2 L. R. 1 H. L., Sec. 668. 3 See post, § 442, * Dawkins v. Antrobus, 17 L. E. Ch. D. 630. 224 GOVERNMENT AND MEMBEKSHIP : BY-LAWS. § 110 consider is whether the members of the club, under such cir- cumstances, have acted ultra vires or not, and it seems to me the only questions which a court can properly entertain for that purpose are, whether anything has been done which is contrary to natural justice, although it is within the rules of the club — in other words, whether the rules of the club are contrary to natural justice; secondly, whether a per- son who has not condoned the departure from them has been acted against contrary to the rules of the club ; and thirdly, whether the decision of the club has been come to bona fide or not. Unless one of those charges can be made out by those who come before the court, the court has no power to interfere with what has been done." l § 110. Presumption of Regularity of Expulsion Pro- ceedings. — While ordinarily there is a presumption that there is fairness on the part of the fellow-members of a society in proceedings for expulsion of another,^ and, while if jurisdiction be shown, courts will also presume that the proceedings were regular, and will look at justice rather than f orm,^ yet there are to be no presumptions in the case of forfeiture of property, or other important rights,* because the law is opposed to sharp, summary proceedings involv- ing forfeitures.^ 1 Society v. Commonwealth, 62 Pa. St. 125; Commonwealth o. Gennan Soc, etc., 15 Pa. St. 251; Otto v. Journeymen Tailors', etc., Union, 75 Gal. 308; 17 Pac. Eep. 217; Schweiger v. Society, etc., 13 Phila. 113; Sibley v. Carteret Club, 40 N. J. L. 295; People v. N. Y. Ben. Assn., 3 Hun, 362; Peoples. St. Franciscus, etc., 24 How. Pr. 216; People v. St. George, etc., 28 Mich. 261; Commonwealths. Guardians of Poor, etc., 6 Serg. & E. 469; Palford ». Fire Dept., 31 Mich. 458; People o. Medical Soc. Erie, 24 Barb. 570. See ante, § 106. 2 Bachmann v. N. Y. Arbeiter, etc., 64 How. Pr. 442; Harman v, Dreher, 1 Speer Eq. 87; Shannon v. Frost, 3 B. Mon. 253. 3 Burton v. St. George Soc, 28 Mich. 261. * Pulford V. Fire Department, 31 Mich. 458. « People V. Medical Society, 32 N. Y. 187. 15 225 § 111 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 111. Withdrawal o£ Member of Voluntary Associa- tion. — Unless the compact between the members of a voluntary association provide to the contrary, a member may withdraw from it at any time. " The entering into it, the remaining in it, the performance of duties incumbent upon the member, by reason of ^is membership, are purely voluntary." Consequently the member may withdraw when he pleases without the consent of the association. But by so doing he cannot avoid any obligations incurred by him to the association, nor can it, after such withdrawal, impose any new obligations upon him.i A notice of with- drawal by a member is a bar to an action for benefits although the society had not assented or dissented thereto or erased his name.^ The court in the case last cited says : " It will be observed that this right of withdrawal on the part of the insured is absolute and in no way dependent upon the assent or dissent ef the company. Its omission to erase his name or accept his withdrawal in no way re- stricts or limits the absolute right of withdrawal under the contract. * * * The insured, therefore, by his own act, during his life-time, availed himself of his right under the contract, and ceased to be a member, which effectually bars a recovery." Nor is the association estopped from asserting that the member has voluntarily withdrawn from membership, although it has denied his right to voluntarily withdraw, unless, in so doing, it has led the member to believe, to his prejudice, that he is still a member.^ By a 1 Ellerbe, etc., v. Barney, 119 Mo. 632; 25 S. W. E. 384; Borgraefe V. Knights & Ladies of Honor, 26 M. A. 218; 22 Mo. App. 127; Stewart V. Supreme Council A. L. H., 36 M. A. 319; Springmeyer ». Benevolent Assn., 5 Cin. L. B. 516; Cramer v. Masonic L. Assn., 9 N. Y. Supp. 356; Gray v. Daly, 40 App. Div. 41; 57 N. Y. Supp. 527. The question is also considered in Patrons Mut. Aid Soc. v. Hall, 19 Ind. App. 118; 49 N. E. R. 279. 2 Cramer v. Masonic L. Assn., supra. 2 Borgraefe t). Knights, etc., of Honor, 26 Mo. App. 218; Stewarts. Sup. Council Am. Leg. of H., 36 M. A. 319. 226 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 112 voluntary withdrawal the member loses any interest in the property or funds of the association, i an intention to with- draw may be shown by conduct as well as words and is a waiver of any informalities in manner of suspension,^ and a member of a fraternal beneficiary association may abandon his membership and thereby lose all rights to benefits.'' It has been held, however,* that where the rights of a beneficiary have attached the withdrawal is not complete unless the benefit certificate is surrendered, the society having notice of the facts. The question is one of intention." § 112. Personal liiabllity of Members o£ Unincorporated Society. — As to the personal liability of members of a voluntary association, for, if incorporated, the identity of the members of the society is for general purposes merged in the entity of the corporation, a distinction is made between differences arising between members themselves, or internal controversy, and questions between a creditor on the one hand and the body, or one or more members, on the other, or external controversies. " The courts have always distinguished between the principles applicable to the two cases of controversies, and have, in the ab- sence of a better guide, leaned in the one class of cases toward the rules offered by corporations, and often in the 1 Burt V. Oneida Community, 137 N. Y. 346; 33 N. E. E. 307; 19 L. E. A. 297; Missouri Bottlers Assn. v. Fennerty, 81 Mo. App. 525. 2 Railway Passenger &c. Assn. v. Leonard, 82 III. App. 214; Lavin v. Grand Lodge A. O. U. W. (Mo. App.), 78 S. W. E. 325. 8 Lavin v. Grand Lodge, supra; Hansen v. Supreme Lodge K. of H,, 140 III. 310; Van Frank v. U. S. Ben. Assn., 158 111. 560. 4 Conselyea v. Supreme Counc. A. L. H., 3 App. Div. 464; 38 N. Y. Supp. 248; affd. 157 N. Y. 719; 53 N. B. E. 1124. s Wanek V. Supreme Lodge Bohemian &c. See, 84 Mo. App. 185; Ryan v. Mutual Reserve F. L. Assn., 96 Fed. R. 796; Foxheyer v. Order Red Cross, 24 Ohio Cir. Ct. R. 56. .227 j§ 112 GOVERNMENT AND MEMBERSHIP: BY-LAWS. other class of cases, towards those offered by the law of partnership or agency." ^ The general principle has thus been laid down: ^ " Certain societies, as clubs, which are not constituted for any purpose of profit, are exposed to liabilities similar in many respects to those of a partner- ship. All parties who take an Edctive part in working out a project, who attend meetings at which resolutions are made or orders given for the supply of goods, in furtherance of a joint undertaking, are, in general, jointly responsible. The act of a secretary of a voluntary association will not bind the board, if not authorized; but it will bind any members who were present at a meeting, and concurred in giving authority to the secretary. Where members of a voluntary association authorize its officers to engage in a particular transaction in the name of the society, as they do not bind the society as a body, or give to persons interested a tangible third party against whom they can proceed, they are themselves the only persons that can be sued, and are, in fact, principals in the transaction.^ If the appellant's members of an organized club or association of gentlemen, expressly authorized the presiding officer of the associa- tion to execute a note in the name of the club, or in any other name whatever, expressive of an association of men, and to use this note when made, for the purpose of pur- chasing bonds to be owned by and used for the club of which they were members, and these bonds were purchased and the note executed in the name of the club, whatever 1 Ebbinghousen v. "Worth Club, i App. N. C. 300 (see note by re- porter). 2 Ferris v. Thaw, 5 Mo. App. 279; affirmed 72 Mo. 446. 3 Heath v. Goslin, 80 Mo. 310; Lewis v. Tilton,64 la. 220; s. c. 52 Am. Eep. 436; Bay «. Powell, 134 Mass. 22; Newell v. Borden, 128 Mass. 31; Doubleday v. Muskett, 7 Bing. 110; Blakely ». Bennecke, 59 Mo. 193; Horseley o. Bell, 1 Brown Ch. 101; CuUeno. Duke Queensbury, 1 Brown Ch. 101. See also Murray v. Walker, 83 la. 202 ; 48 N. W. 1076 and Hornberger v. Orchard, 39 Neb. 639; 58 N. W. R. 425. 228 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 112 may be said as to the liability of the other members of the association, we cannot see on what principle it can be de- nied that those expresslj'^ sanctioning or ratifying this use of the club's name are liable upon the note to the person who advanced the money. It is not necessary to invoke the doctrine of partnership, perhaps ; yet as to this partic- ular transaction these men became partners, though not partners in trade, and however distinct as toother matters. And if they choose to assume a common name, under that name they will, each and every one, be liable as if the name signed to the note was the individual name of each man ; and if they employ an agent's hand to write that name, it is as if each man himself had held the pen. If, on the ma- turity of this note, it was by express authorization or sanc- tion of these several men, renewed by another note, executed in the name of the club by its presiding officer, this note also would be the note, not of the agent, but of all those who had sanctioned this use of the club name, and for the pur- poses of this transaction adopted it as their own. The mere name is nothing; its only office is that of indentification. If Smith choose to call himself Snooks, and to make a con- tract by the name of Snooks, he binds himself as effectually as if he had signed the name of Smith. i If the appellants authorized Thaw to execute a promissory note, to be used to purchase property for their purposes, and told him to execute it in the name of the lodge, it is manifest that they intended to enter into a contract by that name. They did not mean that Thaw alone should be bound, for Thaw could bind himself without any authority from them, and in his own proper name; they could not by their act bind the lodge, for it was not a corporate body ; nor could they bind the individual members of the lodge, for whom they were not authorized to act. They 1 Snooks' Petition, 2 Hilt. 575. 229 § 112 GOVEENMENT AND MEMBERSHIP: BY-LAWS. were themselves the principals in the transactions, if they directed or sanctioned the making and renewal of the note ; and if the money was obtained on this note, and received by the lodge of which they were members, they are per- sonally liable on the just principles of the common law." In another case, where an action had been brought to charge the members of a campaign committee i the court said : " Associations and clubs, the objects of which are social or political and not for purposes of trade or profit, are not partnerships, and pecuniary liability can be fastened upon the individual members of such associations only by reason of the acts of such individuals or of their agents ; and the agency must be made out, — none is implied from the mere fact of association.^ * * * jf ^fjg ^ork was done with the previous concurrence or subsequent approbation of de- fendants, they and all the members of the club who stood in the same situation were liable to pay for the goods if the credit was given to the members of the club. * * * jf the plaintiff had trusted solely to the state of the funds, and this had been shown, the members of the committee could not have been liable unless the funds were collected ; but if the credit was given to the members of the committee, such members as were aware of the dealing and authorized or sanctioned it are undoubtedly liable. So far as the evidence of agency goes, a course of dealing may amount to proof of original authority. The fact that defendants, when the bill was presented to them, recognized it as correct, to- gether with the publicity of the work, go to show that de- fendants knew that the work was being ordered in the name of the committee of which they were members, especially 1 Richmond v. Judy, 6 Mo. App. 467. 2 Bailey v. Macauley, 19 L. J. Q. B. 73; Wood v. Finch, 2 Post. &Fin. 447; Delaunay i>. Strickland, 2 Stark. 416; Sizer v. Daniels, 66 Barb. 426; Luckombe v. Ashton, 2 Fost. &Fin. 707; Flemyng v. Hector, 2 M. &W. 172. 230 GOVERNMENT AND MEMBBKSHIP : BY-LAWS. § 112 as the work done was so clearly in furtherance of the ob- ject for which the committee was organized. The evidence of ratification, even though doubtful and susceptible of different interpretations, is properly submitted to a jury; and slight circumstances and small matters are sometimes sufficient to raise a presumption of ratification. It may further be said that though a part of the members of a voluntary organization cannot, as a general rule, bind the others without their consent before the act which it is claimed binds them is done, or they have ratified it and adopted it with full knowledge of all the facts, yet there are cases, as is said in Sizer v. Daniels, i in which the ob- jects for which the association is organized are so clear, and the acts done so essentially necessary to the further- ance of that object, that all will be presumptively bound by them without evidence of consent or ratification. * * * The question is purely one of agency." ^ And the Supreme Court of Nebraska has said:^ "The plaintiffs in error were entitled to an instruction to the effect that their liabil- ity did not attach for any debts of the society prior to the date of their becoming members of it, and nowhere in the record was there any such instruction given ; and as, before observed. Orchard based his right to hold the plaintiffs in error liable on the theory that they were members of the 1 66 Barb. 426. 2 Kidgeley ». Dobson, 3 Watts & S. 118; Sproatc. Porter, 9 Mass. 300; flemyng v. Hector, 2 M. & W. 172; s. c. 2 Gale, 180; McMahon v. Eauhr, 47 N. Y. 67; Devoss v. Gray, 22 Ohio St. 159; Beaumont v. Mere- dith, 3 Ves. & B. 180; Todd v. Emly, 7 M. & W. 427; In re St. James Club, 2 D. G. M. & G. 383; Caldicott ». Griffiths, 8 Exch. 898; Babb v. Reed, 5 Eawle, 161; Leech v. Harris, 2 Brewst. 571; Ebbinghausea ». Worth Club, 4 Abb. N. C, 300 and note; Gorman v. Russell, 14 Cal. 537; Heath v. Goslin, 80 Mo. 310; Volger v. Ray, 131 Mass. 439; Newell?). Borden, 128 Mass. 31; Ehrmantraut v. Robinson, 52 Minn. 333; 54 N. W. E. 188; Nelson Distilling Co. v. Loe, 47 Mo. App. 31i'McCabe v. Goodfellow, 133 N. Y. 89; 30 N. E. E. 728. See ante, § 21,etseq. 3 Hornbergeru. Orchard, 39 Neb. 639; 58 N. W. R. 425. 231 § 114 GOVERNMENT AND MEMBERSHIP: BY-LAWS. society when the goods were purchased. The charges of the court and the instructions given by him at the request of the plaintiff left room for the jury to infer that if the plaintiffs in error became members after the debt was con- tracted, and then attended meetings of the society, at which the debt was spoken of, acknowledged to be unpaid, and promise made to'pay it, the plaintiffu in error thereby ratified and became liable to pay for what the society had done before they joined it. No member of a voluntary unincorporated association is liable for any debt contracted by such society unless at the time the debt was incurred he was a member thereof, except by an express contract, based on a good consideration, all which must be alleged and proved." Loss, before the record had been made up, of the informal minutes of a meeting of a voluntary asso- ciation, where an act was authorized, does not preclude the plaintiff, in an action against the members of the society for work and materials furnished in fitting up its meeting room, from showing by oral evidence that such a vote was passed. 1 § 113. Personal Liability of Members, how Avoided. — If a member of an unincorporated society wishes to avoid responsibility for debts which it is likely to incur by with- drawal he should give notice to the public ; ^ but if obliga- tions have already been incurred he cannot avoid any liability by withdrawing from membership. ^ § 114. Individual Liability for Sick or Funeral Bene- fits. — It has often been attempted to hold the members of a lodge liable personally for the promised benefit in time of sickness. It may be a question of construction in each ^ Newell V. Borden, 128 Mass. 31. 2 Park V. Spaulding, 10 Hun, 128. ,3 Ante, §§ HI, 112. 232 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 115 particular case whether the members are personally liable or not. In at least one case, that of a lodge of the order of Chosen Friends, ^ the members were held personally lia- ble ; but the better rule seems generally to be that laid down by the Supreme Court of Massachusetts, where it was sought to personally charge the members of a lodge of Odd-fellows for a death benefit. The court held in that case,2 that under the constitution and the laws of the lodge, the credit was given to the fund created by the joint con- tributions of the members who only agreed to pay these certain and stated contributions or dues. § 115. Liability of Persons Contracting in Name of Voluntary Association. — Generally, whenever any person, or persons, contract in the name of an unincorporated or- ganization, he or they are personally liable for the obliga- tions so incurred. In such a case the Supreme Court of Iowa said: ^ " It is said these defendants did not contract. They certainly represented that they had a principal for whom they had authority to contract. They, for or on be- half of an alleged principal, contracted that such principal would do and perform certain things. As we have said, there is no principal, and it seems to us that the defendants should be held liable, and that it is immaterial whether they be so held because they held themselves out as agents for a principal that had no existence, or on the ground that they must, under the contract, be regarded as princi- pals, for the simple reason that there is no other prin- cipal in existence." * The question, however, would 1 Pritchett v. Schafer, 2 W. N. C. 317. 2 Payne ». Snow, 12 Cush. 443; 59 Am. Dec. 203; see also Foster v. Monlton, 35 Minn. 458. To the same effeet Is Myers v. Jenkins, 63 Ohio St. 101; 57 N. E. R. 1089. s Lewis V. Tilton, 64 la. 220; 52 Am. Kep. 436. 4 Ash u. Guie, 97 Pa. St. 493; Fredendail v. Taylor, 26 Wis. 286; ante, § 31. 233 § 116 GOVERNMENT AND MEMBEE8HIP : BY-LAWS. seem to be in all cases an inquiry of to whom credit was given. 1 § 116. Summary of Principles Stated in this Chap- ter. — From the cases hereinbefore cited we deduce the following general rules : — 1. Members of all associations,incorporated or voluntary , are bound by the charter or articles of association and by- laws, lawfully adopted in accordance therewith, provided such by-laws do not contravene the charter, or common or statute law and are not unreasonable. This reasonableness will be determined by the courts, they being governed by considerations growing out of the nature of the society and by the fact whether or not property rights are involved. 2. In seeking to obtain rights under the by-laws or rules of^a society the member must proceed as therein required and generally exhaust the remedies established by the by- laws and rules before applying to the courts for relief. If no tribunal is established by the rules he may at once re- sort to the courts. In the case, however, of property rights, it has been held that he may or may not leave the determination to the tribunals of the order ; he may sue at once or he may consent to an adjudication by the society, in which latter case, he is bound as by an arbitration, pro- Tided no principles of natural justice have been violated by the tribunal and the proceedings are regular. 3. All voluntary associations or incorporated societies may expel a member as provided in their rules, or for vio- lation of his duty as a corporator, or if he becomes infamous, but, if property rights are involved, or if the society be incorporated, the courts will judge of the reason- ableness and validity of such rules and will be reluctant to enforce or permit forfeiture of important rights. In any event the proceedings by the society must be in accordance 1 Ante, §§ 35, 36. 234 GOVERNMENT AND MEMBERSHIP: BY-LAWS. § 116 with its rules ; notice must be given to the accused and he afforded an opportunity to explain his conduct and defend himself, and then if the proceedings are regular and fair or if no property right is involved, the court will not interfere ; if, however, the rules are illegal or unreasonable or the pro- ceedings irregular the court will enjoin the procedure, or any interference with the rights of the members, or, if he has been wrongfully expelled, restore him by mandamus, provided some property right attaches to membership. 4. In regard to the jurisdiction of superior over inferior bodies in an order, or society, the courts will not enforce a forfeiture of the property rights of the latter, but may even interfere to prevent it. In such cases considerations of public policy will always prevail. In mere matters of discipline, where no property right is involved, the decision of the superior organization, if regularly rendered and not inherently unjust, will be regarded as final. 5. Where subordinate organizations have a conventional as well as a State charter either may be forfeited or taken away without affecting the other. But in no case can a State charter be impaired or taken away except by direct action of the State. Forfeiture of the conventional charter of a society incorporated by the State will not divest its property, nor can the property be affected by a secession of part of its members. Even if unincorporated, the ma- jority of a society have generally the right to cut loose from a superior governing body, and the minority have no redress if the property is used for the general purposes for which it was acquired. 6. In regard to personal liability of the member for the debts or obligations of the society, the rule is that liabilities can only be fastened on him by reason of his own acts, or by reason of the acts of his agents ; and the agency must be made out by the person who relies on it, for none is implied by the mere fact of association. 235 CHAPTER IV. OFFICERS AND AGENTS. i 117. AssociatioDS and Corporations Act through Agents. 118. Subordinate Lodges both Principals and Agents. 119. General Principles of Law of Agency. 120. When General Engagements of Clubs are Binding on their Members. 121. OflScers and Committees are Agents. 122. Presumptions of Law concerning Members. 123. When Judicial Powers cannot be Conferred. 123a. Election of Officers. 124. Power of Amotion of Officers, who has. 125. Authority of Officers and Agents. 126. Agents of Corporations. 127. Officers of Corporations are Special Agents. 128. Agent contracting in Name of Irresponsible Principal. 129. Agent Acting in Excess of His Authority. 130. Charter or Articles of Association Fountain of Authority of Officers, Agents and Committees. 131. Fiduciary Relation of Officers and Directors. 132. Discretionary Powers cannot be Delegated. 133. Officers and Agents of Benefit Societies. 134. Powers and Authority of Directors. 135. Formalities to be Observed by Agents. 136. Distinction as to Matters Relating to Internal Management. 137. Execution of Insurance Contracts. 138. Acts and Meetings of Directors and Committees. 139. Record of Proceedings of Meetings of Directors Need not be Kopt. 140. Powers of President. 141 . Of Vice-President. 142. Of Secretary. 143. Of Treasurer. 143a. Trustees. 144. Dual Capacity of Subordinate Lodges of an Order. 145. Officers and Committees of Benefit Societies are Special Agents. 146. Benefit Societies in Law are Mutual Life Insurance Societies. 147. Difference Between Powers of Agents of Stock and those of Mutual Companies. 236 OFFICERS AND AGENTS. § 117 § 148. Authority of Subordinate Lodges when Acting for Qrand and Supreme Lodges. 149. Have Subordinate Lodges the Characteristics of Ordinary Life Insurance Agents? 150. To what Extent Can Local or Subordinate Lodges Bind the Superior Body? 151. General Bales of Agency Apply to Agents of all Kinds of Com- panies. 152. Authority of Life Insurance Agents. 153. The Modern Doctrine. 154. The Contrary View. 155. The General Eule Unimpaired. 166. Dealings with Agents of Mutual Companies, 167. Members of Mutual Benefit Societies must know Limitations of Powers of Officers. 158. The Correct Doctrine ac to the Authority of Insurance Agent Stated in Certain Cases. 169. How far Knowledge of Agent Binds Principal — Fraud of Agent. 160. Notice to Agent. 160a. Relations between Agent and Company. § 117. Associations and Corporations Act Through Agents. — It stands to reason that all associations of indi- viduals, whether endowed with corporate powers and priv- ileges, or unincorporated, must of necessity do most acts through the intervention of agents, for the members can act as a body upon comparatively few occasions. The lia- bility of the associated persons, either as an association or individuals, must usually, if not always, be determined by an application of the general principles of the law of agency, modified sometimes by the circumstances of each particular case.l Benefit societies have certain peculiar and indi- vidual characteristics: in some cases, their undertakings resemble the contracts of life insurance companies, at other times their engagements are only such as arise in the ordi- nary business of clubs or associations for social or commer- cial objects. The one class of contracts are of insurance and are similar in many respects to those of ordinary life 1 Ante, § 49. 237 § 119 OFFICERS AND AGENTS. insurance concerns, they are consequent to and generally arise out of the membership and as incident thereto ; the second class may be made up of all other undertakings and agreements and are not different from those of individuals or of other corporations. § 118. Subordinate Lodges both Principals and Agents. — The various lodges, or subordinate and local divisions or societies, of a general and more extended or- ganization, have in their transactions a dual nature. When they furnish benefits to their members in times of sickness, and when dealing with them in regard to local matters, they are principals ; but when they simply receive members under the direction and supervision of a superior body, which is generally incorporated, and by whom the contract of in- demnity, or benefit, is entered into, or when they collect assessments for this superior, they are agents of such superior,! unless otherwise provided in the contract. If their powers are defined in the by-laws they are special agents.2 § 119. General Principles of Law of Agency. — To determine the rights and liabilities of these corporations, or associations, their members or their agents, involves a con sideration of the whole law of agency. It is not necessary, however, to here undertake so arduous a task nor would it be to the advantage of the reader. There are, it is true, peculiar contingencies and circumstances which we may consider with profit, but it must always be remembered that the contracts of all individuals, corporations or associations entered into through agents are to be construed and the liability determined by an application of the general prin- 1 Post, §§ 144, 146. 3 See post, § 148 and § 434a. 238 OFFICERS AND AGENTS. § 121 ciples of the law of agency, and to the treatises upon that subject the reader must be referred. § 120. When General Engagements of Clubs are Bind- iug on their Members. — In regard to the general engage- ments of associations or clubs, which are contracted through agents, the rule is that they are binding upon all the mem- bers if the rules and constitution of the organization either expressly or impliedly authorize the acts, or if the objects of the association are so clear and the acts done so essen- tially necessary to the furtherance of that object that all the members will be presumptively bound by such acts without evidence of consent or ratification. i Otherwise only those members who have either authorized the act or ratified it when done will be bound. ^ § 121. OflScers and Committees are Special Agents. — The officers and committees of an unincorporated society, as well as those of an incorporated organization, are the agents of the body of members for certain specific purposes and are therefore to be deemed special agents, whose commis- sion and authority is to be found in the rules and articles of association or in the special orders appointing them. As is said in Flemyng v. Hector: ^ «' It is therefore a ques- tion here how far the committee, who are to conduct the affairs of this club as agents, are authorized to enter into such contracts as that upon which the plaintiffs now seek 1 Flemyng v. Hector, 2 Mees. & W. 172; Todd v. Emly, 8 Mees. &W. 505; Sizer v. Daniels, 66 Barb. 426; Richmond v. Judy, 6 Mo. App. 465. 2 Cases, supra; McMahon v. Eauhr, 47 N. Y. 67; Lindley on Partner- ship, p. 67; Beaumont v. Meredith, 3 Ves. & B. 180; Ferris y. Thaw, 5 Mo, App. 279; 72 Mo. 450; Eichbaum v. Irons, 6 Watts & S. 67; Devoss V. Gray, 22 Ohio St. 159; Sproat v. Porter, 9 Mass, 300; Babb v. Reed, 5 Kawle, 151; Ash v. Guie, 97 Pa. St. 493; Bishop on Contracts, § 1174. See ante, § 112. 3 2 Mees. & W. 179. 239 § 123 OFFICERS AND AGENTS. o bind the members of the club at large ; and that depends on the constitution of the club, which is to be found in its own rules." In another case,i it is said that the constitu- tion of the society and its laws agreed upon by the mem- bers, which contain all the stipulations of the parties, form the law which should govern. The members have estab- lished a law themselves.^ So the executive board cannot turn a voluntary association into a corporation in the absence of express authority in the constitution and laws of association. 3 § 122. Presumptious of Law Concerning Members. — The presumption is that each person upon becoming a member of an association consents that it shall be repre- sented by such officers and agents as are reasonably neces- sary for the transaction of its business, and that in the absence of express provisions in the charter limiting their powers, they shall possess the powers and perform the duties ordinarily possessed and performed by such officers and agents ; and such member is bound by the rules of the company which he is presumed to know.* § 123. When Judicial Powers cannot be Conferred. — But an association cannot, by its constitution or by-laws, confer judicial powers upon its officers or committees so as to enable such officers, or committees (without voluntary submission to their authority on the part of lodges or mem- bers), to adjudge a forfeiture of property rights, or to deprive lodges or members of their property, or to arbitra- rily take property away from one set of members and give 1 Leech v. Harris, 2 Brewst. 571. 2 Cockrellj). Aucompte, 26 L.J. C. P. 194; 2 C. B. (N. S.) 410; 3 Jur. (n. s.) 844; White v. Brownell, 2 Daly, 329. 8 Kandolphu. Southern Benef. L., 7 N. Y. Supp. 135. * Protection Life Ins. Co. v. Foots, 79 111. 361. 240 OFFICEES AND AGENTS. § 123 it to another set. This is on the ground that the creation or judicial tribunals is one of the functions of sovereign power and because to allow such powers to be conferred would be contrary to public policy, just as agreements to refer future controversies to arbitration cannot be enforced. An adjudication of these officers, or committees, which has this effect of forfeiture of property, or property rights, is not good either as an award or as a judgment. ^ But this must not be understood to mean that the officers of grand or supreme lodges cannot (if no property rights are in- volved and the inferior lodge is not incorporated in a different State), acting in accordance with the laws of the association, and by way of discipline, deprive local, or subordinate lodges of their fraternal charters ; ^ or that subordinate lodges cannot provide in their laws that no member shall be entitled to benefits for sickness or other- wise, unless certain officers, or a committee, shall determine the amount and extent of the same,^ or, possibly, the right.* Or that lodges may not, by their laws, provide that if a member does not pay an assessment, or his dues, within a specified time, he shall by such failure, forfeit his member- ship, or be subject to expulsion; ^ or that lodges may not, by their laws, and under the restrictions and limitations hereinbefore stated, provide for tribunals, or committees 1 Austin V, Searing, 16 N. Y. 112; 69 Am. Dec. 665; Bauer v. Sampson liOdge, 102 Ind. 262; Supreme Council v. Garrigus, 104 Ind. 133; Schmidt V. A. Lincoln Lodge, 84 Ky. 490; 2 S. W. Eep. 156; see Bouvier L. D., tit. Submission; also ante, §§71,72, and post, §§ 400a and 460 where the subject is fully considered. 2 State V. Odd-Fellows' Grand Lodge, 8 Mo. App. 148. 3 Ante, § 92, et seq. * Bood V. Railway, etc., Mut. Ben. Assn., 31 Fed. Rep. 62. This case, however, has been severely criticised and a contrary doctrine laid down by the Supreme Court of Illinois in Railway Passenger, etc., Assn. v. Boblnson, 147 111. 138; 35 N. E. 168; seepost, § 400cs. 6 Post, §§ 386, 388. Ante, § 95, et seq. 16 241 § 124 OFFICERS AND AGENTS. by which members charged with certain offenses may be tried, and, if found guilty, expelled from membership.! § 123a. Election of Officers. — It is not within the scope of this work to enter into a discussion of the law of corporate elections, or the election of officers of a volun- tary association, other than to sa;y that the requirements of the charter, by laws or articles of association must be substantially followed and that the election must be at a regular, or stated, or annual meeting of the body, un- less there is a provision in the charter or articles of asso- ciation providing for an election at a special meeting.^ However, as was said by the Supreme Court of Rhode Island: 3 "It is matter of common knowledge that both corporations and voluntary associations often disregard, to some extent, the strict rules of procedure prescribed in their charters or by-laws in transacting their internal affairs; but, so far as we are aware, the courts have not held that such technical variation from prescribed forms relieved them from liability to outside parties doing bus- iness with them in good faith upon the strength of what appeared by their own records to have been regularly and properly done ; ' ' and the same cOurt has said : * " Many things may be done improperly by an association ; but if its members acquiesce in them and go on as if they were right, they will be bound by them." Where no term of office is fixed the tenure is at the pleasure of the association.* § 124. Power of Amotion of Officers, wlio has. — The power of removing or suspending officers of an association ' Ante, § 95, et seq. 2 Thompson on Corp., Chap. XV, 3 McDermott v. St. Wilhelmina Ben. A. Soc. (R, I.), 54 Atl. R. 69. •• Industrial Trust Co. v. Green, 17 E. I. 586; 23 Atl. R. 914; 17 L. R. A. 202. » Ostrom V. Greene, 20 Misc. K. 177; 45 N. Y. Supp. 862. 242 OFFICEES AND AGENTS. § 125 or corporation, resides in the body at large and cannot be exercised by other officers unless the articles of association expressly confer the power.i Where the constitution of a society gives one of the officers power to remove other officers for cause and on notice, an attempt to remove such officers without notice is void.^ § 125. Authority |of Officers and Agents. — The au- thority of officers and directors of both voluntary associ- ations and corporations, is derived, either expressly or impliedly, from the articles of association or charter, as we have seen.^ Where the officers or directors of an association had no power to do an act, and such act was done by the president, it was held that the direc- tors could not ratify it.* A course of dealing may be sufficient to authorize an inference of authority, although the officer had not in fact any real authority ; ^ and authority may be inferred from facts and circumstances ; ' for usage often interprets authority ; ^ and ratification also may be implied from apparent consent, acquiescence or acts and circumstances.^ In general, a party dealing with any kind of an agent is bound to ascertain his authority ; as has been said : ' " He is put on inquiry by the very fact that he 1 Potter V. Search, 7 Phila. 443; Lowry v. Stotzer, 7 Phila. 397; Neall V. Hill, 16 Cal. 145. i Caine ». Benevolent, etc.. Order, 88 Hun, 154; 34 N. Y. Supp. 528. For procedure In suspending subordinate councils or lodges, see Grand Grove, etc., v. Garibaldi Grove, etc., 105 Cal. 219; SSPac. E. 947. Ante, § 68. Post, § 886. 3 Ante, § 121; Herndon v. Triple Alliance, 45 Mo. App. 426. « Crum's Appeal, 66 Pa. St. 474. « Union, etc., Mining Co. o. Rocky Mt. Nat. Bk., 2 Colo. 248; Fayles V. National Ins. Co., 49 Mo. 380; Richmond v. Judy, 6 Mo, App. 465. 6 Dougherty o. Hunter, 64 Pa. St. 380 ; Northern Cent. R. Co. v. Bas- tian, 16 Md. 494; Olcott v. Tioga R. Co., 40 Barb. 179. ' Whart on Ag., § 134; Story on Ag., § 95 et seq. " Story on Ag., § 253 et seq. ' Harrison v. City Fire Ins. Co., 9 Allen, 233. 243 § 125 OmCEHS AND AGENTS. is negotiating with an agent and is bound to ascertain whether he can bind his principal in the transaction which he pur- ports to carry on in his behalf." i For whatever purpose an agent is constituted, it is always understood that he shall have authority to do all necessary and usual acts incident to the nature of the business whichjie is constituted to trans- act.^ " The principle, which pervades all cases of agency, whether it be a general or a special agency, is this," says Story :3 " The principal is bound by all acts of his agent, within the scope of the authority which be holds him out to the world to possess ; although he may have given him more limited private instructions, unknown to the persons dealing with him. And this is founded on the doctrine, that where one of two persons must suffer by the act of a third person, he who has held that person out as worthy of trust and confidence, and having authority in that matter, shall be bound by it. It will at once be perceived, this doctrine is equally applicable to all cases of agency, whether it be the case of a general, or of a special agency. When I hold out to the public a person as my agent in all my business and employment, he is deemed my general agent; and all acts done within the scope of that business bind me, notwithstanding I have privately limited his authority by special instructions. Why? Because he is externally clothed with an unlimited authority over the subject-matter, and third persons might otherwise be defrauded by his acts. In such a case, he is not less a general agent as to third persons, than if he had received no private limitations of his authority. As between himself and his principal, his authority is not general, but quoad hoc is limited. In the same case, if the principal had privately revoked his whole 1 Story on Ag., § 58 and note. * Story on Ag., chap, VI,, § 57 et seq. Agency, § 127, note. 244 OFFICERS AND AGENTS. > § 126 authority he would still be bound. So, if he had privately limited the authority to a single act in the same business (and he would accordingly be, between himself and his principal, a special agent), still the principal would be bound. Precisely the same rule applies to a special agency. » * * Jq \}^q case of a general agency, the principal holds out the agent to the public as having un- limited authority as to all its business. In the case of a special agency, like that above stated, the principal holds out the agent to the public, as having unlimited authority as to a particular act, subject or purchase. In each case, therefore, the same general principle applies. " The same author continues : l " But where the agency is not held out by the principal, by any acts or declarations, or implica- tions, to be general in regard to the particular act or busi- ness, it must from necessity be construed according to its real nature and extent ; and the other party must act at l^is own peril, and is bound to inquire into the nature and extent of the authority actually conferred." § 126. Agents of Corporations. — The rule in regard to corporations is not different from that applied to persons : " The powers possessed by the various agents of a corpo- ration may be limited by the terms of their appointment, or by custom ; but the ultimate source of their authority is always the agreement of the shareholders expressed in their charter or articles of association. It follows, therefore, that if an act is in excess of the chartered purposes of a cor- poration it will always be outside of the powers delegated to the company's agents, as well as in excess of the corpo- rate powers which the company is authorized by law to exercise. The general rule, that a contract made by an agent of a corporation in excess of his powers does not bind » Story on Ag., § 133. 245 § 127 OFFICERS AND AGENTS. the company, applies with peculiar force to a contract which is in excess of the charter itself. For a person deal- ing with a corporation must, at his peril, take notice of the terms of its charter, and of the fact that acts in excess of the charter are necessarily in excess of the authority of the agent performing them. * * * It is a settled rule, that a person who deals with a corporation must, at his peril, take notice of its charter or articles of association. It follows, therefore, that so far as the authority of an agent of a corporation is defined by its charter or articles of association, the scope of the agent's powers must always be considered as disclosed." ^ § 127. Officers of Corporation are Special Agents. — Officers of a corporation are special and not general agents ; they have no power to bind a corporation except within the limits prescribed by the charter and by-laws. The prin- ciple, that persons dealing with the officers of a corporation are charged with notice of the authority conferred upon them, and of the limitations and restrictions upon such authority contained in the charter, is too well established to require to be supported by a citation of authorities.^ But this rule is qualified by the statement that if a corporation either elects an officer or appoints an agent of a class, which, according to general custom, have certain functions and powers, it will be bound by his acts within the scope of authority usually exercised by such class, although his pow- 1 Morawetz on Corp., §§ 580, 591; post, § 130. This rule applies to beneficiary associations to its full extent and, as the members are con- clusively presumed to know the laws of the association, they must know if acts done by officers are in excess of the powers conferred by the by-laws. 2 Adriance o. Eoome, 52 Barb. 399; Alexander v. Cauldwell, 83 N. Y. 480; De Bost o. Albert Palmer Co., 35 Hun, 386; Rice ©.Peninsula Clnb, 52 Mich. 87. 246 OFFICERS AND AGENTS. § 128 ers are limited by the by -laws. ^ The scope of the agent's or officer's authority may be established by " proofs of the course of business between the parties themselves ; by the usages and practice which the company has permitted to grow up in its business, and by the knowledge which the board, charged with the duty of controlling and conducting the transactions and property of the corporation, had, or must be presumed to have had, of the acts and doings of its subordinates in and about the affairs of the corporation." ^ There is no inference that a general agent of a life insur- ance company for one State, who has permission from the company to solicit business in another State, has in such latter State any authority greater than that usually pos- sessed by insurance agents.^ § 128. Agents Contracting In Name of Irresponsible Principal. — Generally, an agent, contracting in the name of a foreign or irresponsible principal, or one incapable of contracting, is held personally, because the law presumes that he intended to bind himself or that credit was given to him. So, if an agent contracts in the name of a voluntary association having no legal entity, he is bound, although all the members who have consented to the act or ratified it afterwards are also bound.* "But," as Mr. Story in his 1 MiDor V. Mechanics' Bank, 1 Pet. 46; Fay v. Noble, 12 Cush. 1 ; Mer- chants' Ba.nk v. State Bank, 10 Wall. 604; Commercial Ins. Co. v. Union Ins. Co., 19 How. 318; Smith v. Smith, 62 111.493; Union Mutual Life Ins. Co. V. White, 106 111. 67. 2 Mining Co. v. Anglo-Callfornian Bank, 104 U. S. 192; Lee v. Pitts- burg Coal, etc., Co., 56 How. Pr. 376 ; Phillips v. Campbell, 43 N. Y. 271 ; Morawetz on Corp., § 509. 8 Baldwin v. Conn. Mutual L. Ins. Co., 182 Mass. 389; 65 N. E. E. 837. ^ Doubleday u. Muskett, 7 Bing. 110; Blakely v. Benneoke, 59 Mo. 195; Heath v. Guslin, 80 Mo. 310; Horsley v. Bell, 1 Brown Ch. 101; Lewis u. Tilton, 64 la. 220; 42 Am. Rep. 436; Burls v. Smith, 7 Bing. 704; Ridgleyw. Dobson, 3 Watts & S. 118; Cullen v. Duke of Queens- bury, 1 Brown Ch. 101; Gray v. Raper, L. R. 1 C. P. 694. 247 § 129 OFFICERS AND AGENTS. commentaries on agency 1 says, "although it is thus true that persons, contracting as agents, are ordinarily held personally responsible, where there is no other responsible principal to whom resort can be had ; yet, the doctrine is not without some qualifications and exceptions, as indeed the words, ' ordinarily held,' woi^d lead one naturally to infer. For, independent of the cases already suggested, where the contract is, or may be treated as a nullity, on account of its inherent infirmity or defective mode of exe- cution, other cases may exist, in which it is well known to both of the contracting parties, that there exists no author- ity in the agent to bind other persons for whom he is acting, or that there is no other responsible principal ; and yet, the other contracting party may be content to deal with the agent, not upon his personal credit, or personal responsi- bility, but in the perfect faith and confidence that such con- tracting party will be repaid and indemnified by the persons who feel the same interest in the subject-matter of the con- tract, even though there may be no legal obligation in the case." The question generally is, "to whom is the credit knowingly given, according to the understanduig of both parties?" "The law in all these cases, pronounces the same decisien ; that he to whom the credit is knowingly and exclusively given, is the proper person who incurs lia- bility whether he be the principal or the agent. "'^ § 129. Agent Acting in Excess of liis Authority. — Whenever an agent who contracts for another party, whether a corporation or natural person, exceeds his authority, he is personally liable, unless his acts be after- wards adopted or ratified by the supposed principal ; ^ and 1 § 287. 2 Story on A?., § 288; Whart. on Ag., §§ 507, 508, 509; ante, § 115. 3 Aug. & Ames on Corp., § 303; Whart. on Ag., § 524. 248 OFFICERS AND AGENTS. § 131 he may be sued either for breach of warranty or deceit, ^ but the asent will not be liable if the other contractinoj party have the same opportunities for knowledge as the agent. § 130. Charter or Articles o£ Association Fountain ot Authority of Oflacers, Agents and Committees. — The affairs of all corporations and societies must be managed by agents through whom all their business is transacted and, whether these agents be called officers, directors or com- mittees, theyare, nevertheless, agents, and thegeneral rules of agency apply. The articles of association, or charter, is the fountain of authority defining and limiting their duties and powers, ^ and beyond these definite powers, they cannot go, although in the case of executed contracts, the company is, upon principles analogous to those of estoppel, sometimes debarred from asserting this defense, when this authority has been exceeded. The society is bound by acts done within the apparent scope of the agent's authority and such as are usually performed by agents of a similar class in that particular course of business.* It follows that officers, directors and committees may do all such acts as are within the scope of their apparent authority and usually incident to their offices. This rule, however, must be taken with some degree of allowance, for much will depend upon the special circumstances of each case.^ § 131. Fiduciary Gelation of Officers and Directors . — The general rules must also be held to apply, in all cases, that, while directors and other officers have a wide range of 1 Whart. on Ag., § 524. rt. on Ag., §531. 3 Herndon v. Triple Alliance, 45 M. A. 426; ante, § 120. * Morawetz on Corp., § 587 et seq. * Ante, § 126. 249 § 132 OFFICEES AND AGENTS. discretionary authority, each one sustains a fiduciary rela- tion to the members of the organization, and the utmost good faith is required of him. "He falls, therefore, within the great rule by which equity requires that confi- dence shall not be abused by the party in whom it is reposed, and which it enforces by imposing a disability, either par- tial or complete, upon the party intrusted to deal, on his own behalf, in respect to any matter involved in such con- fidence." 1 The powers conferred upon an agent must be exercised to advance the interests of the principal, and for no other purpose. He must not use either the assets or the credit of the principal, or any of the powers of his own office, except to advance the interests of the company irrespective of his own advantages or desires. ^ And it is the duty of the trustees to resist all invalid claims and protect its members and the funds in their hands. ^ So, the trustees of a benefit society cannot vote themselves back pay.* § 132. Oiscretionary Powers cannot be Delegated. — It is also the rule that discretionary powers, if conferred upon the agent, cannot be delegated.^ But this rule also cannot be said to be invariable, as the power depends in each case upon the intention of the principal. A leading writer says upon this point: ^ " It has sometimes been laid down as a rule, that powers involving the exercise of dis- 1 Hoyle V. Plattsburg, etc., E. B. Co., 54 N. Y. 314; 13 Am. Eep. 595; Cumberland Coal Co. v. Sherman, 30 Barb. 562; Michoud v. Girod, 4 How. 654. 2 York, etc., R. Co. v. Hudson, 16 Beav. 485; Gallery v. Nat. Exch. Bank, 41 Mich. 169; Koehler v. Black Kiver Falls Iron Co., 2 Black. 715; Warden v. Union Pac. R. Co., 103 U. S. 561. s Mayer v. Equitable Reserve F. L. Assn., 42 Hun, 237. ^ State V. People's, etc., Assn., 42 Ohio St. 579. '^ Farmers' Fire Ins. Co., etc., v. Chase, 56 N. H. 341. ^ Morawetz on Corp., § 535. 250 OTTICEKS AND AGENTS. § 133 cretion and judgment cannot be delegated, except under an express grant of authority ; bat this statement of the rule is not strictly accurate. The authority of an agent to delegate powers to another agent depends always upon the intention of the principal. The appointment of an agent with powers requiring the exercise of judgment and discretion is, in many cases, an indication that the principal intended the judgment and discretion to be exercised by the particular agent whom he selected, but this is not always so. Thus, the directors of a corporation have, undoubtedly, implied authority to appoint various agents, the performance of whose duties involves the exercise of a high degree of judgment and discretionary power. Directors of a railroad company may, without express authority, appoint engineers, superintendents, freight and passenger agents, and any other officers that may be required for the proper con- struction and management of the railroad. The directors of banking, insurance and commercial corporations have implied authority to employ financial agents. The employ- ment of attorneys to manage the legal affairs of a corpo- ration, and to institute or defend suits, is clearly within the implied authority of the directors or general managing agents. The board of directors have also implied author- ity to appoint a committee of their number with authority to execute the resolutions of the board, and to exercise general control over the affairs of the corporation during the recess of the board. The extent of the powers whicii may thus be conferred by the board of directors upon a committee, depends upon the character of the corporation, the frequency with which the board is required to meet, the nature of its duties and upon established custom. No more definite rule can be formulated." § 133. Officers and Agents of Benefit Societies. — The affairs of benefit societies are partly managed by superior 251 § 134 OFFICERS AND AGENTS. governing bodies, sometimes styled grand or supreme lodges, which have, in addition to officers corresponding to president, secretary and treasurer, certain committees whose duties are defined in the constitution or articles of association. These committees have many of the charac- teristics of boards of directors o| corporations. In their particular lines of duty they may be general agents with almost unlimited powers, or special agents restricted by provisions of the society's laws. In all cases the rules of the organization will govern unless the officer or commit- tee is held out to the world as having the authority that the designation and name would imply, although in the case of dealings between members or between members and officers there can be no such implied authority held out. Modified by usage or habits of dealing, or restrictions of the articles of association and by-laws, their transactions would be governed by the same general principles applicable to the directors of corporations and, by analogy at least, the same rules would determine the powers and liability of such com- mittees and officers. § 134. Powers and Authority of Directors. — Direc- tors of a corporation cannot make important changes in its business or in any respect modify or change the constitution, their authority only extending to the supervision and man- agement of the company's ordinary or regular business.! Nor can the directors depart from the general purposes of the corporation as defined in the charter.^ In the leading case upon this subject^ the vice-chancellor said: "The principle of jurisprudence which I am asked here to apply is, that the governing body of a corporation, that is in fact a trading partnership, cannot, in general, use the funds of 1 Railway Co. v. AUerton, 18 Wall. 233. 2 Minor v. Mechanics' Bank, 1 Pet. 71. » Pickering v. Stephenson, L. B. 14 Eq. Cas. 322. 252 OFFICERS AND AGENTS. § 135 tHe community for any purpose other than those for which they were contributed. By the governing body I do not, of course, mean exclusively either directors or a general council; but the ultimate authority within the society itself , which would ordinarily be a majority at a general meeting. According to the principle in question, the special powers, given either to the directors or to a majority by the statutes or other constituent documents of the association, however absolute in terms, are always to be construed as subject to a paramount and inherent restriction that they are to be exercised in subjection to the special purposes of the origi- nal bond of association. This is not a mere canon of English municipal law, but a great and broad principle, which must be taken, in absence of proof to the contrary, as part of any given system of jurisprudence." ^ § 135. Formalities to be Observed by Agents. — If the charter or by-laws prescribe any formalities for the orderly transaction of business these ordinarily must be observed. The rule has thus been laid down : ^ " The agents of a cor- poration must observe all formalities which are required by the company's charter in the corporate transactions. Even the majority are not at liberty to disregard the forms pre- scribed by the charter, for they constitute a part of the fundamental agreement between the shareholders. And if any agent of a corporation acts in a manner which is not authorized by the company's charter, his acts will not be binding. Thus, it has been held that where the charter of a company requires contracts of a particular description to be in writing, and signed by specified officers, or ap- proved in a specified manner, no agent can bind the com- pany by a contract of that description unless it was executed in the manner prescribed. And if the constitution of a 1 Ante, § 131. 2 Morawetz on Corp., § 682. 253 § 137 OFFICERS AND AGENTS. compauy requires the concurrence of a certain number of directors in the making of a contract, or the doing of any other corporate act, a less number cannot bind the com- pany." § 136. Distinction as to Matters relating to Internal Management. — A different rule sometimes prevails where certain formalities are prescribed for the internal manage- ment of the business of corporations. The same writer above quoted i says : "A party dealing with an agent of a corporation has usually no means of ascertaining whether formalities prescribed in the management of the internal affairs of the company have been complied with, and mat- ters of this kind are peculiarly within the knowledge of the company's agents. It has therefore been held, that, if a person deals with an agent of a corporation within the scope of his apparent authority, and without notice of the non- performance of any formality prescribed by the charter or by-laws as a condition precedent to the agent's authority to act, he will be entitled to assume that the formality has been complied with, and the corporation will be estopped from showing that the agent had no authority to bind it, by reason of a failure to comply with the prescribed condi- tion." It has also been said : ^ " A stranger must be taken to have read the general act under which the company is incorporated, and also to have read the articles of association ; but he is not to be taken to have read any thing more, and, if he knows nothing to the contrary, he has a right to assume as against the company that all matters of internal management have been duly complied with." § 137. Execution of Insurance Contracts. — In an early 1 Morawetz on Corp., § 610. 2 In re County Life Ass. Co., L. R. 5 Ch. App. 293. 254 OFFICEES AND AGENTS. § 138 easel it ^as held that, where the charter required that " all policies of assurance and other instruments ' ' in order to be effectual and bind the company, should be " made and signed by the president of said company or any other offi- cer thereof, according to the ordinances, by-laws and regu- lations of said company, or of their board of directors," the contract to cancel a policy is as solemn an act as a con- tract to make one; and, to become the act of the company, must be executed according to the forms in which by law they were enabled to make the contract, but in another court ^ it was held that, where the charter of an insurance company required all policies to be signedby the president, it was not necessary that a consent to an assignment of the policy should be signed by him.^ Where the by-laws of a beneficiary society required an initiation in accordance with a secret ceremony it was held that the contract of member- ship was not complete until after initiation. * § 138. Acts and Meetings of Directors and Commit- tee. — "When, by charter, a board are constituted the agents of a corporation for particular purposes,' and the number necessary to be present at the doing of an act is therein specified, an act done or a contract made by less than, or others than, those specified, will not bind the com- pany. If the charter specify no particular number of the board of directors as requisite to bind the corporation, that power resides either in the number specified in a by- law or in a majority, as a quorum, a majority of which have power to decide any question upon which they can act, and it is very clear that a contract made by a minority of a com- mittee appointed for the purpose of making it, not assented 1 Head v. Providence Ins. Co., 2 Cranch, 166. 2 New England Ins. Co. o. DeWolf, 8 Pick. 56. 3 Post, § 429. * Matkin v. Supreme Lodge K. of H., 82 Tex. 301; 18 S. W. R. 307. 255 § 138 OFFICEKS AND AGENTS. to by a majority, nor by the corporation, does not bind the latter. A majority of a committee authorized to sell lands by legislative resolve, or to do business of a public nature, have power to execute the commission ; but in case of quasi- corporations, where a certain number, as three persons, are appointed or authorized to do a particular apt, as to choose a chaplain, or to contract for the building of a meeting-house, in general they must concur in the act or contract to render it binding, though perhaps direct proof that all assented would not be required." ^ A majority of the directors, in the absence of any regulation in the charter, is a quorum, and- a majority of such quorum when convened, can do any act within the power of the directors.^ It will be presumed that the meeting was legally called unless the contrary be shown. 3 Meetings can be held at any place,* and a mem- ber who is present at a meeting and makes no opposition to a resolution is presumed to assent to its adoption.^ A formal meeting of the directors of a corporation is not nec- essary in order to enable them to do any act which is within their corporate powers * unless notice of a meeting is re- quired by the by-laws,' but, where the clauses of a statute enact that the directors of companies incorporated under the act are to hold meetings, at which the prescribed quorum must be present, and that questions at such meetings are to be determined by a majority of votes, it is essential that the directors act together, and as a board, though a fixed place of meeting is unnecessary.* Still it has been deemed suf- 1 Ang. & Ames on Corp., § 291. 2 Wells V. Kahway White Rubber Co., 19 N. J. Eq. 402. 3 Laneu. Brainerd, 30 Conn. 577; Sargent u. Webster, 13 Mete. 497. ' Obio & Miss. E. Co. v. McPherson, 35 Mo. 13; Arms ». Conant, 36 Vt. 744; State v. Smith, 48 Vt. 266; Bellows v. Todd, 39 la. 209. 5 Mowrey e. Indianapolis, etc., E. Co., 4 Biss. 78. 6 Waite V. Windham Co. Mining Co., 37 Vt. 608. ' Edgerly v. Emerson, 23 N. H. 555. 8 D'Arcy v. Tamar, etc., E. Co., 2 L. E. Exch. 158; 36 L. J. Exch. 37; 4 Hurl. & C. 463. 256 OFFICERS AND AGENTS. § 139 ficient presumptive proof, for a stranger, of the concur- rence of a quorum of a board of directors of a corporation, to show that they assented separately .^ It has been held^ that where the charter and by-laws provided that meetings of the directors should be held on the call of the president and the latter refused to call any meetings, whereupon the trustees convened without such call, but after giving notice of the time and place of such meeting to the president, the acts done at such meeting were irregular and void. § 139. Record of Proceedings of Meetings of Directors Need not be Kept. — In the absence of directions to the contrary a board of directors, or agents, or a committee, are not bound to keep a record or minutes of their pro- ceedings.* The general rule has been thus laid down:* " If, indeed, the charter or creating and enabling act of a corporation, expressly make the recording of the acts of its board of directors essential to their validity, or a condition precedent thereto ; or if it make a record taken by a pre- scribed officer the only mode by which such acts can be legally proven ; it is very obvious that to render the acts of the board obligatory, whether for or against the corpora- tion, the charter requisite must be complied within the one case, and that the charter mode of proof is the only one that can be resprted to in the other. The books, however, furnish us with no such provision in the charter of any cor- poration ; and without it there seems to be nothing in prin- ciple or authority to distinguish in this particular the acts of a board of agents, existing within a corporation, from the acts of agents constituted by natural persons. It is usual, indeed, by way of notice, and to facilitate proof, for the 1 Tenney v. East Warren, etc., Co., 43 N. H. 343. 2 State V. Ancker, 2 Rich. (S. C.) 245. 3 Hutchins ». Byrnes, 9 Gray, 367. 4 Ang. & Ames on Corp., § 291a. 17 257 § 140 OFFICERS AND AGENTS. charter and by-laws to provide that a fair and regular rec- ord of the proceedings of the managing board of a corpora- tion, should be made by some designated officer, as the cashier of a bank, or the clerk or secretary of an insurance ■ company. Such provisions are, in common, merely direc- tory to the corporation, its oncers or agents; and the breach or neglect of them, though it may render the direct- ors or their scribe responsible in case of consequential damage for violation of duty, is a matter wholly between themselves and the stockholders, and between the latter and the government, as a violation of the charter and by-laws, and by no means affects the validity of the unrecorded acts." " It is not necessary," said Chancellor Zabriskie,! " that the minutes of a corporation should be written up by the secretary in his own handwriting, or that they should be approved by the board. And, in fact, if it was shown that the resolution had been passed by the board when lawfully assembled, it would be valid, although never entered upon the minutes." § 140. Powers of President. — The president of a cor- poration is its chief executive officer, charged with the duty of a general superintendence of the company's affairs and of seeing that the directions of the board of directors are carried out. In some respects he is like an ordinary direc- tor and so in many companies their affairs are managed by an officer styled " managing director " instead of president. The powers of the president, or other chief officer, extend only to matters arising in the ordinary course of business,^ and he may perform acts of an ordinary nature, which by usage or necessity are incident to his office, without special 1 Wells V. Eahway White Rubber Co., 19 N. J. E. 402. 2 Blen V. Bear River, etc., 20 Cal. 602; St. Nicholas Ins. Co. v. Howe, 7Bosw. 450. 258 OFFICERS AND AGENTS. § 140 authority.! These powers may be inferred from facts and circumstances,^ and from his habits of acting as business agent with the knowledge and without the objection of the company .3 In the absence of any by-law showing that the president of a company had not the usual authority of the office he will be presumed to have the customary powers of such an officer.* If his acts be shown to be within the scope of his authority they are binding upon the company.^ The president of a corporation can em- ploy counsel;^ but cannot confess judgment;' nor sell the land of the corporation; ^ nor dispose of the company's property generally ; ' nor act usually for the company in matters not in the ordinary administration of business. i^ The president of a mutual insurance company cannot waive the conditions of an insurance policy prescribed by the by-laws of the company which are of the essence of the contract, nor make a contract different from that pre- scribed by such laws. 11 There is no objection to the pres- ident acting as secretary of a meeting of the board of directors if so desired. i^ A meeting, called by a deposed 1 Chicago, B. &Q. E. Co. v. Coleman, 18 111. 297. 2 Northern Central R. Co. v. Bastian, 16 Md. 494. s Martin v. Webb, 110 U. S. 7; Dougherty v. Hunter, 54 Pa. St. 380; Olcott V. Tioga E. E. Co., 40 Barb. 179. * Traders' Mut. L. Ins. Co. v. Johnson, 200 111. 359; 66 N. E. R. 634 t Parmer's Bank v. McKee, 2 Pa, St. 318; Bacon v. Mississippi Ins. Co., 31 Miss. 119. " Colraan v. West Va. Oil Co., 25 W. Va. 148; Savings Bank v. Ben- ton, 2 Mete. (Ky.) 240; Oakley v. Worklngmen's Ben. Soc,,2 Hilt. 487. ' Stokes V. N. J. Pottery Co., 46 N. J. L. 237. 3 Bliss V. Kaweah C. & I. Co., 65 Cal. 502. 9 Walworth Co. Bank v. Farmers', etc., Co., 14 Wis. 325. 11 Bright u. Metaire Cem. Assn., 33 La. Ann. 58. " Priest V. Citizens' Ins. Co., 3 Allen, 602; McEvers v. Lawrence, Hoff. Ch. 172; Brewer v. Chelsea F. Ins. Co., 14 Gray, 203. But see post, § 429. 12 Budd V. Walla Walla, etc., Co., 2 Wash. T. 347. 259 § 141 OFFICEES AND AGENTS. president, is illegal, and all acts done thereat are void.^ A contract of a life insurance company to pay a pension to a retiring president, the real consideration appearing to have been past services, is invalid. ^ § 141. Of Vice-President. — In regard to the duties of vice-president it has been said: ^ "As a general rule, in the absence of the president, or where a vacancy occurs in the office, the vice-president may act in his stead and per- form the duties which devolve upon the president. And such being the case, it must be held that, as Eose refused to act as president of the company, Brough, the vice-presi- dent, could not only act as president, but it became his duty to so act in the transaction of the business of the company. Nor does it matter that the act under which the body was organized does not enumerate a vice-president as one of the officers of the company ; but after providing that there shall be a president and other officers named, it authorizes the company to create other officers. And this company, by their by-laws, declared there should be a vice-president, and imposed the duty on him of assisting the president in the performance of such duties as he might require. In organizing such a body, such an office is, if not essential, usually created, and this organization, having provided for and elected such an officer, we must hold that he may perform the duties imposed upon the president in the same cases and under the same circumstances that such an officer may act when the office is created by the charter of the company. We see no objection to the deed because it was signed by Brough, as there was no president 1 Industrial Trust Co. v. Greene, 17 R. I. 58C; 23 Atl. R. 914. 2 Beers v. N. Y. Life Ins. Co., 20 N. Y. Supp. 789. This is an inter- esting case dealing with the powers of trustees under the by-laws and the passage of a resolution contracting with the president who presided at the meeting at which action was held. » Smith V. Smith et al., 62 111. 496. 260 OFFICERS AND AGENTS. § 142 of the company." The second vice-president, who pre- sided at a meeting of a society, i it was held, could after the adjournment of the meeting, appoint a committee of inves- tigation, called for by a resolution adopted at such meet- ing, and the first vice-president could fill the vacancies in the committee caused by the declination of certain of the appointees. As in the case of other officers, the charter must be looked to for the enumeration of the powers of the vice-president and if the constitution is silent, then the by- laws or the custom of the society or of similar societies. § 142. Of Secretary. — The secretary of a corporation is its officer to keep its records, books and seal and to act generally under the directions of the directors and presi- dent. His powers and duties are usually prescribed by the by-laws, but if they are not he has the powers ordinarily exercised by the corresponding officer of companies in the same line of business, or those which the customs and habits of his company have conferred upon him. There is no rea- son why .the secretary of an insurance company or benefit society should have any other or different powers than those of the corresponding officer of other organizations, or his authority be determined by any different rules. The sec- retary of the corporation is the proper person to have pos- session of, and prove, the books of the company ;^ and the directors are presumed to have control over him ; ^ he can make minutes of a meeting of the directors after the meet- ing has been held and they will relate back to the time of the transaction.* He may impose fines on members for non-payment of contributions, if it be so provided by the by-laws,^ but he cannot affix the corporate seal to a com- 1 Burton o. St. George's Society, 28 Mich. 261. 2 Smith V. Natchez Steamboat Co., 1 How. (Miss.) 479. 8 Blmes V. Ogle, 2 Eng. L. & Eq. 379; 15 Jur. 180. 4 Commercial Bank, etc., v. Bonner, 13 Smed. & M. 649. « Parker v. Butcher, L. R. 3 Eq. Cas. 762. 261 § 143 OFFICEES AND AGENTS. pany obligation upon the consent of directors given as they are met separately on the street, if the law of the body or statutes require a formal meeting.^ The secretary of a cor- poration remains, like other officers, in office until a suc- cessor is chosen.^ The statement of the secretary of a mutual benefit association to the insured that he need not pay his dues until certain charges then pending against him which, if true, made the policy forfeitable, were dis- posed of, is not out of the scope of his duties, but binds the company.^ A deed, though not attested by him, will be valid if the charter does not require such attesta- tion, although it may be (unknown to the grantees) required by the by-laws.* Unless there is some provision in the charter of a society for a single secretary, the society may direct any of its officers or agents to perform any of the appropriate duties of the secretary, and in such case such agent so designated is made secretary for that purpose.^ § 143. Of Treasurer. — The treasurer of a corporation is its officer charged by law with the custody of its funds, and responsible for their safe-keeping. So, where the by- laws provided that the treasurer should have custody of the moneys of a corporation and give bond for their safe- keeping, it was held ® that the directors could not lawfully deprive the corporation of the benefit of this responsibility by depositing the funds with others, or causing such dispo- sition to be made, and that they might be restrained by in- junction from so doing at the suit of any stockholder, a proper case being made. It has been said^that a corpora- 1 D'Arcy D. Tamar, etc., E. Co., L. R. 2 Exch. 158. 2 South Bay, etc., v. Gray, 30 Me. 547. 3 Jones V. National Mut. Ben. Assn. (Ky.), 2 S. W. Rep. 447. 4 Smith V. Smith, 62 111. 496. " Peck V. New London, etc., Ins. Co., 22 Conn. 575. 6 Pearson v. Tower, 55 N. H. 215. ' N. E. Car Spring Co. o. Union Indian Rubber Co., 4 Blatchf . 1. 262 OFFICERS AND AGENTS. § 143 tion by conferring upon a person the appointment of treasurer, holds him out to the world as its proper agent to receive funds paid to it; and such officer is the only proper person to whom, when payment is made, notice of the pur- pose to which the payment is to be applied should be given. The treasurer of a corporation must keep its moneys dis- tinct from his own, unless it is otherwise agreed, and pay any balance due on demand, i and he only has power to bind the company by acts in the usual course of business ; for unusual acts some special authority must be shown ; ^ he cannot sell or assign, without such special authority, the se- curities of his company.' In a case * where the treasurer purchased a claim against the company, it was held that he could not maintain a suit upon it against the corporation, because such purchase extinguished the debt. But upon principle he could recover what money he advanced to buy the claim, because he was acting as a trustee for its benefit and it should repay his advances. The treasurer of a vol- untary association will be directed to account for moneys in his hands and pay over according to the interest of the association.^ When by a resolution of an association, the treasurer was directed under certain contingencies to re- turn to each member the amount contributed by him to the common fund, it was held that he was liable to an action brought against him by a member to recover his share, the agreed contingency having occurred.^ So, if an unincorpo- rated body, through its treasurer, has received on deposit, certain money, a suit by the owner will lie against the treas- 1 Second Ave. R. R. Co. v. Coleman, 24 Barb. 300. 2 Stark Banks. U. S. Pottery Co., 34 Vt. 144; Dedham Inst., etc., v. Slack, 6 Cush. 408. 3 Jackson v. Campbell, 5 Wend. 572. * Hill Frazier, 22 Pa. St. 320. 5 Penfleld v. Skinner, 11 Vt. 297; Piggott v. Thompson, 3 Bos. & Pal. 146. 6 Koehler v. Brown, 2 Daly, 78. 263 § 143 OFFICERS AND AGENTS, urer in his individual capacity to recover such money ; i but it has also been held,^ that no action can be maintained by the treasurer of an unincorporated association against one upon his promise in writing to pay money — the same being payable to the " treasurer " of such association alone. In that case the court said: " To maintain that the plaintiff has a right to the action would be to put him upon the same ground he would occupy, if the association had been incorpo- rated, and made capable by its charter, of suing in the name of whoever might be the treasurer of the club, upon instru- ments made payable to the treasurer. Such a capacity to maintain an action can be conferred by a charter only. If the money had been payable to the plaintiff by his indi- vidual name, the right to the action would belong to him, and the description of him as treasurer of the club would not affect the right. The only effect the description would have, would be to make him a trustee for the members of the associatien. If the treasurer of the club could maintain the action, the right to the action might belong to different individuals at different times. The club may re- move from ofGce a person who was the treasurer when such a promise was made, and appoint a successor. In such a case the right which once belonged to one person as treasurer, would be exercised by another, without an as- signment from him who was first entitled; for an assign- ment would be without effect, as the promise is made to no one individually." An action cannot be maintained by trustees of an association against a treasurer to recover the funds of the society, no provision being made therefor in the by-laws and no warrant on such treasurer having been drawn for the funds. ^ One who has been elected treasurer ^ Bennett ». Wheeler, 11 La. Ann. 763. 2 Ewing V. Medlock, 5 Port. (Ala.) 82. 8 Smith V. Pinney, 86 Mich. 484; 49 N. W. E. 305. 264 OFFICERS AND AGENTS. § 143a of a society holds the funds in trust for it and as such trustee is subject to the jurisdiction of a court of equity. ^ § 143a. Trustees. — It is usual for voluntary associ- ations of all kinds, especially lodges and clubs which are unincorporated, to provide for the election of one or more trustees at the same time that other officers are elected, who are charged with duties of holding the funds and property of such organization. Wh^t are the duties and powers of such trustees is a new and interesting question. If it be true that the articles of association constitute a contract both between the society and its members, and among the members themselves, as has generally been held,^ it would naturally result that the trustees are governed by the articles of association and by-laws in the same way and to the same extent as general trustees are by the instrument creating the trust. The generally accepted doctrine has been,3 that a mere voluntary association, unincorporated, has no legal capacity to take or hold real estate as such, and the fact that a deed was made to three grantees in trust for an association, there being no intimation as to who were the persons associated, has been held not to save it from being void ; * but it has also been held ^ that a deed of land to a voluntary unincorporated society, not empowered to take and hold land, but the members of which are ascer- tainable, may be considered to convey to such members as tenants in common. The same court has also held,® that the conveyance of land to the trustees of an unincor- porated religious society, and their successors in trust for 1 Weld V. May, 9 Cush. 181. 2 See ante, §§ 63, 69 and 91. 3 Beach on Corp., § 379. * See cases cited in Beach on Corp., supra. 5 Byam v. Bickford, 140 Mass. 31. ' Peabody v. Eastern Methodist Soc, 87 Mass. 540. 265 § liba OFFICERS AND AGENTS. the use and benefit of the society, does not vest the title in the new trustees, who may be elected from time to time, but it remains in the grantees named in the deed or the survivor of them. In a case in Missouri, i it is said: "If the laws of this association provide for trustees in whom its property vests, or who are to enforce obligations incurred to the society, such persons may sue as trustees of an express trust. In such event the contract, in contemplation of law, may be con- sidered to be made with them for the benefit of all the members and other members of the association are not necessarily parties plaintiff." And the court adds : "While members, of these voluntary associations in many instances may become individually responsible to outside persons to the full extent of obligations incurred by the association, it has never been held that they are liable to each other beyond the limits fixed by their own agreement, nor that their responsibility within such limits is incapable of enforcement without the taking of a complete account and final winding up of the association." On a subsequent appeal of the same case,^ the court says: " The question of the right of the plaintiffs to sue as trustees of the society lies at the foundation of the action and ought to be first considered. The power of the members of an unincorpo- rated society to confer on one or more of their number the care and custody of the common property and the right to maintain suit in reference to the same is not questioned." In this case the court also held that the funds of the society in the hands of the treasurer at the time of his removal from office, under the articles of associa- tion in this case, became surplus funds and belonged to the trustees as the financial agents of the society. And 1 Kuhl V. Meyer, 35 Mo. App. 206; citing Miles v. Davis, 19 Mo. 414. 2 Kulilt). Meyer, 50 M. A. 648. 266 OFFICERS AND AGENTS. § 143a where a member of a society made his benefit payable to the trustees of his lodge for his burial and improvement of his cemetery lot without naming the trustees, it was held,i that the trustees for the time being of the lodge might maintain an action to recover the amount due under the certificate . Tlie court says : ' ' Lastly the defendant says that the judgment must be affirmed for the reason that the plaintiffs are the trustees of one of its subordinate lodges and that they have not the legal capacity to accept and execute the trust imposed, and, therefore, can main- tain no action for its enforcement. No authority is cited on either side of the question. The plaintiffs are only members of the corporation, and their status is not different from that of other members, merely by reason of the fact that they are trustees of a subordinate lodge. It would certainly be permissible for an ordinary member of the defendant society to act as a trustee for a beneficiary in one of its certificates, and there would be nothing in the law prohibiting him as such trustee from suing his corpora- tion to enforce the trust. It seems to us that there is no merit in this objection." It appears from the cases hereto- fore cited 2 that courts of equity treat the funds of volun- tary associations and societies as trust funds placed in the hands of the trustees for a specific purpose, and conse- quently will exercise jurisdiction over the fund to prevent their diversion, and the trustees are subject to the juris- diction the same as other trustees. Where an officer of an unincorporated association has custody and control of the funds of the society he is the only necessary party to a suit to establish a lien on the funds for a claim against it.^ Recurring to the subject whether, where the 1 Hysinger v. Supreme Lodge K. & L. of H., 42 M. A. 627. 2 See ante, §§38, 38a, and post, § 441. 3 Colleyi). Wilson, 86 Mo. App. 396. 267 § 1430! OFFICERS AND AGENTS. funds of a society are vested in trustees, they pass with- out any conveyance to the new trustees upon their election and qualification, it must be said that such question is not altogether clear. As we have seen, where land has been conveyed to trustees for the benefit of a society the title does not pass to new trustees elected from time to time, but remains in the first trustees and the survivor of them.l But it is easy to see how the principle laid down in that case may be right, and yet, where the by-laws of a society provide that the property shall vest in the trustees elected from time to time and pass to their successors without formal conveyance, that such a provision might be held effective, although, if a conveyance of property was made merely to persons in trust for a voluntary association, it would remain in them until divested by their own act. It has been held that where, under a resolution of the majority, the surplus funds passed to the hands of the new trustees between whom and the original contributors there is no privity, such trustees are not accountable to them for the funds ; the remedy being against the original trustees only.* Nor can contributors to a fund to create a trust for religious and charitable purposes, as such, call the trustees to ac- count. ^ But the court will always see that trust funds are applied to the object for which they were raised.* And where the funds of an association were deposited for its use in the names of its four trustees, and afterwards the name of the association was changed and one of the trustees refused to join with his cotrustees in an assign- ment of the funds to their successors, upon bill filed, the recalcitrant trustee was ordered to join in thfe assignment 1 Peabody v. Eastern Methodist Society, supra. 2 Abels V. McKeen, 18 N. J. B. 462. 3 Morton v. Smith, 5 Bush, 467; Penfleld «. Skinner, 11 Vt. 296. * Birmingham v. Gallagher, etc., Savings Bank, 112 Mass. 190. 268 OFFICERS AND AGENTS. § 143a And, generally, the trustees of a society will be compelled to transfer the trust estate to new trustees duly chosen. ^ In a case in Michigan, ^ the laws of the association pro- vided that the funds should be placed in the hands of the treasurer and that no money should be drawn, except by an order of the executive council, signed by a chief officer and at least two trustees, without providing any manner of turning over the funds by the treasurer to his successor. In holding that an action to recover the funds could not be maintained against the treasurer merely because he refused to pay the money in accordance with the resolution of the executive council, when no order was drawn and signed as provided, the court said: "It appears in evidence that the defendant was and still is a member of the association. Unless there is some war- rant of authority for one or more members of an unincor- porated society, no member or number of members can maintain a suit for the benefit of the society to enforce a contract made in its name or for its benefit, or recover prop- erty belonging to such society ; and the question here pre- sented is whether under the general law introduced in evidence, the plaintiffs, as trustees for the subsidiary high court are authorized to maintain this action. It must be confessed that the general laws are crude and lamentably wanting in matters of detail . The duties of the officers of the executive council, and of the trustees, are prescribed in the most general terms. There is no provision stating what the outgoing treasurer shall do with the funds on hand, nor to whom he shall hand over the books and papers in his custody. He is not required to deliver them to his suc- cessor, nor in express terms that he shall deliver the books and money to the executive council, which is the managing 1 Brown v. GrifEen, 14 W. N. C. 358. 2 Smith V. Pinney, 86 Mich. 484. 269 § 143a OFFICERS AND AGENTS. body, when the subsidiary high court is not in session. The only ways provided for withdrawing money from his custody and control are contained in section 2 of article 12 and section 12 of article 33, which have been both quoted. If the money is in the endowment fund it is presumably true that it was deposited in some bank specified or selected by the executive council and trustees, in which case it can- not be withdrawn except by drafts or checks upon the same, as provided for in section 17 of article 33. And if it is in such bank, there is no testimony in this case which shows that the proper officers could not have withdrawn the money from such bank. There is no direct testimony in this case that any bank was selected. It may, however, perhaps be inferred from the testimony of Edmund T. Mack, who testifies that he was cashier of the Citizens' Savings Bank of Detroit, and that it paid out for the benefit of the order, at the Chicago meeting, $15,600. The testimony of Mr. Greening is to the effect that when the accounts were audited in the usual way in August, 1887, just pre- vious to the Chicago meeting, the amount then in defend- ant's hands, was $20,499.69. If any money was in the defendant's hands, and not in the bank and subject to draft or check, as provided for by section 17 of article 33, then it was subject to be drawn out of defendant's hands by virtue of section 2 of article 12. There is no testimony in this regard, showing that the defendant refused to pay any money in his hands, drawn in pursuance of section 2 of article 12. The only evidence that he refused to pay the money pursuant to any authority was his refusal to pay Mr. McMurtry when he called upon him in pursuance of the resolution passed by the executive council, but it does not appear that he was presented with any order signed by the subsidiary high chief ranger and two trustees, or the sub- sidiary high sub-chief ranger and two trustees countersigned 270 OFFICERS AND AGENTS. § 143a by the permanent secretary ; and until the proper order is drawn and presented to him it is difficult to see how he is liable to suit for not paying it over. The trustees them- selves have no authority to draw the moneyfrom his hands, and the subsidiary high court has not directed this suit to be brought by them to obtain the money from Mr. Pinney in this manner. There is no testimony in the case tending to show any recognized custom with reference to tlie pay- ment over by the retiring treasurer of the moneys in his hands to his successor in office. The general laws of the order have been introduced as containing the only method by which the moneys in his hands as treasurer are with- drawn. We think it was incumbent upon the plaintiffs to have shown some breach of duty on the part of defendant prescribed by the general laws of the society of which he was a member, before he can be compelled in a suit of this kind to pay over money in his hands. All the members of the association are bound by these general laws. The executive council cannot draw money from his hands sim- ply by resolution. It requires an order, signed as provided for in section 2 of article 12, or by section 17 of article 33." We conclude that the articles of association constitute the fountain of authority for the trustees and are to be looked to to ascertain their powers, and, if such articles of asso- ciation provide that property shall be vested in the trustees elected from time to time, such property vests in the new trustees without formal action on the part of the old trustees, at least so far as personal property is concerned. While this might be true also in regard to real estate, the safe way is for the trustees to make a conveyance to their successors of the real estate held in trust unless the deed of such property expressly provides that no such convey- ance shall be necessary. In respect to general contracts and acts by trustees, the articles of association are to be 271 § 144 OFFICERS AND AGENTS. looked to for their powers, they being, as are the other officers of corporations or voluntary associations, agents, whose authority is to be measured by the articles of asso- ciation, and, probably so far as dealings with outside parties are concerned, by the authority which they are held out to the world as possessing. l § 144. Dual Capacity of Sabordlnate Liodges of an Order. — We have seen ^ that benefit societies generally have a complex organization; first are the local and subor- dinate lodges under the control of a grand lodge, next is the grand lodge made up of representatives from the local lodges, and lastly may be a supreme lodge composed of delegates from the grand lodges. The certificate or policy of insurance is issued by the supreme or grand lodge to the member through the local lodge, making the latter an agent for this purpose ; and then there may be a collateral benefit to be paid by the local lodge in case of sickness, in the contract for payment of which the local lodge is a prin- cipal. The contract in the former case is the constitution and by-laws of the grand or supreme lodge, in the latter the constitution and by-laws of the local lodge, which usually, however, refer to the constitutions and by-laws of the grand and supreme lodges and make them also a part of the agreement. To these contracts the member assents when he becomes such and consequently is presumed to know their terms.^ The subordinate lodges, therefore, and sometimes the grand lodges, are principals in certain trans- actions and agents in others, and so are governed by differ- 1 Deller ». Staten Island Athletic Club, 56 Hun, 647; 9 N. Y. Supp. 876. See ante, § 130, and post, § 145. 2 Ante, § 11, e{ seq. 3 Hellenbers v. District No. 1, 94 N. Y. 580; St. Patrick's Soc. ». McVey, 92 Pa. St. 510; Dolan v. Court Good Samaritan, 128 Mass. 439; Coleman v. Supreme Lodge, etc., 18 Mo. App. 189; Leech v. Harris, 2 Brewst. 571. 272 OFFICERS AND AGENTS. § 145 ent rules as they act in one capacity or the other, and under the constitutions and laws of the several bodies both supreme and subordinate lodges may be jointly liable with the Grand Lodge. i § 145. Officers and Committees of Benefit Societies are Special Agents. — The affairs of the constituent parts of a benefit society, as local, grand and supreme lodges, are managed by officers, corresponding to president, secretary, treasurer, etc., the same as in other associations or corpo- rations, and by standing, or regular, committees. The latter are generally provided for in the constitution, articles of association and by-laws, and have charge of certain matters, as finance, appeals from subordinate lodges or other special branches of the business. They are like directors in many respects, and the members of each committee act together as one body upon the questions coming before them. They are special agents, whose powers and duties are prescribed by the fundamental law of the organization, but on prin- ciple can perform all things within the usual and ordinary scope of their employment. Their unauthorized acts are not binding on the principal. ^ The general rules of agency apply to them and also the principles which determine the authority of boards of directors. There may also be special committees, created at any time for special purposes, or to do certain things, in which case they will be authorized to employ such means as are neces- sary and usual to accomplish the objects of their appoint- ment. The authority of many of these committees is so extensive as to really constitute them general agents in 1 Supreme Lodge A. O. U. W, v. ZuMke, 129 111. 298; i21 N. E. R. 789. 2 Hiatt V. Fraternal Home, 99 Mo. App. 106; 72 S. W. E. 463. As to powers of W. M. of a Masonic Lodge see Halcyon Lodge v. Watson, Kans. App. 661 ; 53 Pac. E. 879. See also post, §§ 148 to 150. 18 273 § 147 OFFICEES AND AGENTS. particular directions and bind their principals by whatever they do relating to such matter s.i § 146. Benefit Societies in Law are Mutual Liife Insur- auce Companies. — The disposition of the courts has been to hold that benefit societies paying a specified sum to the beneficiaries of a deceased member are to be treated as mutual life assurance organizations. The Supreme Court of "Wisconsin in a case involving the liability of a benevo- lent mutual aid society for a death loss,^ said: " We sup- pese the company is subject to the application of those legal principles applicable to other mutual life insurance companies." In this case the defendant was the incorpo- rated superior, governing a number of subordinate lodges of a social and benevolent organization, known as the "Order of Hermann's Sons." The Supreme Court of Maine, in a case where the benefit promised by a Masonic relief association was in question, said:* "If the preva- lent purpose and nature of an association, of whatever name, be that of insurance, the benevolent or charitable results to its beneficiaries would not change its legal char- acter. And that this association, et id omne genus are mutual life insurance companies, we entertain no doubt whatever. § 147. Difference between Powers of Agents of Stock and those of Mutual Insurance Companies. — A distinc- tion has been sought to be made between agents of stock and those of mutual companies, and generally it may be said that the representatives of the former have greater 1 See post, § 150. 2 Erdmana v. Mutual Ins. Co., etc., 44 Wis. 376. ' Bolton V. Bolton, 73 Me. 299. 4 Ante, § 52. For a very complete review of the authorities see note in 38 L. R. A. 1 to Penn. Mut. L. Ins. Co. v. Mechanics Savings Bank, etc., 37 U. S. App. 692; 72 Fed. E. 413; SSL. R. A. 33. 274 OFFICERS AND AGENTS. § 147 powers in settling the terms of the contract and in waiving compliance with its conditions than have the agents of mutual companies where the by-laws enter into the contract and prescribe that the stipulations shall be the same in all policies and shall regulate alike the rights of all. In Mas- sachusetts, New Jersey and Ehode Island, the courts have ruled strictly on the power of the officers and agents of mutual companies to depart from the directions and regu- lations of their charters and by-laws, interpreted in the light of the purposes for which these companies were established, but these views have not met with favor in other States, where a more liberal construction has been adopted and the differences between stock and mutual companies have been looked upon as more nominal than real. In the first men- tioned States the safety of the companies has been the chief consideration, in the latter the protection and safety of the public . The Massachusetts doctrine may be illustrated by a few extracts. In one case i the by-laws of the company provided that insurance subsequently obtained without the written consent of the president should avoid the policy and that the by-laws should in no case be altered except by a vote of two-thirds of the members of the company. In this case subsequent insurance was obtained with the oral consent of the president and the court held that the policy was avoided. It said: " It is clear, upon the facts in this case, that the policy was annulled under the fifteenth article of the by-laws, by reason of the subsequent insurance obtained by Stone and Perry on the property, without the assent of the president of the corporation in writing; unless the waiver of such written assent by the president, and his verbal consent to such subsequent insurance, as 1 Hale V. Mechanics' Mutual F, Ins. Co., 6 Gray, 169; 66 Am. Dec. 410. And for a later application of the same rule see McCoy «. Roman Catholic, etc., 162 Mass. 272; 25 N. E. K. 289; Lyon v. Supreme Assem- bly, etc., 153 Mass. 83; 26 N. E. K. 236. 275 § 147 OFFICEES AND AGENTS. found by the jury, operate to set aside this provision in the by-laws as to this particular policy and render the contract valid, notwithstanding by its express terms, as well as by the clause in the by-laws, it would be otherwise void. But the difficulty in maintaining the plaintiff's position on this part of the case is, not only that it attempts to substitute for the written agreement of the parties a verbal contract, but that there is an entire absence of any authority on the part of the president to make such waiver, or give such verbal assent. He was an agent with powers strictly lim- ited and defined, and could not act so as to bind the defend- ants beyond the scope of his authority .1 By article fifteen of the by-laws, his power to assent to subsequent insur- ance was expressly confined to giving such assent in writing. In order to guard against the danger of over insurance, the corporation might well require that any assent on their part to further insurance on property insured by them should be given by the deliberate and well considered act of their president in writing and not left to the vagueness and un- certainty of parol proof. The whole extent and limit of the president's authority in this respect were set forth in the by-laws attached to the policy in the present case and, as the evidence shows, were fully known to the assured."'' In a subsequent case ^ the same court held that in matters that did not relate to the substance of the contract, but only to the remedy, the requirements of the by-laws could be waived by the officers of the company. This doctrine, that officers of a mutual company cannot waive the by-laws of the company, has been approved in other cases on the ground that if the officers have discretionary powers as to 1 Story on Ag., §§ 127, 133; Salem Bank v. Gloucester Bank, 17 Mass. 29; 9 Am. Dec. 111. " Worcester Bank v. Hartford Fire Ins. Co., 11 Cush. 265; 59 Am. Dec. H5; Lee v. Howard Fire Ins. Co., 3 Gray, 584. * Brewer v. Ciielsea, etc., Ins. Co., 14 Gray, 203. 276 OFFICERS AND AGENTS. § 147 the terms of the contract the principle of mutuality would be completely abrogated. 1 In a recent case already cited* the court briefly reviewed the law, saying: " But even if the officers of the corporation had attempted to waive the by-laws in this particular, which was of the substance of the contract, we are of the opinion that they had no author- ity so to do. This is a corporation which does not make contracts of life insurance with strangers, but arranges a system of payments for the benefit of the relatives of its deceased members. It adopts by-laws to determine the relations of the members to each other and fix their rights against the corporation. The principles which apply to ordinary mutual insurance companies in regard to the waiver of by-laws by officers are equally applicable to this corporation. 3 It is well settled that the officers of a mutual insurance company have no authority to waive its by-laws which relate to the substance of the contract between an individual member and his associates in their corporate capacity.* In regard to a by-law in relation to the proof of loss which does not touch the essence of the contract, but relates only to the mode in which the liability of the company is to be established to the satisfaction of the officers who are to act upon the matter, the rule is differ- 1 Evans v. Trimountain M. F. Ins. Co., 9 Allen, 329; Behler v. Ger- man, etc., Ins. Co., 68 Ind. 354; Westchester, etc., Ins. Co. v. Earle, 33 Mich. 150; Baxter v. Chelsea M. P. Ins. Co., 1 Allen, 294; Belleville M. Ins. Co. V. Van Winkle,! Beas. (N. J.) 333; Wilson v. Conway M. F. Ins. Co., i E. I. 141 ; Supreme Council Catholic, etc., v. Boyle^ 10 Ind. App. 301; 37 N. E. R. 1105. 2 McCoy V. Roman Catholic, etc., Co., 152 Mass. 272; 25 N. E. E. 289. 3 Bolton ». Bolton, 73 Me. 299 ; Swett v. Society, 78 Me. 541 ; 7 Atl. Rep. 394. * Baxter v. Insurance Co., 1 Allen, 294; Evans v. Insurance Co., 9 Allen, 329; Hale v. Insurance Co., 6 Gray, 169; Mulrey v. Insurance Co., 4 Allen, 116; Swett v. Society, 78 Me. 541; 7 Atl. Rep. 394. See also Burbank v. Association, 144 Mass. 434; 11 N. E. R. 691. 277 § 148 OFFICERS AND AGENTS. ent.^ The officers of the defendant were agents with a limited authority. The corporation, by the law which it laid down for its government, received into association with its members and to participation in its benefit, only persons of a particular class. John McCoy did not belong to that class and he could not become a member of the corporation without appropriate action by the corporation itself. The defendant concedes that he paid his money without con- sideration, and has offered to repay it to his representa- tives." It has been held that although there may be a power to waive the provisions of the by-laws, charter re- quirements cannot be waived.^ Other courts have inclined to the view that there is no difference between agents of mutual and those of stock companies, especially in solicit- ing applications. As was said in one case:? "Incorpo- rated companies, whose business is necessarily conducted altogether by agents, should be required at their peril to see to it that the officers and agents whom they employ, not only know what their powers and duties are, but that they do not habitually, and as a part of their system of business, transcend their powers. How else are third persons to deal with them with any degree of safety? " * § 148. Authority of Subordinate Lodges when Acting for Grand or Supreme Lodges. — That subordinate lodges are in many transactions agents of . the superior, grand or supreme lodges is too clear for argument ; the courts have often acted on this assumption.^ In the case first cited 1 Priest V. Insurance Co., 3 Allen, 602. 2 Welberg v. Minnesota Scandinavian, etc., Assn., 73 Minn. 297; 76 N. W. E. 37. s Conover v. Mutual Ins. Co., 1 Comst. 290. * Post, § 153. 5 Schunck v. Gegenzelter, 44 Wis. 369; Erdmann v. Mutual Ins. Co., etc., 44 Wis. 376; Scheu v. Grand Lodge, etc., 17 Fed. Rep. 214; Bar- baro V. Occidental Grove, etc., 4 Mo. App. 429; Grand Lodge A. O. U. 278 OFFICEKS AND AGENTS. § 148 the controversy was over a death benefit promised by the society and it was claimed by the plaintiff that the local lodge had waived the requirement of prompt payment of an assessment. The court said : i " The constitution and by-laws certainly contain the contract which was entered into by the parties. The grove surely acts for and repre- sents the defendant in making the contract with the mem- ber unless we adopt as correct the idea or conclusion resulting from the counsel's position, namely, that the member by some one-sided arrangement makes a contract with himself through his own agent. It seems to us that any such position as that the grove is the sole agent of the member in effecting the insurance or collecting the assess- ments is untenable." ^ In a case in Missouri^ the subject of the authority of local lodges, subordinate to a supreme lodge in matters relating to the benefit promised by the latter, was considered considerably at length. In this case Judge Thompson delivered the opinion of the court, in the course of which he said : ' ' The subordinate lodges are no doubt the agents of the^supreme lodge in dealings with the members for many purposes, and in those cases where the subordinate lodges act through their ministerial officers, and where the latter act in conformity with the rules governing the lodges and the order, these officers may become pro liac vice the agents of the subor- dinate lodges. But it is not shown to us that these officers are anywhere endowed with power to set aside the rules of the order, or that the subordinate lodges are endowed W. V. Lachmann, 199 111. 140; 64 N. E. E. 1022. As to power of officers of subordinate lodges to waive requirements of law or by their acts to estop their superior, see post, § 434a. 1 Schuncko. Gegenzeiter, etc., supra. 2 Supreme Lodge ii, Abbott, 82 Ind. 1 ; Hall c. Supreme Lodge, 24 Fed. Eep. 450. 3 Borgrafe v. Knights of Honor, 22 Mo. App. 127. See also State v. Temperance, etc., Soc, 42 M. A. 485. 279 § 148 OFFICERS AND AGENTS. with such a faculty. On the other hand, it is perceived by the provision of the laws of the order above quoted, that no grand lodge has power even to alter or amend the laws governing the subordinate lodges. The doctrine of waiver, which is often appealed to to prevent forfeitures in the case of policies of insurapce, has no application to the forfeitures of memberships in these orders. The laws and rules governing the different branches of such an order, are in the nature of contracts among all the members, and considering the widespread extent of these organiza- tions and the very great extent to which these schemes of benevolence have taken the place of life insurance, especially among the working classes, it is highly important as a principle of public policy, that in cases of this kind, their rules and regulations should be substantially upheld by the j udicial courts . " l Although the by-laws of an order may declare that the officers of subordinate lodges are the agents of the members and not of the association, such declaration is not conclusive. "The law will determine whose agent one is, not from the mere declaration that he is the agent of the one or the other, but from the source of his appointment and the nature of the duties he is appointed to perform." ^ 1 Karcher ». Supreme Lodge, 137 Mass. 368; Halle. Supreme Lodge, 24 Fed. Eep. 460; Chamberlain b. Lincoln, 129 Mass. 70; Eood ». Rail- way, etc., Assn., 31 Fed. Eep. 62; Kempe v. Woodmen of the World (Tex. Civ. App.), 44 S. W.B. 688; Lavin v. Grand Lodge A. O. U. W. (Mo. App.), 78 S. W. E. 325; Supreme Lodge K. of H. ». Jones (Ind. App.;, 69 N. E. E. 718, But see Eailway Passenger, etc., Assn. v. Eobinson, 147 111. 138; 35 N. E. E. 168. See also post, § 4296. '■^ McMahon v. Supreme Tent K. O. T. M., 151 Mo. 522; 52 S. W. E. 884; Schunck v. Gegenzeitiger, 44 Wis. 369 ; Supreme Lodge K. of H. v. Davis, 26 Colo. 252; 58 Pac. 595; Schlosser v. Grand Lodge Brotherhood E. E. T., 94 Md. 362; 50 Atl. 1048; Grand Lodge A. 0. U. W. v. Lach- mann, 199 111. 140 ; 64 N. E. 1022 ; Modern Woodmen o. Tevls, 64 C. C. A. 293; 117 Fed. E. 369; Andre ». Modern Woodmen, 102 Mo. App. 377; 76 S. W. E. 710; Eeed v. Ancient Order Eed Cross (Idaho), 69 Pac. R. 127; 280 OFFICERS AND AGENTS. § 150 § 149. Have Sabordloate Lodges the Characteristics of Ordinary Insurance Agents. — We have seen from the last sections that benefit societies are like life insurance com- panies in that they are engaged in the same kind of business. We have also seen that the subordinate lodges are the agents through which the grand or supreme lodges transact this business. The suggestion at once arises that, if this be true, the local lodges, when acting for these superior organizations in bringing in new members, taking their applications and consummating the contract, are doing just what the ordinary life insurance agent does. There are many points of dissimilarity between them in the methods of conducting the business and the contract is made in an entirely different way, but nevertheless the principles un- derlying the contract in both cases are very much the same. The officers of subordinate lodges, however, are special agents whose authority is defined in the laws of the society and as this authority is equally known to the member and the officer, acts beyond the power of the latter will not bind the superior.! § 150. To what Extent can Local or Subordinate Lodges Bind the Superior Body. — Usually the agents of life insurance companies do not have authority to conclude absolutely a contract of insurance, but only to procure and receive applications, which they forward to the company to be acted upon by the immediate officers of the corpora- tion, who alone have the power to issue the policy. ^ If , as Boward v. Bankers' Union, 94 Mo. App. 442; 68 S. W. E. 369. For discussion of position of medical axaminer see post, § 223, 1 Harvey v. Grand Lodge A. O. U. W., 50 M. A, 472; Supreme Lodge K. of H. V. Keener, 6 Tex. Civ. App. 267; 25 S. W. E. 1084. See, how- ever, Hoffman v. Supreme Oounc. A. L. H., 35 Fed. Eep. 252; McDonald V . Chosen Friends, 78 Cal. 49 ; 20 Pac. E. 41 ; O'Connell o. Supreme Con- clave, etc., 102 Ga. 143; 28 S. E. E. 282; see also posJ, § 434a. 2 Bliss on Life Ins., § 283. 281 § 150 OFFICERS AND AGENTS. in the case of fire insurance companies, the agents were intrusted with blank policies their powers would be very much greater and different rules would apply in determin- ing the liability of their principals for their acts. The sub- ordinate lodges of a great beneficiary order may have either a very limited or a very wide authority : if they have blank certificates which they can issue to whom they please they can bind their superior by almost anything they do in the line of issuing them. Generally, however, the local lodges are like the agents of life insurance companies in that they can only solicit applications which are referred to the supe- rior body to be accepted or declined as its officers may elect. The subordinate lodges are tied down by instructions which they cannot violate even if they were so inclined. The law of benefit societies is still in its infancy and many impor- tant questions are still to be determined in regard to the authority of the local lodges when acting as agents of the responsible corporation. For example, the courts must soon decide to what extent the knowledge of the local lodge is that of the superior; whether notice to the former binds the latter ; and how far the principal is liable for the mis- feasance or neglect of the agent. Of course, the rule ap- plies to these societies as to mutual insurance companies, that the members are supposed to have knowledge of all limitations upon the power of the lodge officers, or the lodge itself, contained in the charter and by-laws ; but, as we shall see, the tendency of the courts is to ignore whenever possi- ble the differences between purely mutual and the ordinary stock companies. The probabilities are thatfuture decisions will trace stronger resemblances between benefit societies and life insurance companies, and, as their methods of busi- ness become more alike, so it will be easier to apply the same rules to the contracts of both and emphasize the distinctions because of differences in the methods of doing business. The society and regular company alike issue 282 OFFICERS AND AGENTS. § 151 certificates or policies which are sent to the local agent, or lodge, who countersigns and delivers them, and afterwards collects and remits the assessments or premiums. Though the society has a fraternal and charitable feature that the company has not, the principal business of both is the sale of life insurance for a consideration. The reasonable in- ference is that the same principles of agency determine in each case the liability of the principal for the acts of the agent . i § 151. General Kules of Agency apply to Agents of all Kinds of Companies. — It must not be thought that the established rules of the law of agency do not apply to the transactions of life insurance companies. There is no par- ticular sanctity about the business of life or any other kind of insurance. The companies engaged in it have the right to employ agents and to give to them such authority as they please; whatever limitations are imposed upon such agents, if communicated to those dealing with them, will be binding, and if this authority is exceeded, the act will not hold the principal. On the other hand, if the agents are held out to the public as possessing certain powers, their acts within the apparent scope of this authority will bind their principals. While the business of life insurance has its recognized peculiarities, the courts have constantly endeavored to apply to all the transactions of the agents of fire or life insurance organizations, or mutual benefit socie- ties engaged in doing a life insurance business, the general doctrines of the law of agency. The inquiry always is: What was the contract entered into by the parties ? If made through an agent what was the authority of the agent, and had the party dealing with him any notice of limitations or restrictions upon su«h authority, or were there sufiicient 1 For further discussion of this subject, see post, §§ 385, 4296, and 434a. 283 § 152 OrFICEES AND AGENTS. circumstances to put him on his guard and to require him to acquaint himself with this actual authority? Of course, in these, as in other cases, much depends upon the special circumstances of each case, but the same rules must be applied to all. It is reasonable, on principle, to distinguish between the acts of agents of mutual organizations, where the assured is supposed to acquaint himself with the laws of the society and the limitations, if any there be con- tained in them, upon the powers of such agents, and cases where the agent represents a corporation dealing with all as a stranger. As we inquire further into the subject we shall find that the cases are not always consistent, though these inconsistencies become fewer as we study them. It is not that the courts are in doubt as to what is the princi- ple of the law of agency which is to be applied, but be- cause other legal principles are invoked to modify the hardships of a vigorous application of the strict rules of agency, that the difficulties in reconciling the cases exist. § 152. Authority of Life Insurance Agents. — We shall gain a clearer idea of the difficulties that have arisen in con- struing the authority of the agents of insurance companies if we consider the methods of transacting the business in common use. The companies seek customers throughout a wide extent of territory ; they have their agents in every town of every State who devote their time to securing business. These agents, particularly those of life insurance compa- nies, for the representatives of fire companies are gen- erally now intrusted with blank policies which they can countersign and issue, are not authorized to conclude con- tracts or to issue policies, but only to take the proposal of the applicant, which is submitted to the principal and by it accepted or rejected. The companies for their protection in dealing with so many strangers make the form of these pro- posals, or applications, comprehensive, and in them are a 284 OFFICERS AND AGENTS. § 152 large number of questions to be answered by the person to be insured. By the terms of the application the truth of the answers to these questions is warranted and the pro- posal is made a part of the policy, which is to be void if any of the answers to these questions are found to be untrue. It was found that frequently, though the applicant had an- swered the questions truthfully, the agent of the company, who had prepared the application and written down the an- swers, had, through accident or design, incorrectly reported them, so when the applicant signed the paper, supposing it contained what he had stated, he warranted something to be true which was false and when a loss occurred he dis- covered that he had stipulated away his right of recovery. Naturally he sought to lay the blame on the agent, for whose mistakes and faults, while acting in the apparent .scope of his authority, he claimed the principal was re- sponsible. On the other side the company claimed the pro- tection of the express contract and invoked the aid of the rule that parol testimony was not admissible to explain or modify the terms of this written contract. The insured asked to have the doctrine of equitable estoppel applied and insisted that, if the answers were correct but were not truly written down by the agent of the company the latter was precluded from insisting upon the defense. Here was the first difficulty which presented itself and often the com- panies lost through the inclination of the courts to apply the principles of the law of estoppel. Then came up a new complication. To avoid the effect of these decisions, and for the purpose of taking away the right to invoke them, a clause was inserted in the contract whereby the insured agreed that any person, other than such insured, acting in preparing the application or effecting the insurance ( the agent of the company being thereby meant), should for all intents and purposes be taken and deemed to be the agent of the insured and not of the company. From this stipula- 285 (§153 OrFICERS AND AGENTS. tion arose the much debated question of dual agency in in- surance contracts,! which question has caused much of the apparent conflict in the cases. In dealing with this sub- ject the rule has been applied that insurance contracts are to be liberally construed in favor of the insured and most strongly against the insurer. The disposition of the courts has also been to ignore the suggestion that an agent can represent both parties to a contract, but to require of in- surance agents an undivided allegiance to a single principal and a faithful observance of all duties towards him, and in the determination of controversies as to the powers of agents the companies have been held responsible for all the acts of their agents within the apparent scope of their employment in carrying out the business intrusted to them. § 153. The Modern Doctrine. — The most approved rule may be thus stated : Agents of life insurance compa- nies are like those of other corporations ; in doing the busi- ness of their employers they can represent them alone, and not first one party to the contract and then the other. The principals are bound by all acts within the apparent scope of the authority of the agents while engaged in transacting the business, but all limitations upon the agent's powers, which are brought to the knowledge of the persons dealing with them, must be respected.^ The difficulty is in the ap- plication of this rule, for, while the principles of the law are inflexible and always the same, the facts of no two cases are alike. It is hard to apply the proper principle to these varying facts. We may illustrate this modern doctrine by some free quotations from leading cases. The first of these.^ 1 This subject is exhaustively discussed in 6 South. L. Rev. 367, by J. O. Pierce, and in 10 Am. L. Reg. 680 (note to Von Bories v. United, etc., Ins. Co., 8 Bush, 133), by W. W. Wiltbank. 2 Post, §§ 158 and 429&. * Kausal i;. Minnesota Farmers', etc., Assn., 31 Minn. 17; 47 Am. Rep. 776. Also Whitney v. National, etc., Assn., 57 Minn. 472; 59 N. W. B. 943. 286 OFFICERS AND AGENTS. § 153 while it relates primarily to a fire insurance contract, is ap- plicable generally, for its summary of the law is undoubt- edly correct. " On principle, as well as for considerations of public policy, agents of insurance companies authorized to procure applications for insurance and to forward them to the companies for acceptance, must be deemed the agents of the insurers and not of the insured in all that they do in preparing the application, or in representations they may make to the insured as to the character or effect of the statements therein contained. This rule is rendered necessary by the manner in which business is now usually done by the insurers. They supply these agents with printed blanks, stimulate them by the promise of liberal commissions, and then send them abroad in the community to solicit insurance. The companies employ them for that purpose, and the public regard them as the agents of the companies in the matter of preparing and filling up the ap- plications, — a fact which the companies perfectly under- stand. The parties who are induced by these agents to make applications for insurance rarely know anything about the general officers of the company, or its constitution and by-laws, but look to the agent as its full and complete rep- resentative in all that is said or done in regard to the appli- cation. And in view of the apparent authority with which the companies clothe these solicitors, they have a perfect right to consider them such. Hence, where an agent to procure and forward applications for insurance, either by his direction or direct act, makes out an application incor- rectly, notwithstanding all the facts are correctly stated to him by the applicant, the error is chargeable to the insurer and not to the assured. i After the courts had generally 1 Insurance Co. v. Mahone, 21 Wall. 152; Insurance Co. v. Wilkinson, 13 Wall. 222; Malleable Iron Works v. Phoenix Insurance Co., 25 Conn. 465; Hough v. City Fire Insurance Co., 29 Conn. 10; 76 Am. Dec. 681; Woodbury Savings Bank v. Charter Oak Ins. Co., 31 Conn, 517; 287 § 153 OFFICERS AND AGENTS. established this doctrine, many of the insurance com- panies, in order to obviate it, adopted the ingenious device of inserting a provision in the policy that the application, by whomsoever made, whether by the agent of the company or any other person, shall be deemed the act of the insured and not of , the insurer. But, as has been well remarked by another court, ' there is no magic In mere words to change the real into the unreal. A de- vice of words cannot be imposed upon a court in place of an actuality of facts.' If corporations are astute in con- triving such provisions, courts will take care that they shall not be used as instruments of fraud or injustice. It would be a stretch of legal principles to hold that a person dealing with an agent, apparently clothed with authority to act for his principal in the matter in hand, could be affected by notice, given after the negotiations were completed, that the party with whom he had dealt should be deemed trans- formed from the agent of one party into the agent of the other. To be efficacious, such notice should be given be- fore the negotiations are completed. The application pre- cedes the poUcy and the insured cannot be presumed to know that any such provision will be inserted in the latter. Miner v. Phcenix Ins. Co., 27 Wis. 693; 9 Am. Rep. 479; Winans v. AUe- mania Fire Ins. Co., 38 Wis. 342; Rowley v. Empire Ins. Co., 36 N. T. 550; Brandup v. St. Paul F. & M. Ins. Co., 27 Minn. 393. See also Mul- lin V. Vermont Mutual F. Ins. Co., 58 Vt. 113; Continental Ins. Co. o. Pierce, 39 Kan. 396; 18 Pac. Rep. 291; Eggleston ». Council Blufis Ins. Co., 65 la. 308; Menk v. Home Ins. Co., 76 Cal. 60; 14 Pac. Rep. 837; 18 Id. 117; McGraw v. Germania Fire Ins. Co., 54 Mich. 145; Langdou •B. Union M. L. Ins. Co., 14 Fed. Rep. 272; Lueders v. Hartford L. & A. Ins. Co., 12 Fed. Rep. 465; Dunbar v PhoBnix Ins. Co., 72 Wis. 492, 40 N. W. R. 386; Temminck v. Metropolitan L. Ins. Co., 72 Mich. 388; 40 N. W. 469; Ins. Co. v. Brodie, 52 Ark. 11; 11 S. W. R. 1016; Kans. Prot. Union v. Gardner, 41 Kan. 397; 21 Pac. R. 233; Ames v. Manhattan L. Ins. Co., 68 N. Y. Supp. 244; 40 App. D. 465; Robinson v. Metro- politan L. I. Co., 157 N. Y. 711; 53 N. E. R. 1131; La Marche v. New York Life Ins. Co., 126 Cal. 498; 58 Pac. R. 1053. 288 OFFICERS AND AGENTS. § 153 To hold that by a stipulation unknown to the insured at the time he made the application, and when he relied upon the fact that the agent was acting for the company, he could be held responsible for the mistakes of such agent, would be to impose burdens upon the insured which he never anticipated. Hence, we think that if the agent was the agent of the company in the matter of making out and receiving the application, he cannot be converted into the agent of the insured by merely calling him such in the policy subsequently issued. Neither can any mere form of words wipe out the fact that the insured truthfully informed the insurer, through his agent, of all matters pertaining to the application at the time it was made. We are aware that in so holding we are placing ourselves in conflict with the views of some eminent courts. But the conclusion we have reached is not without authority to sustain it, and is, as we believe, sound in principle and in accordance with public policy .1 It is contended by respondent that there is a distinction in this regard between ' stock ' ' and ' mutual ' insurance companies ; that the difference in the character of the companies makes a difference in the relative duties of the applicant and the company, and in the authority of the agents employed ; that in the case of a mutual company, the application is in effect not merely for insurance, but for admission to membership — the applicant himself becom- ing a member of the company upon the issue of the 1 Commercial Ins. Co. v. Ives, 56 III. 402; Gans v. St. Paul F. & M. Ins. Co., 43 Wis. 108; 28 Am. Eep. 635; Columbia Ins. Co. v. Cooper, 60 Pa. St. 331. See also Planters Ins. Co. v. Myers, 65 Miss. 479; 30 Am. Eep. 521; Piedmont & A. L. Ins. Co. v. Young, 68 Ala. 476; Delancey v. Ins. Co., 62 N. H. 681; Commercial Union Ass. Co. ». Elliott (Pa.), 13 Atl. Rep. 970; Baker v. Ohio Farmers Ins. Co., 70 Mich. 199; 38 N. W. Eep. 216; McArthur«. Ins. Co., 73 Iowa, 336; 33 N. W. Eep. 430 and note; Sullivan v. Phenix Ins. Co., 34 Kan. 170; Ellenberger v. Protective, etc., Ins. Co., 89 Pa. St. 464; Dietz v. Providence, etc., Ins. Co., 31 W. Va. 851; 8 S. E. E. 616. 19 289 § 153 OFFICERS AND AGENTS. policy. By some courts a distinction in this respect is made between the two classes of companies. This distinc- tion is usually based upon the ground that the stipulations held binding upon the insured are contained in the charter, or by-laws of the company, and that a person applying for membership is conclusively boupd by the terms of such charter and by laws. Such is not this case, for the stipu- lations claimed to bind the insured are only in the policy. But so far as concerns the question now under considera- tion, we fail to see any distinction between the two kinds of companies, and we feel confident that the average appli- cant for insurance is rarely aware of any. It is true that in the case of a mutual company the insured becomes in theory a member of the company upon the issue of the policy. But in applying and contracting for insurance, the applicant and the company are as much two distinct persons as in the case of a stock company, and we see no rea- son for holding the agent who takes the application any less the agent of the insurer in the one case than in the other. The membership does not begin until the policy is issued. As to all previous negotiations the agent acts only for the company."^ The Supreme Court of the United States also has said: ^ " The powers of the agent axe, prima facie, 1 Columbia Ins. Co. v. Cooper, 50 Pa. St. 3.31, See alsoBilenberger v. Protective, etc., Ins. Co., 89 Pa. St. 464; Whited u. Germania Ins. Co., 76 N. Y. 415; Lycoming Fire Ins. Co. ■». Woodworth, 83 Pa. St. 223; Thompson v. Ins. Co., 104 U. S. 262, and Lycoming Fire Ins. Co. v. Langley, 62 Md. 196. 2 Ins. Co. V. Wilkinson^ 13 Wall. 235. See also Manhattan L. Ins. Co. V. Carder, 27 C. C. A. 344; 82 Ftd. E. 986; Mutual L. Ins. Co. v. Logan, 31 C. C. A. 172; 87 Fed. R. 637; Ktndrick v. Mut. Ben. L. Ins. Co., 124 N. C. 315; 32 S. E. E. 728; Bact v. Employers Liab. A. C, 93 Fed. E. 930; Knarston v. Manhattan L. Ins. Co., 124 Cal. 74; 56 Pac. E. 773; Metro- politan L. Ins. Co. V. Larson, 85 111. App. 143; Mut. L. Ins. v. Herron, 79 Miss. 381; Sou. E. 691. New York Life Ins. Co. v. People, 195 111. 430; 63 N. E. E. 264j afCg. 95 111. App. 136; Hallex v. New York L. Ins. Co., 22 Ky. L. E. 740; 58 S. W. E. 822; Robinson v. U. S. Ben. Soc. 290 OFFICERS AND AGENTS. § 153 co-extensive with' the business intrusted to his care, and will not be narrowed by limitations not communicated to the person with whom he deals. An insurance company, establishing a local agency, must be held responsible to the parties with whom they transact business for the acts and declarations of the agent, within the scope of his employ- ment, as if they proceeded from the principal. In the fifth edition of American Leading Cases, ^ after a full cosnsidera- tion of the authorities, it is said; 'By the interested or officious zeal of the agents employed by the insurance com- panies in the wish to outbid each other and procure cus- tomers, they not unfrequently mislead the insured, by a false or erroneous statement of what the application should contain, or taking the preparation of it into their own hands, procure his signature by an assurance that it is properly drawn and will meet the requirements of the policy. The better opinion seems to be that, when this course is pursued, the description of the risk should, though nominally proceeding from the insured, be regarded as the act of the insurers.' The modern decisions fully sustain this proposition, and they seem to us founded in reason and justice, and meet our entire approval. This principle does not admit oral testimony to vary or contra- dict that which is in writing, but it goes upon the idea that the writing offered in evidence was not the instrument of the party whose name is signed to it, that it was procured under such circumstances by the other side as estops that side from using it or relying on its contents; not that it may be contradicted by oral testimony, but that it may be shown by such testimony that it cannot be lawfully used against the party whose name is signed to it." ^ But where (Mich.),194N.W. E.211; Bigger ». Eock L. Ass. Co., 71J. K.B. 79; 1 K. B. 516; 85 L. T. R. 636. 1 Vol. 2, p. 817. ■■ Insurance Company v. Mahone, 21 Wall, 152; post, § 221 and § 428, 291 § 155 OFFICEES AND AGENTS. " it is known to the assured that the agent is only author- ized to solicit insurance and receive applications, which are to be forwarded to the company for its acceptance or re- jection, the agent has no implied [authority to bind the company by a contract for insurance and the company is not estopped from showing the Testricted character of such authority." i § 154. The Contrary View. — The views expressed in the foregoing cases have not always been received with ap- proval, but have been criticised with great force and reason. The Supreme Court of New Jersey furnishes perhaps the leading authority ^ on the other side, and argues that the doctrine of Insurance Company v. Wilkinson,^ strikes at the foundation of the recognized principle that parol evidence is not admissible to explain or modify the terms of a written contract. " To except policies of insurance out of the class of contracts to which they belong," says the court, " and deny them the protection of the rule of law that a contract which is put in writing shall not be altered or varied by parol evidence of the contract the parties intended to make, as distinguished from what appears, by the written con- tract, to be that which they have in fact made, is a violation of principle that will open the door to the grossest frauds." * § 155. The General Bale Unimpaired. — The general rule must be taken to be unimpaired by these modem 1 U. S. Mat. Ace. Assn. ». Kittenring, 22 Colo. 257; 44 Pac. K. 595. 2 Franklin F. Ins. Co. o. Martin, 40 N. J. L. 568; 8 Ins. L. J. 134. 8 13 Wall. 222, supra. 4 Van Schoick v. Niagara F. Ins. Co., 68 N. Y. 438; Jennings ». Che- nango Co. Mut. Ins. Co., 2 Denio, 75; Sheldon o. Hartford F. Ins. Co., 22 Conn. 235; 68 Am. Dec. 420; Barrett u. Union Mut. Ins. Co., 7 Cush. 175; Dewees v. Manhattan Ins. Co., 6 Vroom (35 N. J. L.), 366; Lewis Phoenix M. E. Ins. Co., 39 Conn. 100; Ryan ». World M. L. Ins. Co., 41 Conn. 168; 19 Am. Kep. 490; post, § 221 and § 428. 292 OFFICERS AND AGENTS. § 156 decisions, which apply the principle that whereawritten con- tract is entered into all previous preliminary agreements and negotiations are merged in it, and an insurance policy, together with the application, if incorporated therein or properly referred to, govern all matters covered by it.l If the contract, whether contained in the policy and applica- tion, or the constitution and by-laws of a mutual organiza- tion, provides that the insurers are not to be bound by any agreements or statements of the agent, unless the same be incorporated or referred to in the contract, then such pro- vision of the parties will be enforced.* The rule has well been stated as follows : "A principal may limit the author- ity of his agent, and when he does so the agent cannot bind his principal beyond the limits of his authority by contract, estoppel or waiver, to those who knew the limitations of his power."* The limitations in the policy as to the authority of agents do not apply to the preparation of the application.* The company is not bound by the statements of a mere local agent. ^ § 156. Dealings with Agents of Mutual Companies. — 1 Ids. Co. v. Mowry, 96 U. S. 544; Lycoming F. Ins. Co. v. Langley, 62 Md. 196; Thompson v. Ins. Co., 104 TJ. S. 252; New Tork L. Ins. Co. V. Fletcher, 117 U.,S. 519; Am. Ins. Co. v. Neiberger, 74 Mo. 167. 2 Enos V. Sun Ins. Co., 67 Cal. 621; Leonard v. Am. Ins. Co., 97 Ind. 299; Lycoming Ins. Co. v. Langley, 62 Md. 196; Loehnero. Home M. Ins. Co., 17 Mo. 247. s Modern Woodmen v. Tevis, 64 C. C. A. 293; 117 Fed. K. 113; overruling s. c. 49 C. C. A. 256; 111 Fed. R. 113; Travelers' Ins. Co. V. Myers, 62 Ohio St. 529; 57 N. E. E. 458; 49 L. E. A. 760; Conway V. Phoenix M. L. I. Co., 140 N. Y. 79; 35 N. B. E. 420. See post, § 426 et seq. * Mutual Benefit L. Ins. Co. v. Eobison, 7 C. C. A. 444; 58 Fed. R. 723; 22 L. E. A. 325; Mut. Eeserve F. L. A. v. Farmer, 65 Ark. 581; 47 S. W. E. 860; Ward v. Metropolitan L. Ins. Co., 66 Conn. 227; 33 Atl. E. 902; Mutual L. Ins. Co. v. Herron, 79 Miss. 381; 30 Sou. R. 691. 5 Allen V. Mass. Mut. Ace. Assn., 167 Mass. 18; 44 N- E. E. 1063. 293 § 157 OFFICERS AND AGENTS. A distinction has sometimes been made between policies issued by a stock company and those issued by a mutual company , but this distinction is without any substance. The insured, in a mutual company, by taking out a policy, be- comes a member of it. But nevertheless a member of a corporation, and. even a director,* in dealing with the corpo- ration, stand, in respect to their contracts, just the same as a stranger,^ and the Supreme Court of Pennsylvania says : 2 " Too much is attempted to be made of the relation of co-corporator in which the insured stands, in mutual in- surance companies. In the act of insurance he is not so, but a stranger ; and he becomes a corporator only by the consummation of that fact ; and this does not convert the previous act of examination and description, by the agent of the company, into his act and change it into a represen- tation by him."^ § 157. Members of Mutual Benefit Societies Must Know Limitations on Powers o£ Officers. — It would seem reasonable that the doctrine ought to generally pre- vail that every person wishing to become a member of a mutual benefit society should be supposed to make himself acquainted with the charter and regulations of the society, and, where these are specific in their requirements, or limitations upon the powers of agents, or lodges, then that all such requirements and limitations should be pre- sumed to be known to the agent and the applicant alike and must be complied with by both.* A distinction, how- ' Franklin F. Ins. Co. v. Martin, 40 N. J. L. 579; Stratton v. Allen, 16 N. J. Eq. 229. 2 Cumberland Valley Ins. Co. v. Schell, 29 Pa. St. 31. 5 Kausalc. Minnesota Farmers', etc., Ins. Co., 31 Minn. 17; 47 Am. Rep. 776; ante, § 148. * Susquehanna Ins. Co. v. Perrine, 7 W. & S. 348; Eilenberger v. Protective, etc., Ins. Co., 89 Pa. St. 464; Leonard v. American Ins. Co., 97 Ind. 299 ; Belleville Mut., etc., Ins. Co. v. Van Winkle, 1 Beas. (N. J.) 294 OFFICERS AND AGENTS. § 158 ever, is to be made between the requirements of the charter and those of the by-laws and between provisions that go to the essence of the contract and those that are directory merely. 1 § 158. The Correct Doctrine as to the Authority of In- surance Agents Stated in Certain Cases. — The correct doctrine in regard to the authority of insurance agents is laid down in a decision of the Court of Appeals of Maryland, ^ taken in connection with the modifications stated by the Supreme Court of Pennsylvania. ^ In the former the fal- lowing was cited with approval from a standard work on insurance: * " In all cases where the assured has notice of any limitation upon the agent's power, or where there is anything about the transaction to put him on inquiry as to the actual authority of the agent, acts done by him in ex- cess of his authority are not binding, as where it is gener- ally known that limitations are imposed in certain respects. So, where direct notice, or any notice which the assured as a prudent man is bound to regard, is brought home to the assured, limiting the powers of the agent, he relies upon any act in excess of such limited authority at his peril. That an insurance company has the right to limit the powers of its agents must be conceded, and when it does impose such limitations upon his authority, in a way that no prudent man ought to be mistaken in reference thereto, it is not 333; Hellenbergw. District No. 1, etc., 94 N. Y. 580; Eastman v. Provi- dence, etc., Assn., 62 N. H. 555; 20 Cent. L. J. 580. 1 Cumberland, etc., las. Co. v. Scliell, 29 Pa. St. 31; Priest w. Citizens, etc., Ins. Co., 3 Allen, 602; Hile v. Mech., etc., Ins. Co., 6 Gray, 169 ; s. c. 66 Am. Rep. 410; Brewer v. Chelsea Ins. Co., 14 Gray, 203; Leonard v. American Ins. Co., 97 Ind. 299. For further discussion of this subject see post, § 434a. 2 Lycomiog Fire Ins. Co. ». Langley, 63 Md. 196. 8 Ellenberger v. Protective, etc., Ins. Co. 89 Pa. St. 464. * Wood on Ins., § 387. 295 § 158 OFFICERS AND AGENTS. bound by an act done by its agent in contravention of such notice." In the Pennsylvania case the court said that no case " declares that the fraud or mistake of a knavish or blundering agent, done within the scope of the powers given him by the company, will enable the latter to avoid a policy to the injury of the assured, who innocently became a party to the contract. The authorities go far, very likely not too far, in holding the assured responsible for his warranty, and in excluding oral evidence to contradict or vary it ; but they do not establish that where an agent of the assurer has cheated the assured into signing the warranty and paying the premium and the policy was issued upon the false statements of the agent himself, the assured shall not prove the fact and hold the principal to the contract, as if he had committed the wrong. The defendant is a mutual company, and holders of its policies are members. Mem- ship dates from consummation of the contract, and not before. During negotiations for insurance, a mutual com- pany occupies no other or better position than one organ- ized on the stock plan, and cannot profit by a contract induced by the fraud of its agent ; for the membership arises from, but does not precede the contract,! As to all preliminary negotiations, the agent acts only on behalf of the company. A stipulation in a policy that if the agent of the company, in the transaction of their business, should violate the conditions, the violation shall be construed to be the act of the insured, and shall avoid the policy, will not render the insured responsible for the mistakes of the agent. ^ This was said where the mistake was of represen- tations, and does not qualify the rule which holds the assured upon his covenants or warranties. But it shows that a company contracting by its agent will not always 1 Lj'coming F. Ins. Co. v. Woodworth, 82 Pa. St. 223'. 2 Columbia Ins. Co. v. Cooper, 60 Pa. St. 331 296 OFFICBKS AND AGENTS. § 159 escape the consequences of the fraud or mistake of its agent, by inserting a stipulation in the policy that such agent shall be deemed the agent of the insured, who, at the time of applying for the policy, was ignorant of the insurer's intention to so stipulate." We can see no reason why this rule should not apply to mutual benefit societies wherever the facts are analogous. ^ § 159. How far Knowledge of Agent Binds Princi- pal — Fraud of Agent. — It is also an important inquiry how far the knowledge of the agent of an insurer is to be deemed that of his principal. The subject is necessarily closely connected with that of the ap- plication and the powers of agents generally to waive conditions and by their conduct to estop the com- pany or society. It is sufficient to state briefly what is considered the true principle. In the absence of a writ- ten application, containing representations or warranties, where an agent upon his own knowledge or investigation, reports a certain state of facts upon which the policy or certificate is issued, then, in the absence of any attempt to mislead on the part of the insured, the principal is bound by the acts of the agent. ^ Again, material errors committed by the agent, or omissions of the agent in stating material facts, in the absence of fault upon the part of the insured, would affect the principal with the knowledge of the agent, ^ 1 Ante, § 153. 2 Cumberland Valley, etc., Ins. Co. v. Schell, 29 Pa. St. 31; Meadow- crafts. Standard F. Ins. Co., 61 Pa. St. 91; Caston v. Monmouth Mut. F. Ins. Co., 54 Me. 170; Comml. Ins. Co. v. Ives, 56 111. 402; Brink v. Mer- chants', etc., Ins. Co., 49 Vt. 442. 3 Campbell v. Merchants', etc., Ins. Co., 37 N. H. 65 ; 72 Am. Dec. 324 ; Behler v. German Ins. Co., 68 Ind. 353; Beebe v. Hartford, etc., Ins. Co., 25 Conn. 51 ; 65 Am. Dec. 553; Commercial Fire Ins. Co. v. Allen, 80 Ala. 671; 1 South Rep. 202; Howard Ins. Co. v. Bruner, 23 Pa. St. 50; May on Ins., § 132. 297 '§159 OFFICERS AND AGENTS. I So, where the agent knew of the habits of applicant as to use of liquor,! qj. liig having vertigo, ^ or his business which was falsely stated,^ or where applicant did not know his age and agent inserted an untrue age,* and generally where true an- swers are given and agentwrites false answers,® or where by advice of the agent a statementof an applicant is omitted.' The knowledge that the applicant must sign the application, which was not done, binds the principal,' and where insured sued to recover premiums paid on a policy void for want of insurable interest, it was held that knowledge of the agent was that of the company.' Where the agent has a custom which ought to be known to the company the jury is justified in finding knowledge.^ And where an accident policy was issued to a woman by an agent in violation of the rule of the company the latter was held liable. i" The 1 Newman v. Covenant M. B. Assn., 76 la. 56; 40 N. W. K. 87. 2 Mut. L. Ins. Co. V. Daviess, 87 Ky. 541; 9 S. W. R. 812. s McGurk 11. Metropolitan L. Ins. Co., 56 Conn. 528; 16 Atl. R. 263. * Keystone M. B. Assn. v. Jones, 72 Md. 363; 20 Atl. R. 195. « Mut. Ben. L. Ins. Co. v. Robison, 7 C. C. A. Hi; 58 Fed. R. 773; affg. 54 Fed. R. 580; O'Briens. Home Ben. Soc, 117 N. Y. 310; 22 N. E. R. 954; Pudridzky v. Knights of Honor, 76 Micli. 428; 43 N. W. E. 373. 6 Kansas Protective Union v. Gardner, 41 Kan. 397; 21 Pac. R. 233. ' Fulton V. Metropolitan L. Ins. Co., 21 N. Y. Supp. 470. 8 Fulton V. Metropolitan L. Ins. Co., 19 N. Y. Supp. 660. In the fol- lowing cases the knowledge of the agent was held to be that of the com- pany: Lewis ». Mutual Reserve F. L. Assn. (Miss.), 27 Sou. R. 649; German-American Mut. L. Assn. v. Farley, 102 Ga. 720; 29 S. E. E. 615; Germanla L. Ins. Co. ■». Koehler, 168 111. 293; 48 N. E. R. 297; Security Trust Co. ■». Tarpey, 182 111. 52; 54 N. E. R. 1041, affg. 80 111. App. 378; Sun L. Ins. Co. v. Phillips (Tex. Civ. A.), 70 S. W. R. 603; Provident Savings L. Ass. Co. ». Cannon, 201 111. 260; 66 N. E. R. 388; Otte v. Hartford L. Ins. Co., 88 Minn. 423; 93 N. W. R. 608; Rogers v. Far- mers, etc., Co., 106 Ky. 371; 50 S. W. R. 543; North Western M. L. A. Co. V. Bodurtha, 23 Ind. App. 121; 53 N. E. E. 787; Dewitto. Home Forum Ben, Ord., 95 Wis. 305; 70 N. W. R. 476. As to knowledge of medical examiner see post, § 223. Generally also see post, § 221. » iEtna L. Ins. Co. v. Smith, 31 C. C. A. 575; 88 Fed. E. 440. i" Travelers Ins. Co. v. Ebert, 20 Ky. L. Rep. 1008; 47 S. W. R. 866. 298 OFFICERS AND AGENTS. § 159 ignorance of assured to be availing must have been in ignorance of the falsity of the answers written for him by the agent. i Or, if a mutual mistake was made, on general principles equity would relieve the insured, either before or after loss, if he had acted in good faith, 2 as it certainly would in case of fraud on the part of the agent, if circumstances existed from which the authority of the agent could reasonably be inferred.^ If, however, the agent and the insured, both knowing material facts, agree to conceal or omit them from the application, then their acts amount to fraud and the principal is not bound. As was said by the Supreme Court of Pennsylvania : * " Smith's case ^ rests upon a doctrine that ought to prevail everywhere, to wit: ' The principal is bound by the acts of his agent whilst he acts within the scope of the deputed authority; but if, departing from that sphere, or continuing in it, he commits a fraud upon his principal, a particeps criminis shall not profit by the fraud.' "^ The Supreme Court of Wisconsin has also declared itself on this subject, saying,' " If there is a case in the books which holds that a principal is bound by the unauthorized and fraudulent acts of his agent done and performed pursuant to a corrupt conspiracy between such agent and the person who seeks to obtain the benefit of the fraud, we have not found it." * Where a wife, with her 1 Globe R., etc. Co. 0. Duffy, 76 Md. 293; 25 Atl. K. 227. 2 Franklin F. Ins. Co. v. Martin, 40 N. J. 568; 8 Ins. L. J. 134; May on Ins., § 145; In re Universal Non-TarifE Ins. Co., L. R. 19 Eq. 385; post, § 278. 3 McLean v. Equitable L. A. Soc, 100 Ind. 127; Union Mut. Ins. Co. V. Slee, 110 111. 35. ^ Bilenberger v. Protective, etc., Ins. Co., 89 Pa. St. 464. 6 Smith V. Insurance Co., 24 Pa. St. 320. " New Yorli L. Ins. Co. v. Fletclier, 117 U. 519; Ryan v. World Mut. L. Ins. Co., 41 Conn. 168. ' Hanf. V. N. W. Mut. Aid Assn., 76 Wis. 450; 45 N. W. 315. 8 To the same effect are: Sprinkle u. Knights Templar, etc., Co., 124 N. C. 405; 32 S. E. R. 734; Speiser v. Phoenix M. L. I. Co. (Wis.), 97 299 § 160 OFFICEES AND AGENTS. husband's knowledge, and consent, procures an insurance on his life for- his benefit, he paying the premiums, he is bound by her statements in the application though ignorant of them, and if the agent enters into a conspiracy with her to insert false statements in the application he ceases to be the agent of the company and becomes the agent of the applicant and the company is not charged with notice of the facts known to the agent, l § 160. Notice to Agent. — Often, under the provisions of the contracts of insurance companies and benefit socie- ties, notice is required to be given of certain facts under specified contingencies. The general rule is that if the notice be given to the b«ard of directors, or to any officer or agent of the company, whose duty by the by-laws, resolu- tions and usages of the company, is to communicate it to the directors or managing officials of the company, it is sufficient. "Notice of facts to an agent is constructive notice thereof to the principal himself, when it arises from, or is at the time connected with, the subject-matter of his agency; for, upon general principles of public policy, it is presumed that the agent has communicated such facts to the principal, and if he has not, still the principal, having intrusted the agent with the particular business, the other party has a right to deem his acts and knowledge obligatory upon the principal; otherwise the neglect of the agent, whether designed or undesigned, might operate most injuri- ously to the rights and interests of such party." ^ This N. W. E. 207. But a company may be liable for the wrongful act or fraud of the agent. New York L. Ins. Co., v. Baese (Tex. Civ. A.), 31 S. W. E. 824. 1 Centennial Mat. L. Assn. v. Parham, 80 Tex. 518; 16 S. W. E. 316; citing Insurance Co. v. Minch, 53 N. Y, 150, and Smith v. Ins. Co., supra. For further discussion of this subject see post, § 428. 2 Story on Ag., § 140. But when the policy limits the authority of the agent there is no presumption that such agent communicated his 300 OPFICEE8 AND AGENTS. § 160 rule has been applied to insurance companies, as for exam- ple, to cases where true answers have been given to the agent in filling up an application for life insurance but the agent has not correctly stated the answer ,l and as to notice of prior or other insurance, or of an incumbrance. ^ In one case it was said : 3 " The notion that a corporation can only act under their corporate seal and by their president and secretary, has become obsolete. Unless they may be bound by the acts and admissions of their officers and agents acting in the ordinary affairs of the corporation, so far as relates to the business usually transacted by such officers and agents, they would enjoy an immunity incom- patible with the rights of individuals and destructive of the object of their creation. ' ' Where there is nothingbut a provi- sionin general terms for a notice, without prescribing, either in terms, or by necessary implication, the mode in which it should be given, a verbal notice is good, unless the notice be in a legal proceeding, in which case it should be in writing.* For the protection of the assured and to prevent fraud, au- thority of an agent to do a particular act will often be pre- sumed, although the requirements of the charter or by-laws as to matters of form have not been strictly complied with. ^ knowledge to the company. Ward v. Metropolitan L. Ins. Co., 66 Conn. 227; 33 Atl. R. 902. 1 Insurance Co. v. Wilkinson, 13 Wall. 222 ; Miller v. Mutual Ben. Life Ins. Co., 31 la. 216; 7 Am. Rep. 122. Oonira, Vose B. The Eagle L. & H. Ins. Co., 6 Cash. 42. See also ante, § 159. 2 New England F. & M. Ins. Co. v. Schettler, 38 III. 166; Rowley o. Empire Ins. Co., 36 N. Y. 550; Peck v. New London Mut. Ins. Co., 22 Conn. 575. 3 N. E. Fire & M. Ins. Co. v. Schettler, 38 111. 171. * McEwen V. Montgomery County, etc., Ins. Co., 5 Hill. 101; Sexton V. Montgomery County, etc., Ins. Co., 9 Barb. 191; Gilbert v. Columbia Turnpike Co., 3 Johns. Gas. 107; Millers. Mutual Ben. L. Ins. Co., 31 la. 216; 7 Am. Eep. 124; post, § 405. 5 Masters v. Madison, etc., Ins. Co., 11 Barb. 624; New Eng. F. & M. Ins. Co. V. Schettler, 38 111. 166; Miller ».. Mutual Ben. L. Ins. Co., 31 la. 216. The subject of the powers and authority of agents oJ Insurance 301 § 160a OFFICEBS AND AGENTS. § 160a. Relations Between Agent and Company. — The relations between life insurance companies and their agents are governed by the same general rules which apply to all corporations. The questions that have arisen in the few cases decided by the courts chiefly relate to the con- struction of agency contracts, t^ie compensation of agents, or the right to commissions, and the responsibility of the company to sub-agents. In many States this subject is in part covered by statutory provisions and it is not deemed within the scope of this work to here do more than refer to some of the authorities which have dealt with the rights of the agent as against his principal. i companies is farther considered in treating of matters relating to the application, § 221, et seq. ; those.coucerning payment of premiums, § 367, etseq.; those involving questions of notice, etc., in proof s of loss, §§ 405, 408, et seq.; and in discussing the subjects of waiver and estoppel, §§ 426, 428, et seq. ^ There may be an implied authority of a representative of the com- pany to hire agents. Gore v. Canada L. A. Co., 119 Mich. 136; 77 N. W. R. 660; Mut. Life Ins. Co. v. Lewis, 13 Colo. App. 528; 68 Pac. B. 787; Van Werden v. Equitable Life Ass. Soc, 99 la. 621; 68 N. W. E. 892. As to illegal contract with agent see Caldwell v. Mut. R. F. L. Assn., 63 App. Div. 246; 65 N. Y. Supp. 826. The following cases involve ques- tions as to the rights of agents and sub-agents and construction of agency contracts: Lane v. Raney, 139 N. C. 64; 39 N. E. E. 728; Em- ployers, etc., Co. V. Morris, 14 Colo. App. 354; 60 Pac. 21; Eaipe v. Gor- rell, 106 Wis. 636; 81 N. W. R. 1009; Eeed v. Union Cent. L. I. Co., 21 Utah, 295; 61 Pac. B. 21; Frantel v. Mich. Mut. L. Ins. Co., 158 Ind. 304; 62 N. E. R. 703; Wells v. National Life Ins. Co., 39 C. C. A. 476; 99 Fed. E. 222; 53 L. E. A. 33; Shremplin ». Farmers, etc., Co. (la.), 98 N. W. E. 613; Newcomb v. Ins. Co., 64 Fed. R. 725; Stier k. Imperial L. Ins. Co., 58 Fed. E. 843; Brackett v. Metropolitan L. Ins. Co., 18 Misc. E. 239; 41 N. Y. Supp. 375; Ballard v. Travellers Ins. Co., 119 N. C. 187;, 25 S. E. E. 956; Vail v. N. W. Mut. L. Ins. Co., 92 111. App. 655, affd. 192 111. 567; 61 N. E. R. 651; Currier v. Mut. E. F. L. Assn., 47 C. C. A. 651; 108 Fed. R. 737; Arbaugh v. Shockney (Ind. App.), 71 N. E. R. 232. 302 CHAPTER V. NATURE AND SUBJECT-MATTER OF CONTRACT: AETER ENACTED LAWS. t 161. Contract of Benefit Society with Members, Where Found. 161a. The same Subject: Change in Contract, 1616. Societies Incorporated in Two States — Schism. 162. Is One of Insurance. 163. A Life Insurance Contract is not Strictly one of Indemnity. 164. Is Executory and Personal. 165. Is Aleatory. 166. Life Insurance Policies are Valued Policies. 166a. Peculiar Nature of Life Insurance Contract. 167. Endowment Insurance is Life Insurance. 167a. Parties to Insurance Contracts — Minors — Consent of Insured. 1676. Tontine Policies — Right of Policy Holder to Dividends or Profits. 167c. Reinsurance. 168. Benefit Societies Restricted as to Beneficiaries. 169. When Contract is Executed, Society may be Estopped. 170. Liberality of Construction of Charter by some Courts. 171. Contracts of Mutual Companies where a By-Law has been Violated. 172. Insurance Contract need not be in Writing. 173. What Constitutes Perfect Parol Contract of Insurance. 174. Informal Execution. 175. Lex Loci and Lex Fori. 176. Stipulation in Policy cannot avoid Operation of Statute. 177. Interpretation of Contracts of Insurance. 178. Interpretation of Contracts of Benefit Societies. 179. Construction when Language is Ambiguous. 180. Contracts of Mutual and Stock Companies Construed Alike. 181. Other Papers Part of Contract, When. 182. The same Subject: Other Illustrations. 183. Rtference in Policy to other Papers must be Plain to make them a Part of it. 184. What Constitutes the Contract of Insurance. 185. After Enacted Laws of Benefit Societies Generally Bind their Members. 186. The same Subject: Leading Cases. 303 § 161 NATURE AND SUBJECT-MATTER OF CONTRACT. § 187, After Enacted Laws must not be Retroactive or Afiect Vested Bights. 188. The Subject Discussed by the Supreme Court of Alabama. 188a. The same Subject — Conclusion. § 161. Contract of Benefit Society with Members, Where Fonnd. — The principal object of all benefit socie- ties is to confer certain advantages upon their members and pay to them, or their beneficiaries, specified benefits. The understanding between the association and the individ- uals who compose it, as to the membership, the duties im- posed on members and the benefits to be bestowed on them is a contract. The authorities do not all agree as to where this contract is to be found in cases where a certificate is issued to the member, whether in such certificate, in the laws of the society, or in both. All conditions of the con- tract wherever found are binding on the beneficiary and such beneficiary is bound by the acts of the member.! The Court of Appeals of New York, in a case involving the right to recover a death benefit, said : 2 1 1 xhe charter and by-laws of the defendant corporation constituted the terms of an executory contract to which the testator assented when he accepted admission into the order." In a similar case the Supreme Court of Wisconsin said : 3 " The constitution and by-laws certainly contain the contract which was entered into by the parties." On the other hand, it is asserted in some cases, that the certificate of membership contains the contract. In a case in the Federal court in Iowa* it was said: "The contract is contained in the certificates;" the Supreme Court of Indiana also says, in a case where 1 Montour ». Grand Lodge A. O.U. W., 38 Oreg. 47; 62 Pac.R. 524. Cotter t>. Grand Lodge A. O. U. W., 23 Mont. 82; 57 Pac. K. 650; Ebert V. Mutual B. F. L. Assn., 81 Minn. 116; 83 N. W. 506; 84 N. W. R. 457. 2 Hellenberg v. District No. 1, I. O. O. B., 94 N. Y. 580. * Schunck ». Gegenzeiten, etc., 44 Wis. 375. * Worley v. Northwestern Masonic Aid Assn., 10 Fed. Eep. 228. 304 NATURE AND SUBJECT-MATTER OF CONTRACT. § 161 the benefit of a beneficiary society was in dispute : l "The certificate, although issued by a mutual benefit association, is, in legal contemplation, a policy of insur- ance, and is in most respects governed by the generaj rules of law which apply to insurance contracts. "2 In another case ^ the same court says : ' ' The essential differ- ence between a certificate in a beneficiary association and an ordinary life policy is, that in the latter the rights of the beneficiary are fixed by the terms of the policy, while in the former they depend upon the certificate and the rights of the member under the constitution and by-laws of the society." In an action to recover a sick benefit, no cer- tificate having been issued, the Supreme Court of Massa- chusetts said : 4: «' The corporation is not a mere charitable society, but is rather in the nature of an association for the mutual insurance of its members against sickness or acci- dent. If it refuses to perform its contract, contained in the by-laws, the member who is injured may have recourse to the proper courts to enforce the contract." And it is possible that under certain circumstances the application may contain the contract. ^ Of course it is understood that the charter must be considered as part of the con- tract with the by-laws. 6 There is still another view. In a case, where the promised benefit of a beneficiary society was involved, the Supreme Court of New Hamp- 1 Presbyterian, etc., Fund v. Allen, 106 Ind. 693. 2 Bauer v. Sampson Lodge, 102 Ind. 262; Elkhart M. Aid Assn. v. Houghton, 98 Ind. 149; Sup. Commandery, etc., v. Alnsworth, 71 Ala. 443; Supreme Lodge ». Schmidt, 98 Ind. 374. 8 Masonic, etc., Ben. Soc. v. Burkhart, 110 Ind. 192. < Dolan V. Court of Good Samaritan, 128 Mass. 437; and to the same effect are the cases Grand Lodge w. Eisner, 26 M. A. 108; Baldwins. Golden Star Fraternity, 47 N. J. L. 111. 5 Robinson v. U. S. Ben. Soc. (Mich.), 94 N. W. R. 211. 8 Grand Lodge v. Eisner, and Baldwin v. Golden Star Fraternity, supra. 20 305 § 161 NATURE AND SUBJECT-MATTER OF CONTRACT. shire said: i " The charter, by-laws and certificate of membership, taken together, show what was the under- standing of the parties." To the same effect is the state- ment in a similar case in Kentucky ,2 wherein the Court of Appeals said : ' ' The certificate of membership constitutes the contract ; but it is to be construed and governed by the company's charter. In fact, it may be said that the char- ter is a part of the contract; and if it declares who, in a certain event, shall be the beneficiary, the parties cannot alter this legislative direction, because neither the com- pany nor the insured can do anything in violation of it." In many other cases ^ this view is also taken. The document issued to the members of a benefit society must be such as its laws prescribe; it is usually a certificate which recites that the person named therein is a member of the society and " entitled to all the rights and privileges of membership ' ' and to participate in its beneficiary fund to a specified amount, which shall be paid at his death, if then a member in good standing, to a named person, on condition that such member shall, in every particular, while a member of the society, comply with its laws, rules and requirements. This certificate, although not strictly speak- ing an insurance policy,* is in the nature of an insur- ance policy issued by a mutual company .5 If the certifi- ^ Eastman v. Provident M. Relief Assn., 62 N. H. 555; 20 Cent. L. J. 266 (1883). 2 Van Bibber v. Van Bibber, 82 Ky. 350. s Splawn V. Chew, 60 Tex. 536; Supreme Lodge K. of P. b. Stein, 75 Miss. 107; 21 Sou. R. 559; 37 L. R. A. 775; Zimmerman v. Masonic Aid Assn., 75 Fed. R. 236; Condon v. Mut. Reserve F. L. A., 89 Md. 99; 42 Atl. R. 944; 44 L. R. A. 149. < Morton v. Royal Tribe of Joseph, 93 Mo. App. 78. ' In the following cases full copies of the certificates sued on are given: Grand Lodge A. O. U. W. v. Child, 70 Mich. 163; 38 N. W. Rep. 1; Wendt v. Iowa Legion of Honor, 72 la. 682; 34 N. W. Rep. 470; Supreme Lodge Knights of Honor v. Johnson, 78 Ind. 110; Richmond o. Johnson, 28 Minn. 447; Supreme Lodge Knights of Pythias v. Schmidt, 306 NATUKE AND SUBJECT-MATTKK OF CONTRACT. § 161 cate refers to the laws of the order in such a way as to make them a part of it, then, of course, they are to be considered as a part of the contract, but if the charter is in general terms and simply provides that the society may conduct the business of paying benefits to its members, and, if the by-laws contain no restric- tions or limitations, then the whole of the contract would be in the certificate. It has been held, however, that the by-laws form part of the contract although not referred to in the certificate,^ and the constitution may become part of the contract by express agreement in the application.^ The conclusion, from an examination of all the cases, is that the contract is found in the certificate, if one is issued, taken in connection with the application if one is referred to,^ but is to be construed and governed by the charter and by-laws of the society, and the statutes of the State of the domicile of the corporation.* It has 98 Ind. 374 ; Royal Templars of Temperance v. Curd, 111 111. 286 ; Holland V. Taylor, 111 Ind. 121; 13 N. B. Eep. 116; Supreme Commandery, etc., V. Ainsworth, 71 Ala, i37. 1 Gray v. Supreme Lodge K. of H., 118 Ind. 293; 20 N. B. R. 833; He- singer V. Home Ben. Assn., 41 Minn. 516; 43 N. W. E. 481; Davidson v. Old People Soc, 39 Minn. 303; 39 N. W. R. 803; Supreme Lodge, etc., v. Knight, 117 Ind. 489; 20 N. E. R. 479; In re Globe Mut. B. Assn., 32 N. E. R. 122; 135 N. T. 280; affg. 17 N. Y. Supp. 852; Moore v. Union, etc., Assn., 103 la. 424; 72 N. W. E. 645. To the contrary is Goodson v. Mut. Masonic Ace. Soc, 91 Mo. App. 339. 2 Hutchinson v. Supreme Tent K. O. T. M., 22 N. Y. Supp. 801. 3 Robson V. Ancient Order Foresters (Minn.), 100 N. W. R. 381. ^ Miners. Mich. Mut. Ben. Assn., 63 Mich. 338; 29 N. W. Rep. 852; Mulroy v. Knights of Honor, 28 Mo. App. 463; Maryland Mut. Ben. Assn. V. Clendinen, 44 Md, 429; Burbank v. Rockingham Ins. Co., 24 N. H. 550; 57 Am. Dec. 300; Masonic Relief Assn. v. McAuley, 2 Mackey, 70; Simeralo. Dubuque, etc., Ins. Co., 18 la. 319; Mitchell u. Lycoming, etc., Ins. Co., 51 Pa. St. 402; Susquehanna, etc., Ins. Co. v. Perrine, 7 W. & S. 348; Grand Lodge, etc., v. Eisner, 26 Mo. App. 109; McMurry v. Supreme Lodge, etc, 20 Fed. Rep. 107; National Ben. Assn. v. Bowman, 110 Ind. 355; Britton v. Supreme Counc. R. A., 46 N. J. E. 102; 18 Atl. Eep. 675; Lorscherc. Supreme Lodge K. of H., 72 Mich. 316; 40 N. W. 307 § 161a NATURE AND SDBJECT-MATTEE OF CONTRACT. been well said;! "The statute under which the cor- poration is organized, the articles of incorporation and the bj-laws are made to contain the whole plan of insurance, its limitations, extent and the obligations im- posed. They embrace the terms of the contract. What- ever vitality the policy of insurance possesses is derived from these sources. The statute authorizing and controlling the organization and business of this society, became as much part of the contract for insurance and membership as if its terms were incorporated into the printed certifi- cate, and every person becoming a member was bound to take notice of it." A limitation in a certificate is good although not provided for by the by-laws,^ and a provision in the certificate may prevail over the by-laws.^ § 161a. The Same Subject Continued — Change In Contract. — As we have seen * the various divisions or bodies of a beneficiary organization, such as supreme, grand and subordinate lodges, constitute a single society. While this is generally true it does not follow that all are bound for the liabilities and contracts of each other, such liability depends upon the laws of the society. A grand lodge may not be liable for the benefit promised by the order andpay- Bep. 345; Grand Lodge v, Jesse, 60 Ills. App. 101; Drum v. Benton, 13 App. D. C. 245; Polish, etc., Soc. v. Werzek, 182 111. 27; 55 N. E. E. 64 ; Fee V. National Mas. A. Assn. (Wis.), 81 N. "W. R. 483; Newton©. Northern Mat. E. Assn., 21 B. I. 476 ; 44 Atl. E. 690 ; Lithgow v. Supreme Tent K. O. T. M., 165 Pa. St. 292; 30 Atl. E. 830; Grand Lodge, etc., v. Gaudy, 63 N. J. Eq. 692; 53 Atl. E. 142; Seitzinger v. Modern Woodmen, 204 111. 58; 68 N. E. E. 478; afEg. 106, 111. App. 449. Also cases cited just previously. 1 Montgomery ». Whitbeck (North Dak.), 96 N. W. E. 327. 2 McCoy o. N. W. Mut. Belief Assn., 92 Wis. 677; 66 N. W. E. 691; 47 L. E. A. 681 n. 3 Failey v. Fee, 83 Md. 83; 32 L. B. A. 311; 34 Ati. E. 839. To the contrary is Boward v. Bankers Union, 94 Mo. App. 442; 68 S. W. E. 369. ' Ante, § 74. 308 NATUKE ASTD SUBJEGT-MATTEK OF CONTKACT. § 161a able at the death of a member,! although the subordinate lodge may be liable with the superior,^ and by novation the grand lodge may become bound for the contracts of the supreme lodge.3 In the absence of a statute creating a distinction between an insurance company and a beneficiary organization the rights of the beneficiary are determined by the terms of the contract.* A provision in the certifi- cate will prevail over a clause of the by-laws, no charter restriction being violated.^ Unless the articles of association and the laws of the State authorize such a transaction a mutual benefit society has no right to contract to pay the death losses of another insurance company, such a contract being ultra vires.^ Under the by-laws a recovery may be limited to a particular fund,' but it is no defense to an action on a foreign judgment that the contract provides for a par- tial payment of a judgment under certain conditions.* Gen- 1 Grand Lodge, etc., v. Weyrich, 47 M. A. 391. 2 Supreme Lodge A. 0. XJ. "W. ■». Zuhlke, 129 111. 298; 21 N. E. R. 789. 3 Burns B. Grand Lodge A. O. U .W., 153 Mass. 173; 26 N. E. Rep. 443. Where, owing to a schism, a beneficiary order divided into two bodies it was held under the special facts that there was a dual contract and there could be recovery from both by the beneficiaries of a deceased member. Warnebold v. Grand Lodge A. O. U. W., 83 la. ,23; 48 N. W. E. 1070 In another case under somewhat similar facts only one recovery was allowed. Bock o. Grand Lodge A. O. U. W., 75 la. 462; 39 N. W. Rep. 709. » * Block V. Valley Mut. Ins. Assn., 53 Ark. 201; 12 S. W. R. 477; see also Dial v. Valley M. L. Assn., 29 S. C. 560; 8 S. E. R. 27. " Fitzgerald v. Equitable R. F. Assn., 3 N. Y. Supp. 214; Failey v. Fee, 83 Md. 83; 34 Atl. R. 839; 32 L. R. A. 311. To the contrary is Boward v. Bankers Union, 94 Mo. App. 442; 68 S. W. R. 369. 6 Twiss V. Guaranty Life Assn., 87 la. 733; 55 N. W. R. 8. ' Hesinger v. Home Ben. Assn., 41 Minn. 516; 43 N. W. R. 481 ; Kerr V. Association, 39 Minn. 174; 39 N. W. R. 312. « Peoples Mut. Ben. Soc. v. Werner (Ind. App), 34 N.E. R. 106. For further discussion of rights under contract see post, § 453. For law as to minorsbecomingmembersseean£e,§ 63 and post, §167a. For construction of peculiar contracts see Wadsworths. Jewelers, etc., Assn., 132 N. Y. 540; 29 N. E. R. 1103; affg. 9 N. Y. Supp. 771, andEmmeluth v. Home 309 § 161a NATURE AND SUBJECT-MATTER OF CONTRACT. I erally the contract between a society and its members can- not be varied or enlarged without the consent of both con- tracting parties,! and a provision in the certificate of membership is not affected by the subsequent reincorpora- tion of the society .2 "We shall speak later more in detail concerning the effect of changesan the by-laws which have the effect of modifying the contract,^ but at this time it is well to give the views of the Supreme Court of the United States on the subject as expressed in a recent case where the court says : * " It is not every change in the charter or articles of associations of a corporation that will work such a departure from the purposes of its creation as to forfeit obligations incurred to it or prevent the carrying on of the modified business. A radical departure affecting substan- tial rights may release those who had come into the cor- poration on the basis of its original charter. There is much discussion in the authorities as to when a charter amend- ment is of that fundamental character that a majority of the members or stockholders cannot bind the minority by agreeing to a change in the nature of the business to be carried on or the purposes and objects for which the cor- poration was created. Each case depends upon its own circumstances and how far the right of amendment has been impliedly or expressly reserved in the creation of cor- porate rights, ft would be unreasonable and oppressive to require a member or stockholder ta remain in a corpora- Ben. Assn., 122 N. Y. 130; 25 N. E. R. 234; afEg. 46 Hun, 681; Seitzinger V. Modern Woodmen, 284 111. 68; 68 N. E. B. 478; Supreme Lodge, etc., V. Meister, 105 111. App. 471 ; afflrm'd 204 111. 627; 68 N. E. E. 454. 1 Supreme Council Am. L. of H. v. Smith, 45 N. J. E. 466; 17 Atl. R. 770. 2 Hysinger o. Supreme Lodge K. and L. ol H., 42 M, A. 628; Grand Lodge A. O. U. W. ®. Sater, 44 M. A. 445; Courtney o. U. S. Masonic, etc., Assn. (la.), 53 N. W. R. 238. 3 Post, § 185, et seq. « Wright o. Minnesota Mut. L. Ins. Co., 193 U. S. 657; 24 Sup. Ct. Beptr. 649. 310 NATURE AND SUBJECT-MATTER OF CONTRACT. § 161a tion whose fundamental purposes have been changed against his will. On the other hand, where the right of amendment is reserved in the statute or articles of associa- tion, it is because the right to make changes which the .business may require is recognized, and the exercise of the privilege may be vested in the controlling body of the cor- poration. In such cases, where there is an exercise of the power in good faith, which does not change the essential character of the business, but authorizes its extension upon a modified plan, both reason and authority support the corporation in the exercise of the right.l In the present case we have, by express stipulation, the right to amend the articles, with the reservation noted as to article 10. Nor does it appear that the changes were arbitrarily made without good and substantial reason. The testimony in this recoi-d discloses that the experience of this assessment insurance company was not anomalous or unusual. It was a case of history repeating itself. Insurance payable from assessments upon members may begin with fine prospects, butthe lapse of time, resulting in the maturing of certificates, and the abandonment of the plan for other insurance by the better class of risks, has not infrequently resulted in so increasing assessments and diminishing indemnity as to re- sult in failure. The testimony that such was the history of this enterprise is ample. The changes of 1898 to a plan of issuing, in exchange for certificates and upon new business, a policy having some of the features of old line insurance, seems to have been fully justified by the state of the company's business. And the subsequent change to a policy with straight premiums and fixed indemnity was approved by the majority of the members upon proceedings 1 Nugent?;. Putnam County, 19 Wall. 241, 251; 22 L. ed. 83, 89; Plcard V. Hughey, 58 Ohio St. 577; 51 N. E. 133; Miller v. American Mut. Aocl. Ins. Co., 92 Tenn. 167-185; 20 L. R. A. 765; 21 S. W. 89; Supreme Lodge K.of P. V. Knight, 117 Ind. 489; 3 L. R. A. 409; 20 N. E. 479. 311 § 161a NATURE AND SUBJECT-MATTER OF CONTRACT. had under the Minnesota statute, and has resulted in a successful business and a considerable change of the mem- bers to the new and more stable plan. It does not appear that any certificate has been unpaid, nor is any failure shown to levy assessments required under the original arti- cles. It is doubtless true that ^he assessments have in- creased owing to the lesser number subject to assessment, and the death of members. What would have been realized from assessments had there been no change of plan is matter of conjecture. The business is still that of mutual insurance, notwithstanding changed methods of operation. The «iew plan has been legally adopted and approved by the insurance commissioner of the State. The argument for appellants is that having begun as an assessment company, the plan can never be changed with- out the consent of all interested. But we have seen that the right of amendment was given in the original articles of association. There was no contract that the plan of insurance should never be changed. On the contrary, it was recognized that amendments might be necessary. There was no vested right to a continuation of a plan of insurance which experience might demonstrate would result disastrously to the company and its members. We are cited to the statutes of many States authorizing similar changes and transfer of membership, but to no case holding legislative authorization of a change of this character to work the impairment by the State of the obligation of a contract. The courts are slow to interfere with the man- agement of societies, such as this mutual insurance com- pany. While the rights of members will be protected against arbitrary action, such organizations will ordi- narily be left to their own methods of action and manage- ment. The changes under consideration were made in good faith and have been accepted by many of the old members as well as those who have taken policies since 312 NATURE AND SUBJECT-MATTER OF CONTRACT. § 1616 the changes in plan have been made. In our view of the case the law of Minnesota did not impair the obliga- tion of any contract, nor were the changes in the method and plan of this company beyond its corporate powers." Where the directors of an association dissolved the corpo- ration by consolidating it with another and the latter refused to issue a certificate to a member of the old organ- ization because she was uninsurable, it was held, under a statute of the State, providing that intentional fraud by persons having the management of a corporation, such as the diversion of the assets from their proper uses whereby insufficient funds remain to meet its liabilities, will consti- tute a cause of action in favor of any person injured thereby, that such member had a right of action for her damages against the directors for their action, the measure of which is the amount paid in by her to the old association. i Where the superior forfeited the charter of a subordinate branch the former is not relieved from liability to a mem- ber of the latter.^ § 1616. Societies Incorporated in Two States — Schism. — It has sometimes appeared in actions brought against benefit societies that the same society has, for some reason, after its first incorporation under the laws of one State, become reincorporated under the laws of a sec- ond State. In one case ^ the society was incorporated under the laws of the State of Kentucky and subsequently re- incorporated under the laws of the State of Missouri, and the designation in that case was held, under the Missouri charter, to have been illegal but allowable under the charter received in Kentucky and it was also held that the contract, 1 Grayson v. Willoughby, 78 la. 83; 42 N. W. K. 591. See also Court- ney «. U. S. Masonic, etc. (la.), 53 N. W. K. 238. 2 Suprnne Sitting Order Iron Hall v. Moore, 47 111. App. 251. 3 Hysinger v. Supreme Lodge K. & L. of H., 42 M. A. 628. 313 § 1616 NATURE AND SUBJECT-MATTER OP CONTRACT. out of comity, would be enforced in Missouri. In a case in Illinois,! against the same society it was held that an organization having a charter from two States is two sep- arate corporations and can act at its will under either charter. This is in accordance with the general rule laid down in standard works on corporations and as expressly decided in one case.^ In a later case ' the court said : "It is a well-settled law, that a corporation, which in its essen- tial sense is a mere association of persons, may acquire a franchise as such in different States and at different times, and that the organization of a later corporate entity in one State, does not^er se involve the loss of a prior corporate being granted by another State, and that ,the corporation may act in one State under one charter and in another State which it desires to enter for business, under a mere license, or under articles of full incorporation, the latter method being often adopted by a foreign corporation in order to acquire specific power to act as a domestic corpo- ration in a particular State, independent of the principle of comity which it would otherwise be compelled to invoke."* In a case in Texas where the same organization was de- fendant',^ the Civil Court of Appeals of that State said : " The defendant, the Supreme Lodge Knights of Honor, is but one association or corporation, incorporated' first under the laws of Kentucky, and afterwards under the laws of the State of Missouri, but that defendant having elected to abandon the Kentucky charter and to continue its work and organization under the Missouri charter, since June 18, 1884, and having so continued and acted under 1 Bachmann v. Supreme Lodge K. & L. of H., 44 111. App. 188. 2 Newport Co. v. Wooley, 78 Ky. 525. Morawetz on Corp., Sec. 997. 8 Martinez v. Supreme Lodge K. of H., 81 Mo. App. 59. Morawetz on Corporations, sections 991, et seq. ; Tourville v. Kail- way, 148 Mo. 614; 50 S. W. R. 300. 5 Bollman v. Supreme Lodge K. of. H. (Tex. Civ, App.), 53 S. W. R, 722. 314 NATURE AND SUBJECT-MATTER OF CONTRACT. § 1616 said Missouri charter since said date, and the grand lodge and subordinate lodges of Texas including said Travis Lodge, No. 1015, having for many years recognized the Supreme Lodge of the order and the said John Fleming having also recognized said Missouri corporation for many years prior to his death, and was so recognizing said Mis- souri corporation as the Supreme Lodge of the order at the time plaintiffs were designated as his devisees in his will and at the time of his death that the Missouri charter of defendant, and the constitution and by-laws enacted thereunder, v»y the defendant, must govern and control the rights of the parties under the benefit certificate here sued on. * * * That even if the Kentucky charter and laws enacted thereunder by defendant, were to con- trol, that the incorporation under the Missouri laws would be in the nature of an amendment to the original charter, and if the additional limitations as to who could participate in the benefit fund as made by the Missouri charter would have been valid and binding on the original members under the Kentucky charter if made by an amendment to de- fendant's charter by, the legislature of Kentucky, then it is valid if made by the legislature of Missouri." Closely allied with the subject of dual incorporation is that of double insurance, which arises where there is a schism in an order, which divides into two bodies, each claiming to be the true one. In a case of this kind,i a society had separated into two parts each claiming to be legitimate and claiming the members of the former body as its own. The deceased held a certificate in one body, receiving no new certificate but retained his membership in the rival body and continued to pay assessments and dues in both. The certifi- cate was paid by the rival and surrendered, claim was made against the defendant and assessment thereof made and 1 Bock V. A. 0. U. W., 75 la. 462. 315 § 162 NATURE AND SUBJECT-MATTER OF CONTRACT. collected but payment was refused because of plaintiff's inability to surrender the certificate. It was held that the deceased was not doubly insured and that the contract of the defendant did not amount to an estoppel and that it was discharged from liability. In a subse- quent case arising in the same State and where the same factions were interested it was held that recovery could be had from both factions and that the officers of the new lodge having received dues and assessments from the member with notice that he had not severed his connection with the old body, it was estopped from insisting upon his failure to do so as a ground of forfeiture. ^ § 162. Is One of Insurance. — This contract, whether found in the certificate alone, or gathered from the certifi- cate, charter and by-laws, is one of insurance. The Su- preme Court of Massachusetts has made this very clear in the leading case of Commonwealth v. Wetherbee,^in which it said : "A contract of insurance is an agreement by which one party, for a consideration (which is usually paid in money, either in one sum or at different times, during the continuance of the risk), promises to make a certain payment of money upon the destruction or injury of some- thing in which the other party has an interest. In fire and marine insurance, the thing insured is property: in life or accident insurance, it is the life or health of a person. In either case, neither the times and amounts of payments by the assured, nor the modes of estimating or securing the payment of the sum to be paid by the insurer, affect the question whether the agreement between them is a contract of insurance. All that is requisite to constitute such aeon- tract is the payment of the consideration by the one, and 1 Warnebold v. Grand Lodge A. O. D. W., 83 la. 23; 48 N. W. K. 1069. 2 106 Mass. 149. 316 NATURE AND SUBJECT-MATTER OF CONTRACT. § 162 the promise of the other to pay the amount of the insur- ance upon the happening of injury to the subject by a contingency contemplated in the contract. The contract made between the Connecticut Mutual Benefit Company and each of its members by the certificates of membership issued according to its charter, dees not differ in any essential par- ticular of form or substance from an ordinary policy of mutual life insurance. The subject insured is the life of the member. The risk insured is death from any cause not excepted in the terms of the contract. The assured pays a sum fixed by the directors and not exceeding ten dollars, at the inception of the contract, and assessments of two dol- lars each annually, and of one dollar each upon the death of any member of the division to which he belongs, during the continuance of the risk. In case of the death of the insured by a peril insured against, the company absolutely promises to pay to his representatives, in sixty days after receiving satisfactory notice and proof of his death, ' as many dollars as there are members in ' the same division, the number of which is limited to five thousand. The payment of this sum is subject to no contingency but the insolvency of the corporation. The means of paying it are derived from the assessments collected upon his death from other members; from the money received upon issuing other certificates of membership, which the by-laws declare, may, after payment of expenses, be ' used to cover losses caused by the delinquencies of members ; ' and from the guaranty fund of one hundred thousand dollars, established by the corporation under its charter. This is not the less a contract of mutual insurance upon the life of the assured ' because the amount to be paid by the corporation is not a gross sum, but a sum graduated by the number of mem- bers holding similar contracts ; nor because a portion of the premiums is to be paid upon the uncertain periods of the deaths of such members; nor because, in case of non-pay- 317 :5 162 NATUEE AND SUBJECT-MATTEK OF CONTEACT. I ■ ment of assessments by any member, the contract provides no means of enforcing payment thereof, but merely declares the contract to be at an end, and all moneys previously paid by the assured, and all dividends and credits accrued to him, to be forfeited to the company. The fact offered to be proved by the defendant, that the object of the organi- zation was benevolent and not speculative, has no bearing upon the nature and effect of the business conducted and the contracts made by the corporation . ' ' This definition and application have been generally cited with approval by the courts of other States which have jpractically without ex- ception, held that the contracts of benefit societies whether the agreed sura is to be paid upon the sickness or disability of the member to him in person, or upon his death to his designated beneficiary, is one having all the characteristics of an insurance contract. l In an action brought to recover the benefit promised by a benefit society on the death of a member, the Supreme Court of Alabama said : ^ " The in- strument in writing upon which this suit is founded, and which is set out in full in the complaint entitled a - Knight's Benefit Certificate,' has the elements and characteristics of a contract of life insurance. It purports to have been issued by the Supreme Commandery of the Knights of the Golden Eule, which is averred to be a corporation, created and organized under a law of the State of Kentucky. The commandery thereby promises on the death of the hus- band of the appellee to pay her two thousand dollars, in 1 Endowment & Ben. Assn. v. State, 35 Kan, 253; State v. Merchant's Exchange, etc., 72 Mo. 146; Bolton ». Bolton. 73 Me. 299; Folmers' Ap- peal, 87 Pa, St. 133: State v, Binkers, etc., 23 Kan. 499; Miner v. Mich. Mut. B. Ass., 63 Mich. 338; 29 N. W. Rep. 852: State f. Farmers & Mech., etc., Assn., 18 Neb, 276; Supreme Commandery, etc., v. Ains- ■worth, 71 Ala. 443; Chartrand v. Brace, 16 Colo. 19; 26 Pac. E. 162; Supreme Council A. L. H. v. Larmour, 81 Tex. 71; 16 8. W. K. 633; ante, §§ 51 and 62. * Supreme Commandery, etc., v. Ainsworth, 71 Ala. 443. 318 NATURE AND SUBJECT-MATTER OP CONTRACT. § 162 consideration of the husband having become a member of the order, and having paid the fee for admission to mem- bership and of his payment in the future of all assess- ments levied and required by the supreme commandery, upon the condition that he remained a member of the order, in good standing, and complied with all the laws then in force or subsequently enacted. These are the essentiaj elements of a contract of life insurance, made by a mutual insurance company with one of its members. Life is the risk and death is the event upon which the insurance money is payable. There is not, as in ordinary contracts or poli- cies, a stipulation for the payment of premiums fixed and certain in amount, at the inception of the risk, and at periods definitely appointed, during its continuance. The payment of the fee for admission to membership and of the assessments levied and required by the commandery, are the equivalent of premiums, and form the pecuniary consideration of contract. ^The condition expressed, that the assured shall remain a member of the order in good standing, observing its laws, is the expression of that which is implied in all insurance of members by mutual companies. Where a purchaser is in/iuced to buy a news- paper, or make a subscription, because of the offer to pay a certain sum of money on the happening of a certain con- tingency contained in such issue, all the elements of a con- tract of insurance are present.^ And a contract, by the terms of which certain notes are to be given and those re- maining unpaid at the death of the maker are to be can- celed by such death, is one of insurance.^ The members of such companies are presumed to know the charter and by-laws, and to contract in reference to them though they 1 Commonwealth v. Phila. Inquirer, 15 Pa. Co. Ct. K. 463. 2 M. K. & T. Trust Co. v. Krumseig, 23 C. C. A. 1; 77 Fed. R. 23; M. K. & T. Trust Co. v. McLachlan, 59 Minn. 468; 61 N. W. R, 560. 319 § 163 NATURE AND SUBJECT-MATTER OP CONTRACT. may not be recited or referred to in the contract. ' ' ^ Where the proprietors of a medical preparation agreed to pay a specified sum to any one who should contract influenza after using the remedy for a certain period and on the faith of this promise a person bought some but afterwards fell ill of the influenza, the court held, in an action by such person to recover the promised amount, that the contract was neither a wager nor a policy of insurance.^ An associ- ation which contracts with its members, in consideration of a specified annual sum, to repair bicycles in case of accident and to replace those destroyed by accident or stolen, but not to pay any money, is not an insurance company.^ § 163. A Life Insurance Contract is not Strictly one of Indemnity. — A contract of insurance is ordinarily one of indemnity; that is, the insurer agrees that upon the dam- age, loss or destruction of something he will, in the agreed way, indemnify the insured. It has been vigorously con- tended that a contract of life insurance is also one of in- demnity, as much as fire or marine insurance. Mr. May, for example, in his treatise on insurance,* says: " In the one case, the insurance is against the loss of capital, which produces income ; in the other, it is against the loss of faculties, which produce income." And again :^ "It (the contract) can never, therefore, properly be entered into ex- cept for the purpose of security or indemnity ; though the fact that the contract may, under certain circumstances, re- sult as a profitable investment, does not vitiate it, if entered 1 Holland©. Taylor, 111 Ind. 121; 12 N. E. Eep. 116; Farmers. State, 69 Tex. 561; 7 S. W. Kep. 220. 2 Carbill o. Carbolic Smoke Ball Co., 2 Q. B. 484. ' Commonwealth v. Provident Bicycle Assn., 178 Pa. St. 636; 36 Atl. K. 197; 36 L. E. A. 689. ' §7. « § 117. 320 NATURE AND SUBJECT-MATTER OF CONTRACT. § 163 into ia conformity to tlie principles which underlie it. But so far as it seeks any other object than indemnity for loss it departs from the legitimate field of insurance, and en- grafts upon the contract a purpose foreign to its nature." And yet the same author has said' that life insurance " in some of its phases, is not merely a contract of indemnity, but includes that with a possibility of something more." In Dalby v. The India and London Life Ass. Co.,^ it was said of life insurance that it "in no way resembles a con- tract of indemnity," and Baron Parke again in referring to the fact that Lord Mansfield decided the case of Godsall v. Boldero ^ on the theory that a life insurance contract was like one of marine insurance, one for indemnity only, says: " But that is not of the nature of what is termed an assur- ance for life; it really is what it is on the face of it, — a contract to pay a certain sum in the event of death ! " The Supreme Court of the United States * cites this case and approves its reasoning, saying : "In life insurance the loss can seldom be measured by pecuniary values." We must conclude, therefore, that, though sometimes, as where a creditor insures the life of his debtor, the contract is in the nature of an indemnity, still, strictly speaking, a life insur- ance contract is not generally one of indemnity.^ Public policy, however, forbids a person to take out a policy of insurance upon the life of another from the continuance of which he has no expectation of advantage or pecuniary 1 May on Ins., § 117. 2 15 C. B. 365; 24 L. J. C. P. 2. 3 9 East, 72. ' Conn. Mut. Life Ins. Co. v. Schaefer, 94 U. S. 457; Warnock ». Davis, 104 tJ. S. 779. » See Scott v. Dickson, 108 Pa. St. 6; Ferguson v. Mass. M. L. Ins. Co., 32Hnn, 306; 102 N. Y. 647; Mowryi). Home L. Ins. Co., 9 E. I. 346; De Rouge v. Elliott, 8 Green (N. J.), 486; Trenton M. L. & S. Ins. Co., 4 Zab. (N. J.) 576; Rltter v. Smith, 70 Ind. 261; 16 Atl. R. 890; Emrich i). Coakley, 35 Md. 193; Whiting o. Ins. Co., 15 Md. 326. 21 321 § 164 NATURE AND SUBJECT-MATTEE OF CONTKACT. interest, because such policies are in the nature of wagers upon human life and are gambling transactions. Moreover they furnish a strong inducement to the person holding such insurance to hasten the termination of the life of the insured. 1 § 164. Is Executory and Personal. — This contract is executory and personal in its nature. Of a fire insurance policy the Supreme Court of Ohio said: ^ " It is a mere personal indemnity against loss to the person with whom it is made, or those falling within the scope of its provisions. As soon as the interest of such person ceases in the prop- erty the contract is at an end, from the impossibility of any loss happening to him afterwards. It is not assignable without the consent of the insurer." ^ So far as the prin- ciple of the foregoing statement just cited applies to life insurance policies it is incorrect. The question of person- ality is of great importance in cases of fire insurance where restraints on alienation are insisted on, but in life in- surance contracts it is of less importance. It is set- tled doctrine that a life policy originally valid does not cease to be so by the cessation of the interest of the party assured in the life of the insured.* The contract, however, must be considered personal, because generally not assign- able without the consent of the insurer.^ The contract falls strictly within the definition of those that are execu- tory ; on the one hand, certain assessmentsor premiums are 1 Post, § 248, for a discussion of the subject of insurable interest. 2 McDonald v. Black's Admr., 20 Ohio St. 185; 55 Am. Dec. 448. 3 Glendale Woolen Co. v. Protection Ins. Co., 21 Conn. 19; 54 Am. Dec. 309; Morrison's Admr. v. Tennessee, etc., Ins. Co., 18 Mo. 262; 59 Am. Dec. 305 and note. 4 Conn. Mut, L. Ins. Co. v. Schaefer, 94 U. S. 457; post, § 253. 6 For discussion of the assignability of ife insurance policies and change of beneficiary, see Chap. IX. 322 NATURE AND SUBJECT-MATTER OF CONTRACT. § 166 to be paid, on the other side, it is to be executed by the payment of the sum insured when contingency occurs. ^ § 165. Is Aleatory. — Another characteristic of the con- tract is that it is what the French writers call aleatory, " or one in which the equivalent consists in the chances for gain or loss, to the respective parties, depending upon an uncertain event, in contradistinction from a commutative contract in which the thing given or act done by the party is regarded as the exact equivalent of the money paid or done by the other." ^ In other words the parties take chances as they do in throwing dice ; if, as example in cases of life insurance for specified terms, the assured lives, the company makes the premium which the party paying it loses, but if the assured dies within the time specified then the company loses the amount contracted for. At common law a life insurance contract was valid though no insurable in- terest existed and hence was often a mere wager. ^ § 166. Life Insurance Policies are Valued Policies. — Eegarding the certificate of membership as a contract similar to a life insurance policy, it is what is term-ed a " valued " policy, which the Supreme Court of Pennsyl- vania says : * "Is not understood to be one which estimates the value of the property insured merely, but which values the loss, and is equivalent to an assessment of damages in the event of a loss." ^ In this sense all policies of life in- 1 Mutual Life Ins. Co. v. Wager, 27 Barb. 354 ; Hellenberg v. District No. 1, I. O. O. B. B., 94 N. Y. 586; New York L. Ins. Co. b. Slatham, 93 U. S. 24. 2 May on Ins., § 5. 8 Dalby ». East India & London L. Ass. Co., 15 C.B. 365; Crawford «. Hunter, 8 T. E. 242; Lucena v. Crawford, 2 B. & P. N. R. 269 ; Cousins V. NanteSj 3 Taunt. 513. This was changed by statute, 14 G. III., c. 48, making an insurable interest necessary. « Lycoming Ins. Co. v. Mitchell, 48 Pa. St. 372. s Chisholm v. Nat. Capitol L. Ins. Co., 52 Mo. 213; 14 Am. Rep. 414. 323 § 166a NATURE AND SUBJECT-MATTER OF CONTKACT. surance, or benefit certificates, are valued policies, for all specify the amount which the insurer is to pay without question as to the money value of the interest destroyed.i And the policy is not to be considered as open as to the amount because the amount payable is to be determined by the number of members of* a certain class, or of the society. § 166a. PeculiarK"atupeofIiife Insurance Contract. — It has been said by a learned judge concerning life insur- ance: ^ " The business of life insurance is sui generis. It differs widely from fire insurance and is controlled by principles essentially variant from those which limit the latter. Briefly stated, it may be said to rest upon the operation of two distinct, yet closely connected, factors — the average expectation of life and the cumulative ppwer of interest compounded. In other words, the two somewhat uncertain elements which life insurance seeks to reduce to the precision and certainty of a mathematical proposition are the average length of life accorded to a thoroughly well man, on the one hand, and the earning capacity, for a certain definite term of years, of a certain sum of money to be paid certainly on a fixed date during that life, on the other. It is by the skillful use of these two factors that life insurance corporations are enabled to fix and determine, as the very foundation of their business, the sum of money or premium which must be paid by the insured to them, as a just consideration for their contract of insurance; to enable them, in fact, to fulfill, honestly and promptly, their part of the contract. It is perfectly clear, therefore, that promptness of payment of such yearly premiums when fixed at the times designated for such pay- 1 Rockhold V. Canton Masonic, etc., Soc, 129 111. 440; 21 N. E. E. 794. 2 Green, J., in Kellner o. Mutual L. Ins. Co., 43 Fed. R. 623. 324 NATURE AND SUBJECT-MATTER OF CONTRACT. § 167 ment, is necessary and absolutely essential to the honest conduct of life insurance. If there be uncertainty as to such payment of premium, all calculations based upon its prompt and certain receipt must be seriously disturbed if not radically destroyed, resulting finally and surely in the disastrous collapse of the entire business scheme." § 167. Endowment Insurance is Liife Insurance. — "The term, life insurance, is not alone applicable," says the Supreme Court of California,! " to an insurance for the full term of one's life. On the contrary, it may be for a term of years, or until the assured shall arrive at a certain age. It is simply an undertaking on the part of the insurer that either at the death of the assured, whenever that event may occur, or on his death, if it shall happen within a speci- fied term, or before attaining a certain age, as the case may be, there shall be paid a stipulated sum. In either form, it is, strictly speaking, an insurance on the life of the party. In this case the policy was to become payable on the death of McCullough, provided he died within ten years, audit is to that extent certainly an insurance on his life. It is an undertaking to pay the stipulated sum if he shall die within a specified term, which is of the very essence of life insur- ance. The fact that the company is to pay the agreed sum at the expiration of ten years, even though McCullough shall not have died in the meantime, does not divest it of its character of life insurance. It is only a new and addi- tional element in the contract not inconsistent with its other, which is its chief constituent part, to wit, the undertaking to pay on the death of the assured within the specified term." ^ It cannot affect the rights of various parties under a life insurance policy that, instead of fixing the 1 Briggs V. McCuUougli, 36 Cal. 550. 2 Endowment and Benev. Assn. v. The State, 35 Kan. 262 ; Carter v. John Hancock Mut, L. Ins. Co., 127 Mass. 153. 325 § 167a NATURE AND SUBJECT-MATTER OF CONTRACT. exact period when an endowment shall mature, the policy gives the holder the option to fix it at any time after 15 years, l A mutual benefit society organized under a stat- ute authorizing the formation of societies to " give financial aid and benefit to the widows, orphans and heirs or devisees of deceased members ' ' has no power to contract to pay a benefit to a member himself on his arriving at the age of 70 years or after he has been a member twenty-five years, and such a contract is ultra vires and void.^ Nor can a fraternal beneficiary corporation engage in the business of endow- ment insurance by issuing endowment policies. ^ § 167a. Parties to Insurance Contracts — Minors — Consent of Insured — Upon principle it would seem that, so far as the parties are concerned, the same rules apply to insurance contracts as to other contracts, and that any person capable of entering into an obligation of any kind can become a party to a contract of insurance. The ques- tion has arisen whether minors can become members of a fraternal beneficiary association, and there is a conflict of authority on this point. In a recent case * the Court of Appeals of New York said: "It is plain that the powers conferred upon members cannot be exercised by children of tender years, such as have been permitted to become mem- bers of the corporation defendant. The children insured 1 Travellers Ins. Co. v. Healy, 25 App. Dlv. 53; 49 N. Y. Supp. 29. 2 Ro.ckholdc. Canton Masonic Ben. Assn., 129 111. 440; 21 N. E. R. 794; also 19 N. W. R. 710. But such a provision in tlie certificate does not invalidate the certificate as one to pay the benefits to the widow. See case last cited. sstateexrel. w. Orear, 144MO. 157; 45 S. W. R. 1081; Calkins i;. Bump, 120 Mich. 335; 79 N.W. R. 491; Walker u. Commissioner, 103 Mich. 344; '61 N. W. R. 512; Wagner v. Keystone M. B. Assn., 8 Pa. Dist. R. 231; Preferred M. L. I. Co. v. Giddings, 112 Mich. 401; 70 N. W. R. 1026, 1031. •• In re Globe Mut. Ben. Asso., 135 N. Y. 280; 82 N. E. R. 122; 17 L. R. A. 547. See also People v. Industrial Ben. Asso., 92 Hunj 311; 36 N. Y. Sup. 96; affirmed 149 N. Y. 606; 44 N. E. R. 1127. 326 NATURL AND SUBJECT-MATTER OF CONTRACT. § 16705 by the defendant, whose ages are given in the schedule, were incapable of exercising any choice in becoming mem- bers, or of appointing a beneficiary, or of exercising the powers with which members are invested by the statute. They could take no part in the co-operative scheme upon which the corporation rests, and which implies the volun- tary association of persons capable of acting in the admin- istration of the affairs of the corporation. There is noth- ing in the statute which permits the inference that a child may be made a member of the corporation upon the appli- cation of the parent, or that a beneficiary may be desig- nated or changed by any person except the member him- self. It has been held that where a statute authorizes persons to form a corporation, it is implied that they shall be persons of full age.^ Infants admitted as members by the defendant become members of the corporation, if legally entitled to admission, and maybe elected trustees or directors, and it might happen that management of the affairs of the corporation would become vested in persons who could not have organized it. We place our assent to the judgment below on the ground that it appears from a consideration of the statute of 1883, and the nature and object of co-operative insurance companies, and the rela- tion which members hold to the corporation, that adult persons only were contemplated as entitled to membership. The law fixes an arbitrary period when persons become clothed with general legal capacity, and while, in many cases, youths under 21 are capable of exercising an intelligent judgment, and might properly be admitted to the advantage of membership in a company like that of the defendant in many others they would be wholly unfitted to act as members of such an organization." 1 Hamilton & F. R. Co. v. Townsend, 13 Ont. App. Eep. 534; 16 Am. & Eng. Corp. Cas. 645. 327 § 167a NATURE AND SUBJECT-MATTER OF CONTRACT. In Pennsylvania it has also been held/ that minors under 21 years of age were incapable of contracting, and could not qualify as members of a benefit association. In the same State it has also been held,^ that "infants cannot make the contract of membership for themselves, and it is not clear how the parents can make it for them." The contrary view has been advanced by the Supreme Court of Illinois,^ where the court says: " The statute under which the association was organized is silent on the subject, nor do we find any statute which either expressly, or, so far as we can discover, by implication, either permits or forbids their admission to membership. If, then, minors are in- eligible, such ineligibility arises from some principle grow- ing out of the nature and objects of these associations, or the policy of the law applicable thereto. The contention is that the certificate of membership is a personal contract between the member and the association, and that as an an infant is capable of making only a voidable contract, his admission to membership is a violation of those principles of mutuality which lie at the basis of mutual benefit socie- ties. We may admit in the broadest sense that these societies are founded upon the principle of entire mutuality in relation to burdens as well as benefits ; yet we are unable to see how that principle places the membership of infants upon any footing different from that of adults. While the certificate of membership is a contract, such contract in the absence of express stipulations to the contrary, is purely unilateral. It may be enforced against the association where the member has performed all the prescribed condi- 1 Commonwealth ». People's Mut., etc., Asso., 6Pa. Dist. R. 561. 2 Commonwealth v. Keystone Ben. Asso., 171 Pa. St. 465; 32 Atl. E. 1027. 3 Chicago Mut. L. Ind. Asso. v. Hunt, 127 111. 257; 20 N. E. Eep. 55; 2 L. B. A. 549. Another case practically to the same effect is Clements V. London & N. W. E. Co., 2 Q. B. 482; 9 Eeports, 223; 42 Week. E. 338; 58 J. P. 816. 328 NATURE AND SUBJECT-MATTER OF CONTRACT. § 167a tions, but none of its stipulations are enforcible against the member. If he fails to pay his assessments or dues, or does any act forbidden by the certificate of membership, the certificate becomes void and the membership ceases. But the making of an assessment or the maturing of dues does not make the member a debtor to the association so as to authorize it to bring a suit for its recovery in case of his neglect or refusal to pay. Payment is left wholly to his discretion. The contract, then, not being one which has the legal effect of binding him to the payment of any money or the performance of any condition, we cannot see how it can be at all important whether it is voidable or other- wise. Performance is not more left to theoptionof themem- ber where the contract is made by an infant than when made by an adult. If an infant performs the conditions pre- scribed in the certificate, he, the same as an adult, be- comes entitled to the benefits thereby secured. If he fails to perform, his membership ceases, and that is all. We do not assent to the view that, as a further consequence of his disability, he may recover back the dues and assessments he may have already paid. ' If an infant advances money on a voidable contract which he afterwards rescinds, he cannot recover this money back because it is lost to him by his own act, and the privilege of infancy does not extend so far as to restore this money unless it was obtained by fraud.' (1 Parsons, Contracts, 332.) Nor are we able to see any force in the suggestion that minors should not be admitted to membership because of their incapacity to act as trustees, or to perform the duties of members at corporate meetings, such as consult- ing or giving advice for the mutual benefit of the members, voting for officers, and the like. We know of no reason why the capacity to act as trustee should be a necessary qualification, for membership. If a sufficient number of members possess the requisite capacity, so as to afford the 329 § 167a NATURE AND SUBJECT-MATTER OF CONTRACT. members a reasonable and proper range of choice in the selection of trustees, the admission of others who are not thus qualified can work no injury to anybody. It will not be claimed that the want of the requisite intelligence or business experience on the part of an adult to qualify him to act as trustee would render him ineligible to member- ship, but these are quite as essential to the proper discharge of the duties of trustee as mere legal capacity. There would seem to be no legal obstacle in the way of minors taking part in corporate meetings, consulting, advising, or even voting. The only objection to their doing so grows out of their inexperience and the immaturity of their judg- ments, but these are disqualifications which are not nec- essarily confined to persons under age of twenty-one years ; and no one would allege them as a legal bar to the admis- sion of an adult to membership." In regard to policies of ordinary life insurance, it seems to be conceded that a pol- icy of insurance taken out by a minor on his own life is a valid contract, voidable only at the instance of tl;e minor ; and, if not voidable by him during minority, the company will be held liable thereon. i In the case of Johnson u. N. Western Mut. L. Ins. Co.,^ it was held that an infant can disaffirm a contract of insurance taken out by him during infancy ; but, if the insurance is taken out in a sol- vent company, at the ordinary and usual rates, for an amount reasonably commensurate with the infant's estate, or his financial ability to carry it, the infant cannot re- cover the premiums he has paid in so far as they were intended to cover the current annual risk assumed by the company. The Supreme Court of Massachu- setts has on this point taken just the opposite view.^ 1 Union Cent. L. Ins. Co. v. Hilliard, 63 Ohio St. 478; 59 N. E. R. 230; S3 L. R. A. 462. 2 56 Minn. 365; 59 N. W. R. 992; 26 L. R. A. 189. 3 Simpson V. Prudential Insurance Co., 184 Mass. 348 ; 68 N. E. E. «73; 63 L. R. A. 741. 330 NATURE AND SUBJECT-MATTER OP CONTRACT. § 167a It has also been held,* that the surrender by an infant of a policy on his life, for a cash value fairly made without undue influence, cannot be avoided by his administrator, and the insurance contract enforced, although the infant did not receive the whole amount to which the contract enti- tled him. In a case in New York,^ it was decided that an assignment by an infant to his aunt, of an insurance policy, was valid, because, while the infant might have disaffirmed the policy on reaching majority, yet the insur- ance company could not avail itself of that fact as a de- fense against the person who is authorized by the insured to receive the money. An infant is not bound by his war- ranties in a contract for life insurance, and a breach of warranty will not prevent recovery by the bene- ficiary if such beneficiary did not obtain the policy with knowledge of such false warranties.^ The Su- preme Court of Massachusetts has held,* that a con- tract of life insurance is not a necessary or within the class of contracts which, as a matter of law, are bene- ficial to or binding on an infant. An important inquiry is to what extent the consent of a person whose life is insured, is necessary as a conditon for insurance thereon. It seems to be taken for granted that a creditor can insure the life of his debtor, even without his consent, or that any one having an insurable interest in the life of another can insure such person's life.^ The question has more fre- quently arisen in actions to recover the premium paid on account of fraud of the company, or the invalidity of 1 Pippen V. Mut. Ben. L. Ins. Co., 130 N. C. 23; 40 S. E. K. 822; 57 L. K. A. 505. 2 Grogan v. U. S. Industrial Ins. Co., 90 Hun, 521 ; 36 N. Y. Sup. 687. 3 O'Rourke v. John Hancock Mut. L. Ins. Co., 23 R. I. 457; 50 Atl. Rep. 884; 57 L. E. A. 496, where a valuable note is appended. < Simpson v. Prudential Ins. Co., 184 Mass. 348; 68 N. B. E. 673. « Post, § 248. 331 § 1676 NATUKB AND SUBJECT-MATTEE OF CONTRACT. the policy; and this subject will be considered later.* A husband may use community funds without consent of his wife in the procurement of insurance upon her life and the proceeds on her death will belong to him in his individual right. ^ § 1676. Tontine Policies — rtight of Policy Holders to Dividends or Profits. — The name, tontine, has often been applied to a form of life insurance policy as well as to a period, after the expiration of which dividends or profits are to be adjusted and paid. The name is derived from Lorenzo Tonti, a Neapolitan banker, who originated the scheme about 1653. The term, tontine, has been defined by the Century Dictionary as follows : ' ' An annuity shared by subscribers to a loan with the benefit of survivorship, the share of each survivor being increased as the subscribers die, until at last the whole goes to the last survivor, the whole transaction ceasing with his death." The same authority gives this definition of a tontine policy : "A policy of insurance in which the policy holder agrees, in comm»n with the other policy holders under the same plan, that no dividend, return premium or surrender value shall be received for a term of years called the tontine period, the entire surplus from all sources being allowed to accumu- late to the end of that period, and then divided among all who have maintained their insurance in force. This modi- fication of ordinary life insurance has been adopted as optional with the insured for the purpose of countervailing the tendency to burden long lived and persistent policy holders with a large amount of premiums in comparison 1 Post, § 277a. 2 Martin v. McAllister, 94 Tex. 567; 63 S, W. B. 624; 56 L. R. A. 585. For an elaborate discussion of the subject of Insurance upon life without consent of the party insured, see note 56 L. B. A. 585, where this case is reported. 332 NATURE AND SUBJECT-MATTER OF CONTEACT. § 1676 with those whose lives fall in shortly after obtaining insurance. The effect is to reduce the sum payable on deaths after but few years payment of premiums and to increase the sum payable on deaths occurring after a given number of years." Few, if any strictly tontine policiesare now issued, as the non-forfeiture laws of most of the States forbid the forfeiture of life insurance policies after two or three annual premiums have been paid, but a favorite plan is a sort of semi-tontine policy by which the dividends, which ordinarily would be paid annually, are to accumulate during a period of ten or more years and then be divided among the policies in force at the end of that time. The persistent and surviving policy holders in this way receive the divi- dends that have been accumulated on policies that have lapsed or been terminated by death during the agreed period, and the uncertainty of the results is an attraction to those of speculative minds. The legality of the tontine plan has been questioned. In Fuller v. Metropolitan L. Ins. Co.i a suit brought by the holder of a policy, upon what was called the ".reserve dividend plan," or one in the nature of a tontine, for an accounting and for damages, the majority opinion of the court says: "All that dis- tinguishes ordinary life insurance from a wagering con- tract, is the theory of protection against damage that may be suffered through another's death. This protection may be purchased by the insured in behalf of his own family, or of those he sees fit to make his beneficiaries ; it may be purchased by one on his own account where he may suffer damage from another's death by reason of kinship, the relation of creditor or other insurable interest. But when this element of protection is entirely eliminated the insur- ance is a wager and the contract is void.^ In the present case the policy holders stipulate between themselves that 1 70 Conn., 647; 41 Atl. R. 4. 2 Cronino. Vermoiit L. Ins. Co., 20 E. I. 570; 40 Atl. E. 497. 333 § 1675 NATUEE AND SUBJECT-MATTER OF CONTEACT. the surrender value of each policy lapsing, which repre- sents payments made in behalf of the beneficiary, shall go to benefit other policy holders living at a certain time, who are total strangers to the policy and the insured. This is a mutual wager upon the chances of life. There is no con- ceivable element of protection. ^ The sole purpose of the bet is personal profit. It is the risk of what is due to each in the case of a lapse, for the chance of winning what is due to others. It is correctly described by the plaintiff's counsel as ' the chance to speculate on his chances of surviving the other members.' On this ground these policies were urged upon the public, by appeals to the gambling instinct, claiming, as stated in the Stewart pamphlet that, ' Eisk is the condition of success.' The only way of evading the invalidity of such a contract is by the claim that the policy holders in fact wager nothing, that all payments of premiums belong to the company, including those applied to maintain a reserve, and the policy holders are not entitled to any particular sum, but only to an equitable proportion of the excess of assets over liabilities at the time of dividend. We do not pass upon the sufficiency of this claim. But if the claim of the plaintiffs be true ; if upon each lapse a sum equal jn amount to the reserve value of the policy lapsing be- comes a liability of the company which it must pay to the surviving policy holders ; then all doubt as to the gaming nature of the transaction vanishes. The pool thus created is composed of definite sums of money of which the com- pany is stakeholder, under an agreement to divide these sums among the winners who are to be determined by the chances of life." Other courts, however, do not seem to have entertained the same doubts concerning the tontine principle. In a case in Pennsylvania,! ten persons holdmg 1 Hillu. United Life Ass'n, 1B4 Pa. St. 29; 25 Atl. E. 771. 334 NATURE AND SUBJECT-MATTEK OF CONTRACT. § 1676 life insurance policies had made an assignment of the same to a financial agency, as trustee, to collect on the death of each person insured the amount of his policy, and dis- tribute the proceeds to the survivors. The court referred to the fact that property might be held by joint tenants where, on the death of one, the survivor would take, but while not expressly deciding the legality of the arrange- ment, held it good so far as the company discharging its liability by payment to the trustee was concerned, pro- vided the insured had himself paid the premiums. In another oase,i the court inclined to the belief that the contract was not a gambling transaction. The New York Court of Appeals has decided^ that a life insurance company issuing policies on the tontine, or ten year dividend system, is in no sense a trustee of any par- ticular fund for the holder of such a policy : their rela- tion is simply that of debtor and creditor ; and the policy holder, at the expiration of the ten years, is not entitled to an accounting in the absence of any evidence of misappro- priation, wrong-doing or mistake on the part of the com- pany. Other cases support this view."* The rights of tontine policy holders have been fully considered by the New York Court of Appeals, in Greef v. Equitable L. Assur. Soc* In that case the court held that the equitable share of the surplus of a mutual insurance company, with which the policy holder should be credited, is only such a share as may be credited, with due regard to the safety of the 1 SimoDS V. N. Y. Life Ins. Co., 38 Hun, 309. Cited and approved, Komer v. Equitable L. Assur. See, 102 111. App. 621. 2 Uhlman v. N. Y. L. Ins. Co., 109 N. Y. 421; 17 N. E. R. 363. 3 Pierce v. Equitable L. Assur. Soc, 145 Mass. 36; 12 N. E. R. 858; Gadd V. Equitable L. Assur. Soc, 97 Fed. Rep. 834; Bogardus v. N. Y. Life Ins. Co., 101 N. Y. 328; 4 N. E. R. 522; Hunton v. Equitable L. Assur, Soc, 45 Fed. Rep. 661. * 160 N. Y. 19; 54 N. E. R. 712; 46 L. R. A. 288; reversing 40 App. Div. 180; 57 N. Y. Supp. 871. 335 § 1676 NATURE AND SUBJECT-MATTER OF CONTRACT. policy holders and the security of the business of the company. The determination by the officers and managers of the company of the amount that should be accumulated and retained for the security of the company and its members, is prima facie to be regarded as equitable in the absence of any allegation (^ wrong-doing or mistake by them. No title to any part of the surplus of a mutual insurance company, which will enable a policy holder to maintain an action at law for its recovery, exists until a dis- tribution is made and the proportion of the surplus which should be credited to the policy holders has been ascertained and determined. It has also been said,^ that the parties to a contract of life insurance do not contemplate that the policy holder is to be permitted to participate in the man- agement of the company or to dictate the amount of the dividend which it shall declare, or question the result after the discretion of its managers has been exercised in this behalf. A tontine provision as to the division of accumu- lation in a policy issued by an assessment association has been held to be in violation of the State law of Illinois relating to such organizations.^ In an action to deter- mine the liability of the company contemporaneous literature is admissible.^ A company declaring a div- idend out of the surplus earnings of the company can- not limit it to such policies as may be continued in force by the payment of the next premium due thereon, although the policy provides that the amount of surplus as determined by the directors shall be conclusive.* Policy 1 Fuller V. Knapp, 24 Fed. Eep. 100. See also Bain v. Aetua L. Ins. Co., 20 Ont. Rep. 6, citing Manby v. Gresham L. Ins. Co., 7 Jur. (n. s.) 38.3. 2 Chicago Mut. L. Assn. v. Hunt, 127 111. 257; 20 N. E. R. 55; 2 L. R. A. 549. 3 Fuller V. Metropolitan L. Ins. Co., 37 Fed. Eep. 163. « Aetna L. Ins. Co. v. Hartley, 24 Ky. L. 57; 67 S. W. R. 19; 68 S. W. R. 1081; Mut. Ben. L. Ins. Co. v. Davis, 73 S. W.R. 1020; 24 Ky. L. 336 NATURE AND SUBJECT-MATTER OF CONTRACT. § 167c holders in a mutual life insurance company can maintain a bill in equity to enjoin the payment of fraudulent claims on policies, and an allegation in such a bill, that the company has accepted proofs of loss on a fraudulent policy and is about to pay the same from the funds of the company, though the officers know that the policy is fraudulent ; that the officers have refused to contest such claim, though requested by plaintiffs, and will not defend suit thereon, sufficiently shows that plaintiffs have no adequate remedy at law.' An estimate of the probable cash value of a policy at the end of the tontine period has been held not to amount to a misrepresentation, but a mere expression of opinion.^ § 167c. Reinsurance. — The right of a mutual life in- surance company to reinsure does not carry with it power to sell or transfer all its property against the will of a minority of the policy holders and a contract to so sell or transfer is as against dissenting policy holders ultra vires and void. ^ The Supreme Court of Kansas has said:* that, unless the authority exists in the statute under which the fraternal beneficiary association is organized, one such asso- ciation cannot be consolidated with another, and a contract by one such association to pay a death loss of another life association, already approved, in consideration of the trans- fer to it of the membership and offices of such another association, if unauthorized by the statutes of the State, is ultra vires and void, and the society is not estopped to set Rep. 2291. But apparenfly to the contrary is Petrie v. Mut. Benefit L. Ins. Co. (Minn.), 100 N. W. R. 236. 1 Carmien v. Cornell, 148 Ind. 83; 47 N. E. R. 216. 2 Avery ». Equitable L. Assur. Soc, 117 N. Y. 451; 23 N. E. R. 3; re- versing 52 Hun, 392; Doaoho v. Equitable L. Assur. Soc, 22 Tex. Civ. A. 192; 54 S. W. R. 645. 3 Barden v. St. Louis L. Ins. Co., 3 Mo. App. 248; Smltli v. St. Louis Mut. L. Ins. Co., 2 Tenn. Ch. 727. * Bankers' Union, etc., v. Crawford (Kans.), 73 Pac. Rep. 79. 22 337 § 168 NATURE AND SUBJECT-MATTEK OF CONTKACT. up such power. Such transfer, however, has been upheld.^ A plan by the directors of an insurance company to exchange majority holdings of stocjj to a trust company, involving an expenditure of over eight million dollars, in order that they and those whom they may select from time to time, may forever dominate the appointment of directors of each corporation, is as a whole ultra vires.^ One holding a policy in a company which has been absorbed by another, if he accepts a condition imposed to his becoming insured in the latter, instead of standing on his rights under his original contract, is bound thereby ; though he did not un- derstand it,^ A contract of reinsurance by a company in- cludes only the contracts in force at the time of the reinsur- ance.* Ordinarily a mere contract of reinsurance creates no privity between the original insured and the insurer, unless the loss or risk is expressly assumed by another com- pany ; in which case the original insured may sue upon such contract as having been made for his benefit.^ The origi- nal insurer's liability, however, is not affected by the con- tract of reinsurance, and its liability I'emains the same.^ §168. Benefit Societies Restricted as to Beneficiaries. — Benefit societies differ from other mutual insurance organ- izations in that their charters generally impose restrictions upon the issue of certificates by limiting the persons who may be beneficiaries of the members to those who are 1 Cathcart a. Equitable Mut. L, Assn., Ill la. 471; 82 N. W. E. 964. 2 Robotham v. Prudential L. los. Co., 64 N. J. Eq. 673; 53 Atl. Hep. 842. See as to ultra vires, post, § 265. 3 Davitt V. National Life Assn., 36 App. Div. 632; 56 N. Y. Supp. 839. * Parvin v. Mut. Reserve L. Ins. Co. (la.), 100 N. W. R. 39. 6 Travellers' Ins. Co. v. Cal. Ins. Co., 1 N. D. 151; 45 N. W. E. 703; 8 L. R. A. 769 n; Fisher o. Hope L. Ins. Co., 69 N. Y. 16.3. 6 Glen V. Hope Mut. L. Ins. Co., 1 Tiiomp. & C. 463; 56 N. Y. 379; Fisher v. Hope Mut. L. Ins. Co., 69 N. Y. 161. As to reinsurance In gen- eral see note In 10 L. E. A. 423 to Fanull Hall Ins. Co. v. Liverpool, etc., Ins. Co., 153 Mass. 63. 338 NATURE AND SUBJECT-MATTER OF CONTRACT. § 168 heirs, relatives or dependents of such members. Wher- ever these restrictions are imposed by statute, or contained in the charter of the society, it has no power to pass beyond them by issuing a certificate in which any one other than of the specified chisses is beneficiary. The Court of Appeals of Kentucky early established this doctrine when it said: ^ " the charter prescribes who may become mem- bers of the company and their obligations, and who shall be the beneficiaries of the membership after the death of the member, and it is not in the power of the company or of the member, or of both, to alter the rights of those who by the charter are declared to be the beneficiaries, except iu the mode and to the extent therein indicated." This rule was approved by the Supreme Court of Massachusetts,^ which says: " The statute under which the plaintiff corpo- ration is organized gives it authority to provide for the widow, orphans, or other persons dependent upon deceased members, and further provides that such fund shall not be liable to attachment. The classes of persons to be bene- fited are designated and the corporation has no authority to create a fund for other persons than of the classes named . The corporation has power to raise a fund payable to one of the classes named in the statute, to set it apart to await the death of the member, and then to pay it over to the person or persons of the class named in the statute, selected and appointed by the member during his life, and if no one is selected, it is still payable to one of the classes named. « * * If the fund were subject to testamentary bequest, thfen, upon the decease of the member, it might go into the hands of the executor, or the administrator of his estate, and become assets thereof liable to be swallowed up by the creditors. If there were no creditors, the mem- ber by his will could divert it from the three classes named 1 Kentucky Masonic, etc., Ins. Co. v. Miller's Admr., 13 Bush, 489. 2 American Legion of Honor v. Perry, 140 Mass. 589. 339 § 169 NATURE AND SUBJECT-MATTER OF CONTRACT. in the statute. In either case this would defeat the pur- pose for which the fund was raised and held, and would be in direct conflict with the object of the statute for which the association was formed, and would set aside the con- tract entered into between the member and the corpora- tion." And the principle thus established has been generally approved and followed.^ Under the Massachu- setts statute, relating to insurance on the assessment plan and defining it as "a contract whereby a benefit is to accrue to a party or parties named therein upon the death of a person, which benefit is in any way conditioned upon persons holding similar contracts," a member can hold a certificate payable to himself and on his death it forms part of his estate in the absence of anything showing an intention to make his heirs the beneficiaries.^ If, however, no restrictions are imposed by charter or statute the society may constitute any one the beneficiary of the member.^ § 169. Where Contract Is Executed Society may be Estopped. — If, however, a contract with a member has become executed by the death of such member it has been held that, although the beneficiary was not of one of the prescribed classes that fact cannot be set up to defeat the claim.* A contract may be void only in 1 ElseyiJ. Odd-Fellows, etc., Assn., 142 Mass. 224; Presbyterian, etc.. Fund V. Allen, 106 Ind. 593; National, etc., Assn. v. Gonser, 43 Ohio St. 1; Benef. Soc. v. Dugre, 11 B. L. (Queb.) 344; State o. People's M. Ben. Assn., 42 Ohio St. 579; Knights of Honor b. Nairn, 60 Mich. 44; 26 N. W. Rep. 826; Leonard v. American Ins. Co., 97 Ind. 305; post, §§ 244, 245. 2 Harding o. Littledale, ,150 Mass. 100; 22 N. E. R. 703. 3 Massey et al. v. Mutual Relief, etc., Soc, 102 N. Y. 623; Mitchell v. Grand Lodge, etc., 70 Iowa, 360; 30 N. W. Rep. 865; Swift v. Railway, etc., Assn., 96 111. 309; post, § 246. * Bloomington Mut., etc., Assn., v. Blue, 120 111. 127; Lamont v. Grand Lodge, etc., 31 Fed. Rep. 177; post, § 265. But see Mut. Ben. Assn. v. Hoyt, 46 Mich. 473. See post, § 243a, as to Resulting Trust. 340 NATUKE AND SUBJECT-MATTER OF CONTRACT. § 170 part.i The subject of ultra vires will be considered later . ^ § 170. Liberality o£ Construction of Charter by Some Courts. — la some cases the courts have not been disposed to adhere strictly to the letter of the constitution or charter, as where the Supreme Court of Pennsylvania said, in a case where the benefit was made payable to a creditor of the member: ^ " The learned court below was of opinion that there was a fatal conflict between the charter and the con- stitution in respect of the persons who may receive benefits from the defendant company, and for that reason alone re- fused judgment to the plaintiff The second section of the charter upon which this conclusion is based is in the follow- ing words : ' The purposes of this corporation shall be the maintenance of a society for the purpose of benefiting and aiding the widows and orphans of deceased members.' Construing these words the learned court below held that it was not within the power of the defendant to stipulate for the payment of the benefits to any person other than the widow and orphans, who might be designated as the recipient by the deceased under article 19 of the constitu- tion. We think this is too narrow and strained a view to take of the second section of the charter quoted above. While it is true that the general purpose of the corporation is there stated to be the maintenance of a society for bene- fiting and aiding widows and orphans of deceased members, it must be observed that this is only the statement of a general purpose. It is only the recital of an object sought to be accomplished and which doubtless is accomplished in the great majority of cases, even though in exceptional cases the benefits may, by special contract, be paid to other per- 1 Wheeler v. Mutual Res. F. L. Assn., 102 111. App. 48. 2 Post, § 263. s Maneely v. Knights of Birmingliani, 115 Pa. St. 305; 9 Atl. Rep. 41. 341 tj § 171 NATURE AND SUBJECT-MATTER OF CONTRACT. sons than the widow or orphans." ^ This decision carries to its extreme limits the doctrine that the laws of benevolent societies must be construed liberally to carry out the kindly objects of their creation,^ but this construction has not evidently been received with favor in other courts where a stricter rule has been laid down.^ § 171. Contracts of Mutual Companies where a By- Law has been Violated. — It is an important consideration where some requirement of the by-laws of a mutual organ- ization, like a benefit society, has been disregarded in the contract, to what extent the validity of the contract is affected. The question has arisen in actions against mutual fire insurance companies where the provisions of the by- laws have been violated, as for example in regard to sub- sequent insurance, incumbrances on the property and clas- sification of risks.* The Supreme Court of Massachusetts has distinguished mutual from stock companies in this respect on the ground that members of mutual organiza- tions are bound to know their laws, which were intended to regulate and fix by the same stipulations in every policy, the rights of all the assured alike, and the oflicers being special agents with powers limited and defined by these laws, cannot virtually suspend them when matters touching the substance or essence of the contract are involved. This doctrine has been followed in a large number of cases. ^ But 1 Supplee V. Knights of Birmingham, 18 W. N. C. 280; and as to a creditor obtaining an equitable right see Binkley t>. Jarvis, 102 111. App. S9. The subject is also considered post, § 245. 2 Supreme Lodge K. of P. v. Schmidt, 98 Ind. 381; Ballon v. Gile, 50 Wis. 614; Erdmann v. Ins. Co., 44 Wis. 376; Covenant Mut. B. Assn. v. Sears, 114 III. 108; American Legion of Honor v. Perry, 140 Mass. 580. 3 Post, § 244. 4 Post, §§ 426, 428. ^ Brewer v. Chelsea, etc., Ins. Co., 14 Gray, 209 ; Evans v. Tri-Moun- tain Ins. Co., 9 Allen, 329; Hale v. Mechanics', etc., Ins. Co., 6 Gray, 169; 66 Am Dec. 410; Leonard v. Am. Ins. Co., 97 Ind. 305; Behler v. Ger- 342 NATURE AND SUBJECT-MATTER OF CONTRACT. § 171 other authorities hold that not only is a distinction to be made between matters which go to tlie substance and those which affect the form of the contract, but also between those that are mandatory, and others which are only directory requirements. In a case in New Hampshire, where the charter vested all powers relating to contracts in the direc- tors and directed them to divide property insured into classes, and after by-laws had been made establishing a rule for the division of risks, the directors knowingly in- sured property in one class which properly fell in another, the Supreme Court of that State said : ^ " The by-law cannot be regarded as a limitation and restriction of a power which is lodged by the charter in the directors. It can have no higher effect than instructions, or a general regulation, adopted by the directors themselves, as a convenient guide in ordinary cases. The action of the directors is, in this case, the action of the corporation; the corporation could act on this subject in no other way than through the direc- tors, and, as a general riile, mutual fire insurance companies have power to waive provisions of their by-laws which have been introduced for the benefit and protection of the com- pany. In this case the action of the directors may have been irregular, contrary to the established usage and in violation of their own rules, and of the by-laws; but it was still within the scope of their authority, expressly conferred on them by the charter and therefore binding on the com- pany."^ Two principles seem to govern where the re- quirements of the by-laws of a corporation have not been man, etc., Ins. Co., 68 Ind. 354; Westchester F. Ins. Co. u. Earle, 33 Micli. 150; Lyon v. Supreme Assembly, etc., 153 Miss. 83; 26 N. E. R. 236; State ». Temperance Ben. Assn., 42 M. A. 485; Hysinger v. Supreme Lodge K. & L. of H., 42 M. A. 628. Also see ante, § 147; post, § 265. 1 Union Mut. F. Ins. Co. v. Keyser, 82 N. H. 313; 64 Am. Dec. 377. 2 Fuller V. Boston, etc., Ins. Co., 4 Mete. 207; Williams v. N. E. Mu- tual, etc., Ins. Co., 31 Me. 227; Cumberland Valley, etc., Co. v. Sciiell, 29 Pa. St. 37. 343 § 172 NATURE AND SUBJECT-MATTER OF CONTRACT. observed ia making a contract ; the first is that where an act has been done within the apparent scope of the author- ity of an agent the principal will not be heard to say that specific instructions have been violated, unless knowledge be brought home to the party.^ The second principle is that where provisions in the by-laws of a corporation are for the benefit of the company they can be waived.^ To this may be added the further doctrine that after a contract has been executed by the other side a corporation will gen- erally not be allowed to deny its power to make such a contract or' to contract by such an agent. ^ § 172. Insurance Contract Need not be in Writing. — Although in a few early cases it was said that a contract of insurance must be in writing, the validity of a parol insur- ance has been so frequently and uniformly affirmed that it is now the undoubted American doctrine. The reason is that a contract of insurance is not different from any other, nor is it to be governed by any other rules than those which apply in individual transactions. It has been said that, by prescribing a manner of executing the policy, the charter does not exclude the oral engagement because the contract and the policy are not identical. While the doctrine of parol insurance has been most frequently applied to fire or marine contracts,* the same principle has been recognized 1 Emery B. Boston Marine Ins. Co., 138 Mass. 410; Insurance Co. v. Wilkinson, 13 Wall. 222; Davenport v. Peoria, etc., Ins. Co., 17 Iowa, 276; New England etc., Ins. Co. v. Schettler, 38 II. 166. - Cumberland Valley, etc., Ins. Co. v. Schell, 29 Pa. St. 31; Prince of Wales, etc., Co. v. Harding, IE. B. & B. 183; Sheldon v. Conn. Mut. L. Ins. Co., 25 Conn. 221; Splawn v. Chew, 60 Texas, 532; Manning v. Ancient Order United Workmen, 84 Ky. 136; 5 S. W. Eep. 385; Sanborn V. Ins. Co., 16 Gray, 448; 77 Am. Deo. 419. But see post, §§ 307, 426. 2 New England, etc., lae. Co. v. Schettler, 38 111. 166; Bloomington, etc., Assn. v. Blue, 120 111. 127; Lamont ». Grand Lodge, etc., 31 Fed. R. p. 177; Fuller v. Boston, etc., Ins. Co., 4 Mete. 206. 4 Commercial Mut. Ins. Co. v. Union Mut. Ins, Co., 19 How. 318; 344 NATURE AND SUBJECT-MATTER OF CONTRACT. § 173 as applying to life insurance. ^ It lias been said that, in view of the custom of life insurance companies, where no policy is issued there is a presumption of no contract.^ There is no reason why this rule should not apply ' to the contracts of mutual benefit societies wherever the agreement has been entered into and completed, except as to the issu- ance of a certificate or policy. There is no question but that when a member has been received into a benefit society, where certain benefits are incident to membership, he would be entitled to the fiill benefit upon maturity of the right, although no certificate had been issued, or, if it had been issued, not delivered.^ But necessarily much depends upon the laws of the particular society.* § 173. What Constitutes Perfect Parol Contract of Insurance. — It has been established that to constitute a perfect parol contract all the elements of a perfect con- tract must be present." A mere verbal assurance to the assured by the agent that he is insured from the date of the application and the giving of the receipt do not con- stitute a contract of insurance upon which an action First Baptist Church v. Brooklyn Fire Ins. Co., 19 N. Y. 305; North- western Iron Co. V. Mtua, Ins. Co., 23 Wis. 160; 99 Am. Dec. 145; Emery 17. Boston Marine Ins. Co., 138 Mass. 898; Kelief F. Ins. Co. v. Shaw, 94 U. S. 574; Walker zi. Motropolitan Ins. Co., 56 Me. 371. 1 Sheldon v. Conn. Mut. Life Ins. Co., 25 Conn. 219; Cooper ». Pacific Mat. Life Ins. Co., 7 Nov. 121. 2 Equitable L. Ass. Soc. -j. McElroy, 28 C. C. A. 365; 83 Fed. R. 631. See also McMaster v. Now York Life Ins. Co., 40 C. C. A. 119; 99 Fed. R. 856, and 183 U. S. 25. 8 Lorscher ». Supreme Lodge K. of H., 72 Mich. 316; 40 N. W. R. 545. * la Bishop v. Empire Order Mut. Aid, 43 Hun, 472, it was held that under the circumstances of that case the designation of a beneficiary was a condition precedent to the society's liability. But ♦his case has been expressly overruled and reversed on appeal. 112 N. Y. 627; 20 N.E. R. 562. 5 Hartford F. Ins. Co. v. Wilcox, 57 111. 180; Sanford v. Trust, etc., Ins. Co., 11 Paige Ch. 547. 345 § 174 NATURE AND SUBJECT-MATTER OF CONTRACT. can be maintained.^ An insurance contract, it has been said,^ to be valid must contain five essential elements : the subject-matter, the risk, the amount, the duration and the premium. It is not necessary, however, that all these elements be settled by the express contract, for several may be settled by implication from ^he circumstances of the case, from habits of dealing, from the nature of the prop- erty and from previous arrangements.^ So, if a member were received into a benefit society, such reception would justify the assumption that the understanding was that he sought the benefit promised by the society and agreed to pay the amounts paid by other persons of his age. An in- surance made without issue of a policy is to be regarded as made upon the terms and subject to the conditions in the ordinary forms of policies used by the company at the time.* So, upon analogy, a member being received into a society, the certificate to be issued is understood to be one in the usual form and containing the usual agreements. It may even be the custom under the laws of the order not to issue certificates to the members, in which case only the laws of the order are to be looked at for the contract.^ § 174. Informal Execution. — Want of a seal does not vitiate a policy unless by the charter of the company a seal is essential to its validity,* and where the articles of an in- surance association direct that its policies be signed by its president and countersigned by its secretary, the omission 1 Fowler v. Preferred Ace. Ins. Co., 100 Ga. 330; 28 S. E. E. 398. But see Preferred Ace. Ins. Co. v. Stone, 61 Kan. 48; 58 Pac. R. 986. 2 Tyler v. N. A. Ins., 4 Robt. 151. * Audubon v. Excelsior Ins. Co., 27 N. Y. 216; Train v. Holland, etc., Ins. Co., 62 N. Y. 598; Eames ». Home Ins. Co., 94 D. S. 621; Cooke v. ^toa Ins. Co., 7 Daly, 555; Walker ». Met. Ins. Co., 66 Me. 371; Baile V. St. Joseph, etc., Ins. Co., 68 Mo. 617; Stone v. Ins. Co., 78 Mo. 658. * Eureka Ins. Co. v, Robinson, 56 Pa. St. 256; 94 Am. Dec. 65. 5 Grand Lodge v. Eisner, 26 Mo. App. 108. ' National Banking, etc., v. Knaup, 55 Mo. 154. 346 NATURE AND SUBJECT-MATTER OF CONTRACT. § 174 of the president to sign a policy otiierwise valid, does not render the policy invalid. ^ So, in regard to the counter- signing of a policy. On this point the Supreme Court of Pennsylvania 2 says: " We incline also to the opinion that, notwithstanding the express terms of the policy, the coun- tersigning by the agents is not under all circumstances essential. On an ^equitable interpretation of the whole transaction, it may become the duty of the court to dispense with a portion of the forms of contract, if it can find any reliable substitute for them, on the principle that cures de- fective execution of powers, where the intention to execute is sufficiently plain. This contract was to be complete when delivered by the agents of the defendants, and we regard the countersigning by the agents as the appointed evidence of its proper delivery. If we do not find this evidence, we must treat it as not delivered, unless we have other evi- dence, which we can regard as equivalent."^ But it is otherwise where it is to be countersigned only upon the happening of a future event, as the payment of a pre- mium.* On general principles it is hard to see why, if no policy need be issued in order to make the contract valid, the omission of a liierely formal matter, the contract being otherwise complete, or supposed to be so, should have any effect upon it. Equity, it is believed, would always relieve in such. cases, though at law the contract might be deemed incomplete. An insurance policy is not executed by attach- ing the insurer's corporate seal when the names of the president and secretary, called for by the attestation clause, 1 Union Insurance Co. v. Smart, 60 N. H. 458. 2 Myers v. Keystone, etc., Ins. Co., 27 Pa. St. 268; 67 Am. Dec, 462, 3 Norton v. Phoenix M. L. Ins. Co., 36 Conn. 503; Kantreneru. Penn., etc., Ins. Co., 5 Mo. App. 581. But see Badger v. Am. Pop. Life Ins. Co., 103 Mass. 244; McCully v. Phoenix M. L. Ins. Co., 18 W. Va. 782. * Hardie o. St. Louis M. L. Ins. Co., 26 La. Ann. 242; Ormond v. Mutual Life Assn., 96 N. C. 158; IS. B. Rep. 796. 347 § 175 NATURE AND SUBJECT-MATTER OF CONTRACT. are not attached.^ It has been held^ that a new benefit certificate, issued to change the beneficiary, upon applica- tion made in accordance with the by-laws of the union, and signed by the supreme president and secretary of the union, and sealed with the seal of the supreme union, is not invalid because not signed %nd sealed by the officers of the subordinate union. § 175. Lex Loci and Lex Fori. — It is undoubtedly true that agreements of insurance are not governed by different principles than those that apply to other engagements, for all alike are contracts to which in general the same rules are applicable.^ Two general laws may be here laid down which are often applied, the one, that of lex loci, which has been thus tersely stated : ^ " It is a general principle applying to contracts made, rights acquired or acts done relative to personal property, that the law of the place of making the contract, or doing the act, is to govern it and determine its validity or invalidity, as well as the rights of parties under it, in all matters touching the modes of exe- cution and authentication of the form or instrument of con- tract ; and also in relation to the use and meaning of the language in which it is expressed, the construction and interpretation of it, the legal duties and obligations imposed by it, and the legal rights and immunities acquired under it. This principle, though general, does not, however, apply where the parties at the time of entering into the contract, had the law of another kingdom in view, or where the lex loci is in itself unjust, contra honos mores, or con- 1 Globe Ace. Ins. Co. v. Reid, 19 Ind. App. 203; 47 N. E. R. 947; 49 N. E. R. 291. 2 Fisk V. Equitable Aid Union (Pa.), 11 Atl. Rep. 84. 3 St. John V. American Mut. L. Ins. Co., 2 Duer, 419; 13 N. T. 31; 64 Am. Dec. 529. 4 Bouvier L. D., tit. Lex Loci. 348 NATURE AND SUBJECT-MATTER OF CONTRACT. § 175 trary to the public law of the State, as regarding the inter- ests of religion or morality, or the general well-being of society. The lex loci is presumed to be the same as that of the forum unless shown to be otherwise." The second general law is that of lex fori, which Bouvier thus defines : ^ " The form of remedies, modes of proceeding, and execu- tion of judgments are to be regulated solely and exclu- sively by the laws of the place where the action is insti- tuted." In summing up the doctrine of lex loci and lex fori Bishop says:^ "A judicial tribunal should, in the decision of every question, follow the laws prescribed for it by the sovereignty under which it sits. But there is a comity of nations, as the term is, whereby it has become customary for the various governmental powers to respect one another's laws; so that, if a contract made in one country is drawn in question in another, the tribunals of the latter will, in the absence of any domestic rule or policy restraining, accept the foreign law as the domestic, for ascertaining its validity. But this rule stops short at every point where it would become subversive of the do- mestic law. The interpretation and effect of the contract are determined by the law of the place of its intended per- formance, whether at home or abroad; its discharge when by operation of law, by any law moving thereto, and hav- ing a jurisdiction over it. In enforcing the contract, the foreign procedure is never employed." ^ In insurance con- tracts the wording of the policy, or certificate, generally determines the place where it is made. If an application is sent direct to the home oflBce and the policy or certificate is there made out and delivered, or mailed, to the applicant, 1 Bouvier L. D. tit. Lex Fori. 2 Bishop on Cent., § 1412. 3 Whitridge u. Barry, 42 Md. 140; Cannon v. N. W. Mut. L. Ins. Co., 29 Hun, 470; Bloomingdale v. Lisberger, 24 Hun, 355. 349 § 175 NATURE AND SUBJECT-MATTER OF CONTRACT. the home office is the place of the contract.^ Generally there is a provision in the policy or certificate that it shall not be binding until payment of premium, or countersign- ing by a local agent. In such case the place of countersign- ing and delivery is that of the contract.^ The Federal court in Oregon happily stated the law on this point as follows : ' " Generally speaking the validity of a contract is to be de- cided by the law of the place where it is made ; and if valid or void there, it is valid or void everywhere. The few excep- tions to this rule need not be mentioned in the application of it to this case.* Where, then, was this contract made? in Wisconsin or Oregon? The answer to this question in- volves the inquiry, where did the final act take place which made the transaction a contract binding upon the parties? The premium was paid to the agent of the plaintiff at Port- land, who then and there countersigned and delivered the policy. This was the consummation and completion of the 1 Lamb «. Bowser, 7 Biss. 315-372; Hermano v. Mildred, 9 Q. B. 530; Northliampton M. L. S. Ins. Co. v. Tuttle, 40 N. J. L. 476; Wrights. Sun Mat. Ins. Co., 6 Am. L. Reg. 485; Voorlieis ». Peoples Mut. Ben. Soc, 91 Mich. 469; 51 N. W. E. 1109; Wood v. Cascade, etc., Ins. Co., 8 Wasli- ington, 427; 36 Pac. E. 267. The subject of law of place and conflict of laws, so far as insurance contracts is concerned, is exhaustively con- sidered In a note to Johnson v. Mutual L. Ins. Co., 180 Mass. 407; 62 N. E. E. 733; 63 L. E. A. 833. 2 Wallu. Equitable L. Assur. Soc, 32 Fed. Eep. 273; Continental L. Ins. Co. V. Webb, 54 Ala. 688 ; Adler v. StofEel (Breitung, Estate of), 78 Wis. 33; 46 N. W. E. 891; 47 N. W. 17; Yore v. Bankers, etc., Assn., 88 Cal. 609; 26 Pac. B. 514; Mut. Ben. Life Ins. Co.«. Eobison, 64 Fed. E. 580. See also N. W. Masonic, etc., Assn. v. Jones (Appeal of Chance), 154 Pa. St. 99; 26 Atl. E. 253, and Equitable L. Ass. Soc. v. Winning, 7 C. C. A. 359; 58 Fed. E. 541; Pratt v. Globe M. B. L. Ins. Co., (Tenn.,) 17 S. W. E. 352; Knights Templar, etc., Co. v. Berry, 1 C. C. A. 561; 50 Fed. B. 511; affg. 46 Fed. E. 439; Hicks ». National L. Ins. Co., 9 C. C. A. 215; 60 Fed. E. 690; Assurance Soc. v. Clements, 140 U. S. 226. s Northwestern M. L. Ins. Co. v. Elliott, 7 Sawy. 17; 5 Fed. Eep. 226. * Cox V. United States, 6 Pet. 203; Hyde; v. Goodnow, 3 N. Y. 269; In re Clifford, 2 Sawy. 428. 350 NATURE AND SUBJECT-MATTER OE CONTRACT. § 175 contract. But to put this beyond a doubt, the policy itself declares that it shall not be binding on the company until these acts are performed. And until it was binding upon the company, it was not binding on the applicant — in short, it was not yet a contract, but only a proposition. ^ The case of Hyde v. Goodnow,^ cited by counsel for plain- tiff, is not contrary to this conclusion. There the assured, living in Ohio, applied to a company in New York though its local agent and surveyor, for insurance, sending with his application a premium note and the report of the surveyor thereon. The company accepted the application in New York, and mailed the policy direct to the applicant in Ohio, which in accordance with its by-law, contained the stipulation that it should not be binding until the application and premium note were deposited in the office of the com- pany and approved by its directors. The contract, if made in Ohio, was illegal and void, because the company was not authorized to transact business there, but in a suit upon the premium note against the maker in New York, the court held that the contract was made in the latter State, and therefore valid, because, when the application was approved and the jiolicy deposited in the mail, at New York, ad- dressed to the defendant, the contract was then and thereby executed, and became binding on the parties thereto." Ordinarily the place of performance will be deemed the place of the contract,^ but where policies are sent to an agent to be delivered, or where statutes of the State where 1 Pomeroy v. Manbattan L. Ins. Co., 40 111. 400; Tliwing v. Great Western las. Co., lU Mass. 109; Wood F. Ins., 189 a. 2; Hardie v. St. Louis M. L. Ins. Co., 26 La. Ann. 242; St. Louis M. L. Ins. Co. v. Ken- nedy, 6 Busli, 450. 2 3 N. Y. 269. 3 Bottomley v. Metropolitan L. Ins. Co., 170 Mass. 274; 49 N. E. R. 438; Fidelity, etc., Assn. v. McDaniel, 25 Ind. App. 608; 57 N. E. R. 645. and cases infra. 351 § 176 NATDKE AND SUBJECT-MATTER OF CONTRACT. the insured resides regulate the business of life insurance, the rule is that the place of the contract is where the pre- mium is paid and the policy delivered.^ Where a policy issued in Ehode Island lapsed and was revived in Massa- chusetts that fact did not, the insured still residing in the former State, make it a contract of the latter State. ^ The question is important especially in view of the application of State statutes, especially those relating to notice of per- miums.^ An offer by mail to insure certain property and an acceptance by letter of the proposition, constitute a valid contract at and from the place and date of mailing such letter of acceptance. * § 176. Stipulation in Policy cannot avoid Operation of Statute. — A corporation cannot by stipulations in its contract avoid or withdraw the operation of a statute of the place in which it does business. The rule and the facts to which it was applied are sufficiently stated by Judge Treat ' New York Life Ins. Co. v. Cravens, 178 U. S. 389; Cravens v. New York L. Ins. Co., 148 Mo. 683; 50 S. W. 519; 53 L. R. A. 305; Dolan u. Mut. Res. F., 173 Mass. 197; 53 N. E. R. 398. 2 Bottomley v. Metropolitan Lite Ins. Co., supra. * Seepo-sJ, § 360. The following cases consider the subject of law o^ place. Mutual Lite Ins. Co. ». Dingly, 40 C. C. A. 459; 100 Fed. R. 408; 49 L. R. A. 132; Millard v. Brayton, 177 Mass. 633; 59 N. E. R. 436; 52 L. R. A. 117; SeidersD. Merchants' L. Assn , 93 Tex. 194; 54 S. W. R. 763; reversing 61 S. W. 547 ; MutualLif e Ins. Co. ». Hill,24Sup. Ct. Reptr.638; reversing 55 C. C. A. 536; 118 Fed. R. 708; Fidelity, etc., Assn. ». Harris (Tex. C. A.), 57 S. W. R. 635; Johnson v. N. Y. Life I. Co., 109 la. 708; 78 N. W. R. 905; 50 L. R. A. 99; Seely «. Manhattan Life Ins. Co., 72 N. H. 49; 63 Atl. R. 425; Roberts v. Winton, 100 Tenn. 484; 45 S. W. R. 673; Mut. Life Ins. Co. w. Bradley (Tex. C. A.), 79 S. W. E. 367; Ex- pressmen's, etc., Assn. v. Hurlock, 94 Md. 586; 46 Atl. E. 957; Provident, etc., Soc. V. Hadley, 43 C. C. A. 25; 102 Fed. E. 866. ■< Tayloe v. The Merchants F. Ins. Co., 9 How. 398. See also North- hampton Mut., etc., Ins. Co. v. Tuttle, 40 N. J. L. 476; Continental L. I. Ins. Co. V. Webb, 54 Ala. 688; Smith v. Mutual Life Ins. Co., 5 Fed. Rep. 582; Cromwell v. Royal Can. Ins. Co., 49 Md. 366; Todd ». State Ins. Co., 11 Phila. 355. 352 NATURE AND SUBJECT-MATTER Of CONTRACT. § 176 thus: 1 " Inasmuch as the policy sued on declared that it rests on the basis of answers made in the application, and that said policy was to be issued at the home ofSce in New York on return thereto of the application, can the plaintiff avail himself of the force of the Missouri statute? The defendant company was doing business in Missouri, with the privileges granted to it here, when said insurance was effected. It may be that the formal acceptance of the pro- posed contract was, by the letter of the contract, to be consummated in New York. The broad proposition, how- ever, remains, no artifice to avoid which can be upheld. The statutes of Missouri for salutary reasons, permit for- eign corporations to do business in the State on prescribed conditions. If, despite such conditions, they can, by the in- sertion of clauses in their policy, withdraw themselves from, the limitations of the Missouri statutes while obtaining all the advantages of its license, then a foreign corporation can, by special contract, upset the statutes of the State and be- come exempt from the positive requirements of law. Such a proposition is not to be countenanced . The defendant cor- poration chose to embark in business within this State under the terms and conditions named in the statute. It could not by paper contrivances, however specious, withdraw itself from the operation of the laws, by the force of which it could alone do business within the State. To hold other- wise would be subversive of the right of a State to decide on what terms, by comity, a foreign corporation should be admitted to do business or be recognized therefor within the State jurisdiction. Each State can decide for itself whether a foreign corporation shall be recognized by it, and on what terms. Primarily a corporation has no existence beyond the territorial limits of the State creating it, and 1 Fletcher v. New York Life Ins. Co., 4 McCrary, 440; 13 Fed. Rep. 628. 23 353 § 177 NATURE AND SUBJECT-MATTEE OF CONTRACT. wlien it undertakes business beyond it does so only by comity. The defendant corporation having been permitted to do business in Missouri under the statutes of the latter, was bound by all the provisions of those statutes and could not, by the insertion of any of the many clauses in its forms of application, etc., withdraw itself from the obligatory force of the statute." ^ It has been said : ^ that the company is subject to the laws of the place where the policy is issued regardless of whether it applied for permission to do busi- ness there or not. And a provision in a policy, issued in New York, but to be delivered in Missouri on payment of the premium there, requiring payment of three full annual premiums before the assured was entitled to temporary insurance, is void if the statutes of Missouri provide that payment of two full annual premiums shall entitle the insured to such temporary insurance.^ Generally a statu- tory provision as to nonforfeiture cannot be waived.* § 177. Interpretation of Contracts of Insurance. — Contracts of insurance have no particular sanctity over 1 White V. Connecticut Life Ins. Co., 4 Dill. 177; Lowell v. Alliance Life Ins. Co., 3 Cent. L. J. 6B9. 2 Corley v. Travelers, etc., Assn., 105 Fed. R. 854. s Wall. V. Equitable L. Assur. Soc, 32 Fed. Rep. 273; affirmed on appeal Equitable Life Ass. Soc. v. Pettus, 140 U. S. 226; 11 S. C. Rep. 822. See also Knights Templar, etc., Co., v. Berry, 1 C. C. A. 561; 50 Fed. R. 511; affg. 46 Fed. R. 439; Price v. Conn. Mut. L. Ins. Co., 48 M. A. 282; New York Life Ins. Co. v. Cravens, 178 U. S. 389; Cravens V. New York Life I. C, 148 Mo. 583; 53 L. R. A. 305; 50 S. W. R. 519; Knights Templar & Masons L. Ind. Co. w. Jarman, 187 U. S. 197; affg. 44 C. C. A. 93; 104 Fed. R. 638; Equitable L. A. Soc. u. Nixon, 26 C. C. A. 220; 81 Fed. R. 796; Eq. L. Ass. Soc. v. Trimble, 27 C. 0. A. 404; 83 Fed. R 85; New York Life Ins. Co. v. Orlopp, 25 Tex. C. A. 284; 61 S. W. R. 336. ^ Griffith V. New York L. Ins. Co., 101 Cal. 627; 36 Pac. R. 113. See, as to endowment insurance, Rockhold v. Canton Masonic, etc., Assn., 129 111. 440;- 19 N. W. 710; 21 N. W. R. 794; and as to construction of statute requiring uniform treatment of all policy holders. State v, Scharzchiltl, 83 Me. 261; 22 Atl. R. 164, 354 NATURE AND SUBJECT-MATTER OF CONTRACT. § 177 other kinds of agreements, and the same rules of interpre- tation apply to all alike. ^ It was said in the early days that insurance contracts required the utmost good faith, because the facts were of necessity less known to one party than to the otlier , but this may be said of many different agreements, and modern decisions have inclined to greater liberality to the insured than to the insurer. And it is now a general rule that a policy of insurance will be liberally construed in favor of the insured.^ As in the case of statutes the principal consideration is the intent, so in contracts of insurance the courts endeavor to ascertain what the parties intended by their contract,^ and this is, first of all, to be sought by taking the words in which the agreement is ex- pressed in their ordinary meaning, only resorting to other rules where there is ambiguity or doubt. The construc- tion must be reasonable ; as was said by Judge Nelson, in a case * where the contract provided that in case of a loss that a certificate should be given by the nearest magistrate and the contention of the company was that this had not been done: "This clause of the contract is to receive a reasonable interpretation; its intent and substance, as de- rived from language used, should be regarded. There is no more reason for claiming a strict literal compliance with its termsthan in ordinary contracts. Full legal effect should always be given to it, for the purpose of guarding the con- '■ Supreme Commandery, etc., v. Ainsworth, 71 Ala. 448. 2 Mutual Benefit L. Ins. Co. v. Dunn, 106 Ky. 591; 51 S. W. B. 20; McMaster v. New York Lite Ins. Co., 183 U. S. 25, reversing 40 C. C. A. 119; 99 Fed. E. 856; Kendrick v. Mat. Ben. L. Ins. Co., 124 N. C. 315; 32 S. E. K. 728; Provident Life, etc., v. Cannon, 103 111. App. 531; aff'd 201111. 260; 66 N. E. R. 388; BeWing u. N. W. Nat. L., 117 Wis. 24; 93 N. W. E. 800. 3 Goodricli v. Treat, 3 Colo. 408; Foot u..ffitna Life Ins. Co., 61 N. Y. 671; Travelers Ins. Co. v. Myers, 62 Ohio St. 529; 57 N. B. E. 458; 49 L. E. A. 760. 4 Turley v. North Am. Ins. Co., 25 Wend. 377. 355 § 177 NATURE AND SUBJECT-MATTER OF CONTRACT. pany against fraud or imposition. Beyond this one would be sacrificing substance to form — following words rather than ideas." To the same purpose the Supreme Court of Illinois has said :^ "The question here, as in other cases of contract, is to arrive at the intention of the parties, and we are not authorized, in striving to do so, to construe words otherwise than as conveying their plain, natural and obvi- ous meaning, unless from a consideration of the entire evi- dence, it shall appear, this could not have been intended," ^ The Supreme Court of Missouri has also said :^ " The con- struction of the language of the policy is to be determined, as iai other contracts, by usage and common acceptation; and the stipulations, though being of a character of warrant- ies and condition, are to be reasonably construed with reference to the whole subject-matter, and not captiously or literally." * The modern decisions simply reiterate in sub- stance the words of Lord Ellenborough : ^ "In the course of the argument it seems to have been assumed that some pe- culiar rules of construction apply to the terms of a policy of assurance which are not equally applicable to the terms of other instruments and in all other cases; it is therefore proper to state upon this head, that the same rule of con- struction which applies to all other instruments applies equally to this instrument of a policy of insurance, v.iz., that it is to be construed according to its sense and mean- ing, as collected in the first place from the terms used in it, which terms are themselves to be understood in their plain, ordinary and popular sense, unless they have generally, in respect to the subject-matter, as by the known usage of ' Koyal Templars, etc., v. Curd, 111 111. 288. 2 Peoria, etc.SIns. Co. v. Whitehill, 25 111. 466. 3 Tesson v. Atlantic M. Ins. Co., 40. Mo. 33; 93 Am. Dec. 296. * St. John V. American Mut. Life Ins. Co., 13 N. Y. 31 ; 64 Am. Dec. 529; Insurance Co. v. Slaughter, 12 Wall. 404; Mark v. Mtna, Ins. Co., 29 iDd. 390; May on Ins., § 172. ^ 5 Bobertson Vt French, 4 East, 136. 356 NATURE AND SUBJECT-MATTER OP CONTRACT. § 177 trade, or the like, acquired a peculiar sense distinct from the popular sense of the same words ; or unless the context evi- dently points out that they must in the particular instance, and in order to effectuate the immediate intention of the parties to that contract, be understood in some other special and peculiar sense. The only difference between policies of assurance, and other instruments in this respect is, that the greater part of the printed language of them, being in- variable and uniform, has acquired from use and practice a known and definite meaning, and that the words super- added in writing (subject, indeed, always to be governed in point of construction by the language and terms with which they are accompanied) are entitled nevertheless, if there should be any reasonable doubt upon the sense and meaning of the whole, to have a greater effect attributed to them than to the printed words, inasmuch as the written words are the immediate language and terms selected by the par- ties themselves for the expression of their meaning, and the printed words are a general formula adapted equally to their case and that of all other contracting parties upon similar occasions and subjects." ^ Contemporaneous literature may be looked to for explanation of terms used in a con- tract when otherwise not to be understood.^ Where the policy referred to a schedule as for the amount to be paid, and underneath this schedule was printed a condition that the company should not be liable if the death of the insured occurred within ninety days from the issue of the policy, it 1 Colt V. Commercial Ins. Co., 7 Johns. 385. 2 Fuller V. Metropolitan L. Ins. Co., 37 Fed. R. 163. For peculiar contracts see Mclntyre v. Cotton States L. Ins. Co., 82 Ga. 478; 9 S. E. C. 1124; and Palmer v. Commercial Travelers Ace. Ins. Assn., 53 Hun, 601; 6 N. Y. Supp. 870. In the first case a clause relating to interest on loans is construed, in the latter the certificate and not the resolution of the directors accepting the proposal was held to contain the contract. 357 § 179 NATUEE AND SUBJECT-MATTER OF CONTEACT- was held ^ that this clause was not repugnant to the main body of the policy. § 178. Interpretation of Contracts of Benefit So- cieties. — In the case of benefit societies the contract must be construed liberally in order to carry out the benevolent object of the creation of these organizations. It is to be construed with reference to the statutes of the place of its organization, and it will never be presumed that the society intended to violate the law ; but, whenever a by-law seems to go beyond the statute restrictions, such meaning will be given to it, if possible, as will make the two consistent, and generally the courts have manifested a liberality to these institutions and have looked upon them with favor. ^ § 179. Construction when Lang-uage is Ambiguous. — It is also a rule of construction that where the language used is ambiguous or inaccurate and susceptible of two in- terpretations, it shall be construed most favorably to the promisee in the obligation. The Court of Appeals of New York has stated this general principle very clearly in a case where the insurance company contended, that by one part- ner in a firm selling out to the others the condition in the policy, that if the property assured should be sold or con- veyed, then the policy should be void, had happened. In that case the court, in deciding in favor of the assured, held as follows : ^ " The design of the provision was, not to in- 1 Bruton v. Metropolitan L. Ins., 48 Hun, 20i. 2 Elsey V. Odd-fellows, etc., Assn., 142 Mass, 224; American Legion of Honor v. Perry, 140 Mass. 580; Ballon v. Gile, 50 Wis. 614; Supreme Lodge, etc., v. Schmidt, 98 Ind. 374; Erdmann v. Ins. Co., 44 Wis, 376; Covenant Mut. B. A. v. Sears, 114 111. 108; Maneely ». Knights of Bir- i mingham, 115 Pa. St. 305 (March, 1887); 9 Atl. Rep. 41; Splawn v. Chew, 60 Tex. 532; American Order Protection v. Stanley (Neb.), 97 N. W. R. 467; Golden Star Fraternity v. Martin, 69 N. J. L. 207; 35 Atl. R. 908; Brock ». Brotherhood, etc. (Vt.), 54 Atl, R, 176; post, § 247. s Hoffman v. Mtna Fire Ins. Co., 32 N. Y. 412, 358 NATURE AND SUBJECT-MATTER OF CONTRACT. § 179 terdict all sales, but only sales of proprietary interests by parties insured to parties not insured. If the words were taken literally, a renewal of the policy would be required at the close of each day's sales. Indeterminate forms of expression, in such a case, are to be understood in a sense subservient to the general purposes of the contract. It is true that the language of the proviso against sales, was not guarded by a special exclusion of changes of interest as between the assured, or of the sales of merchandise in the usual course of their business, but this was for the obvious reason that there was nothing in the tenor of the instrument to denote, that the application of the clause to such a case was within the contemplation of the underwriters. ' The matter in hand is always presumed to be in the mind and thoughts of the speaker, though his words seem to admit a larger sense ; and therefore the generality of the words used shall be restrained by the particular occasion.' i Thus, in an action on a life policy, containing a proviso that it should be void ' in case the assured should die by his own hands,' it was held by this court, that though in terms it embraced all cases of suicide, it could not properly be ap- plied to self-destruction by a lunatic, as there was no rea- son to suppose that such a case was within the purpose of the clause or the contemplation of the parties.^ ' All words,' says Lord Bacon, ' whether they be in deeds or statutes, or otherwise, if they be general, and not express and precise, shall be restrained unto the fitness of the matter and the person.' ^ Reading the proviso as it was read by the par- ties, it is easy to discern the purpose of its insertion. It was to protect the company from a continuing obligation to the assured, if the title and beneficial interest should pass 1 Powell onCont. 389; Van Hagen». Van Rensselaer, 18 Johns. 423. 2 Breasted v. Farmers' Loan and Trust Co., i Seld. 299. 3 Bacon's Law Maxims, Reg. 10. 359 § 179 NATURE AND SUBJECT-MATTER OF COXTEACT. to others, whom they might not be equally willing to trust. Words should not be taken in their broadest import, when they are equally appropriate in a sense limited to the ob- ject the parties had in view. The terms of the policy were not such as would naturally suggest even a query in the minds of the assured, whether a transfer of interest as be- tween themselves would work a forfeiture of the insurance, and relieve the company from its promise to indemnify both — the buyer as well as the seller — the premium being paid in advance, and the risk remaining unchanged. One of two joint payees of a non-negotiable note would hardly be more surprised to be met with a claim, that by buying the interest of his associate he had extinguished the obliga- tion of the maker to both. It is a rule of law as well as of ethics, that where the language of a promisor may be understood in more senses than one, it is to be interpreted in the sense in which he had reason to suppose it was under- stood by the promisee. ^ It is also a familiar rule of law, that if it be left in doubt, in view of the general tenor of the instrument and the relations of the contracting parties, whether given words were used in an enlarged or restricted sense, other things being equal, that construction should be adopted which is most beneficial to the promisee.^ This rule has been very uniformly applied to conditions and pro- visos in policies of insurance, on the ground that though they are inserted for the benefit of the underwriters, their office is to limit the force of the principal obligation.^ In the case first cited * the action was for a marine loss, and one of the issues was , whether a recovery was barred by the entry 1 Potter i;. Ontario Ins. Co., 5 Hill, 149; Barlow v. Scott, 34 N. Y. 40. 2 Co. Litt. 183; Bacon's Law Maxims, Reg. 3; Doe v. Dixon, 9 East, 16 ; Marvin v. Stone, 2 Cow. 806. 3 Yeaton u. Fry, 5 Crancli, 341; Palmer v. Warren Ins. Co., 1 Story, 364; Pelly v. Royal Exchange Ins. Co., 1 Bur. 349. * Yeaton v. Fry, 5 Cranch, 341. 360 NATURE AND SUBJECT-MATTER OF CONTRACT. § 179 of a ship into a blockaded port, such ports being excepted by the policy. The court held, that though the case was within the terms, it was not within the intent of the excep- tion ; and that as the risk contemplated in the clause was merely that of capture, the rule of liberal construction must be applied in favor of the promisee. The reason assigned by Chief Justice Marshall was that ' the words are the words of the insurer, not of the insured; and they take a partic- ular risk out of the policy, which but for the exception would be comprehended in the contract.' " ^ Contracts of insurance, because they have indemnity for their object, are to be construed liberally so as to give them effect if possible.^ If the policy contains two provisions, one favor- able to the assured and one unfavorable, they being incon- sistent and contradictory, that provision most favorable to the assured will be accepted and the other disregarded. 3 Only a stern legal necessity will induce such a construction as will nullify the contract.* The rule that an insurance contract shall be construed most strongly against the in- surer, can only be resorted to when, after using such helps as are proper to arrive at the intent of the parties, some of the language used, or some phrase inserted in the policy, 1 Merrick v. Germania Fire Ins. Co., 54 Pa. St. 277; Atlantic Ins. Co. v. Manning, 3 Colo. 226; Allen v. St. Louis, etc., Ins. Co., 85 N. Y. 473; Piedmont & Arlington, etc., Ins. Co. v. Young, 68 Ala. 476 ; Metropolitan L. Ins. Co. V. Drach, 101 Pa. St. 278; Symonds a. Northwestern M. L. Ins. Co., 23 Minn. 491; Niagara F. Ins. Co. v. Scammon, 100 111. 644. 2 State Ins. Co. v. Hughes, 10 Lea, 461 ; B ink v. Merchants, etc., Ins. Co.,49Vt. 442; Miller i). Insurance Co., 12 W. Va. 116. 3 Northwestern M. L. Ins. Co. v- Hazelett, 105 Ind. 212; 55 Am. Eep. 192; Moulor V. American Life Ins. Co., Ill IT. S. 335; National Bank u. Insurance Co., 95 U. S. 673; Teutonia F. Ins. Co. v. Mund, 102 Pa. St. 89. ^ Carson v. Jersey City Ins. Co., 14 Vroom (43 N. J.L.), 300; 39 Am. Rep. 584; Franklin L. Ins. Co. v. Wallace, 93 Ind. 7; Burkhard v. Trav- elers Ins. Co., 102 Pa. St. 262; 48 Am. Rep. 205. 361 § 180 NATURE AND SUBJECT-MATTER OF CONTRACT. is of doubtful import, in which case the rule should be applied because the insurer wrote the contract.^ § 180, Contracts of Mutual and Stock Companies Con- strued Alike. — No distinction is made, as regards con- struction, between the policies of mutual and those of other companies. The fact th^t the policy is one of a mutual company cannot modify the construction which is to be given to the terms of the contract. While the rela- tions of the parties are always to be considered in seeking the true interpretation of their language, their words used for a definite purpose and applied to a transaction of well understood character, must be held to convey the meaning and force which is ordinarily attached to them. There is no reason why a contract of insurance between a mutual company and its members should be given any significance different from what would be the fair construction of a similar contract entered into between any parties . ^ The stipulations of a written contract are no less binding in a contract between a corporation and one of its members than in a contract made with a stranger, in each case the rules of construction are the same.^ On this point it has been said:* "These benevolent associations or fraterni- ties, not more than other parties to contracts, cannot be allowed to construe the words they use in making agree- ments otherwise than according to their plain and unam- biguous meaning, in the English language they employ, whether of the words of the contract itself or of the rules and regulations which become, by the principle they insist on, embodied in the contract as a part of it. They can- not be permitted to interpret the contract as they please and 1 Foot V. iEtna Life Ins. Co., 61 N. Y. 585; post, § 468. 2 Cluff V. Mutual Benefit Life Ins. Co., 99 Mass. 325. 3 Willcuts V. Northwestern Mutual Life Ins. Co., 81 Ind. 300. * Wiggins V. Knights of Pythias, 31 Fed. Rep. 124. 362 NATURE AND SUBJECT-MATTER OF OONTKACT. § 181 become their own judges of what they mean by the use of the words employed that have either a technical or a well defined signification, known of all men who use the lan- guage. Legislatures and parliaments cannot do that, and even they are bound by the common meaning of the words they use in their statutes which become part of a contract." § 181. Otiier Papers Part of Contract, when. — It is not necessary that a written contract be wholly embraced in one document. Other papers may become part of such contracts by either being incorporated or being properly referred to therein. The question is one of intent and the intention is to be found in the contract, and a writing in- tended to be a part thereof may be incorporated in it by apt reference as well as by extended recital.^ The principle becomes chiefly important where application has been made in writing for insurance, and the inquiry is whether or not the application, by the terms of the policy, has been made part thereof so that its statements have become warranties. The subject will be further discussed when we come to con- sider the matters of warranty and representation,^ and at present it is enough to refer to it in a general way. It is not every reference in a contract to another writing that will make the latter a part of the contract ; there must suffi- ciently appear the intention to unite the two writings and merge them into one by reference or recital. Thus, where an application, by a member of a benefit society for a cer- tificate in the nature of a life insurance policy contained this clause, " I further agree, that should I, at any time, violate my pledge of total abstinence, or be suspended or 1 Sheldon B. Hartford Fire Ins. Co., 21 Conn. 235; 58 Am. Dec. 420; Anderson v. Fitzgerald, 4H. of L. Cas. 474; Carson v. Jersey City Ins. Co., 43N. J- L. 303; Robertson v. French, 4 Bast, 130; Kelly v. Life Ins. Clearing Co., 113 Ala. 453; 21 Sou. E. 361. 2 Post, § 194, et seq. 363 § 181 NATURE AND SUBJECT-MATTER OF CONTRACT. expelled for a violation of any of the laws of the order, or for non-payment of dues, etc., then all rights which either myself, the person orf'persons named in the certificate, my heirs, etc., may have upon the beneficiary fund of the order, shall be forfeited," it was held that the application was a part of the contract of insurance, and obligatory upon the beneficiary named in the certificate, to whom payment was promised on the death of the member, and that the lan- guage was in the alternative, making either or any One of the causes named, a ground of forfeiture of all right of recovery upon the certificate. ^ So, where a policy of life insurance contained a stipulation that it should be void if a certain declaration made in the application by or for the person whose life was insured, '" and upon the faith of which the agreement was made, shall be found in any respect untrue, ' ' it was held that such declaration constituted a portion of the contract, and was made material by the contract, and the only question of fact respecting the same was whether it was true or false. ^ The Supreme Court of Iowa, in a case where the policy stated that it was issued and accepted in consideration of the agreements made in the application of the assured, and it was provided in the application that a failure to pay the annual dues should avoid the policy, said:^ "The policy, as we have seen, was issued in consideration of the statements made in the application, and the application states that it forms the basis and consideration upon wh ich the policy was issued and , that a neglect to pay the annual dues shall render the pol- 1 Supreme Council, etc., v. Curd, 111111.284. See also State u. Tem- perance, etc., Soc, 42 M. A. 485. 2 Day V. Mutual Benefit L. Ins. Co.,1 McArthur, 41; 29 Am. Eep. 565; Kelsey v. Universal L. Ins. Co., 35 Conn. 225; Byers v. Insurance Co., 35 Ohio St. 606; JefEries v. Life Insurance Co., 22 Wall. 47. 3 Mandego ». Centennial, etc., Assn., 64 la. 134. See also Supreme Lodge, etc., v. Underwood (Neb.) 92 N. W. E. 1051; Parisii ». Mut. Ben. L.Ins. Co., 19 Tex. C. A. 457; 49 S. W. R. 153. 364 NATURE AND SUBJECT-MATTER OF CONTRACT. § 181 icy void. We think these two papers should be read together, in order to ascertain what the contract between the parties is . The pohcy is based on the application. But for the latter the policy would never have been issued. * * * As the application is a part of the policy, it makes no dif- ference in what part of either paper the condition is found which renders the policy void. It may be found partly in one and partly in the other. The two papers, when read together, form the contract. The rights of the parties in no other way can be ascertained."^ An application for membership in a benefit society is a part of the contract though not referred to in the certificate ;2 and, conse- quently, a stipulation in the application, as that the benefit shall not be paid in case of suicide, will be construed as forming a part of the certificate.' The medical examina- tion, if referred to in the application, is part of the contract.* In many States statutes exist requiring a copy of the application to be attached to the policy. These statutes have been construed to mean that the copy must be exact and slight variances have been held to exclude the application. 5 When the application is pasted to the policy 1 Foot u. ^tna Life Ins. Co., 61 N. Y. 575; Clirisman v. State Ins. Co., 16 Or. 283; 18 Pac. Rep. 466; Treat v. Merchants Life Assn., 198 111. 431; 64 N. E. R. 692. 2 McVey V. Grand Lodge A. O. U, W., 53 N. J. L. 17; 20 Atl. R. 873; see also Clapp v. Mass. Benefit Assn., 146 Mass. 519; 16 N. E. R. 433; Flynn v. Mass. Benefit Assn., 152 Mass. 288; 25 N. E. R. 716; Studwell v. Mutual Benefit L. Assn., 19 N. Y. Supp, 709; but see 6oodson«. National Mas. Ace. Assn., 91 Mo. App. 399. ' Northwestern Benev., etc., Assn. v. Hand, 29 111. App. 73. * Northwestern Life Ass. Co- o. Bodurtha, 23 Ind. App. 121; 53 N. E. R. 787; Dinick v. Metropolitan L. Ins. Co. (N. J.), 55 Atl. B. 291. But see Leonard v. New Eng. M. L. I. Co., 22 R. I. 519 ; 48 Atl. R. 808, and Johnson v. Des Moines Life Ins. Co., 105 la. 273; 75 N. W. R. 101. 5 Seller v. Economical Life Assn., 105 la. 87; 74 N. W. R. 941; 43 L. R. A. 537; Johnson v. Des Moines L. Ins. Co., 105 la. 273; 75 N. W. R. 101; Mutual L. Ins. Co. v. Kelly, 52 C. C. A. 154; 114 Fed. R. 268. See also post, § 193. 365 § 182 NATURE AND SUBJECT-MATTER OF CONTRACT. it is indorsed thereon. ^ Where the by-laws must be by statute attached to the policy new by-laws are not binding.* § 182. The Same Subject : Further Illustrations. — A paper drawn up in lead pencil, and containing statements made by the assured, and signed by him has been held to be a part of the policy if referred to therein by a number, although it was addressed to another than the insuring com- pany.^ Words and figures in the margin of a policy denot- ing that part of the agreed premiums have been paid may be considered part of it.* So an ad interim receipt recit- ing that the insurance under it is subject to the condition of the company's policies makes the conditions part of the contract.' So, in a mutual company, the premium note ordinarily forms a part of the contract,* but not so if the note is absolute on its face, only reciting that its consider- ation was a policy of insurance ; ' and it has been held that the application, policy and premium note are parts of the same transaction and should be construed together,* In- dorsements on a policy are generally to be construed in con- nection with its provisions,' and where the body of the policy refers to the annexed conditions, these, though printed on the back of the policy and unsigned, form a part of the contract," but the reference may be such as not to i Reynolds u. Atlas Ace. Ins. Co., 69 Minn. 93; 71 N. W. R. 831. 2 Boyden v. Mass. Masonic L. Assn., 167 Mass. 242; 45 N. B. R. 735; Mooney c. Ancient Order United Workmen (Ky.), 72 S. W. K. 288; 24 Ky. L. R. 1787. a City Ins. Co. «. Bricljer, 91 Pa. St. 488. ^ Pierce o. Charter Oak Life Ins. Co., 138 Mass. 151. 5 Goodwins. Ins. Co., 16 Low. Can. Jur. 298. 8 Scbultz V. Hawkeye Ins. Co., 42 la. 239 ; Murdock v. Clienango Ins. Co., 2N.Y. 221. ' American Ins. Co. v. Gallahan, 75 Ind. 168. 8 American Ins. Co. v. Stoy, 41 Micli. 385. 9 Alabama, etc., Ins. Co. v. Thomas, 74 Ala. 578. 1° Kensington National Bank o. Yerkes, 86 Pa. St. 227. 366 NATURE AND SUBJECT-MATTER OF CONTRACT. § 183 make the indorsement a part of the policy. ^ It has been held also that where conditions are indorsed in small type upon the back of a policy they are not parts of it unless the attention of the insured is distinctly called to them at the time the contract is made.^ A notice on the back of a premium receipt is a part of it,^ and a letter accompanying the application.* § 183. Reference In Policy to Other Papers must be Plain to make Them a Part of It. — Where it is desired to make other papers, as in contracts of insurance the applica- tion, a part of the policy, the reference thereto in the latter must be plain. Where there are no words of reference to the application in the policy they form no part thereof. If the insurer wishes to make them so he must refer to them and cannot claim that by implication they are to be treated as a part thereof. ' In the latter of the cases cited as sup- porting the foregoing proposition, the policy provided that an application or survey, if referred to therein, should be considered part of the agreement, but no other reference being made, the court held that the application was not to be regarded as embodied in the policy. So, where the policy contained no reference to the application, but the latter pro- vided that it was part of the contract, it was held that this stipulation did not make it so.® In the same way, if an indorsement or direction on the back of a policy is not referred to in the policy or by-laws of the compan}'-, there is nothing to show that the parties meant the indorsement 1 Mullaney v. National, etc., Ins. Co., 118 Mass. 393. 2 Bassell v. American P. Ins. Co., 2 Hughes, 531. 3 Iowa Life Ids. Co. v. Lewis, 187 U. S. 335; 23 Sup. Ct. Reptr. 126. * Aetna Life Ins. Co. v. Frierson, 51 C. C. A. 424; 114 Fed. R. 56. 5 Merchants Ins. Co. v. Dwyer, 1 Tex. Unrep. Cas. 445; Moore v. State Ins. Co., 72 la. 414; 34 N. W. Rep. 183; Weed v. Schenectady Ins. Co., 7 Lans. 452. 6 Brogan v. Manufacturers', etc., Ins. Co., 29 Up. Can C. P. 414. 367 § 183 NATURE AND SUBJECT-MATTER OF CONTRACT. to be part of the contract and it will not be so regarded. ^ It has been held, where an application for a policy of life insurance contained an agreement that the answers and statements should " be the basis and form part of the con- tract or policy, and if the same be not in all respects true and correctly stated, the said policy shall be void according to the terms thereof," and the policy declared that the insurance was " in consideration of the representations," etc., and that fraud and intentional misrepresentations should vitiate the policy, but did not otherwise refer to the application, that the agreement and statements in the appli- cation did not become a part of the policy.^ In that case the court said: " to hold that the statements of the pro- posal and application , notwithstanding the agreement therein above quoted, are not incorporated into the policy, and, therefore, are not warranties or conditions of insurance, is but to apply the rule that where the parties to an agreement have reduced their contract to writing, that writing, at law, determines what the contract is, and evidence cannot be received to contradict, add to, subtract from or vary the terms of the writing. The policy in this case is the agree- ment for insurance, and it must be held to contain the agreement and all the agreement of the parties to it. Though the proposal and application contain an agreement on the part of the insured, that the answers to the questions annexed to them and the accompanying statements, to- gether with the statements made to the examining physi- cian, shall be the basis and form part of the contract or 1 Planters', etc., Ins. Co. v. Rowland, 66 Md. 240; Stone v. U. S. Casualty Co., 34 N. J. L. 371; Kingsley o. New Eng., etc., Ins. Co., 8 Cush. 393; Ferrer v. Home Mat. Ins. Co., 47 Cal. 416; Farmers', etc., Ins. Co. V. Snyder, 16 Wend. 481; Union Cent. L. Ins, Co. v. Fox, 102 Tenn. 347; 61 S. W. E. 62. As to application for original policy being part of new policy. Nelson v. Equitable Life Ass. Soc, 73 111. App. 133. 2 American Popular, etc., Ins. Co. v. Day, 39 N. J. L. 89; 23 Am. Rep. 198. 368 NATURE AND SUBJECT-MATTER OP CONTRACT. § 185 policy between the insured and the company, yet the policy does not, directly or indirectly, so declare, and it will be assumed that all previous negotiations have been super- seded and that the policy alone expresses the contract of the parties.^ Where the face of the benefit certificate showed an acceptance by the member of " all the conditions therein named," such acceptance did not carry a reference to the matters on the back of the certificate and make them a part thereof. § 184. What Constitutes the Contract of Insurance. — The conclusion from the preceding statements is that the policy of insurance, after it is issued, together with all other writings aptly referred to therein, constitutes the contract of the parties ; or in the case of benefit societies the certifi- cate, in connection with the laws of the order, contains such contract. It follows that all previous verbal stipula- tions not contained in the policy or certificate, nor referred to therein, are not to be considered in any way as modify- ing such a written contract.^ And parol agreements as to future conduct, or subsequent promises resting on a new consideration, cannot constitute a part of the contract.* § 185. After Enacted Laws of Benefit Society Gener- ally Bind its Memhers. — It is often the case that after a person becomes a member of a benefit society the laws are changed and it then becomes a question to what extent the original contract is thereby affected. As the laws of every benefit society enter into the contract between it and its 1 Pawson V. Watson, 1 Cowp. 785; Insurance Co, v. Mowry, 96 U. S. Mi. 2 Page V. Knights and Ladies of America (Tenn.), 61 S. W. R. 1068. 3 Insurance Co. v. Mowry, 96 U. S. 544. ' Hartford F. Ins. Co. v. Davenport, 37 Mich. 609; Knickerbocker L. Ins. Co. V. Heidel, 8 Lea, 488; Hearn v. Equitable, etc., Ins. Co., 3 ClifE. 328; post, §§ 221, 356, 428, 464. 24 369 § 185 NATUKE AND SUBJECT-MATTER OF CONTRACT. members, whether it be so stipulated or not in the certifi- cate/ it follows that, when the laws provide for their amendment or repeal and changes are made in the pre- scribed manner, the alterations are equally binding upon all the members because this is the express agreement of such members and no exceptions can be made. And even if the by-laws contain no provision for amendment, under general principles changes made with notice to all mem- bers and by consent of the majority would bind all.^ The rule must be understood with the proviso or exception, which applies to all legislation alike, that laws cannot be retroactive or be so construed as to cut off rights already fixed. This rule may be also further modified by the language of the contract in each particular case. It is a settled rule that amendments to by-laws will be held to have a prospective operation only unless a contrary intention clearly appears. In an Illinois case^ the court says: "It would seem that the construction of the act passed in June, 1893, giving it the effect to destroy that right of appointing a beneficiary, or naming another bene- ficiary, which existed in favor of the deceased under his contract prior to the passage of the act, would be to give the act a retrospective effect, and destroy the obligation of the contract entered into between the deceased and the complainant. It is a recognized rule in the construction of statutes that they should be so construed as to give them a prospective operation only, and they should be allowed to operate retrospectively only where the legisla- 1 Ante, § 161. 2 Poultney v. Bachman, 31 Hun, 49; Supreme Lodge K. of H. v. Knight, 117 Ind. 489; 20 N. E. 479. See also Stoher v. San Francisco Mus. Fund Soc, 82 Cal. 567; 22 Pac. R. 1125; State v. Grand Lodge A. O. U. W., 70 Mo. App. 456; Supreme Council, etc., v. Adams, 68 N. H. 236; 44 Atl. R, 380; Robinson v. Templar Lodge, etc., 117 Cal. 370; 49 Pdc. R. 170; ante, §§ 91a and 161a. s Voight V. Kersten, 164 111. 344; 43 N. E. R. 543. 370 NATURE AND SUBJECT-MATTER OF CONTRACT. § 185 tive intention to give them such operation is clear and undoubted."^ In another case^ the court said: "Nothing in it (the constitution) authorized the associa- tion to amend, and thereby bind a member to any change in the contract without his assent, nor do the amended articles purport to change existing contracts or to authorize any such change by the adoption of by-laws. In the absence of such provisions, the articles and by-laws as amended cannot be treated as retrospective in their op- eration. Mere silence as to the effect of revision and amendment of the constitution and by-laws will not war- rant the inference that any change wrought will limit or extend the obligation heretofore created by the issuance of certificates of membership. Statutes are construed so as to give them a prospective operation, unless the intention that they operate retrospectively is clear and undoubted, and it is not perceived why the same canon of con- struction should not be applied to the rules adopted by a mutual insurance association for the transaction of its business and the government of its members."^ It seems to be settled by the weight of authority, that, under the reserved power to amend the by-laws, the amount of the assessments to be paid by the members, can be in- creased ; such change being reasonable and exercised for 1 See, also, Moore v. Chicago, etc. Society, 178 111. 102; 52 N. E. E. 882; Knights Templar, etc., Ind. Co. v. Jarman, 44 C. C. A. 93; 104 Fed. E. 638; 187 TJ. S. 197; 23 Sap. Ct. E. 108; Morton v. Supreme Council R. L.lOO Mo. App. 76; 73 S. W. 259; Grand Lodge A. O. U. W. v. Brown, 112 Ga. 545; 37 S. E. E. 890; Sovereign Camp, etc., u. Thornton, 115 Ga. 798; 42 S. E. R. 236. 2 Carnesu. Iowa Traveling Men's Association, 106 Iowa, 281; 76 N. W. R. 683. s See also Spencer v. Grand Lodge, 22 Misc. 147; 48 N. Y. Supp. 590; affirmed 65 N. Y Supp. 1146; Grand Lodge, etc., v. Stumpf, 24 Tex. Civ. App. 309; 58 S. W. R. 340; Hobbs u. Association, 82 lovfa, 107; 47 N. W. E. 983; Sieverts v. Association, 95 Iov?a, 710; 64 N. W. E. 671; Benton v. Brotherhood, 146 111. 590; 34 N. E. R. 939. 371 § 185 NATURE AND SUBJECT-MATTER OF CONTRACT. the good of the organization. In a leading case,^ the court said : ' ' This association was organized for the mutual benefit and support of its members. It has no capital except what is paid by the members of the mutual benefit of all in case of sickness, or their beneficiaries in case of death. It was not organized for profit, but to furnish a cheap rate of insurance for its members. The contractual relation between the members for such associa- tion and the association should not be measured by the same standard or determined by the same legal principle applicable between an ordinary insurance company and the holder of one of its policies. The insured are members of the association; each has a voice in all proceedings per- taining to the business or general welfare of the association, and in some ways it assimilates a partnership. All money collected by its scheme of assessment is the common prop- erty of the members, to be paid out in such amounts and to such persons as are designated by the member in his certificate, upon the happening of a certain event. For the purpose of better carrying out the scheme, a national council was created, upon which was conferred the power to decide all matters pertaining to the order, and it was provided that its decisions were final. The condition in plaintiff's certificate, that he would in every particular, while a member of the order, comply with all the laws, rules, and requirements of the association, was not only a consent on his part that he would comply with the laws then in force, but it was a consent that he would abide and comply with all reasonable rules and regulations there- after made in the interest of the association. Every person joining an association obligates himself, without so expres- sing it, to conform and to comply with all the existing laws of the association, and, if the provision in the plaintiff's cer- 1 Miller ». National Council K. & L. of S. (Kans.), 76 Pac. Rep. 830. 372 NATUEE AND SUBJECT-MATTER OF CONTEACT. § 186 tificate means anything, it means that he agreed to comply with all laws then in force or subsequently enacted by the national council." Other cases sustain this view.'^ If so provided the byrlaws of a mutual fire insurance com- pany can be changed so as to modify the contract and exempt the company from certain losses,^ and no notice of the change need be given. ^ Even after a member has given notice of withdrawal the laws may be changed so as to affect his rights.* Amendments must be made in the prescribed manner and at a regular meeting called as the constitution provides.^ § 186. The same Subject — !Leading Cases. — One of the earliest cases was decided by the Supreme Court of Vermont, where Judge Kedfield said:^ "At the time the husband became a member of the society in 1862, the by-laws provided that each member paying the regular assessment, should ' be entitled to twenty-five cents per day during their sickness ; ' and ' to the widow of each 1 Fullenwider u. Supreme Council R. L., 180 111. 621; 54 N. E. R. i85; Messer v. Ancient Order United Workmen, 180 Mass. 321; 62 N. E. R. 252; Haydell v. Mut. Reserve Fund Life Ass'n, i4 C. C. A. 169; 104 Fed. Rep. 718; Mutual Reserve Fund L. Ass'n ». Taylor, 99 Va. 208; 37 S. E. R. 854; but see Covenant Mut. L. Assn. v. Tuttle, 87 111. App. 309; Ebert v. Mut. Reserve Fund L. Assn., 81 Minn. 116; 83 N. W. R. 606; 84 N. W. R. 457; Strauss v. Mut. Reserve Fund L. Assn., 126 N. C. 971; 36 S. E. R. 352; 54 L. R. A. 605. The division line between proper and improper amendments and tlie authorities bearing thereon, are discussed in Parish v. N. Y. Produce Exchange, 169 N. Y. 34; 61 N. E. R. 97; 56 L. R. A. 149. 2 Borgards v. Farmers', etc., Co., 79 Mich. 440; 44 N. W. R. 856. 3 Montgomery, etc., Ins. Co. v. Milner (Mich.), 57 N. W. R. 612. " Pepeu. City, etc., Bldg. Soc, 3 R. (Ch.) 47; citing Davies v. Second Chatham, etc., 61 L. T. R. 680. 5 Metropolitan, etc., v. Windover, 137 111.417; 29N. E. R. 538; Hutch- inson V. Supreme Tent K. O. T. M., 22 N. Y. Supp. 801; Bowie u. Grand Lodge, etc., 99 Cal. 392; 34 Pac. R. 103. See also ante, § 161a. 6 Fugure v. Society St. Joseph, 46 Vt. 369. To the same effect is Chambers v. Supreme Tent, etc., 200 Pa. St. 244; 49 All. R. 784. 373 § 186 NATURE AND SUBJECT-MATTER OF CONTRACT. member deceased, so long as she shall remain a widow, and shall enjoy a good reputation, twenty-five cents per day.' It was further provided that, ' so long as there shall be twenty dollars in the treasury, the society can- not reduce its aid to the sick.' There is also a special provision for the matter of altering or changing the by- laws ; and there is, also, a provision in the charter that the society may alter or change its by-laws. In August, 1869, the defendant corporation adopted a set of by-laws which provided that such widows shall receive twenty-five cents per day ' until she had received $200.' The plaintiff has received $200, in accordance with the latter by-law of the society. It is insisted that a right had become vested in the plaintiff (her husband died Jan. 5, 1869) to have and receive of the defendant twenty-five cents per day during her widowhood; and that it was not competent for the defendant to deny or diminish it. The means of making these contributions to the sick, and the widows of deceased members, were derived solely from voluntary assessments upon the members of the society and must be graduated by such assessments. And experience might prove that, with- out assessments greater than the members could bear, there must be a limitation to the stipend to widows. Prevailing sickness among the members may have so exhausted the means of the society, that the provision for widows, must, necessarily, be modified, or it could not discharge the duties for which it was formed. It must be incident to the very nature and purpose of such an association, that it should have power to modify and change its by-laws so as to grad- uate its charities as experience and necessity may require. It cannot, indeed, pervert its contributions to subserve other ends and purposes; but the society may regulate the man- ner in which they shall carry out the purposes for which they associated. They provided that care for the sick should not be suspended or abridged while $20 remained in 374 NATURE AND SUBJECT-IIATTER OF CONTRACT. § 186 the treasury; thus, by necessary implication, conceding that other provisions might be made. Some sweeping dis- ease might so exhaust the resources of the society, that stipends to widows in health must necessarily be suspended or much abridged; and this could be regulated only by practice and experience. The regulation limiting the widow's share in this charity to $200, was made by a gen- eral law, and applicable to all ; and there is no suggestion of fraud, or that the regulation was not wise and salutary. We think that the society were competent to make this by-law; and, having fully performed the duty imposed the plaintiff cannot recover. But in this case there was an express provision in the constitution of this society, that the by-laws might be changed, and the manner of doing it was specifically pointed out ; so that the husband volun- tarily became party in an association, and contributed his money with full knowledge of all the provisions in the ar- ticles of association, and fully assented to the same. There is no good reason, therefore, for claiming that the widow had a vested right which the society could not modify." The Supreme Court of Indiana in a recent case,i has also carefully considered this question and states its conclusions as follows: " The provisions of the established by-laws of an association such as that with which the assured united, are, as appellee's counsel justly affirm, elements of the con- tract of insurance. They are factors that cannot be disre- garded. That they have this effect all who become mem- bers of the association must know. A person who enters an association must acquaint himself with its laws, for they conti^ibute to the admeasurement of his rights, his duties and his liabilities.^ It is not one by-law or some by-law ' Supreme Lodge Kalghts of Pythias B. Kaight, 117 Ind. 289; 20 N. E. 479; 3L, R. A. 409. 2 Bauer v. Sampson Lodge, 102 Ind. 262; 1 N. E. Rep. 571; Fugure v. Society, 46 Vt. 368; Simeral u. Insurance Co., 18 Iowa, 319; Coles v. 375 § 186 NATURE AND SUBJECT-MATTER OE CONTRACT. of which the member must take notice, but he must take notice of all which affect his rights or interests. ^ Where, as here, there is an express and clear reservation of the right to amend, he is bound to take notice of the existence and effect of that reserved power. The power to enact by-laws is inherent in every corporation as an incident of its exist- ence. This power is a continuous one.^ No one has a right to presume that by-laws will remain unchanged. Associa- tions and corporations have a right to change their by-laws when the welfare of the corporation or association requires it, and it is not forbidden by the organic law. The power which enacts may alter or repeal.^ The duly chosen and authorized representatives of the members alone are vested with the power of determining when a change is demanded, and with their discretion courts cannot interfere. Were it otherwise, courts would control all benevolent associa- tions, all corporations and all fraternities . It is only when there is an abuse of discretion, and a clear, unreasonable and arbitrary invasion of private rights, that courts will assume jurisdiction over such societies or corporations. With questions of policy, doctrine or discipline courts will not interfere. Courts will compel adherence to the charter, and to the purpose for which the society was organized, but they will not do more.* The principle which rules here is strictly analogous to those which prevail in controversies between the officers and members of religious organizations Insurance Co., Id. 425; Coleman 11. Knights of Honor, 18 Mo. App. 189 Mitchell V. Insurance Co., 51 Pa. St 402; People v. Society, 28 Mich. 2G1 Osceola Tribe v. Schmidt, 57 Md. 98; Sperry's Appeal, 116 Pa. St. 391 9 Atl. Rep. 478; Bac. Ben. Soc, § 81. 1 Poultney ». Bachman, 31 Hun, 49. 2 Nibl. Mut. Ben. Soc, § 124. 3 Richardson v. Society, 58 N. H. 187; Com. «. Mayor, 5 Watts, 152; Society v. McVey, 92 Pa. St. 510. < Stadler «. Grand Lodge, 3 Am. Law Rec. 589; Crossman v. Associ- ation, 143 Mass. 435; 9 N. E. Eep. 753; Hussey v. Gallagher, 61 Ga. 86. 376 NATURE AND SUBJECT-MATTER OF CONTRACT. § 186 and it is well settled that in such cases courts will not contro the exercise of discretionary powers, or direct the course of an action in matters of expediency or polity.^ To justify interference by the courts, and warrant the overthrow of by-laws enacted in the mode prescribed by the by-laws, it must be shown that there was an abuse of power, or that the later by-law is unreasonable. It is not enough to show that a better or wiser course might have been pursued, for it must be shown that there was an abuse of discretion, or that the by-law is so unreasonable as to be void. We do not affirm that a benefit society may, by a change in its by- laws, arbitrarily repudiate an obligation created by a policy of insurance ; but we do affirm that where a change is regularly made in its by-laws, and the motive which in- fluences the change is an honest one to promote the welfare of the society, and the members are all given an opportunity to avail themselves of the change, no actionable wrong is done the members or their beneficiaries. It may sometimes happen that the interests of an individual, or of a few indi- viduals, may be impaired; but it is the right and indeed it is the duty, of the society, to protect the interests of the many rather than of the few. Persons who become mem- bers of such societies must take notice of this ; and one person cannot, therefore, demand that the welfare of the society and the interests of the many be sacrificed for his sole benefit." ^ 1 Dwenger v. Geary, 113 Ind. 106; U N. E. Rep. 903. 2 The following cases sustain the right to make reasonable amend- ments: Gilmore v. Knights of Columbus (Conn.), 58 Atl. K. 223; Domes V. Supreme Lodge K. of P., 22 Sou. R. 191; Schmidt u. Supreme Tent, etc., 97 Wis. 528; 73 N. W. R. 22; Hughes v. Wisconsin Odd Fellows, etc., Assn., 98 Wis. 292; 73 N. W. R. 1015; Loeffler v. Modern Wood- men, 100 Wis. 79; 75 N. W. R. 1012; Morton v. Royal Tribe of Joseph, 93 Mo. App. 78; Richmond v. Supreme Lodge, etc., 100 Mo. App. 8; 71 S. W. R. 736; Evans v. Southern Tier, etc., 76 App. Div. ISl; 78 N. Y. Supp. 611 and 88 N. Y. Supp. 162; Eversbarg v. Supreme Tent, etc. 377 § 187 NATQEE AND SUBJECT-MATTER OF CONTRACT. § 187. After Enacted Laws Must not be Retroactive or Affect Vested Rights. — Notwithstanding the foregoing views it still remains a conceded doctrine that amendments to by-laws, or subsequently enacted laws, must not be retroactive or affect vested rights. A case of this kind arose in Oregon,^ where the C(jntract provided that com- pliance by the member with all laws of the society, then existing or such as it should thereafter adopt, should be the condition upon which he should be entitled to benefits. At the time a member became such no restrictions were placed by the laws of the society upon the designation of beneficiary, but subsequently an amendment was adopted requiring beneficiaries in all cases to be members of the family, blood relatives or dependents. This member had designated as beneficiary a person not of these classes and when the new law was enacted refused to make the change because he was unmarried and had no living relatives or dependents. He soon afterwards died and the court held that the new law had no retroactive effect, or in any event did not apply to a member who was unable to comply with its requirements. In its opinion the court says: " The law does not undertake by its terms to disturb what has been done ; it does not nullify previous appointments ; it only undertakes to limit to the classes specified the power to designate beneficiaries, whenever it shall be exercised by a member. It is a settled rule of construction that laws will not be interpreted to be retrospective unless by their terms it is clearly intended to be' so. They are construed as operating only on cases or facts which come into existence after the laws were passed. ' Every statute,' it has been said, ' which takes away or impairs vested rights, acquired (Tex. C. A.), 77 S. W. K. 246; Supreme Tent w. Stensland, 105 111. App. 267; Boss v. Modern Brotherhood, 120 la. 692; 95 N. W. E. 207; Hall v. Western Travelers, etc., Assn. (_Ia.),96 N. W. R. 170. 1 Wist V. Grand Lodge A. 0. U. W., 22 Oreg. 271; 29 Pac. R. 610. 378 NATURE AND SUBJECT-MATTEK OF CONTRACT. § 187 under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of trans- actions or considerations already passed, must be presumed, out of respect to the legislature, to be intended not to have a retroactive operation.' ^ Eights will not be interfered with unless there are express words to that effect. It is not enough that upon some principles of interpretation a retroactive construction could be given to the law, but the intent to make it retroactive must be so plain and demon- strable as to exclude its prospective operation. ' It is not enough that general terms are employed, broad enough to cover past transactions,' for laws ' are to be construed as prospective only,' if possible.^ In fact, so great is the disfavor in which such laws are held, and so generally are they condemned by the courts, that they will not construe any law, no matter how positive in its terms, as intended to interfere with existing contracts or vested rights, unless the intention that it shall so operate is expressly declared or is to be necessarily implied. As the law of the society is prospective in its operation, it did not affect Freeman's contract with the defendant. It did not by its terms nor by implication require him to change his policy. It would only have affected his contract in the event he should have revoked the appointment of the plaintiff as his beneficiary and then only to the extent of requiring him to appoint a beneficiary that should belong to the specified classes. There is not a word in the law requiring any member to make a change of his beneficiary, or in case of his failure to do so, as contended for by the appellant, that his benefit certificate should revert to the society. It may be con- ceded that Freeman was bound by all subsequent laws en- icted, but as the law in question is not retroactive it does 1 End. Interp. St., Sec. 273. 2 Sedgw. St. & Const. Law, 161a. 379 § 187 NATURE AND SUBJECT-MATTER OF CONTRACT. not affect his contract. It only affects him or any other member of the society in the issue of certificates after its passage. While there is no pretense that this contract was a cover for speculation, or a wager policy, it may be con- ceded that the object of the law was to discourage wager policies. And it was said by pounsel, unless it was held ' that the society could amend its laws so as to discourage wager policies, it will be involved in a maze of difficulties.' By giving this law a prospective operation it will greatly cut off the opportunities for such speculation in life insur- ance policies, and will in a great measure remedy the evil it was designed to abate, without denying the power of the society to amend its laws, or to enact others, for the promotion of its interest and welfare. But we may go further and admit that the law is retroactive ; that it was intended, as claimed by counsel, to affect certificates not of the classes ^numerated and requiring the holders of such certificates to designate others comformably to such law; otherwise, upon their failure to do so, that the fund payable under their certificates to such beneficiai'ies as do not belong to any of such classes, would descend under the laws of the society or revert to it, and still we do not think such a law would be construed to affect the certificate of Freeman, or the class to which he belongs or their beneficiaries. It is only addressed retroactively to those who can comply with its terms ; for while it might have the effect to modify or vary the contracts of all such it does not operate as a destruction of their power to appoint a beneficiary, or as a repudiation of the obligation of the society. They can comply with its terms and make the change of beneficiary and preserve the fund for his benefit. The case is different with Freeman, or those belonging to his class, who prior to the time the law was enacted, had appointed the plaintiff as his beneficiary and who from the time of such appointment, continuously up to his death, 380 NATURE AND SUBJECT-MATTEK OF CONTRACT. § 187 bad no family, nor anyone related to him by blood, nor dependent upon him. It was not possible for him to com- ply with the terms of the law naming another beneficiary. To give the law such a construction as would include his class would operate as a complete deprivation of their rights, and an absolute repudiation by the society of its obligations. Such an injustice will never be tolerated, if by any construction it can be avoided. We are bound to construe a law, if we can, so as to make it operate without impairing the obligation of existing contracts, or divesting vested rights. "We may therefore assume, for the pur- poses of the case, thatthelaw was retroactive, and intended to require a change of beneficiaries limiting them to the classes specified and still we would be bound to construe it so as to make it operative and valid, which can only be done by confining its operations to those members who could make the change. So averse are courts to giving a law a retroactive operation that even where the retroactive char- acter of the law is clearly indicated on its face, they always subject it to the most circumscribing construction that can possibly be made, consistent with the intention of the legis- lature." And this view has been followed in other cases. ^ In another case ^ the articles of association provided that upon the death of one of its members, his widow should be entitled to receive four dollars monthly during widow- hood. After the death of the plaintiff't husband, who was a member of the society, the article was amended so as to entitle the widows to receive one dollar from each member of the society. Under these facts the court held that the new article was not retroactive and 1 Benton v. Brotherhood Kajlway Brakemen, 146 111. 570; 34 N. E. B. 939; Hysinger v. Supreme Lodge K. & L. of H., 42 Mo. App. 627; North- western etc., Assn. V. Wanner, 24 111. App. 357; Becker v. Berlin Ben. Soc, 144 Pa. St. 232; 22 Atl. K. 699. 2 Gundlach v. Germania, etc., Assn., 4 Hun, 341. 381 § 187 NATURE AND SUBJECT-MATTEK OF CONTRACT did not affect plaintiff's rights. In a somewhat similar case in Ohio,i the facts were that the defendant was a benevolent society of which the plaintiff's insane husband was a member, she being his guardian. By one of its by-laws, sick members were entitled to receive three dol- lars per week while unable to pursue their usual business. In these by-laws the usual right to amend was reserved. Plaintiff's husband had been a member for many years, and in October, 1881, became unable to work. In Octo- ber, 1882, the original by-laws were amended limiting the right to benefits to thirteen weeks in the year. The wife sued for benefits under the old law, her husband never having agreed to the change. The superior court, in upholding the claim, said: "It is true, as argued by counsel for defendant, and held by the court in Ver- mont,^ that by the terms of the agreement between the members, which constitutes the society, and of that be- tween the society and each member, which amounts to a policy of insurance, a right to amend was reserved. But it was a right to amend the by-laws, not to repudiate a debt. A by-law provides what the rights of members shall be in certain events if they continue to pay their dues until such events happen; this, of course, by virtue of the reserved right, may be amended or repealed. But when the event happens, what was a contract depending upon a contingency, becomes in law a debt. The right to modify a contract does not include the right to repudiate a debt any more than the reserved right of a legis- lature to repeal the charter of a corporation gives it the right to confiscate its property."^ In another 1 Pellazzino v. German, etc., Society, 16 Cin. W. L. B. 27. 2 Fugare v. Society St. Joseph, 46 Vt. 362, supra. 3 St. Patrick's, etc.. Society ». McVey, 92 Pa. St. 610; Byrne v. Casey, 70 Tex. 247; 8 S. W. Kep. 38; McCabe v. Father Matthew, etc., Soc, 24 382 NATURE AND SUBJECT-MATTER OF CONTRACT. § 187 case 1 the court said : " The corporation has no capacity, as a legislative power from which it derived existence has no com- petency, b}/ laws of its own enactment to disturb or divest rights which it had created, or to impair the obligation of its contracts or to change its responsibilities to its members, or to draw them into new and distinct relations." In hold- ing that an amendment to the by-laws of a fraternal bene- ficiary association, providing for forfeiture in event of suicide should avoid the certificate, the New York Court of Appeals said : ^ " This defendant cannot, by amendment to its rules, deprive persons already insured, or their benefi- ciaries, of their rights under contracts of insurance in the event that death shall result from specific causes necessa- rily insured against by the original contract." So a soci- ety cannot by amendment to its by-laws cut down the amount of its benefit certificate. The Supreme Court of Massachusetts said in a case of this kind : ^ " But the plaintiff's rights do not stand upon the by-laws alone. They stand also upon express contract. The prom- ise to pay five thousand dollars is conditioned by the by-laws only to the extent that has been stated. Even if the ' full compliance with all the by-laws,' which is mentioned as a consideration for the promise, is not interpreted and limited by the more specific provisions of the express conditions, « compliance ' in this connection means doing what the by- laws may require the member to do, not submission to see- ing his only inducement to do it destroyed. The case is not like Daley v. Association,* and Moore v. Association,' Hun, 149; Morrison ». Winconsin, etc., Ins. Co., 59 Wis. 162; Stewart v. Lee Mut., etc., Assn., 64 Miss. 499; 1 South Rep. 743; ante, § 92. 1 Hobbs V. Iowa Benefit Association, 82 Iowa, 107; 47 N. Y. E. 983. 2 Weber v. Supreme Tent K. O. T. M., 172 N. Y. 490; 65 N. E. E. 258. 8 Newhall v. Supreme Council American Legion of Honor, 181 Mass. 117; 68 N. B. Rep. 1. i 172 Mass. 533; 52 N. E. 1090. 6 103 Iowa, 424; 72 N. W. 645. 383 § 188 NATURE AND SUBJECT-MATTEK OF CONTEACT. where the promise to pay a fixed sum was qualified by ref- erence to a fund from which the payment was to come and which might turn out inadequate from causes over which the defendant had no control." ^ § 188. The Subject discussed by the Supreme Court of Alabama. — The subject has alst) been fully discussed by the Supreme Court of Alabama,^ where a benefit society had issued a certificate, promising to pay a certain benefit in event of the death of the member, and containing a condi- tion that it should ba " subject to the laws of the order now in force or which may hereafter be enacted by the supreme commandery." After the issue of the certificate the supreme commandery enacted a by-law providing that any member who should "take his own life, sane or in- sane," should thereby forfeit all rights under the certificate and it should become void. The member did take his own life and the plea of forfeiture under the by-law was set up by the society in an action brought by the bene- ficiary named in the certificate. In deciding the point the court said: "With a view of excepting from the opera- 1 To the same effect are Gant v. Supreme Council A. L. H., 107 Tenn. 603; 64 S. W. K. 1070; 65 L. R. A. 465; Supreme Council, etc., o. Orcutt, 119 Fed. E. 682; Supreme Council, etc., ». Jordan, 117 Ga 808; 45 S. E. R. 33; Russ v. A. L. H., 110 La. 588; 34 Sou. R. 697; For ter V. Sup. Council, 183 Mass. 326; 67 N. E. R. 238; Makely ». Sup CI., 133 N. C. 867; 45 S. E. R. 649; O'Nell v. Supreme Counc. (N, J.), 57 Atl. R. 463; Boettger v. Sup. CI., 78 App. D. 546; 79 N. T Supp. 713; Supreme Counc. v. Storey (Tex. C. A.), 75 S. W. R. 901; Williams v. Supreme Counc, 80 App. Div. 402; 80 N. Y. Supp. 713. 2 Supreme Commandery, etc., v. Alnsworth, 71 Ala. 449. This case has been followed in Supreme Lods!e K. of P. a. La Malta, 95 Tenn. 157; 31 S. W. 498; 30 L. R. A. 838; Daughtry v. Supreme Lodge K. of P., 48 La. Aan. 1203; 20 Sou. R. 712; and United Moderns v. Col- ligan (Tex. Civ. App.), 77 S. W. R. 1032. To the contrary are Weber V. Supreme Tent, etc., 172 N. Y. 490; 65 N. E. R. 258; Smith v. Su- preme Lodge K. of P., 83 Mo. App. 512; Morton v. Supreme Council R. L., 100 Mo. App. 76; 73 S. W. E. 259. 384 NATURE AND SUBJECT-MATTER OF CONTRACT. § 188 tion of the policy any intended self-destruction, whether the assured is sane or insane at the time of its commission, insurance companies are in the habit of inserting in policies a provision, the equivalent of that expressed in the law of the association now under consideration. The exception as to the insane has been supported, and it is said to be as much the right of the insurer to stipulate for exemption from liability in the event of intentional self-destruction by the insane, as to stipulate for an exemption from liabil- ity because the hazard of loss is increased from the fact of the assured engaging in occupations perilous to life, or tak- ing up residence in an unhealthy climate.^ In this respect the law adds a new term to the contract, relieves the asso- ciation from an existing liability, and lessens the value and security of the certificate to the assured. It is not claimed that there is an inherent power in the association, by the adoption of a by-law, to work such radical changes in its existing contracts. The power is derived from, and de- pends upon the stipulations of the contract at the time it was made. The stipulations are expressed in varying terms and several of them import no more than would be implied — the observance by the insured of the requirements of the association, such requirements as were reasonable, and in- tended to promote the harmony of the association, and the purposes and objects for which it was formed. They im- port also obedience to the by-laws, so far as reasonable, consistent with the charter and law of the land. We do not construe them as reserving, or as intended to reserve, to the association the power to change or avoid its contracts, to lessen its responsibilities, or to divest its members of rights. This is n,ot the proper office of a by-law ; and from the general expressions to which we are referring, it can- not be fairly presumed or intended that it was contemplated 1 Bigelow V. Berkshire Life Iqs. Co., 93 U. S. 284. 25 385 § 188 NATURE AND SUBJECT-MATTER OP CONTRACT. to affect tht) members by other than such by-laws, as it was within the competency of the association to enact. But in addition to these, the averment of the plea is, that the cer- tificate was accepted by the assured ' subject to the laws of the order now in force, or which may be hereafter enacted by the supreme commandery.' , These are words of large signification, and clearly express that the assured consented that the contract should be subject to future, as well as ex- isting by-laws. Parties may contract in reference to laws of future enactment — may agree to be bound and affected by them, as they would be bound and affected if such laws were existing. They may consent that such laws may enter into and form parts of their contracts, modifying or vary- ing them. It is their voluntary agreement which relieves the application of such laws to their contracts and transac- tions from all imputations of injustice. * * * The members of associations, created for purposes and objects like those which seem to be the purposes and objects of this organization, may very properly be required to assent that the contract conferring upon them rights shall be subject to, and depend upon the future, as well as the ex- isting laws adopted by the governing power. The funda- mental principle of such organizations is the mutuality of duty and equality of rights of the membership, without re- gard to time of admission. This cannot well be preserved, if the members stipulating for benefits were not required to consent that they would be subject to future as well as ex- isting by-laws. Time and experience will develop a necessity for changes in the laws, and if the consent was not required, there would be a class of members bound by the changed laws, and a class exempt from their operation. The case before us is an illustration. Of the legality and propriety of the provision relieving the association from liability, if a member while insane deprived himself of life, there is no good reason to question. If no other reason could be given 386 NATURE AND SUBJECT-MATTER OF CONTRACT. § 188a that it relieves the association from litigating with the representatives of a deceased member the distressing ques- tion of his sanity, would be sufficient. If the law was applied only to certificates issued subsequent to its enact- ment there would be a class of members having certificates of greater value than the certificates held by another class ; yet each class would be subject to the same assessments and the same duties. There is but little room, if any, for the apprehension, that advantage will be taken by the govern- ing body of the assent of the members to be bound and affected by subsequent laws, to impose upon him unjust bur- dens or to vary the contract, save so far as an alteration or modification of it may be promotive of the general good. Subsequent or existing by-laws are valid only when consist- ent with the charter and confined to the nature and objects of the association. While a subsequent law, because of the assent of the member, may add new terms or conditions to a certificate, terms or conditions reasonably calculated to promote the general good of the membership, and may be valid and binding, it does not follow that a law operating a destruction of a certificate, or a deprivation of all rights under it, would be of any force." ^ § 188a. Same Subject — Conclusion. — It will be seen from the cases cited in the preceding sections, that the views of different courts are conflicting, and that it is almost, if not altogether, impossible to lay down a general rule that will apply to all cases. We may, however, say that the weight of authority is that in all matters of inter- nal management, those relating to rates, or to conduct of members, laws enacted after the issue of the benefit cer- tificate will be binding on the member, provided no new condition is injected into the contract materially affecting it. After a review of most of the authorities, the St. 1 Korn V. Mut. Assn. Soc, 6 Cranch, 396. 387 § 188a NATURE AND SUBJECT-MATTER OF CONTRACT. Louis Court of Appeals saidr^ "The foregoing cases were all decided on the theory that subsequent by-laws, despite the member's agreement to comply with them, cannot defeat or abridge the essential rights created by the policy, but affect only the member's duties as such ; not his interests as a contracting party. In all of them we find the same argument here advanced and accepted by some courts, that the business experience of companies shows them what regulations ought to prevail and that it is necessary that they be per- mitted to avail themselves of the teachings of experience by enacting new regulations, as needed, to bind all mem- bers and control all agreements. There is some merit in that argument and it is pertinent to any legislation respect- ing contracts. It has not been thought, however, suffi- ciently meritorious to permit State legislatures to impair obligations, and we think it not sufficiently so to permit insurance societies." We give in a note a list of the cases in which the right to change the by-laws has been sus- tained and those in which the right has been denied, which must be examined in order to arrive at a just conclusion; and to this list must also be added the cases cited in the last four sections . ^ 1 Morton v. Supreme Council R. L., 100 Mo. App. 76; 73 S. W. B. 259. 2 In the following cases the members were held bound by subsequent amendments to the by-laws: Union Ben. Society v. Martin, 23 Ky. L. B. 2276; 67 S. W. R. 38; Wuerfler v. Trustees Grand Lodge, etc., 116 Wis. 19; 92 N. W. 433; Messer ». A. O. U. W., 180 Mass. 321; 62N. E. R. 252; O'Brien v. Supreme Council Cath. Ben. Leg., 176 N. Y. 697; 68 N. B. K. 1120; affirming 81 App. Div. 1; 80 N. Y. Supp. 775; Morton V. Eoyal Tribe of Joseph, 93 Mo. App. 78 ; Bichmond v. Supreme Lodge, etc., 100 Mo. App. 8; 71 S. W. E. 36; Evans v. Southern Tier, etc., 76 App. Div. 151; 78 N. Y. Supp. 611; 88 N. Y. Supp. 162; Doidge v. Boyal, etc., 4 Ont. L. B. 423; Eversberg v. Supreme Tent, etc. (Tex. C. A.), 77 S. W. E. 246; Supreme Tent, etc., v. Stensland, 105 III. App. 267; Eoss v. Modern Brotherhood, etc., 120 la. 692; 95 N. W. 207; Hall o. Western Travelers', etc. (Neb.), 96 N. W. B. 170; Miller 388 NATURE AND SUBJECT-MATTER OF CONTRACT. § 188a V. National Council, etc. (Kas.), 76 Pac. Rep, 830; Supreme Lodge K. of P. V. La Malta, 95 Tenn. 157; 31 S. W. E. 493; 30 L. K. A. 838; Par- ish V. N. Y. Produce Exchange, 169 N. Y. 34; 61 N. E. E. 977; 56 L. E. A. 149; Chambers v. Supreme Tent, etc., 200 Pa. St. 244; 49 Atl. Eep. 784; Fullenwider?;. Supreme Council R. L, 180 111. 621; 54N.E. R. 486; Domes v. Supreme Lodge K. of P., 76 Miss. 466; 23 S. E. 191 ; Schmidt V. Supreme Tent, etc., 97 Wis. 628; 73 N. W. E. 22; Loeffler u. Mod. Woodmen, 100 Wis. 79; 75 N. W. E. 1012; Daughty «. Supreme Lodge K. of P., 48 La. Ann. 1203; 20 S. E. 712; Haydell v. Mut. Eeserve Fund L. Ass'n, 44 C. C. A. 169; 104 Fed. Eep. 718; Mut. Eeserve Fund L. Assn. v. Taylor, 99 Va. 208; 37 S. E. E. 854. In the following cases the amendment was either held unreasonable and, therefore, not binding on the member, or inoperative so far as ex- isting contracts were concerned, because an attempt to affect vested rights: Carnes v. Iowa Traveling Men's Assn., 106 la. 281; 76 N. W. E. 683; Hobbs v. la. Ben. Assn., 82 la. 107; 47 N. W. R. 983; Pokretky v. Detroit, etc., Assn, 121 Mich. 456; 80 N. W. R. 240; Voight v. Kerstern, 164 111. 314; 45 N. E. E. 543; Startling v. Supreme Council, etc., 108 Mich. 140; 66 N. W. E. 340; Hale v. Equitable Aid Union, 168 Pa. St. 377; 31 Atl. Eep. 1066; Weiler v. Equitable Aid Onion, 92 Hun, 277; 86 N. Y. Supp. 734; Smith v. Supreme Lodge K. of P., 83 Mo. App. 512; Peterson v. Gibson, 191 111. 365; 61 N. E. E. 127; Bragaw v. Supreme Lodge K. & L. of H., 128 N. C. 354; 38 S. E. E. 905; 54 L. E. A. 602; Strauss V. Mut. Eeserve Fund L. Assn., 128 N. C. 465; 39 S. E. E. 55; 54 L. R. A. 605; Roberts v. Grand Lodge, etc., 60 App.Div. 259; 70 N. Y. Supp. 57; Gaut v. Supreme Council, etc., 107 Tenn. 603; 64 S. W. R. 1070; 55 L. E. A. 465; Tebo v. Supreme Council E. A., 89 Minn. 3; 93 N. W. E. 513; Thibert v. Supreme Lodge K. of P., 78 Minn. 448; 81 N. W. E. 220; 47 L. R. A. 136; 79 Am. St. Eep. 412; Weber v. Supreme Tent, etc., 172 N. Y. 490; 66 N. E. E. 258; Deuble v. Grand Lodge, etc., 172 N. Y. 665; 65 N. E. R. 1116; Pittinger v. Pittinger, 28 Col. 308; 64 Pac. Eep. 195; Miller v. Tuttle (Kans.), 73 Pac. Rep. 88; Morton v. Supreme Council R. L., 100 Mo. App. 76; 73 S. W. E. 259; Campbell v. Am. B. C. Frat., 100 Mo. App. 249; 73 S. W. R. 342; Marshall v. Pilots' Assn., 206 Pa. St. 182; 65 Atl. Eep. 916; Beach v. Supreme Tent, etc., 177 N. Y. 160; 69 N. E. E. 281; Fargo v. Supreme Tent, etc. (App. Div.), 89 N. Y. Supp. 65; Langan v. Supreme Council, etc., 174 N. Y. 266; 66 N. E. B. 932; Sisson v. Sup. Ct of Honor (Mo. App ), 78 S. W. E. 297: Spencer u. Grand Lodge, etc., 63 App. Div. 627; 66 N. Y. Supp. 1146: Covenant Mut. Life Assn. v. Kentner, 188 111. 431; 58 N. E. E. 966; Eichter v. Supreme Lodge K. of P., 137 Cal. 8; 69 Pac. Eep. 483; Grand Lodge, etc., v. Stumpf. 24 Tex. Civ. App. 309; 58 S. W. E. 840; Benton V. Brotherhood, etc., 146 111. 590; 34 N. E. R. 939; Sieverts v. Assn., 95 la. 710;. 64 N. W. B. 671. See also American Legion of Honor cases cited in § 187, 389 CHAPTER VI. APPLICATION, WARRANTY, REPRESENTATION AND CONCEAL- MENT. § 190. Insurance Contract Result of Proposal and Acceptance. 191. Difficulties in Construing Language of the Policy Referring to the Application. 191a. The Proposal or Application. 192. Early Interpretation Contrasted with Modern Construction. 193. Statutes on the Subject. 193a. Do these Statutes apply to Benefit Societies. 194. Warranty Defined. 195. Difficulty of Determining what Amounts to Warranty. 196. Difference between Warranty and Representation. 197. Breach of Warranty Avoids the Contract. 198. Warranties not Favored at Law; Strict Construction. 199. Warranty never Created by Construction. 200. Must be Express. 201 . Affirmative and Promissory Warranties. 202. Construction of Warranties must be Reasonable. 203. Review of Rules of Construction. 204. Where Partial or no Answers are Made to Questions. 205. When Answers are not Responsive. 205a. Qualified Answers. 206. Representations. 207. Material and Immaterial Representations. 208. Affirmative and Promissory Representations. 209. False Representations Avoid Contract only when Material. 210. Immaterial whether False Representation is Intentional or Acci- dental. 211. Materiality of Representation Question of Fact. 212. Answers to Specific Questions always Material. 213. Representations to be Material need not always be of Facts Relating D rectly to the Risk. 214. Representations need only be Substantially True : Good Faith of Applicant. 215. Understanding of Applicant as to Efiect of False Answers. 216. Answers to questions in Applications for Membership in Benefit Societies Generally not Warranties but Representations. 216a. The Same Subject Continued. 390 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 190 § 217. Concealment. 218. Concealment of Material Fact will Avoid the Contract. 219. Questions of Knowledge, Intent and Materiality are for Jury. 220. No Concealment when Facts are Unknown to Applicant: DiHer- ence between Representation and Concealment. 221. Error or Fraud of Agent in Preparing Application. 222. When Authority of Agent is known to Applicant. 223. Answers to Referee: to Medical Examiner: Position of Latter. 224. Rules of Construction in Particular Cases. 225. Age. 226. Whether Applicant is Married or Single. 227. Residence. 228. Occupation. 229. The Dwight Case. 2i'0. Answers in Regard to Parents, Relatives, etc. 230a. Family Physician: Medical Attendant: Consulting a Physician. 231. Habits: Use of Intoxicants: Liquor, Opium, etc. 232. Good Health. 233. Latent Diseases Unknown to Applicant. 234. Disease. 235. Accident or Serious Injury. 235a. Other Insurance. 2356. Limitation on Time within which Defense can be Made. § 190. Insurance Contract Result of Proposal and Acceptance. — The contract of ia.surance is the result of a proposal, or application, upon the part of the insured, and its acceptance by the insurer. Whether life insurance be effected with stock or mutual companies, or through mem- bership in benefit societies, the process is much the same. First is the proposal, or application, and then the accept- ance. When accepted the application is followed by the issuance of the policy, or, in the case of benefit societies, the reception into membership, after which the certificate is furnished. The application is usually composed of sev- eral parts : first are the answers by the applicant to certain questions relating to age, family history, etc. ; then is the certificate of the examining physician as to the results of the physical examination of the applicant, and sometimes lastly the certificate of a friend of the insured who occupies the 391 § 191a APPLICATION, WARRANTY, REPRESENTATION, ETC. position of a referee. In the case of beneficiary societies a report concerning the qualifications of the applicant by an investigating committee appointed by the lodge is usually required. From this proposal or application, the insurer determines the value of the risk and whether or not he will accept it. § 191. DiflBculties in Construing Language of the Policy Referring to the Application. — The policy, issued upon acceptance of this proposal, generally refers in some way to the application. It is in construing the language used in such reference that some of the greatest difficulties have been experienced by the courts. The effort of the companies has been to iii'-orporate the application in the contract and have the insured warrant the truth of all his statements. When these statements were true no differ- ences could well arise, but when the answers of the appli- cant to questions in the application were untrue, or equiv- ocal, or partial, the only escape from loss of the insurance was to have the language of the policy so construed that it would be held that the statements made in the applica- tion were not warranted to be absolutely true, whether material or not. In the reported cases, therefore, the controversy has often been over this reference in the policy to the application, and whether the statements in the latter were warranties, which must be literally true, or representations which must be substantially true. In this chapter we propose to treat of the classes of statements made in the application which are sometimes mere repre- sentations and sometimes warranties. Also of what is called concealment, or thewithholdingof information which should be disclosed. § 191a. The Proposal or Application. — The proposal, or application, consists of the written statements concern- 392 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 191a ing the physical condition, family history and antecedents of the subject for insurance ; it is supposed to contain the information upon which the insurer can estimate the desirability of the risk. As has been said, this application may consist of several papers, or series of answers to questions, by the applicant or some person referred to by him. The person to be insured also submits to a physical examination by an agent of the insurer. If the applicant conceals information that should have been imparted the contract may or may not be avoided, and the law of con- cealment applies. Whether the statements are representa tions or warranties depends ilpon the language used. Nice questions of construction arise in construing the language used and some of the most elaborate opinions of the courts are devoted to this subject. The word statements, in an application includes a warranty, as to representations therein, and a waiver of the provisions of law relating to the disclosure by a physician of communications relating to the patient's physical condition. ^ The reference, how- ever, in an application to different sets of questions or forms must be plain to make them part of the contract.^ Although the application generally must be signed such signature may be made by an agent and the company may be estopped from disputing such signature made in the presence of its agent, ^ nor can the company set up the defense that the signature to the application was forged unless it offers to return the premiums paid.* The bene- 1 Foley V. Boyal Arcanum, 151 N. Y. 196; 45 N. B. R. 456. 2 Northwestern L. Ass. Co. v. Tietze (Colo. App.), 64 Pac. E. 773. 3 Somers v. Kansas Protective Union, 42 Kans. 619; 22 Pac. E. 702; Bohninger v. Empire Mut. Co., 2 T. & C. 610; Fulton v. Metropolitan L. Ins. Co., 19 N. T. Supp. 470; Prudential Ins. Co. u. Cummins, etc., 19 Ky. L. E. 1770; 44 S. W. R, 431; see also Sullivan v. Industrial Ben. Assn, 73 Hun, 319; 26 N. Y. Supp. 186; Pickett u. Metropolitan L. Ins. Co., 20 App. Div. 114; 46 N. Y. Supp. 693. * Home Mut. E. Asso. v. Kiel, (Pa. St.), 17 Atl. E. 36. 393 § 192 APPLICATION, WARRANTY, REPRESENTATION, ETC. ficiary suing on a policy adopts the application and is bound by it.' A society may be bound even though an application was never made.^ § 192. Early Interpretation Contrasted with Modern Construction. — In no branch of the law have the deci- sions been more numerous or coilflicting than in cases relat- ing to applications for insurance, and it is difficult, if not impossible, to lay down any general rules which will apply in all cases. Says a standard writer on this subject:'' " The cases would have presented fewer difficulties of con- struction if the early jurisprudence had been less open to the admission of forfeitures of the policy, and more easily satisfied with a compliance with written stipulations sub- stantially equivalent to a literal one, when such construc- tion was not inconsistent with the express provisions of the contract. The recent jurisprudence tends to greater liber- ality of construction in favor of maintaining the contract. Such a rule may as well be applied to stipulations and reci- tals in the policy as to representations preliminary and collateral to it ; and it is more equitable after the policy has gone into effect and the underwriter has a right to retain the premium, that the contract should be continued in force as long as its being maintained is consistent with its express provisions, and the underwriter is not thereby preju- diced." The companies themselves forced the courts into this departure, because their policies were generally so in- tricate, in their wording, and their liability so hedged in and restricted by a multiplicity of covenants and conditions ; 1 Centennial Mutual L. Asso. v. Parham, 80 Tex. 518; 16 S. W. R. 816; Prudential Ins. Co. v. Fredericks, 41 Ills. App. 419; Kelley v. Home Life Ins. Co., 95 Mo. App. 627; 69 S. W. B. 612. 2 Wagner v. Supreme Lodge K. & L. of H., 128 Mich. 660; 87 ». W. R. 903. 3 Phillips on Ins., § 638. 394 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 192 the assured was tied down by so many warranties concern- ing immaterial matters, that in most cases, especially those involving fire insurance, the payment of the policy in event of loss was optional with the insurer, for an avenue of escape was generally open if he wished to avoid responsi- bility. Judicial sentiment, somewhat akin to popular sen- timent, began to set in against this perversion of justice, and the absolute necessity for different reasoning appeared, for it was seen that it was unjust to absolve the insurer by a rigid adherence to forms of words rather than the intent of the parties, when the assured had been persuaded into a contract the terms of which he generally could not under- stand, and where, after he had paid in good faith the pre- mium asked, he discovered too late that he had stipulated away any probability of getting his insurance if a loss occurred. The courts, therefore, began to condemn this scrupulously technical construction and to seek to avoid it. In one of the first cases, where this necessity for change was referred to, the Supreme Court of Iowa said: ^ " The business of insurance is rapidly increasing in magnitude and importance, and it is as essential to the companies them- selves as to the assured that the rules of law declared ap- plicable to them should be based upon just and equitable principles, and administered in a manner in harmony with the doctrines of an enlightened jurisprudence. It is quite time that the technical constructions which have pertained with reference to contracts of this kind, blocking the path- way to justice, and leading to decisions opposed to the general sense of mankind, should be abandoned, and that these corporations, grown opulent from the scanty savings of the indigent, should be held to the same measure of responsibihty as is exacted of individuals." About the same time the Supreme Court of the United States prac- 1 Miller V. Mutual Benefit Life Ins. Co., 31 la. 22G; 7 Am. Rep. 122. 395 § 193 APPLICATION, WAEKANTY, KEPKESENTATION, ETC. tically adopted the same doctrine,iand this doctrine, which had even earlier been favorably considered by a few courts, was still more generally accepted and approved, so that from reading some of the decisions in these cases, one would be justified in the conclusion that in many localities insurance companies as a class, had made themselves dis- reputable in judicial eyes.^ § 193. Statutes on the Subject. — These judicial declara- tions and the influence of public sentiment have led to the enactment, in some States, of statutes which provide that no misrepresentation or false statement in an application for life insurance shall be deemed material, or render the policy void, unless the matter misrepresented shall have actually contributed to the happening of the contingency or event on which the pelicy was to become due and payable, and that whether it so contributed in any case shall be a question for the jury.^ The power of the legislature to define the pub- lic policy of the State in respect to life insurance, and to impose conditions upon the transaction of such business within the State, is exercised without violation of the Fed- eral Constitution when a statute provides that a false answer in an application shall not bar recovery on a policy unless clearly proved to be willfully false and fraudulently made, and also material, and that it induced the company to issue the policy, and that the agent of the insurer had no 1 Insurance Co. v. Wilkinson, 13 Wall. 222. 2 American Central Ins. Co. v. Rothschild, 82 111. 166; New England, etc., Ins. Co. v. Schettler, 38 111. 166; Piedmont & Arlington L. Ins. Co. V. Young, 68 Ala. 476; Kausal v. Minnesota, etc., Assn., 31 Minn. 17; Rowley v. Empire Ins. Co., 36 N. Y. 550; Combs v. Hannibal, etc., Ins. Co., 43 Mo. 148; Insurance Co. u. Wilkinson, 13 Wall. 222; Miller v. Mut. Ben. L. Ins. Co., 31 la. 226. 3 Rev. Stat. Mo. 1889, § 5849. Similar provisions are found in some States relating to fire insurance. Ante, § 176. 396 APPLICATION, WaRKANTY, KEPEESENTATION, ETC. § 193 knowledge of the falsity or fraud of such answer. i Such a statute includes warranties as well as representations, ^ and, under the Missouri statute, that the matter mis- represented contributed to the death must be pleaded.' Statutes also have been enacted in many States requiring a copy of the application to be attached to the policy, or providing that the company shall be bound by the knowl- edge of its agent. The cases construing these statutes, as well as those in regard to misrepresentation, are cited in the note.* These beneficial provisions of the statute it has 1 John Hancock Mut. L. Ins. Co. v. Warren, 181 U. S. 73; 21 Sup. Ct. K. 635. See also Schuermann v. Union Cent. L. Ins. Co., 165 Mo. 641; 65 S. W. R. 723; Kern v. Supreme Council A. L. H., 167 Mo. 471; 67 S. W. K. 252; John Hancock, etc., Co. v. Warren, 59 Ohio St. 45; 51 N. E. R. 546. 2 Kerns. Supreme Council, etc., supra; White v. Provident Savings, etc.,Assoc.,163Mas8. 108; 37N. E.R. 771; 27L. R. A. 398; Dean o. Life Assn., 84 Mo. App. 459. 3 Christian v. Conn. Mut. L. Ins. Co., 143 Mo. 460; 45 S. W. R. 268. ^ Marston v. Kennebec Mut. L. Ins. Co., 89 Me. 266; 36 Atl. Rep. 389; Hartford L. Ins. Co. v. Stalling (Tenu.), 72 S. W. R. 960; John Hancock L. Ins. Co. V. Warren, 59 O. St. 45; 51 N. E. R. 546; Metropolitan L. Ins. Co. V. Howie, 62 O. St. 204; 56 N. E. R. 908; Albert v. Mut. L. Ins. Co., 122 N. C. 92; 30 S. E. R. 327; Dolan v. Mut. Reserve F. L. Ass'n, 173 Mass. 197; 53 N. E. R. 398; Johnsons. Philadelphia, etc., Co., 163 Pa. St. 127; 29 Atl. Rep. 854; Lithgow v. Supreme Tent, etc., 165 Pa. St. 292; 30 Atl. Rep. 830; Stocker v. Boston Mut. L. Ass'n, 170 Mass. 224; 49 N. E. R. 116; Md. Casualty v. Gehrmann, 96 Md. 634; 54 Atl. Rep. 678; Supreme Commander, etc., v. Hughes (Ky.), 70 S. W. R. 405; 24 Ky. L. Rep. 924; Hunziker v. Supreme Lodge K. of P. (Ky.), 78 S. W. R. 201; 25 Ky. L. Rep. 1510; Rice v. Rice (Ky.), 63 S. W. R. 586; 23 Ky, L. Rep. 635; North Western L. Ass'n v. Findley, 29 Tex. Civ. App. 494; 68 S. W. R. 695; Smith v. Supreme Lodge, etc. (la.), 99 N. W. R. 553; Collins v. Life Ass'n, 85 Mo. App. 242; Summers v. Met- ropolitan L. Ins. Co., 90 Mo. App. 691 ; Selders v. Merchants', etc., Ass'n, 93 Tex. 194; 54 S. W. R. 753; Jenkins v. Covenant Mut. L. Co., 171 Mo. 375; 71 S. W. R. 688; Jacobs v. Omaha L. Ass'n, 142 Mo. 49; 43 S. W. R. 375; Jacobs v. Omaha L. Ass'n, 146 Mo. 523; 48 S. W. R. 462; Deane v. South Western, etc., Ass'n, 86 Mo. App. 459; Ashford ■». Met- ropolitan L. Ins. Co., 98 Mo. App. 605; 72 S. W. R. 712; Aloe v. Fidelity, etc., Co., 164 Mo. 675; 65 S. W. R. 993; Kern u. American Legion of 397 § 193 APPLICATION, WARRANTY, REPRESENTATION, ETC. been held cannot be waived by agreement in the applica- tion. ^ This is true although the contract was made in another State than that in which it is sought to be enforced and where no similar statute exists.^ The effect of these laws has been to benefit the assured and prevent technical forfeitures.^ Honor, 167 Mo. 471; 67 S. W. E. 252; Toomey ». Knights of Pythias, 147 Mo. 129; 48 S. W. R. 936; affirming 74 Mo. App. 607; Logan v. Fidelity & Casualty Co., 146 Mo. 114; 47 S. W. R. 948; McDonald v. Banlsers', etc., Assn., 154 Mo. 618; 55 S, W. R. 999; Penn. Mut. L. Ins. Co.w. Mechanics', etc., Co., 19 C. C. A. 286; 72 Fed. Rep. 413; 37 U. S. App. 692; 38 L. E. A. 38; Albro v. Manhattan L. Ins. Co. (C. C. A.), 127 Fed. Rep. 281; affirming 119 Fed. Rep. 629; Corley o. Travelers', etc., Ass'n, 105 Fed. Eep. 854; 46 C. C. A. 278; Manhattan Ins. Co. v. Myers, 109 Ky. 372; 59 S. W. B. 80; 22 Ky. L. Rep. 875; Fisher v. Fidelity, etc., Assn., 188 Pa. St. 1; 41 Atl. R. 467; Burruss ». National li. Ins. Co., 96 Va. 543; 82 S. E. R. 49; National L. Assn. V. Berkley, 97 Va. 574; 34 S. E. E. 469; Stork v. Supreme Lodge, etc., 113 la. 724; 84 N. W. R. 721; National Ace. Soc. v. Dolph, 94 Fed. R. 743, 38 C. C. A. 1; Goodwin v. Provident Savings L. A. Soc. 97Ia. 226; 66 N. W. R. 157; 32 L. R. A. 473; Considine v. Metropolitan L. Ins Co., 165 Mass. 462; 43 N. E. R. 201; Fitzgerald, v. Metropolitan Ace. Assn., 106 la. 457; 76 N. W. R. 809; Mut. L. Ins. Co. y. Kelly, 52 C. C. A. 154; 114 Fed. R. 268. The subject is exhaustively discussed in a note in 63 L. R. A. 833 to Johnson v. Mutual Lite Ins. Co., 180 Mass. 407; 62 N. E. R. 738. ' Hermany v. Fidelity Mut. L. Assn., 151 Pa. St. 17; 24 Atl. R. 1064. In this case the court says: "It would be contrary to public policy to recognize the right of parties to circumvent the law by setting up a waiver such as was insisted on in this case." 2 Fidelity Mut. L. Assn. v. Ficklin, 74 Md. 172; 23 Atl. R. 197; affg. 21 Atl. R. 680. 8 The state of things out of which this necessity for the protection of the assured, in cases of fire insurance especially, sprang, has been thus graphically portrayed (Delancey v. Rockingham, etc., Ins. Co., 52 N. H. 581) : '* Some companies chartered by the legislature as insurance com- panies, were organized for the purpose of providing one or two of their officers, at headquarters, with lucrative employment, — large compensa- tion for light work, — not for the purpose of insuring property ; for the payment of expenses, not of losses. Whether a so-called insurance company was originally started for the purpose of insuring an easily earned income to one or two individuals, or whether it came to that end 398 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 193a § 193a. Do these Statutes Apply to Benefit Societies. — The question arises whether these statutes, for the most part, if not always, adopted before the organization of the beneficiary orders, applies to them as well as to the regu- after a time, the ultimate evil was the same. Names of men of high standing were necessary to represent directors. The directorship, lilse the rest of the institution and its operations, except the collection of pre- miums and the division of the same among the collectors, was nominal. Men of eminent respectability were induced to lend their names for the official benefit of a concern of which they knew and were expected to know nothing, but which was representedto them as highly ad vaatageous to the public. There was no stock, no investment of capital, no iudi- vidual liability, no official responsibility, — nothing but a formal organ- ization for the collection of premiums, and their appropriation as com- pensation for the services of its operators. The principal act of precau- tion was, to guard the company against liability for losses. Forms of applications and policies of a most complicated and elaborate structure, were prepared and filled with covenants, exceptions, stipulations, pro- visos, rules, regulations and conditions rendering the policy void in a great number of contingencies. These provisions were of such bulk and character that they would not be understood by men in general even if subjected to a careful and laborious study ; by men in general they were sure not to be studied at all. The study of them was rendered particularly unattractive, by a profuse intermixture of discourses on sub- . jects in which a premium payer would have no interest. The compound, if read by him, would, unless he were an extraordinary man, be an inex- plicable riddle, a mere flood of darkness and confusion. Some of the most material stipulations were concealed in a mass of rubbish, on the back side of the policy and the following page, where few would expect to find anything more than a dull appendix, and where scarcely any one would think of looking for information so important as that the com- pany claimed a special exemption from the operation of the general law of the land relating to the only business in which the company professed to be engaged. As if it were feared that notwithstanding these dis- couraging circumstances, some extremely eccentric person might attempt to examine and understand the meaning of the involved and intricate net in which he was to be entangled. It was printed in such small type, and In lines so long and so crowded, that the perusal of it was made physi- cally difficult, painful and injurious. Seldom has the art of typography been so successfully diverted from the diffusion of knowledge to the sup- pression of it. There was ground for the premium payer to argue that the print alone was evidence, competent to be submitted to a jury, of a fraudulent plot. It was not a little remarkable, that a method of doing 399 § 193a APPLICATION, WAEEANTT, REPRESENTATION, ETC. larlife insurance corporations. It would reasonably seem that the question is one of construction and probable intent. Where a statute forbade the setting up of the defense of business not designed to impose upon, mislead and deceive him by hiding the truth, practically concealing and misrepresenting the facts, and de- priving him of all knowledge of what he was concerned to know, should happen to be so admirably adapted to that purpose. As a contrivance for keeping out of sight the dangers created by the agents of the nomi- nal corporation, the system displayed a degree of cultivated ingenuity, which if it had been exercised in any useful calling, would have merited the strongest commendation. Traveling agents were necessary to apprise the people of their opportunities, and induce them to act as policy holders and premium payers, under the name of 'the insured.' Such emissaries were sent out: ' The soliciting agents of insurance companies swarm through the country, plying the inexperienced and unwary who are ignorant of the principles of insurance law, and unlearned in the distinctions that are drawn between legal and equitable estates ' (Combs V. Hannibal, etc., Ins. Co., 43 Mo. 152.) The agents made personal and ardent application to people to accept policies, and prevailed upon large numbers to sign papers (represented to be mere matters of form), fal.si- fylng an importantfact by declaring that they made application for poli- cies, reversing the first material step in the negotiation. An insurance company, by its agent, making assiduous application to an individual to make application to the company for a policy, was a sample of the crookedness characteristic of the whole business. When a premium payer met with a loss, and called for the payment promised in the policy, which he had accepted upon the most zealous solicitation, he was sur- prised to find that the voluminous, unread and unexplained papers had been so printed at headqaarters, and so filled out by the agents of the company, as to show that he had applied for the policy. This, however, was the least of his surprises. He was informed that he had not only obtained the policy of his own application, but had obtained it by a series of representations (of which he had not the slightest conception), and had solemnly bound himself by a general assortment of covenants and warranties (of which he was unconscious), the number of which was equaled only by their variety, and the variety of which was equaled only by their supposed capacity to defeat every claim that could be made upon the company for the performance of its part of the contract. He was further informed that he had succeeded in his application by the falsehood and fraud of his representations, — the omission and misstate- ment of facts which he had expressly covenanted truthfully to disclose. Knowing well that the application had been made to him, and that he had been cajoled by the skillful arts of an importunate agent into the 400 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 193a suicide unless it was shown that the assured contemplated suicide at the time the policy was applied for, it was held that it applied to a co-operative association on the assess- ment plan whose membership was confined to the masonic fraternity.^ It was intimated by the Supreme Court of Missouri that the provisions in the statute of that State relative to the application do not apply to the benevolent orders : ^ and the same court has expressly held * that such provisions, under a subsequent statute, do not apply to assessment life insurance companies. But this question has been settled by a later statute and fraternal beneficiary societies are now exempt from these provisions of the law.* acceptance of the policy and the signing of some paper or other, with as little understanding of their effect as if they had been prin'ted in an un- known and untranslated tongue, he might well be astonished at the in- verted application, and the strange multitude of fatal representations and ruinous covenants. But when he had time to realize his situation' had heard the evidence of his having beset the invisible company, and obtained the policy by just such means as those by which he knew he had been induced to accept it, and listened to the proof of his obtaining it by treachery and guilt, in pursuance of a premeditated scheme of fraud, with intent to swindle the company in regard to a lien for assess- ments or some other matter of theoretical materiality, he was measur- ably prepared for the next regular charge of having burned his own property." » Berry v. Knights Templar, etc., Co., 46 Fed. E. 439; aff'd 50 Fed. E. 511. See ante, § 50, et seq. 2 Whitmore v. Supreme Lodge, Knights & L. of H., 100 Mo. 47; 13 S. W. E. 495. 3 Hanford v. Mass. Benefit Assn., 122 Mo. 60; 26 S. W. E. 680. ^ ShotlifE V. Modern Woodmen, 100 Mo. App. 138; 73 S. W. E. 326; McDermott v. Modern Woodmen, 97 Mo. App. 636; 71 S. W. E. 833- Prior to the statute of 1897 of Missouri foreign fraternal associations were not so exempt. Kern ». Supreme Council, etc., 167 Mo. 471; 67 S. W. E. 252. As to attaching by-laws to certificate under a statute requiring a copy of the application to be attached, see Fitzgerald v. Metropolitan Ace. Assn.. 106 la. 457; 76 N. W. R. 809; Johnson u. Phila. & E. Ry. Co., 163 Pa. St. 127; 29 Atl. R. 854; Lithgow v. Supreme Tent, etc., 165 Pa. St. 292; 30 Atl. E. 830; Corley u. Travelers, etc., 105 Fed. E. 854; 46 C. C. A. 278; Kundan v. Grand Council, etc., 7 S. D. 214; 63 N. W. E. 911. 26 401 § 194 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 194. Warranty Defined. — The definition of warranty given by Angell,i and approved by the Court of Appeals of New York,''' is that it is "a stipulation inserted in writing on the face of the policy, on the literal truth or fulfillment of which the validity of the entire contract depends. The stipulation is considered to be, on the face of the policy, although it may be written in the margin, or transversely, or on a subjoined paper referred to in the policy." Lord Mansfield has said,^ that in order to make written instruc- tions valid and binding as a warranty, they must undoubt- edly be inserted in the policy. "It is," said Lord Ellenborough,* " a question of construction in every case, whether a policy is so worded as to make the accuracy of a bona fide statement a condition precedent, and the rules of construction are the same in policies as in other written contracts." And Bunyon adds : ^ "In order to make any statements binding as warranties, they must appear upon the face of the instrument itself by which the contract of insurance is effected ; they must either be expressly set out or by inference incorporated in the policy. If they are not so they are not warranties, but representations."* The word " guaranty " is not equivalent to " warranty." ' The substance of the decisions relating to the subject of warranty in insurance contracts is that the truth of all statements warranted to be true is a condition precedent of the liability of the insurer ; for, if the statements so war- ranted are untrue, there if no contract. Where the policy 1 Angellonlns., § 140. 2 Ripley v. JEtna F. Ins. Co., 30 N. Y. 136. 8 Pawson n. Watson, 1 Cowp. 785. * Robertson v. French, 4 East, 135. * Bunyon on Life Assurance, 34. 8 American Popular L. Ins. Co. v. Day, 39 N, J. L. 89; 23 Am. Rep. 198. "> Masons Union L. Ins. Assn. v. Brockman, 20 Ind. App. 206; 60 N. E. R. 493. 402 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 195 recited that the statements made in the application were warranted to be true and were the basis of the contract and that any misstatements in the application should make the policy void the answers in the application are warran- ties. ^ § 195. DiflSculty of Determining what Amounts to Warranty. — Warranties are not favored in law and it is no error to so instruct the jury,^ and statements in an applica- tion for a policy of insurance will not be construed as war- ranties unless the provisions of the application and policy, taken together, leave no room for any other construction.^ It is not always easy to determine what language in an in- surance contract amounts to a warranty. As was said by the Supreme Court of Massachusetts:* " There is undoubt- edly some difficulty in determining by any simple and certain test what propositions in a contract of insurance constitute warranties and what representations. One gen- eral rule is, that a warranty must be embraced in the policy itself. If, by any words of reference, the stipulation in another instrument, such as the proposal or application, can be construed a warranty, it must be such as make it in legal effect a part of the policy. In a recent case, it was said that ' the proposal or declaration for insurance, when forming a part of the policy, has been held to amount to a condition or warranty, which must be strictly true or com- plied with, and upon the truth of which, whether a statement be intentional or not, the whole instrument 1 Provident Sav. L. Ass. Soc. v. Eeutlinger, 58 Ark. 528; 25 S. W. R. 835; Foley v. Royal Arcanum, 28 N. Y. Supp. 952. '' Masons Union L. I. Co. v. Brodeman, 20Ind. App. 206; 50 N. E. E. 493. s Modern Woodman Ace. Assn. v, Shryock, 64 Neb. 250; 79 N. W. R. 607; 39 L. R. A. 826. 4 Daniels v. Hudson R. F. Ins. Co., 12 Cash. 416; 59 Am. Dec. 192. 403 § 195 APPLICATION, WARRANTY, REPRESENTATION, ETC. depends.' ^ But no rule is laid down in that case for deter- mining how or in what mode such statements, contained in the application or answer to interrogatories, shall be em- braced or incorporated into the policy so as to form part thereof. The difference is most essential, as indicated in the definition of a warranty iu'the case last cited, and as stated by the counsel for the defendants in the prayer for instruction. If any statement of fact, however unimpor- tant it may have been regarded by both parties to the con- tract, is a warranty, and it happens to be untrue, it avoids the policy; if it be construed a representation, and is un- true, it does not avoid the contract if not willful or if not material. To illustrate this, the application in answer to an interrogatory is this : ' Ashes are taken up and removed in iron hods ; ' whereas it should turn out in evidence that ashes were taken up and removed in copper hods, — per- haps a set recently obtained, and unknown to the owner. If this was a warranty, the policy is gone ; but if a repre- sentation, it would not, we presume, affect the policy, be- cause not willful or designed to deceive, but more especially because it would be utterly immaterial, and would not have influenced the mind of either party in making the contract or in fixing its terms. Hence it is, we suppose, that the leaning of all courts is to hold such a stipulation to be a representation rather than a warranty, in all cases where there is any room for construction ; because such construc- tion will, in general, best carry into effect the real intent and purpose which the parties have in view in making their contract." The trouble is caused by the difficulty of as- certaining the intent of the contracting parties because of the ambiguous language often used by them. The insurer on the one hand wishes to have the terms of the contract seem liberal, and yet, in fact, admit of a strict construction ' Vose V. Eagle Life & Health Ins. Co., 6 Cash. 47. 404 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 196 favorable to him. The insured, on the other hand, gener- ally gives little thought to the conditions of the contract until a loss has occurred. § 196. Difference between Warranty and Representa- tion. — The Supreme Court of Connecticut ^ states the difference between a representation and a warranty thus : " The former precedes and is no part of the contract of insurance, and need be only materially true ; the latter is a part of the contract and policy, and must be exactly and literally fulfilled, or else the contract is broken and the policy becomes void." " A warranty, in insurance, " says the Supreme Court of Massachusetts,^ " enters into and forms a part of the contract itself. It, defines, by ways of particular stipulation, description, condition, or otherwise, the precise limits of the obligation which the insurers undertake to assume. No liability can arise except within those limits. In order to charge the insurers, therefore, every one of the terms which define their obligation must be satisfied by the facts which appear in proof. From the very nature of the case, the party seeking his indemnity, or payment under the contract, must bring his claim within the provisions of the instrument he is undertaking to en- force. The burden of proof is upon the plaintiff to pre- sent a case in all respects conforming to the terms under which the risk was assumed. It must be not merely a sub- stantial conformity, but exact and literal; not only in 1 Glendale Woolen Co. v. Protection Ins. Co., 21 Conn. 19; 54 Am. Dec. 309. 2 Campbell v. New England Mut. L. Ins. Co., 98 Mass. 389. See also Welle. NewTork Life Ins. Co., 47 La. Ann. 1405; 17 Sou. R. 853; Aloe V. Mutual Res. L. Assn., 147 Mo. 561; 49 S. W. R. 553; Mut. Ben. L. Ins. Co. V. Lehman, 132 Ala. 640; 32 Sou. R. 733; Royal Neighbors, etc., ».. Wallace, 64 Neb. 330; 89 N. W. R. 758; 99N. W. R. 129; Welchu. Union Central L. I. Co., 117 la. 394; 90 N. W. R. 828; Supreme Conclave, etc., V. Wood (Ga.), 47 S. E. R. 940. 405 § 196 APPLICATION, WAKKANTY, REPRESENTATION, ETC. material particulars, but in those that are immaterial as well. A representation is, on the other hand, in its nature no part of the contract of insurance. Its relation to the contract is usually described by the term 'collateral.' It may be proved, although existing only in parol and pre- ceding the written instrument. JJnlike other verbal nego- tiations, it is not merged in nor waived by the subsequent writing. This principle is in some respects peculiar to insurance, and rests upon other considerations than the rule which admits proof of verbal representations to im- peach written contracts on the ground of fraud. Kepre- sentations to insurers, before or at the time of making a contract, are a presentation of the elements upon which to estimate the risk proposed to be assumed. They are the basis of the contract ; its foundation, on the faith of which it is entered into. If wrongly presented, in any way ma- terial to the risk, the policy that may be issued thereupon will not take effect. To enforce it would be to apply the insurance to a risk that was never presented.^ * * * When statements or engagements on the part of the in- sured are inserted or referred to in the policy itself, it often . becomes difficult to determine to which class they belong. If they appear on the face of the policy, they do not necessarily become warranties. Their character will depend upon the form of expression used, the apparent purpose of the insertion, and sometimes upon the connec- tion or relation to other parts of the instrument. If they are contained in a separate paper, referred to in such a way as to make it a part of the contract, the same considerations of course will apply. But if the reference appears to be for a special purpose, and not with a view to import the separate paper into the policy as a part of the contract, the statements it contains will not thereby be changed from ' Kimball v, Mtaa, Insurance Co., 9 Allen, 640. 406 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 197 representations into warranties. It is perhaps needless to add that verbal representations can never be converted iJito warranties otherwise than being afterwards written into the policy. » * * The application is, in itself, collateral merely to the contract of insurance. Its statements, whether of facts or agreements, belong to the class of ' representa- tions.' They are to be so construed, unless, converted into warranties by force of a reference to them in the policy, and a clear purpose, manifest in the papers thus connected, that the whole shall form one entire contract. When the reference to the application is expressed to be for another purpose, or when no purpose is indicated to make it a part of the policy, it will not be so treated. "^ In Daniels ?;. Hudson River Ins. Co.,^ the court says: ' If by any words of reference the stipulations in another instrument, such as the proposal or application, can be construed a warranty, it must be such as make it in legal effect a part of the policy.' " § 197. Breach of Warranty Avoids the Contract. — If the contract of life insurance therefore declares that the statements made in the application touching the subject of insurance are warranted to be true, and that the policy shall be void if they are untrue, the falsity of such state- ments will defeat the insurance. The parties having in their contract so agreed, and having been free to agree upon whatever terms and conditions they chose, the con- tract being a voluntary one,^ the courts have no other alternative than to give effect to the contract of the par- 1 Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; 22 Am. Dec. 567; Snyder V. Farmers', etc., Co., 13 Wend. 92. 2 12 Gush. 423; 69 Am. Dec. 192. 3 Keim v. Home Mut. F. Ins. Co., 42 Mo. 38 ; 97 Am. Dec. 291 ; Ful- lum V. New York U. Ins. Co., 7 Gray, 61; 66 Am. Dec. 462; Brown V. Roger Williams Ins. Co., 5 B. I. 394; Wilson v. Mtaa, Ins. Co., 27 Vt. 99. 407 § 198 APPLICATION, WARRANTY, REPRESENTATION, ETC. ties. The truth of the fact warranted is a condition pre- cedent to recovery.^ It is immaterial that the applicant believed the statements to be true.^ Nor that he was illit- erate and did not understand what the warranty meant. Whether the applicant acted in good faith is immaterial.^ § 198. Warranties not Favored at Liaw ; Strict Con- strnction . — In determining whether or not the language of the contract imports a warranty, the courts will endeavor to discover the intent of the parties, and with a disposition, if possible, to avoid holding tho statements to be warranties. 1 Fowler v. ^tna F. Ins. Co., 6 Cow. 673; 16 Am. Dec. 460; ^tna L. Ins. Co. V.' France, 91 U. S. 510; Barrltt v. Saratoga, etc., Ins. Co., 5 Hill, 193; 40 Am. Dec. 345; American Popular L. Ins. Co. v. Day, 39 N. J. L. 89; 23 Am. Kep. 198 ; Fitch v. American Popular L. Ins. Co., 59 N. Y. 657; 17 Am, Rep. 372 ; Glutting v. Metropolitan L. Ins. Co., 50 N. J. L. 287; 13 Atl. Hep. 4; Jeffries v. Economical Mut. L. Ins. Co., 22 Wall. 47; Wilkins v. Mut. R. F. Life Ins. Assn., 7 N. Y. Supp. 589; Johnson V. Maine, etc., Ins. Co., 83 Me. 182; 22 Atl. R. 107; Clements v. Conn. Ind. Co., 51 N. Y. Supp. 442; Fell o. John Hancock M. L. Ins. Co. (Conn.), 57 Atl. R. 175; Leonard v. State Mut. L. Ins. Co. (R. I.), 51 Atl. R. 1049; Metropolitan L. Ins. Co. v. Rutherford, 98 Va. 195; 35 S. E. R. 361 and 36 S. E. R. 719; Hubbard v. Mut. Res. F. L. Assn., 40 C. C. A. 605; 100 Fed. R. 719; McClaln «. Provident Life, etc., Soc, 105 Fed. E. 834; National Fraternity, etc., v. Karnes, 24 Tex. C. A. 607; 60 S. W. R. 576; Farrell v. Security Life, etc., 125 Fed. R. 684; McGowan V. Supreme Court, etc., 107 Wis. 462; 83 N. W. E. 775; Kansas Mutual L. A. V. PinsOD,94 Tex. 553; 68 S. W. 531; Selby v. Mut. L. Ins. Co., 67 Fed. R, 490; K--lly v. Life Ins. CI. Co., 113 Ala. 453; 21 Sou. R. 361; Finn v. Metropolitan L. Ins. Go. (N. J. L), 57 Atl. R. 438; Priestly v. Provident Savings Co., 112 Fed. R. 271; Demick «. Metro- politan L. Ins. Co., 67 N. J. L. 367; 51 Atl. R. 692; Dwyer v. Mutual Life Ids. Co. (^N. H.), 58 Atl. R. 502; also authorities cited ante, §§ 195, 196, and post, § 198, et seq. 2 Elliott I). Mutual Ben. Assn., 27 N. Y. Supp. 696. 3 Woehrle v. Metropolitan Life Ins. Co., 21 Misc. R. 88; 46 N. Y. Supp. 862; Standard L. & Ace. Ins. Co. v. Sale, 57 C. C. A. 418; 121 Fed. R. 661; 61 L. R. A. 337; Jennings v. Supreme Council, etc., 81 N. Y. Supp. 90; 81 App. Div. 76; Hoover v. Royal Nei'^hbora, 65 Kans. 616; 70 Pac. R. 595; Standard L. & A. Co. v. Lauderdale, 94 Tenn. 635; 30 S. W. E. 732. 408 APPLICATION, WAERANTY, EEPEESENTATION, ETC. § 198 The strict rule of construction as to warranties does not find favor with modern judges. Many years ago a learned jurist said: ^ " The construction that our own, as well as the English courts, have unfortunately given to a warranty, is exceedingly strict, but it is too well established to be now changed by any exercise of judicial discretion. It is not enough that a provision construed as a warranty in its spirit and substance is fulfilled ; its terms must be literally complied with. Its breach is not excused by showing that it was the result, not of choice, but of accident or necessity ; that it worked no prejudice to the insurer, and not only had no influence on the loss that is claimed, but had no ten- dency to increase, or even vary, the risks that were meant to be assumed. If a breach, however slight, and confes- sedly immaterial, is proved, the entire contract is at an end, the assured loses his indemnity, and the insurer retains his premium, and rejoices in his discharge. When the provi- sion that is claimed to be a warranty is at all ambiguous, it seems to us it is a reasonable presumption that the assured never meant to bind himself by a stipulation thus rigidly construed, and we cannot but think that this presumption, unless the words used are such as plainly, if not necessarily, to exclude it, ought to prevail." ^ The Supreme Court of the United States, in a case where the application was made a part of the policy and the assured covenanted that he had made a full and just exposition of the material facts in re- gard to the condition, situation and value of the property, in concluding that an overestimate of the value of theprop- ' Westfall V. Hudson River F. Ins. Co., 2 Duer, 495. 2 Price V. Phoenix Mut. L. Ins. Co., 17 Minn. 497; 10 Am. Rep. 166; Miller B. Mutual Ben. Life Ins. Co., 31 la. 216; 7 Am. Rep. 122; Wiieelton ij.Hardnisty, 8E1.&B. 232; Stokesu. Cox, 1 H. &N.Excti. 320; Ander- son V. Fitzgerald, 4 H. of L. Ca8.484; 17Jur. 995; 24 E. L. &E. 1 ; Jen- nings V. Chenango, etc., Ins. Co., 2 Denio, 78; Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; 22 Am. Dec. 571. 409 § 198 APPLICATION, WARRANTY, REPRESENTATION, ETC. erty did not vitiate the policy, said : ^ " Two constructions of the contract may be suggested. One is to regard the warranty expressed in the policy as limited or qualified by the terms of the application. In that view, the assured would be held as only warranting that he had stated all mate- rial facts in regard to the condition, situation, value and risk of the property, so far as they were known to him. This is, perhaps, the construction most consistent with the literal import of the terms used in the application and the policy. The other construction is to regard the warranty as relating only to matters of which the assured had or should be presumed to have had, distinct, definite knowl- edge, and not to such matters as values, which depend upon mere opinion or probabilities. But without adopt- ing either of these constructions, we rest the conclusion already indicated upon the broad ground that when a policy of insurance contains contradictory provisions, or has been so framed as to leave room for construction, rendering it doubtful whether the parties intended the exact truth of the applicant's statements to be a condition precedent to any binding contract the court should lean against that construction which imposes upon the assured the obliga- tions of a warranty. The company cannot justly complain of such a rule. Its attorneys, officers or agents prepared the policy for the purpose, we shall assume, both of protect- ing the company against fraud, and of securing the just rights of the assured under a valid contract of insurance. It is its language which the court is invited to interpret, and it is both reasonable and just that its own words should be con- strued most strongly against itself . " ^ 1 National Bank v. Insurance Co., 95 U. S. 678. 2 Mutual, etc., Ins. Co. v. Bobertsou, 59 111. 123; Kentucky, etc., Ins. Co, V. Southard, 8 B. Mon. 634; Gracelon v. Hampden F. Ins. Co., 60 Me. 580; Monlor v. American Life Ins. Co., Ill U. S. 335; Woodruff v. Im- perial F. Ins. Co., 83 N. Y. 133. 410 APPLICATION, WAEEANTT, EEPEESBNTATION, ETC. § 199 § 199. Warranty Never Created by Construction. — It follows that a warranty will never be created by construc- tion. As has been said in a leading case upon the subject of warranty : ^ " The doctrine of warranty in the law of in- surance is one of great rigor, and frequently operates very harshly upon the assured. A warranty is considered as a condition precedent, and whether material or immaterial, as it regards the risk, must be complied with before the assured can sustain an action against the underwriters. A warranty, therefore, is never created by construction. It must either appear in express terms, affirmative or promis- sory, or must necessarily result frdm the nature of the con- tract. It must, therefore, appear on the face of the policy, in order that there may be unequivocal evidence of a stipu- lation, the non-compliance with which is to have the effect of avoiding the contract. It was once doubted whether it must not be incorporated into the body of the policy ; and it was contended that it was not sufficient for it to be writ- ten in the margin. But if it appears on the face of the policy, that is sufficient." ^ On this subject the Supreme Court of Alabama says:^ "While warranties are not favored, and will neither be created or extended by con- struction, when a warranty is expressly and in terms declared, its stipulations and conditions must be strictly complied with ; the question is disembarrassed of any con- sideration of materiality, the parties having made it material by their agreement." * " In considering the question," says the Supreme Court of Massachusetts,^ " whether 1 Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; 22 Am. Dec. 571. " Higbie v. Guardian M. L. Ins. Co., 63 N. Y. 603; Hobby v. Dana, 17 Barb. 114; Burritt v. Saratoga, etc., Ins. Co., 5 Hill, 191; 40 Am. Deo- 345; Ripley v. Mtaa. Ins. Co., 30 N. Y. 157. 3 Ala. Gold L. Ins. Co. v. Garoer, 77 Ala. 215. < Jeffries v. Life Ins. Co., 22 Wall. 47; Mtn-^ Life Ins. Co. v. France Ins., 91 tr. S. 510; American Popular L. Ins. Co. v. Day, 89 N. J. L. 89; 23 Am. Rep. 198. « Campbell v. New England M. L. Ins. Co., 98 Mass. 391. 411 § 200 APPLICATION, WARRANTy, REPRESENTATION, ETC. a statement forming a part of the contract is a warranty, it must be borne in mind, as an established maxim, that war- ranties are not to be created nor extended by construction. They must arise, if at all, from the fair interpretation and clear intendment-of the words used by the parties. ^ Where, therefore, from the designation, of such statements as ' statements ' or as ' representations,' or from the form in which they are expressed, there appears to be no intention to give them the force and effect of warranties, they will not be so construed."^ But where an application is re- ferred to in the policy as the basis of the contract and it is agreed that it shall be deemed and taken as part of the policy and as a warranty on the part of the assured, both the application and policy are to be construed together as one entire contract. And it has been held that the state- ment in the policy, which makes an application part of it, and which contains various warranties on the part of the assured, and the further statement therein that any false or untrue answers or statements, material to the hazard of the risk, shall render the policy void, does not defeat or limit the express warranties contained in the policy.^ § 200. Must be Express. — Warranties, therefore, never being implied, must be express. ' ' The stipulations in poli- cies," says Judge Savage,* " are considered express war- ranties ; an express warranty is an agreement expressed in 1 Daniels v. Hudson E. Ins. Co., 12 Gush. 416; 59 Am. Dec. 192; Blood V. Howard Ins Co., 12 Gosh. 472; Forbush v. Western Mass. Ins. Co., 4 Gray, 340. 2 Houghton?;. Manufacturers' Ins. Co., 8 Met. 114; Jones' Manufac- turing Co. u. Manufacturers' Ins. Co., 8 Cush. 83; 64* Am. Dec. 742; Towne V. Fitchburg Ins. Co., 7 Allen, 51; Price v. Phoenix M. L. Ins. Co., 17 Minn. 497; Fitch W.American Popular L. Ins. Co., 59 N. Y. 557; 17 Am. Kep. 372. 3 Chrisman v. State Ins. Co., 16 Or. 283; 18 Pac. Rep. 466; ante, §§ 196, 197, 198. ■* Duncan ». Sun F. Ins. Co., 6 Wend. 494. 412 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 201 the policy whereby the assured stipulates that certain facts relating to the risk are, or shall be true, or certain acts relating to the same subject have been, or shall be done. It is not requisite that the circumstance or act warranted should be material to the risii ; in this respect an express warranty is distinguished from a representation. Lord Eldon says : ' It is a first principle in the law of insur- ance, that if there is a warranty, it is a part of the con- tract, that the matter is such as it is represented to be. The materiality or immateriality signifies nothing. The only question is as to the mere fact.' " § 201. Afflrmative and Promissory Warranties. — War- ranties may be either affirmative, that is, those which allege affirmatively that certain facts are true ; or prom- issory, that is, those which undertake that certain things shall or shall not be done. Promissory warranties are often also called executory. The distinction is thus illus- trated by the Supreme Court of Iowa: ^ " The policy in this case contains both affirmative and executory warran- ties: 1. The acceptance of the policy with the clause that the lower story of the building insured was, at the time the policy was effected, occupied for stores, was an affirmative or express warranty that the same was at the time so occu- jDied. And if the representation was false, in other words, if the lower story was not then so occupied, whether ma- terial to the risk or not, would avoid the policy. 2. The upper portion of this building insured, as set forth in the policy, was to remain unoccupied during the continuance of the policy. This portion is promissory or executory, and must be strictly complied with on the part of the assured, or the policy will be avoided, whether material to the risk or not. The distinction between the affirmative, or ex- 1 Stout o. City Fire Ins. Co., 12 la. 371; 79 Am. Dec. 539. See also Waters v. Supreme Conclave K. of D., 105 Ga. 151; 31 S. E. K. 166. 413 § 202 APPLICATION, WARRANTY, REPRESENTATION, ETC. press, and promissory, or executory, warranties is very perceptible in this case. The former represents that a cer- tain fact did exist at the time the policy was effected ; and the latter, that a certain thing should exist during the con- tinuance of the policy — both made equally material by the parties themselves, and each fatal to the assured if false or not executed." The promise which is to be a warranty may frequently consist only of an expression of intention. Language in a policy which imports that the assured intends to do or not to do an act which materially affects the risk involves generally an engagement to perform or omit such act. If the assured would reserve a right to change such intention, he must employ explicit language to denote the reservation. 1 But this intent must always appear from the language used and the courts will not infer a warranty in promissory any more thaniu affirmative statements. As where the application stated that the premises insured were "occupied by Goodhue as a private dwelling" the New York Court of Appeals^ held that " here was an affirmative stipulation, that the house was then occupied by Goodhue, but not a promissory agreement that he should continue to occupy it. If it had been the intention of the parties to make it a condition that he should remain the occupant during the term of the insurance, it would have been easy to say so, and there is no good reason in this case for sup- posing the parties intended what they have not expressed." ^ § 202. Construction of Warranties Must be Keason- able. — The construction of aU warranties must be reason- able. A distinction, according to the later authorities, must be observed between those descriptive particulars, 1 Bilbrough v. Metropolis P. Ins. Co., 5 Duer, 587. 2 O'Neil ». BufEaloF. Ins. Co., 3 N. T, 123. 3 Benham v. United G. & L. Ass. Co., 7 Exch. 744; 14 E. L. & E. 324; 16 Jur. 691 ; 21 L. J. Ex. 317. 414 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 202 which are inserted ia the contract merely for the purpose of identification, and those which are designed to indicate the nature, extent and incidents of the risk. These two classes of statements are to be construed with reference to the pur- pose for which they are respectively made. These distinc- tions necessarily oftener arise in cases of fire and marine than in those of life insurance.^ As in all other matters of construction the object to be attained is to ascertain the intent of the parties, and warranties will never be held to exist except upon a fair interpretation and clear intend- ment of the words of the parties. The construction will never be forced.^ And of late the courts seem inclined to relax former rules. We may instance the case of Supreme Lodge K. of H. v. Dickson,^ where the court said : " It is true that any statement made of a material fact which forms the basis of the contract must be considered as a warranty, and, if false, will vitiate the contract, whether made in good faith, though ignorantly, or willfully, and with knowl- edge of its falsity. But there is a difference between state- ments of fact, as such, and statements of opinion on mat- ters where only opinion can be expressed. Falsehood may be predicated of a misstatement of fact, but not of a mis- taken opinion* as to whether a man has a disease when it is latent, and it can only be a matter of opinion. As to what a person may have died of may be largely, if not altogether, a matter of opinion, about which attending physicians often disagree, and as to such matters their statements made can only be treated as representations, and not as warranties, and if made in good faith and on the best 1 See note to Fowle: y. Mlna, F. Ins. Co., 6 Cow. 673; 16 Am. Dec. 466, and cases cited. 2 Conoveru. Mass. Mut. L. Ins. Co., 3 Dill. 217; Campbell i). New England L. Ins. Co., 98 Mass. 381; Provident Life, etc., Assn. v. Keut- linger, 58 Ark. 528; 25 S.W. R. 835. 3 102 Tenn. 255; 52 8. W. R. 862, 415 § 203 APPLICATION, WAREANTY, KEPRESENTATION, ETC. information had or obtainable, they will not vitiate a policy, if incorrect and not willfully untrue." In another case^ it was said : ' ' Whether statements which obviously can- not lie within the knowledge of the applicant, and which both parties know are to be given upon information and belief, must be taken to be warranties, is a question which we need not decide : but that the above provisions consti- tute a warranty of the truth of the statements in the appli- cation, so far as they rest upon the applicant's own knowl- edge, is beyond question.^ § 203. Review of Rules o£ Construction. — The mod- ern rules of construction of insurance contracts in regard to warranties and representations are thus summarized by the Supreme Court of Alabama, in a recent case :^ "In construing contracts of insurance, there are some settled rules of construction bearing on this subject which we may briefly formulate as follows : 1. The courts, being strongly inclined against forfeitures, will construe all the conditions of the contract, and the obligations imposed, liberally in favor of the assured, and strictly against the insurer. 2. It requires the clearest and most unequivocal language to create a warranty, and every statement or engagement of the assured will be construed to be a representation, and not a warranty, if it be at all doubtful in meaning, or the contract contains contradictory provisions relating to the subject, or be otherwise reasonably susceptible of such con- struction. The court, in other words, will lean against that construction of the contract which will impose upon the as- ^ Sweeney v. Metropolitan L. Ins. Co., 19 R. 1. 171; 36 Atl. R. 9. 2 See also Provident Savings L. A. Soc^ v. Oliver, 22 Tex. Ciy. App. 8; 63 S. W. R. 594; McCarthy v. Catholic Knights, etc., 102Tenn. 345; 62 S. W. R. 142; Thompson u. Family Protective Union, 66 S. C. 459; 45 S. E. R. 19; ^tna L. Ins. Co. v. King, 84 111. App. 171. 3 Alabama Gold L. Ins. Co. ■». Johnson, 80 Ala. 467; 2 South. Hep. 128. 416 APPLICATION, WAKRANTY, REPRESENTATION, ETC. § 203 snred the burdens of a warranty, and will neither create nor extend a warranty by construction. 3. Even though a warranty in name or form be created by the terms of the contract, its effect may be modified by other parts of the policy, or of the application, including the questions and answers, so that the answers of the assured, so often merely categorical, will be construed not to be a warranty of immaterial facts stated in such answers, but rather a warranty of the assured' s houest belief in their truth ; or in other words, that they were stated in good faith. The strong inclination of the courts is thus to make these state- ments or answers binding only so far as they are material to the risk, where this can be done without doing violence to the clear intention of the parties expressed in unequivocal and unqualified language to the contrary. In support of these deductions we need not do more than refer to the following authorities.^ Many early adjudications may be found, and not a few recent ones also, in which contracts of insurance, and especially of life insurance, have been con- strued in such a manner as to operate with great harshness and injustice to policy-holders, who, acting with all proper prudence, as remarked by Lord St. Leonards in the case of Anderson v. Fitzgerald,^ had been ' led to suppose that they had made a provision for their families by an insurance ®n their lives, when in point of fact the policy was not worth the paper on which it is written.' The rapid growth of the 1 Moulor V. American Life Ins. Co., Ill U S. 335; National Bank u. Insurance Co., 95 U. S. 673; Price v. PbcBoix Mat. L. Ins. Co., 17 Minn. 497; 10 Am. Rep. 166; Southern Life las. Co. v. Booker, 9 Helsk. 606; 24 Am. Eep. 344; Bliss Ins., §34; Campbell v. New England L. Ins. Co., 98 Mass. 381; Fowler o. ^maF. Ins. Co., 6 Cow. 673; 16 Am. Dec. (note) 463; Piedmont, etc., Ins. Co. v. Young, 58 Ala. 476; Pars. Cont. 465; Glendale Woolen Co. v. Protection Ins. Co., 21 Conn. 19; 24 Am. Dec. 309; Wilkinson v. Conn. Mut. L. Ins. Co., 30 la. 119; 6 Am. Rep. 657; 1 Phill. Ins., § 6.38; Ang. Ins., §§ 147-1470. 2 4 H. L. Cas. 484; 17 Jur. 995; 24 E. L. & E. 1. 27 417 § 20b APPLICATION, WAEKANTY, REPRESENTATION, ETC. business of life insurance in tlie past quarter of a century, with the tendency of insurers to exact increasingly rigid and technical conditions, and the evils resulting from an abuse of the whole system, justify, if they do not necessitate a depart- ure from the rigidity of our earlier jurisprudence on the sub- ject of warranties. And such, as we have said, is the ten- dency of the more modern authorities. There are, it is true, in this case, some expressions in both the policy and the ap- plication (which, taken together, constitute the contract of insurance) that indicate an intention to make all statements by the assured absolute warranties. The application, con- sisting of a ' proposal ' and a ' declaration,' is declared to ' form the basis of the contract ' of insurance, and the policy is asserted to have been issued ' on the faith ' of the application. It is further provided that if the declara- tion, or any part of it, made by the assured, shall be found ' in any respect untrue,' or ' any untrue or fraudulent an- swers ' are made to the questions propounded, or facts suppressed, the policy shall be vitiated, and all payments of premiums made thereon shall be forfeited. So, if there were nothing in the contract to rebut the implication, it might perhaps be held out that the parties had made each answer of the assured material to the risk by the mere fact of propounding the questions to which such answers were made and that this precluded all inquiry into the question of materiality. 1 On the contrary, the policy purports to be issued ' in consideration of the representations ' made in the application, and of the annual premiums. The answers are nowhere expressly declared to be warranties; nor is the application, in so many words, made a part of the contract so as to clearly import the answers into the te>rms and conditions of the policy. Among numerous other questions the assured was asked whether he had been 1 Price t. Phoenix L. Ins. Co., 17 Minn. 497. 418 APPLICATION, WABKANTY, KEPEESENTATION, ETC. § 203 affected since childhood with any one of an enumerated list of complaints or diseases, including ' fits or convulsions,' and whether he had ' ever been seriously ill,' or had been affected with 'any serious disease.' To each of these questions he answered* ' no.' The concluding question is as follows : ' Is the party aware that any untrue or fraudu- lent answers to the above queries, or any suppression of h, etc.. Ass. Co., 29L. J. C. P. (n. s.) 160; 6 Jur. (N. s.) 826; 8 W. R. 243 Ex. Ch. 4 Conn. Mat. L. Ins. Co. v. Luchs, 108 U. S. 498; Hall «. People's Ins. Co., 6 Gray, 185; Lorillard Ins. Co. v. McCulloch, 21 Ohio St. 176 f American Ins. Co. ». Mahone, 66 Miss. 180; Carson v. Jersey City Ins. Co., 43 N. J. L. 300; s. o. 44 N. J. L, 210; Lebanon Ins. Co. v. Kelper, 106 Pa. St. 28. 424 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 205 fact incomplete, and therefor^ untrue, and an answer man- ifestly incomplete and as such accepted by the insurers, may be illustrated by two cases of fire insurance, which are governed by the same rules in this respect as cases of life insurance. If one applying for insurance upon a building against fire is asked whether the property is in- cumbered, and for what amount, and in his answer discloses one mortgage when in fact there are two, the policy issued thereon is avoided.^ But if to the same question he merely answers that the property is incumbered, without stating the amount of incumbrances, the issue of the policy with- out further inquiry is a waiver of the omission to state the amount." ^ The English doctrine in regard to incomplete answers is more favorable to the companies.^ There is no warranty where a question is unanswered.* The ditto mark placed under an answer of " No," in response to a question immediately above will be construed to mean the same and, if the answer be false, the policy will be avoided whether the answer be regarded as an evasion or a falsity.® But a mere check mark placed opposite a ques- tion cannot be construed to mean a negative answer when check marks of the same kind are placed opposite ques- tions not answered and deemed immaterial.® § 205. When Answers are not Responsive. — Where the answers to questions in the application are not respon- 1 Towne V. Fitchburg Ins. Co., 7 Allen, 61. See also Wright v. Equi- table Life, etc., See , 50 How. Pr. 367. 2 Nichols V. Fayette Ins. Co., 1 Allen, 63; Dunbar v. Phenix Ins. Co., 72 Wis. 492 ; 40 N. "W. E. 386. 3 London Ass. v. Mansel, II Ch. D. 363; 48 L. J. Ch. 381; 41 L. T. 225; 27 W. R- 444. 4 Brown v. Greenfield L. Assn. 172 Mass. 498; 53 N. E. R. 129; Mut. Res. F. L. A. V. Farmer, 65 Ark. 581; 47 S. W. E. 850. 6 Fitzrandolph v. Mutual R. Soc, 21 Nova Scotia R. 274. 6 Manhattan L. Ins. Co. v. P. J. Willis & Bro., 8 C. C. A. 594; 60 Fed. R. 236. 425 § 205a APPLICATION, WARRANTY, REPRESENTATION, ETC. sive they will not be considered warranties although made so by the policy. This was held in a case in the Federal court in Ohio, ^ where the question was whether the father or certain other relatives had been afflicted with certain diseases, and continued, "If so, state full particulars of each case? " Thereply was: " No, father died from ex- posure in water, age 58." In fact the father died at the age of 30. The court held the latter part of the answer not responsive and therefore a representation, stating the ruljj thus: " "Where the answers are responsive to direct questions asked by the insurance company, they are to be regarded as warranties, and where they are not so respon- sive, but volunteered without being called for, they should be construed to be mere representations. The part of the answer in question in this case in reference to the age of the father at death, being a mere representation, does not con- stitute a defense unless it appears to have been material as well as false. ^ In a case in Minnesota, ^ the court says : "The answer to a material question may be in itself wholly immaterial and of no effect. An answer so irresponsive as to leave the fact inquired of wholly undisclosed, the question unanswered, will not avoid the contract in the absence of fraud." § 205a. Qualified Answers. — If the answers of the ap- plicant to the questions in the application are limited or qualified by any particular or general expression, clearly showing an intention so to limit or qualify his statements, effect will be given to such extent. Thus, where the ques- tion was whether certain relatives of the applicant had been afflicted with any hereditary disease and he replied, " Not ' Buell V. Conn. Mut. L. Ins. Co., 2 Flipp. 9; Triple Link, etc., v. Froebe, 90 III. App. 299. 2 Protection Ins. Co. v. Harmer, 2 Ohio St. 473. 8 Ferine v. Grand Lodge A, O. U. W., 51 Minn. 224; S3 N. W. B. 367. 426 APPLICATION, AVAERANTY, EEPEESENTATION, ETC. § 205 to my knowledge," it was held by the Supreme Court of the United States ^ that the affirmation was narrowed down to what the applicant himself personally knew touching the subject. And to make out the defense sought to be estab- lished, that the answer was false, the company must show that the disease existed, that it was hereditary, and that both of these things were known to the applicant when he answered the question. So, where the answers in the ap- plication were qualified by the words at its foot: "The above is as near- correct as I remember it," it was held^ that, to defeat recovery on the policy, the applicant must have been consciously incorrect in some one of the answers. In another case ^ the applicant stated that the facts recited in his application were " true to the best of his knowledge and belief." It was held that it would not avail the com- pany to show that such acts were false, unless it also showed that at the time the statements were made the ap- plicant knew them to be false.* This is much more the case when the question requires the applicant to answer " so far as he knows," ' or where the question calls for an opinion or judgment.' ^ Insurance Co. v. Gridley, 100 U. S. 614. 2 iEtna Ins. Co. v. France, 94 U. S. 561. 3 Clapp V. Mass. Benefit Assn., 146 Mass. 519; 16 N. Bast. Rep. 433. * See also Fishery. Crescent Ins. Co., 33 Fed. Rep. 549; Anders u. Su- preme L. K. of H., 51 N. J. L. 175; 17 Atl. R. 119; O'Connell u. Supreme Conclave K. of D., 102 Ga. 143; 28 S. E. R. 282; and generally see as to qualified answers: Mutual Reserve F. L. Assn. u. Sullivan (Tex. Civ. A.), 29 S. W. R. 190; Mutual Reserve F. L. Assn. v. Farmer, 65 Ark. 581; 47 S. W. R. 850; Egan v. Supreme Counc. Cath. Benev. L., 52 N. Y. Supp. 978; affirmed 161 N. Y. 650; 57 N. E. R. 1109; Jennings v. Supreme Counc. Loyal Ben. Assn., 81 App. Dlv. 76; 81 N. Y. Supp. 90; Henn v. Metropolitan L. I. Co., 67 N. J. L. 310; 51 Atl. R. 689. 6 Fitzgerald v. Supreme Council Cath., etc., Assn., 39 App. Div. 251; 56 N. T. Supp. 1005; aff' d 167 N. Y. 568; 60 N. E. R. 1110. 6 Royal Neighbors v. Wallace (Neb.), 99 N. W. R. 256, following .Sltna L. Ins. Co. ». Rehlaender (Neb.), 94 N. W. R. 129; Security Trust Co. V. Tarpey, 182 111. 52; 54 N. E. R. 1041. 427 § 206 APPLICATION, WAEBANTY, REPRESENTATION, ETC. § 206. Bepresentations. — In the course of the preced- ing discussion much has been said in regard to representa- tion as contra-distinguished from warranty, and in speaking of the latter many characteristics of the former have been mentioned. A representation has been defined to be a verbal or written statement made before the issuance of jthe policy as to some fact, or state of facts, tending to induce the in- surer more readily to assume the risk, or to assume it for a less premium, by diminishing the estimate he would other- wise have formed of it.^ Another definition^ is, that it is " a statement of facts, circumstances, or information, tend- ing to increase or diminish the risks, as they would other- wise be considered, made prior to the execution of the policy by the assured or his agent to the insurer, in order to guide his judgment in forming a just estimate of the risks he is desired to assume. It is usually made by parol or by a writing not inserted in the policy, but when the in- tention as to the construction is sufficiently declared, may be expressed in the policy." It is extrinsic, collateral and in- cidental to the contract, because a presentation of the ele- ments upon which to estimate the risk and the basis of the undertaking to be entered into.^ The Supreme Court of Alabama happily says: * " A representation is not, strictly speaking, a part of the contract of insurance, or of the es- sence of it, but rather something collateral or preliminary, and in the nature of an inducement to it. A false repre- sentation, unlike a false warranty, will not operate to vitiate the contract or avoid the policy, unless it relates to a fact actually material, or clearly intended to be made mate- rial by the agreement of the parties. It is sufficient, if 1 Arnold on Ins., § 182; Bliss on Life Ins., § 35. 2 Duer on Ins. 644. 8 Campbell v. New England Mut. L. Ins. Co., 98 Mass 381; Daniels V. Hudson River Ins. Co., 12 Cush. 416; 58 Am. Dec. 192. ^ Alabama Gold Life Ins. Co. v. Johnson, 80 Ala. 467 ; 2 So. Bep. 128. 428 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 208 representations be substantially true. They need not be strictly nor literally true. A misrepresentation renders the policy void on the ground oi fraud, while non-compliance with a warranty operates as an express breach of the con- tract." 1 § 207. Material and Immaterial Representations. — The natural division of representations is into those which are material and those which are immaterial, the former having a tendency to influence the insurer to make the con- tract, and the latter not having any influence upon him. These definitions become more clear as we discuss particu- lar examples. § 208. Affirmative and Promissory Representations. — According to some authorities representations are divided, like warranties, into affirmative and promissory. It has, however, been denied that there is any such thing as a promissory representation, although the text-book writers have approved the division.^ It has been said^ that, " Language in a policy which imports that it is intended to do or omit an act which materially affects the risk, its ex- tent or nature, is to be treated as involving an engagement to do or omit such act. ' ' This statement has been approved by the Federal courtin at least one case* where the engagement was that the policy should be void " if any of the statements 1 Price V. Phoenix Mat. Ins. Co., 17 Minn. 497; 10 Am. Rep. 166; Fishery. Crescent Ins. Co., 33 Fed. Rep. 549; Moulor v. Am. Ins. Co., Ill U. S. 335; Phoenix Mut. L. Ins. Co. v. Raddin, 120 U. S. 183; Thomp- son V. Weems, 9 App. Cas. 671. See also Maine Ben. Assn. v. Parks, 81 Me. 79; 16 Atl. R. 339. See also Aetna L. Ins. Co., v. Rehlaender (Neb.), 94 N. W. R. 129; Royal Neighbors v. Wallace fNeb.), 92 N. W. E. 897. 2 May on Ins., § 182. And see Zepp v. Grand Lodge A. 0. U. W., 69 Mo. App. 487. 3 Bilbrongh v. Ins. Co., 5 Duer, 587. , = Schultz V. Mut. Life Ins. Co., 6 Fed. Rep. 672. 429 § 208 APPLICATION, WARRANTY, REPRESENTATION, ETC. and declarations made in the application for this policy, up- on the faith of which this policy is issued, shall be found in any respect untrue." In the application the language used was that the applicant ' ' declares ' ' that he does not now and will not practice any pernicious habit tending to shorten life. The court held as follows: "In this policy such statement and declaration is, in substance, incorporated into and made part of the policy. The language in regard to future pernicious habits is far more than a declaration of intention. It is a positive representation of a future fact, and is not to be regarded as an expression of the expecta- tion or belief of the insured. I am, therefore, led to the conclusion that the clause in the policy imports an agree- ment that future pernicious habits shall not be entered into, and that if the insured thereafter practices any pernicious habit that obviously tends to shorten life the policy will be thereby avoided." The Supreme Court of Penny Ivania, upon the same state of facts, came to a different conclusion. The defendant in both cases was the same and the language of the application and policy identical. In this case ^ the court said : " It is unnecessary to discuss the question as to whether the declarations of the insured as to existing facts in his application constitute a warranty. The authorities are by no means uniform on this point. Our own case of the Washington Life Insurance Company v. Schaible,^ holds that they do not constitute such warranty. Where, how- ever, the policy has been issued upon faith of such repre- sentations, and they are false in point of fact, the better opinion seems to be that the policy is avoided. And this is so even where the false statement is to a matter not mate- rial to the risk.^ In such case the agreement is that if the statements are false, there is no insurance ; no policy is 1 Knecht v. Mutual Life Ins. Co., 90 Pa. St. 120; 35 Am. Rep. 641. .2 1 W. N. C. 369. 3 Jeffries v. Life Ins. Co., 22 Wall. 47. 430 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 208 made by the company, and no policy is accepted by the insured. In the case in hand the policy attached. There was nothing to avoid it db initio. Were the mere declara- tions by the insured in his application, as to his future in- tentions, and his failure to carry out his declarations, or to comply with his intentions as to his future conduct suffi- cient to work subsequent forfeiture of the policy? In no part of the application did the assured covenant that he would not practice any pernicious habit. Nor did he prom- ise ^ agree or warrant not to do so. He declared that he would not. To declare, is to sta,te; to assert; to publish; to utter; to announce; to announce clearly some opinion or resolution ; while to promise is to agree ; ' to pledge one's self ; to engage ; to assure or make sure ; to pledge by contract.'^ There is no clause in the policy which provides that if the assured shall practice any pernicious habit tend- ing to shorten life, the policy shall ipso facto become void. There is only the stipulation that, ' if any of the statements or declarations made in the application » « * shall be found in any respect untrue, the policy shall be null and void. ' This evidently referred to a state of things existing at the time the policy was issued. As to such matters, as I have already said, there was no untrue statement. But the assured dexjlared, as a matter of intention, that he would not practice any pernicious habit. Was this declaration of future intention false? There is no allegation, much less proof, that it was so. The assured might well have in- tended to adhere to his declarations in the most perfect good faith, yet in a moment of temptation have been overcome by this insidious enemy (intemperance). In the absence of any clause in the policy avoiding it in case the assured should practice any such habit, and of any covenant or warranty on his part that he would not do so, we 1 Worcester. 431 § 208 APPLICATION, WARRANTY, REPRESENTATION, ETC. do not think his mere declaration to that effect in the application sufficient to avoid the policy." In a Massachusetts case,^ the Supreme Court of that State said: "The word, 'representations,' has not always been confined in use to representations of facts existing at the time of making the policy; but has been sometimes ex- tended to statements made by the assured concerning what is to happen during the term of the insurance ; in other words, not to the present but to the future ; not to facts which any human being knows or can know, but to matters of expectation or belief, or of promise and contract. Such statements (when not expressed in the form of a distinct and explicit warranty which must be strictly complied with), are sometimes called ' promissory representations,' to distinguish them from those relating to facts, or ' affirm- ative representations.' 'And these words express the dis- tinction ; the one is an affirmation of a fact existing when the contract begins ; the other is a promise, to be performed after the contract has oome into existence. Falsehood in the affirmation prevents the contract from ever having any life ; breach of the promise could only bring it to a prema- ture end. A promissory representation may be inserted in the policy itself ; or it may be in the form of a written application for insurance, referred to in the policy in such a manner as to make it in law a part thereof ; and in either case the whole instrument must be construed together. But this written instrument is the expression, and the only evidence, of the duties, obligations and promises to be per- formed by each party while the insurance continues. To make the continuance or termination of a written contract, which has once taken effect, dependent on the performance or breach of an earilier oral agreement, would be to violate a fundamental rule of evidence. A representation that a 1 Kimball v jEina Ins. Co., 9 Allen, 642. 432 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 209 fact now exists may be either oral or written ; for if it does not exist, there is nothing to which the contract can apply. But an oral representation as to a future fact, honestly made, can have no effect: for if it is a mere statement of an expectation, subsequent disappointment will not prove that it was untrue ; and if it is a promise that a certain state of facts shall exist, or continue during the term of the policy, it ought to be embodied in the written contract." This opinion goes on to state that if the oral promise be made mala fide, and with the intention to mislead and deceive, the fraud will have the same effect as the material falsity of an affirmative representation. But if made bona fide, and without intention to mislead, or deceive, it cannot be set up to avoid a contract. Only those promissory representa- tions are available for such a purpose which are reduced to writing and made part of the centract, thus becoming sub- stantially, if not formally, warranties. ^ 'It is eminently reasonable, as well as consistent with authority, that prom- issory representations, when false, should avoid the contract only when they are either made under such circumstances that their breach substantially amounts to a fraud upon the insurer, or else when they are incorporated into the policy in such way as to become virtually warranties.^ § 209. False Representations avoid contract only when Material. — We have seen that in case of warranties the question of materiality cannot arise because the truth of the facts is made material by the contract itself, but in- asmuch as representations are collateral and form only an inducement, to the contract, they avoid it only when mate- rial, or in other words have led the insurer into an engage- ment he would have been less likely to have entered into if ' Prudential Assurance Soc. v. Mtna, L, Ins. Co., 62 Conn. 579; 2 Blatchf. 223; 23 Fed. Rep. 438; May on Ins., § 182. 2 See post, § 323. 28 433 § 210 APPLICATION, WARRANTY, REPRESENTATION, ETC. the statement or representation had not been made or if he had known that the representations were untrue. The Su- preme Court of Massachusetts says on this point : ^ " When the insurer seeks to defeat a poUcy upon this ground (false representations) his position in court is essentially different from that which he may hold upon a policy con- taining a like description of the risk as one of its terms. It is sufficient for the plaintiff to show fulfillment of all the conditions of recovery which are made such by the contract itself. The burden is then thrown upon the defendant to set forth and prove the collateral matters upon which he relies. There is also another distinction very important in its practical application. As this defense relates entirely to the substance and not to the letter of the contract, it can only prevail by proof of some representation material to the risk, and that it was untrue in some material particu- Y^j. * * # rpj^g answers contained in the application being in the nature of representations only, the question is of their substantial and not their literal truth. To defeat the policy they must be shown to be materially untrue, or untrue in some particular material to the risk." ^ § 210. Immaterial whether False Representation is Intentional or Accidental. — It is immaterial whether the misrepresentation was intentional or accidental. "It is not necessary in all cases," says the Court of Appeals of New York,^ " in order to sustain a defense of misrepresen- tation in applying for the policy to show that the misrepre- 1 Campbell v. New England Mut. L. Ins. Co., 98 Mass. 390. 2 Murphy v. Am. Mut. Ace. Assn ., 90 Wis. 206; 62 N. W. R. 1057; Prudential Ins. Co. v. Leyden (Ark.), 47 S. W. B. 767; Higgins v. Jno. Hancock M. L, I. Co., 20 Misc. B. 231; 45 N. Y. Supp. 414; German American M. L. Assn. v. Farley, 102 Ga. 720; 29 S. E. E. 615. 3 Amour V. Transatlantic F. Ins. Co., 90 N. Y. 456; Provident Savings, etc., Soc. V. Llewellyn, 58 Fed. Bep. 940; 7 C. C. A. 579; McGowan v. Supreme Court I. O. O. F. , 107 Wis. 462 ; 83 N. W. B. 775. 434 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 210 sentation was intentionally fraudulent. A misrepresenta- tion is defined by Phillips to be where a party to the contract of insurance, either purposely, or through negligence, mistake or inadvertence, or oversight, misrepresents a fact which he is bound to represent truly ^ and he lays down the doctrine that it is an implied condition of the contract of insurance that it is free from misrepresentation or con- cealment, whether fraudulent or through mistake. If the misrepresentation induces the insurer to enter into a con- tract which he would otherwise have declined, or to take a less premium than he would have demanded had he known the representation to be untrue, the effect as to him is the same as if it was made through mistake or inadvertence, as if it had been made with a fraudulent intent, and it avoids the contract. An immaterial misrepresentation, unless in reply to a specific inquiry, or made with a fraudulent intent and influencing the other party, will not impair the contract. But if the risk is greater than it would have been if the representation had been true, the preponderance of author- ity is to the effect that it avoids the policy, even though the misrepresentation was honestly made,^ A material misrepresentation by the agent for effecting the insurance will defeat it, though not known to the assured, and though made without any fraudulent intent on the part of the agent, to the same extent as though made by the assured himself.^ In this case (which was a case of fire insurance) Story, J., says: 'A false representation of a material fact is, according to well settled principles, sufficient to avoid a policy of insurance underwritten on the faith thereof, whether the false representation be by mistake or design.' " The assured, having given an untrue answer, whether by accident, mistake or design, it matters not, to 1 Phill. on Ins., § 537. 2 Phill. on Ins., §§ 537-542; Wall v. Howard Ins. Co., 14 Barb. 383. 3 Carpenter v. Am. Ins. Co., 1 Story C. C. 57. 435 § 211 APPLICATION, WARRANTY, REPRESENTATION, ETC. a direct, plain and practical question, he cannot afterwards be heard to say it was immaterial.^ § 211. Materiality of Representation Question of Fact. — Where any doubt exists as to the materiality of the misrepresentation, it is a question of fact for the jury.^ Where, however, the questions and answers in an applica- tion are clearly material, it is the duty of the court to determine the materiality and not leave it to the jury.^ The Supreme Court of Massachusetts says upon this sub- ject : * "It is true that a representation need not, like a warranty, be strictly and literally complied with, but only substantially and in those particulars which are material to be disclosed to the insurers to enable them to determine whether they will enter into the contract ; and that, where the question of materiality of such particulars depends upon circumstances, and not upon the construction of any writing, it is a question of fact to be determined by the jury. But where the representations upon which the con- 1 Davenport u. New England Ins. Co., 6 Gush. 340; Day v. Mutual Ben. L. Ins. Co., 1 McArthur, 11; 29 Am. Eep. 571; Anderson v. Fitz- gerald, 4 H. of L. Cas. 484; 2 Big. 341; McCoy v. Metropolitan Life Ins. Co., 133 Mass. 82; Mtua. L. Ins. Co. ». France, 91 U. S. 510; Footu. ^tna L. Ins. Co., 61 N. Y. 571; Baker v. Home Life Ins. Co., 64 N. T. 648; Cushman V. United States Life Ins. Co., 63 N. Y. 404; Galbraith v. Arlington, etc., Ins. Co., 12 Bush, 29; Powers o. N. E. Mutual Life Assn., 50 Vt. 630; Metropolitan L. Ins. Co. ». McTague, 49 N. J. L. 587; 9 Atl. Rep. 766; Cazenove v. British Equitable Ins. Co., 29 L. J. C. P. 160; 6 Jur. (n. s.) 826; 8 W. E. 243; Ferine v. Grand Lodge A. O. U. W., 51 Minn. 224; 53 N. W. E. 367; Levie v. Metropolitan Life Ins. Co., 163 Mass. 117; 39 N. E. E. 792; McGowan o. Supreme Court I. O. O. F., 104 Wis. 173; 80 N. W. R. 603. 2 Armour v. Transatlantic F. Ins. Co., 90 N. Y. 450; Mut. Benefit L. Ins. Co. V. Miller, 39 Ind. 475; Campbell v. New England M. L. Ins. Co., 98 Mass. 395; Washington Mut. L. Ins. Co. w. Haney, 10 Can. 625. 3 Lutzo. Metropolitan L. Ins. Co., 186 Pa. St. 627; 40 Atl. R. 1104; March v. Metropolitan L. Ins. Co., 186 Pa. St. 629; 40 Atl. E. 1100; Fidelity M. L. Assn. v. Miller, 34 C. C. A. 211; 92 Fed. E. 63. * Campbell v. N. E. Life Ins, Co., 98 Mass. 402. 436 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 212 tract of insurance is based are in writing, their interpreta- tion, like that of other written instruments, belongs to the court, and the parties may, by the frame and contents of the papers, either by putting representations as to the quality, history or relations of the subject insured into the form of answers to specific questions, or by the mode of referring to them in the policy, settle for themselves that they shall be deemed material; and, when they have done so, the applicant for insurance cannot afterwards be permitted to show that a fact which the parties have thus declared material to be truly stated to -the insurers, was in fact immaterial, and thereby escape from the consequences of making a false answer to such a question." ^ The test of materiality is whether the matter misrepresented influ- enced the action of the insurer. ^ The falsity of a state- ment in an application raises no presumption that it was made with intent to deceive.^ § 212. Answers to Specific Questions alwaj's Mate- rial. — Where a specific question is asked and the applicant makes an untruthful answer, the policy is avoided whether the answers are warranties or representations, because " the parties may by their contract make material a fact that would otherwise be immaterial, or make immaterial a fact that would otherwise be material."* On this point the Supreme Court of Iowa said:^ "A misrepresentation by one party of a fact specifically inquired about by the other, though not material, will have the same effect in ex- 1 Anderson?;. Fitzgerald, i H. L. Cas. 484; ]7 Jur. 995; Von Lindenan V. Desborough, 3 M. & Bob. 45; 8 B. & C. 586; 3 C. & P. 350. 2 Matson B. Modern Samaritans (Minn.), 98 N. W. K. 330. 3 Dolan V. Mutual Reserve F. L. A., 173 Mass. 197; 53 N. E. R. 398. ^ Phoenix Mut. L. Ins. Co. v. Raddin, 120 U. S. 183; Brigoac v. Pacific Mut. L. Ins. Co. (112 La.), 36 Sou. R. 595; Thomas v. Grand Lodge A. O. U. W., 12 Wash. 500; 41 Pac. R. 882. 6 Miller u. Mutual Benefit L. Ins. Co.. 31 la. 232- 7 Am. Rep. 122. 4.37 § 212 APPLICATION, WARRANTY, REPRESENTATION, ETC, onerating the latter from the contract as if the fact had been material, since, by making such inquiry, he implies that he considers it so. In all jurisprudence this distinc- tion is recognized. It is particularly applicable to written inquiries referred to in a policy. The rule is so because a party, in making a contract, has a right to the advantage of his own judgment of what is material, and if by making specific inquiry, he implies that he considers a fact to be so, the other party is bound by it as such.^ Eepresentations of this kind differ from warranties in that a substantial compliance with them is sufficient to answer their terms. Whether there has been such substantial compliance, that is whether the representation is, in every material respect, true, is a question of fact for the jury. But it is not for the jury to say that the representation, though substantially untrue, is, notwithstanding, immaterial. An illustration will make plain the view of the court. Suppose that, in answer to a specific question, the assured states that his age is a week or a month greater. The question would be a proper one for the jury to say whether the representation, though strictly and technically untrue, was not substantially and materially true. But suppose it appears, from the evidence, that the age of the assured is fifty, instead of thirty, years. It is not the province of the jury to say that the represen- tation, though untrue, is immaterial." It is not within the province of the jury, under the guise of determining whether the statements of the applicant were substantially true or false to find that diseases and infirmities were not material to be disclosed when the parties had, by the form of the contract of insurance and of the contemporaneous written application, conclusively agreed to consider them material. That is, it is for the court to rule whether or not a matter 1 1 Phil, on Ins., § 342; Campbell v. New England Mut. L. Ins. Co., 98 Mass. 401. 438 APPLICATION, WAKEANTT, REPRESENTATION, ETC. § 212 is material, and for the jury to determine whether the statements concerning such matters, ruled material, were substantially true.^ Yet it has been held that the answer given to a material question may be immaterial and of no effect, even though untrue (in the absence of fraud), e. g., where the fact stated is not of itself material and is so irre- sponsive to the question as to leave it wholly unanswered.^ On this subject the Supreme Court of New Jersey has said in a recent case : ^ " Usually the materiality of a representa- tion will be inferred from the fact that it was made pend- ing the negotiations, in response to a specific inquiry by the insurer ; but this rule is not universal ; for the purpose of an inquiry must be considered to see whether the infor- mation is sought to aid the insurer in fixing the terms on which he will contract, or with an entirely different object. Thus, if a mutual insurance company should require its premiums to be paid within a definite time after mailing of notice addressed to the residence of the insured, and with this rule in view should require every applicant for insur- ance to state his residence in his application, and an appli- cant should give as his residence, not the truth, but the place where he ordinarily received his mail, it would seem absurd that this circumstance could invalidate the con- tract." And the court held that a misrepresentation as to the relationship of the payee did not affect the risk in that particular case, conceding that under other circum- stances statements as to relationship of the payee would 1 Campbell v. New England, L. Ins. Co., 98 Mass. 401; Davenport v. New England Ins. Co., 6 Cush. 341; Miller v. Mutual Ben. L. Ins. Co., 31 la. 233; Phoenix M. L. Ins. Co. v. Raddin, 120 U. S. 183; Day v. Mutual Ben. L. Ins. Co., 1 McArthur, 41; 29 Am. Eep. 565; Anderson V. Fitzgerald, 4 H. L. Cas. 484; Jeffries v. Life Ins. Co., 22 Wall. 47; Co-operative, etc., Assn., v. Leflore, 63 Miss. 4. 2 Ferine v. Grand Lodge A. O. U. W., 51 Minn. 224 ; 53 N. W. R. 367. 3 Vivar v. Supreme Lodge K. of P., 42 N. J. L. 455 ; 20 Atl. E. 36. 439 § 213 APPLICATION, WARRANTY, REPRESENTATION, ETC. be material.^ Still, as we shall see, it has often been left to the jury to say whether certain statements in the applica- tion were material to the risk. § 213. Representations to be Material Need not Always be of Facts Relating Directly to the Risk. — In order to be material a representation need not necessarily be of facts relating directly to the risk. If the applicant makes false statements as to some incidental matters, as for exam- ple concerning his pecuniary means, or his social or business relations, from which an inference can be drawn as to the propriety of accepting or declining the risk, they will avoid the policy, provided the jury, for it is a question of fact to be left to a jury, find that the insurer was influenced by them, or, in other words, that they were material elements in the making of the contract. This doctrine has been laid down by the text-books,^ and also in an old English case,^ and it has been approved by the Court of Appeals of New York.* In that case the insured, Schumacher, was, it was claimed, represented to be a partner in the firm of Valton Martin & Co., and the moneyed man of the concern, when, in fact, he was only the porter who worked in the store, and the false representation was made by Martin, who was with the insured and took an active part in effecting the insurance and was one of the payees of the policy. In this case the court said: " The judge, among other things, charged the jury that if the insured untruly represented that he was a partner of the firm of Valton, Martin & Co., or that if he untruly represented that he was the moneyed man of the 1 See Supreme Council, etc., v. Green, 71 Md. 263; 17 Atl. R. 1048; Sup. Council A. L. H. v. Smitli, 45 N. J. Eq. 466; 17 Atl. R. 770, and posJ, §230. 2 Arnonld on Ins., p. 520; 2 Duer, 692; 3 Kent Comm. 282. s Sibbald v. Hill, 2 Dow's Pari. R. 263. ■* Valton V. National, etc., Soc, 20 N. Y. 32. 440 APPLICATION, WAREANTY, REPRESENTATION, ETC. § 213 firm, and either or both such untrue representations were material to the risis, then the policy was avoided, and there could be no recovery. That if Schumacher was dead in September, 1850, and his occupation that of a merchant at the time the proposals were signed, and the representations of his being a partner, or the moneyed man of the firm, were either not untrue or not material to the risk, then the action was, prima facie sustained. The defendant's counsel requested the court to charge the jury that if Schumacher himself, or by Martin in his behalf, represented to the agent of the defendants that Schumacher was a partner of the firm of Martin, Valton & Co., when in fact at that time he was not such a partner, and if the defendants would not have issued the policy if the representation had not been made, then the policy was void and the plaintiffs could not recover. The judge declined so to charge, and the defendant's coun- sel excepted. The defendant's counsel also requested the judge to charge the jury that if they found that Schumacher himself, or by Martin in his behalf, represented to the agent of the defendants that Schumacher was the moneyed man of the concern of Valton, Martin & Co., when in fact at that time he was not such, and that the defendants would not have issued the policy if the representations had not been made, then the policy is void and the plaintiffs cannot recover. The judge refused so to charge, and the defend- ant's counsel excepted. The charge of the judge was cor- rect as far as given. If the representations were made, and false, the falsity must have been known to Schumacher and Martin. The facts were within their knowledge, and the representations fraudulent. The requests to charge, considered in connection with the charge given, present the question whether fraudulent representations made by the assured to the insurer upon his application for a policy, though not material to the risk, yet material in the judgment of the insurer, and which induced him to take the risk, will 441 § 213 APPLICATION, WARRANTY, EEPEESENTATION, ETC. t avoid the policy. This question has not been determined by any adjudged case in this State, so far as I have been able to discover. The elementary writers hold that the policy may be avoided. In Sibbald v. Hill i it was held that when the assured fraudulently represented to the un- derwriter that a prior insurance by another underwriter upon the same risk had been made at a less premium than it was in fact made, the policy was vitiated. In this case it is obvious that the risk itself was not affected by the representations. Lord Eldon, in his opinion, says that it appeared to him settled law, that if a person meaning to effect an insurance exhibited a policy underwritten by a person of skill and judgment, knowing that this would weigh with the other party and disarm the ordinary pru- dence exercised in the common transactions of life, and it turned out that this person had not in fact underwritten the policy or had done so under such terms that he came under no obligation to pay, it appeared to him settled law that this would vitiate the policy. The courts in this country would say that this was a fraud ; not on the ground that the misrepresentation affected the nature of the risk, but because it induced a confidence without which the party would not have acted. The principle of this case, when applied to the one under consideration, shows that the judge committed an error in refusing to charge as re- quested. It is clear that the circumstance of a party being engaged in commercial business, possessed of large means, might induce an insurer to made an insurance upon his life for a large amount, while were he a mere porter, the risk would be rejected, although the chance of life would be as good in the latter situation as in the former." ^ So, where the residence a»f the applicant was stated at Fisherton 1 2 Dow'sFarl. R. 263. 2 Higbie v. Guardian Muf. L. Ins. Co., 53 N. Y. 603. 442 APPLICATION, WAEEANTY, EEPEESENTATION, ETC. § 214 Anger and it appeared that she had been in jail there, it was left to the jury to say whether the fact was material and ought to have been communicated." ' § 214. Representations Need only be Substantially True: Good Faith of Applicant. — It is enough, however, if representations be substantially true ; in this respect being unlike warranties, which are always material, and which must be literally true. The authorities are not, however, perfectly clear on this point, for in some cases it has been held that the element of good faith enters so far into the construction of statements warranted to be true that it is enough if they are substantially true. " Substantially true, does not mean partly true, on the one hand; nor does it mean true in every possible and immaterial respect, on the other. It means true, without qualification, in all re- spects material to the risk."^ An interesting case was decided by the Supreme Court of Minnesota,' where the insured had stated that he had not had rheumatism, when he, in fact, had had sub-acute rheumatism, which is not ordinarily considered a disease. In this case the court said: "The rheumatism referred to in the question is the disease of rheumatism. Any rheumatic affection not amounting to the rfeserase of rheumatism, is not comprehended in its terms, any more than the spitting of blood occasioned by a wound of the tongue, or the extract- ing of a tooth, is the disease of ' spitting of blood ' men- tioned in the same question. The life insured had the right to answer the question upon the basis that its terms 1 Huguenin ?;. Rayley, 6 Taunt. 186; Rawlins ». Desborough, 2 M. & Rob. 328. 2 Jeffrey v. United Order of the Golden Cross, 97 Me. 176; 53 Atl. Rep. 1102. See also note to case of Fidelity Mut. L. Assn. v. JefEords, 46 C. C. A, 377; 107 Fed. R. 402; 53 L. R. A. 193. 8 Price V. Phoenix Mut. L. Ins. Co., 17 Minn. 518; 10 Am. Rep. 166. 443 § 214 APPLICATION, AVAERANTY, REPRESENTATION, ETC. were used in their ordinary signification. Iftliere was any ambiguity in the question, so that its language was capable of being construed in an ordinary, as well as in a technical sense, the defendant can take no advantage from such am- biguity." 1 So, the Supreme Court of the United States has said: ^ " It is contended that if fhe answers of the assured are to be deemed representations only, the policy was, nevertheless, forfeited, if those representations were untrue in respect of any matters material to the risk. The argu- ment is, that if the insured was, at the time of his applica- tion, or had been atany former period of his life, seriously or in an appreciable sense, afflicted with scrofula, asthma, or consumption, his answer, without qualification, that he had never been so afflicted, being untrue, avoided the policy, without reference to any knowledge or belief he had upon the subject. The soundness of this proposition could not be disputed if, as assumed, the knowledge or good faith of the insured, as to the existence of such diseases, was, under the terms of the contract in suit, of no consequence whatever in determining the liability of the company. But is that assumption authorized by a proper interpretation of the two instruments constituting the con- tract? We think not. Looking into the application, upon the faith of which the policy' was issued and accepted we find much justifying the conclusion that the company did not require the insured to do more, when applying for insui-ance, than observe the utmost good faith, and deal fairly and honestly with it, in respect of all material facts about which inquiry is made, and as to which he has or should be presumed to have knowledge or information. The applicant was required to answer yes or no as to whether he had been afflicted with certain diseases. In 1 Wilson V. Hampden F. Ins. Co., 4 R. I. 159. 2 Moulor u. American Life Ins. Co., Ill U. S. 335. 444 application; waekantt, eepkesentation, etc. § 214 respect to some of those diseases, particularly consumption, and diseases of the lungs, heart, and other internal organs, common experience informs us that an individual may have them in active form, without at the time being conscious of the fact, and beyond the power of any one, however learned or skillful, to discover. Did the company expect, when requiring categorical answers as to the exist- ence of diseases of that character, that the applicant should answer with absolute certainty about matters of which cer- tainty could not possibly be predicated? Did it intend to put upon him the responsibihty of knowing that which, perhaps, no one, however thoroughly trained in the study of human diseases, could possibly ascertain? We shall be aided in the solution of these inquiries by an examina- tion of other questions propounded to the applicant. In that way we may ascertain what was in the minds of the parties. Beyond doubt, the phrase, ' other known causes,' in the fourteenth question, serves the double purpose of interpreting and qualifying all that precedes it in the same clause or section. . For instance, the applicant was not re- quired to state all the circumstances, within his recollection, of his family history, but those only which rendered the proposed insurance more than usually hazardous, and of which he had personal knowledge, or of which he had information fairly justifying a belief of their existence. If he omitted to state circumstances in his ' family history ' of which he had no knowledge, nor any information deserv- ing attention, that omission would not avoid the policy, although it subsequently appeared that those circumstances, if known to the company, would have shown that the pro- posed insurance was more than usually hazardous. Apart from ether questions or clauses in the application, the tenth question would indicate that an incorrect or untrue answer as to whether the applicant's ' father, mother, brothers or sisters had been affected with consumption, or any other 445 § 214 APPLICATION, WAEEANTT, REPRESENTATION, ETC, serious family disease, such as scrofula, insanity,' etc., would absolve the company from all liability. Yet in the fourteenth question, the insured, being asked as to his family history and as to ' hereditary predispositions ' — an inquiry substantially covering some of the specific matters referred to in the tenth questipn — was, as we have seen, only required to state such circumstances as were known to him, or of which he had information, and which rendered an insurance upon his life more than usually hazardous. So, in reference to that part of the fourteenth question relating to the then physical condition of the applicant. Suppose, at the time of his application, he had a disease of the lungs or heart, but was entirely unaware that he was so affected. In such a case he would have met all the require- ments of that particular question, and acted in the utmost good faith, by answering no, thereby implying that he was aware of no circumstance in his then physical condition which rendered an insurance upon his life more than usually hazardous. And yet, according to the contention of the company, if he had, at any former period of his life, been afflicted with a disease of the heart or lungs, his positive answer to the seventh question, that he had not been so afflicted, was fatal to the contract; ;this, although the ap- plicant had no knowledge or information of the existence at any time of such a disease in his system. So, also, in reference to the inquiry in the fourteenth question as to any ' constitutional infirmity ' of the insured. If, in answering that question, he was required to disclose only such consti- tutional infirmities as were then known to him, or which he had reason to believe then existed, it would be un- reasonable to infer that he was expected, in answer to a prior question in the same policy, to guarantee absolutely, and as a condition precedent to any binding contract, that he had never, at any time, been afflicted with diseases of which, perhaps, he never had, and could not have any 446 APPLICATION, WARKANTY, REPRESENTATION, ETC. § 214 knowledge whatever. The entire argument in behalf of the company proceeds upon a too literal interpretation of those clauses in the policy and application which declare the contract null and void if the answers of the insured to the questions propounded to him, were, in any respect, untrue. What was meant by ' true ' and ' imtrue ' answers? In one sense, that only is true which is conformable to the actual state of things. In that sense a statement is untrue which does not express things exactly as they are. Bui in another and broader sense, the word ' true ' is often used as a synonym of honest, sincere, not fraudulent. Looking at all the clauses of the application, in connection with the policy, it is reasonably clear — certainly the contrary can- not be confidently asserted — that what the company re- quired of the applicant as a condition precedent to any binding contract, was, that he would observe the utmost good faith towards it, and make full, direct and honest answers to all questions, without evasion or fraud, and without sup- pression, misrepresentation or concealment of facts with which the company ought to be made acquainted ; and that by so doing, and only by so doing, would he be deemed to have made ' fair and true answers.' If it be said that an individual could not be afflicted with the diseases specified in the application, without being cognizant of the fact, the answer is that the jury would, in that case, have no serious difficulty in finding that he had failed to communicate to the company what he knew or should have known was material to the risk, and that consequently, for the want of ' fair and true answers,' the policy was, by its terms, null and void. But, whether a disease is of such a charac- ter that its existence must have been known to the individ- ual afflicted with it, and, therefore, whether an answer denying its existence was or not a fair and true answer, is a matter which should have been submitted to the 447 § 214 APPLICATION, WAREANTY, EEPRESENTATION, ETC. jury." 1 The general disposition of the courts in matters of construction of applications is thus stated by the Kentucky Court of Appeals : ^ " Forfeitures are regarded by courts with but little favor, and while the non-payment of pre- miums or a representation of facts fraudulently or innocently made, if untrue and material to the risk, or such as would induce the insurer to enter into* the contract, must prove fatal to the policy, when minute and trivial qustions are propounded and answered, having no bearing or influence on the minds of those about entering into the contract, and not material to the risk, the parties cannot be affected by them. An honest belief in the truth of the statement made, when not material to the risk, should not avoid a policy if the statement should prove to be untrue, and to adjudge that it works a forfeiture is contrary to the intent and meaning of the parties, and subversive of that rule of good faith and fair dealing, that should enter into and form a part of every insurance contract." As further illustra- tive of the principle that the representations of the appli- cant in his answer to questions in the application need be only substantially true, we may cite an opinion of the Supreme Court of the United States. In this case the defense was that the applicant had falsely answered the 1 Alabama Gold Life Ins. Co. v. Johnson, 80 Ala. 467; 2 South. Eep. 130; Miller v. Mutual Ben. Life Ins. Co., 31 la. 229; Langdon v. Union M. L. Ins. Co., 14 Fed. Rep. 272; Campbell u. New England Mut. Life Ins. Co., 98 Mass. 405; Phoenix Mut. Life Ins. Co. v. Raddia, 120 tJ. S. 183; Fowkes v. Manch. & Lond., etc., Ins. Co., 3 B & S. 917; 32 L. J. Q. B. 153; 11 W. R. 622; 8 L. T. (N. S.) 309. 2 Germania Ins. Co. v. Rudwig, 80 Ky. 235. See also on the question of intent and good faith Fidelity, etc., Asso. •». Ficklin, 74 Md. 172; 21 All. R. 680; 23a, 197; and Maine Ben. Asso. v. Parks, 81 Me. 79; 16 Atl. R. 339; Bloomington, etc., Assn. v. CummingSj 53 111. App. 530; Louis v. Connecticut Mut. L. Ins. Co., 58 App. Div. 137; 68 N. Y. Supp. 683; N. W. Mut. L. Ins. Co. v. Montgomery, 116 Ga. 799; 43 S. E. R. 79; Rainger v. Boston M. L. Assn., 167 Mass 109; 44 N. E. R. 1088; Tarpey V. Security Trust Co., 80 111. App. 378. 448 APPLICATION, WABEANTY, REPRESENTATION, ETC. § 214 question, " Have you ever had any of the following dis- eases, * * * affection of liver?" by saying, "No." The court said : ^ " It seems to the court, however, that the company by its question sought to know whether the liver had been so affected that its ordinary operations were seriously disturbed, or its vital power materially weak- ened. It was not contemplated that the insured could recall, with such distinctness as to be able to answer cate- gorically, every instance during his past life, or even during his manhood, of accidental disorder or ailment affecting the liver, which lasted only for a brief period, and was unat- tended by substantial injury, or inconvenience, or pro- longed suffering. Unless he had an affection of the liver that amounted to disease, — that is, of a character so well- defined and marked as to materially derange for a time the functions of that organ, — the answer that he had never had the disease called affection of the liver was a ' fair and true ' one; for such an answer involved neither fraud, mis- representation, evasion, nor concealment, and withheld no information as to his physical condition with which the company ought to have been made acquainted." This case was followed by the Federal court in Indiana where the applicant had answered "no," to the question whether he had ever had "spitting or raising of blood." The court held,^ that this answer was true although on one occasion the applicant had " spit blood," and that the only warranty implied by the terms of the question was not that he had never had spitting or raising of blood, but that he had never had the complaint of spitting or raising blood, or " had blood-spitting in such form as to be called a disease, disorder, or constitutional vice." The court continues: "If the question put to the applicant for the insurance 1 Connecticut Mut. L. Ins. Co. v. Union Trust Co., 112 U. S. 250; 6 Sup. Ct. Eep. 119. 2 Dreler v. Continental Life Ins. Co., 24 Fed. Eep. 670. 29 449 § 216 APPLICATION, WARRANTY, REPRESENTATION, ETC. had been whether or not he had had any spitting of blood, or had had any symptom of disease, such as spitting or raising of blood, it would doubtless have required the dis- closure of a single instance of blood-spitting." i § 215. Understanding of Applicant as to Effect of False Answers. — In many amplications for insurance a question is included asking what the understanding of the applicant is as to the effect of untrue answers upon the contract, or oftener, if the applicant does not understand that the contract will be avoided under certain conditions. Such statements in the application cannot control the legal construction of the ))olicy afterwards issued and accepted, although the application warrants the facts stated therein to be true, and the policy is expressed to be made in con- sideration of the warranties made in the application . ' ' The statements expressing his understanding of what will be the effect of the insurance are statements not of fact, but of law, and cannot control the legal construction of the policy afterwards issued and accepted." ^ § 216. Answers to Questions iu Applications for Mem- bership in Benefit Societies Generally not Warranties but Bppresentations. — As a general thing the answers in a medical examination or an application for membership in a benefit society are not warranties but representations. 1 On this point the opinion cites: Geach v. Ingall, 14 M. & W. 95; 2 Big. L. & A. Ins. E. 306; Insurance Co. v. Miller, 39 Ind. 475; Vose v. Eagle, etc., Ins. Co., 6 Gush. 42; Cushman v. Ins. Co., 70 N. Y. 72. See also § 223, et seq., and Mut. Ben. Lile Ins. Co. v. Davis, 87 Ky. 541 ; 9 S. W. E. 812; Hoffman v. Supreme C. A. L. H., 35 Fed. E, 252, where the word "essentially" in an instruction was held equivalent to " strictly;" and Anders v. Sup. Lodge K. of H., 51 N. J. L. 176; 17 Atl. E. 119. 2 Accident Insurance Co. v. Crandall, 120 U. S. 533; see also as to effect of a question which calls for the opinion of the applicant Louis v. Coon. Mut. L. Ins. Co., 58 App. Div. 137; 68 N. Y. Supp. 683; afi'd 172 N. Y. 659; 65 N. E. E. 1119. See also supra, § 20Ja. 450 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 216 This statement is true as to the early forms of applications, but learning by experience, the applications now in general use are so worded as to make all statements contained therein express warranties. Whenever this is done the rules as to warranties apply. ^ In a case in the Federal court of New York, where the form of the agreement, however, was not given, ^ the court says: "The question of law is whether, under Semm's application to Humboldt lodge for membership therein and the certificate which he received from said lodge, he warranted the truth of the answer which he gave to the question, ' Have you been rejected by the medical examiner of any lodge or society? ' In my opinion, he was required, under the contract, to answer the question according to his knowl- edge or reasonable means of belief, and not to misrepre- sent or suppress known facts, biit that he did not warrant the absolute truth of his answers." In a case in Indiana the Supreme Court held as follows: ^ " Statements made by the insured in his application for insurance are not deemed warranties unless they are incorporated in the policy, or, in some appropriate method, referred to in that instrument. The statements by the insured in his applica- tion are not set forth in the policy, nor in any way is reference made to them, and they cannot be considered warranties." The question was more squarely presented in a case in Illinois,* where the application concluded : "It 1 KDUdson V. Grand Council N. W. L. of H., 7. S. D. 214; 63 N. W. K. 911; Foley «. Supreme Council R. A., 78 Hun, 222; 28 N. Y. Supp.952; Home Friendly Soc. v. Berry, 94 Ga. 606; 21 S. E. R. 583; Levell o. Royal Arcanum, 9 Misc. R. 257; 30 N. Y. Supp. 205; Marcoux v. Society, etc., 91 Me. 250; 39 Atl. R. 1027; Callies v. Modern Woodmen, 98 Mo, App. 521; 72 S. W. R. 713. As to fraud in application for reinstatement see Sieverts v. National Ben. Assn., 95 la, 710; 64 N. W. R. 671. 2 Semm v. Supreme Lodge, etc., 29 Fed. Rep. 895. 3 Presbyterian Mut. Ass. Fund v. Allen, 106 Ind. 693. * Illinois Masons, etc., v. Winthrop, 85 111. 537. 451 § 216 APPLICATION, WAEKANTY, EEPEE8ENTATION, ETC. is hereby declared, that the above are fair and true answers to the foregoing questions, in which there is no misrepre- sentation or suppression of known facts ; and I acknowledge and agree that the above statement shall form the basis of the agreement with the society." In an action on the policy the defense was that f alse*answers had been made in the application which voided the policy. The Supreme Court, in passing upon the matter, said: " The answers, of course, enter into the application, because, if for no other reason, assured expressly agreed they should be the basis of the agreement with the society ; but the effect that shall be given to the representations is the principal ques- tion in dispute between the parties. Appellant claims they were intended to be, and should be, held to constitute a warranty of their truth, and if any or either of them are shown to be untrue, whether their falsity was known, or whether intentionally or unintentionally the truth was con- cealed, or it was only from the want of memory, or by inadvertence, there can be no recovery. On the other hand, it is contended that the answers are not warranties but simply representations ; and that, if made in good faith, although some one or more of them may be untrue, if the misstatement was not intentional, but was made in good faith and under the belief that the statements were true, the misstatement did not operate to avoid the policy. The clause stating that the assured agreed * that the statement shall form the basis of the agreement with the society,' is different from the agreements usu- ally contained in life policies. In such instruments it is usually agreed, that the statement is a warranty and that if any part of it should prove to be untrue, the policy should be void. With persons of ordinary intelligence, the language used in this application would not be so under- stood. Nor do we suppose that the promoters of this enterprise, when they adopted this form, intended that it 4f)2 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 216 should operate as a warranty, such as is usually inserted in life policies. Nop can we suppose for a moment that they would adopt a form of words thaf would be understood one way by the applicant and would be construed another by the courts, and thus cheat, wrong or defraud a brother. Such a supposition cannot be for a moment entertained. If the language employed was intended to operate as the usual warranty, we apprehend it has not been so understood by those, or any portion of them, who had applied for member- ship before the death of Price. If intended as an absolute warranty that the statement and every part of it was true, why limit the previous part of the statement to ' no misrep- resentation or suppression of known facts ? ' This the com- pany required of each applicant, and when they made that requirement, they, by implication, absolved him from any injurious consequences from misrepresentation or failure to disclose unknown facts. If a warranty was required of the answers to some of these questions, it would be useless for persons to become members of the society. Each ap- plicant is required to answer the question, whether he is able to earn a livelihood for himself and family. Now, with the great majority of men, this is problematical. That power depends upon so large a number of circumstances that a prudent man might well hesitate to answer it in the affirmative. The solution of this question depends, with most men, so decidedly on such a variety of contingencies, that almost any man, whatever his mental or physical en- dowments, would be regarded as extremely rash to warrant that he could. If able at the time, what guaranty that he could do so for any definite period? Does this statement require that he should remain so during life or for a shorter period? And if so, for what period? It is manifest that all that can be required of the applicant is, that he should give to this question an answer based on an honest, fair and intelligent belief. The applicant is also asked if his 453 § 216 APPLICATION, WAKKANTY, REPRESENTATION, ETC. ancestors generally reached old age. Now, who are his ancestors, referred to in this interrogatory? How many generations back is it intended to extend? And, suppose the applicant, on slight or unreliable information, answers in the affirmative, do the directors suppose they can show the misinformation and defeat a recovery? If such a con- struction is to be given to this application, then members, if not wronged, cheated, or defrauded, are, we have no doubt, generally deceived unintentionally. Suppose, to the question whether the applicant is, at the time, in good health, the answer is in the affirmative, is every slight obstruction to the performance of their proper functions by the various organs of the system to be held as a breach of warranty, and to avoid the policy? Such, we presume was never intended to be the construction given to the answer, as all know that but a small percentage of the human family are entirely free from some infirmity, slight qr serious. There is the question whether the applicant has ever had any serious illness or personal injury. Suppose the ap- plicant answers in the negative, may the society show that the applicant, in his early infancy, and so far back that it is beyond memory's reach, had serious illness, and defeat a recovery, although he had never been informed of the fact? That would be a fact that would, in all probability, be wholly unknown to him, and neither party intended that a neo-ative answer should be a warranty that it did not so occur, and a misrepresentation or suppression of such an unknown fact was intended to be included in the exception in the statement. It was only known facts that were not to be misrepresented or suppressed. » * * From what has been said, we are unable to hold that the statement was made or intended as a warrany of the abso- lute truth of the answers, but the statement was only designed to insure honesty and good,faith in making them. Otherwise the statement would not have contained the 454 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 216a limitation that tliey were true and fair answers, ' in which there is no misrepresentation or suppression of known facts.' " ^ If the applicant is a foreigner, with an imper- fect knowledge of the language, this circumstance must be considered in determining the meaning of the words he has used. § 216a. The Same Subject Continued. — In construing the effect of false answers in applications for member- ship in benefit societies the courts have given effect to the provisions of the contract in regard to warranty of the truth of answers contained in such applications, but the decisions in regard to misrepresentation do not always har- monize. Thus the Court of Appeals of Maryland has held,^ where an applicant represented a woman, not related to him, to be his niece, that the statement was a warranty and avoided the contract, the court saying: " In order to recover the insured knew that the appellee must be bound to meet the description of some one of the classes desig- nated in the act, and in order to meet that requirement she was named by the insured in his application as his niece, which declared her a relative, and, therefore, a qual- ified beneficiary, whether a dependent or not. Now the utmost good faith is required in such cases, and the appli- cant so knew ; for he agreed in his application that any untruthful statement, or any fraudulent statement, or any concealment of facts, should forfeit all rights under the 1 Morrison v. Odd-Fellows, etc., Ins. Co., 59 Wis. 165; Clapp v. Mass. Ben. Assn., U6 Mass. 519; 16 N. East Kep. 433; Swett v. Relief Society, 78 Me. 541; Mut. Benefit Ins. Co. v. Miller, 39 Ind. 475; Grossmann v. Supreme Lodge, etc., Sup. Ct. N. Y., 13 N. Y. St. B. 592; Northwestern Benev., etc., Assn. u. Cain, 21 111. App, Ct. 471; Sup. Council Eoyal Arcanum v. Lund, 25 111. App. 492. 2 Knickerbocker L. Ins. Co. v. Trefz, 104 U. S. 197. 3 Supreme Council American Legion of Honor v. Green, 71 Md. 263; 17 Atl. E. 1048. 455 § 216a APPLICATION, WARRANTY, EEPKESENTATION, ETC. insurance he was effecting. The association was entitled to know the facts, that they might agree or refuse to have the applicant a member and an associate in the society or not, and to allow the beneficiary named to be the recipient of its provisions for aid, as it might decide. It is con- tended that improper relations existed between the insured and the beneficiary named, to wit, the appellee, and that the designation of her as applicant's ' niece ' was a cover to conceal the true relation. The jury seem to have found that immoral relations did not exist and of course that question is not before us. Whatever may have been the motive of the deceased for stating the plaintiff, the benefi- ciary, to be his niece when she was not is wholly immaterial to the question for decision. A relationship was stated to exist which on its face placed the beneficiary named within one of the classes provided for by the corporation and allowed by the statutes of Massachusetts ; and the corpo- ration was called on to look no further, but might rely on the warranty of its truth and the agreement to forfeit if falsely stated. It is not pretended there was any kinship in fact between the parties. It is conceded that there was not. The plaintiff testifies there was not any relationship by blood but says she called him ' Uncle ' .and he treated her as a niece by mutual understanding. It is very clear that their agreement to act towards each other as uncle and niece could not have the effect to make them such and bring her within the class named in the statute as ' rela- tives,' so as to make her a qualified beneficiary to take under the statute as a relative. The question of depend- ency, we are not now considering. She is not named in the application or in the policy (or certificate) as a depend- ent, but as a ' niece ' and it was as ' niece ' she was intended to take : otherwise she would not have been so described. The relation of the parties to each other was certainly very peculiar and on the theory of entire purity 456 APPLICATION. WAKKANTY, REPRESENTATION, ETC. § 2160! the deceased was marvelously generous, but whether she could be regarded as a dependent within the meaning of the society's constitution and the statute of Massachusetts, would admit, at least, of serious doubts, if the case turned on that point. We think the false statement of the insured that the appellee was his 'niece' so manifestly material, as it declared her a relative and qualified beneficiary, in view of the warranty of its truth, and agreement to forfeit rights, that if false, it should defeat this action." In New Jersey and elsewhere the misrepresentation was held not to avoid the contract, but the designation, and that a resulting trust followed for the benefit of the next of kin. The leading case is Britton v. Supreme Council E. A.,i where a creditor of the member was falsely represented to be his cousin. The court says: " The question whether Brennan possessed the qualifications necessary to enable him to become Britton's beneficiary or not was so entirely aside from the question whether Britton should be admitted to mumbership or not, that it is almost certain that during the time the last question was under consideration the first never suggested itself to the mind of Britton, nor to the minds of the officers with whom he dealt. Whether the person designated by a member on his admission, as his beneficiary, is qualified or not, is a question which is wholly unimportant and immaterial to the defendant. The desig- nation then made will only continue in force so long as the member chooses to let it stand. He has a right to change his beneficiary as often as his will changes. The only lim- itation upon his power in that regard is that he cannot make a designation that will divert that part of the fund payable on his death from its appointed channel. And whether he designates a qualified or incompetent person can have no effect whatever, in either increasing or diminishing 1 46 N. J. E. 102; 18 All. R. 675. 457 § 216a APPLICATION, WAREANTT, EEPEESENTATION, ETC. the defendant's liability. The sum which it must pay on the death of a member is fixed by its contract, as well as the person or persons to whom it must be paid. In no case can the defendant be required to pay until the certificate issued by it has been surrendered or declared invalid. Britton undoubtedly told a falsehood when he said Bren- nan was his cousin, but his faTsehood did the defendant no harm . A falsehood or fraud that does not result in legal injury can neither be made the foundation of an action nor the ground of a defense." Other cases support this view.i And in Indiana it was held,^ that an application, directing payment to a person de- scribed as the wife of the applicant, was not a warranty that she was his wife. These cases were all those where the misrepresentation was as to the relationship of the bene- ficiary. While it is geaerally true that in applications for membership in beneficiary societies the statements are rep- resentations and not warranties,^ these representations may be the basis of the contract, though not referred to in the cer- tificate, and being false will avoid the contract whether re- garded as representations or warranties. As was said in one case : * "In this case it is notimportant whetherthe statement made by the insured is regarded as a warranty or a repre- sentation; for being the basis of the coutract, and false in a material respect, it defeats the action whether more properly called by the one name or the other. It is there- fore unnecessary to decide under which head it falls. The statement was material to the risk, and one about which the 1 Vivaru. Supreme Lodge K, of P., 42 N. J.'L., 455; 20 Atl. K. 36; Mace V. Provident L. Assa., 101 N. C. 122; 7 S. E. R. 674. 2 Supreme Lodge A. O. U. W. v. Hutchinson, 6 Ind. App. 399; 33 N. E. R. 816. 3 Ferine v. Grand Lodge A. O. U. W., 51 Minn. 224; 53 N. W. B. 367; ante, §216. * Numiich v. Supreme Lodge K. & L. of H., 3 N. Y. Supp. 552. 458 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 216a insured could not have been mistaken. The evidence shows that the plaintiff called five times for medical treat- ment at the German Polyclinic, to wit, on October 12, 21, November 4, 9 and 15th, 1886. She was also attended by Dr. Guden in July, 1886, and by Dr. Schmidt in the early part of October, 1886. If she had answered that she had been professionally attended at these several times the medical examiner of the defendant might and probably would have made a more searching medical examination or consulted these gentlemen, or without going to further trouble, might have declined the risk entirely. Her answers are supposed to have influenced his judgment more or less ; as they -were favorable so was the impression they naturally created. The evidence proves that the answers were untrue and their falsity furnished the defendant with a complete defense. As the am.ount insured is small, the defendant as a benevolent organization, might (if it had chosen to do so) have thrown the broad mantle of charity ■ ®ver its deceased member by adjusting the loss without litigation, but as truth and charity seem to be concomitant requirements of the order, the defendant had the legal right to resist the demand made and interpose the breach of the one obligation as a bar to the enforcement of the other. The liability to pay is founded solely on the contract obli- gation, which must be enforced (if at all) by the general principles applicable to life insurance. The defendant agreed to pay a specified sum on certain contingencies, and cannot be forced to pay it unless they occur in the manner agreed; and while it may voluntarily bestow charity, it cannot be compelled to do so against its will. In contracts for life insurance, the prevailing maxim is uberrima fides and the best of faith must be observed by each of the contracting parties, for the foundation stone of the obligations is truth." And the Supreme Court of New Jersey in a similar case 459 § 216a APPLICATION, WAEEANTY, REPRESENTATION, ETC. remarked ;! " In this class of cases warranties should be regarded as the creatures of plain expression and not of implication or construction. The certificate sued on con- tains the contract, and the whole of the contract between the parties to it, and neither the interrogatories nor the re- plies to them are mentioned, or even in the most distant way alluded to. They are therefore mere representations not warranted to be true, notpart of the agreement. But being intentionally false, with respect to material matters, and having misledthe society into the making of this obligation, such obligation is void by force of ordinary legal principles. ' ' In another case where the occupation was misrepresented,^ the court says: "In his application the deceased repre- sented that his occupation was that of a printer, and that his business was pressman; that he was employed by P. Lorillard in Jersey City and had been so employed for nine years. In 'his statement to the medical examiner he answered in the negative the question : ' Are you engaged in the sale or manufacture of wine, beer or distilled liquors? ' The proof at the trial was that the deceased was employed in the printing department of the works of P. Lorillard for a period of time down to December, 1881 ; that in July, 1883, he was employed in another department of the same works and left that employment in June, 1884 ; and that he had not been in Lorillard's employ after that date. It was also proved that after December, 1884, down to his last illness, and within a few days of his death, his employment was that of a bartender. He was so employed in December, 1889, when he made application for his mem- bership in the society. The statement made by the de- ceased in his application a;id in^his answers to the questions 1 McVey v. Grand Lodge A. O. U. W., 53 N. J. L. 17; 20 Atl. Rep. 873. 2 Holland v. Supreme Council O. C. F., 54 N. J. L. 490; 25 Atl. Rep. 367. 460 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 217 in the statement to the medical examiner with respect to his occupation was false, and if he had truly represented his occupation, he would by force of the relief fund laws, have been excluded from beneficial membership. Whether the statement in the application and the answers to the questions proposed by the medical examiner be regarded as a warranty or simply as representations, they were in a material respect willfully false and fraudulent and in either event they avoided the contract." ^ A misrepresentation of age will avoid the contract also.^ It has been held,^ that the statutes of Missouri, making false representation no defense unless they contributed to the death, do not apply to beneficiary orders or assessment concerns, they being expressly excepted by a subsequent statute, though proba- bly unintentionally. § 217. Concealment. — According to the law of insur- ance concealment is the designed and intentional withhold- ing of any fact, material to the risk, which the assured in honesty and good faith ought to communicate ; and any fact is material, the knowledge or ignorance of which would naturally influence an insurer in making the contract at all, or in estiniating the degree and character of the risk, or in fixing the rate of insurance. All representations which enter into the essence of the contract, and which go to lay the foundation of it, whatever would cause the company to accept or reject the application, should be truly stated.* 1 McVey v. Grand Lodge A. O. U. W., 53 N. J. L. 17; 20 Atl. Eep. 873. 2 Mutual Relief Soc. v. Webster, 25 Can. L. J. (n. s.) 206. See ante, §225. 3 Whitmore v. Supreme Lodge K. & L. of H., 100 Mo. 36; Hanfordu. Mass. Ben. Assn., 122 Mo. 50; 26 S. W. B. 680. < Clark V. Union M. F. Ins. Co., 40 N. H. 333 ; 77 Am. Dec. 721 ; Locke V. North America F. Ins. Co., 13 Mass. 61; Kimball v. iBtna Ins. Co., 9 Allen, 610. 461 § 217 APPLICATION, WARRANTi', REPRESENTATIOiV, ETC, The generally accepted definition of concealment is that given in the leading case of Daniels v. Hudson River, etc., Co.,1 and is as follows: "Concealment is the designed and intentional withholding of any fact material to the risk, which the assured, in honesty and good faith, ought to communicate to the underwriter ; mere silence on the part of the assured, especially as to some matter of fact which he does not consider it important for the underwriter to know is not to be considered as such concealment. Aliud est celare. aliud tacere. And every such fact, untruly asserted or wrongfully suppressed, must be regarded as material, the knowledge or ignorance of which would naturally influence the judgment of the underwriter in making the contract at all or in estimating the degree and character of the risk or in fixing the rate of the premium. 1 12 Cash. 416. 2 The English courts have been very strict in declaring life insurance policies invalid by reason of fraudulent practices in procuring them. The general rule obtains in England that failure to make known a material fact affecting the risk whether inquired into by the application or not, vitiates the policy. The authorities have thus been summarized in Encyclopaedia of the Laws of England, Vol. 7, page 438, as follows: "The answers in the declaration, however, may not cover, all the facts material to be known; and if such facts are concealed the policy may be vitiated. Thus the non-disclosure of a serious illness of the person to be insured, though not specifically inquired about, may vitiate a policy (Morrison v. Muf.pratt, 1827, 4 Bing. 60; British Equitable Co. V. Musgrove, 1887, 3 T. L. E. 630). Among the facts which insurance companies and courts consider to be most material are whether or not the life has been accepted or refused by other companies, and the name of the medical attendant who can give information as to the health of the life proposed. Thus where a man stated that he was insured by two other offices, but omitted to mention that several others had refused the risk, his policy was declared to be void (Wainwright v. Bland, 1836, 1 Mee. & W. 33; London Assurance Co. v. Mansel, 1879, 11 Ch. D. 367). So also a reference to a medical practitioner who could give no information of any value, instead of to the one who had really attended, was held to be illusory (Huckman v. Fernie, 1838, 3 Mee. & W. 505). The person who acts as the usual medical attendant, even if unqualified, is the one whose name should be 462 APPLICATION, WARRANTy, REPRESENTATION, ETC. § 218 § 218. Concealment of Material fact will Avoid the Contract. — The English cases, ^ hold to the priaciple that an applicant is bound to disclose a fact material to the risk, even though no specific inquiry is made on that subject. The American cases, however, are not in entire accord, although the weight of authority seems to be in favor of the English rule. In a case in Tennessee,^ the court said: " If the insured when he makes the application, knows or given (Everett v. Desborough, 1829, 5 Bing. 503; 30 R. R. 709.)" It was said m Lindenau v. Desborough, 8 B. & C. 586 (1828), by Lit- TLEDALB, J. : " It Is the duty of the assured in all cases to disclose all material facts within their knowledge. In cases of life insurance certain specific questions are proposed as to points affecting in general all mankind. But there may be also circumstances affeciing particular individuals which are not likely to be known to the insurers aud which, had they been, would no doubt have been made the subject of specific inquiries." See also Life Ass. of Scotland v. Foster, II Ct. of Sess. Cas., 3rd series, 351; s. c. 4 Big. Life &Acc. Ins. Cas. 520, where the rule is thus well stated : " Concealment or nondisclosure of material facts by a person entering into a contract is, generally speaking, either fraudu- lent or innocent, and in the case of such contracts where parties are dealing at arm's-length, that which is not fraudulent is innocent. But contracts of insurance are in this, among other particulars, exceptional, that they require on both sides uberrima fides. Hence without any fraudulent, and even in bona fides, the injured may fail in the duty of disclosure. His duty is carefully and diligently to review all the facts, known to himself and bearing on the risk proposed to the insurers, and to state every circumstance which any reasonable man might suppose could in any way influence the insurers in concealing and deciding whether they will enter into the contract. Any negligence or want of fair consideration for the interests of the insurers on the part of the insured leading to the non- disclosure of material facts, though there be no dishonesty, may therefore constitute a failure in the duty of disclos- ure which will lead to the voidance of the contract. The facts undis- closed may not have appeared to the insured at the time to bo material, and yet it turns out to be material, and in the opinion of a jury was a fact that a reasonable and cautious man proposing insurance would think material and proper to be disclosed, its non-disclosure will consti- tute such negligence on the insured as to void the contract." 1 See note in last section. 2 Knights of Pythias v. Eosenfeld, 92 Tenn. (8 Pickle), 508; 22 S. W. B. 204. 463 § 218 APPLICATION, WARRANTy, REPRESENTATION, ETC. has any reason or ground to believe that he has any disease, even though it may be latent and undeveloped he is in duty bound to make it known, whether specially questioned or not and if he fail to do so, it will amount to a mis- statement or concealment, as the case may be, that will avoid his policy." Judge Sharswood, in a charge to the jury in a case involving this question, i said: " There was at the time of the proposals a concealment by Daniel Le- favour of a fact material to the risk, which avoids the con- tract of insurance. There is no doubt that this is the law in life policies as well as in policies of marine insurance. Good faith is required on the part of the insured. He knows, and the underwriter is not presumed to know what- ever is material, and he is not confined to the warran- ties contained in the policy." A leading case is Penn Mutual Life Ins. Co. v. Mechanics' Savings Bank, etc.,^ in which the court he^ that even if Schardt, the insured, who was a bank teller was not required by any specific question to disclose the fact of his embezzlements, of which it was claimed he was guilty, the policy would still be avoided if it were material to the risk, and he inten- tionally concealed it from the company. Judge Taft, in delivering the opinion of the court, said: "But even if Schardt was not required by any specific question to disclose the fact of his embezzlements, the policy would still be avoided, if it were material to the risk, and he intentionally concealed it from the company. This is not controverted. The issue of law between the parties is whether the policy would not be avoided even if his failure to disclose it were due, not to fraudulent intent, but to mere inadvertence, or a belief that it was not material. It is insisted for the plaintiff in error that the motive or cause ' Lefavour o. Ins. Co., 1 Fhila. 558. 2 72 Fed. 413; 37 U. S. App. 692; 43 U. S. App. 75; 19 C. C. A. 286; 38 L. E. A. 33. 464 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 218 of the non-disclosure is unimportant, if tiie fact be found material to the risk, and was known to the insured when he obtained the insurance. The trial court took the other view, and instructed the jury accordingly. If this were a case of marine insurance, the contention for the plaintiff in error must certainly be sustained. The great and lead- ing case on the subject is that of Carter v. Boehm,i where Lord Mansfield explained the effect of concealment of material facts in insurance to avoid the policy. He said : ' Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only. The underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circum- stances in his knowledge to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. The keep- ing back such circumstances is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived, and the policy is void, because the risk run is really different from the risk understood and intended to be run, atthe time of the agreement.' * * * With respect to a contract thus made, it is clearly just to require that nothing but a fraudulent non-disclosure shall avoid the policy. Nor does this rule result in practical hardship to the insurer, for in every case where the undis- closed fact is palpably material to the risk the mere non- disclosure is itself a strong evidence of a fraudulent intent. Thus if a man about to fight a duel should obtain life in- surance without disclosing his intention, it would seem that no argument or additional evidence would be needed to show the fraudulent character of the non-disclosure. On the 1 3 Burr. 1905. 30 465 § 218 APPLICATION, WAREANTV, REPRESENTATION, ETC. other hand where men may reasonably differ as to the mate- riality of a fact concerning which the insurer might have elicited full information, and did not do so, the insurer occupies no such position of disadvantage in judging the risk as to make it unjust to require that before the policy is avoided it shall appear not only that the undisclosed fact was material, but also that it was withheld in bad faith. To hold that good faith is immaterial in such case is to apply the harsh and rigorous rule of marine insurance to a class of insurance contracts differing so materially from marine policies in the circumstances under which the con- tracting parties agree that the reason for the rule ceases." The court also says : "In every case where the undisclosed fact is palpably material to the risk the mere non-disclosure is itself strong evidence of a fraudulent intent, thus if a man about to fight a duel should obtain life insurance with- out disclosing his intention, it would seem that no argument or additional evidence wouid be needed to show the fraudu- lent character of the non-disclosure." There are a num- ber of cases, however, where it has been held that, if a company desires information, it should make specific inquiries. These cases are well summarized in the case above referred to as follows:^ "With respect to a con- tract thus made, it is clearly just to require that nothing but a fraudulent non-disclosure shall avoid the policy. Nor does this rule result in practical hardship to the insurer, for in every case where the undisclosed fact is palpably material to the risk the mere non-disclosure is itself strong evidence of a fraudulent intent. Thus, if a man about to fight a duel should obtain life insurance without disclosing his intention, it would seem that no argument or additional evidence would be needed to show the 1 Penn. Mut. L. Ins. Co. v. Mechanics' Savings Bank & Trust Co., supra ■ 466 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 218 fraudulent character of the nondisclosure. On the other hand, where men may reasonably differ as to the materi- ality of a fact concerning which the insurer might have elicited full information, and did not do so, the insurer occupies no such position of disadvantage in judging of the risk as to make it unjust to require that before the policy is avoided it shall appear not only that the undisclosed fact was material, but also that it was withheld in bad faith. To hold that good faith is immaterial in such a case is to apply the harsh and rigorous rule of marine insurance to a class of in- surance contracts differing so materially from marine policies in the circumstances under which the contracting parties agree that the reason for the rule ceases." As a general thing, concealment in most of the cases seems to have been a partial disclosure, omitting matters of impor- tance, which if disclosed would make the answer full and complete, but which if disclosed would have led to the rejection of the risk. Such a case was one where a dan- gerous illness was concealed.^ Another, where the fact that the applicant had had consumption was concealed, was held to vitiate the policy.^ To the same effect are other cases.' Another class of cases are those where delivery of the policy was obtained by a fraudulent coa- cealment of the fact that the applicant was at the time dangerously ill which illness soon resulted in death.* 1 Equitable L. Ass. Soc. v. McElroy, 83 Fed. Eep. 631; 28 C. C. A. 365; 49 U.S. App. 648. 2 March v. National L. Ins. Co., 186 Pa. St. 629; 40 Atl. 1100. 3 Drakeford e. Supreme Conclave, etc., 61 S. C. 338; 39 S. E. K. 523; Callies v. Modern Woodmen, 98 M. A. 521; 72 S.W. R. 713. ^ Equitable Life Ins. Soc. v. McBlroy, 83 Fed. Eep. 631; 28 C. C. A. 865; 49 U. S. App. 548; Piedmont, etc., Ins. Co. v. Swing, 92 U. S. 377; Union Life Ins. Co. v. Biggs, 123 Fed. Rep. 812; U. S. Life Ins. Co. v. Cable, 38 Fed. Rep. 761; 39 C. C. A. 264; 49 C. 0. A. 216; HI Fed. Eep. 19j 191 U. S. 288; Mat. Life Ins. Co. v. Pearson, 114 Fed. Rep. 395. 467 § 219 APPLICATION, WARRANTY, REPRESENT ATION, ETC. The concealment of a material fact, if inquiry is made upon such point, will avoid the policy, although the assured did not suppose the fact to be material. ^ "The concealment which vitiates the policy must be such as mis- leads, or deceives; such as a partial disclosure, omitting matters of importance, which, i:^ disclosed, would make the answer full ; as if the answer about former sickness detail a slight illness, concealing a much more serious and recent sickness; as if the question be whether the applicant had ever been seriously hurt by an accident, and the answer be that an arm was broken ten years, when the truth was that a serious internal injury was received by a fall from a carriage. * * * If, in answer to the fifteenth question, Dillard had said he had ' made an application to the Conti- nental company, which he had withdrawn,' when the truth was, he had also made application to two other companies, which had been rejected, it would be a case of concealment which would avoid the policy, because the answer suggests that there was no objection to the risk, whereas two com- panies had declined to take it. The answer to this ques- tion is valuable to the insurer, as it opens the avenue to further inquiry, if the company desires to pursue the in- vestigation." ^ § 219. Qnestions of Knowledge, Intent and Materiality are for Jury. — The question of knowledge concerning a fact and the intent of the party in withholding it and the 1 Vose V. Eagle, etc., InD. Co., 6 Gush. 42; Curry v. Commonwealth Ins. Co., 10 Pick. 535; Burrittw. Saratoga Co., etc., Ins. Co., 6 Hilt. 188; Conn. Mut. L. Ins, Co. ». Young, 77 111. App. 440. But a mere failure to state a material fact, if not fraudulent, will not avoid. German Am. M. L. Assn. ■». Farley, 102 Ga. 720; 29 S. E. K. 615. 2 American Ins. Co. v. Mabone, 56 Miss. 192; London Assurance o. Mansel, 11 Ch. Div.363; Story «. Williamsburgh M.,etc., Assn., 95N. Y. 474. 468 APPLICATION, WAEEANTT, REPRESENTATION, ETC. § 230 question of materiality are for the jury.^ Oa this point the Supreme Court of Massachusetts says : ^ "The ques- tion whether the facts, if misrepresented, were known to the applicants, was a question of fact, to be left to the jury upon the evidence. The considerations referred to, as founding a legal conclusion of knowledge, are all fit and proper to be submitted to a jury ; such as, that the assured and applicant is himself the owner of the property, and may be presumed to be acquainted with its condition ; that the matter relates to things open and visible, things capa- ble of distinct knowledge and not depending upon estimate, opinion, or mere probability; things in respect to which an owner is bound in honesty and good faith to know, takes upon himself to know, and usually does know; these and all other pertinent ovidence bearing on the question are to be left to the jury, with directions that if they are satisfied from all the evidence, and can reasonably infer, that the assured did know the fact as it really existed, in regard to which misrepresentation is imputed, they are to find that he did know it; otherwise, not." § 220. No Concealment When Facts are Unknown to Applicant : Difference between Representation and Con- cealment. — Logically speaking there can be no conceal- ment of a fact not known to the applicant, for one cannot conceal that of which he is ignorant. The subjects of rep- resentation and concealment are so closely allied that it is hard to tell where the dividing, line is. Kepresentation ^ Burritt V. Saratoga, etc., Ins. Co., 5 Hill, 188; Mutual Benefit laS. Co« V. Wise, 34 Md. 582; Gates v. Madison, etc., Ins. Co., 2 N. Y. 43; Malloryu. Travelers Ins. Co.,47N. Y. 52; Monroe, etc., Ins. Co. v. Rob- inson, 5 W. N. C. (Pa.) 389; Virginia, etc., Ins. Co. v. Kloeber, 31 Gratt. (Va.) 749; O'Hara v. United Brethren Aid Soc, 134 Pa. St. 417; 19 Atl. E. 683; Doty v. N. Y. State, etc., Assn., 9 N. Y. Supp. 42. ' Houghton V. Manufacturers, etc., Ins. Co., 8 Met. 121; 41 Am. Bep. 489. 469 § 221 APPLICATION, WARRANTY, REPRESENTATION, ETC. seems to be the active and positive statements of the party, while concealment is the want or omission of a statement. The Supreme Court of the United States has held,^ that the suppression of a material fact which a man is bound in good faith to disclose is equivalent to a false representation. The connection and nature of th^se subjects will be clearer after discussion of the numerous decisions construing spe- cific words and questions generally found in applications, which will close the present chapter. § 221. Error or Fraud, of Agent in Preparing Appli- cation. — It is often the case that an applicant for insur- ance answers correctly the questions propounded, but the agent of the company, in writing down the replies, either from accident or design, changes the statement or omits it altogether, or fills in the answer from information obtained from another source. The question then arises whether the company is bound by the acts of its agent, so as to be estopped from insisting upon the forfeiture of the policy for a breach of the warranty of the truth of the statements in the application, or because of the false representations of the assured. The determination of this matter depends largely upon the fact whether the agent of the company is to be -considered the agent of the assured in filling out the appli- cation. In some of the cases decided there was an express stipulation in the policy making the agent of the company the agent of the insured in preparing the application. The earlier decisions were favorable to the company upon this question, but the modern authorities are practically unanimous in hold- ing that where the agents make out the applications incor- rectly, notwithstanding the applicant has stated all the facts correctly, the errors will be chargeable to the insurer and not to the insured. The reason of this conclusion is that 1 Tyler », Savage, 143 U. S. 79; 12 S. Ct. R. 340; citing Stewart u. "Wyoming Rancli Co., 128 U. S. 383; 9 S. Ct. K. 101. 470 APPLICATION, WAEKANTr, REPRESENTATION, ETC. § 221 the insurance companies clothe the agents whom they send out to solicit business with an apparent authority, so that those dealing with them have a perfect right to regard them as the full and complete representatives of the companies by which they are employed, in all that is said and done in regard to the application. ^ This doctrine was followed although the companies, in order to avoid its application, had inserted in the policy a stipulation generally as fol- lows : " It is a part of this contract that any perfon other than the assured who may have procured this insurance to be taken by this company shall be deemed to be the agent of the assured named in the policy, and not of this com- pany, under any circumstances whatever, or in any transac- tion relating to this insurance." But the courts said that ' Kowley». Ins. Co., 36 N. Y. 550; 3 Keyes, 557; McCall u. Phcenix Mut. Ins. Co., 9 W. Va. 237; 27 Am. Bep. 558; Simmons v. Ins. Co., 8 W. Va. Hi; Grattan v. Metropolitan L. Ins. Co., 80 N. Y. 281; 36 Am. Rep. 617; Boos v. Ins. Co., 64 N. Y. 236; Baker u. Ins. Co., 64 N. Y, 648; Columbia Ins. Co. v. Cooper, 60 Pa. St. 331; Merserau u. Ins. Co., 66 N. Y. 274; Miner u. Phoenixlns. Co., 27 Wis. 693; 9 Am. Rep. 479. In the following later cases the subject is considered and the authorities are reviewed: Wells v. Metropolitan L. las. Co., 163 N. Y. 572; 57 N. E. R. 1128; affg. 19 App Div. 18; 46 N. Y. Supp. 80; O'Rourlie v. John Hancock M. L. Ins. Co., 30 N. Y. Supp. 215; Mut. Ben. L, Ins. Co. v. Robinson, 7 C. C. A. 444; 58 Fed. R. 723; 22 L. R. A. 325; affg. 54 Fed. R. 580 ; Howe v. Provident Sav. F. L. A. Soc, 7 Ind. App. 586 ; 34 N. E . R. 830; Whitney 17. National Mas. Ac. Ass., 57 Minn. 472; 59 N. W. K. 943; Leonard v. State Mut. Ins. Co. (R. I.), 51 Atl. R. 1049; Mutual L. Ins. Co. u. Blodgett, 8 Tex. C. A. 45; 27 S. W. R. 286; Standard L. & A. Ins. Co. V. Davis, 69 Kan. 621 ; 63 Pac. R. 856; O'Farrell v. Metropolitan L. Ins. Co., 22 App. Div. 495; 48 N. Y. Supp. 199; Jacob u. N. W. Life Ins. Corp., 30 App. Div. 285; 61 N. Y. Supp. 967; 164 N. Y. 582; 58 N. E. R. 1088; Order Columbus v. Fuqua (Tex. Civ. A.), 60 S. W. R. 1020; Mullen V. Union Cent. L.Ins. Co., 182 Pa,. St. 150; 37 Atl. R. 988; Boy- Ian?;. Prudential Ins. Co., 10 Misc. R. 444; 42 N. Y. Supp. 52; Quinn v. Metropolitan Life Ins. Co., 10 App. Div. 483; 41 N. Y. Supp. 1060; Ber- nards. U. S. Life Ins. Co., 11 App. Div. 142; 42 N. Y. Supp. 527; Wells V. Metropolitan L. Ins. Co., 19 App. Div. 18; 46 N. Y. Supp. 80; Hamil- ton ■». Fidelity M. L. Ins. Co., 27 App. Div. 480; 59 N. Y. Supp. 526; New York L. Ins. Co. v. Russell, 23 C. C. A. 43; 77 Fed. R. 94. 471 § 221 APPLICATION, WAERANTT, REPRESENTATION, ETC. no man can serve two naasters and no stipulation can suc- cessfully attempt such a logical and legal impossibility and have the same person guard two antagonistic interests at the same time. That if the agent was the agent of the company in the matter of making out and receiving the application he cannot be converted into the agent of the insured by merely calling him such in the policy subse- quently issued. No mere form of words could wipe out the fact that the insured truthfully informed the insurer, through its agent, of all matters pertaining to the applica- tion at the time it was made. " There is no magic power," said the Supreme Court of Illinois,^ " residing in the words of that stipulation to transmute the real into the unreal. A device of mere words cannot, in a case like this, be im- posed upon the view of a court of justice in the place of an actuality of fact." The Supreme Court of Minnesota added :^ "If corporations are astute in contriving such provisions, courts will take care that they shall not be used as instruments of fraud or injustice. ' ' ^ The fraud, however, of the agent and assured will vitiate the policy,* although, if the agent, without the knowledge of the applicant, ^ Commercial Ins. Co. v. Iv.es, 56 111. 402. 2 Kausal v. Minnesota, etc., Ins. Co., 31 Minn. 17; 47 Am. Kep. 776. In Whitney v. National Masonic Ace. Assn., 57 Minn. 472; 59 N, W. K. 943 ; the Supreme Court of Minnesota held that the rule applied in the preceding case applied to Mutual Benefit Societies. See also post, § 4296. 8 Insurance Co. o. Wllkenson, 13 Wall. 222; Insurance Co. v. Mahone, 21 Wall. 152; Flynn v. Equitable L. Ins. Co., 78 N. Y. 568; 34 Am. Rep. 561; Planters' Ins. Co. o. Myers, 55 Miss. 479; 30 Am. Eep. 521; Camp- bell V. Merchants', etc., Ins. Co., 37 N. H. 36; 72 Am. Dec. 324; Gans v. Ben. L. Ins. Co., 31 la. 216; 7 Am. Rep. 122; Campbell v. New England Mut. L. Ins. Co., 98 Mass. 389; Plumb v. Ins. Co., 18 N. Y. 392. See ante, § 153, et seq., andpos4, §§ 427 and 428. < Centennial,etc., Assn.c.Parham, 80Tex. 518; 16 S. W. R. 316. See ante, § 158. 472 APFIilCATION, WARRANTY, REPRESENTATION, ETC. § 222 inserts false answers in the application, the contract will not be avoided. 1 § 222. When Authority of Agent is Known to Ap[)li- eant. — In spite of the great array of authority, however, the foregoing propositions, much depends upon the special circumstances of each case. In a case which afterwards went to the Supreme Court of the United States, in the Eastern District of Missouri,^ the rule was applied on the trial below where the facts were these : The deceased was solicited by the agent of the company to take out the insurance and he, finally consenting to do so, was told that it was necessary, as a mere form, to answer certain ques- tions. The agent read to him these questions and as he answered the agent pretended to take down and write in the blank the substance of the answers, not reading them over to the assured nor telling him what he had written. "When the applicant was asked whether he had any disease of the kidneys he said that his condition was well known to the agent, who was aware that he had been sick and under treatment for diabetes, that the doctor's office was opposite, and he could go there and find out everything. The applicant signed the paper without reading it. The answer in regard to disease of the kidneys was written in the application " No." The policy whenissued had attached to it a copy of the application and a memorandum calling 1 Sawyer v Equitable Ace. Ins. Co., 42 Fed. K. 30; Gerraaaia L. Ins. Co.'». Lunkenheimer, 127 lod. 536; 26 N. E. R. 1082; Mutual Beu. L. Ins. Co. V. Kobison, 7 C. C. A. 4tt; 58 Fed. Rep. 723; affi?. 54 Fed, R. 580; Keystone v. M. B. Assn. v. Jones, 72 Md. 363; 20 Atl. Kep. 195; Kaas. Prot. U. V. Gardner, 41 Kan. 397; 21 Pac. R. 233; O'Briens. Home Ban. Soc, 117N. Y. 310; 22 N. E. R. 954; Padridsky ». Supreme Lodge K. of H.,76 Micb. 428; 43 N. W. R. 373; Globe, etc., Co. v. Duffy, 76 Md. 293; 25 Atl. R. 227; Brewster v. National L. Ids. Co., 8 Times L. R. 648; Bowden v. London, etc., Ins. Co. (Ct. App.), 8 Times L. R. 666. 2 Fletcher v. New York L. las. Co., 14 Fed. Rep. 846. See also Dimlcb V. Metropolitan L. Ins. Co. (N. J. L.), 55 Atl. R. 291. 473 § 222 APPLICATION, WARRANTY, REPRESENTATION, ETC. the attention of the insured to it and requesting that any errors in the application be reported to the company for correction. The assured died of diabetes and the false answer of the applicant was set up in defense to the action on the policy. The court instructed the jury that if the assured answered the questions correctly and the false answers were written in by the agent, without the knowl- edge of the assured, and if the assured did not know of the misstatement until after the policy was issued, then such action of the agent was a fraud upon the assured, and the policy was not avoided. Upon the appeal of this case to the Supreme Court of the United States,^ it was re- versed, the court, after stating that the company had a right to limit the authority of its agents if knowledge of such limitations was brought home to those having dealings with such agents, continues £hus: "The present case is very different from Insurance Co. v. Wilkenson,^ and from Insurance Co. v. Mahone.^- In neither of these cases was any limitation upon the power of the agent brought to the notice of the assured. Reference was made to the inter- ested and officious zeal of insurance agents to procure con- tracts, and to the fact that parties who were induced to take out policies rarely knew anything concerning the com- pany or its officers, but relied upon the agent who had per- suaded them to effect irisurance ' as the full and complete representative of the company in all that is said or done in making the contract ; ' and the court held that the powers of the agent are prima facie coextensive with the business intrusted to his care, and would not be narrowed by limi- tations not communicated to the person with whom he dealt. Where such agents, not limited in their authority, 1 New York Life Ins. Co. v. Fletcher, 117 U. S. 531. 2 13 Wall. 222. 3 21 Wall. 152. 474 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 222 undertake to prepare applications and take down answers they will be deemed as acting for the companies. In such cases it may well be held that the description of the risk though nominally proceeding from the assured, should be regarded as the act of the company. Nothing in these views has any bearing upon the present case. Here the power of the agent was limited, and notice of such limitation given by being embodied in the application, which the assured was required to make and sign, and which, as we have stated, he must be presumed to have read. He is, therefore, bound by its statements. * * * The in- struction given to the jury in the case before us, is, in effect, that the assured was bound by his application if it was not avoided for fraud, and that it was so avoided by reason of the false statements contained in it, and that, therefore, the plaintiff, as his representative, could recover. But if the application was avoided, it would seem to be a necessary consequence that the policy itself was also avoided, and his right limited to recovering the premiums paid. But such was not the conclusion of the court. It directed the jury that if the application was avoided for fraud, he could recover. It does not seem to have occurred to the court that had the answers been truthfully reported, and the fact of the assured having had diabetes within a recent period been thus disclosed, the insurance would ia all probability have been refused. If the policy can stand with the application avoided, itmust stand upon parol state- ments not communicated to the company. This, of course, cannot be seriously maintained in the face of its notice that only statements in writing forwarded to its officers would be considered. A curious result is the outcome of the in- struction. If the agents committed no fraud the plaintiff cannot recover, for the answers reported are not true ; but if they did commit the imputed fraud he may recover, al- 475 § 222 APPLICATION, WAREANTT, REPRESENTATION, ETC. though upon the answers actually given, if truly reported, no policy would have issued. Such anomalous conclusions cannot be maintained. There is another view of this case equally fatal to a recovery. Assuming that the answers of the assured were falsified, as alleged, the fact would be at once disclosed by the copy of the application, annexed to the policy to which his attention was called. He wquld have discovered by inspection that a fraud had been perpe- trated, not only upon himself, but upon the company, and it would have been his duty to make the fact known to the company. He could not hold the policy without approv- ing the action of the agents and thus becoming a partici- pant in the fraud committed. The retention of the policy was an approval of the application and of its statements. The consequences of that approval cannot, after his death, be avoided." ^ This view however does not seem to prevail in every instance, as is shown by a recent case in Indiana,^ where the Supreme Court of that State reviews the law and applies the principles in a way somewhat different. In that case the State agent wrote " no," in place of " yes " as answered by the applicant, and the court held the com- pany estopped, although a copy of the application was attached to the policy ; saying: " It is claimed, however, by the appellant, that, inasmuch as a correct copy of the appli- cation was attached to and made part of the policy of insurance, the assured by accepting the policy was bound to know its contents, and became bound by the representa- tions upon which it was issued. Whatever may be the rule as to theapplicationsprepared by special agents, where the assured has knowledge of the limitations upon his 1 Eyan v. "World Mut. L. Co., 41 Conn. 568; 19 Am. Rep. 490; Lewis V. Phoenix Mut. Life Ins. Co., 39 Conn. 100; Franklin F. Ins, Co. v. Martin, 40 N. J. L. 568; American Ins. Co. v. Neiberger, 74 Mo. 167; Richardson v. Maine Ins. Co., 46 Me. 394. "- Michia;an Mut. L. Ins. Co. v. Leon, 138 Ind. 636; 37 N. E. R. 584. 476 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 222 authority, we are of the opinion that thernle contended for by the appellant should not be applied to a case like this, where the application is prepared by a general agent having no superior in the State. As we have seen, if the answers found in the application are untrue the wrong is with the appellant. As the appellant, through its duly authorized agent, was in possession of all the facts affecting the risk, we think the assured might well assume that the policy was properly prepared, and was based upon such facts, and that he was under no obligation to make a diligent reading of the policy with a view of ascertaining whether the appel- lant's own agent had perpetrated a fraud upon it. To per- mit the appellant now, since a loss has occurred, to void its policy on the ground that it was deceived by its own agent, without the fault of the assured, is to permit it to violate one of the best known principles of the law, namely, to take advantage of its own wrong. It is equivalent to permitting it to say, ' It is true I issued to the assured the policy upon which the suit is based, but I will not pay it because I, through my duly authorized agent, was guilty of the wrong of falsely recording the answers made by the assured to the questions asked him.' The case of Donnelly V. Insurance Co.,^ and the case of Boetcher u. Insurance Co.,^ are, we think, much in point here. In the latter case cited it was said by the court: ' We can readily see that the assured may be bound to take notice of the conditions and covenants in the policy that affect his rights, or that apply to matters in existence at the time the policy is delivered, or that may occur in the future, but we know of no principle of law which requires him to diligently examine the policy for the purpose of ascertaining whether it contains false statements of facts as to a 1 70 la. 693; 28 N. W. 607. 2 47 la. 253. 477 § 222 APPLICATION, WARRANTY, EEPEBSENTATION, ETC. past transaction, which he might well suppose closed.' Though the appellant in this case, through its agent, had full notice of the matters of which it now complains, it took no steps to avoid this policy until the assured had been fatally injured in a railroad accident, and until it was too late to secure insurance elsewhere. Under such circum- stances, in order to avoid the poficy, we think it should be shown that the assured was guilty of some positive wrong. No wrong is attributed to him unless it be said that he was guilty of a wrong in neglecting to read the copy of the application attached to the policy issued to him by the ap- pellant. We do not think this was such a wrong as would relieve the appellant from liability on its policy under the circumstances surrounding this case." And in the re- cent case of McMaster v. New York Life Ins. Co.,i the Supreme Court of the United States held that the omission of the insured to read a life insurance policy when delivered to him and payment of premiums made, and when in an- swer to his inquiry the insurance agent told him that the policy conformed to their agreement, does not constitute such negligence as to estop the insured from denying that by accepting the policy he agreed to a provision therein contained, but of which he was ignorant, and to which he had not agreed, to the effect that the annual premium should be paid in subsequent years on a date earlier than that on which the policy was issued. In a case where the application was signed by the applicant and taken away by the agent and filled out incorrectly by him, it was held by the Supreme Court of Michigan^ that the bene- ficiary in an action on the policy ' ' had the right to show by her testimony that the answers made by her daughter 1 183 U. S. 25; reversing 40 C. C. A. 19; 99 Fed. E. 856. 2 Brown v- Metropolitan L. Ins. Co., 65 Micli. 306; 33 N. W. Rep. 610, 478 APPLICATION, WARKANir, EEPKESENTATION, ETC. § 223 at the house were incorrectly written in by the agent after he went to his office, or that he filled in answers at such office that were not made at the house by Victoria (the assured). As such answers, if made by the agent, and not by Victoria, or without her knowledge or consent, could not bind her, the fact that they were so made could be es- tablished by parol. If the application had not been signed until filled out, a different rule might prevail." ^ Where the agent fills out the application and presents it to the applicant for signature, without acquainting him with its contents, the representations therein made are conclusive against the company,^ so where by advice of the agent certain statements are omitted from the application.* If the proposal for insurance be prepared by the agent and he incorrectly report the answers of the applicant, and if there be no fraud or collusion between the agent and the insured, the contract may be reformed in equity, and made to conform to the true facts stated to the agent.* § 223. Answers to Referee: To Medical Eixaminer: Position o£ Latter. — If the policy so refers to the answers of a mutual friend, or referee, or to the answers of the ap- 1 Ante, § 152 et seg. 2 Dunbar o. Phoenix las. Co., 73 Wis. 492; 40 N. VS''. K. 386; Temminck v. Metropolitan L. Ins. Co., 72 Mich. 388; 40 N. W. E. 469; Mich. Mut. L. Ins. Co. v. Leon, 138 Ind. 636; 37 N. E. R. 584. 3 Kansas Protective Union v. Gardner, 41 Kans. 397; 21 Pac. R. 233; Equitable L. Assn. Soc. u. Hazlewood, 75 Tex. 338; 12 S. W. R. 621; O'Brien v. Home Ben. Assn., 117 N. Y. 310; 22 N. E. R. 954; Fidelity Mut. L. Assn. v. Ficlslin, 74 Md. 172; 21 Atl. R. 680; Mutual L. Ins. Co. ■0. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. R. 286. * Franklin F. Ins. Co. o. Martin, 40 N. J. L. 568; CoUett w. Morrison, 9 Hare, 162; In re Universal Non-TarifE F. Ins. Co., L. R. 19 Eq. 385; Malleable Iron Works v. Phcenix Ins. Co., 25 Conn. 465 ; Woodbury Savi n:;s Bank «. Charter Oak los. Co., 31 Cona. 517; Maher u. Hibernia Iqs. Co., 67 N. Y. 283. The effect of fault or fraud of agent will be further con- sidered when we come to speak of estoppel. See "post, § 426, eJ seq Also ante, § 152, e« seq. 479 § 223 APPLICATION, WARRANTY, REPRESENTATION, ETC. plicant to the medical examiner as to warrant their truth and make them a part of the contract, they are warranties, other- wise they are representations which must be substantially true.i The medical examiner has a wide latitude in his examination and the answers of the applicant must be sub- stantially true. The object of a physical examination of a person proposing to insure his life in an insurance company, by a competent physician, is to ascertain whether he is labor- ing under, or is subject to any disease or defects which may have a tendency to shorten life. " It is impossible," says the New York Court of Appeals,^ " to affix limits to the sub- jects, into which it is not only proper but necessary for an exadiining surgeon to inquire in order to arrive at a conclu- sion upon which he can safely advise the acceptance or rejection of a risk. Whether I am right or wrong in these views, I entertain no doubt that in many cases a knowledge of the pecuniary circumstances of a person desiring to be in- sured is material to the risk, as affecting in some degree the life and they are a legitimate subject of inquiry for the examining physician or surgeon." Where the medical examiner writes down false answers, when true information is given, there can be no misrepresentation. In a case in New York the facts were that the medical examiner was re- quired by his instructions from the company to write the answers to the questions in his own handwriting and not to allow any person to dictate any portion of them. In an- swer to a question calling for the family history of the applicant he stated correctly the cause of the death of a ' Miller v. Mutual Benefit Life Ins. Co., 31 la. 235; United Brethren, etc.j Soc. V. Klntner, 12 W. N. 0. (Pa.) 76. Provident Savings L. Ass. See. v. Eeutlinger, 58 Ark. 528; 25 S. W. R. 835; Ins. Co. v. McMurdy, 89 Pa. St. 363; Equitable L. Ass. Soc. v. Hazlewood, 75 Tex. 348; 12 S. W. E. 621 ; Continental L. Ins. Co. v. Chamberlain, 132 U. S. 304; 10 Sup. Ct. Reptr. 87; McCollum v. N. Y. Ins. Co., 8 N. Y. Supp. 249. 2 Valton V. Loan Fund, etc., Soc, 1 Keyes, 21. 480 APPLICATION, WARKANTT, REPRESENTATION, ETC. § 223 Sister. At the time the insured signed his name to the certificate, the answer had not been written in by the ex- aminer ; he subsequently filled in the cause of death as ' ' not known to applicant." Under the facts the court held :^ " He (the examiner) was the agent of the defendant for the purpose of reporting the answers to the questions referred to and was so held out to Terence Grattan. He was, as medical examiner, charged with certain duties by the de- fendant, and was acting in concert with the soliciting agent of the company. On the part of the life insured was en- tire good faith and truthfulness, and there is no reason to suspect any intentional unfairness on the part of the exam- iner. The omission was inadvertent. Is the company thereby released from its obligation? Many decisions in this court show that it is not.^ Within the principle therein recognized as well established, the erroneous answer must be taken as the declaration of the defendant, and any controversy depending upon it must, as between the par- ties, be taken as true. In this case the physician was not the agent to solicit insurance, but he had an act to perform in regard to it as the agent of the company . His written instructions were to write out the answers. In this in- stance he failed to do it correctly. The principle upon which it has been held that the company and not the insured, is responsible for the error of the soliciting agent, is equally applicable here. This question has been repeatedly con- sidered by this court, and in the recent case of Flynn v. ' Grattan v. Metropolitan Life Ins. Co., SON. Y. 293; 36 Am. Rep. 617. See also Ames v. Manhattan Life Ins. Co., 167 N. Y. 584; 60 N. E. R. 1106; affirming 40 App. Div. 465; 58 N. Y. Snpp. 244; Robinson v. Metropolitan L. Ins. Co., 157 N. Y. 711; 53 N. E. R. 1131; Mass. Ben. L. Assn. V. Robinson, 104 Ga. 256; 30 S. E. R. 918; 42 L. R. A. 261; Hacbett v. Supreme Council, etc., 168 N. Y. 588; 60 N. E. R. 1112; Dimick v. Metropolitan L. Ins. Co. (N. J.), 55 Atl. R. 291. 2 Mowry v, Rosendale, 74 N. Y. 360 and cases cited. 31 481 § 223 APPLICATION, WARRANTY, REPRESENTATION, ETC. The Equitable Life Ins. Co.^ was again before us. The point presented was similar to the one under review. The decision was in conformity with the views above expressed, and the doctrine referred to must be deemed settled. Not- was it incompetent to prove by parol the actual transaction between the insured and the medical examiner. It was proper to do this in reply to the defendant's case, without reforming the contract or asking for equitable relief. Fraud and breach of warranty in regard to his sister's death, is averred in the answer, and the matter given in evidence was proper in reply thereto. If sufficient as the foundation for equitable relief or ground for reforming the contract, it was not improper to receive in this action evidence which would defeat the defendant's claim, or which would be competent in any action in a court of equity. This advantage is secured to the litigant by the union of legal and equitable remedies in one system . " ^ This opinion was adhered to in a subsequent case in the same court, and reason supports the vievr that the medical examiner is the agent of the company upon whom the burden rests if he incorrectly reports the answers of the applicant.^ It has been held in New York,' that an agree- 1 78 N. Y. 568; 34 Am. Kep. 561. 2 Emery v. Peace, 20 N. Y. 62; N. Y. Ice Co. v. N. Y. Ins. Co., 23 N. Y. 357; Arthur v. Homestead F. Ins. Co., 78 N. Y. 462. ^ Grattan «. Metropolitan Life Ins. Co., 92 N. Y. 285; Co-operative Life Assoc, v. Leflore, 53 Miss. 20; United Breth., etc., Soc. v. Kintner, 12W. N. C. (Pa.) 76; Mutual Benefit L. Ins. Co. v. Wise, 34 Md. 582; Higbie v. Guardian Mut. L. Ins. Co., 63 N. Y. 603. To the same efEect are Arnholst v. National Union, 179 111. 486; 53 N. E, B. 988; reversing 74 Ills. App. 482; Mutual Reserve F. L. Asgn. v. Ogletree, 77 Miss. 7; 25 Son. R. 869; Endowment Rank v. Cogbill, 99 Tenn. 28; 41 S. W. B. 340; Mais. Ben. L. Assn. v. Robinson, 104 Ga. 256; 30 S. E K. 918; 42 L. R. A. 261 ; Alger V. Metropolitan L. Ins. Co., 32 N. Y. Supp. 323; 84 Hun, 271; Leonard ». State Mut. L. Ass. Co. (R. I.), 51 Atl. R. 1049. * Sternaman u. Metropolitan L. Ins. Co., 170 N. Y. 13; 62 N. E. B. 763; 57 L. R. A. 318; reversing 63 N. Y. Supp. 674. 482 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 223 ment in an application that a medical examiner, employed and paid by the insurer, should not be its agent but solely that of the insured is invalid as being against public policy. So, also, where a printed application to a life insurance com- pany was referred to in the policy and made apart thereof. The application was headed " Questions to be asked by the medical examiner, who will fully explain the questions and witness the answers and signature of the person exam- ined. ' ' At the time of an examination the medical examiner made certain verbal explanations of the meaning of these printed questions. The court held ^ that the applicant for in- surance might properly infer, from what was stated in the caption to the questions, that in answering them he should do so with reference to the construction and explanation given at the time, and if the questions were explained and answered in good faith, according to the interpretation put upon them at the time by the representative of the com- pany, there could be no objection to proving the facts and submitting them to the jury, notwithstanding the insured warranted the truth of his answers to the questions. The court approved the instruction to the jury of the judge below that " if in good faith the insured answered these questions in view of tbe interpretation that was presented to him by the agent, then, gentlemen, there is no fraud : and if such you find to be the case, you must read in these interrogatories the explanation made by the agent at the time, and then read his answers to the interrogatories in the light of such explanations." So where the applicant truthfully stated to the medical examiner that she had had '< La Grippe " but by his advice the question was answered no, it was held ^ that the company was estopped to deny the truth of the answer.^ Rejection by the medical exam- 1 Connecticut General L. Ins. Co. v. McMurdy, 89 Pa. St. 363. 2 Mutual L. Ins. Co. v. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. R. 286. 3 See also ante, § 222. 483 § 224 APPLICATION, WARRANTY, REPRESENTATION, ETC. iner of a company renders false the answer of the appli- cant that he has not been rejected by any other company.^ But a negative answer to the question whether application has been made to any other company for insurance, is true although an application had in fact been made to another company which had not been passed on.^ Where the med- ical examiner or agent upon a statement of the facts, sug- gests the answer, the company afterwards will not be heard to say that it is untrue.^ Still, in spite of this array of authority, if the limitations on the power of the medical examiner are embodied in the contract it has been held that his knowledge will not bind the company.* Where an organizer takes the applicant, who is the regular physician of the association, to another physician who signs a cer- tificate without making an examination, facts known by the latter will not bind the association.^ § 224. Rules of Construction in Particular Cases. — A clearer idea of the nature of warranties and representa- tions and of the rules of construction of answers of the applicant in his application will be gained from an exami- nation of particular cases where a direct ruling of the court has been had upon specific matters contained in the appli- cation. We shall proceed therefore to refer to some of these cases relating to such matters as age, condition, occupation, habits, health, and residence of applicant, seri- ous injury, sickness, other insurance, and questions relating to intemperance. 1 Edington v. Mtna, L. Ins. Co., 100 N. Y. 536. 2 Langdon v. Union Mut. L. Ins. Co., 14 Fed. Rep. 27. s Higgins u. Phoenix, etc., Ins. Co., 74 N. T. 6. See also post, § 427. This subject of answers to referee or medical examiner is also discussed in the remaining sections of this chapter. 1 John Hancock M. L. Ins. Co. ». Houpt, 113 Fed. E. 572. s National Fraternity v. Karnes, 24 Tex. Civ. A. 607; 60 S. W. R. 576 484 APPLICATION, WAEEANTT, REPRESENTATION, ETC. § 225 § 225. Age. — Where it is provided that if any of the statements made by the applicant as the basis of the con- tract shall be found in any respect untrue, then the policy shall be void, a misrepresentation as to age will avoid the policy. The question of age is so material that a false statement in regard to it will be fatal whether regarded as a representation or a warranty. ^ Where an applicant for admission to a voluntary association for mutual relief, the rules of which did not admit members over sixty years of age, stated his age, in his application, to be fifty-nine years, when in fact he was sixty-four years of age, it was held by the Supreme Court of Maine ^ that the misrepresentation avoided the contract of insurance issued thereon. In this case the court says : ' ' The age of the applicant was a ma- terial fact. If more than sixty he could not become a member. His representation of the fact was a warranty of its truth, and if not true, the contract was invalid. This rule is so uniformly held by the courts that no authorities need be cited." ^ But where the agent of a life insurance company filled in the answers in the application, and the applicant, an old man who spoke English imperfectly, stated to the agent that he did not know his age, and the agent wrote in a certain age, which turned out to be incor- rect, and upon the trial of an action upon the policy issued upon such application, the agent testified that on the appli- 1 Hunt V. Supreme Council Chosen Friends, 64 Mich. 671 ; 31 N. W. Eep. 576; United Brethren, etc., Soc. v. White, 100 Pa. St. 12; ^tua Life Ins. Co. v. France, 91 U. S. 510; Alabama Gold Life Ins. Co. v. Mobile Mut. Ins. Co., 81 Ala. 329; 1 South Rep. 561; Hartigan v. Inter- national, etc., Soc, 8 Low. Can. Jur. 203; Linz v. Mass. Mut. L. In-:. Co., 6 Mo. App. 363; Dinan v. Supreme Council Cath. M. B. Assn., 201 Pa. St. 363; 50 Atl. R. 999; Dolan o. Mutual Reserve L. Assn., 173 Mass. 187; 63N E.R. 398; Marcoux«. Society of Beneficence, etc., 91 Me. 250; 39 Atl, R. 1027. 2 Swett V. Citizens' Mut. Bel. Soc, 78 Me. 541; 7 Atl. Rep. 394. 6 See also McCoy v. Roman Catholic Ins. Co., 132 Mass. 272; 25 N. E. E. 289; Mutual B. Soc. v. Webster, 25 Can. L. J. (n. s.) 206. 485 § 226 APPLICATION, AYARRANTY, REPRESENTATION, ETC. cant's failure to state his age, he expostulated with him and then obtained some data from him which he (the agent) did not then recollect, and from them he computed the age, and inserted it in the application, the Court of Appeals of New York held that an estoppel en pais was fairly established and the company was precluded from setting up the falsity of the statement with reference to age in avoidance of the policy. ^ So, where the agent in writing in the age made a miscalculation ^ aad where the applicant was an ignorant man and the agent computed it and stated it falsely.^ Where, however, the agent and the applicant conspired to falsely state the age the contract was held void on account of fraud.* A provision in the policy that, "in case the age of the insured shall have been under- stated by mistake, the sum insured will be reduced to the amount the premium would pay for at the true age," pre- cludes the insurance company from asserting the under- statement as a breach of warranty, and its remedy is to ask that the sum insured be reduced accordingly.^ The ques- tion of age is one of fact for the jury.' § 226. Whether Applicant is Married or Single. — If the question is asked whether the applicant is married or single the answer must be true, for by asking the question the insurer has shown that an answer was considered material. The question arose in Jeffries v. Life Insurance 1 Miller w. Phoenix Mut. Life Ins. Co., 107 N. Y. 292; 14 N. East.Eep. 271. 2 Brink v. Guaranty Mut. Ace. Assn., 7 N. Y. Supp. 847. = Keystone M. B. Assn. v. Jones, 72 Md 363; 20 Atl. R. 195. 4 Hanf. V. N. W. Masonic Aid Soc, 76 Wis. 450; 45 N. W. 315. 5 Singleton v. Prudential Ins. Co., II App. Div. 403; 42 N. Y. Supp. 446. See also Floyd v. Prudential L. Ins. Co., 72 Mo. App. 455. * Deutscher, etc., v, Berger, 35 111. App. 112; Corbett o. Metropolitan L. Ins. Co., 37 App. Div. 152; 55 N. Y. Supp. 775; Meehan v. Supreme Council Cath. Benev. L. (App. Div.), 88 N. Y. Supp. 821. For discus- sion of law of evidence as to age -see post, § 469a. 486 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 226 Company, in the Supreme Court of the United States, ^ where it was argued that it was immaterial because, in this case, the insured having answered that he was single, when in fact he was married, and being married made the risk better, the company was not injured. The court says : " This stipulation is not expressed to be made as to impor- tant or material statements only, or to those supposed to be material, but as to all statements. The statements need not come up to the degree of warranties. They need not be representations even, if this term conveys an idea of an affirmation having any technical character. Statements and declarations is the expression ; what the applicant states and what the applicant declares. Nothing can be more simple. If he makes any statement in the application it must be true, if he makes any declaration in the applica- tion it must be true. A faithful performance of this agree- ment is made an express condition to the existence of a liability on the part of the company. There is no place for the argument either that the false statement was not material to the risk, or that it was a positive advantage to the company to be deceived by it. It is the distinct agree- ment of the parties, that the company shall not be deceived to its injury or to its benefit. The right of an individual or corporation to make an unwise bargain is as complete as that to make a wise bargain. The right to make con- tracts carries with it the right to determine what is prudent and wise, what is unwise and imprudent, and upon that point the judgment of the individual is subject to that of no other tribunal. The case in hand affords a good illus- tration of this principle. The company deems it wise and prudent that the applicant should inform them truly whether he has made any other application to have his life insured. 1 22 Wall. 47. See also Makel v. John Hancock M. L. Ins. Co., 88 N- Y. Supp. 757; Travelers Ins^ Co. v. Lampkin, 5 Colo. App. 177; 38 Pac. R. 335. 487 § 227 APPLICATION, WARKANTT, REPRESENTATION, ETC. So material does it deem this information, that it stipulates that its liability shall depend upon the truth of the answer. The same is true of its inquiry whether the party is married or single. The company fixes this estimate of its impor- tance. The applicant agrees that it is thus important by accepting this test. It would be a violation of the legal rights of the company to take from it its acknowledged power, thus to make its opinion the standard of what is material and to leave that point to the determination of a jury." 1 This is true where in an application for member- ship in a benefit society, the beneficiaries of which were limited to wife and children, a person is represented to be the applicant's wife when she was not.^ § 227. Residence. — When the residence of the appli- cant is asked the meaning is that the ordinary place of abode of the person should be given. " The term resi- dence," says the Supreme Court of Alabama,? " as em- ployed in the questions propounded to the assured, was in- tended to signify the place of permanent, rather than mere temporary abode, in the sense of domicile, rather than of mere inhabitancy. It is undisputed that the domicile of the assured was truly stated, and that his sojourn in Ken- tucky was merely temporary. The doinicile, and the place of temporary residence, are each within the territorial limits, in which, according to the stipulation of the policy, the assured had the right to visit or reside. The policy and the application must be construed together. Kesidence, as employed in the one, must have the same signification it hears in the other, there being no indication of an intention to employ them in a different signification. The word visit 1 United Brethren Mut. Aid Soc. u. White, 100 Pa. St. 12. 2 Smith V. Baltimore & Ohio B. Co., 81 Md. 412; 32 Atl. R. 181. But see post, §§ 230 and 269. 3 Mobile Life Ins Co. v. Walker, 58 Ala. 290. 488 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 228 is manifestly employed in contradistinction to the word reside. The one conferring the right to travel and sojourn, and the other the right to acquire domicile by residence with the intention of remaining." ^ A false statement as to residence, when the answers are warranted to be true will avoid the policy.^ § 228. Occupation. — The occupation of the applicant, which is •required to be disclosed, means the business in which he is engaged at the time of making the application. "If it meant the trade he had learned in his youth and which he had followed years before, it would indeed be immaterial whether he told the truth or a falsehood, and it would have been mere folly in the insurers to ask him the question." ^ So, where the applicant stated that he was a "laborer," and it appeared that, as a matter of fact-, he had suspended labor for several years prior to making the application, either on account of old age or other contin- uous disability, it was held by the Supreme Court of Penn- sylvania,* that the answer was misleading and the policy thereby avoided. "It is indeed true," says the court, " that the rule would not embrace a riierely temporary sus- l^ension of the alleged occupation but it does embrace a suspension extending through several years, or resulting from old age or other continuous disability." So where the applicant stated his occupation to be "lockmaker," when in fact, he was doing odd jobs in a livery stable the 1 Southern Life Ins. Co. v. Booker, 9 Heisb. 606; 24 Am. Rep. 344; Perrins v. Marine, etc., Ins. Soc, 2 El. & EI. 317; 29 L. J. Q. B. 242; 6 Jur. (N. s) 627; 8 W. R. 563. 2 Hatcliinson v. Hartlord L. & A. Ins. Co. (Tex. Civ. A.), 39 S. W. R. 325. 3 Hartman v. Keystone Ins. Co., 21 Pa. St. 178. In this case the occupation was stated as " farmer " when in fact he was a slave-taker. * Mutual Aid Society v. White, 100 Pa. St. 12. 489 § 228 APPLICATION, WARRANTY, REPRESENTATION, ETC. policy was avoided. ^ So where a cattle dealer stated his occupation to be " ice dealer and proprietor transportation company." ^ So where a person who stated his application as t pumpmaker was killed by dynamite while blowing out a well."^ Under a construction of the language of the application a statement as to occupation may apply to a time after the delivery of the policy.* The New York Court of Appeals^ has held where, in the application for the policy, in answer to the question as to the occu- pation of the deceased, the answer was " soda-water maker," and the medical examiner's certificate, required to be signed by the applicant, stated in answer to an inquiry as to the occupation of the applicant, that " he is out of doors most of the time selling soda-water," and it appeared that the deceased both made and sold soda-water, that the answers were to be taken together and stated the facts correctly. And, where the applicant stated his occu- pation to be " manufacturing, ' ' and it was shown that during the month the application was made insured kept a billiard saloon, and that for years previous he had been engaged in manufacturing soda-water, and was about to resume this business, the court held,® that the question might have been understood as calling for the usual rather than the tempo- rary occupation, and there was no breach of warranty. A director of a corporation, engaged in manufacturing and selling liquor, is not engaged as " principal, agent or ser- 1 Fell V. Hancock M. L. I. Co. (Conn.), 67 Atl. K. 175. 2 Standard L. & A. Ins. Co. v. Ward, 65 Ark. 295; 45 S. W. K. 1065. s Mortensen v. Central Life Assa. (la.), 99 N. W. E. 1059. ♦ McGurk B. Metropolitan L. Ins. Co., 56 Conn. 525; 16 Atl. 263. 5 Grattan v. Metropolitan Life Ins. Co., 80 N. Y 281 ; 36 Am. Rep. 617. « Mowry v. World Mutual Life Ins. Co., 7 Daly, 321. See aiso Higti Court I. O. O. F., 70 111. App. 139; Perrin ». Prudential Ins. Co., 29 Misc. E. 597; 61 N. Y. Supp. 249; afi'd 62 N. Y. Supp. 720; Hadley o. Provi- dent Savings L. A. Soc, 90 Fed. B. 390. But see Mallcki v. Chicago Guaranty, etc., Soc, 119 Mich. 151; 77 N. W. R. 690. 490 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 22$ vant " iu the manufacture or sale of malt liquors.^ In England it was held that a representation that the applicant was an " esquire " was sufficient, if true, although he was at the time engaged in business as an ironmonger. This was on the ground that the statement was not untrue, but imperfect. 2 When the applicant stated that he was a wholesale liquor dealer and importer and had a government license and sold liquor only at wholesale, it was held that the answer was true although he sold liquor by the pint or quart in bottles.^ The fact that, where the occupation stated is that of " country merchant," liquor is carried in stock does not make false the answer that applicant is not engaged in the business of selling intoxicating liquor.* Nor is one engaged in the sale of liquor though as servant in a hotel he is occasionally called on to serve liquor to guests.^ "Where the applicant represented his occupation to be that of printer when in fact he was tending bar the contract was held void.* A fair disclosure is required and if that is made it is sufficient.' The company may be estopped if the agent incorrectly states the occupation, the applicant making no misrepresentation, as where a saloonkeeper was described as a general merchant,* or ' People u. Supreme Tent, etc., 35 Misc. R. 424; 71 N. Y. Supp. 960 2 Perrins v. Marine & Gen. Tr. Ins. Co., 2 BI. &E1. 317; 29 L. J. Q. B. 242 ; 6 Jur. (n. s.) 627; 8 W. B. 563. See also Southern Life Ins. Co. v. Booker, 9 Heisk. 606. 3 Kenyon «. Knights Templar, etc., Assn., 122 N. Y. 247; 25 N. E. K. 299; afflrmins 48 Hun, 278. 1 Fidelity Mat. L. Assn. v. Ficklin, 74 Md. 172; 21 Atl. E. 680. 5 Guiitmane. Metropolitan L. Ins. Co., 69 Vt. 469; 38 Atl. R. 315; but to the contrary Malicki v. Chicago Guaranty, etc., Soc, 119 Mich. 151 ; 77 N. W. E. 690. « Holland V. Supreme Council O. C. F., 54 N. J. L. 490; 25 Atl. R. 367 See also Standard L. & A. Ins. Co. v. Fraser, 22 C. C. A. 499; 44 D. S. App. 694; 76 Fed. E. 705. ' Brink v. Guaranty Mut. Ace. Assn., 7 N. Y. Supp. 84V. » Continental L. Ins. Co. v. Thoena, 26 111. App. 495. 491 § 229 APPLICATION, WAKRANTY, REPRESENTATION, ETC. where a railroad yardman was described as a " laborer," ^ or where the agent knew that a country merchant carried liquor.^ No recovery can be had upon a policy providing that it only extended to assured as " yardmaster," where assured at the time was a yard conductor.^ One having charge of a gang of laborers is properly called an " in- spector." * If the statement of present occupation is true a subsequent change will not avoid the policy, unless it is so stipulated in the contract.' But the stipulation must be clear.* § 229. The Dwigbt Case. — One of the most interesting cases relating to life insurance questions, discusses this matter of occupation, and also the principles of construction of life insurance contracts, and deserves somewhat full extracts. It is the famous case of Dwight v. Germania Life Insurance Co.' In this case, by the terms of the contract, the as- sured warranted the truth of his answers to questions in his application, and compliance with the terms of the warranty was held to be a condition of the contract, so that any sub- stantial deviation from the truth in an answer must be as- sumed to be material to the risk so as to forfeit the policy. The court proceeded as follows : " Among the facts which the defendant deemed it important to know before enter- ing into a contract of insurance with the deceased, was his previous business and occupation. The materiality of truthful information in relation thereto was impressed upon the applicant by specific inquiries and the requirement 1 Wright's Admr. v. N. W. Mut. Life Ins. Co., 91 Ky. 208; 15 S. W. R. 242. 2 Fidelity Mut. L. Assn. v. Ficklin, supra. 2 Moore v. Citizens Mut. L. Ins. Co., 26 N. Y. Supp. 1014. * Smith V. Prudential Ins. Co., 41 N. Y. Supp. 925; 10 App. Div. 148. « Provident Life Ins. Co. v. Fennel], 49 111. 180. s Hobbs V. la. Mut. Ben. Assn., 82 la. 107; 47 N. W. B. 983. ' 103 N. Y. 341; 8N. East. Rep. 654. 492 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 229 that truthful answers thereto should be made the condition of a valid contract. With the view of eliciting the informa- tion desired, a series of questions was proposed to the deceased embracing not only an inquiry as to his general business and occupation, but special inquiries as to certain particular trades and employments. Among those which we deem it important to refer to in this case were the fol- lowing: 'A. For the party whose life is proposed to be assured, state the business, carefully specified? Ans. Eeal estate and grain dealer. B. Is this business his own or does he work for other persons, and in what capacity? Ans. His own. C. In what occupation has he been en- gaged during the last ten years? A. Eeal estate and grain dealer. D. Is he now, or has he been engaged in or con- nected with the manufacture or sale of any beer, wine or other intoxicating liquors? Ans. No.' * * * Upon the trial it appeared that Dwight was engaged in the busi- ness of keeping hotel at Binghampton, from May, 1874, until March, 1877, and that during that period he regularly and systematically sold wines and liquors, in bottles of vari- ous sizes, bearing the name of his hotel blown in the glass, to such of his guests as desired them. He kept a wine or liquor room in which was stored a large supply of wines and liquors, and each year while so engaged he applied, paid for and received, from the representatives of both the State and National Governments, licenses and permits, authorizing him to carry on the business of selling beer, wine and liquors at retail, to be drank upon his premises. It also appeared that he kept no bar and did not sell to persons who were not his guests. These facts were undis- puted. Their absolute truth was assumed by the trial judge in charging the jury, and by the general term in passing upon the appeal to that court. That the answer given by Dwight to the questions (relating to the sale of liquor) was incorrect was admitted by both tribunals. That 493 § 229 APPLICATION, WARRANTY, REPRESENTATION, ETC. Dwight did not misconceive the meaning and intent of the question conclusively appeared from repeated answers made by him to other companies within three weeks prior to this time to similar questions in applications for other insurance in which he stated that he had kept a hotel for three years in which liquor was sold in packages. Upon denying the motion for a non- suit, the trial court refused to pass upon the question as to whether the facts constituted a breach of warranty or not, but left it to the jury to say whether the sales of liquor, proved to have been made, were sales at all, within the intent and meaning of the contract. In this, we think that the court erred, no question arising upon the evidence which authorized its reference to the jury. If there was any room for doubt in respect to the true meaning and intent of the inquiry answered by the deceased, it presented a question of law for the court to determine, and not one for the jury.^ But we are of the opinion that no such doubt existed in the case. The contract was in writing, subscribed by the parties, and they expressed their agree- ment in clear, umambiguous and intelligible language. Its import and meaning was not obscured by any reference to the situation and circumstances, surrounding the transac- tion, or by the consideration of other parts of the same instrument. On the contrary, an examination of the con- text and associated questions make more certain and defi- nite its object and intent. The assured had been previously interrogated as to his general business and employment, and it is to be assumed had given such answers in respect thereto, as satisfied the object of the inquirer. He was then specially requested to state whether he was then, or had been, engaged in, or connected with the manufacture or sale of any beer, wine, or other intoxicating liquors. 1 Lomer v. Merker, 26 N. Y. 361; Glacius v. Black, 67 N. Y. 563. 494 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 229 The information called for was made material, not only by the express agreement of the parties, but also by the object for which it was required, plainly apparent from the nature of the transaction. The question called for no opinion, and was capable of a precise, definite and catesjorical answer. It was intentionally framed in broad and compre- hensive terms, apparently to avoid any evasion of its object; but was, nevertheless, expressed in clear and unambiguous language . Tf an intention to inquire concern- ing the conduct of the regular or principal business of the assured could be implied from the use of the word ' en- gaged,' an idea that such was the only meaning of the question was negatived by the further words, ' or con- nected with the manufacture or sale of any beer,' etc., which pointed unmistakably to every transaction of the kind described, however limited its character, or remote his connection with it, might have been. The motive prompting the question was reasonable, natural and proper, and apparent even to the most careless reader. The inquiry could not have referred to the general business employment of the insured, because inquiries on that sub- ject had previously been exhausted, and the question had no office to perform in that respect. It carried upon its face the object which the insurer had in making it, and re- quired an answer as to whether the applicant was, or had been engaged in, or connected with, the manufacture or sale of liquors, etc., not in a limited or restricted capacity or employment, but in any and every way in which such acts could have been performed. The question itself assumes that persons engaged in or connected with the manufacture or sale of liquors in any manner were more hazardous subjects for insurance than those occupied in more reputable em- ployments, and that the insurer would regard such employ- ment as an objection to the proposed contract. The extent to which the employment affected the character of the 495 § 229 APPLICATION, WARRANTY, REPRESENTATION, ETC. applicant, or his value as a risk, was a question solely for the insurer. The defendant had a right to a full and frank disclosure of any and all facts bearing upon the subject, and this confessedly it did not obtain. It was misinformed as to the precise fact which had been agreed upon as a fact material for it to know, in determining the propriety of enter- ing into the proposed contract, and by the parties who had assented to the proposition, that such information should invalidate any contract made. If the fair import of the language used, indicates that the interrogatory intended to include within its scope and meaning single transactions or incidental occupations, neither courts nor juries have authority to say that such transactions may properly be dis- regarded in the answer made. The defendant must be deemed to have meant what is said, and its express language embraces all transactions, audits express contract has made every transaction of the kind referred to, material to the risk. « * * We are also of the opinion that the answers of the assured to the questions relating to his business and occupation, were evasive and untrue, and, upon the whole evidence, required' the dismissal of the complaint. There was not only an absence of satisfactory evidence in the case that he had ever been engaged in the business of a real estate or grain dealer, for himself in the ordinary accepta- tion of those terms, but such an acceptation was negatived by his repeated sworn declarations to the contrary, and the proof of circumstances of the most convincing charactor. The evidence upon these questions is substantially all to the same effect, and presents a case so preponderating in character, that a verdict against it could not be allowed to stand. The case, therefore, presented a question of law as to whether the business engaged in by the deceased, constituted him a dealer in real estate and grain, within the ordinary meaning of those terms." 496 APPLICATION, WAREANTY, REPRESENTATION, ETC. § 230 § 230. Answers in regard to Parents, Relatives, etc. — The age of the parents of the applicant at the time of their death, the diseases of which they died, and facts relating to the relatives and family of the applicant, are all material and must be truly stated. Where the statements of the application are warranted to be true the stipulation is for absolute truth and not for the truth according to the belief of the applicant and if such applicant answers falsely that his brother never had insanity, the contract is void.^ Answers to these questions assume knowledge, as in a case, where the assured in his application answered " no " to the question whether either of his parents, brothers or sisters had ever had pulmonary, scrofulous or other consti- tutional or. hereditary diseases, in which it was held that the answer assumed his knowledge of the fact and, in an action on the policy, the beneficiary was precluded from alleging the want of knowledge on the part of the insured as an excuse for not answering correctly.^ A statement that a sister died of kidney disease, when in fact she died of chronic pneumonia, has been held not' to "be prima facie a material misrepresentation.^ Where in an application for membership in a benefit society, designating a bene- ficiary a person was falsely represented to be a niece the contract was held void.* So as to cousin.^ So as to wife.^ But the better rule is that in such case the contract is only avoided as to the person wrongfully designated as bene- 1 Johnson v. Maine, etc., Ins. Co., 83 Me. 182; 22 Atl. R. 107. 2 Hartford L. & A. Ins. Co. v. Gray, 91 111. 159. See also Jerrett v. John Hancock M. L. Ins. Co., 18 R. I. 754; 30 Atl. R. 793; McGowan v. Supreme Court I. O. O. F., 107 Wis. 462; 83 N. W. R. 775; Kansas Mut. L. In.s. Co. u. Pinson (Tex. C. A.), 64 S. W. R. 818. 3 New Era Assn. v. McTavish (Mich.), 94 N. W. R. 599. .4 Supreme Counc. A. L. H. v. Green, 71 Md. 263; 17 Atl. R. 1048. 5 Mace V. Provident L. Ins. Assn., 101 N. C. 122; 7 S. E. R. 674. s Travelers Ins. Co. v. Lampkin, 5 Colo. App. 177; 38 Pac. R. 335. But see Bogartu. Thompson, 24 Misc. R. 581; 53 N, Y. Supp. 622. 32 497 § 230a APPLICATION, WARRANTY, REPRESENTATION, ETC. ficiary and inures to the benefit of the next of kin as in case of no designation. ^ As half-brothers are not gen- erally regarded as brothers it will be left to the jury to say whether a failure to mention them is a concealment of a material fact.^ A representation that the applicant had no brother dead, in the absenge of fraud, has been held not to ayoid the policy.^ And a statement that the appli- cant's father enjoyed good health means only reasonably good health.^ And the word, wife, in an application after the name of the payee is not a warranty but a mere description of the person.' The omission to mention the name of a brother who died before the applicant was born and of whom he had no knowledge is not a breach of war- ranty.^ And it has been held that a question, as to whether certain relatives have died of consumption, so far as known, calls only for the applicant's knowledge and a false answer is not a breach of warranty unless he knew it was false.' § 230a. Family Physician — Medical Attendant — Con- sTilting a Pliysician. — Where questions are asked as to the family physician, or medical attendant, of the ap- plicant, they must be answered truthfully and in good ^ Britton (7. Supreme Counc. R. A., 46 N. J. E. 102; 18 Atl. K. 675; Vivar v. Supreme Lodge K. of P., 42 N. J. L. 455; 20 Atl. 36; Supreme Lodge A. O. U. W. v. Hutchinson (Ind. App,), 33 N. B. R. 816; Mace V. Provident L. I. Assn., 101 N. C. 122; 7 S. E. R. 674. 2 Spitz V. Mut. Ben. L. Assn., 25 N. Y. Supp. 469. 3 Globe Mut. L. Ins. Assn. v. Wagner, 188 111. 133; 58 N. E. 970; 52 L. R. A. 649. * Provident Savings L. A. Soc. v. Beyer, 23 Ky. L. 2460; 67 S. W. R. 827. 5 Lampkln v. Travelers Ins. Co., 11 Colo. App. 249; 52 Pac. R. 1040. 6 Mutual L. Ins. Co. v. Baker, 10 Tex. Civ. A. 515; 31 S. W. R. 1072. ' Davis V, Supreme Lodge K. of H., 35 App. Div. 354; 54 N. Y. Supp. 1023. 498 APPLICATION, WAEEANTY, REPRESENTATION, ETC. § 230a faith or the policy will be avoided. ^ Whether this has been done or not is genei'ally a question for the jury.2 The question is material to the risk.^ As the object of the question is to obtain the name of a medical attendant who can give information as to the quality of the life proposed, the failure to give full information may amount to a concealment, as where the applicant gave the name of a casual medical attendant but did not give the name of a physician who had recently attended him for delirium tremens, it was held that the duty of the appli- cant was to have made a full disclosure.* So, where the applicant was asiied to state the physician usually employed by him, and if he had none, to name any other doctor who could be applied to for information as to the state of his health, and he answered "none," and it was shown that be had occasionally applied to a physician for serious ailments and had been examined for insurance and rejected by another physician, it was held that the failure to state the names of the two physicians was a fraudulent con- cealment and avoided the policy.^ Where the applicant 1 In addition 10 authorities cited Id this section may be added: Boland V. Industrial Ben. Assn., 26 N. Y. Supp. 433; Wilkins «. Mut. Reserve Fund L. Assn., 7 N. Y. Supp. 589; Cobb v. Covenant M. B. Assn., 153 Mass. 176; 26 N. B. R. 230; Philips ». N. Y. Life Ins. Co., 9 N. Y. Supp. 836; Sullivan v. Metropolitan L. Ins. Co., 12 N. Y. Supp. 923; Fidelity Mut. L. A.ssn. ». Ficklin, 74 Md. 172; 21 Atl. R. 680; Provident, etc, As>n. V. Reutlinger, 68 Ark. 528; 26 S. W. 836. 2 Gibson v. American Mut. Life Ins. Co., 37 N. Y. 380; Maynard v. Rhodes, 1 C & P. 360; 5 D. & R. 266; Scoles v. Universal Life Ins. Co., 42 Cal. 523; Cushman v. United States Ins. Co., 70 N. Y. 72; Edington V. Mutual, etc., Ins. Co., 67 N. Y. 185; Smith®. Metropolitan L. Ins. Co. 183 Pa. St. 504; 38 Atl. R. 103. 3 Fidelity M. L. Assn. v. McDaniel, 25 Md. App. 608; 57 N. B. R. 645. * Hutton ». Waterloo, etc., Soc, 1 F. & F. 735. 5 Horn V. Amicable, etc., Ins. Co., 64 Barb. 81 ; HucKman v. Fernie, 3 M. & W. 505; 1 H. & H. 149; 2 Jur. 444; see also Brady v. United L. Ins. 499 § 230a APPLICATION, WARRANTY, REPRESENTATION, ETC. is asked whether he has " consulted a physician, been pre- scribed for, or professionally treated," he must answer truthfully and it is immaterial whether he was prescribed for on account of disease or only temporary or trivial ailment ; ^ this has been held to include medical treatment two years previous.^ In the case last cited the court says : "If he (the assured) had consulted any physician in a professional character, or received any treatment or advice at the hands of one, it was hisbounden duty to disclose the fact in answer to the inquiries, for his warranty fully covers such matters. The stipulation was a competent one for the appellee to make, and, so far as the evidence is concerned, was justified ; and, in our opinion it clearly shows a breach of the warranty of the truth of the answers quoted. If there is any doubt of this, we add that the un- contradicted evidence unquestionably shows that the de- ceased was attended and treated by another physician. Dr. Cook, upon other occasions during the year 1888 or 1889, when he had indulged in protracted sprees and become sick. The appellant had a perfect right to make the questions and answers in the application a part of the contract, and we have no right to make any other or different contract Co., 9 C. C. A. 252; 20 O. S. App. 337; 60 Fed. 727; Caruthers v. Kansas Mut. L. Ins. Co., 108 Fed. R. 487. 1 Cobb B. Covenant M. B. Assn., 153 Mass. 176; 26 N. E. R. 230; In- surance Co. v. McTeasue, 49 N. J. L. 687; 9 Atl. Rep. 766; Provident Sav., etc., Soc. v. Reutlinger, 58 Ark. 628; 25 S . W. Rep. 835; Hubbard V. Mutual R. F. L. Assn., 40 C. C. A. 663; 100 Fed. R. 719; Metropolitan L. Ins. Co. V. Larsen, 85 111. App. 143; Flippen v. State L. Ins. Co., 30 Tex. Civ. A. 362; 70 S. W. R. 787; Sladden v. N. Y. L. Ins. Co., 29 C. C. A. 596; 86 Fed. 102; Brock v. United Moderns (Tex. Civ. A.), 81 S. W. R. 340; McDermott v. Modern Woodmen, 97 N. W. App. 636; 71 S. W. R. 833; Roche v. Supreme Lodge K. of H., 21 App. Div. 599; 47 N. Y. Supp. 774; Wall v. Royal Society, etc., 179 Pa. St. 355; 36 Atl. R. 748; Fidelity, etc., Assn. ■«. Harris (Tex. Civ. A.), 57 S. W. R. 635; Aloe V. Mutual Res. F. L. A., 147 Mo. 561; 49 S. W. R. 553. 2 Mut. L. Ins, Co. V. Arhelger (Ariz.), 36 Pac. R. 895. 500 APPLICATION, WAERANTY, REPRESENTATION, ETC. § 230fl for the parties. Such answers were material to the policy. They were made so by its terms, and no rule of construc- tion will be suffered to destroy the effect of plain language. We hold that the statements by the deceased in the application for the insurance about a physician were warranted to be true, and that the stipulation and the evidence show a clear breach of such warranty. The policy is voided.^ It makes no difference whether the de- ceased knew them to be untrue or not. It is a good de- fense to show that, as a matter of fact, they were untrue, without showing that he knew or believed them to be un- true.^ Counsel for appellee directs our attention to the case of Moulor v. Insurance Co.,^ and thinks that case should govern this. The cases are clearly distinguishable.* In Moulor v. Insurance Co. it was held, in effect, that there was doubt of the meaning of the contract, and it was there- fore proper to consider the statements of the applicant as ' representations ' and warranties only to the extent that they were made in good faith, and were true as far as the insured knew. The statements of the applicant were referred to in the body of the policy as being representa- tions, and this expression was made to govern. But there is no doubt of the meaning of this contract. Eead it as you will, it remains a strict warranty. The words used are plain, and are comprehended as soon as read. In such a case there is no room for construction, for the very good reason that there is no need for it.^ The term 'rule of construction ' is confined by general usage to rules for the 1 Dwightc. Germania L. Insurance Co., 103 N. Y. 341; 8 N. E. 654; McCollum V. Insurance Co. (Sup.), 8 N. Y.Sapp. 249; Boland v. Associa- tion (Sup.), 26 N. Y. Supp. 433. 2 Provident L. Assn. Soc. v. Llewellyn, 58 Fed. 940; 7 C. C. A. 579* 3 111 U. S. 335; 4 Sup. Ct. E. 466. * Provident L. A. Soc. v. Llewellyn, supra. « 2 Pars. Cont. 600. 501 § 230a APPLICATION, WARRANTY, REPRESENTATION, ETC. interpretation of written documents in matters on which, in the absence of a rule to aid, there might be a doubt." ^ Still it has been held ^ that the fact that the insured had twice been prescribed for for indigestion is not enough to show bad faith. If the question be ambiguous, as for ex- ample, " How long since you have consulted a physician," and the answer admits of two ccftistructions, the one most favorable to the insured will be adopted.^ The question must have a reasonable interpretation, and casually meet- ing a physician on the street and receiving a prescription for a trivial ailment will not vitiate,* and consulting a phy- sician for drunkenness does not mean consulting him for disease.^ But calling at a physician's office, submitting to an examination and receiving a prescription is being at- tended by such physician.^ A false answer to a question whether a physician had ever given an unfavorable opinion on the applicant's life will avoid the policy.' The Su- preme Court of Minnesota * define the term ' ' family phy- sician " as follows : " The phrase ' family physician ' is in common use, and has not, so far as we are aware, any technical signification. As used in this instance, and for the purposes of the testimony appearing in this case, the chief justice and myself are of opinion that it may be sufficiently defined as signifying the physician who usually attends and is consulted by the members of the family in 1 Pol. Cont. 466. 2 Fidelity M. L. Assn. v. Ficklin, 74 Md. 172; 21 Atl. E. 680. 8 Stewart!). Equitable Mut. L. Assn., 110 la. 528; 81 N. W. R. 782. * Mut. Reserve F. L. Assn. v. Ogletree, 77 Miss. 7; 25 Sou. R. 869; Blumenthal v. Berkshire L. Ins. Co. (Mich.), 96 N. W. R. 17; Plumb v. Penn. M. L. Ins. Co., 108 Mich. 94; 65 N. W. 611; Woodward v. Iowa Life Ins. Co., 104 Tenn. 49; 56 S. W. 1020. 6 Supreme Lodge K. P. v. Taylor (Ala.), 24 Sou. R. 247. 6 White V. Provident Sav. Life Ass. Soc, 163 Mass. 108; 39 N. E. R. 771; 27 L. R. A. 398. ' Ferris v. Home L. Ass. Co., 118 Mich. 485; 76 N. W. R. 1041. 8 Price V. Phoenix L. Ins. Co., 17 Minn. 497; 10 Am. Rep. 166. 502 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 230a the capacity of physician. We employ the word usually, both because we do not deem it necessary to constitute a person a family physician that he should invariably attend, and be consulted by the members of a family in the ca- pacity of a physician, and because we do not deem it necessary that he should attend and be consulted as such physician, by each and all of the members of a family. For instance the testimony in this case shows that at the time when the application for insurance was made, the family of Eichard Price consisted of himself, his wife and two or three children. We think that a person who usually attended and was consulted by the wife and chil- dren of Eichard Price as a physician, would be the family physician of Eichard Price in the meaning of the interrogatory, although he did not usually attend on, and was not usually consulted as a physician by Eichard Price himself." A dissenting opinion was filed in this case, the judge reasoning that as the object of the question is to obtain the name of a person who can give information as to the risk, it obviously requires the name of the physician who ordinarily attends the party to be given. The opinion concludes: " I think the phrase, as used in this instance, means the physician who usually attends and is consulted by all or most of the members of the family of the person whose life is assured, and that, the person thus assured, if he has medical attendance, must be one of the members attended by such physician." The phrase, " family ph}^- sician " is said by the Supreme Court of Missouri ^ to be one that is in common use and has no particular, definite or technical signification. It signifies one who usually attends and is consulted by the members of a family in the capacity of a physician; it means one who is accustomed to attend, and not one who occasionally attended. The mere calling at 1 Reidu. Piedmunt & Arlington L. Ins. Co., 58 Mo. 421. 503 § 231 APPLICATION, WAKKANTY, REPRESENTATION, ETC. a doctor's oflice for some medicine to remove a temporary indisposition, not serious in its nature, cannot be considered an attendance by a physician, nor would the calling at the home by the doctor for the same purpose be so regarded. Attendance of a physician, in the meaning of the question generally employed in applications for life insurance, must be an attendance upon the assufed for some disease or ail- ment of importance and not for an indisposition of a day or two, trivial in its nature, and such as all persons are liable to and yet who are considered to be in sound health generally.^ § 231. Habits: Use of Intoxicants: Liquor, Opium, etc. — Applications for life insurance generally contain questions bearing upon the habits of the applicant, es- pecially in regard to the use of intoxicants, tobacco and opium. In whatever language these questions are couched the words are to be taken in their plain, ordinary meaning. As where the inquiry was whether the applicant was "sober and temperate " the court said:^ " The words, sober and temperate, are to be taken in their ordinary sense. The language does not imply total abstinence from intoxicating liquors. The moderate, temperate use of intoxicating liquors is consistent with sobriety. But if a man use spirituous liquors to such an extent as to produce frequent intoxication, he is not sober and temperate within the mean- ing of this contract of insurance."^ "The questions as to health and habits in respect to intoxicating drinks will be taken to mean what the words employed by those ques- 1 Brown v. Metropolitan L. Ins. Co., 65 Mich. 306; 32 N. W.Rep. 610. 2 Brockway v. Mutual Benefit Life Ins. Co., 9 Fed. Rep. 253. See also Knights of Pythias v. Bridges, 15 Tex. Civ. A. 196; 89S. W. R. 333; Chambers v. N. W. Mut. L. Ins. Co., 64 Minn. 495; 67 N. W. R. 367. 3 John Hancock Mutnal Life Ins. Co. v. Daly, 65 Ind. 10; Holtum v. Germania Life Ins. Co., 139 Cal. 645; 73 Pac. R. 591. 504 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 231 tions usually and commonly mean. They are not words of art, but words of every-day meaning; and this is a contract not between professional men or lawyers, but a contract that these companies profess to make with the world, and when they ask a man if his health is good there is no mystery in the question. "1 In a case involving similar questions, decided by the Supreme Court of the United States ,2 after- wards approved by the same court, ^ the question was, " Is the party of temperate habits? Has he always been so? " and it was said: " When we speak of the habits of a per- son, we refer to his customary conduct, to pursue which he has acquired a tendency, from frequent repetitions of the same acts. It would be incorrect to say that a man has a habit of anything from a single act. A habit of early ris- ing, for example, could not be affirmed of one because he was once seen on the streets in the morning before the sun had risen; nor could intemperate habits be imputed to him because his appearance and actions on that occasion might indicate a night of excessive indulgence. The court did not, therefore, err in instructing the jury that if the habits of the insured ' in the usual, ordinary, and every-day routine of his life were temperate,' the representations made are not untrue, within the meaning of the policy, although he may have had an attack of delirium tremens from an ex- ceptional over-indulgence. It could not have been contem- plated from the language used in the policy that it should become void for an occasional excess by the insured, but only when such excess had by frequent repetitions become a habit." "An occasional excess in the use of intoxicat- ing liquor," says the Supreme Court of Ohio,* " does not, 1 Swlcku. Home Life Ins. Co., 2 Dill. C. C. 160. 2 Insurance Co. w. Foley, 105 U. S. 330. s Northwestern Life Ins. Co. v. Muskegon Bank, 122 U. S. 601. ^ Union Mutual Life Ins. Co. v. Reif, 36 Ohio St. 599; S8 Am. Eep. G13. And to the same effect is Grand Lodge A. O. U. W. v. Belcham, 505 § 231 APPLICATION, WARRANTY, REPRESENTATION, ETC. it is true, constitute a habit, or make a man intemperate, within the meaning of this policy; but if the habit has been formed and is indulged in, of drinking to excess and becoming intoxicated, whether daily and continuously, or periodically, with sober intervals of greater or less length, the person addicted to such a habit cannot be said to be of temperate habits, within the meaning of the policy. * * * The habit of using intoxicating liquors to excess is the re- sult of indulging a natural or acquired habit, by continued use, until it becomes a customary practice. This habit may manifest itself in practice by daily or periodical in- toxication or drunkenness. Within the purview of these questions it must have existed at some previous time, or at the date of the application, but it is not essential to its existence that it should be continuously practiced, or that the insured should be daily and habitually under the influ- ence of liquor. Where the general habits of a man are either abstemious or temperate, an occasional indulgence to excess does not make him a man of intemperate habits. But if the habit is formed of drinking to excess, and the appetite for liquor is indulged to intoxication, either con- stantly or periodically, no one will claim that his habits are temperate, though he may be duly sober for longer or shorter periods in the intervals between the times of his debauches." An occasional use of liquor will not be con- strued as falsifying an answer that the applicant does not use liquor "at all."i In Van Valkenburgh t;. American 145 111. 308; 33 N. B. E. 886, where it was held not sufficient to negative the answer that the applicant did not use liquor to show a single indul- gence. See also Provident Savings, etc., Assn. v. Exchange Bank, 126 Fed. R. 360; Equitable L. Ass. Soc. v. Liddell (Tex. Civ. A.), 74 S. W. E. 87; Malicki v. Chicago Guaranty F. L. Soc, 119 Mich. 151; 77 N. "W. E. 690; Bacon v. New England Order, etc., 123 Fed. E. 152. 1 Mutual L. Ins. Co. v. Simpson (Tex. Civ. A.), 28 S. W. E. 837; Supreme Lodge K. of P. v. Foster, 26 Ind. App. 333; 59 N. E. R. 877. 506 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 231 Popular Life Ins. Co.,i the question was: "Does the in- sured use any intoxicating liquors or substances ? ' ' And the court held that this question did not direct the mind to a single or incidental use, but to a customary or habitual use.^ In a case in Illinois^ it was held that even a moder- ate use of tobacco implies a fixed habit, but the reverse is true as to liquor. False representations made by the insured concerning his habits as to temperance avoid the policy even though they were made in good faith without intent to deceive.* And there may be such a gross mis- statement as to require a judgment for the company as a matter of law.^ The use of intoxicating liquors and drunk- enness are pernicious habits tending to shorten life." It is for the jury to weigh all the circumstances and to determine, in view of them all, whether the applicant was habitually intemperate, or used liquors to excess, or otherwise an- swered the questions falsely.' Habits of intemperance acquired subsequent to the insurance, even though the But see Union Cent. L. Ins. Co. v. Lee, 20 Ky. L. Rep. 839; 47 S. W. E. 614; Sovereign Camp, etc., v. Burgess, 80 Miss. 646; 31 Sou. W. E. 809. 1 70 N. Y. 605; 9 Hun, 583. 2 Tatum V. State, 63 Ala. 147; Mowry v. Home Lif6 Ins. Co., 9 E. I. 346; National Fraternity v. Karnes, 24 Tex. Civ. A. 607; 60 S. W. R. 576. 3 Grand Lodge A. O. U. W. v. Belcham, 48 111. App. 346. See also Continental L. Ins. Co. ». Thoena, 26 111. App. 495. * Hartwell v. Alabama Gold L. Ins. Co., 33 La. Ann. 1353. 5 Mengel «. N. W. Mut. L. Ins. Co., 176 Pa. St. 280; 35 Atl. E. 197; Shea ». Great Camp., etc., 52 N. Y. Supp. 333. 6 Schultz V. Mut. Life Ins. Co., 6 Fed. Eep. 672; Knecht v. Mutual Life Ins. Co., 90 Pa. St. 118. ' N. W. Ins. Co. V. Muskegon Bank, 132 U. S. 501. The Supreme Court of the United States has also discussed this subject at length in the two cases, .aEtna L. Ins. Co. ». Davey, 123 U. S. 739; 8 S. C. E. 333, reversing 20 Fed. E. 482 and 494, and, on a subsequent appeal, .^tna L. Ins. Co. V. Ward, 140 U. S. 76; 11 S. C. E. 720, affirming 38 Fed. R. 650, and 40 Fed. E. 911. See, also, post, § 338. The question of use of nar- cotics or tobacco is considered in Continental L. Ins. Co. v. Thoena, 26 111. App. 495, and as to,.morphinism see note in 39 L. E. A. 262. 507 § 232 APPLICATIOiN', WAERANTY, EEPRESENTATION, ETC. cause of death, will not avoid the policy, unless expressly so stipulated.^ There may be an estoppel also where the habits were known to the agent. ^ § 232. Good Health. — The expressions "good health," or " sound health," must be regarded as practically synon- ymous, and the question whethfer one is in good or sound health is generally one of fact for the jury.* Thus, it was left to the jury to say if the habit of taking opium was a breach of the warranty of perfect health.* Insanity is not a "diseased condition."* Nor will it be held as a mat- ter of law to be an unsound condition of health.' In one of the earliest cases relating to life insurance,' Lord Mansfield said that a warranty of good health meant simply that the applicant was in a reasonably good state of health, and was such a life as ought to be insured on common terms. That it did not mean that he was free from every infirmity, and, in fact, though he had one, the life might be a good one, and the fact that the insured had several years before received a wound in the loins, which so affected him that he could not retain his urine or faeces, though not mentioned, was not inconsistent with a good insurable life. Afterwards the same eminent jurist said,* in a case where it appeared that the insured was at times troubled with spasms from violent fits of the gout, though at the time of insurance in his usual ^ Reichard v. Manhattan Life Ins. Co., 31 Mo. 518; Horton v. Equit- able Life A. Soc. (C. C. P. N. Y.),2 Big. Life & Ace. Ins. Cas. 108. 2 Newman v. Covenant Mat. Ben. Assn., 76 la. 56; 40 N. W. R. 87. 8 Life Ins. Clearing Co. v. Altschuler, 65 Neb. 341; 76 N. W. R. 862; Keatley ». Travelers Ins. Co., 187 Pa. St. 197; 40 Atl. R. 808. * Forbes v. ^dinburg, etc., Co., 10 Scotcli Session Cas., Ist series, 451. ' Jackson v. National L. Assn., 24 N. Y. Supp. 746. * Jacklin ». National L. Assn., 75 Hun, 695; 24 N. Y. Supp. 746; 27 N. Y. Supp. 1112. ' Ross V. Bradshaw, 1 W. Bl. 312, A. D. 1760. 8 Willis V. Poole, 2 Parke on Ins. 650. 508 APPLICATIOX, WARRANTY, REPRESENTATION, ETC. § 232 state of health: " The imperfection of language is such that we have not words for every different idea, and the real in- tention of the parties must be found out by the subject- matter. By the present policy the life is warranted in health ; to others in good health And yet there is no difference in point of fact. Such a warranty can never mean that a man has not in him the seeds of some disorder. We are all born with the seeds of mortality in us. A man subject to the gout is a life capable of being insured, if he has no sickness at thetime to make it an unequal contract. ' ' ^ "The word 'health' as ordinarily used," says the New York Court of Appeals,^ "is a relative term. It has refer- ence to the condition of the body. Thus, it is frequently characterized as perfect, as good, as indifferent, and as bad. The epithet 'good ' is comparative. It does not require absolute perfection. When, therefore, one is described as being in good health, that does not necessarily nor ordinarily mean that heis absolutely free from all andevery ill 'which flesh is heir to.' If the phrase should be so interpreted as to require entire exemption from physical ills, the number to which it would be strictly applicable would be very in- considerable."^ Another authority* states: "The term, good health, as here used, is to be considered in its ordi- nary sense, and means that ' the applicant was free from any apparent sensible disease, or symptoms of disease, and that he was unconscious of any derangement of the func- tions by which health could be tested.'^ Slight, unfre- 1 Watson V. Mainwaring, i Taunt. 763. 2 Peacock v. New York Life Ins. Co., 20 N. Y. 296; affirming 1 Bosw. 338. 3 Morrison v. Odd fellows' Mut. L. Ins. Co., 59 Wis. 170. ' Goucher B. Northwestern Traveling Men's Assn., 20 Fed. Rep. 598 and note. 5 Conver v. Phoenix Ins. Co., 3 Dill. 226. See also Manhattan L. Ins. Co. V. Carder, 27 C C. A. 344; 82 Fed. R. 986 ; Tooker v. Security Trust Co , 26 App. Div. 372; 49 N. Y. Supp. 814; Mass. Ben. L. Assn. v. Robin- 509 § 232 APPLICATION, AVAERANTY, EEPEESENTATION, ETC. quent, transient disturbances, not usually ending in seri- ous consequences, may be consistent with the possession of good health as that term was here employed." ^ When a third person is asked if the applicant is now in good health, it does not mean whether he is actually free from illness or disease, but simply that he has yidicated in his actions and appearance no symptoms or traces of disease, and to the ordinary observation of a friend or relative is in truth well.^ A representation that the applicant had a florid appearance, when, in fact, he was pale and emaciated, will not, of it- self, avoid a life policy of insurance, such appearance being no certain indication of disease or feebleness, and would not necessarily cause the insurer to refuse the risk.^ But equivocation in the answers touching health or anything which amounts to concealment is fatal.* As the Supreme Court of Maine has said:^ "The good faith of the answers should be perfect. The presence of it goes very far to protect a policy, while a want of it would be an ele- ment of great power to the defense. There is obviously son, 104 Ga. 256; 30 S. E. R. 918; 42 L. R. A. 261; Metropolitan L. Ins. Co. v. Howlie, 62 Ohio St. 204; 56 N. E. R. 908; Malligan v Prudential Ins. Co. (Conn.), 68 Atl. R. 230; Maryland Casualty Co. v. Gehrmann, 96 Md, 634; 54 Atl. E. 678; Packard v. Metropolitan L. Ins. Co., 72 N. H. 1 ; 54 Atl. R. 287. 1 Browns. Metropolitan Life Ins. Co., 65 Mich. 306; 32 N. W. Rep. 610; French u. Mutual R. F. L. Assn., Ill N. C. 391; 16 S. E. B. 427; Hann v. National Union, 97 Mich. 513 ; 56 N. W. R. 834 ; Brink v. Guarranty Mut. Assn., 7 N. Y. Supp. 847; Provident L. Assn. v. Reutlinger, 58 Ark. 528; 25 S. W. R. 835; Metropolitan L. Ins. Co. v. Rutherford, 95 Va. 773; 30 S. E. R. 383. 2 Grattan v. Metropolitan Life Ins. Co., 92 N. Y. 274. 3 Illinois Masons' Benev. Soc. v. Winthrop, 85 111. 537. « Smith V. .ffitna Life Ins. Co., 49 N. Y. 211; Goucher v. N. W. Travel- ing Men's Assn., 20 Fed. Rep. 598; Northwestern Mut. Life Ins. Co. v. Heimann, 93 Ind. 24; Nelson B.Nederland L. Ins. Co., 110 la. 600; 81 N. W. R. 807; ante, § 203. 6 Maine Benefit Assn. v. Parks, 81 Me. 79; 16 Atl. R. 339; also see Metropolitan L. Ins. Co. v. Dempsey, 72 Md. 288; 19 Atl. R. 642. 510 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 233 a close line between incipient disease, disease in its first stages, and merely a bodily condition which is susceptible to the contraction of disease." In that case it was held that the insured had misrepresented her condition and had consumption at the time she stated herself to be in good health. A person is not in good health who has had asthma for three years. ^ An anaemic murmur of the heart is not a bodily or mental infirmity.^ An " inmate " of a hospital is one who is there for any kind of treat- ment ; ^ but one was not ' ' under treatment at a hospital ' ' who went there simply to have a foreign substance taken from her eye.* § 233. Latent Diseases Unknown to Applicant. — If a representation of the applicant is that he is of sound body, and it be untrue ; if it is made in good faith, without suspi- cion that he was of unsound body, though it afterwards be shown that he had then a fatal internal disease which caused his death, the policy will not be avoided.^ But, where the applicant was asked if he had disease of the heart and he answered no, it was held, the answers being warranties, that the policy was void if the assured died of heart disease soon afterwards, although he could not have known that he had 1 Volker v. Metropolitan L. Ins. Co., 21 N. Y. Supp. 456. 2 Manufacturers Ace. Ind. Co. v. Dorgan, 7 C. C. A. 681; 58 Fed. R. 945; 160 U. S. App. 290; 22 L. R. A. 620. s Farrello. Security Mut. L. Ins. Co., 60 C. C. A. 374; 125 Fed. R. 684. * Chlnnery «. U. S. Industrial Co., 15 App. Dlv. 515; 44 N. Y. Supp. 581. 5 Schwarzbach v. Ohio Valley P. Union, 25 W. Va. 622; Moulorw. Am. Life Ins. Co,, 111 U. S. 335; Life Assn., etc., v. Foster, 11 Sc. Sess. Cas. (3ii series) 351; Thompson v. Weems, L. R. 9 App. Cas. 671; Haun v. National Union, 97 Mich. 513; 56 N. W. 834; Endowment Rank K. of P. V. Rosenfleld, 92Tenn. 508; 22 S. W. R. 204; Ames v. Manhattan L. Ins. Co., 40 App. Div. 465; 58 N. Y. Supp. 244; Fidelity Mut. L. Assn. v. Jeffords, 107 Fed. R. 402; 46 C. C. A. 377; 63 L. R. A. 193 and note. See also ante, § 214. 511 § 234 APPLICATION, WARRANTY, REPRESENTATION, ETC. the disease.^ In a case in Indiana,^ the court below instructed the jury, the answers in the application of the insured being warranties, that if the assured had, at the time of making his application, some affection or ailment, of some one or more of the organs inquired' about in the application, which ailment was of a character so well defined and marked as materially to derknge, for a time, the func- tions of such organ, such ailment, whether known to the assured or not, would avoid the policy, and that " this would be so with reference to Bright' s disease of the kid- neys, if it was such a disease as I have just ipentioned." ^ This view seems to be reasonable as well as consistent with authority. The rule, therefore, is that, where the answers to questions in the application are representations, the death of the applicant from a latent disease, which existed at the time of the application, but unknown to the applicant, he answering all questions in good faith, will not avoid the policy. But, where the answers are warranties, then the death of the applicant from a latent disease, which existed at the time when he warranted himself to be free from it, will avoid the policy. It is a question for the jury to say how long the disease had existed and whether the insured was afflicted with it at the time the insurance was taken out.* § 234. Disease. — Before any temporary ailment can be ^ Powers V. Northeastern Mut. L. Assn , 50 Vt. 630; Banmgart v. Modern Woodmen, etc., 85 Wis. 546; 55 N. W. E. 743; but the contrary was held in Hutchinson v. National Loan Co., 7 Scott. Session Cas., 2d series, 467. See also Ross o.Bradshaw, 1 Wm. Bl. 312; Holloman ». Life Ins. Co., 1 Woods, 674; Breeze v. Metropolitan L. Ins. Co., 24 App. Dlv. 377; 48 N. Y. Supp. 753. 2 Continental L; Ins. Co. v. Young, 113 Ind. 159; 15 N. E. Rep. 220; see also Boyle v. N. W. Mut. Relief Assn., 95 Wis. 312; 70 N. W, E, 351. 3 Conn. Mut. L. Insurance Co. v. Union Trust Co., 112 U. S. 250; Cushman v. U. S. Ins. Co., 70 N. Y. 72. * Tucker «. United Life and A. Ins. Co., 133 N. Y. 548; 30 N. E. 723. 512 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 234 called a disease, it must be such as to indicate a vice in the constitution, or be so serious as to have some bearing upon general health and the continuance of life, oi' such as, according to common understanding, would be called a disease, and such has been the uniform opinion of text- writers and courts. 1 So, a cold is not a disease,^ though accompanied with more or less congestion of the lungs, and though most, if not all persons, will have at times conges- tion of the liver, causing slight functional derangement and temporary illness, yet in the contemplation of parties enter- ing into contracts of life insurance, and having regard to general health and the continuance of life, it may be safely said that there is in such cases no disease of the liver.'' In- sanity is not a diseased conditiou*noradisease,^nor is near- sightedness a bodily infirmity.* A severe sickness or dis- ease does not include the ordinary diseases of the country, which yield readily to medical treatment and when ended leave no permanent injury to the physical system , but refers 1 Cushmano.U. S. Life Ins. Co.,70N. Y. 72; N, W. Mut. L. Ins. Co. V. Heimann, 93 Ind. 24; 2 Park on Ins. 933-935; Chattock v. Shawe, 1 M. & R. 498; Fowkes v. The M. & L. Life Ins. Co., 3 Fost. & F. 440; Barteau v. Phoenix Mut. Life Ins. Co., 67 N. Y. 595; I Hun, 430; 67 Barb. 354; 3 T. & C. 576; Peacock v. N. Y, Life Ins. Co., 20 N. Y. 293; Higbie v. Guardian Mut. L. Ins. Co , 53 N. Y. 603; Fitch v. Am. Popular L. Ins. Co., 59 N. Y. 557; 17 Am. Eep. 372; Woodmen, etc., v. Locklin, 28 Tex. Civ. A. 486; 67 S. W. R. 331; Rand v. Provident, etc., Soc, 97 Tenn. 291; 37 S. W. R. 7; Life Insurance Clearing Co. v. Bullock, 91 Fed. R. 487; 33 C. C. A. 365; 62 U. S. App. 625; Billings v. Metropolitan L. Ins. Co., 70 Vt. 477; 41 Atl. R. 516; Woodward i>. Iowa Life, etc., 104 Tenn. 49; 56 S. W. R. 1020; Caruthers v. Kansas Mut. L. Ins. Co., 108 Fed. R. 487. 2 Metropolitan Life Ins. Co. v. McTague, 49 N. J. i,. 587; 9 Atl. Rep. 766. 3 Cushman v. U. S. Life Ins. Co., 70 N. Y. 72; Qoucher v. Northwest Traveling Men's Ass., 20 Fed. Rep. 600; N. W. Mut. Life Ins. Co. v. Heimann, 93 Ind. 24. * Jackson v. National Life Assn., 24 N. Y. Supp. 746. 6 Accident Ins. Co. v. Crandall, 120 U. S. 533; 7 S. C. K. 685. 6 Gotten V. Fidelity, etc., Co., 41 Fed. Rep. 507. 33 513 § 234 APPLICATION, WARKANTY, EEPRESBNTAXION, ETC. to those severe attacks which often leave a permanent injury and tends to shorten life.^ The answer may be considered as a mere expression of opinion.^ When the applicant says that he has never had any " serious illness " the courts will construe the meaning to be that he has never been so seriously ill as to permanently impair his constitution and render the risk unusually hazardous.* Clearly the term " severe" or " serious " illness does not mean slight, temporary physical disturbances or ailments, speedily and entirely recovered from, not interfering materially with the pursuit of one's avocation, producing no permanent effect on the constitution and not rendering the insurance risk more than usually hazardous.* If necessary the court will admit evidence to explain what is meant by the term used, as, for instance, to show that the medical term, "spitting blood," means spitting of blood from the lungs exclusively,' or that gastritis and chronic gastritis are not the same, or that subacute rheumatism is not the disease of rheumatism.* The court will not hold as a matter of law that either pheumonia or sunstroke is a severe sickness or disease, but will leave » Holloman v. The Life Ins. Co., 1 Woods C. C. 674. 2 Supreme Ruling, etc., ». Crawford (Tex Civ. A.), 75 S. W. E. 8i4. ' III. Masons Benev. Soc. v. Winthrop, 85 111. 542; Dreier v. Conti- nental L. Ins. Co., 24 Fed. Rep. 670. * Goucher v. N. W. Traveling Men's Assn., 20 Fed. Bep. 600; Con- necticut Mut. L. Ins. Co. V. Union Trust Co., 112 U. S. 250; Chattock V. Shaw, 1 M. & Bob. 498; Fowkes v. Manchester & L., etc., Ins. Co., 3 F. & F. 440; Watson v. Maiowaring, 4 Taunt. 763; Union Cent. Life Ins. Co. V. Cheever, 11 Ins. L. J. 264 (affd. Sup. Ct. Ohio). s Singleton v. St. Louis Ins. Co., 66 Mo. 63; 27 Am. Rep. 321. See, as to spitting blood: Smith o. N. W. Mut. L. Ins. Co., 196 Pa. St. 314; 46Atl.R. 426. Spitting blood includes hemorrhage. March w. Metropoli- tan L. Ins. Co., 186 Pa. St. 629; 40 Atl. K. 1100; Murphy v. Prudential Ins. Co., 205 Pa. St. 444; 55 Atl. E. 19; Peterson v. Des Moines L. Assn., 1151a. 668; 87 N. W. R. 397. « Price ». Phoenix Mut. L. Ins. Co., 17 Minn. 518; 10 Am. Rep. 166. 514 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 234 the question to the jury,i nor will it say that the omission to mention a temporary injury to the eye, by sand having been thrown into it, which had produced an inflammation six years before the policy was applied for, and which was then cured, is conclusive evidence of fraud or a breach of the warranty.^ Nor that "chronic pharyngitis" is a "sickness" in contemplation of the parties putting the question.^ An attempt at suicide is not a mental or nervous disease.* Nor is typhoid a serious illness.^ A serious ill- ness is one that permanently impairs the health of the applicant.® By all of the foregoing cases the doctrine is established that it will be left, ordinarily, to the jury to say whether the applicant has answered the questions correctly. In a leading case' the court says: " It was for the jury to decide whether ' chronic bronchitis ' or ' bronchial difS- culty,' or any other bodily affection or condition to which the assured was found by them to be subject, amounted to bronchitis, consumption, disease of the lungs, or some other of the infirmities stated in the application, and relied on by the defendants ; and whether the spitting of blood by him, if proved to have taken place, was under such cir- cumstances as to indicate disease in his throat, lungs, air passages, or other internal organs." la England it has been held that the applicant is bound to state to the com- pany a single instance of spitting of blood, although the 1 Boos V. World Mut. Life Ins. Co., 64 N. Y. 236; Knickerbocker L. Ins. Co. V. Trefz, 104 U. S. 197. 2 Fitch V. American Popular Life Ins. Co., 59 N. Y. 557; 17 Am. Rep. 372. 3 Mutual Ben. L. Ins. Co. v. Wise, 34 Md. 599. * Mat. R. F. L. Assn. v. Farmer (Ark.), 64 S. W. E. 850. « Myers v. Woodmen, etc., 193 Pa. St. 470; 44 Atl. R. 563. « Drakeferd v. Supreme Conclave K. of D., 61 S. C. 338; 39 S. E. R. 523. ' Campbell v. New England Mut. Life Ins. Co., 98 Mass. 381 ; 1 Big. I. & A. Ins. Cas, 229. 515 § 234 APPLICATION, WARRANTY, REPRESENTATION, ETC. same court said that the expression " has not had any spitting of blood " does not mean that he had never spit blood, but never from unascertained causes or disease tend- ing to shorten life.^ 1 Geach v. Ingall, 14 M. & W. 95; 15 L. J. Ex. 37; 9 Jur. 691. But see Smiths. N. W. Mat. L., 196 Pa. St. 314; 46 Atl. R. 426. The following list of particular cases where special diseases or ailments were in quesiloa is given: ''Dyspepsia," Jeffrey v. United Orler, etc., 97 Me. 176; 53 Atl. R. 1102; " Consumption" or " phthisis," Metropolitan L. Ins. Co. v. Dempsey, 72 Md. 228; 19 Atl. R. 642; Tucker ». United L. & Ace. Assn., 133 N. Y. 548; 30 N. E. R. 723; affi;. 16 N. Y. Supp. 953; Modern Wood- men V. Van Wald, 6 Kan. App. 231 ; 49 Pac. E. 782. Maine Ben. Assn. ». Parks, 81 Me. 79; 16 Atl. E. 642; " headache," Mm. L. Ins. C>. ». Simpson (Tex. Civ. A.), 28 S. W. R. 837; " hemorrhage," Brady u. In- dustrial Ben. Assn., 29 N. Y. Supp. 768; " liver disease," Cushman o. U. S. L. Ins. Co , 70 N. Y. 72; Conn. Mut. L. Ins. Co. v. Trust Co., 112 U. S. 250; "brain disease," Knickerbocker L. Ins. Co. w. Trefz, 104 U. S. 197; "local disease," Sco'es v. Universal L. Ins. Co., 42 C-iI. 523; " hereditary disease," Grldley v. N. W. Mut. L. Ins. Co., 14 Blatchf. 109; "serious disease," Holloman v. Life Ins. Co., 1 Woods, 674; Life Ins. Co. V. Francisco, 17 Wall. 672; '• throat disease," Eisner v. Guardian L. Ins. Co., 3 Cent. L. J. 302; "piles," Baumgart v. Modern Woodmen, 85 Wis. 546; 65 N. W. R. 713; " vertigo," Mut. Benefit L. Ins. Co. u. Davies, 87Ky.641; 9 S. W. R. 812; " pimple on tongue developing into cancer," Story V. United L. & Ace. Assn., 4 N. Y. Supp. 373; " asthma," Volker o. Metropolitan L. Ins. Co., 21 N. Y. Supp. 456; " gastritis," Mutual Ben., etc., Co. v. Wise, 34 Md. 582; " open sores," Corbett«. Metropoli- tan L. Ins. Co., 37 App. Div, 152; 55 N. Y. Supp. 775; " tonsllitis," McCollum V. Mutual, etc., Co., 55 Hun, 103; " Bright's disease," Con- tinental L. Ins. Co. V. Young, 113 Ind. 159; "syphilis," Fitzrandolph v. Mutual Relief Soc, 21 Nova Scotia R. 274; " La Grippe," Mutual L. Ins. Co. V. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. B. 286; Davis o. Supreme Lodge, etc , 35 App. Div. 354; 54 N. Y. Supp. 1023; " priapism," Hub- bard©. Mut. Res. F. L. Assn., 40 C. C.A. 665; 100 Fed. R. 719; "sprain," Tyler ». Ideal, etc., Assn., 172 Mass. 536; 52 N. E. R. 1083; "pneumo- nia," Hena ». Metropolitan L. Ins. Co., 67 N. J. L. 310; 51 Atl. R. 689; Carson v. Metropolitan Life Ins. Co., 1 Pa Sup. Ct. 572; Iowa Life Ins. Co. V. Zehr, 91 111. App. 93; "sore throat," Penn. M. L. Ins. Co. w. Mechanics, etc., Co., 19 C. C. A. 286; 72 Fed. R. 413; 38 L. R. A, 33; " kidney trouble," Hogan ». Metropolitan L. Ins. Co., 104 Mass. 448; 41 N. E. R. 663; "gall stone," Weintrant v. Metropolifan L. Ins. Co., 27 Misc. R. 540; 58 N. Y. Supp. 295; " catarrh," Lippencott v. Royal Soc, etc., 64 N. J. L. 309; 45 Atl. B. 774; Endowment Bank v. Cogbill, 99 516 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 235 § 235. Accident or Serious Injury. — In a case arising in Iowa the defense was that the applicant had not correctly answered the question whether the party had ever met with any accidental or serious injury," and the answers being warranted true the policy was thereby avoided. The opin- ion of the Supreme Court of the State says : ^ " The de- fendant claims that if the insured ever met with any * * * accidental injury," that will bar a recovery because the application is a warranty that she never did. In this con- struction we do not concur. The language of the question is to have a reasonable construction, in view of the pur- poses for which the question was asked. It must have reference to such an accidental injury as probably would or might possibly have influenced the subsequent health or longevity of the insured. It could not refer, and could not be understood by any person reading the question for a personal answer to refer, to a simple burn upon the hand or arm, in infancy; to a cut upon the thumb or finger, in youth ; to a stumble and falling, or the sprain of a joint, in a more advanced age. The idea is, that such a construc- tion is to be put by the courts upon the language as an ordinary person of common understanding would put upon it when addressed to him for answer. The strict construc- tion or hypercriticismof the language, which would make the word ' any ' an indefinite term, so as to include all injuries, even the most trifling, would bring a just reproach upon the courts, the law, the defendant itself and its business." Upon the same subject the Supreme Court of the United Tenn. 28; 41 S. W. R. 340; "hernia," Levie «. Metropolitan L. Ins. Co., 163 Mass. 117; 39 N. E. R. 792; " bronchitis," Billings v. Metropolitan L. Ins. Co., 70 Vt. 477; 41 Atl. R 516; " cancer," McClain v. Provident Sav. L. A. Soc, 49 C. C. A. 31 ; 110 Fed. R. 80; "Small-pox," Sovereign Camp, etc., v. Gray, 26 Tex. Civ. A. 457; 64 S. W. R. 801. General answers, Bancroft©. Home Ben. Assn., 12 N. Y. Supp. 718. 1 Wilkensou v. Conn. Mut. Life Ins. Co., 30 la. 127. 517 § 235 APPLICATION, WARRANTY, REPRESENTATION, ETC. States says i^ " It is insisted by counsel for the defendant that if the injury was considered serious at the time, it is one which must be mentioned in reply to the interrogatory, and that whether any further inquiry is expedient on the subject of its permanent influence on the health, is for the insurer to determine before making insurance. But there are grave and obvious difficulties m this construction. The accidents resulting in personal injuries, which at the mo- ment are considered by the parties serious, are so very numerous that it would almost be impossible for a person engaged in active life to recall them at the age of forty or fifty years, and if the failure to mention all such injuries must invalidate the policj', very few would be sustained where thorough inquiry is made into the history of the party, whose life is the subject of insurance. There is, besides, the question of what is to be considered a serious injury at the time. If the party gets over the injury com- pletely, without leaving any ill consequence, in a few days, it is clear that the serious aspect of the case was a mistake. Is it necessary to state the injury and explain the mistake to meet the requirements of the policy? On the other hand, when the question arises, as in this case, on a trial, the jury, and not the insurer, must decide whether the injury was serious or not. In deciding this are they to reject the evidence of the ultimate effect of the injury on the party's health, longevity, strength and other similar considerations? This would be to leave out of view the essential purpose of the inquiry, and the very matters which would throw most light on the nature of the inquiry with reference to its influence on the insurable character 1 Insurance Co. 11. Wilkenson, 13 Wall. 222. This case was approved in Confederation L. Assn. v. Miller, 11 Can. Sup. Ct. 330; afEg. 14 Ont. App. 218. For further consideration of the subject see Coop. L. Assn. V. Leflore, 53 Miss. 1; Fitch v. American Popular L. Ins. Co., 69 N. Y, 557; 17 Am. Kep. 372; Snyder v. Mutual L. Ins. Co., 3 Ins. L. J. 579. 518 APPLICATION, WAEKANTY, REPRESENTATION, ETC. § 235 of the life proposed. Looking, then, to the purpose for which the information is sought by the question and to the difficulty of answering whether an injury was serious, in any other manner than by reference to its permanent or temporary influence on the health, strength and longevity of the party, we are of opinion that the court did not err in the criterion by which it directed the jury to decide the interrogatory propounded to them." A fracture of the skull, whether it affected the health or not, is such a seri- ous and unusual an injury, that it must be disclosed. i So, where a blow on the throat had caused an abrasion of the windpipe and the raising of a little blood and a confinement to the bed for three days and the attendance of a physician, it was held ^ that the evidence was not sufficient to sustain a finding that the party had received a wound, hurt or seri- ous bodily injury. In a case in Pennsylvania,^ where the questions and answers were these: ^'4. Have you been subject to or had any of the following disorders or diseases * * * Open sores, lumps, or swelling of any kind? Ans. Nothing of that kind to my knowledge. 9. Have you ever had any malformation, illness or injury, or undergone any surgical operation? Ans. No." The court said: " These questions, it must be admitted, are in the most general terms, and if they are to be so read and understood, they are not only unreasonable but absurd. A slight cutting of the finger, with a penknife, may for a time produce both an open sore and a swelling; the mere indisposition arising from cold is an illness ; the stubbing J Moore v. Conn. Mut. L. Ins. Co., 41 Up. Can. Q. B. 497; on appeal 3 Ont. App. 230, the court were equally divided, 2 Bancroft v. Home Ben. Assn., 120 N. Y. 14; 23 N. E. Rep. 997; re- versing 54 N. Y. Superior Ct. 332, and 8 N. Y. St. Kept. 129 ; cited in first edition. 3 Home, etc., Life Association v. Gillespie, 110 Pa. St. 88; 1 Atl. Rep. 340. See also National Fraternity v. Karnes, 24 Tex. Civ. A. 607; 60 S. W. R. 576. 519 § 235a APPLICATION, WARRANTY, REPRESENTATION, ETC. of a toe is an injury ; and the most trivial operations with hand or knife may be said to be surgical. It would be impossible for a person of mature years to remember, and absurd for the association to inquire as to the common and trivial ailments or injuries he may have suffered from his earliest childhood, and it is unreasonable to suppose that these were in contemplation of the parties. The form of the fourth question indicates, however, that the open sore or swelling intended, is such as results from ' disease or disorder,' that is to say, such as result by defective action, from some functional derangement, and not from wounds or accidental injuries, and the court was right, we think, in saying that they were to some extent permanent or continuous, connected or recurrent. So, the illness or injury referred to, must be of such nature and importance as would reasonably fall within the line of inquiry proper to be pursued in such cases. We do not say that the illness or injury must be such as would be ma- terial to the risk, but such as in the judgment of the jury was reasonably in contemplation of the parties, in view of the nature of the matter under consideration. If the line of distinction is obscure, and difficult to draw, the fault is with the association for making it so. We do not believe that the assured was expected or required to remember and to recite in his application all of the trivial ailments of his life." § 235a. Other Insurance. — If the answers to the ques- tions in the application are warranted to be true, a false answer to the inquiry concerning other insurance or appli- cations to other companies vitiates the policy. ^ The sup- ' Clemans v. Supreme Assembly Eoyal Society of Goodfellows, 131 N. Y. 485; 30 N. E. E. 496, 16 L. E. A. 33; reversing 16 N. Y. Supp. 378; Webb V. Bankers L. Ins. Co. (Colo.) , 76 Pac. E. 738 ; Webb v. Security Mut. L. Ins. Co. (C. C. A.), 126 Fed. E. 635; Dimmlck v. Metropolitan L. I. 520 APPLICATION, ■WARRANTY, REPRESENTATION, ETC. § 235a pression by the insured of the fact of the existence of other insurance on his life in violation of the condition of the policy is such concealment as will make void the policy.^ And the question as to other insurance is material.^ The answer is not false if no other insurance has been obtained by the apphcant himself.^ And if the appli- cant states that "to the best of his belief" no com- pany has refused to issue a policy on his life, the fact that a policy has in fact been refused is a good de- fense.* Whether or not beneficiary societies are embraced in the question as to other insurance is not entirely settled, but it has been held that the act of the agent in stating to the applicant that certificates in beneficiary societies are not regarded a.s life insurance, is binding upon the company.^ Co. (N. J. L.), 55 Atl. R. 291; Home L. Ins. Co. v. Meyers, 50C. C. A. 54i; 112 Fed. E. 846; Security Mut. L. Ins. Co. !). Webb, 45 C. C. A. 648; 106 Fed. R. 648; National Life Assn. v. Hopkins, 97 Va. 167; 33 S. E. E. 539; Williams v. St. Louis L. Ins. Co., 97 Mo. App. 449; 71 S. W. R. 376. 1 Studwell V. Mut. Ben.L. Assn., 19 N. Y. Supp. 709. 2 March v. Metropolitan L. Ins. Co., 186 Pa. St. 629; 40 Atl. R. 1100; Am. Union L. Ins. Co. v. Judge, 191 Pa. St. 484; 43 Atl. R. 374. 3 Aufderheider v. German Mut. L. Ins. Co., 66 Mo. App. 285. 4 Kemp V. Good Templars Mut. Ben. Assn., 64 Hun, 637; 19 N. Y. Supp. 435. See also Clapp v. Association, 146 Mass. 519; 16 N. E. R. 433, in regard to answers to " best of the belief " of applicant. 6 Continental Life Ins. Co. v. Chamberlain, 132 U. S. 304; 10 S. C. E. 87 ; Equitable Life Assurance Society «. Hazelwood, 75 Texas, 338 ; 1 2 S. W. E. 622. See, however, McCollum v. New York Mut. L. Ins. Co., 55 Hun, 103; 8N. Y. Supp. 249. A valuable note as to whether beneficiary societies are included in the term, other insurance, is appended in 38 L. E. A. 33 to Penn. M. L. Ins. Co. v, Mechanics, etc., Co., 43 U. S. App. 75; 73 Fed. E. 653; 72 Fed. E. 413. In Bruce v. Conn. M. L. Ins. Co., 74 Minn. 310; 77 N. W. E. 210; Meyer-Bruno v. Pennsylvania Mut. L. lus. Co., 189 Pa. St. 579; 42 Atl. E. 297; Aldens. Supreme Tent., etc. (N.Y ), 71 N. E. E. 104 ; a fraternal society was held to be embraced in the ques- tion. To the contrary are Newton u. S. W. Mut. L. Assn., 116 la. 311 ; 90 N. W. E .73, and Fidelity Mut. ■«. Miller, 34 C. C. A. 211 ; 92 Fed. E. 63. It depends largely upon the form of the question as to whether there is a misrepresentation, 521 § 235a APPLICATION, WARRANTY, REPRESENTATION, ETC. Where the applicant stated that no company had ever declined to grant insurance on his life an application made by him to another company, indorsed " declined" by the medical director of such company, is admissible in evidence, it being shown that such action was a rejection of the appli- cation. * The medical examination not being a part of the application, a statement that 'no prior application for life insurance has been rejected is untrue if it appears that an application was in fact received by the agent and forwarded to the company although there was no medical examination, the medical examiner having pronounced the applicant unfit without an examination.^ A negative answer to the question whether any application had been made to the agent for which a policy was not issued is not falsified by proof of an application that had not been finally passed upon by the company.^ Where the medical examiner reported unfavorably on an application for ad- ditional insurance whereupon it was declined, it was held to be a refusal to insure within the meaning of the question, " Has any proposal to insure, etc., ever been declined."* Where the answers are warranted to be true there will be a strict construction so'that the policy will be saved if possible." ^ Elliot o. Mut. Ben. L. Assn., 27 N. Y. Supp. 696. 2 Edington v. Mtna. L. Ins. Co., 77 N. Y. 564; 100 N. Y. 536. s Langdon «. Union Mat, L. Ins. Co., 14 Fed. E. 272. Otlxer cases involving tlie truth of statements concerning other insurance are: N. Y. Life Ins. Co. v. Flack, 3 Md. 341 ; Mut. Ben. L. Ins. Co. v. Wise, 34 Md. 582; American L. Ins. Co. ». Mahone, 56 Miss. 180; Fowkes ». Manches- ter & London L. Ins. Co., 3 Foster & F. 440; London L. Ins. Co. v. Mansel, 11 L. K. Ch. D. 363; In matter Gen. Provincial L. Ins. Co., 18 W. E. 396. * Stuart V. Mut. Eeserve F. L. Ins. Co., 28 N. Y. Supp. 944. « Eobinson o. Supreme Commandery etc., 38 Misc. E. 97; 77 N. Y. Supp. Ill; 79 App. Div. 215; 79 N. Y. Supp. 13; Security Trust Co. v. Tarpey, 182 111. 52; 54 N. E. K. 1041; Kansas Mut. L. Ins. Co. o. Coal- 522 APPLICATION, WARRANTY, REPRESENTATION, ETC. § 2356 § 2356. Limitation of Time within wliich Defense can be Made. — It has become the custom among life iasur- ance companies to insert in the policy a provision that such policy shall be incontestable after the lapse of a certain time, and one company at least makes its policies incon- testable from date of issue. Upon principle it would seem that the defense of fraud could be made notwithstanding a general provision of incontestability from date of issue for fraud cuts under everything.^ But where the stipula- tion is that the policy shall be incontestable after a certain period the rule is that such au agreement is like a short statute of limitations, after the expiration of which even the defense of fraud is excluded.^ We shall consider the subject further in another place. ^ son, 22 Tex. Civ. A. 64; 54 S. W. R. 388; Commercial Mut. Ace. Assn. V. Bates, 176 III. 194; 52 N. E. E. 49. 1 Welch V. Union Cent. L. Ins. Co., 108 la. 224; 78 N. W. R.[853; 60 L. R. A. 774. 2 Wright V. Mut. Ben. L. Assn., 118 N. Y. 237; 23 N. E. R. 186; 6 L. R. A. 731; afig. 43 Hun, 61; Mass. Ben. L. Assn. v. Robinson, 104 Ga. 256; 30 S. E. E. 918 ; 42 L. R. A. 261 ; Murray v. State Mut. L. A. Co., 22 R. I. 524; 48 Atl. R. 800; 63 L. R. A. 742; Clement v. N. Y. Life Ins. Co., 101 Tenn. 22; 46 S. W. R. 561; 42 L. R. A. 247, where valuable note is appended. 3 Post, § 340a. 523 CHAPTEE VII. DESIGNATION OF BENEFICIARY: INSURABLE INTEREST. ♦ 236. Beue&t of Beneficiary Association is paid to a Person Designated by the Member, or by tlie Laws of the Society. 237. Member has no Property in Benefit but only Power to Designate Beneficiary. 238. This Power may be General or Special. 239. Execution of Power must be ia compliance with Terms of Instru- ment Creating it. 240. Equity sometimes Aids Defective Execution. 241. Consequences of Failure to Execute Power. 242. Designation of Beneficiary is not Condition Precedent of Society's Liability. 243. When Designation of Beneficiary Lapses. 243a. The same Subject Continued: Resulting Trust : Death in Com- mon Calamity. 2436. Revocation of Designation. 243c. If Designated Beneficiary Die in Lifetime of Member Benefit will be Disposed of in Accordance with Laws of Society. 244. Limitations on Power, Restricting the Designation to Certain Classes. 244a. The same Subject: Examples of Construction — Creditors. 245. The same Subject: A more Liberal View. 246. Unless Contract or Statute Forbids, Choice of Beneficiary is Unlimited. 247. Liberal Construction of Charter and By-Laws : Lex Loci. 248. Insurable Interest. 248a. The Same Subject : Opposing Views. 249. The same Subject: Wagering Policies. 249a. The same Subject: Meritorious Object. 250. The same Subject: Relatives. 25Pa. The same Subject: Creditors. 2506. Want of Insurable Interest does not Make Policy Void but Payee is a Trustee. 251. General Rule. 252. The Doctrine of Insurable Interest Applied to Contracts of Benefit Societies. 263. Policy or Designation of Beneficiary Valid In its Inception Re - mains so. 524 DESIGNATION OF BENEnCIAKY. § 236 § 251. Lawfulness of Designation of Beneficiary a Question of Con- struction. 255. Rules of Construction in Cases of Designation of Beneficiary. 256. Family. 257. Ciiildren. 258. Orphans. 259. Widow. 260. Heirs. 260a. Relatives. 261. Dependents. 261a. Affianced Husband or Affianced Wife. 262. Legal Representatives : Devisee : Legatee. 263. Ambiguous Designation : "Estate." 264. Several Beneficiaries : Construction. 265. Incorporated and Unincorporated Benefit Secieties : Ultra Vires. § 236. Benefit of Beneficiary Association is Paid to a Person Designated by tlie member, or by the Laws of the Society. — In regular life insurance the choice of a benefi- ciary is unrestricted, except as limited by the law of insur- able interest, which is to be considered in this chapter. Material differences, however, exist between the contracts of the ordinary life companies and those of benefit societies with their members which will more fully appear as we proceed. Such differences especially appear in the principles governing the selection of a beneficiary by the members of these societies, and of these we are now to treat. Nearly all benefit societies have for their principal object the pay- ment of a stated sum of money upon the death of a mem- ber to his properly designated beneficiary, or, in default of such designation, then to his widow, children or heirs, as provided in the charter or by-laws of the society. Under some circumstances, if no designatioa is made as required by the fundamental law of the organization, the benefit may revert to the society. The authorities agree that the con- tract entered into by a benefit society with its members is executory in its nature and is contained in the certificate, if any be issued, taken in connection with the application, if 525 § 237 DESIGNATION OP BENEFICIARY. any, the charter, or constitution and by-laws of the organi- zation, and the statutes of the State under which it is formed. To the terms of this contract the member is conclusively presumed to have assented when he became such."^ § 237. Member has no Property in Benefit, but only Power to Designate Beneficiary. — The contract of a benefit society is with the member, he alone is interested in it and the beneficiary has no rights which cannot be lost by the act of the member, and none that can be asserted while the member is living.^ The member of the society as such has, under this contract, no interest nor property in this benefit, but simply the power to appoint some one to receive it. By the definition usually given a power is technically ' ' an authority by which one person enables the other to do some act for him." ^ That a member of a benefit society has only this power, and nothing else, was decided in an early case in which the right was fully dis- cussed.* In that case a power was defined to be "a 1 Hellenberg v. District No. 1, etc., 94 N. Y. 680; Maryland Mutual B. Assn. V. Clendinen, 44 Md. 429; Artliur et al. u. Odd-Fellows' Ben. Assn., 29 Ohio St. 567; Belief Assn. v. McAuley, 2 Mackey, 70; Barton v. Provident Belief Assn., 63 N. H. 535; Richmond v. Johnson, 28 Minn. 447; Greeno v. Greene, 23 Hun, 47S; Masonic Mut. Ben. Soc. v. Burk- hart, 110 Ind. 189; 10 N. Bast. Eep. 79; Van Bibber's Adm. v. Van Bib- ber, 82 Ky. 347; Worley v. Northwestern Masonic, etc., 10 Fed. Rep. 227; Kentucky Masonic, etc., Ins. Co. v. Miller, 13 Bush, 489; Hammer- stein ». Parsons, 29 Mo. App. 509; Boasberg v. Croniu, 9 N. Y. Supp. 664. 2 Pollako. Supreme CouncU R. A., 40 Misc. R. 274; 81 N. Y. Supp. 942; Montour v. Grand Lodge A. O. U. W., 38 Oreg. 47; 62 Pac. R. 624; Hofman v. Grand Lodge B. L. F., 73 Mo. App. 47; Deacon v. Clarke (Tenn.), 79 S. W. R. 382; Hunter v. National Union, 197 111. 478; 64 N. B. R. 366; affg; 99 111. App. 146. To the same effect are practically all the cases relative to change of beneflclary. See post, § 306, et seq. 3 Boav. Law Die. tit., Power; 2 Lilly Abr. 339. ^ Maryland Mut. Ben. Soc. v. Clendinen, 44 Md. 433. 526 DESIGNATION Or BENEFICIARY. § 237 liberty or authority reserved by, or limited to, a party to dispose of real or personal property for his own benefit, or for the benefit of others, and operating upon an estate or interest, vested either in himself or in some other person ; the liberty or authority, however, not being derived out of such estate or interest, but overreaching or superseding it either wholly or partially." 1 It has been said: "That a person having a power over property has not in strictness any interest in, or right or title to, the property to which the power relates, appears in early authority." ^ This definition is not strictly accurate when applied to the pow- ers possessed by members of benefit societies, yet probably is sufficiently so for all practical purposes. This right of designation is a naked power because it is aright or author- ity disconnected from any interest of the donee in the subject-matter, and is governed generally by the rules applicable to that class of powers. ** In the very first cases relating to benefit societies this principle was clearly recog- nized. In 1876 the Supreme Court of Ohio * construed the rights of the member in the benefit to be a power to appoint a beneficiary, and a similar case had been decided in the same way the year before by the Supreme Court of Maryland.* In this case the residuary legatees under the will of a deceased member, who left no wife nor children, sued to recover the benefit. This benefit was not specifically mentioned in the will. The charter of the defendant provided that the fund should be paid upon the death of a member " to the widow, child, children, or such person or persons to whom the deceased may have disposed of the same by will or assign- 1 Butl. Notel, Co. Litt. 3426. 2 Albany's Case, 1 Eep. 1106; Lampet's Case, 10 Rep. 486; Co. Litt. 2656. ' Bloomer v. Waldron, 3 Hill, 365. * Arthur et al. v. Odd-fellows' Ben. Assn., 29 Ohio St. 557. £ Maryland Mut. Ben. Soc. v. Clendinen, 44 Md. 429 ; 22 Am. Bep. 52. 527 § 237 DESIGNATION OF BENEFICIARY. ment." If there were none of these parties, and no dis- position by will or assignment, then, after payment of funeral expenses, the balance was to revert to the society. The court said: "The interest acquired by a member of this association is not one payable to himself, or for his own benefit, further than his funeral expenses. It is not a ' debitum in prcesenti, solvendum infuturo;^ if the deceased had only a power, and not an interest or property in the sura or fund, it was not assets. In 2 Chance on Powers, ^ it is said: " That an ordinary power is not in itself assets, is clear from all the cafees.' This cannot be classed among the assets to be returned by an administrator in his inven- tory ; it is not a chose in action or any species of personal property. We know of no case in which the jus disponendi authorized by charter, under provisions like the present, has been declared a mere power ; but powers arise at com- mon law, under bonds to convey estates as another shall appoint, or pay sums of money as another shall appoint, either generally, or among children, or under covenants for like purposes.^ We cannot see why an authority or privilege acquired under a charter, to be exercised for the benefit of another, should not be governed by the same rules." And the benefit reverted to the society as there was no disposi- tion by will or assignment according to the terms of the con- tract. A similar case afterwards arose in New York. In this case the charter provided that the fund should be " paid to the wife of the deceased, if living, and if dead to his chil- dren, and, if there are none, then to such person as he may formally have designated to his lodge prior to his decease." The deceased had no wife nor children and so formally des- ignated his mother, who died before him. He afterwards, and before his mother's death, made a will in which the 1 § 1820. 2 3 Aik. 666; 1 Vesey Sr. 88 ( Cro. Car. 219, 376, and other cases cited In 1 Chance on Powers. 528 DESIGNATION OF BENEFICIARY. § 237 benefit was given to his mother, or in case of her prior de- cease, then to his brother. The suit was brought by the executor under this will against the society and, in affirming the judgment of the lower court for the defendant, the Court of Appeals said : ^ " The charter and by-laws of the defendant corporation constituted the terms of an execu- tory contract to which the testator assented when he ac- cepted admission into the order. The testator agreed on his part to pay certain dues and assessments as specified and the corporation agreed upon the death of the testator to pay $1,000 to his wife, if living; if dead, to his chil- dren; and if there should be neither wife nor children, then to ' such person or persons as he may have formally designated to his lodge prior to his decease ; ' such sum to be collected for that purpose by assessments. The corpo- ration contracted to pay to no one else, and were not bound to pay at all except ' to the person or persons ' described in the agreement, and out of such collected assessments. Lowenstein, the plaintiff's testator, did so designate to his lodge prior to his decease, his mother, Rika Lowenstein. He had neither wife nor children, and so was at liberty to select and name the beneficiary. The designation which he thus made describes the payment directed as ' the $1,000 my heirs are to receive ' of the corporation. This language was purely matter of description, intended to identify the fund, and will not at all bear the interpretation sought to be put upon it of a designation of his ' heirs ' as the re- cipients. On the contrary, the paper itself excluded any such interpretation, for its very purpose was to name and designate the particular recipient, irrespective of the ques- tion whether she should prove to be one of his heirs or not. If his mother had been living at his death she would have been entitled to the endowment because specifically named, 1 Hellenberg v. Dist. No. 1, I. O. B. B., 94 N. Y. 580. 34 529 § 237 DESIGNATION OF BENEFICIARY. and not by virtue of any relationship to the testator. The mother thus named had no interest in or title to the money to be paid while she was living. The testator could at any time have gone to his lodge and designated upon the books some other recipient, thus revoking his previous designa- tion. The mother could not become entitled to the endow- ment at all unless she survived the testator, and her designation remained unrevoked. Nor did the testator have any interest in the future fund. He had simply a power of appointment, authority to designate the ultimate beneficiary, and that power and authority died with him, because it could only be exercised by him, and prior to his decease. If he did not so exercise it, nobody surviving or representing him could, and upon his death he could have nothing which would descend or upon which a will could operate. His contract effected that result. He agreed that the endowment to be collected should be paid not to his next of kin, not to the legatee named in his will, but to the person designated to his lodge, or in default of such person so named then to nobody." All of the authorities agree that the rights of the members of benefit societies in the sums agreed to be paid at death is simply the power to appoint the beneficiary and that the constitution, or charter, and the by-laws are the foundation and source of such power. 1 The cases must not, however, be under- ' Greeno ». Greeno, 23 Hun, 479; Barton v. Provident Mut. Belief Assn., 63 N. H. 535; Eastman ?;. Provident Mut. R. Assn., 62 N. H. 555; 20 C. L. J. 266; Worley «. N. W. Mass. Aid Assn., 10 Fed. Rep. 227; Gentry ». Sap. Lodge K. of H., 23 Fed. Rep. 718; Swift v. Ry. Cond. Mut. Assn., 96 111. 309; Masonic Mut. R. Assn. ». McAuley, 2 Mackey, 70; Presb. Assn. Fund v. Allen, 106 Ind. 593; Masonic Mut. Ben. Soc. v. Burlsiiart, 110 Ind. 189,- ION. Bast. Rep. 79; Richmond v. Jolinson, 28 Minn. 447; Ky. Masonic Mut. Life Ins. Co. v. Miller, 13 Busli, 486; Van Bibber's Admr. w. Van Bibber, 82 Ky. 347; Sup. Counc. Catholic M. B. A. V. Priest et al., 46 Mich. 429; Durion v. Central Verein, 7 Daly, 168; Tennessee Lodge «. Ladd, 5 Lea, 716 ; Arthur v. Odd-fellow's B. Ass., 530 DESIGNATION OF BENEFICIARY. § 239 stood to hold that the member of a benefit society has not a property right in the contract of membership, under which he has the power to designate a recipient of the benefit to be paid, because of such membership and under the contract. The right of the member in this contract is a valuable one, which the courts will at all times recognize and protect, although strictly speaking, such member has no property interest in the benefit paid, or subject of the power. The membership, which includes the right to pay the agreed consideration and to appoint a person to take the benefit, must be regarded as a species of property and is to be distinguished from the benefit, or sum to be paid, itself, in which the member has no property. This prin- ciple has been clearly recognized in later cases. ^ § 238. This Power may be G-eneral or Special. — The power of a member to appoint a beneficiary may be general, if by the contract he is at liberty to appoint to whom he pleases, or special if he is restricted to an appointment to or among particular classes only.^ And we shall see as we proceed farther, the power, in nearly every instance, is special, because the appointment is limited to persons of a specified class. § 239 . Execution of Power Mast be in Compliance With Terms of Instrument Creating It. — It follows, from the preceding citations, and also from general principles,^ that 29 Ohio St. 557; Duvall v. Goodson, 79 Ky. 224; Masonic Ben. Assn. v. Bunch, 109 Mo. 560; 19 S. W. E. 25; Keener v. Grand Lodge, etc, 38 Mo. App. 543. 1 Wlsto. Grand Lodge A. O. U. W., 22 Greg. 271; 29 Pac. R. 610; Hogan ». Pacific Endowment League, 99 Cal. 248; 33 Pac. R. 924; Hy- singer i;. Supreme Lodge K. & L. of H., 42 Mo. App. 627; Froelich v. Musician's Mut. Ben. Assn. 93 Mo. App. 383; Lysaght v. Stonemasons', etc., Assn., 55 Mo. App. 538. 2 Washb. on Real Prop. 307. 3 2 Washb. on Real Prop. 317; 1 Sugden on Powers, 250. 531 § 239 DESIGNATION OF BENEFICIAKY. the execution of the power, to be valid, must be in precise compliance with the terms of the contract creating such power. 1 As Sugden^ says : " Where forms are imposed on the execution of a power it is either to protect the remain- der-man from a charge in any other mode, or to preserve the person to whom it is given from a hasty and unadvised execution of the power. In each case the circumstances must be strictly complied with ; in the first it would be in direct opposition to the agreement to consider the estate charged when the mode pointed out is not adhered to • in the second, to dispense with the solemnities and forms required to attend the execution of the power, is to deprive a man of the bridle which he has thought proper to impose on his weaiiness or frailty of mind, in order effectually to guard himself against fraud or imposition. Besides, the cir- cumstances required to the execution of a power are perfectly arbitrary, and (except only as they are in fact required) un- essential in point of effect to the validity of any instrument by which the power may be exercised." Consequently, a power to designate by deed, or written instrument in the nature of a deed, cannot be executed by will, or vice versa.^ In executing this power, the instrument or will, if such dis- position be" allowed, should refer to it so as to show that the donee had in view the subject of the power at the time. The law itself prescribes no particular ceremonies to be observed in the execution of a power except those required for the execution of the instrument executing the power, as of a deed or tyill, in which case the requisite formalities of execution or attestation must be complied with. The 1 Elliott V. Whedbee, 94 N. C. 116; Sup. L. K. & L. of H. v. Grace, 60 Tex. 571. 2 1 Sugden on Powers, 260. 3 2 Washb. onEeal Prop. 317; 1 Sugden on Powers, 255; Worley v. N. W. Masonic Aid Ass., 10 Fed. Bep. 227; Daniels v. Pratt, 143 Mass. 216; ION. East. Bep. 166. 532 DESIGNATION OF BENEFICIAEY. § 240 contract creating the power governs in all respects its exe- cution. ^ It has sometimes been a question whether the act of the member was an original designation or a change of beneficiary. The courts will, if possible, construe the act so as to carry out the intent of the member.^ The benefit will not pass under the residuary clause of a will, nor by general disposition of all of the testator's property,^ unless some authority providing otherwise is found in the laws of the organization.* It is now settled that defects or irregu- larities in the designation or change of beneficiary may be waived by the lodge,^ although it has been held that the required formalities in the laws of the society relative to designation of beneficiary are part of the contract and must be strictly complied with.* § 240. Equity Sometimes Aids Defective Execution. — Equity will sometimes interfere to remedy a defective exe- 1 1 Sugden on Powers, 250, 255; 2 Washb. on Real Prop. 317; Presby- terian Ass. Fund v. Allen, 106 Ind. 593; 7 N. East. Rep. 317; Am. Legion of Honor v. Perry, 140 Mass. 580; 5 N. East. Rep. 634. 2 Hanson v. Scandinavian, etc., Assn., 69 Minn. 123; 60 N. W. R. 1091 ; Shryock v. Shryock, 50 Neb. 886; 70 N. W. R. 515; Allison v. Stevenson, 51 App. Div. 626; 64 N. Y. Supp. 481 ; Grand Lodge, etc. v. Ohnstein, 85 III. App. 355; Loewenthal v. District Grand Lodge, etc., 19 Ind. App. 377; 49N. E. R. 610. 3 Arthur v. Odd-fellows' Assn., 29 Ohio St. 657; Maryland Mut. Ben. Assn. V. Clendinen, 44 Md. 429; 22 Am. Rep. 62; Hellenberg v. Dist. No. 1, 1. O. B. B., 94 N. Y. 680; Morey v. Michael, 18 Md. 241; Higfiland v. Highland, 109 111. 366; Greeno v. Greeno, 23 Hun, 478; Eastman v. Prov- ident B. Soc, 62 N. H. 655; 20 Cent. L. J. 267; contra, St. John's Mite Soc. V. Buckley CD. C.), 5 Mackey, 406; Bown v. Catholic M. Ben. Assn., 33 Hun, 263; Kepler v. Sup. L. Knights of Honor, 45 Hun, 274. ■* Weil V. TrafEord, 3 Tenn. Ch. 108. In Aveling v. N. W. Masonic Aid. Assn., 71 Mich. 681; 40 N. W. B. 28, it was held that a certificate payable to " the devisees, or if no will, to the heirs " passed under a will though not specifically mentioned. And in High Court Cath. Order, etc. V. Malloy, 169 111. 68; 48 N. E. R. 392; a devise was given effect because of the evident intent of the testator. 5 Kepler v. Supreme L. of H., 45 Hun, 274, and see post, § 308. 6 See post, § 307. 533 § 241 DESIGNATION OF BENEFICIARY. cution of a power, but the case must be very clear, and no opposing equity must exist. ^ It has been held ^ that a cer- tificate in a benefit society may be reformed after the death of a member by inserting the name of the beneficiary when it appears that the secretary of the society and the member both understood that the name should be entered on the record withaut further direction. The Supreme Court of Michigan has said upon this subject: ' " It is possible — and we need not consider under what circumstances — that when a member has executed and delivered to the reporter (secretary) his attested surrender in favor of a competent beneficiary, his death before a new certificate is issued, may leave his power of designation so far executed as to enable a court of equity to relieve against the accident." § 241. Consequences of Failure to Execute Power. — The member of a benefit association having no interest nor property in the fund stipulated to be paid on his death to his appointee, but simply the power of appointment, fail- ure to so appoint leaves the fund to be disposed of as pro- vided for in the contract creating the power, and if no disposition is so provided for, then there is a total lapse of the power and the fund will revert to the society. In no case is this fund assets, and if collected by the executor or administrator it is to be regarded as a trust fund held for the benefit of the person entitled to it and the cred- itors cannot share in it. However, the disposition of the benefit is determined by the charter and by-laws of J 1 story Eq. Jur. 181, 182, et seq. 2 Scott V. Provident Mut. K. Assn., 63 N. H. 556; and see also East- man u. Provident Mut. R. Assn., 65 N. H. 176; 18 Atl. E. 745, where reformation was decreed. The question was touched on in Newman v. Covenant Mut. Ben. Assn., 76 la. 66; 40 N. W. R. 87. 3 Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Kep. 826. 4 See post, § 284. 534 DESIGNATION OF BENEFICIARY. § 241 the society and is to be ordered accordingly.^ In a case,^ which was an action brought by plaintiff as the admin- istrator of one Gigar, to recover the benefit stipulated to be paid by the defendant society, the society was organized for the object of securing " to dependent and loved ones assist- ance and relief at the death of a member," and by the by- laws, the benefit was payable " to such person or persons as he might by entry on the record book of the association or on the face of his certificate, direct the sum to be paid." No person was designated by the deceased on the record book or the face of the certificate. The defendant society offered to show by parol testimony that the deceased intended that the benefit should go to his affianced, and had often so declared. The Supreme Court af New Hampshire, in affirming judgment for the defendants, said : " The cer- tificate was neither payable to the deceased, nor to his ad- ministrator, assigns, heirs, estate, or legal representatives. The defendant promised to pay the benefit to no one, save such person or persons as Gigar should direct by entry upon the certificate or record book of the association. By the contract he had the mere power of appointing the per- son who should receive the benefit. He was bound by the ' Eastman v. Prov. Relief, etc., Soc, 62 N. H. 555; 20 C. L. J. 266; Worley v. N. W. Mas. Aid, etc., 10 Fed. Rep. 227; Daniels v. Pratt, 143 Mass. 216; 10 N. East. Kep. 166; Hellenberg v. Dist. No. 1, I. O. B. B., 94 N.Y. 580; Maryland, etc., v. Clendinen, 44 Md. 429; Greeno v. Greeno, 23 Hun, 478; Gould v. Emerson, 99 Mass. 154; Van Bibber's Admr. v. Van Bibber, 82 Ky. 347; Duvallu. Goodson, 79 Ky. 224; Masonic Rel. Assn. V. McAuley, 2 Mackey, 70; McClure ». Johnson, 56 la. 620; Ballon v. Gile, Admr., 50 Wis. 614; American Legion of Honor v. Perry, 140 Mass. 680; 5 N. East. Rep. 634; Sup. Counc, etc.u. Priest, 46 Mich. 429; 9 N. W. Rep. 481; Whitehurst, Admr. v. Whltehurst, 83 Va. 153; 1 S. E. Rep. 801; Covenant Mut. Benefit Assn. v. Sears et al., 114 111. 108; Swilt v. San Francisco S. & E. Board, 67 Cal. 567; Fenn v. Lewis, 10 Mo. App. 478; West v. Grand Lodge A. 0. U. W., 14 Tex. Civ. App. 471; 37 S. W. R. 966. 2 Eastman v. Provident Mut. Rel. Assn., 20 C. L. J. 266; 62 N. H. 555. 535 § 241 DESIGNATION OF BENEFICIARY. rules of the associatioa, and could not change the benefi- ciary in a way not in conformity with them. We cannot know why he did not exercise his power of directing to whom the benefit should be paid. He may not have decided in his mind who should receive it. He may have intended that his associate members should not be called upon to contribute the sums required to fulfill his contract with the association. The only presumption is that he intended not to do what he omitted to do.^ He had no personal interest in his membership and his personal rep- resentative, as such, can take no interest in it after his death. The benefit is not assets, for if the administrator can collect the money it must go primarily to Gigar's creditors. The charter, by-laws and certificate, all show that neither party had any such understanding. If Gigar had exercised the power of appointment, it is plain that the administrator could not maintain a suit to recover the money. How does Gigar's neglect to exercise it give him the power? There being no contract to pay to Gigar or to this legal representative, there is no breach. The plaintiff fails. In Worley v. N. W. Masonic Aid, etc.,^ the facts are similar to those in this case and it was held that the plaintiff, who was administrator of the assured, could not recover. McClure, Exr. v. Johnson,^ decides that where a life policy, by its terms, is payable to a person other than the assured or his represe natives, the payee cannot by will make a different disposition of the fund from that directed by the policy. Our conclusion is that the plaintiff cannot recover. The evidence offered as to Gigar's inten- tion as to whom the money should be made payable, was inadmissible to vary the construction of the certificate, and 1 Worley «. N. W. Mass. Aid. Assn., 10 Fed. Rep. 227 ; 11 Ins. L. J.141. 2 Supra. 3 56 la. 620. 536 DESIGNATION OF BENEFIOIAET. § 241 was insufficient to constitute a trust." ^ And where a member never designated any beneficiary it was held that the fund reverted to the , society even though he left a widow. ^ Where a competent beneficiary has been designated by the member the wife has no claim. ^ The Court of Appeals of Kentucky, in passing upon a case involving the disposition of a benefit,* says: "A life policy for the benefit of the family of the person procuring, though not a testament, is in the nature of a testament, and iu construing it the courts should treat it, as far as possible, as a will, as in so doing they will more nearly approximate the intention of the persons the destination of whose bounty is involved in such cases. As said in a former case, it is not to be supposed that a father, in procuring insur- ance on his own life for the benefit of his family, or in keeping such a policy alive, intends to benefit himself or his estate, and especially is that true when, by the terms of the charter of the company in which he insures, with which he must be supposed to be familiar, he cannot take in- surance for the benefit of any one except his wife or chil- dren, if he have either, and cannot dispose of the insurance if he leave either wife or child surviving. We, therefore, conclude that the charter gave the member a mere power of appointment in case he has neither wife nor child, and that he has no interest whatever in the fund, and, there- fore, it did not pass under a will merely disposing of all his estate, but in which no mention is made of the fund to arise from his membership." s In a case decided by the Supreme Court of Illinois,^ where the charter of defendant 1 Wason V. Colburn, 99 Mass. 342. 2 Grand Lodge A. O. U. W. ■». Cleghorn (Tex. Civ. A.), 42 S. W. R. 1043; West v. Grand Lodge, etc., 14 Tex. Civ. A. 471; 37 S. W. K. 966. s Sheeiian v. Journeymen Butchers', etc., Ass. (^Cal.)i 76 Pac. B. 238. * Duvall, etc., v. Goodson, 79 Ky. 224. s See ante, § 239. 6 Covenant Mutual Ben. Assn. v. Sears, 114 111. 108. 537 § 242 DESIGNATION OF BENEFICIARY. declared the objects of the association to be " to afford financial aid and assistance to the widows, orphans, heirs or devisees of deceased members," and the certificate was payable to the members, " devisees, as provided in last will and testament, or in event of their prior death, to the legal heir or devisees of the certificate holder," the member died intestate and the complainants ^ his only heirs, brought a bill to recover the benefit money. The court held that the clear intent was that the devisees, or the heirs — one or either of them should take. That if there were no devisee then to the heir.i § 242. Desiguation of Beneficiary is not Condition Precedent to Liability of Society. — It has been questioned whether the designation of beneficiary was not a condition precedent to the liability of the society. The New York court of Appeals has held that the defect of designation may be supplied by construction of the charter and by-laws.^ The court says: " By the act of incorporation, the object of the defendant was to aid and support members and their families in case of want, sickness or death ; and the act further provided that the corporation might create a beneficiary fund for relief of members and their families, subject to such conditions and regulations as might be adopted by the defendant. This fund was to be set apart to be paid over to the families, heirs or legal representatives 1 See also Smith v. Coveaant, etc., Assa., 24 Fed. Eep. 685; and Newmaa v. Coveiant Mat. Bea. Assa., 76 la. 66; 40 N. W. R. 87; see also Jewell ». Grand Lodge A. O. U. W., 41 Minn. 405; 48 N. W. R. 88. 2 Bishop V. Gr. Lodge Empire Order Mat. Aid, 112 N. Y". 637; 20 N. B. R. 662, reversing 43 Han, 472, which In the first edition of this work was cited in support of a contrary doctrine to that now laid down. The same rale was applied io Pfeifer v. Supreme Lodge Bohemian, etc., Soc, 173 N. Y. 418; 66 N. E. E. 108; reversing 77 N. Y. Sapp. 1138; 74 App. Div. 630. See also Munroe v. Providence, etc., Assn., 19 R. I. 491; 34 Atl. R. 997. 538 DESIGNATION OF BENEFICIARY. § 242 of deceased or disabled members or to such persoa or per- sons as the deceased might, while living, have directed. Following out such general purpose, the seventh section of the constitution of the defendant in order to promote benevolence and charity, provided for the establishment of this beneficiary fund, from wliich, on satisfactory evidence of the death of a member of the order who had complied will all its legal requirements, a sum not exceeding $2,000 was to be paid to his family as he might direct. Stop- ping here, it is plain that the parties who were to receive the $2,000 were, by the very terms of the act of incorpora- tion and of the constitution of the defendant, to be the families, heirs, or legal representatives of deceased or dis- abled members, or such other persoa as the deceased mem- ber might, while living, have directed ; and we think that in case no such direction was given, such payment was intended to be made to the family, heirs or legal representatives of a deceased member. It is true, tlie act and the constitution fail to state which it shall be in case no direction is given, whether it shall be the family, the heirs or legal represen- tatives ; but we think this expression should be construed with reference to the general purpose of the corporation and, having such purpose in view, we think it really was meant, and that it should be held, to include those who would take such property as in cases of intestacy. It is true that by the twenty-fourth section of the laws of the defendant it is provided that each member of the order shall be entitled to a certificate setting forth the name and good standing of the member and the amount of the benefit to be paid at death, and to whom payable. Butwedonotthinkthe issuing of such certificate is a condition precedent to the right of such legal representatives to receive the fund in question. The amount of the fund is provided in the by- laws, and it is there stated to be $2,000. We think the certificate is only necessary in cases where the money is to 539 § 243 DESIGNATION OF BENEFICIARY. be paid, as directed by the member, to some person or body otlier than the family, heirs or legal representatives of the deceased member. We cannot think that it was the intention of the defendant, in making up its constitution, its general laws and its by-laws, to make the issuing of such certificate a condition precedent to its liability to pay this amount to the families, etc., of deceased members who at the time of their decease were in good standing, and who had paid all the assessments, and fully com- plied with all the rules and regulations of the defendant up to that time. The neglect of the company might thus result in a forfeiture of the fund." And where the certifi- cate was executed, but withheld and never delivered on account of the alleged fraud of the member, it was held,^ that the society was liable, no proof of the alleged fraud having been offered. But if the membership is not com- plete, as, for example, because the applicant has not been initiated, the society will not be bound. ^ And a certificate payable to whom might be designated by will is valid. ^ § 243. When Designation o£ Beneficiary Lapses. — In event of the death of the party designated in the lifetime of a member of tlje society, then there is also a failure of the exercise of the power, and, unless the contract provides otherwise, or there is another designation of a person ei^- titled to take, the power lapses and the society takes bv reversion. This rule has always been applied, one of the first precedents being the early case of Oke v. Heath,* where Lord Hardwicke held, the case being one where an appointee, by a will, died in the lifetime of the testator, who had power only to appoint by will, that by such death 1 Lorscher v. Supreme Lodge K. of H., 72 Mich. 316; 40 N. W. R. 645- 2 Matkin v. Supreme Lodge K. of H., 82 Tex. 301; 18 S. W. R. 806. ' Ledebuhr u. Wisconsin Trust Co., 112 Wis. 657; 88 N. W. U. 607. * 1 Ves. Sr. 139. 540 DESIGNATION OF BENEFICIARY. § 243 the appointment became void. The quaint language used will apply to the exercise of powers by members of benefit societies which are as a rule revocable, for he says : " Then she, executing her power by will, it must be construed to all intents like a will; the conditions of which are, that it is ambulatory, revocable and incomplete till her death; nor can any one dying in the testator's life, take under it." Other old cases are to the same effect.^ Modern authority follows the older precedents.^ It is but fair, however, to state that in a majority of these late authorities the reason of the decision has been, not the lapse of the designation, because it was ambulatory and liable to be revoked by the death of the appointee before that of the member, but a construction of the supposed intention of such member. One of the principal cases arose in the District of Colum- bia.^ A member of the association .designated his wife as the beneficiary of the fund; she diedand he married again, but soon afterwards died, without changing his first appoint- ment. The by-laws provided that on the death of a mem- ber the fund accruing because of the membership, should be paid to " his widow, orphan, heir, assignee or legatee ; " the right of the member to designate the beneficiary was recognized and this designation could be changed with the consent of the board of directors. If the member died ^ Marlborough v. Godolphin, 2 Ves. Sr, 60; Burges v. Mawbey, 10 Ves. Jr. 319. 2 Masonic Mut. Relief Assn. v. McAuley, 2 Mackey, 70; Gatterson a. Gutterson, 50 Minn. 278; 52 S. W. R. 530; Van Bibber's Admr. v. Van Bibber, 82 Ky. 3i7; Ballon v. Gile, 50 Wis. 6U; Given v. Wisconsin Oddfellows' Mut. L. Ins. Co., 71 Wis. 547; 37 N. W. Rep. 817; Duvall V. Goodson, 79 Ky. 224; Hellenberg v. Dist. No. 1, 1. O. B. B., 94 N. Y. 580; American Legion of Honor v. Perry, 140 Mass. 580; 6 N. East. Rep. 634; Adams Policy Trusts, 23 Cli. Div. 525; 52 L. J. Ch. 642; 48 L. T. 727; 31 W. R. 810; Supreme Council A. L. H. «. Gelirenbeck, 124 Cal. 43; 56 Pac. R. 640; Screwmen's Benev. Assn. v. Whitridge, 95 Tex. 539; 68 S. W. R. 501. ° Masonic Mut. Relief Assn. v. McAuley, 2Mackey, 70. 541 § 243 DESIGNATION OF BENEFICIARY, ' ' without legal representatives ' ' the fund went to the association. Upon the death of the member the fund was claimed by the administrators of the deceased wife by the administrators of the husband and by the widow. The court in deciding the question said : "It will be sufficient to remark that in this case the question at issue is controlled by the particular language of the designation made by the husband. He had the power to designate the beneficiary, and he had a right to do so either absolutely or condition- ally, and the direction given by him was that, in event of his death, all benefits arising from his connection with the association should be paid to his wife, Ann Eeed. Now, it is obvious that this direction cannot be literally gratified unless the wife survive the husband, and the whole lan- guage of the husband on this point is that of contingency or condition. He was looking forward to this provision for the benefit of his wife in case she should survive him — that is, in that contingency. His own death was not, of course, contingent; it was an event certain to occur; but it might be regarded as contingent with reference to some other event — the death of his wife for instance — and we think the fair interpretation of the language of the husband is that, in case of his dying before his wife, the benefits arising under this transaction were to inure to her, but not otherwise. To construe it otherwise would be to hold that the design of the husband in making this provision was that its benefits should go first, to the wife, if she survived, but otherwise to her relations; and it is not to be supposed that this association was organized and sustained by its members for the purpose of benefiting the relations of their widows. We think, therefore, the meaning of the lan- guage used by the husband in designating the beneficiary was that the benefits of this provision were to go to his wife only in case she survived him; and as she did not survive her husband, the provision falls to the ground so far as she 542 DESIGNATION OF BENEFICIARY. § 243 is concerned, and the claims of her representatives are out of the question. The controversy remains then between the personal representatives or administrators of the hus- band and the surviving widow. In behalf of the former, the same general ground already stated is taken, namely, that this is virtually an insurance on the husband's life, and as such would pass to his estate. In some respects it is like a life insurance and in other respects it is different. It was not designed to provide for creditors of the husband or for those generally interested in his estate ; but for his widow, orphans or immediate heirs ; and therefore the charter pro- vides for ' the immediate payment to the widow, orphans, heir, assignee or legatee of a deceased member, of as many dollars as there are members in good standing on the books of the corporation.' The charter and the by-laws control the destination of this fund, and they explicitly provide that in the condition of affairs which this case presents, the widow, orphans, heir, assignee or legatee shall be entitled to receive it. An argument is based on the language of article V, section 5 (of the charter) which provides that where the deceased member has no legal representative, the money shall become the property of the association. From this provision it is argued that if there are legal representatives of the deceased, they must be entitled to the fund. This argument, if it proved anything, would prove too much. It would prove that in a case where there were no legal representatives, notwithstanding the existence of a widow, or an orphan, or heir, the money must go back into the general fund of the association to the direct frustration of the whole scheme and object of the association and in dis- regard of the express language of its charter and by-laws. We think, therefore, that the term, - legal representatives,' here means those who are the legal representatives in the contemplation of this charter and by-laws, namely the very people who are there enumerated, ' the widow, orphans, 543 § 243 DESIGNATION OF BENEFICIARY. heir, or legatee.' The fund is to go to some one of these parties. They are mentioned disjunctively : the money is to be paid to the widow, or the orphans, or the heir, or the assignee or legatee. Now, that means one of two things, either that it shall go to some one of these to be selected by some authority, or else that they are to have prece- dence in the order in which they are named. But there is no authority provided for or indicated in either the charter or the by-laws by whom any one of these beneficiaries shall be selected; and, therefore, our conclusion is, that the order in which they are named is the order in which they are to benefit by this fund; first, the widow; if there is no widow, then the orphans ; if there is no orphan, then the heir, etc. In this case the question is between the widow and the personal representatives. The latter are excluded entirely by our construction of the by-laws, and, therefore, the decree will be that the widow shall take the fund. ' ' It has been held that where, by the laws of the society and the State, the payment of benefits is confined to the heirs of the member, or members of his family, and the member designated his wife, and she afterwards became divorced from him, that the appointment was thereby re- voked.^ This view however has not always prevailed and there is authority to the contrary .^ But divorce a mensa et tlioro does not affect the designation.* The Supreme Court of Massachusetts has also held that where the mem- 1 Tyler ». Odd-fellows' Mut. R. Assn., 145 Mass. 134; 13 N. East. Rep. 360. To the same effect are Saenger v, Rothschild, 123 N. Y . 677 ; 26 N. E. K. 3; afeg. 2 N. Y. Supp. 794; Courtols v. Grand Lodge, etc., 135 Cal. 652; 67 Pac. R. 970; Order Railway Conductors v. Koster, 55 Mo. App. 186. 2 White ». Brotherhood, etc. (la.), 99 N. W. R. 1071; Overhiser v. Overhiser, 14 Colo. App. 1; 59 Pac. R. 75; Brown v. Grand Lodge, etc. (Pa. St.), 57 Atl. R. 176; Grego v. Grego, 78 Miss. 443; 28 Sou. R. 817. See also post, § 254. 3 Supreme Council A. L. H. v. Smith, 45 N. J. E. 466; 17 Atl. R. 770. 544 DESIGNATION OF BENEFICIARY. § 243a ber designated his mother, and she was a person whom he could UiwfuUy so designate, as hisbeneficiary, this appoint- ment was not revoked by his subsequent marriage.^ Although in the cases just cited the courts have been con- trolled by the supposed intent of the member, the same conclusions would have been reached had the rules gen- erally governing the execution of powers been followed . As the death of the appointee, under a power executed by will, during the life of the testator, causes the appointment to fall, so where a member of a benefit society designates a beneficiary who dies during the lifetime of the member, the designation is revoked, or lapses, and it has been held that if the designated beneficiary dies after the designation but before the issuance of a certificate and in the lifetime of the member the designation fails.''' § 243a. The Same Subject Continued: Resulting Trust: Death in Common Calamity. — Conceding the rule to be that, if the person designated as beneficiary die in the lifetime of the member, a lapse of the designation results, it has been held that, under the rules of the society, the benefit generally will not revert to the society but a resulting trust accrues for the benefit of either those designated by the laws of the organization to receive in case of failure of designation, or for those entitled to take as heirs of the member under the statutes of distribution.^ Thus where the certificate contained no 1 Catholic Order of Foresters v. Callahan, 146 Mass. 391; 16 N. East. Sep. 14, See also Grand Lodge, etc., v. Child, 70 Mich. 163; 38 N. W. Rep. 1. 2 Order Mut. Companions o. Griest, 76 Oal. 494; 18 Pac. Bep. 652; In re Baton, 23 Ontario E. (Ch. D.) 693. 3 Wolf V. District No. 1, etc., 102 Mich. 23; 60 N. W. R. 445; Carson V. Vicksburg Bank, 75 Miss. 167; 22 Sou. R. 1; 37 L. R. A. 559; Chi- cago, etc., V. Wheeler, 79 111. App. 241; Simon v. O'Brien, 87 Hun, 160; 33 N. Y. Supp. 815. See also cases cited, post, § 243c. 35 545 § 243a DESIGNATION OF BENEFICIARY. provision that it was to accrue to the representatives of the wife, it was held that a resulting trust was created in favor of such member and the proceeds became part of his estate. 1 The same result follows where the designation is illegal. As was said by the Supreme Court of Massachu- setts:^ " The designation of beneficiaries in the policy or certificate of membership is invalid, as the statutes under which the defendant corporation was organized did not authorize it to grant insurance for the benefit of friends.^ But an invalid designation of beneficiaries does not render the whole contract invalid. The contract in terms recog- nizes that there may be a change or substitution of benefi- ciaries, and there is a provision that, if the member shall survive all original or substituted beneficiaries, then his membership shall be for the benefit of his legal heirs. This provision is within the authority of St. 1882,* heirs being included under the head of relatives, and if there is no other legal designation, this may take effect." The Court of Chancery of New Jersey has also considered the subject and thus reasons: " The claim is that the right of a beneficiary to take depends on the fact that the power of appointment vested in a member has been exercised in his favor, and that if he cannot show such an appointment he is without right. But this view manifestly overlooks another very material part of the contract. One of the defendant's by-laws, it will be remembered, ordains in substance that if the beneficiary appointed by a member dies in the lifetime of the member, and the member shall subsequently make no other or. further disposition of the part of the benefit fund 1 Haskins v. Kendall, 158 Mass. 224; 33 N. E. R. 495; Walsh o. Walsb, 20 N. Y. Supp. 933 ; In re Eaton, 23 Ontario K. (Ch. D.) 593. 2 Rindge-B, New England M. A. See, 146 Mass. 286; 15 N. E. R. 628. 3 Daniels w. Pratt, 143 Mass. 221; 10 N. E, R. 166. 4 C. 196, § 1. * Britton v. Supreme Council R. A., 46 N. J. E. 102. 546 DESIGNATION OF BENEFICIARY. § 243a payable on his death, it shall on his death be paid to his legal heirs dependent on him ; and that if there be no per- son entitled to receive it, according to the laws of the order, it shall revert to the widows and orphans benefit fund. If we look then at the whole contract and construe it in the light of all of its provisions, it would seem to be clear that there can be no lapse or reverter, except a mem- ber dies without leaving an heir dependent on him. This is the construction which similar contracts have already received. In the case of Legion of Honor v. Perry ,i the Supreme Court of Massachusetts said,^ ' The statute under which the plaintiff (corporation) is organized (the defendant in this case is organized under the same statute) gives it authority to provide for the widows, orphans or other dependents upon deceased members, and provides that such fund shall not be liable to attachment. The classes of persons to be benefited are designated and the corporation has no authority to create a fund for other per- sons than of the classes named. The corporation has power to raise a fund payable to one of the classes named in the statute, to set it apart to await the death of the member, and then to pay it over to the person or persons of the class named in the statute, selected and appointed by the member during his life and if no one is so selected it is still payable to one of the classes named.' The appellate court of the first district of Illinois in enforcing a contract made by the defendant in this case, containing substantially, the same terms found in the contract now in suit, said, after adopting the view which has just been quoted from the opinion in Legion of Honor v. Perry, that where the beneficiaries are prescribed by law, it is an invasion of its policy and a violation of its letter to say that where a 1 Supra. 2 140 Mass. 589; 5 N. E. R. 636. 547 § 243a DESIGNATION OF BENEFICIARY. member has named a person not within the class to be benefited, and the corporation has issued the certificate to such person such acts shall deprive the proper person or class of persons of all right to or interest in the fund.^ These decisions settle the construction which should be given to that part of the contract, which is put in contest in this case, and they settle it in strict accord with the purpose which the legislature had in view in authorizing the formation of such corporations as the defendant. The legislative purpose is clear. It was to provide a way by which men of small means might combine together to accu- mulate a fund for the benefit of those who should, as each dropped out by death, be dependent on him for food, rai- ment and shelter and from which his dependents should on his death, receive a certain fixed sum. So it would seem to be entirely clear that the complainant's case falls directly within both the terms of the contract on which her action is founded and the purpose of the statute from which the defendant derives its corporate life and power. She is one of the next of kin of a deceased member of the defend- ant corporation. She is also his heir by force of our stat- ute regulating descents, but not according to the canons of the common law,^ but the phrase ' legal heirs ' as used in the defendant's by-laws, directing that in case a member shall have made no disposition of the benefit payable on his death his benefit shall, on his death, be paid to his legal heirs dependent on him, is obviously used as the equiva- lent of ' next of kin,' or perhaps in a still broader sense, meaning ' dependents' as well as ' next of kin.' That it is used in a sense broader than that which its words, un- derstood in a technical sense, import, is placed beyond doubt when it is remembered that the fund from which 1 Palmer v. Welch, 132 111. 141; 23 N. E E. 412; afig. Parke v. Welch, 33 111. App. 188. 2 Taylor v. Bray, 32 N. J. L. 182; on error, 36 N. J. Law, 415. 548 DESIGNATION OF BENEFICIARY. § 243a the benefit is pajcable was established for the benefit of the widows and orphans of deceased members and persons dependent on deceased members. If in this case the de- ceased member had left no person who would have been entitled to succeed to his land as heir, but had left a widow, T do not think it would have been successfully contended that that part of the benefit fund payable on his death had lapsed because his widow was not his heir, and could not, therefore, take it. It would be impossible for any court so to adjudge without first declaring as a matter of law, that it was within the power of a corporation, organized to estabUsh a fund for the benefit of widows of its deceased members, so to frame its by-laws as to cut off the rights of the very class of persons for whose benefit it was organized and thus defeat the fundamental object of its organization. The complainant was not only one of the next of kin of a deceased member but his dependent. She was the only person who was dependent on him at the time of his death. He left neither widow nor child and the only dependent on him at the time of his death, or to whose support he con- tributed during his life, was the complainant. The proofs on this part of the case are full and free from dispute. The complainant's right, therefore, to the fund for which she sues, is, in my judgment, clear." ^ If the laws of the society provide that in case of the death of the beneficiary in lifetime of member it shall go to certain persons, such stipulation will govern and they will take.^ It has been 1 See also Shea B. Mass. Benefit Assn., 160 Mass. 289; 35N.E.R.855; N. W. MasonicAidAssn.o. Jones, 154 Pa. St. 99; 26 Atl.Rep. 263; Keener V. Grand Lodge A. O. U. W., 38 M. A. 543; Sargent v. Supreme Lodge K. of H., 168 Mass. 657; 33 N. E. E. 650. But see also Supreme Council A. L. of H. v. Green, 71 Md. 263; 17 Atl. Rep. 1048, to the con- trary. If one of several designated beneficiaries is incompetent the others take. Beard ». Sharp, 100 Ky.606; 38 S. W. R. 1057. 2 Britton v. Sup. Counc. R, A. and Keener v. Grand Lodge, supra; and see post, § 243c. 549 § 243a DESIGNATION OF BENEFICIARY. held, under a construction of such laws, that, where the benefit was payable to the wife and she died and the mem- ber married again, it was on his death payable to the second wife, on the ground that such was the intent of the laws of the society.^ Where father, mother and children all perish in a common calamity, there is,no presumption of survivor- ship, or priority of death, by reason of age or sex, nor is it presumed that they all died at the same time.^ But if two or more persons are lost in the same catastrophe and the ownership of property is afterwards drawn into litiga- tion by contesting parties, each claiming to derive his right from one of the deceased persons as being the actual owner of the property when he died, and the question, of which of those deceased persons owned it at his death, turns on which survived longest, and there is no proof on this sub- ject, the right to the property will be adjudged as it would be if it were known that both died at the same instant.^ If the beneficiary and the member die simul- taneously there is a lapse of designation and the benefit will go to the heirs of the husband, as in case of failure to designate under the laws of the society. In one case,* the court says: " The court below finds that the wife, the beneficiary named by the husband, did not die before her husband, but died at the same instant. The result of this finding is that the beneficiary named at the time the policy 1 Riley v. Riley, 75 Wis. 464; 44 N. W. E. 112; In re Griest's Estate, 76 Cal. 497; 18 Pac. R. 658; Given v. Ins. Co., 71 Wis. 547. " Cowman v. Eogers, 73 Md. 403; 21 Atl. Rep. 64; 10 L. E. A. 550. See also Johnson v. Merrithew, 80 Me. Ill; 13 Atl. Rep. 132. » Supreme Council E. A. v. Kacer, 96 Mo. App. 93; 69 S. W. E. 671. See also U. S. Casualty Co. v. Kacer, 169 Mo. 301; 69 S. W. E. 370; 68 L. E. A. 436; Balder o. Middeke, 92 111. App. 227; affirmed 198 111. 590; 69 L. E. A. 653; In re Willbor, 20 K. I. 126; 51 L. E. A. 863, and notes; Coulter v. Linzee, 135 Mass. 468. An instructive case is Screw- men's Ben. Assn. v. Whitridge, 68 S. W. R. 601 ; 95 Tex. 639. * Padeu V. Briscoe, 81 Tex. 563; 17 S. W. E. 42. And see cases cited last supra. 550 DESIGNATION OF BENEFICIARY. § 243a was earned by the death of the husband did not survive him, and was incapable of taking the proceeds of the policy. The purpose of the contract of insurance entered into by the husband and the association was to provide a fund for bis wife, payable at his death ; and in the event she was in- capable of taking, by reason of her death, then those heirs of the husband dependent upon him should take. These are plain provisions of the rules and by-laws of the associa- tion, that enter into and form part of the contract of insurance. The use of the words : ' die before ' in the contract of insurance, was, evidently, intended to mean that the beneficiary named must be dead, and incapable of taking, at the time the policy was earned, by reason of the death of the husband. The instantaneous death of both the husband and wife successfully accomplished the ina- bility of the wife to take as if she had died before." If the certificate be payable to the wife of the member, her heirs, etc., and she die leaving no children, the heirs of the husband will take and not those of the wife,i and where the benefit was payable according to will and the member died intestate it was held that under the laws of the society, the benefit went to the father, the son leaving no widow. ^ There is no resulting trust where a policy of insurance on the life of a wife is payable to her children and she dies childless.* But there is in favor of the execu- tors of the assured where the policy was payable to the wife who had poisoned him.* And this rule has been applied to a beneficiary association.^ 1 Lyonv. Rolf (Mich. Mut. Ben. Assn. v. Eolf), 76 Mich. 146; 42 N. W. R. 1094. 2 Jewell o. Grand Lodge A. O. U. W., 41 Minn. 405; 43 N. W. R. 88. 3 McBlwee v. N. Y. Life Ins. Co., 47 Fed. Rep. 798. * Cleavero. Mutual Res. F. L. Assn., 1 Q. B. 147. 5 Schmidt V. Northern L. Assn., 112 la. 41; 83 N. W. R. 800; 51 L. R. A. 141. 551 § 2436 DESIGNATION OF BENEFICIARY. § 2436. Bevocation of Designation. — If the laws of the society either expressly or impliedly allow a revocation and change of designation the member may exercise that power. Such power is implied from the very nature of the contract. ^ The member may revoke the designation without exercis- ing the right of appointment of a new beneficiary, in which case there will generally be no lapse of designation, but the benefit will go as provided by the laws of the society in case of failure to designate, or in event of the death of the beneficiaries in the life-time of the member, or, if the laws make no such provision, a resulting trust will arise for the benefit of the heirs as shown in the section preceding. In a case of this kind,'' the court said, in awarding the fund to the widow: "The intention is, to our minds, quite apparent; and it is that, in the event of the death of the beneficiaries, named in the certificate before the decease of the member, and if no other disposition be made thereof, or in a case where no direction has been made by the mem- ber in such certificate, the benefit should be paid to the beneficiaries of the deceased member first in the order named in section 10, which is, first to the widow, if there be one; if not, to the children, if any survive; if not, to the dependents, etc. It is true the plaintiff first designated Mrs. Eochford as the beneficiary in the cer- tificate, but he subsequently revoked such designation, and thereafter the certificate remained without any desig- nation. Mrs. Rochford would not be entitled, because her designation had been revoked. The fund would not revert to the supreme tent, because the constitution provides that it shall only so revert back in case the member does not leave a widow, children, etc. We think, therefore, that 1 Masonic Mut Ass. v. Bunch, 409 Mo. 560; 19 S. W. R. 25. But see post, § 290, 310c, et seg., where the subject is considered. 2 CnlliQ V. Supreme Tent K. O. T. M. QN. Y. Sup. Ct.), 28 N. Y. Supp. 276. 552 DESIGNATION OF BENEFICIARY. § 243c the certificate must be treated as if no designation had been made, and that, under our interpretation of the provisions of the sections quoted, the plaintiff becomes entitled to the fund."^ Where a new certificate was issued without desig- nating a beneficiary it was held that the designation in the first certificate governed.^ Where a society amended its laws and provided that, " where marriage is contracted after the issuatice of the policy and said policy becomes payable through death, it shall be paid to the widow, or, in event of their death, to their joint issue, if any, unless otherwise ordered," it was held^ that such law did not operate so as to require a new designation, and where a member, before the adoption of the law, had designated his mother and afterwards married again the mother would take, the first designation being considered within the con- dition " unless otherwise ordered." § 243c. If Designated Beneficiary Die in the Lifetime of a Member, Benefit will be Disposed of in Accordance •with Laws of Society. — Although probably it sufficiently appears from the three preceding sections that, if there is a lapse of designation, there is a resulting trust in favor of those designated by the laws of the organization to receive in such event, or for those entitled to take as heirs . of the member, it may be well to emphasize this principle by a few quotations from leading cases. The Supreme Court of Pennsylvania has said:* "There is a material and fundamental distinction between phil- anthropic or beneficial associations, which issue benefit 1 See also Bishop v. Empire Order Mut. Aid, 112 N. T. 627; 20 N. E. K. 662 ; Jewell V. Grand Lodge A. O. U. W. , 41 Minn. 405 ; 43 N. W. R. 88. 2 Derrington v. Conrad, 3 Kan. App. 725; 45 Pac. R. 458. 3 Benton V. Brotherhood R. R. Brakemen, 146 111. 570; 34 N. E. R. 939; reversing 45 111. App. 112. See also post, Chap. IX, § 305 eJ seq. « Fischer v. Am. Legion of Honor, 168 Pa. St. 279-285; 31 Atl. 1089. 653 § 243c DESIGNATION OP BENEFICIAKT. certificates to their members, and life insurance companies, which is pointed out in Commonwealth v. Equitable B. Ass'n,^ and has since been recognized in Dickenson v. A. O. U. W.,^ and Lithgow v. Supreme Tent, etc.^ It ap'. pears from the charter and by-laws that the association was organized for social, moral and intellectual purposes and for the relief of sick and distressed members. Insur- ance is not its only and primary object. It limits the per- sons or classes of persons who may be named as beneficiaries to 'the family, orphans or dependents ' and provides that in the event of the failure of all such persons the sum due shall revert to the order. « * * Where the benefi- ciary has died the member may name another. These provisions are in entire harmony with the object of the order as a fraternal and beneficial organization, and they are entirely incompatible with the vesting of an interest in the fund before the death of the member. Such a construction would, in many cases, by giving the fund to the legal representatives of the beneficiary, divert it entirely from the purpose in- tended by the member and for which the organization was formed. It was the right of Charles F. Fischer, after the death of his first wife to name a new beneficiary within the limits as to persons and classes prescribed. Upon his failure to do so the law of the association fixed the persons to be benefited. Of this law he presumably had knowledge and his acquiescence in the selection made by it had all the effect of a new appointment by him." In another case* the court said : " The certificate was issued in 1888, the beneficiary died in 1895 and the member died in November, 1897. In 1897, prior to his death. Section 5 of By-Law X was amended. He was bound by this 1 137 Pa. 412. 2 169 Pa. 258. s 165 Pa. 292. 4 Pease v. Royal Soc, etc., 176 Mass. 506; 57 N. E. B. lOOa. 554 DESIGNATION OF BENEFICIAKT. § 243c * change, and so far as that by-law is material it must be taken as it stood at the time of his decease. The benefi- ciary, having died before the member and no other or further designation of a beneficiary having been made upon which a certificate issued the case falls within the terms of Sec. 5, Art. X, as amended. * * « Ceiley was a member and a permanent officer of the organ- ization, and it must be assumed that he knew and understood this by-law. He knew that it provided that unless he took out a new certificate, his next of kin would be considered as his beneficiaries, and that the money would be paid to them as such. It is not to be supposed that he intended to dis- pute the validity of this by-law, but rather that it should be operative, and that the fund should go in accordance therewith. Under these circumstances, his failure to take out a new certificate was in effect a designation of his next of kin as the real beneficiaries, and it was not any less a direction than it would have been if he had taken out a new certificate." This doctriue has generally been up- held. ^ It has, however, been held to the contrary in Maryland.^ Where several beneficiaries are named and one of them dies in the lifetime of the member the surviving beneficiaries will take the whole, especially if the contract so provides.^ But the contrary view has sometimes been 1 Supreme Council A. L. of H. v. Adams, 68 N. H. 236; 48 Atl. Rep. 381; Moss W.Littleton, 6 App. D. C. 201; Given ». Odd Fellows, etc., Ass'n, 71 Wis. 547; 37 N. W. R. 817; Supreme Council E. A. v. Bevis (Mo. App.), 80 S. W. R. 739; Golden Star, etc., Frat. «. Martin, 69 N. J. L. 207; 35 Atl. Rep. 908; Supreme Council R. A. ». Kacer, 96 Mo. App. 93; 69 S. W. R. 671; Grand Lodge A. O. U. W. v. Connolly, 58 U. J. Eq. 180; 43 Atl. Rep. 286. 2 Thomas v. Cochran, 89 Md. 390; 43 Atl. Rep. 792; 46 L. R. A. 160; Expressmen's Mut. Ben. Assn. ». Hurlock, 91 Md. 585; 46 Atl. Rep. 957; and see In re Copeland's Estate, 75 N. Y. Supp. 1042. 8 ^eepost, § 264. 555 § 243c DESIGNATION OF BENKFICIART. taken. 1 la the case of Warner v. Modern Woodmen,^ it, was held that a member of a fraternal beneficiary society has no such interest or property in the proceeds of a cer- tificate therein as will impress sach proceeds with a trust in favor of his estate or his creditors ; and where, by the statute, payment is limited to the family, heirs, relatives or dependents of the member, the death of such member without the existence of anyone who is entitled to be made a beneficiary creates no interest in his estate in the fund mentioned in the certificate, and his administrator cannot recover against the association on such certificate. The court in that case says : " There being no one competent to become beneficiary, and the deceased having failed to execute the power of designation, there is a total lapse of the power. The certificate in this case was neither pay- able to the deceased, nor to anyone, except as named by him. He had named his legal heirs as beneficiaries. It is not alleged in the petition that no persons were in existence who could have become Richardson's legal heirs at the time he made his designation and the certificate was issued. The allegation is that at the time of his death no such heirs could be found. It is not claimed that he named any other beneficiary, and why he did not do so, it is unneces- sary to inquire. He may have intended that his associate members should not be called upon to contribute the sum required to fulfill the contract. As we have before stated, it could not go to the adminstrator, nor be subject to the pay- ment of the debts of the member. Where there is a failure to designate a beneficiary, or there is a void designation, or the death of the beneficiary occurs before that of the insured, and no new beneficiary is named, the association 1 Supreme Council Cath., etc. v. Densford (Ky.), 56 S. W. E. 172; 49 L. R. A. 776; Gault c. Gault (Ky.), 80 S. W. E. 894. 2 93 N. W. E. 397 (Neb.), 61 L. E. A. 603. See also Gould v. Union Traction, etc., Assn. (E. I.), 58 Atl. E. 624. 556 DESIGNATION OF BENEFICIARY. § 244 is not liable ; and, if no dispositioa of the fund is provided for in the contract with the association, it reverts to the society." § 244. Liimitations upon Power : Restricting the Desig- nation to Certain Classes. — In nearly all benefit societies limitations are placed by the charter and by-laws, or by statute, upon the power of the members to designate the beneficiaries of the money to be paid under the contract. Where the power is special it must be exercised within the restrictions imposed by the terms of its creation, which, in the case of the associations under consideration, are con- tained in the charter and by-laws as modified by statute. A case was decided in Kentucky where the society was organ- ized under special charter, which provided among other things for the creation of a fund by assessments upon the members ; this fund was declared to be " for the benefit of the widows and children of the deceased members, and the balance to defray the expenses of the company," and further: " The fund created for the benefit of the widow and children of the deceased member, shall be paid to them by said company. * * * Or if he should leave no widow or child, then to be appropriated according to his will ; or if he makes no will, and leaves no widow and child, it shall vest and remain in the company." The certificate issued to Miller, the member, obligated the company to pay to " his heirs or as he may direct in his will." Miller died intestate leaving no child but a widow, whose com- mittee in lunacy sued for the money. The fund was also claimed by Miller's administrator. The Court of Appeals, in passing on the case,i says: "We need not stop to 1 Kentucky Masonic Mut. Ins. Co. v. Miller's Admr., 13 Busli, 489. In accord with this case It was said in the case of Ferbrache v. Grand Lodge, etc., 81 Mo. App. at page 270; "Incorporated associations or societies of the class to which the defendant order belongs are creations 557 § 244 DESIGNATION OF BENEFICIARY. inquire what may be the extent of the power of the com- pany to make contracts, nor whether a covenant with the ancestor to pay to the heir after his death will pass to the personal representative of the ancestor, or to the heir for whose benefit the covenant was made, because we are of the opinion that whatever might be the answers to those inquiries, they could have no influence on the decision of this case. The charter prescribes who may become mem- bers of the society, and their obligations, and who shall be the beneficiaries of the membership after the death of the member, and it is not in the power of the company or of the member, or of both, to alter the rights of those who by the charter are declared to be the beneficiaries, except in the mode and to the extent therein indicated. The company and Miller could decide the question whether he should be- come a member, and having done so, from that moment the rights of the beneficiaries attached, subject to be defeated by his failure to comply with the terms of his membership, but subject to no other contingency whatever. If there- fore the stipulation to pay to Miller's heirs should be con- strued to have been intended to secure the fund, payable on account of his membership, to his administrator, or his creditors, such stipulation could not prevail over the unequi- vocal provisions of the charter, that it shall be paid to his widow and children." In Massachusetts, Missouri, Ohio, and other States, statutes have been enacted limiting the beneficiaries of members of benefit associations to certain classes of persons. It is not necessary at this place to of the statute, incapable of exercising any power which is not therein either expressed or clearly implied. And so it has been held that if they attempt to provide for the relief of persons not named in the statutes or shall recognize as beneficiaries such as are not named in their organic law, their acts are ultralvires. Keener v. Grand Lodge, 38 Mo. App. 54:3; Wagner v. Benefit Society, 70 Mo. App. 161; Masonic Benefit Assn. v. Bunch, 109 Mo. 560." 558 DESIGNATION OF BENEFICIARY. § 244 refer more particularly to the statutes, but they generally provide that benevolent and charitable associations may become incorporated and in their laws provide for bene- fits, to be paid upon the death of a member to his family, widow, relatives, orphans or other dependents. In Ameri- can Legion of Honor v. Perry, ^ the Supreme Court of Massachusetts said: "The statute under which the plain- tiff corporation is organized gives it authority to provide for the widow, orphans or other dependents upon de- ceased members, and provides that such fund shall not be liable to attachment. The class of persons to be bene- fited is designated and the corporation has no authority to create a fund for other persons than the class named. The corporation has power to raise a fund payable to one of the classes named in the statute, to set it apart to await the death of the member, and then to pay it over to the person or persons of the class named in the statute, selected and appointed by the member during his life, and, if no one is so selected, it is still payable to one of the classes named." In a later case in the same court ^ the deceased was a member of a benefit association organized under the law of Massachusetts just referred to, authorizing such organizations to provide for a benefit for the family, widow, relations, orphans or other dependents of deceased members. He had designated as his beneficiary " my estate." The court says: "The designation by Dewey that his money should go to his estate, was invalid. If it were a part of his estate, it would be assets for the pay- ment of debts and expenses of administration, and would be subject to an unrestricted disposition by will. But this is inconsistent with the statutes, and so beyond the powers of the parties." In this case the money had been paid to 1 140 MaS8. 580; 5 N. Bast. Rep. 634. 2 Daniels v. Pratt„143 Mass. 221; 10 N. E. Eep. 166. 559 § 2i4 DESIGNATION OF BENEFICIAEY. the executor, but the court held that he held it in trust to pay it over to the person entitled thereto. The executor may be the proper party to sue to recover a benefit in case of the death in the lifetime of the member of the benefi- ciary, but in such case the fund is not assets as held in the preceding case, but is a trust fund for the persons for whose benefit the society was formed.^ In Ohio, under a somewhat similar statute, the Supreme Court, in pass- ing upon a case, where a member of a benefit society attempted to dispose of the benefit by will and to a creditor, not related to him, held: ^ " That the plaintiff in error had no power to issue certificates of membership payable upon the death of an insured member to a person not an heir, or of the family of a deceased member, and that such a certificate is void, is too well established to admit of controversy. If the assured may designate the benefi- ciary of the insurance by testamentary appointment (a question the determination of which is not necessary in the case before us), it is very clear that such beneficiary must be either a member of his family, or one, who, upon his death, may be his heir." In a case in Michigan,^ the Supreme Court of that State said : "It appears that under a Kentucky charter, and under the constitution as it stood prior to 1884, the benefits could be made payable to his family, or as the member should direct. This, apparently, would have made Nairn a competent beneficiary, if we can regard these constitutions as controlling the contract. But this benefit is payable by a corporation of the State of Missouri, and the laws of that State very clearly and ex- pressly forbid corporations of this sort from paying benefits 1 Bishop V. Grand Lodge Empire Order M. A., 112 N. Y. 627; 20 N. E. E. 562; and see post, § 452. ^ National Mutual Aid Association o. Gonser, 13 Ohio St. 1 ; 1 N. East. Rep. 11. 3 Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Rep. 826. 560 DESIGNATION OF BENEFICIARY. § 244 to any but the member's family or dependents. This pro- hibition is further strengthened by some further provisions making it unlawful to issue policies of life insurance, or for the benefit of the members themselves in any shape. The restrictions imposed by the laws of Missouri cannot be abrogated or changed by the corporation, and it cannot sub- ject itself to any outside control, which will override the laws of its organization as a corporate body. The intent of the prohibition is clearly to shut out all persons who are not actual relatives, or standing in the place of relatives in some permanent way, or in some actual dependence on the member." But the provisions of a State statute limiting the beneficiaries to certain classes, does not apply to foreign associations unless expressly so stated.^ The numerous cases which have arisen thoughout the country, as a rule, support the principles as above stated.^ Under the statute 1 Hoffmeyerw. Muench, 59 Mo. App. 20; Supreme Commaadery, etc., V. Merrick, 165 Mass. 421; 43 N. E. R. 127. 2 American Legion of Honor v. Perry, 140 Mass. 580; 5 N. East. Kep. 634; Elsey v. Odd -fellows', etc., 142 Mass. 224; 7 N. East. Eep, 844; Daniels v. Pratt, 143 Mass. 216; 10 N. East. Rep. 166; National Mut. Aid, etc., 13. Gonser, 43 Ohio St. 1; 1 N. East. Eep. 11; State v. People's Mut. Ben. Assn., 42 Ohio St. 579; State v. Moore, 38 Oliio St. 7; State V. Standard Life Assn., 38 Ohio St. 281; Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Rep. 826; Ky. Masonic Mut. Life Ins. Co. v. Miller's Admr., 13 Bush, 489; Van Bibber's Admr. v. Van Bibber, 82 Ky. 347; Duvall V. Goodson, 79 Ky. 224; Masonic Mut. Relief Assn. v. McAuley, 2 Macbey, 70; Worley i;. N. W. Masonic Aid Assn., 10 Fed. Eep. 227; Ex- pressmen's, etc., V. Lewis, 9 Mo. App. 412; Baliou v. Gile, etc., 50 Wis. 614; Presb. Ass. Fund v. Allen, 106 Ind. 593; 7 N. East. 317; Dietrich et al. V. Madison Rel. Assn., 45 Wis. 79; Highland v. Highland, 109 111. 366; Addison ». N. E. Com. Travelers' Assn., 144 Mass. 591; 12 N. East. Rep. 407; Skillingso. Mass. Ben. Assn , 146 Mass. 217; 15 N. East. Rep. 566 ; Rice «. N. Eog. M. A. Soc, 146 Mass. 248; 15 N. East. Rep. 624; Con- dell u. Woodward, 16 Ky. L. 742; 29 S. W. R. 614; Gibson «. Imperial Council, etc., 168 Mass. 391; 47 N. E. E. 101; Groth «. Central Verein, etc., 95 Wis. 140; 70 N. W. R. 80; Grand Lodge Sons, etc., w. Iselt (Tex. Civ. A.), 37 S. W. R. 377; Fodell v. Miller, 193 Pa. St. 570; 44 Atl. 919. 36 561 § 244 DESIGNATION OF BENEFICIAEY. of Massachusetts definiog a contract of insurance upon the assessment plan to be one " whereby a benefit is to accrue to a party or parties named therein upon the death or physical disability of a person, which benefit is in any degree or manner conditioned upon persons holding similar contracts ' ' an applicant may make the benefit payable to himself, in which case it must be administered as part of his estate. 1 Where by statute the persons for w"hose bene- fit are declared to be the " widows, orphans, heirs or devisees" of deceased members, an executor is not of the class named and cannot take.^ One not included in the classes of beneficiaries mentioned in the statute cannot indirectly become a beneficiary by agreement between the member and one lawfully entitled to become a beneficiary whereby the latter agreed to act as trustee for such ex- cluded person.^ Nor can the society by a by-law enlarge or diminish the classes of beneficiaries mentioned in the statute.* It has been held that a subordinate lodge of an order can be a beneficiary, though unincorporated, no statutory requirement being violated.^ But an old people's home is not a complete beneficiary.' A statute limiting the classes of beneficiaries does not apply to certificates issued before its enactment, but such statute will be given a prospective operation only.'' > Harding v. Littledale, 150 Mass. 100; 22 N. E. R. 703. See also Eastman v. Provident M. R. Assn., 65 N. H. 176; 18 Atl. R. 745. 2 Northwestern Mass. Aid. Soc. «. Jones, 164 Pa. St. 99; 26 Atl. R. 253. s Gillam v. Dale (Kan.), 76 Pac. R. 861. * Wallace v. Maden, 168 111. 356; 48 N. E. R. 181; affg. 67 111. App. 524; Supreme Council L. of H. v. Nledelet, 81 Mo. App. 698; Di Messiah V. Gem, 30 N. T. Supp. 824; 10 Misc. 30. « Finch V. Grand Grove, 60 Minn. 308; 62 N. W. E. 384. ^ Norwegian, etc., Soc. v. Willson, 176 111. 94; 52 N. E. E. 41. ' Moore v. Chicago Guaranty Fund L. Soc, 178 111. 202; 62 N. E. R. 882; affg. 76 111. App. 433; Grimme v. Grimme, 198 111. 265; 64 N. E. R. 1088; Roberts u. Grand Lodge A. O. U. W., 173 N. Y. 580; 65 N. B. K. 562 DESIGNATION OF BENEFICIARY. § 244a § 244(3!. The same Subject: Examples of Construc- tion — Creditors. — It sufficiently appears from the cases cited in the preceding section that creditors, not being of the classes for the benefit of whom fraternal beneficiary organizations were intended cannot be named as bene- ficiaries, nor acquire any rights in the benefit to be paid.^ Cases have arisen where a member of a society has attempted to sell his benefit certificate or make it payable to some creditor. As this question is likely to arise still more frequently, we give, as bearing on the subject in its different phases, extracts from the opinions in several recent cases. In that of Boasberg v. Cronin,^ the Superior Court of Buffalo passed upon the question whether a certificate could be made payable to a trustee for the benefit of the creditors of the member. Answering this in the negative, the court said: "The Empire Order of Mutual Aid is a corporation created under and by virtue of chapter 189, laws 1879. Section 2 of said act provides that the objects of incorporation are to improve the moral, mental and social condition of the members, to prevent strikes, and to aid, assist and support members or their families in case of want, sickness or death. Section 3 authorizes the creation, management and disbursement of a beneficiary fund. Section 4 pro- vides : ' Such beneficiary fund as may be ordained suitable by said grand lodge of the State of New York may be provided and set apart to be paid over to the families, heirs or legal representatives of deceased or disabled 1122; affg. 60 App. Div. 259; 70 N. Y. Supp. 57; Voight ». Kersten, 164 111. 314; 45 N. E. E. 543; Baldwia v. Bagley, 185 111. 180; 56 N. E. R. 1065; Love v. Clune, 24 Colo. 237; 50Pac. R. 34. See post, § 253. 1 See also Clarke v. Schwartzenberg, 164 Mass. 347; 41 N. E. R. 655; National Exchange Bank v. Bright, 18 Ky. L. Bep. 588; 36 S. W. B. 10; and post, § 312. i 2 9 N. Y. Supp. 664. 563 § 244a DESIGNATION OF BENEFICIARY. member or to such person or persons as such deceased member may, while living, have directed. * * * ^nd such beneficiary fund, so provided and paid, shall be ex- empt from execution and shall not be liable to be seized, taken or appropriated by any legal or equitable process, to pay any debt or liability of said deceased member.' Tlie proof upon the trial tended to establish, and the court found, that the defendant was duly designated by deceased, in his lifetime, as beneficiary in the sum of $1,000; that said defendant, in consideration of said sum, agreed to pay the creditors of deceased the amounts due them, pay his funeral expenses and erect a monument over his grave ; that plaintiff was a creditor and became entitled to judg- ment for the amount of his approved claim. The finding of the court in language is ' that defendant in considera- tion of the sum of $1,000 agreed to pay creditors,' etc. If such finding be construed literally, it would if warranted by the evidence, support thej judgment rendered, but it is to be construed in connection with the other findings and the proof, and when so construed it appears that its true interpretation is that the thousand dollars received by defendant is such sum as he received by virtue of his des- ■ ignation as beneficiary in the certificate issued by the cor- poration, and alone furnishes the consideration to support the judgment; otherwise there would be a failure of evidence to support the finding. It is the duty of the court to construe and harmonize findings, so as to give them effect, when possible. ^ It is clear from the pro- visions of the act of incorporation, that the fund authorized to be created has for its fundamental object, so far as the same relates to the payment of the fund after death, the providing a sum of money for the benefit of the families, heirs, or legal representatives of deceased per- 1 Green v. Kowortli, 113 N. Y. 467, 468; 21 N. E. K. 166. 564 DESIGNATION OF BENEFICIARY. § 244a sons, solely applicable to such purpose, freed from any lia- bility of seizure for debt. The contract of insurance is executory in its character, and, under the provisions of this act, the agreement of the association was to pay to certain persons named inthe statute, or to such person or persons as the insured should designate in his lifetime. There is nothing in the act or in the by-laws of the corporation which enlarges in this regard the rights of the parties with respect to the fund. There is no property vested in the insured, or property right in any sense, and it does not form any part of his estate.^ As it forms no part of his estate it does not pass to his executor or administrator, and a will is ineffectual for the purpose of making it subject to the payment of debts. ^ In the event of failure of persons to take under the statute as therein named, and in the ab- sence of a designation by the insured, there is no person to take, and the corporation is under no obligation to pay.'^ The right, therefore, f the insured, in and to the fund created, is not a property right, but a right to provide a fund to be disposed of by the statute, or by the naked power of designation; beyond this he cannot go in the control of the fund or its disposition.* The beneficiary named takes no vested right in the certificate of insurance until the contingent event of death happens.^ If, there- fore, the fund provided is not the property of the assured, and he has no property rights therein, he cannot deal with it as property and impress it with a trust for the payment of debts, as the impress of a trust upon the disposition of 1 Bishop V. Grand Lodge, etc., 112 N. Y. 627; 20 N. E. K. 562; Greeno V. Greeno, 23 Hun, 478; Hellenberg v. District No. 1, etc., 94 N. Y. 580. 2 Brown v. Association, 83 Hun, 263. 3 Hellenberg v. District No. 1, etc., supra. * Sabin v. Grand Lodge, etc., 6 N. Y. St. Rep. 151; Society v. Clen- dlnen, 44 Md. 429. 6 Sabin v. Grand Lodge, etc., 8 N. Y. Supp. 185; Luhrs v. Lodge, etc.i 7 N. Y. Supp. 487. 565 § 244a DESIGNATION OF BENEFICIARY. property necessarily presupposes a property right and in- terest upon which the trust may fasten ; where that fails the whole is nugatory. Creditors dealing with the deceased can in no view be said to have so dealt upon the strength of the interest of the assured, as the act in terms gives notice of the exemption from d^bt, and the limitation upon the power of disposition is equally clear, so no equities can exist in that regard. It is said that, but for the agreement upon the part of defendant to distribute the fund, he would not have been named as beneficiary and consequently that, having so received it, equity will lay hold upon the fund, impress it with the trust, and distribute it accord- ingly. If we assume this to be true, it does not aid plaintiff, for the reason that the trust provided for was in violation of law, and beyond the power of deceased to ereate ; and if defendant by fraud procured himself to be designated and the designation should be held void for that reason, equity might lay hold so far as to fasten upon him a trust ex maleficio, and compel distribution of the fund among those empowered to take; but this would only include the other persons named in the statute, who would then be by law empowered to take, and would not embrace plaintiff or-the other creditors."^ A creditor cannot take by being designated as dependent friend.^ Nor by assign- ment.* Where, by the by-laws of a benefit association-, a foreigner could not be designated as beneficiary it was held * that he could take as beneficiary under a provision that if the designation first made should fail for any cause payment should be made to specified parties. The fund is not liable for funeral expenses of a member.^ It has been 1 In re O'Hara's "Will, 95 N. Y. 403. 2 Fodell V. Royal Arcanum, 44 W. N. C. 498. 3 Rose V. Wilkins, 78 Miss. 401; 29 Sou. R. 397. 4 Supreme Council R. A. v. Kacer, 96 Mo. App. 93; 69 S. W. R. 671. " Voelker v. Brotherhood, etc. (Mo. App.), 77 S. W. R. 999. 566 DESIGNATION OF BENEFICIARY. § 244a held that the association is not obliged to formally accept the provisions of an enlarging statute which applies to certificates issued before the act was enacted. ^ And a reinstatement of a suspended member after the enact- ment of a statute restricting the beneficiaries to certain classes does not bring the case of a member so reinstated within the restrictions of such a s^tute.^ It was held ' where a certificate recognized the right of the superior body to change the laws of the order, by which changes the member would be bound, and afterwards the laws were so amended that payment of the benefit fund was limited to the members of the family of a member and persons dependent upon him, and afterwards such member being notified of the changes in the laws made affidavit that the person designated was a dependent, who was not in fact a dependent, such designation became illegal, notwithstanding the fact that when the certificate was issued to such person the laws of the society permitted the certificate to be made payable to any one. We have already considered the ques- tion as to the effect of an illegal designation of beneficiary, and the cases there referred to may be considered as also bearing on this subject.* It has been held,^ that where a society in an interpleader proceeding pays the money into court the limitations in its charter cannot aid the widow's claim. But the better view is undoubtedly that in cases of this kind a court will be governed by the laws of the association. The Missouri Court of Appeals, in passing 1 Marsh v. Supreme Council A. L. of H., 149 Mass. 512; 21 N. E. R. 1070. 2 Lindsey v. Western M. A. Soc, 84 Iowa, 734; 50 N. W. B. 29. 3 Sargent v. Supreme Lodge K. of H., 158 Mass. 557; 33 N. B. 650. See also Grand Lodge A. O. U. W. v. McKlnstry, 67 Mo. App. 82. 4 Ante, § 248o. 5 Johnson v. Sup. Lodge.K. of H., 53 Ark. 255; 13 S. W. 794; Knights of Honor v. Watson, 64 N. H. 517; 15 Atl. 125. 567 § 244a DESIGNATION OF BENEFICIARY. on this question, says:^ " It is insisted that] the associa- tion is the only party which can take advantage of these objections, and as it is making no objection to the payment the judgment must be in favor of the inter- pleader. But this would be permitting the association to do indirectly what the law has forbidden it to do di- rectly. The corporation, as an association, has its exist- ence from the law, and it has no power to raise funds, or to pay them over to any other than those contemplated by the law.^ If we permit the mere acquiescence of the corporation to cause an illegal diversion of the fund, we enable it to thwart the object and evade the command of the law, its creator. Interpleader is in a court of equity asking that she be paid a fund which has been raised for others and which does not belong to her. The association does not confess it to be hers by right, but by paying the money into court and asking the court to adjudicate the matter it, in effect, says, the money may not belong to her. The fact of its fear that she is not the rightful party, is the cause of the association taking the course it has. In speak- ing of a matter of this nature the Supreme Court of Wiscon- sin says : ' The fact that the association has paid the money into court instead of paying it directly to the widow, to avoid litigation with other claimants, can make no differ- ence as to the rights of the persons claiming the same. If the appellant could not have revovered this money in a direct action against the association, he cannot recover it in this action. The association not having, for prudential reasons, paid the money to the party entitled thereto, the court must see that it is paid out as directed and "required by the rules and regulations of the society * * * The money having been paid into court, the court must now 1 Grand Lodge, etc., v. Keener, 38 Mo. App. 643. 2 Bacon on Ben. Soc, §§ 244, 252, and authorities, supra. 568 DESIGNATION OP BENEFICIARY. § 245 determine who is the proper person to receive it. * * * 'i We have been cited to two cases as holding views contrary to the above. One of Story v. The Williamsburg M. M. B. A.,^ is not in conflict. The case concedes that the by- law of the association may have contemplated only the lawful widow as the beneficiary, but that, such was not a limitation on the power of the company recognizing as a beneficiary one whom the deceased had designated as holding to him the relation of wife, the plaintiff, in that case, having lived with the deceased for sixteen years, believing herself to be his lawful wife, and having children by him, dependent upon them for support. The opinion holds such a case to be one which the law aimed to protect. The other case cited is from New Hampshire,^ and is contrary to the views we have expressed. But the reasons we have advanced appear not to have been suggested in that case, and we are so fully persuaded that the decision is unsound, that we are not inclined to follow it." § 245. The Same Subject: A More Liberal View. — A seemingly contradictory case has been decided by the Supreme Court in Pennsylvania.* The action was brought by a creditor of the deceased member to whom the certificate had been made payable. The defense was that the society had no power to issue certificates payable to any other than the families of its members, the language of the charter being: "The purposes of this corporation shall be the maintenance of a society for the purpose of benefiting and aiding the widows and orphans of deceased members." 1 Ballou V. Gile, 50 Wis. 614. 2 95N. Y. 474. 3 Knights of Honor v. Watson, 64 N. H. 517; 16 Atl. Rep. 125. * Maneeley v. Knights of Birmingham, 115 Pa. St. 305; 9 Atl. Rep. 41. Also WoUert v. Grand Lodge K. of B , 39 W. N. C. 264. See, however. Northwestern Masonic Aid Soc. v. Jones, 154 Pa. St. 99; 26 Atl. R. 253. 569 § 245 DESIGNATION OF BENEFICIARY. The lower court sustained the defense and held that the charter prohibited such a contract. In reversing this decision the language of the court was as follows: "We think this is too narrow and strained a view to take of this section of the charter. While it is true that the general purpose of the corporation is there stated to be, the main- tenance of a society for benefiting and aiding widows and orphans of deceased members, it must be observed that this is only the statement of a general purpose. It is only the recital of an object sought to be accomplished, and which doubtless is accomplished in the great majority of cases, even though in exceptional cases the benefits may, by special contract, be paid to other persons than the widow or orphans. There is no prohibitory or restrictive lan- guage excluding from the powers of the corporation the right to contract specially with the member for the pay- ment of benefits to other persons than his widow or orphans. Nor is such a contract to be held void by reason of any necessary implication from the language of the charter for the widow and orphans may be much benefited, and ia many ways, by a contract designating another beneficiary; as, for instance, if the member ia his lifetime, desiring to establish a home for his wife and children, which they might hold after his death, borrowed money for that put- pose and so used it and to secure the loan designated the lender as the beneficiary of his membership. Certainly his widow and orphans would be most materially benefited by such an arrangement or, if having a home, he met with disaster, and was about to lose it by a judicial sale, and should save it by a similar provision, his widow and orphans vould be thereby benefited. Or, if having property and also debts, but not to the point of insolvency, he could borrow money by means of a membership with such an association, and he should become a member for that very purpose, the creditor possibly also paying the dues, and 570 DESIGNATION OF BENEFICIARY. § 245 he could to tHat extent dimiaish his iadebtedaess duriag his life and thus leave that much more of his property to his widow and orphans, undoubtedly they would be thereby benefited. Or, he might borrow the money, and give it directly to his wife or children during his life, pledging his membership to the lender as above, and then also they would receive the full advantage of the transaction without waiting until his death. Many more illustrations of a sim- ilar character might easily be suggested, but is unnecessary. They all prove the same proposition, to wit: That it is entirely possible to benefit the widow or orphan by means of such a membership, although neither of them is the desig- nated beneficiary." It must be noted, however, as to this case, that by the language of the charter, the object of the corporation was noLto pay to the widows and orphans, etc., butyb?' the purpose of benefiting and aiding the 'wiAo'^s and orphans, etc. Other cases tend to support this liberal view, though none go so far.i In a Missouri case^ a member of an order incorporated in Kentucky and subsequently in Missouri made his certificate payable to the trustees of his subordinate lodge for the purpose of erecting a tomb- stone and improving his burial lot. In upholding the validity of this designation the court said: " The words in the charter, ' or as he or she may have directed ' gave to Levin absolute power to make any disposition of the fund due under the certificate; provided such disposition was not repugnant to the declared purposes of the corporation.' One of the objects of the defendant 1 Folmer's Appeal, 87 Pa. St. 135; Lamont v. Grand Lodge la. Leg. Honor, 31 Fed. Eep. 177; Sup. Lodge K. of H. v. Martin et al. (Pa.), 12 Ins. L. J. 628. 2 Hysingeru. Supreme Lodge K. & L. of H., 42 M. A. 628. 3 Gentry o. Supreme Lodge Knights of Honor, 23 Fed. Rep. 718; Dw/aWv. Goodson, 79 Ky. 224; Lamont v. Grand Lodge, 31 Fed. Eep. 177; Highland!;. Highland, 109 111. 366. 571 § 245 DESIGNATION OF BENEFICIARY. • corporation is, ' to promote benevolence and charity,' and to this end a relief fund 5vas provided for. We cannot agree with the defendant that the object of Levin, in providing the means to defray his own burial expenses and to improve the lot where he was to be buried, was not a benevolent or charitable one. It was a very natural impulse for him, if he was without property, or kindred, to provide against the contingency of being buried at the expense of the public in an unmarked grave. This might very well be regarded as an act of charity. To say the least, the matter is debatable, and as the defendant accepted Levin's money, and permitted him to live and die under the belief that his body would be decently taken care of after his death, we are of the opinion that the corporation is in no position to split hairs in the discussion of the question. We, therefore, hold tha^the contract was authorized by the defendant's Kentucky charter. But, if the contract with Levin is to be governed by the Mis- souri statute, then it must certainly be held to be ultra vires. When the law or charter of such an institution confines the beneficiaries to a particular class the corpora- tion can only accumulate a fund for the benefit of such persons who may fall within the class and are named as beneficiaries. Under our statute the choice of beneficiaries, when the corporation is organized in this State, is confined to some member of the family of the assured, or to some person or persons dependent upon him. It is quite clear, therefore, that the direction made by Levin in his certifi- cate, would, under the Missouri statute, subject the con- tract to the charge of being ultra vires." And in Minne- sota in a somewhat similar case it was held^ that where the benefit was payable to an unincorporated voluntary asso- ' Bacon v. Brotherliood B. R. Brakemen, 46 Min. 303; 48 N. W. R. 1127. 572 DESIGNATION OF BENEFICIARY. § 246 elation the father of the member could not question the legal existence of the lodge or its capacity to take. The Supreme Court of Illinois has held^ that, if a member under the charter could devise the benefits of his policy to a stranger, he might in the first instance take out the policy payable to a stranger, and that, having' received the premiums and the contract being executed by the death of the member, the company was estopped to invoke the doc- trine of ultra vires to defeat an action brought by the beneficiary.^ The question is one of construction of par- ticular words in the statutes and in the charters of these societies and necessarily no more general rule can be laid down than that if, by statute or charter, the beneficiaries of members are confined to certain classes, the designation of any one not of such class is void. The cases cited in the preceding and subsequent sections of this chapter suffi- ciently illustrate this doctrine. § 246. Unless Contract or Statute Forbid, Choice of Beneficiary is Unlimited. — In all cases the member may have as broad a range of choice in selecting his beneficiary as the organic law of his society gives him. If there is nothing in the charter or by-laws of the organization, or inthe statutes of the State, restricting the appointment, the member may designate whomsoever he pleases and no one can question the right. ^ 1 Bloomington Mut. L. Ben. Assn. v. Blue, 120 111. 121; 11 N. E. Rep. 331. 2 See also Lamont ». Hotel Men's B. Assn., 30 Fed. Bep. 817; Lamont u. Grand Lodge la. Leg. Honor, 31 Fed. Rep. 177. 3 Basye v. Adams, 81 Ky. 368; Gentry v. Supreme Lodge, 23 Fed. Rep. 718; Massey «. Mut. Relief Soc, 102 N. Y. 523; 7 N. East. Rep. 619; MitcheU v. Grand Lodge, 70 la. 360; 30 N. W. Rep. 865; Freeman v. Nat. Benefit Soc, 42 Hun, 252; Swift v. Ry. Conductor's Assn., 96 111. 309; Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Rep. 826; Supreme Lodge, etc., o. Martin, 12 Ins. L. J. 628; 13 W. N. C. 160; Martin «. 573 § 247 DESIGNATION OF BENEFICIARY. § 247. liiberal Construction of Charter and By-Laws : licx Loci. — In determining whether the designated bene- ficiary conies within the class specified or not, the charter and by-laws of the society will be construed liberally so as to carry out the benevolent purposes of its organization, and yet not so as to violate the statute law of the State or contravene public policy.* In deciding the rights of the member in respect to the designation of beneficiary, the law of the place of the contract under which the power is given, will govern, for a contract, good at the place where made, is good everywhere, unless the statutes or public policy of the State where the contract is sought to be en- forced forbid ; ^ and the law of the situs of the subject of the power controls the execution of such power. ^ A con- tract of a corporation will often be enforced by comity when made in conformity with its charter although it would, if made by a domestic corporation, have been against the statutes of the State where the action is brought." * Stubbings, 126 111. 387; 18 N. E. R. 657; Brown ». BrowQ, 27 N. Y. Supp 129; Bckert v. Mutual Ben. Soc, 2 N. Y. St. Kep. 612; Walter v. Odd- fellows, etc., Soc, 42 Minn. 204; 44 N. W. Rep. 57; Union Fraternal League v. Walton, 109 Ga. 1 ; 34 S. E. R. 317; 46 L. R. A. 424; Independ. ent Order, etc.,w. Allen, 76 Miss. 326; 24 Sou. R. 702;;Delaney u. Delaney 175 111. 187; 51 N. E. R. 961; afe?. 70 111. App. 130; Berkeley v. Harper, 3 App. D. C. 308; Derrington v. Conrad, 3 Kan. App. 725; 45 Pac. R. 458; Supreme Council, etc., v. Adams, 107 Fed. R. 335; Nelson v. Gibson, 92 111. App. 595; Strike v. Wisconsin, etc., Co., 95 Wis. 683; 70 N. W. R. 819. 1 Supreme Lodge E. of P. v. Schmidt, 98 Ind. 374; Ballou v. Gile, 50 Wis. 614; Am. Legion of Honor v. Perry, 140 Mass. 580; Maneeley ». Knights of Birmingham, 115 Fa. St. 305; 9 Atl. Bep. 41; Elsey v. Odd- Fellows, etc., 142 Mass. 224. 2 Am. Legion of Honor v. Perry, 140 Mass. 580; Knights of Honor v. Nairn, 60 Mich. 44; Daniels v. Pratt, 143 Mass. 216; Bishop on Contr., §§ 1383-1389 inc. 3 Bingham's Appeal, 64 Pa. St. 345. ^ Hysinger v. Supreme Lodge K. & L. of H., 42 M. A. 627; Martinez V. Supreme Lodge, etc., 81 Mo. App. 590. 574 DESIGNATION OF BENEFICIARY. § 248 § 248. Insurable Interest. — A contract of life insurance is peculiar in that it is not every person who can become a party to it. The law forbids, from considerations of public policy, any person to insure the life of another unless he has some interest in the life of such person, and this fact makes it necessary to here discuss what is called the law of insur- able interest. The difficulty courts have experienced is not so much in defining the rule, but in its application. It is in respect to the beneficiary, or person for whose benefit the insurance is effected, that the greatest differences are found between the form of insurance furnished by benefit societies and that given by regular life insurance corpora- tions. The latter are free to contract with whom they choose and in the manner they prefer, subject only to the restraints imposed by public policy; the bene- ficiaries of the societies, however, are generally limited to specified classes, either relatives or dependents, and out of these they cannot go. The subject of insurable in- terest is a most important one in the law of life insurance, for it has often been considered by the courts in the re- ported cases and has been discussed with great earnestness and vigorous reasoning. Though the contract of life in- surance is not strictly one of indemnity, the policy of the law does not permit any one to insure the life of another in which he has not at the time what is called an insurable interest, because such contract would be in the nature of a wager or speculation in human life. The Supreme Court of the United States, in passing upon the point whether a divorced woman could recover upon a policy of insurance on the life of a former husband, ^ reviews the law of insur- 1 Connecticut Mut. Life insurance Company v, Schaefer, 94 U. S. 457. To the same effect are ; American, etc., Co. v. Barr, 16 C. C. A. 51 ; 32 U. S. App. Hi; 68 Fed. E. 873; Prudential Ins. Co. v. Leyden, 20 Ky. L Eep. 881; 47 S. W. K. 767; Prudential Ins. Co. ■». Hunn, 21 Ind. App. 525; 52 N. E. R. 772; Albert v. Mutual L. Ins. Co., 122 N. C 92; 30 S. 575 § 248 DESIGNATION OF BENEFICIARY. able interest as follows : " It is generally agreed that mere wager policies, that is, policies in which the assured party has no interest whatever in the matter insured, but only an interest in its loss or destruction, are void as against public policy. * * * But precisely what interest is necessary in order to take a policy out of the category of mere wager has been the subject of much discussion. In marine and fire insurance the difficulty is not so great because there insurance is construed as strictly an indemnity. But in life insurance the loss can seldom be measured by pecuniary values. Still an interest of some sort in the insured life must exist. A man cannot take out insurance on the life of a total stranger, nor on that of one who is not so connected with him as to make the continuance of the life a matter of some real in- terest to him. It is well settled that a man has an insurable interest in his own life and in that of his wife and children ; a woman in the life of her husband; and the creditor in the life of his debtor. Indeed it may be said generally that any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life. And there is no doubt that a man may effect an insurance on his own life for the benefit of a relative or friend ; or two or more persons on their joint lives for the benefit of the survivor or survivors. The old tontin^es were based substantially on this principle and their validity has never been called in question. The essential thing is that the policy shall be obtained in good faith, and not for the purpose of speculating upon the hazard of a life in which the insured has no interest. On this point the remarks of Chief Justice Shaw in a case which arose in Connecticut (in which State the present policy originated), E. B. 327; Cisna ». Sheibley, 88 111. App. 385; Crosswell v. Conn. Ind. Assn., 51 S. C. 103; 28 S. E. R. 200; Foster v. Preferred Ace. I. Co., 126 Fed. R. 636; Heinlein c. Imperial L. Ins. Co., 101 Mich. 250; 69 N. W. R. 615 ; 26 L. R. A. 627 and note. 576 DESIGNATION OF BENEFICIARY. § 248 seems to us characterized by great good sense. He says:^ ' In discussing the question in this commonwealth (Massachu- setts) we are to consider it solely as a question of common law, unaffected by the statute of 14 Geo. III. passed about the time of the commencement of the revolution and never adopted in this State. All, therefore, which it seems neces- sary to show, in order to take the case out of the objection of being a wager policy, is that the insured has some interest in the cestui que vie; that his temporal affairs, his just hopes and well-grounded expectations of support, of patronage and advantage in life, will be impaired; so that the real pui'pose is not a wager, but to secure such advantages, sup- posed to depend on the life of another; such, we suppose, would be sufficient to prevent it from being regarded as a mere wager. Whatever may be the nature of such in- terest, and whatever the amount insured, it can work no injury to the insurers, because the premium is proportioned to the amount; and whether the insurance be a large or small amount the premium is computed to be a precise equiv- alent for the risk taken. We cannot doubt,' he continues, ' that a parent has an interest in the life of a child and vice versa, a child in the life of a parent; not merely on the ground of a provision of law that parents and grandparents are bound to support their lineal kindred when they may stand in need of relief, but upon considerations of strong morals, and the force of natural affection between near kin- dred, operating often more efficaciously than those of posi- tive law.' We concur in these views. * * * We do not hesitate to say however that a policy taken out in good faith and valid at its inception, is not avoided by the cessation of the insurable interest, unless such be the necessary effect of the provisions of the policy itself.^ Of course, a colorable or 1 Loomis V. Insurance Co., 6 Gray, 399. 2 See Tyler v. Odd-Fellows, etc., 145 Mass. 134; 13 N. Bast. Rep. 360. 37 577 § 248a DESIGNATION OF BENEFICIARY. merely temporary interest would present circumstances from which want of good faith and intent to evade the rule might be inferred. And in cases where the insurance is effected merely by way of indemnity, as where a creditor insures the life of his debtor, for the purpose of securing his debt, the amount of insurable interest is the amount of the debt." The rule prevails in England under judicial construction of the statute of 14 Geo. III.^ that there must be an interest at the time of effecting the insurance, but that it need not continue until death. ^ The same rule applies to accident insurance policies.^ If the policy is payable to the insured himself it is immaterial that one pays the premiums who has no interest in the life insured.* § 248a. The Same Subject: Opposing Views. — The doctrine that there must be an insurable interest to support a policy taken out on the life of another has been vigor- ously attacked by recent writers ® on the grounds- not only that it is absurd to hold that human life is so sacred that public policy forbids one not interested in the continuance of the life of a person to obtain an insurance on it, but also that insurance policies should be like any other chose in action, or merchandise. We apprehend that the law of insurable interest is now too well established to look for any change, and moreover the reasons upon which it rests are too substantial to allow any retrogression. Wagers may 1 Dalby v. Ins. Co., 15 C. B. 365; Overruling Godsall v. Boldero, 9 East, 72; Law v. Lond. I. P. Co., 3 Bq. E. 338; 1 Kay & J. 223; 124 L. J. Ch. 196; 1 Jur. (n. s.) 178. 2 Manhattan L. Ins. Co. ». Hennessy, 39 C. C. A. 625; 99 Fed. E. 64. Post, §§ 253 and 397. * TJ. S. Mat. Ace. Assn. v. Hodgkin, 4 App. D. C. 616; Eobinson v. V. S. Mat. Ace. Assn., 68 Fed. E. 825; Foster v. Preferred, etc., Co., 125 Fed. R. 536. * Prudential Ins. Co. v. Cumraings, 19 Ky. L. Eep. 1770; 44 S. W. E. 431 ; Merchants L. Assn. v. Yoakum, 39 C. C. A. 56; 98 Fed. E. 251. * Cooke on Life Ins., § 58 et seq.; Biddle on Ins., § 183. 578 DESIGNATION OF BENEFICIAEY . § 249 have been, and probably were, valid at common law, but modern law makers have decided thatpublic policy requires wagering; to be discountenanced because of its demorahz- ing tendencies. Insurance on life by persons having no interest in the continuance of such life, might not lead to an increase of murder, as insurance against fire by persons not interested in the property insured would stimulate arson, but it would certainly encourage fraud. Whenever it becomes unnecessary for a policy holder to have any interest in the life of the insured we may expect to hear of numer- ous frauds on the insurers, for it is not difficult to concoct schemes against insurance companies and often make them succeed. 1 § 249. The Same Subject: Wagering Policies. — As said in the previous citation, the right of a man to insure his own life and make the policy payable to whomsoever he chooses, irrespective of the question of insurable interest, has never been doubted,^ but the transaction must not be a cover for a speculation and wager contravening the gen- eral policy of the law.^ The mere fact that the premium 1 Mr. Cooke in a note cites the following authorities to sustain his view: Shannon v. Nugent, Hayes (Irish), 536; Schweiger v. Magee, Cooke & Ale. (Irish), 182; Trenton Mat. L. Ins. Co. u. Johnson, 4 Zab. (N. J.) 576; DeRouge v. Elliott, 23 N. J. Eq. 486; Vivar v. Supreme L. K. of v., 42 N. J. L. 455; 20 Atl. E. 36; Chisholra i;. National Capital L. Ins. Co., 52 Mo. 213; Packard v. Conn. Mut. L. Ins. Co., 9 M. A. 469. As to lack of insurable interest being an incentive to crime; Ritterc. Smith, 70 Md. 261; 16 Atl. R. 187. 2 Connecticut Mut. Life Ins. Co. v. Schaefer, supra; .ffitna Life Ins. Co. V. France, 94 U. S. 561; Goodrich v. Treat, 3 Colo. 408; Lemon v. Phoenix M. L. Ins. Co., 38 Conn. 294; Fairchild v. N. E. M. L. Assn., 51 Vt. 613; North Am. L. Ins. Co. v. Craigen, 6 Euss. & G. (Nova Scotia) 440; Elkhart, etc., v. Houghton, 103 Ind. 286; 2 N. East. Rep. 763; Bloomington M. L. B. Assn. v. Blue, 120 111. 121; 11 N. East. Rep. 331 ; Heinlein v. Imperial L. Ins. Co., 101 Mich. 250; 59 N. W. R. 615; 25 L. R. A. 627. See also cases cited in preceding sections. 3 Mutual Ben. Assn. v. Hoyt, 46 Mich. 473; Stevens v. Warren, )'"\ 579 § 249 DESIGNATION OF BENEFICIARY. is paid by a third party who is payee of the policy, how- ever, does not make the contract a wagering one.'^ Nor the taking out by a stranger of a policy on the life of an- other payable to one not having an insurable interest.^ In a recent case in Pennsylvania, ^ a State where the subject of insurable interest and wagering* policies has been much discussed, the Supreme Court gives an intimation as to what should be a rule in determining insurable interest and what makes the policy a wagering one. In this case the action was brought by the administrators of Graut to recover the amount of a policy taken out by Kline on Grant's life, less the debt of Grant to Kline. The policy had been made payable to Kline and was for the sura of $3,000, while the debt of Grant was ouly $743, as Kline claimed, or $214 as claimed by the administrators. The court said: "It was not disputed at the trial below that there was a bona fide indebtedness of Grant to Kline, at the time the policy was taken out, of something over $300. It was also in evidence that one or more policies had been taken out on Grant's life for Kline's benefit prior to the policy in question. These policies had been aban- doned because of the insolvency of the companies, or for other sufficient reason . Kline had paid in premiums thereon Mass. 564; Keystone M. B. Assn. v. Norris, 113 Pa. St. 446; 8 At). Kep. 638; Ruth v. Katterman, 112 Pa. St. 251; Gilberts. Moose, 104 Pa. St. 74. In this case the court says : " If we admit that one man may Insure his life for. the benefit of another, who la neither a relative nor a creditor, our whole doctrine concerning wagering policies goes by the board." Insurance Co. o. Hogan, 80 111. 35; 22 Am. Rep. 180; Cammack ». Lewis, 15 Wall. 643; Exchange Bank v. Loh, 104 Ga. 446; 31 S. E. 459; 44 L. R. A. 372; Prudential Ins. Co. v. Hunn, 21 Ind. App. 525; 52 N. E. R. 772 1 Mutual L. Ins. Co. v. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. R. 286. 2 McCann v. Metropolitan L. Ins. Co., 177 Mass. 280; 58 N. E. R. 1026; Union Cent. L. Ins. Co. v. HlUiard, 63 Ohio St. 478; 59 H. E. K. 230; 53 L. E. A. 462. 3 Grant v. Kline, 115 Pa. St. 618; 9 All. Rep. 150. 580 DESIGNATION OF BENEFICIARY. § 249 several hundred dollars. While the money thus fruitlessly paid ia premiums may not have amounted to an insurable interest in the life of Grant, for the reason that such pay- ments did not make him a creditor for their amount, we think they show good faith in the transaction. This case is to be determined upon the facts as they existed at the time the last policy was taken out; and if both Grant and Kline saw proper to treat the premiums paid as an insurable interest. Grant's administrators have no standing, to say they were not. The company could have defended upon this ground, but it did not. It paid the money over to Kline without question. This brings us to the main ques- tion, was the amount of insurance so disproportioned to Kline's interest in the life of Grant as to make this a wagering policy? We approach this question with caution, the more so that this court has not yet laid down a rule upon this subject. That we shall be compelled some day to do so is possible. We have said that the sum insured must not be disproportioned to the interest the holder of the policy has in the life insured. To take out a policy of $5,000 to secure a debt of five dollars would be such a palpable wager that no court would hesitate to declare it so as a matter of law. Care must be taken, also, that a debt shall not be col- lusively contracted for the mere purpose of creating an in- surable interest. Mr. Dickens, in his inimitable ' Pickwick Papers,' has shown how a debt may be created for the purpose of lodging the debtor in prison by collusion with the creditor. Speaking for myself, it may be that a policy taken out by a creditor on the life of his debtor ought to be limited to the amount of the debt, with interest, and the amount of premiums, with interest thereon, during the expectancy of life as shown by the Carlisle tables. This view, however, has never yet been adopted by this court in any adjudicated case ; nor do we feel compelled to define the disproportion now in view of the particular facts of the 581 § 249 DESIGNATION OP BENEFICIAKT. case ia hand. We do not regard it as either immoral or wagering for Kline to attempt to secure the sums he had already fruitlessly paid in premiums on Grant's life; and if Grant had no objection thereto, and assisted him therein, I do not see that any one could object to this but the company. Again, we have the declarations of Grant that he owed Kline a considerable sum of money, — the precise amount not stated; that Kline had aided him in various ways; had never refused him a favor, etc. In view of their connection by marriage, and of their admitted relations, it is at least probable that Kline had aided him at many times and in various ways pecuniarily that are not represented by any evidences of debt. And, if the sum insured was regarded by Grant as a reasonable amount to indemnify Kline, with what grace can Grant's administrators come in and allege that it was not? They have no possible equity. Grant never paid one dollar of the premiums ; and if they are allowed now to recover, it is not by virtue of any equity, but by force of an inexorable rule of public policy which treats it as a wagering policy, and declares the policy-holder a trustee for the person insured as to the entire proceeds, save only the money actually loaned with the premiums paid. Assuming, then, that Kline might, with Grant's consent and as against his administrators, lawfully seek to indemnify himself for the premiums paid and lost, we have the sum of $743.56 as the amount which Kline was out of pocket. We do not know what Grant's expectation of life was when the policy was taken out, and there is nothing before us upon which we could base any reliable opinion. But it appears he was sixty-five years of age and was an unusually good risk. While we do not know what the amount of the annual premium was, we do know that it must have been a considerable sum on $3,000 for a man of sixty-five years ; and, witii the annual interest, it would roll up rapidly. That Grant died within a year is 582 DESIGNATION OF BENEFICIARY. § 249 not to the purpose, he might have lived long enough for the debt and premiums at compound interest to have ex- ceeded the amount of the policy. Surely, in such case, we cannot say, as a matter of law, that the disproportion was so great as to make it a wagering policy." In another case in the same court, ^ where A., an old woman, was living with her daughter, and B., the father of her son-in-law, with whom the latter lived, had A.'s life insured, his only interest being, as stated in the application, that he had " kept her a certain length of time and promises to keep her as long as she lives." Upon the death of A., B. col- lected the amount of the policies and was sued by A.'s executors for the money so collected ; it was held that as a matter of law, the insurance could not be held to be specu- lative.^ An agreement of the beneficiary to pay the funeral expenses of the insured creates an insurable interest under certain circumstances.^ And one who has advanced money to pay premiums has an insur- able interest.* The rule recently reasserted by the Su- preme Court of Pennsylvania is that a creditor may lawfully take out insurance on the life of his debtor to an amount to cover the debt and cost of the insurance, together with interest on such amounts during the expectancy of the life of the assured according to the Carlisle tables ; and the fact that the debtor dies before the expiration of his expectancy will not affect the validity of the policy or the right to recover the whole amount." A promise on the part 1 Batdorfe Exr. v. Fehler, 9 Atl. Rep. 468. 2 Fitzgerald v. Hartford L. & A. Ins. Co., 56 Conn. 116; 13 Atl. Rep. 673. 3 Burke V. Prudential L. Ins. Co., 155 Pa. St. 295; 26 Atl. R. 445. * Reed v. Provident Savings L. A. Soc, 36 App. Div. 250; 55 N. Y. Supp. 292. « Ulrich V. Reinoehl, 143 Pa. St. 238; 22 Atl. R. 862, where the in- surance was on a man pt 42 lor $3,000 to cover a debt of $100; Shaffer V. tjpangler, 144 Pa. St. 223; 22 Atl. R. 865; Kitter o. Smith, 70 Md. 261; 583 § 249a DESIGNATION OF BENEFICIARY. of a person not having an insurable interest to pay to the wife of the assured a specified amount after his death in consideration of permission to the pi'omisor to insure his life is against public policy as being a gambling transaction and cannot be enforced.^ Where a debtor at the solici- tation of his creditor, to whom he owed $600, effected an insurance of $2,000 on his lifa for the benefit of his cred- itor, the latter being designated in the policy as the beneficiary ; and agreeing to pay the expense of effecting the insurance and keeping it up, with a condition that the debtor might at any time pay the debt and reimburse the creditor, and thereby become entitled to an assignment of the policy ; it was held ^ after the death of the assured and payment of the amount named in the policy to the bene- ficiary, that the administrator of the deceased could not maintain an action against the beneficiary to recover the excess over the debt and amount of premiums paid. § 249a. The Same Subject: Meritorious Object. — An interesting case was recently decided by the Supreme Court of North Carolina, where a policy of life insurance was procured by a religious society, supported largely by vol- untary contributions, on the life of one of its members. The court, in holding the policy void as a wagering con- 16 Atl. R. 890, where certificates to the amount of $6,500, yielding, however, only $2,124.82, were talien out to secure a debt of $1,000. An insurance of $15,000 for a debt of $1,200 has been held not speculative. Equitable L. Assn. Soc. v. Hazelwood, 75 Tex. 338 ; 12 S. W. R. 621 . Nor $2,000 for a debt of $700. McHale v. McDoanell, 175 Pa. St. 632 ; 34 Atl. R. 966. Nor $6,000 for a debt of $2,001. Givens «. Veeder, 9 N. M . 256; 50 Pac. R. 316. Nor $2,000 for a debt of $300, it not being shown what the expectancy was. Nye v. Grand Lodge A. O. U. W.,9 Ind. App. 131; 36 N. E. B. 429. For an example of an unconscionable transac- tion, see United Security, etc, Co. ». Ritchey, 187 Pa. St. 173; 40 Atl. R. 978. 1 Burbage v. Windley's Exrs., 108 N. C. 357; 12 N. E. R. 839. 2 Amick». Butler, 111 Ind. 678; 12 N. East. Rep. 518. 584 DESIGNATION OF BENEFICIARY. § 250 tract, said:^ "Except in cases where there are ties of blood or marriage, the expectation of advantage from the continuance of the life insured, in order to be reasonable, as the law counts reasonableness, must be founded in the existence of some contract between the person whose life is insured and the beneficiary, the fulfillment of which the death will prevent ; it must appear that by the death there may come damage which can be estimated under some rule of law, for which loss or damage the insurance company has undertaken to indemnify the beneficiary under its policy. When the contractual relation does not exist, and there are no ties of blood or marriage, an insurance policy becomes what the law denominates a " wagering contract," and under its rules, made and enforced in the interest of the best public policy, all such contracts must be declared illegal and void, no matter what good object the parties may really have in view. The end will not, in the eye of the law, justify the means." A building association has no insurable interest in the life of a stockholder. ^ § 250. The Same Subject: Relatives. — Although pos- itive in its denunciation of wager policies, the Supreme Court of the United States has been liberal in its views concerning the insurable interest of relatives. In a lead- ing case ^ it said: " The natural affection in cases of this kind is considered as more powerful — as operating more efficaciously — to protect the life of the assured than an}' other consideration. But in ail cases there must be a rea- sonable ground, founded upon the relations of the parties to each other, either pecuniary, or of blood or affinity, to expect some benefit or advantage from the continuance of 1 Trinity College v. Travellers Ins. Co., 113 N. C. 244; 18 S. E. K. 175. 2 Tate V. Commercial Bldg. Assn., 97 Va. 74; 33 8. E. K. 382; 45 L. R. A. 243. 3 Warnock v. Davis, 104 U. S. 779. 585 § 250 DESIGNATION OF BENEFICIARY. the life of the assured. Otherwise the contract is a mere wager, by which the party taking the policy is directly interested in the early death of the assured." The same court has held ^ that a sister has an insurable interest in the life of her brother from the mere relationship. The same principle was also determined by the Supreme Court of Massachusetts in an early case.^ A brother has, how- ever, been held to have no insurable interest in the life of a brother ; ^ but under all cii'cumstances a wife has an insur- able interest in the life of her husband ; * though it has been said that to support the interest she must be his law- ful wife ; s and divorce subsequent to the policy does not vitiate such policy,^ and it has even been held that a woman, living with a man as his wife, though not legally married to him, has an insurable interest in his life.' If a woman is the wife of the insured the fact that she is named in the policy by another name does not affect her rights.* In a mutual benefit society the description of the beneficiary as the 1 ^tna L. Ins. Co. u. France, 94 U. S. 561. 2 Lord V. Dall, 12 Mass. 115; 7 Am. Dec. 38. See also Hosmer v. Welch, 107 Mich. 470; 67 N. W. R 504. s Lewis V. Phoenix Mut. Life Ins. Co., 39 Conn. 100; Fidelity Mat. L. Assn. o. Jeffords, 46 C. C. A. 377; 107 Fed. E. 402; 53 L. R. A. 193. See also Reynolds v. Prudential Ins. Co., 88 Mo. App. 679. * Conn. Mut. Life Ins. Co. v. Schaefer, 94 U .S. 457; Mlnai Life Ins. Co. V. France, 94 U. S. 561; Warnock v. Davis, 104 U. S. 779; Baker v. Union Mut. Life Ins. Co., 43 N. Y. 283; Gambs v. Covenant Mut. Life Ins. Co., 50 Mo. 44; Ellison v. Straw, 116 Wis. 207; 92 N. W. R. 1094. 5 Holablrd v. Atlantic Ins. Co., 2 Dill. 166; 2 Ins. L. J. 588; Keener ■V. Grand Lodge A. O. U. W., 38 M. A. 543. = Conn. Mut. Life Ins. Co. v. Schaefer, supra;"M.aKeev. Phoenix Mut. Life Ins. Co., 28 Mo. 383; 75 Am. Dec. 129. Bat see Tyler v. Oddfel- lows, etc., Soc, 145 Mass. 134; 13 N. E. Rep. 360. ' Equitable Ass. Soc. v. Patterson, 41 6a. 338. See also Scott v. Scott (Ky.), 77 S. W. R. 1122; Lampkiu v. Travelers Ins. Co., 11 Colo. App. 249; 62 Pac. E. 1040; Euoff v. John Hancock M. L. I. Co., 86 App. Div. 447; 83 N. Y. Supp. 758. 8 Watson V. Centennial Mut. Life Assn., 21 Fed. Rep. 698. 586 DESIGNATION OF BENEFICIAKY. § 250 " wife " of the member, whea she was not so in fact, has been held not to invalidate the designation. ^ A woman engaged to be married to a man has an insurable interest in his life ; ^ but in Massachusetts an engaged woman has been held not to be a " dependent ' ' upon her betrothed within the meaning of the statute authorizing members of benefit so- cieties to designate " dependents " as their beneficiaries; ^ and in one society at least a member is expressly allowed by the charter to designate his betrothed as his beneficiary.* Unless it appears that the wife was insane, or an invalid, the presumption is that she is a helpmate to her husband and he has an insurable interest in het life.^ The mere relationship of a father and son has been held not to give the latter an insurable interest in the life of the former; ® although other courts have decided that a son has an insur- able interest in the life of a father whom he may be com- pelled by law to support,^ and a grandson in the life of his grandfather who resided with him.* And a granddaughter 1 Durian v. Central Verein, etc., 7 Daly, 168. 2 Ctilsholm V. National C. Life las. Co., 52 Mo. 213; 18 Am. Rep. 414. See also Bogart v. Tliompsoa, 24 Misc. K. 581 ; 53 N. Y. Supp. 662 ; Opitz V. Karel, 118 Wis. 527; 95 N. W. R. 948; Taylor v. Travellers Ins. Co., 15 Tex. Civ. App. 254; 39 S. W. E. 185. 2 Am. Legion of Honor c. Perry, 140 Mass. 580. But the same court has held that a betrothed woman may in fact be a dependent. McCarthy V. New England, etc., 153 Mass. 314; 26 N. E. R. 866. The rule of Am. Legion of Honor o. Perry, was affirmed iu Palmer v. Welch, 132 111. 141; 23 N. E. E. 412; affg. 33 111. App. 186. See post, § 261. ^ Knights of Pythias. 5 Currier v. Continental Life Ins. Co., 57 Vt. 496. » Guardian Mut. Lite Ins. Co. v. Hogan, 80 III. 35; 22 Am. Rep. 180; Life Ins. Clearing Co. ■». O'Neill, 45 C. C. A. 641; 106 Fed. R. 800; 64 L. E. A. 225, where valuable note is appended. And a mother as such has no insurable interest in the life of her son. Prudential Ins. Co. v. Hunn, 21 Ind. App. 526; 52 N. E. R. 772. But see Wakeman v. Metropolitan Life Ins. Co , 30 Out. 705. ' Eeserve Mut. Life Ins. Co. ». Kane, 81 Pa. St. 154; 22 Am. Rep. 741. 8 Elkhart Mut., etc., Assn. v. Houghton, 103 Ind. 286. But see Bur- ton V. Conn. Mut. L. Ins. Co., cited later in this section. 587 § 250 DESIGNATION OF BENBFICIAEY. in the life of her grandfather; ^ and a daughter in the life of her father ; ^ and a widow in the life of her brother ; ^ and an orphan in life of uncle who had brought her up ; * and an aunt in life of niece who lives with her.^ In a number of cases, however, the rule has been de- clared that from the very rjplationship of the parties the parent has an insurable interest in the life of the child, except possibly when, the child is of age,* and the child in the life of the parent.' A mother has an insurable interest in the life of her son.* But a mother not residing with a son has been held not to be a " dependent " upon him within the meaning of the statutes of Massachusetts.' When a person assumed the position of father to one not related to him the latter has an insur- 1 Corbett v. Metropolitan L. Ins. Co., 37 App. Div. 152; 55 N. Y. Supp. 775. 2 Farmers, etc., Assn. v. Johnson, 118 la. 282; 91 N. "W. E. 1074; Geoffrey ». Gilbert, 5 App. Div. 98; 38 N. Y. Supp. 643; Standard L. & A. Assn. V. Catlin, 106 Mich. 138; 63 N. W. R. 897. But contra, Metro- politan L. I. Co. V. Bleach, 22 Ky. L. Bep. 530; 58 S W. R. 436. 3 Sternberg v. Levi, 159 Mo. 617; 60 S. W. E. 1114; 53 L. R. A. 438. * McGraw v. Metropolitan L. I. Co., 41 W. N. C. 62; 5 Pa. Sup. Ct. 488. s Cronin v. Vermont L. Ins. Co., 30 R. I. 570; 40 Atl. R. 497. 8 Mitchell V. Union Life Ins. Co., 45 Me. 104; Worthington v. Curtis, L. R. 1 Ch. D. 419; 45 L. J. Ch. D. 259; 33 L. T. (n. s.) 828; 24 W. E. 221. ' Loomis ». Eagle Life Ins. Co., 6 Gray, 396; Valley Mut. Life Assn. V. Teewalt, 79 Va. 421; Mitchells. Union Life Ins. Co., 45 Me. 104; 71 Am. Dec. 529; Eeserve Mut. Life Ins. Co. v. Kane, 81 Pa. St. 154; Grat- tan u. National Life Ins. Co., 15 Hun, 74; Corson's Appeal, 113 Pa. St. 438; 6 Atl. Rep. 213; Forbes v. Am. Mut. Life Ins. Co., 15 Gray, 249. Children named in a policy need not show an insurable Interest. Vor- heis V. People, etc., 91 Mich. 469; 51 N. W. E. 1109. 8 Reif V. Union Life Ins. Co., 17 Ins. Chron. 3; 18 C. L. J. 347; O'Eourke v. Jno. Hancock M. L. I. Co., 10 Misc. E. 405; 31 N. Y. Supp. 130. But see Prudential Ins. Co. v. Hunn, 21 Ind. App. 525; 52 N. E. R. 772. 9 Elsey V. Odd-fellows' Mut. Relief Assn., 142 Mass. 224. 588 DESIGNATION OF BENEFICIARY. § 250 able interest in the life of such person,^ and a sister has an insurable interest in the life of her half-sister whom she has promised to support.^ It has been said that a daughter by the mere virtue of relationship has no interest in her mother's life,^ nor son in life of mother.* In Missouri the rule has been laid down that the insurable interest in the life of another person must be a direct and pecuniary interest, and that a person has not such an interest in the life of his wife or child simply in the character of a hus- band or parent.^ In the same State it has been held that an uncle has no insurable interest in the life of a nephew ; ° nor niece in the life of her uncle ; ' and the Supreme Court of Pennsylvania has said^ that a nephew has no insurable interest in the life of his aunt. A stepson has no insura- ble interest in his stepfather's father ; ^ nor a stepson in the life of his stepfather,!" ^qj. g^ grandchild in life of grandfather, 11 but a son can insure his life for the benefit of his father ; ^^ nor has a son-in-law in the life of his mother-in-law ; ^^ nor his father-in-law. i* The Supreme 1 Carpenter v. U. S. Ins. Co., 161 Pa. St. 9; 28 Atl. R. 943. 2 Barnes v. London, etc., L. Ins. Co., 8 Times L. R. 143; 1 Q. B. 864. 3 Continental Life Ins. Co. v. Volger, 89 Ind. 572. * Peoples, etc., Assn. v. Templeton, 16 Ind. App. 126; 44 N. E. R. 809. But see Crosswell v. Com. Ind. Co., 31 S. C. 103; ^8 S. E. R. 200. ° Charter Oak Life Ins. Co. v. Brant, 47 Mo. 419; Gambs v. Covenant Mut. Life Ids. Co., 50 Mo. 44. « Singleton v. St. Louis, etc., Life Ins. Co., 66 Mo. 63; 27 Am. Rep. 321; nor a niece. Prudential Ins. Co. v. Jenkins, 15 Ind. App. 297; 43 N. E. R. 1066. ' Wilton V. New York L. Ins. Co. (Tex. Civ. A.), 78 S. W. R. 403. 8 Appeal of Corson, 113 Pa. St. 438; 6 Atl. Rep. 213. 9 Gilbert v. Moose's Admr., 104 Pa. St. 74. M United Brethren Aid. Soc. v. McDonald, 123 Pa. St. 324 ; 15 Atl. R. 439. u Burton ». Conn. M. L. Ins. Co., 119 Ind. 207; 21 N. E. R. 746. 12 Tucker o.Mut. Ben. L. Ins. Co., 4 N. Y. Supp. 505. 13 Rombach v. Piedmont, etc., Ins. Co., 35 La Ann. 233 ; Stoner v. Line, 16 W. N. C. 187. Nor mother-in-law in life of son-in-law. Adams v. Reed (Ky.), 36 S. W. R. 568. w Ramsey v. Myers, 6 Pa. Distr. 468. 589 § 250a DESIGNATION OF BENEFICIARY. Court of Connecticut has held that the providing by a rela- tive of a home and proper care for life is sufficient consid- eration for the assignment by a laboring woman, living apart from her husband and childless, of her life insurance policy if the transaction was in good faith and not a wager.* A friend as such has no insurable interest in life of a friend.^ § 250a. The Same Subject: Creditors. — A creditor has an insurable interest in the life of his debtor; ^ and can insure the life of a debtor without his consent; * but such interest is limited to the amount of the debt.^ The debt to give an insurable interest must be valid. The holder of a note given for money won at play has no insurable interest in the debtor's life;* nor does a mere moral claim confer insurable interest;' but the fact that a debt is barred by the statute of limitations does not deprive a creditor of insurable interest; ^ nor does " Fitzgerald v. Hartford L. & A. Ins. Co., 56 Conn. 116; 13 Atl. Rep. 673. ' Condell v. Woodward, 16 Ky. L. Eep. 142; 29 S. W. E. 614; Glassey V. Metropolitan L. Ins. Co., 84 Hun, 350; 32 N. Y. Supp. 335. 8 Rawls V. American Ins. Co., 27 N. Y. 282; Mowry v. Insurance Co., 9 R. I. 346; Cunningham v. Smith's Exrs., 70 Pa. St. 450; Conn. Mnt. L. Ins. Co. V. Scbaefer, 94 U. S. 457; Cammacks. Lewis, 15 Wall. 643. But not in the life of his debtor's wife. Wheeland v. Atwood, 42 W. N. C. 178; 7 Pa. Super Ct. 86; Cameron ». Barcus, 31 Tex. Civ. App. 46; 71 S. W. R. 423. i Sue. of Hearing, 26 La. Ann. 326. 6 CammackD. Lewis, supra; Warnock ». Davis, 104 U. S. 779; Drys- dale V, Piggott, etc., 22 Beav. 238; Von Lindeman v. Desborough, 3 Car. &P. 353; 8 Barn. & C. 586; Ruth ». Eattermaa,112Pa. St. 251; Appeal of Corson, 113 Pa. St. 438; 6 Atl. Rep. 213; Siegrist Admr.o. Schmoltz, 113 Pa. St. 326; 6 Atl. Eep. 47; Exchange Bank v. Loh, 104 Ga. 446; 31 S. E. R. 459; 44 L. R. A. 372; Strode v. Meyer Bros , etc., 101 Mo. App. 627; 74 S. W. R. 379; Belknap v. Johnson, 114 la. 265; 86 N. W. R. 267; ante, § 248; post, § 397. « Dwyder v. Edie, Ang. on Ins., § 296; 2 Parke Ins. (7th ed.) 639. ' Guardian M. L, Ins. Co. v. Hogan, 80 111. 35. 8 Rawls V. American L. Ins. Co., 27 N. Y. 282. 590 DESIGNATION OF BENEFICIARY. § 250a the fact that the debtor is an infant.^ A partner has an insurable interest in the life of a partner ; ^ but it ceases when such partner holding the insurance retires from the firm indebted to it ; ^ a judgment creditor has an insurable interest in the life of the debtor,* and an agreement for further advances for which the policy was to stand as security gives an additional insurable interest." A bonds- man has an insurable interest in the life of the person on Avhose bond he is a surety; ® and joint obligors in a bond in each other's lives; ^ and a surety on a note in the life of the principal ; ® a corporation in the life of its manager ; ^ and a tenant has an insurable interest in the landlord's life when the latter is himself only a tenant for life, because the term depends upon the continuance of the life.^" Where a member of a mining association employs a substitute to represent bim and work in his stead in the mines, he has an insurable interest in the life of his substitute. ^^ A master has an insurable interest in the life of his servant, ^^ and a servant in the life of his master. ^^ A general assign- 1 Rivers v. Gregg, 5 Eich. Eq. 274. 2 Morrell 1). Trenton, etc. L. Ins. Co., 10 Gush. 282; 57 Am. Dec. 92 and note; Valton v. National F. Ins. Co., 22 Barb. 9; 20 N. Y. 32; Conn. M. L. Ins. Co. V. Luchs, 108 U. S. 498 ; Hoyt v. N. Y. L. Ins. Co., 3 Bosw. 440; Bevin v. Conn. M. L. Ins. Co., 23 Conn. 244; post, § 397. But con«m, see Powell u. Mut. Ben. L. Ins. Co., 123 N. C. 103; 31 S. E. E. 381 3 Cheeves B. Anders (Tex. Civ. App.), 25 S. W. E. 324. * Walker v. Larkin, 127 Ind. 100; 26 N. E. E. 684. 5 Curtissu. iEtna L. Ins. Co., 90 Cal. 245; 27 Pac. R. 211. 8 Scott V. Dickson, 108 Pa. St. 6. ' Brandon v. Saunders, 25 W. E. 650. 3 Lea V. Hinton, 5 De G., M. & G. 823; Embry v. Harris, 107 Ky. 61; 52 S.. W. E. 958. 9 Mechanics Nat. Bk. v. Comins, 72 N. H. 12; 55 Atl. E. 191. 1" Sides V. Knickerbocker L. Ins. Co., 16 Fed. Eep. 650. u Trenton, etc., Ins. Co. v. Johnson, 24 N. J. L. 576. 12 Miller v. Eagle Ins. Co., 2 E. D. Smith, 268; Summers v. V. S., etc., Trust Co., 13 La. Ann. 504; Woodfln v. Asheville, etc., Ins. Co. 6, Jones L. 558. 18 HebdeuB. West, 3 Best & Sm. 579; 32 L. J. Q. B. 86; 9 Jnr. (n. 8.) 747; 7 L. T. 854; 11 W. B. 422. 591 § 2506 DESIGNATION OF BENEFICIARY. ment by the debtor does not destroy the insurable interest of the creditor. 1 § 2506. Want of Insurable Interest does not make Policy Void, but Payee is a Trustee. — If the person effecting the insurance has no insurable interest in the life of the insured he cannot recovef more than the amount of premiums paid with interest, but if he collects the whole amount of the insurance he must pay over to the per- sonal representatives of the insured the excess over the amount of the premiums and interest.^ And where the beneficiary has no insurable interest the heirs of the insured can, in an action brought by such beneficiary, to recover on the policy, intervene and recover in his place. ^ In a recent case * the Court of Civil Appeals of Texas thus states the rule: " The fact that the premium was paid by the beneficiary does not give to the contract the character of a wagering contract; nor does the fact that the beneficiary has no insurable interest in the life of the assured render the policy void as against public policy. The courts will treat the person named as beneficiary, having no insurable interest as a trustee appointed to collect the policy for the benefit of those legally entitled, thereby indorsing the con- tract by which the company has solemnly bound itself, and at the same time conserving public policy, by preventing the stranger from gambling in the life of his fellow or profiting by his death." No action can be maintained on a policy of life insurance, issued to one not having an 1 Manhattan L. Ins. Co. ». Hennessy, 39 C. C. A. 624; 99 Fed. R, 64. 2 Warnock v. Davis, 104 U. S. 775; Gilbert v. Moose, 104 Pa. St. 74 ; Eath ». Katterman, 112 Pa. St. 251; Siegrist's Admr. ?;. Schmoltz, 113 Pa. St. 326; Downey c. HofEer, 110 Pa. St. 109; 20 Atl. R. 655; Sanon- ette V. Laplante, 67 N. H. 118; 36 Atl. R. 981; post, §§ 302, 303, 397. 8 Mayher v. Manhattan L. Ins. Co., 87 Tex. 169; 27 S. W. E. 124. ^ Mutual L. Ins. Co. v. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. E. 286. 592 DESIGNATION OF BENEFICIAEY. § 251 insurable interest in the life insured, against the company issuing it, by the personal representatives of the person whose life was insured, for there is do privity of contract between them ; nor is the company bound by a notice from such personal representatives forbidding it to pay over the amount of such insurance to the payee named in the policy. ^ It is no defense to an action on a policy by an administrator that the policy was delivered to and the premiums paid by one who had no insurable interest in the life insured.^ Yet, where the money due on a policy void for want of insur- able interest has been voluntarily paid to the beneficiary, it has been held that the heirs of the insured have no claim to it.^ In the case cited the court says: " The complain- ants are not parties to the contract, neither have they been injured by it. It could not have been enforced between the parties in courts of justice, and the fact that one of the parties has seen fit to pay over to the other the wage does not afford a basis in equity for outside parties to lay claim to the reward of iniquity." § 251. General Rule. — It is seen from the preceding citations that the authorities are not altogether in harmony and it would be difficult, if not impossible, to lay down a general rule that would apply to all cases. It can with safety be said, however, that in all cases of insurance by onepers®n upon the life of another some pecuniary interest or advantage, to be derived or received from the continu- ance of the life insured by the person procuring or effect- ing such insurance, must exist in order to relieve the con- tract from the stigma of being a wager policy and against 1 Bombergers. United Brethren, etc., Soc. (Pa.), 18 W. N. C. 459; 6 Atl. Rep. 41; post, §§ 302, 397, et seq. 2 Brennan v. Prudential h. Ins. Co., 148 Pa. St. 199; 23 Atl. E. 901. 3 Smith V. Pinch, 80 Mich. 332; 45 N. W. E. 183. See also Meyers v. Schumann, 64 N. J. E. 414; 34 Atl. R. 1066. 38 593 § 252 DESIGNATION OF BENEFICIAEY. public policy. A careful examination of the cases will show that wherever the point has been raised the courts have considered whether or not the person procuring the policy was interested pecuniarily to an appreciable extent in the life insured. Perhaps a slighter interest will support a policy on the life of a relative than in other cases, but the interest must exist in some form. Where a wife in- sures the life of a husband or the husband that of the wife, it is clear that there is a pecuniary interest of a decided character, and so where a parent insures the life of a child, for there is the expectation of support when age shall im- pair the abilities of the former. " The interest required," says a leading case,^ " need not be such as to constitute the basis of any direct claim in favor of the plaintiff upon the party whose life is insured ; it is sufficient if an indirect advantage may result to the plaintiff from its lif e. ' ' Where the want of insurable interest was known to the company at the time of the issuance of the policy the company will be estopped.^ § 252, The Doctrine of Insurable Interest Applied to Contracts o£ Benefit Societies. — Many of the cases in- volving the question of insurable interest, cited in the eight preceding sections, are those in which benefit societies were parties. As a rule, however, it is only when the right of designation of beneficiary is unrestricted, can the point of insurable interest be raised.^ Even then as the member must be prima facie considered as the party effecting the insurance and free to choose whom he pleases as the recip- ient of his bounty, he can designate whomsoever he likes.* 1 Trenton, etc., Ins. Co. v. Johnson, 24 N. J. L. 586. 2 Mutual L. Ins. Co. v. Blodgett, 8 Tex. Civ. App. 45; 27 S. W. R. 286; Barnes v. London, etc., Ins. Co., 8 Times L. B. 1 Q. B. 864. 8 Freeman v. National Benefit Soc, 42 Hun, 252. « Masonic Benefit Assn. v. Bunch, 109 Mo. 560; 19 S. W. E. 25; Sabin V. Phinney, 134 N. Y. 423; 31 N. E. K. 1087; affg. 8 N. Y. Supp. I855 594 DESIGNATION OF BENEFICIARY. § 253 Clearly, however, the contract must not be, in fact, a cover for a wagering transaction and if the creditor, or a person having no inourable interest, should himself pay the entrance fee and assessments and be the mover in the matter, the certificate would be void and the beneficiary could not recover.! Where, by a by-law of a beneficiary society, no person could be named as beneficiary, unless he should have an insurable interest in the life of the member, the designation of one not having such an interest is invalid and confers no rights on the one so designated. ^ If the beneficiaries are, by the charter, limited to certain classes, as family, relatives, etc., and the member desig- nate some one not of such classes, the designation is void, and, if the money be paid to such beneficiary, he holds it as trustee for the persons entitled to receive, under the laws of the society, in default of a designation.' § 253. Policy or Designation of Beneficiary Valid in Its Inception Remains so. — The general rule undoubt- edly is 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, unless it is otherwise stipulated in the contract.* Overbeck v. Overbeck, 155 Pa. St. 5; 25 Atl. R. 646; IngersoU v. Knights of the Golden Rule, 47 Fed. R. 272; Knights of Honor v. Watson, 64 N. H. 517; 15 All. R. 125; Manning v. United Workmen, 86 Ky. 136; 5 S. W. K. 385 ; Titsworth v. Tits worth, 40 Kan. 571 ; 20 Pac. R. 213 ; Milner v. Bowman, 119 Ind. 448; 21 N. E. R. 1094; Byrne v. Casey, 70 Tex. 247; 8 S. W. R. 38 ; Schillinger v. Boes, 85 Ky. 357; 3 S. W. R. 427; Ancient Order United Workmen b. Brown, 112 Ga. 545; 37 S. E. R. 890; Lane v. Lane, 99 Tenn. 639; 42 S. W. E. 1058. 1 Metropolitan L. Ins. Co. v. O'Brien, 92 Mich. 584; 52 N. W. 1012; Lyonu. Rolfe, 76 Mich. 151; 42 N. W. R. 1094; Mutual Ben. Associa- tion V. Hoyt, 46 Mich. 473; 9 N. W. R. 497. 2 Union Fraternal League©. Walton, 112 Ga. 315; 37 S. E. R. 389. 3 Am. Legion of Honor v. Perry, 140 Mass. 580; Daniels v. Pratt, 143 Mass. 216; ante, § 241. * Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U. S. 457; McKee ». 595 § 253 DESIGNATION OF BENEFICIAKY. Where, however, the beneficiaries of members of benefit societies were, by statute, restricted to the family, or depend- ents, or relatives of their members, and a member of one of such societies designated his wife, from whom he afterwards was divorced, it was held ^ that she lost her rights under the designation in consequence of ^uch divorce. This case , might seem to be apparently against authority, but the reason given is, that under the statute, the relationship or status must exist at the time of the maturity of the con- tract. Especially is this true if the regulating statute specifies certain classes to which^a?/»ze?i^ of benefits shall be made. If designation of beneficiary is analogous to making a will, as we shall see,^ and, like a will, speaks from the death of the member, it might be well said that if the status does not exist at the time the designation is to take effect the benefit shall go as the laws of the society provide. There is eminent authority, however, for a doctrine con- trary to that just stated. The Supreme Court of Iowa has said: ^ " The statute provides only for the relationship that shall exist when the certificate is issued, and does not in words, or by fair implication, limit payment to those only who occupy such relation at the time of death. It wa,s the Phoenix M. L. Ins. Co., 28 Mo. 383; 75 Am. Dec. 129; Clark v. Allen, 11 H. I. 439; Dalby v. India & London Ass. Co., 15 C. B. 365; Campbell v. N. Eng. Mut. L. Ins. Co., 98 Mass. 381; Provident L. Ins. Co. v. Baum, 29 Ind. 236; Wist v. Gr. Lodge A. O. U. W., 22 Oreg. 271; 29 Pac. B. 610; Overhiser's Adm'x. v. Overhiser, 63 Ohio St. 77; 57 N. E. K. 965; 50 L, E. A. 552 ; ante, § 248; post, § 397. 1 Tyler ». Oddfellows' Mat Relief Assn., 145 Mass. 134; 13 N. East. Rep. 360. To the same effect are Order R'y Conductors v. Koster, 55 Mo. App. 186; Saenger v. Rothschild, 123 N. Y. 577; 26 N. E. R.3; affg. 2 N. y. St. Eep. 794. a Post, § 255. 3 White -0. Brotherhood of American Yeomen (.la.), 99 N. W. E. 1071. And to the same effect are Brown v. Grand Lodge A. O. U. W. (Pa. St.;, 57 Atl. Eep. 176; Overhiser v. Overhiser, 14 Colo. App. 1; 59 Pac. Rep. 75. See also Leaf v. Leaf, 92 Ky. 166; 17 S. W. R. 354. 596 DESIGNATION OF BBNEFICIAKY. § 254 evident intent of the legislature to prohibit anything in the nature of gambling contracts, and to so limit the bene- ficiaries as to accomplish such a result. Under the statute, and under the laws of the order, the member's legatee may be his beneficiary, and this without reference to who the legatee may be. A person may will his property as he pleases, and it is therefore evident that the statute was not intended to limit beneficiaries to those for whom the law would provide in the absence of a last will and testament. When the certificate was issued, the beneficiary being one of the class named by the statute and by the laws of the order, it created a valid contract with the member, agree- ing to pay the sum therein named to the named beneficiary. True, the member had the right to change his beneficiary, but he did not do so, nor attempt to do so, and we see no reason why we should change the contract and deprive the appellant of the provision which was thus made for her. It is a well recognized rule that a policy of life insur- ance or a designation of a beneficiary, valid in its inception, remains so although the insurable interest or relationship of the beneficiary has ceased, unless it is otherwise stipulated in the contract." § 254. Lawfulness of Designation of Beneficiary a Question of Construction. — From the preceding, sections it appears that the question, who is entitled to be the bene- ficiary of a member of a benefit society, is one of construction of the laws of such society, and the terms used in them. Hardly any two of such societies, as far as the cases show, use precisely the same language, yet in all certain generic terms are used. The benefits are variously required to be made payable to: "the widow and children of de- ceased inember;"! "widow, orphan, heir, assignee or ' Duvall V. Goodson, 79 Ky. 224; Dietrich v. Madison Relief Assn., 45 Wis. 79; Kentucky Masonic M. L. I. Co. v. Miller's Admr., 13 Busli, 489. 597 § 254 DESIGNATION OF BENKFICIAEY. legatee ; "i " families or assigns ; "^ " family or dependents, ' '^ "widow, orphan children and other persons dependent on him ; " * " person or persons last named by deceased and en- tered by his order, on the will-book of the company;"' " widows, orphans, heirs or devisees;" ® " legal represent- atives;"' " widows, orphans, heirs and devisees;"® " to his family or as he may direct;' * " families and heirs;" i" " to his family or those dependent on him;" " "to family, orphans or dependents ;" ^^ "families or relatives ;" ^^ " families of deceased members or their heirs." " By the statutory provisions of many of the States payment of benefits by a fraternal beneficiary society is restricted to certain classes, usually: "Families, heirs, blood relatives, affianced husband or affianced wife of, or to, persons de- pendent upon the member." ^^ In many charters or by- laws, other generic terms are used, such as " orphans," " devisees or legatees," and "legal representatives," and sometimes there is an ambiguous designation, such as "estate." It becomes important, then, to know who are included in these generic terms, "families," "orphans," > Masonic Mut. R. Assn. v McAuley, 2 Mackey, 70. 2 Massey v. Mut. R. A., 102 N. Y. 523. s Knights of Honor v. Nairn, 60 Mich. 44; 26 N. W. Rep. 826. ^ Addison v. N. E. C. Travelers' Assn., 144 Mass. 691; 12 N. East Rep. 407. 5 Sup. Counc. Catholic Ben. Assn. v. Priest, 46 Mich. 429. 6 Covenant M. Benefit Assn. v. Sears, 114 111. 108. ' Expressmen's Aid Soc. v. Lewis, 9 Mo. App. 412. 8 Worley v. IS. W. Masonic Aid Assn., 10 Fed. Rep. 227. s Gentry v. Sup. Lodge, etc., 23 Fed. Rep. 718; Mitchell o. Grand Lodge, etc., 70 la. 360; 30 N. W. Rep. 865. 1° National Mut., etc., Assn. v. Gonser, 43 Ohio St. 1. " Ballou V. Gile, etc., 50 Wis. 614. 12 Am. Legion of Honor v. Perry, 140 Mass. 580. , M Presbyterian Assur, Fund v. Allen, 106 Ind. 593; Van Bibber's Admr. v. Van Bibber, 82 Ky. 347. 1* Blsey o. Odd-Fellows', etc., 142 Mass. 224. 16 Revised Stats. Mo. 1899, § 1408. 598 DESIGNATION OF BENEFICIARY. § 255 " widow," " affianced husband or affianced wife," " chil- dren," " heirs," " legatees," " relatives," " legal repre- sentatives," " devisees," and " dependents." § 255. Rules o£ Construction in Cases of Designation of Beneficiary. — The principles governing the construction of the charters, laws and certificates of benefit societies, as well as of the various statutes relating to them, are of a manifold nature and analogous to the general rules of con- struction of statutes, contracts and wills, for the subject- matter partakes of the characteristics of all. The first essential of the designation of beneficiary is that it conform to the requirements of the statute under which the society exists, or at least violate no provisions of any statute; the designation must also be in conformity with the terms of the contract of the membership. If the meaning of the mem- ber is not clear, then the inquiry is to ascertain it. The same general rules of construction apply to the designation of beneficiaries that apply to all written documents, but the interpretation of some generic terms must be separately discussed. The primary rule is that the intent of the leg- islature, parties to a contract or designator must be first ascertained and then carried into effect, ^ and this intention must be judged of exclusively by the words of the instru- ment, if unambiguous, as applied to the subject-matter and the surrounding circumstances. ^ The whole of the statute law, or designatory writing, must be looked at and considered and words are supposed, unless the contrary be shown, to have been used in their ordinary e very-day sense and with the meaning a long line of judicial decisions has given them.^ It is not necessary to here refer in detail 1 Bishop OQ Con., § 380; 2 Pars, on Con., p. *494; 1 Redf. on Wills, p. *433 and vol. 2, p. •20. 2 Redf. on Wills, p. "433; Bishop on Con., § 381. 3 Bishop on Con., § 377; 1 Redf. on Wills, pp. *434 and 438, and vol. 2, p. *19. 599 § 255 DESIGNATION OF BENEFICIAEY. to the other numerous rules of construction that have been laid down by a long series of judicial decisions, coL lected and digested by learned and accurate commentators ; the text-books upon contracts, statutes, wills and kindred subjects must be consulted by those who wish to search deeper into the law governing particular cases. The courts substantially agree that the rules and regulations of benefit societies are to be construed liberally in order to effect the benevolent objects of their organization.^ And the court will, if possible, so construe the designation as to bring it within the power given by the statutes and sustain its legality.^ We can have a wider range of authority in search- ing for precedents for construing the meaning of the language used indesignationsof beneficiary, as well as in the laws of these societies and statutes relating to them, because of the analogies that have been found between such desig- nations and laws, so far as disposition of property is con- cerned, and wills. The Supreme Court of Michigan, for example, has said:^ "The same rules of construction should be applied to dispositions of property created by those mutual benefit associations as are applied to bequests by will." And Chief Justice Cofer, of the Kentucky Court 1 Supreme Lodge K. of P. v. Schmidt, 98 Ind. 381; Ballou v. Gile, 50 Wis. 614; Erdmann v. Mutual Ins. Co., 4* Wis. 376; Maneely v. Knights of Birmingham, 115 Pa. St. 306; 9Atl. Eep.41; Sup. Lodge K. of H. ». Martin (Pa), 12 Ins. L. J. 628; 13 W. N. C. 160; American Legion of Honor u. Perry, 140 Mass. 580; Gnndlacti o. Germania, etc.,t Hun, 339; Expressman's Mut. Aid Assn. u. Lewis, 9 Mo. App. 412; Dietrich at al. u. Madison Relief, etc., 45 Wis. 79; Massey et al. v. Mutual Belief Assn., 102 N. Y. 523; VauBibber's Admr. v. Van Bibber, 82 Ky. 347; Duvall v. Goodson, 79 Ky. 224 ; Masonic Mut. Relief Assn. v. McAuley, 2 Mackey, 70; Whitehurst Admr. v. Whiteliurst, 83 Va. 153; 1 S. E. R. 801. 2 Elsey V. Odd-Fellows' Mut. Relief Assn., 142 Mass. 224; Am. Legion of Honor V. Perry, 140 Mass. 580; 2 Pars, on Con., p. *505. 3 Union Mutual Aid Assn. v. Montgomery, 70 Mich. 587; 38 N. W. Rep. 588. To the same effect is Kottmann u, Gazett, 66 Minn. 88; 68 N. W. R. 732. 600 DESIGNATION OF BENEFICIARY. § 255 of Appeals, has said : ^ " A life policy for the benefit of the family of the person procuring, though not a testament, is in the nature of a testament, and in construing it the courts should treat it as far as possible as a will, as in so doing they will more nearly approximate the intention of the persons, the destination of whose bounty is involved in such cases." In other cases this analogy has been men- tioned.^ It is a settled principle in wills that they take effect upon the death of the testator, and are treated as speaking from that time.^ Following the analogies above noticed, it follows that the designation of beneficiaries by the members of mutual benefit societies takes effect only upon the death of such members and the benefit certificate con- fers upon the beneficiary only an inchoate, contingent ex- pectation, liable to be diverted either by the death of the beneficiary before that of the member, or by a revocation of the appointment and a naming of another beneficiary. Upon the death of the member then the benefit certificate takes effect, so far as to vest in the beneficiary an absolute right to the benefit money.* In a case in Illinois,^ the court said : "A benefit certificate in a society of this char- acter differs from an ordinary policy of life insurance in that it speaks with reference to the conditions existing at the time of the death of the member whose life has been 1 Duvall V. Goodson, 79 Ky. 224. 2 Continental L. Ins. Co. v. Palmer, 42 Conn. 65; Thomas v. Leake, 67 Tex. 469; 3 S. W. Kep. 703; National American Assn. v. Kirgin, 28 Mo. App. 80; Chartrand v. Brace, 16 Colo. 19; 26 Pac. R. 152; Felixc. Grand Lodge, etc., 31 Kans. 81; Masonic Benev. Assn. v. Bunch, 109 Mo. 560; 19 S. W. R. 25; Knights Templars, etc., Assn.o. Greene, 79 Fed. R. 457. s 2 Redf. on Wills, 10-12; 2 Jarm. on Wills, 406; Shotts v. Poe, 47 Md. 513; Davidsons. Dallas, 14 Ves. 576. * Thomas v. Leake, 67 Tex. 469; 3 S. W. Rep. 703; Union M. Aid Assn. V. Montgomery, 70 Mich. 587; 38 N. W. Rep. 588; Chartrand ». Brace, 16 Col. 19. « Klrkpatrick o. Modern Woodmen, 103 111. App. 468-473, citing Order Railway Conductors v. Koster, 65 Mo. App. 186. 601 § 256 DESIGNATION OF BENEFICIARY. insured by it. A beneficiary named in a certificate of a fraternal benefit society organized under the statutes of the State of Illinois, or like statutes of other States, has no vested interest in such certificate or the fund provided for its payment, until the decease of the member whose death matures the certificate. The constitution and by- laws of the society and the statutes of the State must be construed not only to the terms of the certificate but to the status of the parties existing at the time of the death." i In De Grote v. T>e Grote,^ it was held that a woman, to whom the member was bigamously married but to whom he was afterwards legally married, became a competent beneficiary because of the subsequent marriage. § 256. Family. — In the specification of the persons who may be designated as beneficiaries, the term which most fre- quently occurs in the charters of benefit societies, and also in the statutes authorizing their existence and doing^of cer- tain acts, is " family." The word has been frequently the subject of judicial discussion in two classes of cases, those involving homestead rights and those relating to the con- struction of wills. Very different results follow as the one or the other class of decisions is followed, for in homestead laws the intent of the legislature is evidently to protect a person who has others, who are dependent upon his labors, abiding with him under the same roof. On the other hand, in construing wills, the object is to ascertain the intention of the testator. The latter body of cases favor a more liberal construction than the former. The definition given by Bouvier is comprehensive^ and is this: " Father, mother and children. All the individuals who live under the authority of another, including the servants of the family. 1 Delaney u. Delaney, 175 Hi. 187; Lister t). Lister, 73 Mo. App. 99. 2 175 Pa. St. SO; 34 Ati. R. 312. 3 Law Die, tit. Family. 602 DESIGNATION OF BENEFICIARY. § 256 All the relations who descend from a common ancestor, or who spring from a common root." We cannot understand that those persons who are hired to assist in household work are included among those termed servants in this definition. In discussing this word as affecting rights of homestead, and after a review of the authorities, a learned writer says : ^ " The family relation is obviously a relation of status, and not of contract merely. An assemblage of persons held together by a mere contract, other than the marriage con- tract, although such a contract may raise a duty of support on the part of one member, and create a state of depend- ence on the part of the others, is not a family. Of such a nature are the ordinary contracts of service now in vogue iu the United States. And, hence, the relation of master and servant, or more properly speaking, of employer and employe, as it ordinarily exists in this country, does not constitute 2i family . ' There is absent that peculiar fea- ture, which can be better understood than described, which distinguishes the family even from those who may dwell within the limits of the same curtilage.' And, therefore, a single man, who has no other persons living with him than servants and employes, is not the head of a family within the meaning of the statutes creating homestead exemptions." In questions involving both the construction of wills and homestead rights the courts are inclined to adopt liberal views. In testing the right of a debtor to be con- sidered the " head of a family " certain tests are applied which are easily understood. The first of these is whether the law imposed upon the head of the associated persons the duty of supporting them, which would be a simple and uniform test, but this test would not apply to all cases, consequently there is the further inquiry whether a moral duty to support existed. There is the test of condition of i Thompson on Homesteads, § 47. 603 § 256 DESIGNATION OF BENEFICIARY. dependence and also those of common residence and good faith. In applying these tests and in construing who are included in the family of any person, the courts will be lib- eral.^ Accordingly it has been held that indigent mother and sisters who live with a man and are supported by him are members of his family ; ^ and a widowed daughter and her minor child residing with a father who was a widower are members of his family ; ^ also dependent mother and dependent minor brothers and sisters residing with an un- married man are members of his family;* so also minor brothers and sisters residing with an unmarried man; ^ also a widowed sister supported by a brother, whether she has or has not dependent children.® Children of a wife by a former husband are members of the husband's family ' and adopted children.* The Supreme Court of Massachusetts has held ^ that under the statute of that State, limiting beneficiaries to the widow, orphans or dependents of deceased members, the mother, who was living with her husband away from a son was not a ' ' dependent ' ' upon him, nor strictly speaking a member of the son's family in the sense of being dependent. In a Michigan case ^" the Supreme Court of that State said: " Now this word ' family ' contained in the statute, is an expression of great flexibil- ity. It is applied in many ways. It may mean the husband and wife having no children and living alone together, or it 1 Thompson on Homesteads, § 4. 2 Marsh v. Lazenby, 41 Ga. 153. s Blackwell v. Broughton, 56 Ga., 390; Cox ». StafEord, 14 How. Pr» 621. * Connaughton v. Sands, 32 Wis. 387. '■ Greenwood v. Maddox, 27 Ark. 658. ^ Wade V. Jones, 20 Mo. 75; Bailey v. Cummings, cited Thompson on Homesteads, § 59. ' Allen V. Manasse, 4 Ala. 554; Sallee v. Waters, 17 Ala. 488. ' Thompson on Homesteads, § 48. s Blsey V. Odd-Fellows' Mat. R. Ass., 142 Mass. 224. M Carmichael v. N. W. Mut. Ben. Assn., 51 Mich. 494. 604 DESIGNATION OF BENEFICIAEY. § 256 TOiiy mean children, or wife and children, or blood relatives, or any group constituting a distinct domestic or social body." The court therefore held that, where the insured was an old man and his beneficiary a young woman, who was not related to him, but who had lived for many years with him in the same household and was treated by him as a daughter, the term, family, as used in the statute covered the case and included her. A woman living with a man as his mistress is not a member of his family within the meaning of the statute. 1 In construing wills the word family is very comprehensive and, in its ordinary sense, comprises the same persons as " kindred " or " relations." ^ In some of the older cases bequests to one's family have been held void for uncertainty.^ It was said by Romilly , M. R. ,* that the primary meaning of family is children, and that there must be some circumstances arising on the will itself, or from the situation of the parties, to prevent that con- struction.^ Jessel, M. E., also said^ that the primary meaning was children. And so in this country ; ^ though ordinarily it includes the wife.* An adult son is a mem- ber of his father's family although he does not live under the same roof .' Where the designation was "family" and it consisted of wife and daughter, they are the beneficiaries, and if the daughter die before the father the mother takes the whole. i" In the English cases 1 Keener v. Grand Lodge A. O. U. W., 38 M. A. 543. 2 2 Williams on Exrs. 1213. 3 2 Jar. on Wills, chap. 29. * In re Terry's Will, 19 Beav. 580. '■ Snow V. Teed, 9 Eq. Cas. 622. " Pigg V. Clarke, 3 Ch. D. 674. ' Spencer o. Spencer, 11 Paige, 159. " Bowditch V. Andrew, 8 Allen, 339; Bradlee v. Andrews, 137 jIuss. 50 9 Klotz n. Klotz, 15 Ky, L. Rep. 183; 22 S. W. R. 651. 10 Brooklyn Mas. R. Assn. v. Hanson, 6 N. Y. Supp. 161. 605 § 256 DESIGNATION OF BENEFICIARY. collected in the last edition of Jarman on Wills,^ various meanings have been given to the word according to the sup- posed intent of the testator, as heir, or children, relations, descendants, or wife. As said by Vice-Chancellor Kind- ersley in Green v. Marsden,^ " family " is not a technical word, but is of flexible meaning. It has been held even to mean ancestors, and not infrequently next of kin, but often the parents have been excluded.^ Judge Redfield, in his work on wills, says: * " There has been considerable con- troversy in the English courts in regard to the proper con- struction of bequests to the family of the testator, or of others. The state of things is so different in England, as it regards families, from what it is here, that the ordinary import of the word can scarcely be regarded the same. And' the fact that so many cases, where the meaning of this term came in question, have arisen in the English courts upon the construction of wills, and so comparatively few in this country, leads us to the conjecture, that the word, family, will but seldom occur in a will, in this country, where there will not be something, either in other portions of the will or in the surrounding circumstances, which may lead to a reasonable ground of inferring, with probable certainty, the sense in which it was used by the testator." When used in the statutes in connection with other words, as where it says, " the families, widows, orphans, or other de- pendents of the deceased members," ^ it may include those not embraced in any of the other classes^ and, therefore, was probably used in the larger sense of kindred or relations. 1 Vol. II, p. 622, et seq. 2 1 Drew, 651. 3 2 Red£. on Wills, *73. 4 2 Bedf. on Wills, *71. 6 Kev. Stat, of Mo. 1889, Sec. 2823. 6 Grand Lodge v. Eisner, 26 Mo, App. 116. ' Carmichael v. N. W. Mat. Ben, Assn., 61 Mich. 494. 606 DESIGNATION OF BENEFICIARY. § 256 Later cases seem to incline to the definition of family ap- proved by the cases relating to homestead rights. For example, it has been said: ^ " We are not of the opinion that the words ' or their families,' as used in section 47, supra, of the constitution of the order, should be con- strued to embrace all kindred of the same degree, but that the family therein intended to be benefited, where one exists, is the family as understood in its usual and ordinary sense, that is to such persons as habitually reside under one roof and form one domestic circle, or to such as are dependent upon each other for support, or among whom there is a legal or equitable obligation to furnish support." Under this definition immediate relatives often cannot be in- cluded in the term and a mother has, under this construc- tion, been excluded.^ Under some circumstances a father would be included : ^ and a child by the member's prior mar- riage ; * and an aunt ; •' and a mother ; ^ and a sister ; ^ and an orphan child taken into the family when an infant;^ and a grandchild of a sister of the insured.' The only child of a deceased member, his wife being divorced, was awarded the fund in preference to the member's brother who lived in the member's family, the term used in the charter being " immediate family." i" But the term " immediate 1 Hofman v. Grand Lodge B. L. F., 73 Mo. App. 47. See also Lister V. Lister, 73 Mo. App. 99. 2 Lister v. Lister, 73 Mo. App. 99; Kniglits of Columbus v. Rowe, 70 Conn. 546; 40 Atl. Rep. 451. 8 Ferbrache v. Grand Lodge A. O. U. W., 81 Mo. App., 268 4 Hutson V. Jenson, 110 Wis. 26; 85 N. W. R. 689. 5 Knights of Columbus v. Rowe, supra. « Manley v. Manley, 107 Tenn. 191; 64 S. W. R. 8. ' Supreme Assembly Royal Soc. etc. t>. Adams, 107 Fed. Rep. 335; Hosmer v. Welcli, 107 Mich. 470; 67 N. W. R. 504; Supreme Council L. of H. V. Nidelet, 81 Mo. App. 599. 8 Grand Lodge A. O. U. W. v. McKinstry, 67 Mo. App. 82. 9 Grand Lodge A. O. U. W. v. Fisk, 126 Mich. 356; 85 N. W. R. 875. 1° Norwegian Old People's, etc., Assn. w. Wilson, 176 111. 94; 52 N. E. R. 41. 607 § 257 DESIGNATION OF BENKFICIAKY. family ' ' does not include a married daughter not living with her father.^ Nor does the term ' ' family ' ' include a son who has come to maturity and has left his father's home permanently.^ §257. Childreu. — Where the word "children" as well as all other descriptive ' names of classes or re- lations, is used it must always, when that can be done, be understood in its primary and ordinary signification,' and where the word has received a larger and more extended construction it has been based upon a sup- posed intention of a testator, grantor, or law-making power to so extend it.* Life insurance policies payable to the chil- dren of insured include those subsequently born.^ When there are those answering to the description, only legiti- mate children are included under the term,* butthe authori- ties seem to agree that the question is one of intent, and if the term " children " is used by a testator who leaves one legitimate and one illegitimate child, both will gener- ally take; ' so, if an unmarried man leaves children who have been recognized by him, they will take.^ If sup- ported by him they can take as dependents.^ It has also been held that the term " child," will not include an illegitimate child.'" An assignment of a policy of life insurance by a man to the mother of his illegi- 1 Danielson v. Wilson, 73 111. App. 287. 2 Brower v. Supreme Lodge N. R. A., 87 Mo. App. 614. 3 2 Redf. on Wills, *15; Bedford's Appeal, 40 Pa. St. 18. * 2 Redf. on Wills, *16 and note; Wigram on Extrinsic Evidence, 42. Roquemore v. Dent, 1.S5 Ala. 292 ; 33 Sou. R. 178 ; Scull o. ^tna L. Ins. Co., 132 N. C. 30; 43 S. E. R. 604; 60 L. R. A. 615. " Van Voorhis v. Brintnall, 23 Hun, 260. ' 2 Redf. on Wills, *24 and cases cited in note. 8 2 Redf. on Wills, *25. 9 Hanleys. Supreme Tent, etc., 38 Misc. R. 161; 77 N. Y. Supp. 246. 1" Savigne v. Ligue des Patriotes, 178 Mass. 25; 59 N. E. R. 674; 54 L. R. A. 814. 608 DESIGNATION OF BENEriCIAEY. § 257 timate child to secure its support has been upheld. ^ Step-children will take if such can be supposed to have been intended.^ Also children by different mar- riages,^ and posthumous children,* and adopted children,^ but the right of the latter depends upon whether the child was legally adopted and whether there was an intent that it should take. The motive for the adoption is immate- rial.* In a case where a policy of life insurance on the life of a husband was payable " to my wife M. and children," the court held that a child of the insured by a former wife was included ; ' and it has been held that ' ' children ' ' means children of the assured by several wives, but not children of a wife by another husband.^ And where the policy on the life of a man was payable to his wife his child by a subsequent marriage takes nothing.' Where the benefit was payable to certain children by name a child subsequently born is not included ; ^^ but where the appli- cant designated his wife and children and the agent in- formed him that afterborn children would be included it was held,^^ that the company was estopped to claim the contrary. An adult son can be properly designated although he does not live with his rather and the latter 1 Brown u. Mansur, 64 N. H. 39; 5 Atl. R. 768. 2 Tepper v. Supreme Council R. A,, 61 N. J. Eq. 638; 47 Atl. R. 460. 3 Redf. on Wills, *29; Jackman B.Nelson, 147 Mass. 300; 17 N. E. Rep. 529; State L. Ins. Co. v. Redman, 91 Mo. App. 49. * 4 Kent Coram. 412; 2 Washb. on Real Prop. 654; 2 Redf. on Wills, *10, 5 Barnes v. Allen, 25 Ind. 222; Virgin u. Marwick, 97 Me. 578; 55 Atl. R. 520. 6 Kemp^. N. Y. Produce Ex. 34; 34 App. Div. 175; 54 N. Y. Supp. 678. ' McDermott v. Centennial M. L. Ins. Assn., 24 Mo. App. 73; see also Jackman o. Nelson, supra- » Koehler ». Centennial M. L. Ins. Co., 66 la. 325. 9 ^tna Mat. L. Ins. Co. «. Clough, 68 N. H. 298; 44 Atl. R. 520. i» Spry V. Williams, 82 la. 61; 47 N. W. R. 890; 10 L. R. A. 863. 11 Siurbier v. Union Central L. Ins. Co., 39 Ills. App. 620. 39 609 § 257 DESIGNATION OF BENEFICIARY. leave a widow. i Ordinarily, the word, ciiild, does not include a grandchild,^ but the general rule is, that whether grandchildren will take under the term children, depends entirely upon the construction of the intent of the party using the word. A leading English case ^ says : " Children may mean grandchildren when there can be no other con- struction, but not otherwise." The late American cases are apparently conflicting, but seem to agree that the ques- tion is one of intent, depending upon the special circum- stances of each case.* The Court of Appeals of Kentucky has held,^ that under the circumstances of that case any other construction would defeat the intention of the maker of the instrument, and that, there at least, the words, child and grandchild , were synonymous . In a Rhode Island case ,^ the Supreme Court held the opposite. In a case where the policy was payable to the wife of the assured, if she sur- vived him, and if not, then to his " children," it was held,' that grandchildren were not included. In another case,* where the policy was payable to the wife of assured " and children," the same court held that parol evidence was not admissible to show that a grandchild was intended to be included. The word, in a statute, has been construed to embrace grandchildren.' Obviously, rather than admit a construction that would result in intestacy, children would be held to mean descendants ; ^'' but there must be special 1 Klotz V. Klotz, 15 Ky. L. Rep. 183; 22 S. W. R. 551. '■' Churchill ». Churchill, 2 Mete. (Ky.) 469; Hughes v. Hughes, 12 B. Mon. 121; Carson ». Carson,! Phill. Esq. 57; Robinsons. Hardcastle, 2 Br. Ch. C. 344; In re Cashman, 3 Demarest (N. Y.), 242, " Beeves v. Brymer, 4 Ves. 6a2-698. ^ Castner's Appeal, 88 Pa. St. 478. 5 Duvall V. Goodson, 79 Ky. 224. " Winsor v. Odd-fellows' Assn., 13 R. I. 149. ' Continental L. Ins. Co. v. Webb, 54 Ala. 688. " Russell V. Russell, 64 Ala. 500. ^ Cutting V. Cutting, 6 Sawy. C. C. 396 ; Walton v. Cotton, 19 How. 355. 1" Roylec. Hamilton, 4 Ves. 437; Radcliffe v. Buckley, 10 Ves. 195; Beebe v. Estabrook, 79 N. Y. 246. 610 DESIGNATION OF BENEFICIARY. § 257 and satisfactory reasons to justify a departure from the primary import of the word;i the rule, however, is not general. 2 Often, in order to carry out a supposed inten- tion, children may mean issue generally.' All the persons who come within the designation and are in existence at the time the bequest or designation takes effect, will take un- less the language used clearly convej's a different import.* A benefit certificate takes effect, so far as to vest in the beneficiaries an absolute right to the benefit money, at the death of the party to whom it is issued, and hence the same rules should hold to them which prevail as to wills and policies of life insurance. Where the certificate was issued payable to the "children" of the applicant with- out naming them, the term does not mean certain named children then in existence, but those together with such as may thereafter be born to the member.' The words "their children" mean those common to the husband and wife.^ They will take an equal share per capita, but if there are not words indicating a purpose to have the bequest or benefit go in shares, it will be so construed and the several classes will take per stirpes.'' , Generally 1 Jackson v, Staats, 11 Johns. 337; Hallowell v. Phipps, 2 Whart. 376; Feit u. Vanata, 21 N. J. Eq. 84; Scott v. Guernsey, 48 N. Y. 106. 2 Thompson v. Ludington, 104 Mass. 193. 3 2 Redf. on Wills, *22, 23; Prowltt v. Kodman, 37 N. Y. 42; Churchill V Churchill, 2 Meic. (Ky.) 466; Bond's Appeal, 31 Conn. 183; Collins v. Hoxie, 9 Paige, 81 ; Hone v. Van Schaick, 3 N. Y. 538; Dickenson v. Lee, 4 Watts, 82. But see Hopson v. Commonwealth, 7 Bush, 644. * 2 Redf. on Wills, § 2, chap. I., part II. ; Chesmar v. Bucken, 37 N. J. Eq. 415; Campbell u. Rawdon, 18 N. Y. 412; Felix w. Grand Lodge, etc., 31 Kan. 81. 6 Thomas v. Leake, 67 Tex. 469; 3 S. W. Rep. 703; Union Mut. Aid Assn. V. Montgomery, 70 Mich. 587; 38 N. W. Rep. 588. To the contrary iS Conn. Mut. L. Ins. Co. v. Bddwin, 15 R. I. 106; 33 Atl. R. 105. See also § 294. 6 Evans B. Opperman, 76 Tex. 293; 13 S. W. R. 312. ' Hallan v. Gardner, 5 Ky. L. Rep. 857; Covenant Mut. Ben. Assn. v. Hoffman, 110 111. 603; Maionev. Majors, 8 Humph. 577: 2 Redf. on Wills, 611 § 257 DESIGNATION OF BENEFICIARY. where the fund is payable to ' ' wife and children ' ' they are tenants in common,! and the statutes of distribu- tion govern.^ Under the Illinois statute abolishing distinc- tions between the kindred of the whole and the half blood, the Supreme Court of that State has held,^ children of the same mother by different fathers are as much brothers and sisters as children of the same father by dif- ferent mothers. Where a policy was made payable to the children of the insured and she died before any were born it was held * that her executor could not maintain an action for the amount of the insurance. The court (Thayer, J. ) says : " The policy was obviously intended as a provision for such children as might be born of the marriage between Mr. and Mrs. Vail, and for no one else. The promise was to pay to the children, they were the beneficiaries. If Mrs. Vail had contemplated the possibility of death before she had given birth to any children, some provision would probably have been inserted in the policy touching the disposition of the insurance money in that event. What such provision would have been it is impossible to say and it is useless to indulge in speculation on that subject, as the court is powerless to make a contract for the parties covering that contingency. It can only enforce such a contract as the parties have themselves made. Some stress is laid on the *34; Harris' Estate, 74 Pa. St. 452; Kean v. Eoe, 2 Harr. (Del.) 103; Morgan M. Pettitt, 3 Demarest (N. Y.), 61; Campbell u. Wiggins, Bice (S. C.) Cli. 10; Lemacks v. Glover, 1 Rich. Eq. 150. 1 Seyton v. Satterthwaite, 34 Ch. D. 511; Milburn ». Milburn, 83 Ind 55. 2 McLln y. Calvert, 78 Ky. 472; Taylor v. Hill, 86 Wis. 99; 56 N. W. R. 738; Kelleyc. Ball, 14 Ky. S. Rep. 132; 19 S.W.R. 581; Grand Lodge A. O. U. W. V. Sater, 44 M. A. 446. 8 Oglesby Coal Co. v Pasco, 79 111. 164. For further discussion, see post, § 264. * McElwee ». N. Y. Life Ins. Co., 47 Fed. B. 798; see also Vanorme]. V. Hornberger, 142 Pa. St. 576; 21 Atl. R. 887. 612 DESIGNATION OF BENEFICIAKY. § 257 fact that, according to the rule which prevails in some States, Mrs. Vail retained the power, so long as she held the policy, to change the beneficiaries with the consent of the insurer.! It is claimed that because she retained such power her administrator may recover on the policy. I am unable to assent to that proposition. Even if she had a right to change the beneficiary it was a mere power, to be exercised with the company's consent, and, as the agreed case shows, she never exercised it, or attempted to do so. The existence of such power, even if its existence be con- ceded, is not sufficient to make the policy a part of her estate, or authorize her administrator to sue thereon. Furthermore, it is said by taking out the policy for the benefit of her children, Mrs. Vail constituted the defendant company a trustee, for her children, and, the trust having failed because she died childless, that the fund in the trustee's hands inures to the benefit of her estate in the same manner that a fund left in trust for a given purpose will inure to the benefit of the donor or his heirs, if for any reason the trust cannot be executed. It is sufficient to say of this contention that, if the principle invoked has any application to the case at bar it is only applicable to the premiums actually paid up to the time of Mrs. Vail's death and the interest accumulated thereon ; and the remedy is in equity. Mrs. Vail did not place $5,000 in the hands of the defendant company to be held for the benefit of or in trust for her children. She contracted to pay $39.60 quarterly, and up to the time of her death had paid only two quarterly installments. The contract was entered into with the expectation that Mrs. Vail would live many years and that the premiums paid in the meantime, with accumulated interest, would equal the face of the policy at the end of her expectancy. Under the circumstances, it cannot be ^ Kerman v. Howard, 23 Wis. 108; Gambs w. Insurance Co., 50 Mo. i7. 613 § 258 DESIGNATION OP BENEFICIARY. maintained, even on tiie trnst theory above outlined, that tlie defendant is liable to the plaintiff in the sum of $5,000, or in any other sum in a strictly legal proceeding." §258. Orphans. — In the statutes of Massachusetts, Missouri and other States relative to benefit associations, and in the charters of many societies, the benefits are ex- pressed to be, among other classes, for " orphans " of deceased members. An orphan is defined to be a minor, or infant child, who has lost both of his or her parents. Sometimes the term is applied to a person who has lost only one of his or her parents. ^ Webster's dictionary defines the noun orphan substantially as Bouvier, but the adjective as " bereaved of parents." The English author- ities usually cited ^ and at least one American case,^ sub- stantially support this definition. In a Pennsylvania case involving the construction of the word in Girard's will* the subject received exhaustive discussion, the conclusion being that a fatherless child was an orphan as well as a child who had lost both parents. The most reasonable view of the subject is that in the use of the word in connection with benefit societies, the orphans of a member are his children for, although a member's children cannot be orphans so long as he lives, his orphans must certainly be his children, and the word " orphans " has been held to be synonymous with " children." ^ But in a Missouri case ^ it was held, from consideration of the rules of the association, that in that case, the true construction demanded that the term ^ Bouvier's Law Die, tit. "Orphan." 2 2 Salk. 426 ; 2 Bl. Com. 519 ; 4 Burns Ecc. Law, 443-444 ; 7 Vin. Abr. 213; 1 McPherson on Inf. 54. ' Heiss, Exr., etc., v. Murphey et aL,40 Wis. 276. « Soohan v. City of Pliiladelphia et al., 33 Pa. St. 9. 5 Jackraan v. Nelson, 147 Mass. 300; 17 N. E. K. 529. 6 Hammerstein w. Parsons, 29 Mo. App. 509. 614 DESIGXATION OP" BENEFICIARY. § 259 " orphaa children," be taken as intended to mean minor children and not fatherless adults. § 259. Widow. — By " widow" we are undoubtedly to understand an unmarried woman whose husband is dead,' and that the word is used in its ordinary popular sense. An interesting case was recently decided by the Supreme Court of Maine ^ where the facts were as follows : Bolton insured his life in two societies to a considerable amount, payable to his widow; he then living with a woman who for many years had passed as his wife. Upon his death the money passed to this supposed widow, but afterwards the true widow appeared and sued the pretender for this insurance money. The court decided in the claimant's favor holding that there could be but one widow of a man. Under this rule a divorced woman whose husband is dead is not his widow. ^ In a New York case it was held* that the term wife after the name of a woman who was not the wife of the member will not invalidate the designation of her as his beneficiary. Nor does adultery affect the widow's right. ^ If a man designate as his beneficiary a woman with whom he is living as his wife the designation will be held good, although he may not in fact have been legally married to the woman, because if there be no violation of the laws of the society in the designation, the society by the issue of the certificate assents to such designation." And where a 1 Bouvier's Law D., tit. Widow. 2 Boltoa V. Bolton, 73 Me. 299. 3 Schonfleld v. Turner, 75 Tex. 324; 12 S. W. R. 626 ■1 Darian u. Central Vereiu, 7 Daly, 168; Vivar v. Supreme Lodge, etc., 42 N. J. L. 455; 20 Atl. R. 36. But under the limitations of the charter a woman not a lawful wife may be precluded from taking the benefit. Keener v. Grand Lodge A. O. U. W., 38 M. A. 643 * Shamrock Ben. Soc. v. Durm, 1 Mo. App. 320. * Story V. Williamsburg Masonic, etc., Assn., 95 N. Y. 474; Standard L. & A. Asan, v. Martin, 133 Ind. 376; 33 N. E. R. 105. 615 § 260 DESIGNATION OF BENEriCIAET. man lives with a woman as his wife in good faith and has children by her she is a dependent and can take.i But, where the by-laws of the society designate the widow of a deceased member as the party to whem the benefit is to bo paid, it has been held^ that in the absence of qualifying circumstances the lawful wife of the member is intended, although it is legally possible f of such member to designate as his beneficiary a person living with him as his wife, though not legally married to him, and if such designation is assented to and becomes a part of the contract, the per- son so designated may, on the member's death, recover on the contract, though the burden of proof is on her clearly to establish such designation. But in such a case the proof must be clear, for courts will not encourage concubinage, and no right of a lawful wife or child will be permitted to be taken away except upon clear proof. In a case in Mis- souri ^ where the laws of the order designated the widow of the member as his beneficiary, the deceased had abandoned his wife in a foreign country and had lived in Missouri many years with a woman who was held out to be his wife and by whom he had reared a large family. The court held, on a contest between the lawful and the alleged widow, that the former was entitled to the benefit and the intention of the member in effecting the insurance and the good faith of the putative wife in considering herself his wife were immaterial facts. § 260. Heirs. — In construing the meaning of the word heirs the intent will also be considered and regarded, if pos- sible ; * and if there is a plain demonstration that the word 1 Supreme Lodge A. 0. U. W. v. Hutchinson, 6 Ind. App. 399; 33 N. E.R. 816. See post, §261. ' Schnook v. Independent Order, etc., 21 Jones & Sp. 181. 3 Grand Lodge v. Eisner, 26 Mo. App. 108. * Tillman v. Davis et al., 95 N. Y. 17; s. c. 47 Am. Rep. 1; Criswell o. 616 DESIGNATION OF BENEFICIAET. § 260 was used in any other than a strict legal sense a liberal in- terpretation will be given it.^ Accordingly it has been held to have been used in the sense of family,^ and in the sense of children.^ The general current of authority is to the effect that when applied to the succession of personal estate the words mean next of kin and a husband or widow are excluded.* Applied to benefit societies the word will not be given a technical meaning. There are numerous cases which hold that by heirs those are meant who would take personal property under the statutes of distribu- tion.^ And a widow is included.^ In an Illinois case Grumbling, 107 Pa. St. 408; Bradlee v. Andrews, 137 Mass. 50; Green- wood V, Murray, 28 Minn. 120; Addison v. N. E. C. Travelers' Assn., 144 Mass. 591; 12 N. East. Eep. 407; Sweet v. Button, 109 Mass. 591; De Beauyoir v. Beauvoir, 3 H. L. Cis. 524; In re Bootes, 1 Drew & Sai.228. ' Rivara v. Gisenhof, 35 Hun, 247; Addison o. N. E. C. Trav. Assn., 144 Mass. 691; 12 N. East. Bep. 407. 2 Bradlee v. Andrews, 137 Mass. 50; Rivard v. Gisenhof, 35 Hun, 247; Criswell v. Grumbling, 107 Pa. St. 408; Brown v. Harmon, 73 Ind. 412. 8 Morton v. Barrett, 22 Me. 257; Mace v. Cushman, 45 Me. 250. 4 Hodge's Appeal, 8 W. N. C. (Pa.) 209; Hascall v. Cox, 49 Mich. 435; Irwin's Appeal, 106 Pa. St. 176; 61 Am. Rep.516; Tillman «. Davis ct al., 96N. Y. 17; s.c. 47 Am. Rep. 1; Wright ». Trustees, Hofe. Ch. 202; KeteltasB. Keteltas, 72 N. Y. 312; Luce ». Dunham, 69 N. Y. 36; Dodge's Appeal, 106 Pa. St. 216; s. c. 61 Am. B p. 519; Blackmaa v. Wadsworth, 65 la. 80; Wilkins k. Ordway,59 N. H. 378; s. c. 47 Am. Eep. 216; Gordon «. Small, 63 Md. 550; Phillips v. Carpenter, 79 la. 600; 44 N. W. R. 898; Knights Templars, etc., Assn. v. Greene, 79 Fed. B. 461. s Withy V. Mangles, 10 Clark & Fin. 215; Evans v. Salt, 6 Beav. 266; Jacobs V. Jacobs, 16 Beav. 557; Low v. Smith, 2 Jur. Pt. 1344; Doody V. Biggins, 2 Kay & J. 729; Elmsley v. Young, 2 Myl. & K. 82; In re Porter's Will, 6 W. R. 187; Gittings v. McDermott, 2 Myl. & K. 69; Eby's Appeal, 84 Pa. St. 241; Sweet v. Dutton, 109 Mass. 591; Welsh v. Crater, 32 N. J Eq. 177; Freeman v. Knight, 2 Ired. Eq. 72; Alexander v. Wallace, 8 Lea, 569; Houghton v. Kendall, 7 Allen, 72; Johnson v. Supreme Lodge K. of H., 53 Ark. 242; 13 S. W. E. 794; Lawwill -a. Lawwill, 29 111. App. 643; Walsh v. Walsh, 20 N. Y. Supp. 933; N. W. Masonic, etc., Assn. v. Jones (Appeal of Chance), 154 Pa. St. 99; 26 Atl. R. 253; Anderson v. Groesbeck, 26 Colo. 3; 55 Pac. R. 1086; Pleimann v. Harbung, 84 Mo. App. 283. 6 Leavitt o. Dunn, 66 N. J. L. 309; 28 Atl. R. 590; Lyous v. Yerex, 617 § 260 DESIGNATION OF BBNEFICIAEY, the Supreme Court of that State, ^ held that the des- ignation "legal heirs" in a benefit certificate gave the money to the next of kin and excluded the widow . How- ever, where under the laws of the State a widow is a distributee of her husband's personal estate she is entitled to share in the proceeds of insurance on his life payable to "his heirs at law."^ In a' case in Missouri^ "heirs or representatives " was held to mean next of kin, if the intent of the assured could be shown to be that the money was not to go to his executors or administrators to be administered as ordinary assets. The Supreme Court of Massachusetts has held* that the word "heirs" was used in the by-laws of a benefit society "in its limited sense, to designate such persons as would be the legal heirs or distributees of the member at the time of his applica- tion or designation. This view is strengthened by the fact that, in the fourth clause of the same section, the same words are used in this sense, it being provided that, ' if the designator leave no widow, or children, or assignee, then it shall be payable to his heirs.' In the case at bar, W., in his application for membership, designated his wife as the person to whom the benefit was to be paid* upon his death. At a later day he attempted to change the designa- tion from his wife to his mother. It is agreed that his mother was not living with him, but was living with her 100 Mich. 214; 58 N. W. E. 1112; Hanson v. Scandinavian, etc., Assn 59 Minn- 123; 60 N. W. B. 1091. • Gaucli V. St. Louis M. L. I. Co., 88 III. 251; see also Mearns v. Ancient Order United Workmen, 22 Ont. K. 34. 2 Lyons v. Yerex, 100 Mich. 214; 58 N. W. R. 1112, where all the cases bearing on the subject are reviewed. 3 Loos V. John Hancocli L. Ins. Co., 41 Mo. 538. To the same effect are Britton B. Supreme Counc. R. A., 46 N. J. E. 102; 18 Ati. R 675; Leavitt v. Dunn, 66 N. J. L. 309; 28 Atl. R. 590; Hannigan v. Ingra- ham, 8N. Y. Supp. 232. * Elsey V. Odd-fellows, etc., 142 Mass. 224. 618 DESIGNATION OF BENEFICIARY. § 260 husband in another town and county. It was not suggested that she was dependent upon him. She was not one of those who would be his heirs, and she was not one of the ' members of the decedent's family,' within the meaning of the by-law." In another case, however,^ the mother of deceased, under the special facts in the case, was held to be a dependent. In another case, heirs was held to mean widows,^ and the term has been construed to mean wife and children.^ The widow of a member of a mutual benefit asso- ciation is the beneficiary under a certificate issued by it which is payable to" his heirs," he having brothers and sisters but no children.* The Supreme Court of Ohio has held that it is not within the power of a member of a benefit society to try to make one who is not related to him his beneficiary and heir within the statute limiting beneficiaries to the fam- ilies of heirs of members,^ and a divorced wife has no share in the benefit^ unless equities existin her favor and the fund is in court.' In a Michigan case ^ it was held that, where a benefit was payable to the wife of the member, " her heirs, executors, etc.," and she died before her husband, leaving a will bequeathing the benefit to such husband, his heirs who were collateral kindred were within the statute providing for the payment to " heirs, etc." Under the i Am. Legion of Honor o. Perry, 140 Mass. 580. 2 Addison v. N. B. C. Travelers' Assn., 144 Mass. 591; 12 N. East. Kep. 407; Kaiser ». Kaiser, 13 Daly, 522; Lawwill v. Lawwill, 29 111. App. 643. 2 Janda u. Bohemian, etc., Union, 71 App. Div. 150; 75 N. Y. Supp- 654; afEd. 173 N. Y. 617; 66 N. E. E. 1110; Taylor o. Hill, 86 Wis. 99 ; 56 N. W. E. 738. 4 Alexanders. N. W. Masonic Aid Assn., 126 111. 558; 18 N. E.K. 556; Jamieson v. Knight's Templar, etc., Assn., 12 Cin. L. Bui. 272 (Superior Ct. Cin). 5 National Aid Assn. o. Gonser, 43 Ohio St. 1. 6 Schonfield v. Turner, 75 Tex. 324; 12 S. W. R. 626. 7 Leaf V. Leaf, 92 Ky. 166; 17 S. W. E. 354. 8 Silvers v. Mich. Mut. Ben. Assn., 94 Mich. 39; 53 N. W. R. 935. 619 § 260a DESIGNATION OF BENEFICIAKT. general rules and the statutes, in most States governing such cases of legacies to a class, heirs would take -per stirpes.^ § 260a. Relatives. — In the Massachusetts statute and in charters of some benefit societies the word "relatives" is used. This term undoubtedly is synonymous with rela- tions or kindred,^ and is to be tjonstrued accordingly. It has long been settled that the word, relatives, when used in a will or statute, includes those persons who are next of kin under the statutes of distribution, unless from the nature of the bequest or from the testator having author- ized a power of selection, a different construction is allowed.^ In the construction of a statute it has been held not to include a step-son * nor a wife.^ In this latter case the court s£iid : ' ' There seems to be no authority f oi- hold- ing that the word relation, in its strict legal and technical sense, includes husband or wife. Oh the contrary, authorities are found very direct and explicit to the point that they are not relations. Thus in 2 Williams on Execu- tors,* it is laid down that ' no person can regularly answer the description of relations but those who are akin to the testator by blood. A wife, therefore, cannot claim under a bequest to her husband's relations nor a husband as a relation to his wife.' " The Supreme Court of Penn- 1 Redf. on Wills, *34; Burgin v. Patton, 5 Jones Eq. (N. C.) 425; Gos. ling V. Caldwell, 1 Lea (Tenn.), 454; Conigland v. Smitii, 79 N. C. 303; Bell V. Kinneer, 101 Ky. 271; 40 S. W. R. 686. 2 Bouvier Law Die, tit. "Relative;" Sheehan ». Journeymen's, etc., Assn. (Cal.), 76 Pac. R. 238; Donitban «. Independent Order, etc. (Pa. St.), 58 Atl. B. 142. 8 Drew V. Wakefield, 54 Me. 291 ; 2 Jarm. on Wills, 661 ; Bonvier's Law Die, tit. " Relative." * Kimball v. Story, 108 Mass. 382. To the contrary, Simcoke v. Grand Lodge A. O. U. W., 84 la. 383; 51 N. W. R. 8. " Esty Admr. v. Clark et al., 101 Mass. 36. " P. 1004. 620 DESIGNATION OF BENEFICIARY. § 260a sylvania^ has decided that in a will the terms, " my near- est relations or connections," do not include the testator's wife. The decision says: " A wife is no more a relation of her husband than he is of himself." The English rule is the same.''' The word " relations " includes only rela- tions by blood and not connections by marriage, even a husband or wife.' This however is not always true, for a more liberal construction has been adopted and, in constru- ing statutes relative to benefit societies, the wife of a nephew lias been held to be a relative of the uncle. In a case of this kind the court says : * "In our more modern dictionaries we find that a ' relation ' or ' relative ' is defined as a person connected by blood or affinity. When used in a contract, as in this case, I do not find that it has such a fixed and definite meaning that we must thwart the purpose of this decedent, who supposed that, by the terms of the article givino; him control of his benefit in the relief fund he could bestow it on any one of those popularly called ' relatives ' whom he might select. It seems also that a liberal rather than a restricted meaning given to the word ' relative » used in this article of the association, would better comport with its benevolent purpose. The construction contended for against this certificate would exclude a member's wife unless she came within the other part of the phrase by being dependent on him for her support. The ties of affinity are often stronger than those between collateral or even lineal, kinsmen by blood; and there is nothing unreasonable in saying that this certificate was made pay- 1 Storer v. Wheatley, 1 Pa. St. 506. 2 Garrick v. Lord Camden, 14 Ves. 372. 3 Paine v. Prentiss, 5 Met. 396; Esty v. Clark, 101 Mass. 36; Dickin- son V. Purvis, 8 S. & R. 71; Kimball o. Story, 108|Ma8s. 582. To the contrary is Tepper v. Supreme Council R. A., 61 N. J. Eq. 638; 47 Atl. R. 460; reversing 45 Atl. R. 114. * Bennett v. Van Riper, 47 N. J. E. 563; 22 Atl. R. 1055; reversing Supreme Council, etc., v. Bennett, 47 N. J.E. 39; 19 Atl. R. 785. 621 § 260a DESIGNATION OF BENEFICIARY. able to one whom the holder supposed was properly classed among his relatives and that the council so intended. Where there is no fixed legal or technical meaning which the court must follow in the construction of a contract, then 'the best construction," says Chief Justice Gibson, 'is that which is made by viewing the subject of the contract as the mass of mankind would view it ; for it may be safely assumed that such was the aspect in which the parties themselves viewed it. A result thus obtained is exactly what is obtained from the cardinal rule of intention.' ^ It seems that the objects of this association will be best attained by the adoption of a common, though it may be an inexact, interpretation of the words ' related to ' as used in the article above referred to, rather than by a restricted meaning that may not have been known, and is certain to defeat the purpose of this deceased member; and that no rule of legal construction will be violated by giving it such a meaning." A step-son is a relative of the step-father. As the Supreme Court of Iowa says:^ "It is urged that the certificate is void because plaintiff is not a ' relative ' within the mean- ing of the statute. By particular specification the statute comprehends many classes of relatives, and then supplements their use by the term ' relative ' without words of limitation. Nothing seems to indicate that the word is used in a restricted sense. A step-father is a relative by affinity and the relationship continues after the death of the wife on whom the relationship depends. In Spear v. Robinson ^ it is said : ' By the marriage one party thereto holds by affinity the same relation to the kindred of the other that the latter holds by consanguinity, and no 1 Navigation Co. v. Moore, 2 Whart. 491. ' Simcoke u. Grand Lodge A. O. U. W., 84 la. 383; 51 N. W. R. 8. » S9Me. 531. 622 DESIGNATION OF BENEFICIARY. § 261 rule is kaown to us under which the relation by affinity is lost on a dissolution of the marriage, more than that by blood is lost by the death of those through whom it is derived. The dissolution of a marriage, once lawful, by death or divorce, has no effect upon the issue; and it is apprehended, it can have no greater operation to annul the relation of affinity which it produced. There is nothing in the spirit or purpose of the law that indicates to us that relatives by affinity are not within the legislative intent,' " ^ and a stepdaughter is included.^ A sister also is a relative within the meaning of the term used in a statute.^ § 261. Dependents. — The statutes of the various States, and a majority of the charters of the leading benefit asso- ciations, restrict the payment of benefits, among other classes, to the " dependents " of the member, or " those dependent upon him." In the discussion of the meaning of the word " dependents " we have not the benefit of a series of judicial decisions extending over many years, for the point has not often arisen; but the only cases bciring directly on the subject will be referred to in the course of this inquiry. Webster's Dictionary defines the word pri- marily to mean, " One who depends; one who is sustained by another, or who relies on another for support or favor; a retainer; as a numerous train of dependents." In cases arising under the homestead and exemption laws, the courts have, with scarcely an exception, held that hired servants are not members of a family within the meaning of those la ws.* Following the analogy of these precedents we must conclude that " retainers " or servants are not to be classed among dependents, nor is any person whose relation to the 1 Anthony v. Mass. Ben. Assn., 158 Mass. 322; 33 N. E. R. 577. 2 Eenner v. Supn-me Lodge, etc., 89 Wis. 401; 62 N. ^. R. 80. 3 Anthony v. Mass. Ben. Assn., 158 Mass. 322; 33 N. E. R. 577. * Thompson on Homesteads, etc., §§ 45-47. 623 § 261 DESIGNATION OF BENEFICIARY. testator is fixed by contract and not by situs, except of course, husband and wife, who undoubtedly are dependents each upon the other. A servant therefore is not a depend- ent. ^ Nor a woman with whom the member boarded.^ But a woman is a dependent who in good faith lives with him in the belief that she is his wife although there is no lesjal marriage.' In the case' first cited the court, review- ing a number of cases bearing on the subject, which are also cited again in the text, says: " Margretta Hutchin- son sustained to the deceased the actual, but not the legal relation of wife. She was not his wife and could not take as such. She was, however, in her relations with him, entirely innocent of any wrong intent, and being innocent no principle of public policy can intervene to prevent the courts giving to her that to which she is otherwise entitled. This certificate is no more tainted with evil in her hands than in the hands of the lawful wife. While Margretta was not the wife, she was a dependent upon the deceased and she had at least a moral right to look to him for support. She and her children were in fact dependent upon him. He owed to her and to them a duty which was in part performed by taking out this certificate payable to her. While it was not lawful for him to live with Margretta, it was eminently lawful and proper that he should provide for the support of herself and children after he had wronged her so grievously. We think the true meaning of the word ' dependent ' in this connection means some person 1 Grand Lodge A. O. U. W. v. Gandy, 63 N. J. Eq. 692; 53 Atl. R. 142. 2 Faxon v. Locomotive, etc., Assn., 87 111. 262. " Sapreme Lodge A. O. U. W. y. Hutchinson, 6 Ind. App. 399; 33 N. E. R. 816. To the same effect are: Crosby ». Ball, 4 Ont. L. E. 496; Supreme Tent, etc., v. McAllister (Mich.), 92 N. W, E. 770; Senge V. Senge, 106 111. App. 140; James v. Supreme Counc. E. A., 130 Fed. R. 1014. The ripening ol an illicit connection into a lawful marriage makes the woman a wife. Busch v. Busch, 81 Mo. App. 562. 624 DESIGNATION OF BENEFICIARY. § 261 or persons dependent for support in some way upon the deceased.* The beneficiary must be dependent upon the member in a material degree for support or maintenance or assistance, and the obligation on the part of the member to furnish it must rest upon some moral or legal or equitable grounds. ' ^ In Keener v. Grand Lodge, etc. ,^ this language is used : ' I would not restrict dependency to those whom one may be legally bound to support, nor yet to those to whom he may be morally bound, but the term should be restricted to those whom it is lawful for him to support. It is not lawful to support a woman knowingly occupying the illicit relationship in which interpleader places herself.' The case of Story v. Association,* meets every feature of the case in hand except that relating to the warranty. In that case the member was married, but lived with another woman as his wife, joined the association, and received a cer- tificate payable to ' Mary Story, his wife,' although she was not his wife. The court says : ' The nondisclosure by Story of the prior marriage was not a fraud upon the society. Its obligation was not in any way enlarged by making the plaintiff the beneficiary. Nor did the appropriation of the fund for her benefit contravene the policy or objects of the association. The plaintiff for sixteen years lived with Story, believing herself to be his lawful wife. They had children dependent upon them for support. It was a case where it was the duty of Story to provide for them, and the provision he made through this insurance was in entire accord with the objects of defendant's organization.' And upon this ground expressly the judgment in favor of the plaintiff was affirmed." • A mistress, however, is not a 1 Bilious. Gile, 50 Wis. 614; 7 N. W. R. 561. 2 McCarthy v. Order of Protection, 153 Mass. 314; 26 N. E. R. 866. 3 36 Mo. App. 513. < 95 N. Y. 474. 40 625 § 261 DESIGNATION OF BENEFICIAKY. dependent in any sense. ^ We must logically exclude also those whose dependence upon the member is for favor, which may or may not take a pecuniary form, and which may be cast off at pleasure. Evidently, to bring a person within the circle of dependents, there must be some more substantial and open reliance, and yet we can easily conceive of cases where a state of dependency may be actual, although no legal nor moral duty rests upon the member to give aid or support to the dependent. Under the definition, three classes are left and even these have no well-defined limits, or bounds of separation ; so that all persons can be segre- gated into oneor the other division. " One who depends," — what is included in this definition? We are all more or less dependent on each other, and so are dependents, yet none can affirm that all the world is included in the class named in the charters or statutes. " One who is sustained by another, or who relies on another for support." Taking this definition as a whole, we are forced to the conclusion that they limit the term dependents to those who reasonably rely upon another for subsistence, nourishment and support. In a Wisconsin case,^ the Supreme Court defined dependent as follows : " We think the true meaning of the word ' de- pendent,' in this connection, means some person or persons dependent for support in some way upon the deceased." This definition has been cited and seemingly approved by the Supreme Court of Massachusetts,^ which held, under the special facts in the case, that the betrothed of the member was not a dependent upon him, nor was his sister, nor a sister of his deceased wife. Although an affianced wife is generally not a dependent * yet she in fact may ^ Keener v. Grand Lodge, supra; West v. Grand Lodge A. O. U. W., 14 Tex. Civ. App. 471; 37 S. W. R. 966; Grand Lodge, etc., v. Kiebllng, 81 Mo. App. 545. 2 Ballou M Gile, 50 Wis. 614. 3 American Legion of Honor v. Perry, 140 Mass. 580. * Palmer v. Welch, 132 111. 141; 23 N. E. R. 412; afeg. Parke «. Welch, 626 DESIGNATION OF BENEFICIARY. § 261 be a dependent and it has so been held.^ In an- other Massachusetts case,^ a mother was held not to be a dependent, and a brother is sometimes not a dependent.^ Nor a father.* A child living with its par- ents and supported by them is not a dependent of a man who occasionally made her presents.^ The question has also arisen in Missouri, where the statute ^ authorizes cer- tain benevolent corporations to provide by assessments on their members certain benefits for " the relief and aid of the families, widows, orphans or other dependents" of the deceased members. In construing this section the St, Louis Court of Appeals says : ' " Counsel for the appellant argues that section 972 contains a limitation of power, and, as the provision is for ' relief and aid,' the beneficiary must not only be a member of the family, or a widow, or orphan of the deceased member, but also must have lived dependent upon him for support. There is no warrant for this construction. The words ' other dependents,' are in- serted to include persons who, not being either members of the family of the deceased, nor his widow or orphans, are yet dependent upon him in some manner. Any other con- struction would require the court in each case to enter into an investigation of the fact how far the widow or orphan, or any other member of the family, was self-supporting; 33 III. App. 186; Alexander v. Parier, U4 111. 355; 33 N. E. R. 183; re- versing 42 111. App. 455; and Am. Legion of Hoaor v. Perry, supra. 1 Iq McCarthy v. New England Order, etc., 153 Mass. 314; 26 N. E. R. 866; Alexander y. Parker, supra. See also Kinney v. Dodd, 41 111. App. 49. 2 Elsey V. Odd-Fellows, etc., 142 Mass. 224. 3 Supreme Counc. Am. L. of H. v. Smith, 45 N. J. E. 466; 17 Atl. R. 770. » Brower ». Supreme Lodge, etc., 87 Mo. App. 614; Wagner u. St_ Francis Ben. Soc, 70 Mo. App. 161. « Offlll V. Supreme Lodge K. of H. (Tenn.), 46 S. W. R. 758. 6 § 972, Rev. Stat. 1879. ' Grand Lodge v. Eisner, 26 Mo. App. 116. 627 § 261 DESIGNATION OF BENEFICIARY. which, in itself, instead of furthering the objects of these associations, would soon encompass their complete destruc- tion. This is in accord with the construction placed upon the statute by the Supreme Court of Michigan in Supreme Lodge V. Nairn,! ^here it is held : ' The laws of that State (Missouri) expressly forbid corporations of this sort from paying benefits to any but the member's family or depend- ents. The intent of the prohibition is clearly to shut out all persons who are not actual relatives or standing in place of relatives in some permanent way, or in some actual dependence on the member.' " From the definition and cases cited it seems that whether or not a person is included among the dependents of a member of a benefit society is a question of fact, and that each case must be decided upon its own merits.^ In accordance with the liberal view of the Supreme Court of Michigan,^ in defining who are included in the term family, we should say that if any person, rela- tive of the member or not, was supported by him, directly or indirectly, or wholly or in part, at his home or abroad, because of a legal or moral obligation, or merely from affection, such person might be called a dependent and be designated as the beneficiary of such member. But in all cases it would appear essential to apply the test of good faith, for mere capricious liking or temporary liberality in the way of gifts would not make the recipient a dependent.* A person whose only relation to the deceased member is that of a creditor, is not a person dependent upon him, within the meaning of the statutes authorizing the organiza- 1 60 Mich. 44. 2 Alexander v. Parker, 144 111. 355; 33 N. E. R. 183; reversing 42 111. App. 456, and indeed all the cases cited in this section. See also Grand Lodge A. O. U. W. V. BoUman, 22 Tex. Civ. A. 106; 53 S. W. R. 829. 8 Carraichael h. N. W. Mat. Ben. Assn., 51 Mich. 494. See also Car- penter V. U. S. Life Ins. Co., 161 Pa. St. 9; 28 Atl. 943. * Thompson on Homesteads, § 50; Seaton v. Marshall, 6 Bush, 429; Marsh v. Lazenby, 41 Ga. 153. 628 DESIGNATION OF BENEFICIARY. § 261a ion of societies to pay benefits to tiie families, dependents, etc., of deceased members, and a promise by the association to pay such a creditor is void. It has been said : ^ " Such a promise is beyond the powers of the association, and con- - travenes the intention of the statutes under which the asso- ciation was organized. The plaintiff cannot, therefore, maintain an action on this promise either for his own use, or for that of any other person." ^ § 261a. Affianced Husband and Affianced Wife. — Upon principle the words " affianced husband or affianced wife," used in the statute are to be construed in the ordi- nary and usual acceptation of the term, one to whom the member is affianced in good faith and not for the mere pur- pose of making such person a competent beneficiary. The question, ordinarily, would be one of fact. An affianced wife may be in fact a dependent,^ although it has been held to the contrary.* Classes of beneficiaries mentioned in the statute relating to fraternal beneficiary associations cannot be restricted or enlarged by the by-laws of the society, and so where the statute provided that payment of benefits should be made, among other classes, to "the affianced husband or affianced wife" of the member, an affianced wife will take, even though the by-laws of the society con- tain no provision for such a class and the issue of the bene- fit certificate payable to such affianced wife had been re- fused by the society .^ In a case in California a member of 1 Skillings V. Mass. Benefit Assn., 146 Mass. 217; 15 N. East Bep. 566. 2 Rice B. New England M. A. Soc, 146 Mass. 248; 15 N. E. Rep. 624; Brlggs v. Earl, 139 Mass. 473; 1 N. East. Rep. 847; Am. Legioa of Honor v. Perry, 140 Mass. 580; 5 N. East. Rep. 634. 3 McCarthy v. New England Order, etc., 153 Mass. 314; 26 N. E. R. 866; Kinney v. Dodd, 41 111. App. 49. * Palmer v. Welch, 132 111. 141; 23 N. E. B. 412; Alexanders. Parker, 144 111. 355; 33 N. E. E. 183. 6 Wallace v. Madden, 168 111. 356; 48 N. E. R. 181; affirming 67 111. 629 § 261a DESIGNATION OF BENEFICIARY. u fraternal society obtained a benefit certificate payable to a woman described as his " fiancee." On his death both she and his deserted wife claimed the benefit. In award- ing the fund to the former tlie court said: * " If any fraud or deception had been used in procuring the issuance of said certificate in reference to the designation of Mary E. Buzzard as fiancee, or otherwise, such certificate might have been declared void, and the sum specified therein forfeited, at the instance of tl:e plaintiff company; but, as found by the court, and as appears by the record, the com- joany makes no complaint, and disclaims any right to the fund. The term pmployed may be considered as merely descriptio personse. ' It may be stated that, where a policy of life insurance expressly designates a person as entitled to receive the insurance money, such designation is conclusive, in the absence of some question as to the rights of the creditors. The receipt of the person desig- nated will discharge the insurer, and he may sue and recover the amount due at maturity of the policy. In such cases the legal representative of the insured has no claim upon the money, and cannot maintain an action therefor. It forms no part of the assets of the estate of the insured.'^ And in that case it was suggested that the policy might lapse for want of a beneficiary, and the court replies: 'Such a contingency cannot arise in any event here, for the defendant admits its liability, has paid the money into court, and only asks that the question as to the right of the two claimants may be determined so as to absolve it from liability.' It has also been held: ' Where a person makes an insurance on his life, he may make any App. 524. See also Supreme Council L. of H. », Niedelet, 81 Mo. App. 598. 1 Woodmen of the Worlds. Rutledge (Cal.%65 Pac. Eep. 1105. 2 Winterhalter v. Association, 75 Cal. 248; 17 Pac. 1. 630 DESIGNATION OF BENEFICIARY. • § 262 one he pleases the beneficiary, and the latter is not obliged to show an interest in his life, in order to recover." ^ § 262. LiBgal Kepresentatives : DsTisee : Iiegatee. — We may group under one heading the remaining terms most commonly used in describing the classes among whom the designation of beneficiaries must be made. " Legal representatives" is perhaps the most important of these. In construing the meaning of this word, as employed in a statute forbidding the use in business by any person of the name of any one formerly connected with him in partnershid without the consent of such person so formerly connected, or his legal representatives, the Supreme Court of Massa- chusetts held ^ as follows : ' ' There can be no doubt that the ordinary meaning of the term ' legal representatives ' is executors and administrators.^ In wills, the term may mean whatever the testator intended; but, if the meaning is not controlled by the context, it means executors or ad- ministrators.* In the construction of statutes, technical words and phrases, and such others as have acquired a peculiar and appropriate meaning in the law, are to be construed and understood according to such peculiar and appropriate meaning, unless such construction would be inconsistent with the manifest intent of the legislature, or repugnant to the context of the same statute. Accordingly, in a particular statute, this term was held to include heirs. 5 Looking at the legislation now before us for construction, nothing is found to change the ordinary meaning of the term." And the Supreme Court of Minne- sota has said:^ "This word 'representative' means one 1 5 Lawson, Eights, Kem. & Prac, p. 3636. 2 Lodge V. Weld, 129 Mass. 499. 3 Coxi;. Curwen, 118 Mass. 198; Price u. Strange, 6 Madd. 159 < 2 Williams on Ex. 1216-1220. « Johnson v. Ames, 11 Pick. 173, 180. « Walter v. Oddfellows' Mut. Ben. Assn., 42 Minn. 204; 44 N. W, R. 631 § 262 DESIGNATION OF BENEFICIARY. who represents, or stands in the place of another. It has, however, many applications. An executor or administrator is called the representative of a deceased person, because he stands in his place as to personalty : while an heir is some- times called his representative because he stands in his place as to realty. While the word may mean almost any- thing, especially in wills, which the context evidencing the intention of the party demands, yet, primarily, and ia the absence of some reason for putting some other meaning upon it to be found in the context, it ordinarily means the executor or administrator." The words, "legal repre- sentatives " in the contracts of beneficiary societies gener- ally mean heirs, or next of kin, and are not given a technical meaning.^ It may mean a widow or children who are legal representatives in the contemplation of the charter and by-laws, ^ or family.^ " Devisee " is one to whom a devise, i. e., a gift of realty, is given by a will, and " legatee" is one to whom a legacy, i. c, a gift of personalty, is given by a will,* but ia construing these terms the courts are inclined to search for the intent of the instrument maker .^ In one case^ the designation was " to his devisees, as provided in last will and testament, or, in event of their prior death, to the legal heir or devisees of certificate holder," and the member died intestate. In proceedings brought in equity to recover, the court held 57. See also Pittel v. Fidelity M. L. Assn., 86 Fed. R. 255; 30 C. C. A. 21. 1 Schultz V. Citizens Mut. L. Ins. Co., 59 Minn. 308; 61 N. W. K. 331. ^ Masonic Mut. Belief A. v. McAnley, 2 Mackey, 70 ; Griswold v. Saw- yer, 125 N. Y. 411; 26 N. E. R. 464; reversing 8 N. Y. Supp. 517; Murray V. Strang, 28 111. App. 508. 3 Sulz V. Mut. R. F. Ij. Ins. Assn., 28 N. Y. Supp. 263. See also Ins. Co. V. Flack, 3 Md. 341. * Bouvier's Law Diet. tit. "Devisee," "Legatee." « Lodge V. Weld, 139 Mass. 499. 6 Covenant Mut. Benefit Assn. v. Sears, 114 111. 108. 632 DESIGNATION OF BENEFICIAEY. § 263 these words to be equivalent to a promise to pay to the devisees, if there sliould be any, and if not then to his heirs. ^ And the words may mean wife.^ § 263. Ambiguous Designation: "Estate." — If the name of the person, for whose benefit the insurance is ob- tained, does not appear upon the face of tiie certificate or policy, or if the designations used are applicable to several persons, or if the description of the assured is imperfect or ambiguous, so that it cannot be understood without expla- nation, extrinsic evidence may be resorted to, to ascertain the meaning of the contract ; and when thus ascertained it will be held to apply to the interests intended to be covered by it, and they will be deemed to be comprehended within it who were in the mind of the parties when the contract was made.^ So, where the agent was told that the insurance was desired for the benefit of the widow and heirs of Daniel Eoss and the policy was made payable to " the estate of Daniel Eoss," the Court of Appeals of New York* held that the rule above given had direct application, as it is not essentia] that the person or persons assured should be named in the policy nor is that essential to the contract of insur- ance. In this case the court said: "It is insisted, how- ever, that the words, " estate of Daniel Ross ' have a definite legal signification, meaning his administratrix, and that the policy is to be construed in the same manner as though she was named as the person assured thereby. This position 1 Smith V. Covenant Mut. Ben. Assn., 24 Fed. Rep. 685; Newmans. Covenant M. B. Assn., 76 la. 56; 40 N. W. R. 87. See also People v. Petrie, 191 III. 497; 61 N. E. R. 469; affg. 94 111. App. 662. 2 House V. N. W. L. Assur. Co., 200 Pa. St. 173; 49 Atl. E. 937. 8 1 Phil, on Ins. 163; Colpoys ». Colpoys, Jacob, 451; Burrows^. Turner, 24 Wend. 277; Davis i;. Boardman, 12 Mass. 80; Newson's Admrs. V. D lUglass, 7 Harr. & J. 417; Myers ». John Hancock Ins. Co., 41 Mo. 538; Globe Ins. Co. v. Boyle, 21 Ohio St. 119. , i Clinton t7. Hope Ins. Co., 45 N. Y. 461. 633 § 263 DESIGNATION' OF BENEFICIARY. has some support in the remark of Denio, C. J., in Herki- mer V. Eice,^ to the effect that in common parlance and in legal language, when the estate of a deceased person is spoken of, the reference is to his effects in the hands of his executor or administrator. In that case the question was as to the right of the administrator and the creditors of the intestate on the one side, and the heirs upon the other, to certain money recovered upon policies of insurance upon the buildings on the land of the intestate, issued directly to the administratrix or renewed upon her application. The renewal receipts stated the premium to have been re- ceived of the estate of the intestate. In fact, the policies were renewed upon the application of and for the benefit of the administratrix and the creditors, and the court gave effect to the contract according to the intention of the parties." In a case decided by the Supreme Court of Flor- ida,^ the contract of life insurance described the beneficiary thereunder as " for the benefit of the estate of the insui'ed," and it was held that under the circumstances of the case the terms referred to and meant for the benefit of an only minor child less than five years of age at the date of the contract, and not to the administrator or distributee of the estate. The court in its opinion said: " The term estate here in its strict legal signification embraces neither the administrator, the heir or the creditor of the assured. It means the ef- fects, personal and real, left by the decedent when given a signification with reference to a period subsequent to his death, and that is the date when the benefit was to accrue. Such literal legal signification would be absurd. The word benefit in a policy of insurance must be interpreted with reference to persons, not things. An insurance may be for the benefit of the person owning a house, not for the house. 1 27 N. Y. 163. 2 Pace V. Pace, 19 Fla. 438. 634 DESIGNATION OF BENEFICIARY. § 263 To benefit stocks and stores was not the intention of the parties. Without entering into any elaborate discussion of the subject we will simply state that the cases having a bear- ing upon the subject^ show that these and similar terms,' under the circumstances of this case, are so interpreted as to benefit the surviving members of the family rather than for the benefit of the creditor or administrator, and that in this instance the beneficiary intended was the infant child. In the interpretation of contracts of this character the courts go a great way in this direction. This, we. think, would have been the construction of this policy, independent of the policy of the statute, which, as a matter of course, .should have some effect iu controlling cur action in the matter."^ The term used in benefit certificates usually will be construed to mean wife and children. ■"* In a Massachusetts case,* the Supreme Court held that a designation by a member of a benefit society of " ray estate " as the beneficiary, was illegal under the stat- utes of that State regulating benefit societies. And where the benefit was payable " subject to will" creditors were held to have no rights in it.^ In a Kentucky case,^ the controversy was over a benefit promised to be paid by the National Mutual Benefit Association on the death of one Throckmorton. By the charter the benefits could be paid to the "legal heirs or beneficiary" of the member. Throckmorton designated " my estate " as the beneficiary, but afterwards assigned the certificate to Basye, his cred- itor, for the sum of $500, the benefit being $4,000. The 1 Myera v. John Hancock Ins. Co., 41 Mo. 538; Clinton v. Hope las. Co., 45 N. Y. 454; Globe Ids. Co. v. Boyle, 21 Ohio St. 119, 2 See also Bppinger v. Canepa, 20 Fla. 262. 3 Dale V. Brumley, 96 Ind. 674; Hutson v. Jensen, 110 Wis. 26; 85 N; W. R. 689. * Daniels v. Pratt, 143 Mass. 216. 5 Beeckman v. Imperial Counc, etc., 11 N. Y. Supp. 321. 6 Basye v. Adams, 81 Ky. 368. 635 § 264 DESIGNATION OF BENEFICIARY. court awarded the amount, less what Basye had paid, to the heirs on the ground that though the assignment was void because a wagering transaction, yet, as Basye's claim was the only one against the estate, it allowed it to be paid. The court said : "He (Throckmorton) designated his estate as his beneficiary, by which he clearly meant that the amount payable at his death should become assets of his estate, to be paid over to his personal representative, according to the laws providing for the distribution of estates of deceased persons, and payment of debts against them." The term " survivors " as used in a benefit certifi- cate cannot include one not included in the classes men- tioned in the charter. 1 "Trustee and children" means trustee for children.^ "To his will" is a valid designa- tion.^ § 264. Several Beneficiaries, CoDStructloii. — If a policy or certificate be payable to several beneficiaries, as for ex- ample to " wife and children," all share equally and the wife will not take a moiety,* although it has been held that the statutes of distribution govern the designation of wife and children and the parties named do not take per capita,^ and where a policy names as beneficiaries the wife and children they all take as tenants in common and the wife does not take a life estate.* Where there are several beneficiaries named in a policy it has been held, as to insur- 1 Koertz v. Grand Lodge, etc. (Wis.) , 97 N. W. R. 163. 2 Atkins ». Atkins, 70 Vt. 565; 41 Atl. R. 503. 3 Hoffmeyer v. Muench, 59 Mo. App. 20. « Taylor w. Hill, 86 Wis. 99; 56 N. W. K. 738; Felix v. Grand Lodge A. O- U. W., 31 Kan. 81; 1 Pac. R. 281; Jackman v. Nelson, 147 Mass. 300; 17N. E. R. 529; Gould u. Emerson, 99 Mass. 154; Grand Lodge i). Sater, 44 M. A. 445; Bell v. Kinneer, 101 Ky. 271 ; 40 S. W. R. 686. 5 Kelly V. Ball, 14 Ky. L. Rep. 132; 19 S. W. R. 581; following McLin V. Calvert, 78 Ky. 472. Seyton ». Satterthwalte, 34 Ch. D. 511; Milburn v. Milburn, 83 Ind. 55. See also Brown «. Iowa L. of H., 107 la. 439; 78 N. W. R. 73. 636 DESIGNATION OF BENEFICIAEY. § 264 ance policies proper, that if one or more of them die before the assured, the benefit of the policy inures to the surviv- ors, and so long as any of the beneficiaries are living the assured has no interest in the policy and cannot assign it.^ Generally it may be said that the law of survivorship applies to designations of beneficiary and the last survivor takes the whole. ^ The laws of most benefit societies, how- ever, cover this point and provide that in case of the death of one or more beneficiaries during the life-time of the mem- ber the survivors shall take.^ And where a benefit certifi- cate was payable to " Mrs. M. H. Case or lawful heirs," and it appeared that at the time the certificate was issued to the member he had a wife Amelia, named in the desig- nation as Mrs. M. H. Case, who afterwards died leaving a daughter, Inez, and the member subsequently married and died leaving a widow Emma, it was held that when the wife, Amelia, died, the designation lapsed as to her and as Inez was the only heir of the member the benefit went to her.* Under a certificate of a mutual aid society naming two beneficiaries, and providing that " in case of the death of either, full amount to go to the survivor — if living ; if not living then to the heirs of said member," — upon the death of the member, the beneficiaries both living, the shares of such beneficiaries vest in them, and if one dies 1 RobinsoQ v. Duvall, 79 Ky. 83. See alse Small v. Jose, 86 Me. 120; 29 Atl. E. 976. 2 Farri). Trustees Gr. L. A. O.U. W., 83 Wis. 446; 53 N. W. R. 738; Walsh v'. Mutual L. Ins. Co., 133 N. Y. 408; 31 N. E. E. 228; reversing 15 N. Y. Supp. 697; U. S. Trust Co. t>. Mut. Ben. L. Ins. Co., 115 N. Y. 152; 21 N. E- E. 1025; Brofklya Mas. E. Assn. v. Hanson, 5N. Y. Supp. 161 ; Murray v. McDonald, 22 Oat. E. (^Q. B.) 557. See also Hemenway V. Draper (Minn.), 97 N. W. E. 874. 3 But to the contrary see Supreme Oounc. Oath., etc., v. Densford, 21 Ky. L; Eep. 1574; 56 S. W. E. 172; 49 L. K. A. 776; Gault v. Gault (Ky.), 80 S. W. E. 493. ^ Day V. Case, 43 Hun, 179. 637 § 264 DESIGNATION OF BENEFICIART. before the payment of the benefit, his share goes to his executor, not to the survivor. In a case where the mem- ber had directed that the benefit be paid to a son and daugh- ter, or the survivor of them, the money was payable ninety days after receipt of proofs of the death of the member and the son died after his father, but within the ninety days. The daughter claimed the entire fund on the ground that the period of survivorship related to the time of payment of the money, not to the time of death of the member. In awarding the son's share of the fund to his executor the court said: ^ " The scheme of the corporation is to raise a fund which shall pass to designated beneficiaries at the death of the member. The right, which before was inchoate and contingent, becomes upon the death of the member fixed and certain in the beneficiary. He may com- pel the corporation to levy the assessment, if it refuses, after the time limited for payment. The provision relating to survivorship applies to the one of the two who shall sur- vive the donor. If neither survive him, the fund goes to the heirs of the member. The time of payment provided for, namely ninety days after the death of the member, has no reference to who shall take as survivor. The time of payment is defined simply to enable the corporation to raise the fund by assessment upon the members. If the son, N. Lyon Franklin, had died before his father, Edward C., the whole sum would have been payable to the daughter, Charlotte A., and, if she had also died before her father, the fund would have been payable to his heirs. The words 'if living,' and 'if not living' refer to living at the time of Edward C. Franklin's death." ^ Where a father 1 Union Mut. Aid Assn. v. Montgomery, 70 Mich. 587; 38 N. W. Kep. 588. 2 See Thomas v. Leake, 67 Tex. 469; 3S. W. Eep. 703; Chartrand v. Brace, 16 Colo. 19; 26 Pac. E, 162. 638 DESIGNATION OF BENEFICIARY. ^ § 225 insured his life for the benefit of his children and some die in his lifetime he can, with the consent of the insurer, substi- tute other beneficiaries for the deceased parties but if he does riot the share he inherits from the deceased beneficiaries goes to his personal representatives.! If the constitution and by-laws of a benefit society provide that in default of a designation of a beneficiary by the member that the sum shall be paid to certain persons; as, for example, to the widow, orphans, heirs, etc., the word, " or," will be un- derstood between the names of these different classes and the fund in such case would go first to the widow, if there was one, if there was no widow, then to the orphans, or if there were no orphans or widow then to the heirs, and so on.^ § 265, Incorporated and Unincorporated Benefit So- cieties : Ultra Vires. — Whether a benefit society is incor- dorated or a mere voluntary association, it is believed that the laws governing the designation of beneficiary are the same. It is a question of construction of the contract, modified by statute, and the effect of non-compliance with the laws of the society or statute is to generally vitiate the designation. Whether or not an incorporated benefit society can invoke the doctrine of ultra vires to avoid a con- tracts must depend upon the general rules of law applicable to corporations, which we have already discussed.^ There 1 Shields ». Sharp, 35 Mo. App. 178. This is oa the theory of the vested rights ol the payees named in life insurance policies, the right being fixed by the issue of the policy but beneficiaries under contracts with benefit societies, take as legatees, the designation speaking from the death of the member, and only those living at the time of the death can take. 2 Relief Assn. «. McAuley, 2 Mackey, 70; Kentucky Masonic Aid, etc, v. Miller's Admr , 13 Bush, 489; Addison ». N. E. C. Travelers' Assn., U4 Mass. 491 ; 12 N. E. Bep. 407; Ballou o. Gile, 60 Wis. 614; Covenant M. B. A. B. Sears, 114 111. 108. 3 Ante, § 47, et seq. 639 § 265 DESIGNATION OF BENEFICIARY. are authorities which hold that it is always lawful to setup such a defense, but of late years the courts seem to frown upon this action, especially when the contract has been executed as by the death of the person insured and the later rule is that, in an action upon a benefit certificate, the society will not be allowed to assert in defense that the designation of the beneficiary in the certificate was one of a class of persons not included in the enumeration, in the charter, of those for whom benefits were to be provided. This is especially the case when the society has been receiv- ing the assessments on the policy with knowledge. i It has been held, however, that members of a beneficiary society are all in equality and are bound by the restrictions imposed by statute and that the doctrine of ultra vires does not apply to such societies because public policy for- bids. Otherwise the beneficiary of an illegal contract might receive its benefits because it had been executed on the side of the member.^ The reason does not, however, apply where there are no statutory restrictions, but only a by-law of the association.^ But under the rule of later cases, that the designation of a person not entitled to take under the laws of the society, or its charter, does 1 Matt V. Roman Catholic Mut. Pro. Sec, 70 la. 455; 30 N. W. Rpp. 799; Lamont v. Hotel Men's Mut. Ben. Assn., 30 Fed. Rep. 817; Bloom- ington Ben. Mut. Assn. v. Blue, 120 III. 121; Lamont v. Grand Lodge la. Leg. of Honor, 31 Fed. Rep. 177; Folmer's Appeal, 87 Pa. St. 135. But see Blsey v. Odd-Fellows, 142 Mass. 224; Am. Legion of Honor ». Perry, 140 Mass. 580; Mut. Ben. Assn. v. Hoyt, 46 Mich. 473; Knights of Honor©. Nairn, 60 Mich. 44; Rice v. N. Eng. M. A. Soc, 15 N. B. Rep. 624. The Supreme Court of Massachusetts is firm in holding these contracts ultra vires and void, although with the limitations as to result- ing trust as stated in the text. The Court of Appeal^ of Maryland holds that a misrepresentation as to relationship of the beneficiary viti- ates the contract. Supreme Counc. A. L. H. v. Smith, 45 N. J. E 466; 17 Atl. R. 770. See also Ferbrache ». Grand Lodge A. O. U. W., 81 Mo. App. 268. 2 Montgomery u. Whitbecli (N. D.), 96 N. W. R. 327. 3 Gruber v. Grand Lodge, etc., 79 Minn. 59; 81 N. W. R. 743. 640 DESIGNATION OF BENEFICIARY. § 265 not invalidate the contract but only the designation, so that the" benefit will go, either as the laws of the society provide in case of the death of all the bene- ficiaries, or to the next of kin, the difficulties in the way of application of the doctrine of ultra vires are not so great. i The contracts of a benefit society may be ultra vires only in part.^ 1 Britton v. Supreme Council R. A., 46 N. J. E. 102; 18 Atl. R. 675; Sargent u. Supreme L. K. of H., 158 Mass. 557; 33 N. E. R..650; Shea V. Mass. Benefit Assn., 160 Mass. 289; 35 N. E. R. 855; Ky. Grangers, etc., Soc. ». McGregor, 7 Ky. L. B. 550; see ante, § 243a. 2 Rockhold V. Canton Masonic, etc., Assn., 129 111. 440; 21 N. E. 794; 19 N. E. R. 710; Grand Lodge, etc., v. Waddill, 36 Ala. 313. As to com- ity in enforcing contract made in another State, see Hysinger v. Supreme L. K. & L. of H., 42 Mo. App. 628. 41 641 CHAPTEE VIII. CONSUMMATION OF CONTRACT: INCOMPLETE CONTRACTS: JURISDICTION OF EQUITY TO REFORM OR CANCEL. § 266. To Complete Contract of Insurance Negotiations must be Con- cluJed. 267. Application must be Accepted to make a Contract. 268. Proposal may be withdrawn at any time before Acceptance. 268a. Death of Applicant Before Delivery of Policy is a Withdrawal of ttie Proposition. 269. If the Policy be Different from that Applied for it is not Binding upon the Company until Accepted by the Applicant. 269a. Where the Policy, or Certificate, Differs, as to Payee, or other- wise, from Application. 270. Delay in Acting upon an Application will not Amount to Accept- ance ; Company not Bound to Accept. 271. Company may be Bound though Application has been Rejected or not Acted on. 272. When Contract of Insurance becomes Complete. 273. The Same Subject : Contract may be Complete without Delivery of the Policy. 273a. The Same Subject : When Contract of Benefit Society Becomes Complete. 274. Fraudulent Delivery of Policy. 275. After Contract is Complete Change in Risk Immaterial. 276. There may be a Conditional Delivery of Policy. 277. Unconditional Delivery of Policy by Agent in Violation of In- structions. 277a. Rescission. 277&. Abandonment. 278. Court of Equity can Correct Mistakes in Insurance Policies. 279. Equity will Relieve if Agent has Acted in bad Faith. 280. Of if the Policy does not Conform to the Application. 281. Or if the Errors are Manifest. 282. Reasons for Refusal to Intertere. 283. No Relief when Legal Effect of Plain Terms was Misunderstood. 284. Application of Foregoing Principles to Benefit Societies. 285. Jurisdiction of Equity to Decree Cancellation. 642 CONSUMMATION OF CONTRACT. § 266 § 286. The Same Subject: Application to Benefit Societies. 287. The Same Subject: Cancellation after Loss. 288. General Doctrine as to Interference of Equity Stated. § 266. To complete Contract of Insurance Negotia- tions must be Concluded. — We have seen ^ that the con- tract of insurance is the result of negotiations which are generally conducted through the medium of agents. On the one side is the proposal, or application, of the insured, on the other is the acceptance of such offer by the insurer before there can be a complete contract. Various impor- tant and interesting questions arise as to when the contract is complete and at what point in the negotiations it becomes binding upon one side or the other. The business of life insurance companies, as now conducted in this country, is done in this way: an agent solicits the application, which accompanied with the certificates of medical examination, of the referee, and of the agent, is sent to the company, whose immediate officers accept or reject it. If accepted a policy is forwarded to the agent, who countersigns it and delivers it on payment of the premium. The customs of the various companies are somewhat different, but their methods of doing business are substantially the same. Benefit socie- ties pursue a somewhat similar course. In applying for membership, and the insurance incident thereto, the appli- cant sends his application to the officers of the local lodge, accompanied with the prescribed fee : he is examined by the lodge physician, and the papers are sent to the grand medi- cal examiner, who approves or rejects. If approved and the investigating committee reports favorably, the appli- cant is voted on by the lodge, and, if received, is initiated into membership, after which the grand or supreme lodge issues the certificate, which is countersigned by the officers of the local lodge and delivered. In different societies these 1 Ante, § 189, et seq. 643 § 266 CONSUMMATION OF CONTEACT. processes are not always the same, nor are they always in the order stated, for often the member is not initiated until the grand lodge approves of the examination and issues the certificate. Generally, the course pursued is as first indi- cated. There is this difference between the methods of conducting the business of benefit societies and that of life insurance companies : the lodges have greater powers than the insurance agents. The lodge is the sole judge of the moral and social qualifications of the applicant, as the grand or supreme lodge is the judge of his physical qualifications. The powers of insurance agents are limited : subordinate lodges, like agents of life insurance companies, seldom have the authority to absolutely conclude a contract. Their powers are ordinarily confined to the procuring of applica- tions for insurance without any right to make a binding agreement. In some cases, as when an agent represents a foreign company, the agents may have a qualified authority to make their contracts temporarily binding during the period necessary to transmit the application to the company, or the grand, or supreme, lodge officers, and receive a reply. But the usage that lodges, or agents, cannot con- clude a contract, is so general that if an exception is alleged there must be evidence of actual authority, or of the repeated exercise of the authority with the knowledge of the company. In the case of benefit societies the constitu- tion and by-laws is the source of authority and in applying for membership the applicant will be presumed to have acquainted himself with their requirements and limitations of the authority of lodges.l Before the company, or society, can be held liable for the insurance applied for, the negoti- ations must have reached such a point that nothing remains for either party to do except to comply with the terms of the contract.^ 1 Supreme Lodge, etc. v. Grace, 60 Tex. 569. 2 Connecticut Mut. L. Ins. Co. v. Budolpb, 15 Tex. 151; Todd v. 644 CONSUMMATION OF CONTRVCT. § 267 § 267. Application Must be Accepted to Make a Con- tract. — The application for insurance is a mere proposal on the part of the applicant.! When the insurer signifies his acceptance of it to the proposer, and not before, the minds of the parties meet and the contract is made. This acceptance must be signified by some act, a simple mental acceptance, a mere thought unexpressed, amounting to nothing.^ This application must be in due form and signed by the applicant if the rules so require. As where the rules of a society required that the medical examination of an applicant and his application for a benefit certificate, which contained an agreement and warranty of the truth of the answers, be signed by him, which was not done, and no certificate was issued on that account, it was held that no liability resulted.^ In this case the court said : " The minds of the respective parties never met. There was no such mutual agreement and understanding of the matter between them as is essential in order to create the contract and give it binding force on both parties, under the rules and regu- lations by which the relations of the deceased to the appel- lant were governed." Where application was made to a benefit society in due form, and the agent received the papers and the applicant was examined by the medical examiner and gave his note for the first payment, but was killed before the note was paid or the application forwarded, it was held,* that until the application was approved by the company there was no contract. The court said : "The Piedmont & Arlington L. Ins. Co , 34 La. Ann. 63. As applied to revival of lapsed policy : Diboll & ^tna L. Ins. Co., 32 La. Ann. 179. 1 McCullyw. Phoenix M. L. Ins. Co., 18 W. Va. 782; Helmano. Phoenix M. L. Ins. Co., 17 Minn. 157. 2 Ala. Gold Life Ins. Co. v. Mayes, 61 Ala. 163 ; Heiman v. Phoenix Mut. L. Ins. Co., 17 Minn. 157; Tayloe v. Merch. F. Ins. Co., 9 How. 390; Armstrong v. Provident, etc., Soc, 3 Ont. L. R. 771. 8 Supreme Lodge, etc. v. Grace, 60 Tex. 570. * Covenant M. B. Assn. v. Conway, 10 Bradw. 348. 645 § 268 CONSUMMATION OF CONTRACT. applicatiou in such cases is a mere proposal, and, until it is accepted, there can be no contract, for until that time the minds of the parties have not met. There is simply an offer on one side, which maybe accepted or rejected by the other. There must be a meeting of the minds of the parties, in all cases, as to the,whole subject and the sub- stantial conditions of the whole contract, or there is obvi- ously no contract." And the payment of the premiums at the time of signing the application does not make a binding contract unless the agent is authorized to accept the application.^ § 268. Proposal may be Withdrawn at any Time before Acceptance. — It follows that the applicant can, at any time before the application is accepted, withdraw it, and if he does so, is not bound to accept the policy.^ The prin- ciple is that laid down in relation to all contracts,^ that "the party making the promise is bound to do nothing unless the promisee, within a reasonable time, engages to do, or else does or begins to do, the thing which is the condi- tion of the first promisee. Until such engagement or doing, the promisor may withdraw his promise, because there is no mutuality, and, therefore, no consideration forit."* An interesting case on this subject is that of Travis v. Nederland Life Ins. Co.,Sin which Judge Sanborn said: " Propositions, negotiations, correspondence, conversations do not make a contract unless the minds of the parties 1 Allen w. Mass. Mnt. Ace. Assn., 167 Mass. 18; 44 N. E. R. 1053; Pace V. Provident Savings L. A. Soc, 51 C. C. A. 32; 113 Fed. R. 13; Rossiter v. Mtaa. L. Ins. Co., 91 Wis. 121; 64 N. W. R. 876. 2 Globe Mut. L. Ins. Co. ■». Snell, 19 Hun, 561. See also Newcomb o. Provident Fund Soc, 5 Colo. App. 140; 38Pac. R. 61; Cofeer ». Atlas M. Ace. Ins. Co. (Tex. Civ. A.), 31 S. W. R. 703. 3 1 Pars, on Con. 550. ■■ Real Estate M. F. Ins. Co. v. Roessle 1 Gray, 336. 5 43 C. C. A. 653; 104 Fed. Rep. 486. 646 CONSUMMATION OF CONTRACT. § 268 meet upon the same stipulations and they consent to com- ply with them. Until this has been done, either party has the right to withdraw or to modify his proposition, to make new conditions or proposals, or to retire absolutely from the negotiations. The addition of a new term or condition to an earlier proposal before the latter has been accepted is the withdrawal of the earlier proposition, and the sub- mission of a new proposal of which the new condition or term is a part. From the time the newjcondition is sub- mitted the earlier proposition is withdrawn, and it is no longer open to acceptance or rejection by the party to whom it was presented. An application for life insurance is not a contract. It is only a proposal to contract on cer- tain terms which the company to which it is presented is at perfect liberty to accept or to reject. It does not in any way bind the company to accept the risk proposed, to make the contract requested, or to issue a policy. Nor does it in any way bind the applicant to take the policy, to make the contract he proposed, or to pay the premium until his proposal has been accepted by the company and its policy has been issued. Until the meeting of the minds of the parties upon the terms of the same agreement is effected by an acceptance of the proposition contained in the application or of some other proposition, each party is entirely free from contractual obligations. The appli- cant may withdraw his application and refuse to take in- surance on any terms. He may modify his proposal, may affix additional conditions or terms to it, or may make an entirely new proposition, while the company may refuse to entertain any proposition or may reject that presented and submit a substitute. Nor is the freedom of the parties to retire from the negotiations or to modify their proposals, at any time before some proposition has been agreed upon by both, ever lost or affected by the fact that the applicant accompanies his proposal or application with a promise to 647 § 268a CONSUMMATION OF CONTRACT. pay the premium iu the form of promissory notes, or even by actual payment thereof. Until his application is accepted, such a promise or payment is conditional upon the acceptance, and his application is still no more than a proposition to take and to pay for the insurance if the company accepts his terms. The payment of the premium when the application is signed does not bind the company to accept his terms nor does it estop the applicant from recovering the money he pays if the company rejects his proposal. These are fundamental rules of the law of con- tracts, which are constantly applied in this and other courts, and which are decisive of the case before us." i § 268a. Death of Applicant before Delivery of the Policy is Withdrawal of Proposition . — The death of the applicant before the delivery of the policy operates as a withdrawal of the proposal.^ In this case^ the court says : " The death of Kendall on June 3, 1890, before the appli- cation had reached defendant's home office, revoked his offer to become insured by the defendant company, which was contained in his application and rendered the making of the proposed contract of insurance impossible. An offer is revoked by the death of the proposer, or by the death of 1 Paine v. Insurance Co., 51 Fed. 689,691; 2 C. C. A. 459,461; 10 D. S. App. 256, 263, 264; Society v. McElroy, 83 Fed. 631, 640; 28 0. C. A. 365, 374; 49 U. S. App. 548, 564; McMaster v. Insurance Co., 40 C. C. A. 119; 99 Fed. 856, 866; Giddings v. Insurance Co., 102 U. S. 108, 112; 26 L. Ed. 92; Griffith v. Insurance Co., 101 Cal. 627; 36 Pac. 113, 115; Insurance Co. v. Young's Adm'r, 23 Wall. 85, 107; 23 L. Ed. 152; Insur- ance Co. o. Ewing, 92 U. S. 377, 381; 23 L. Ed. 610; Harnickell ». Insur- ance Co., Ill N. Y. 390, 399; 18 N. B. 632; 2 L. R. A. 150; Whiting ». Insurance Co., 128 Mass. 240; Markey ». Insurance Co., 118 Mass. 178; Id., 126 Mass. 168; Rogers v. Insurance Co., 41 Conn. 97, 106; Insurance Co. V. Collerd, 38 N. J. Law, 480, 483; Heiman v. Insurance Co., 17 Minn. 153, 157 (Gil. 127); Hogben v. Insurance Co., 69 Conn. 503; 38 Atl. 214-216. 2 Paine v. Pacific Mut. L. Ins. Co , 2 C. C. A, 459; 51 Fed. K. 689. ' Paine v. Pacific M. L. Ins. Co., supra. 648 CONSUMMATION OF CONTRACT. § 268a the party to whom the offer is made before acceptance. The continuance of an offer is in the nature of its constant repetition, which necessarily requires some one capable of making a repetition. Obviously, this can no more be done by a dead man than a contract can in the first instance be made by a dead maa.i Conceding that the defendant could and did determine to accept the application on June 7, 1890, one day after its receipt, and four days after the death of Kendall, still such acceptance and the contract, if so made, were void, because the life that was the subject- matter of the contract was not then in existence. The first party to this proposed contract was Kendall ; the second the defendant ; the subject-matter of the contract, Kendall's life. The contract was not made, in any event, before June 7, when defendant's medical director approved the application and at that time the first party to it was dead, and its subject-matter did not exist. Neither party would have knowingly made an insurance contract regarding a life that was not in being. Parties make no contract where the thing which they supposed to exist, and the existence of which was indispensable to the making of their contract, had no existence.^ Conceding that the action of the medi- cal director in approving the application on June 7th, in ignorance of the applicant's death was a determination to accept the application by the defendant, still there was no contract because no notice of the acceptance of the appli- cation was in any way communicated to the applicant or his representatives. The acceptance of an offer not com- 1 Pratt V. Trustees, 93 111. 475, 479; Dickenson v. Dodds, L. R. 2 Ch. Div. 463, 476; Phippsu. Jones, 20 Pa. St. 260, 264; Wallace t). Townsend, 43 Ohio St. 537; 3 N. E. R^p. 601. 2 Franklin v. Long, 7 Gill. & J. 407, 419; Gibson v. Pelkie, 37 Mich. 380; Stickland v. Turner, 7 Excti. 208, 219; Couturier v. Hastie, 5 H. L. Cas. 673, 682; ClifEord o. Watts, L. R. 5 C. P. 577; Hazard «. Insurance Co., 1 Sum. 218, 226; Insurance Co. u. Ewing, 92 tl. S. 381. 649 § 269 CONSUMMATION OF CONTRACT. munioated to the proposer does not make a contract.^ Conceding that the application was accepted on June 7th, 1890, by the defendant, it expressly provided that the con- tract of insurance should take effect and be in force only upon compliance with three conditions precedent, * viz. : that a policy should be delivered, that it should be delivered during the life and good health of the applicant, and that the premium should be paid when the policy was delivered. These conditions were never complied with. The vital in- dispensable condition was that the policy should be deliv- ered and take effect during the life and good health of the applicant; but that life had ended, that applicant was no more, and that condition could never be complied with, and therefore the contract could never take effect."^ But where the secretary of an organization was authorized to accept applications, his notice that the application is accepted will bind the company though given by mistake, if the applicant dies before the notice is recalled.^ And where the applica- tion provides that there shall be no liability until it is approved and accepted and the applicant dies pending its consideration. the company is not liable.* § 269. If the Policy be Different from that Applied for, it is not Bindings upon the Company until Accepted by the Applicant. — If the policy, issued by a company, is in any particular, different from that applied for, it is not binding upon the company until it is accepted by the appli- ' Jenness v. Iron Co., 53 Me. 20, 23; McCuUoch o. Insurance Co., 1 Pick. 278; Thayer v. Insurance Co., 10 Pick. 325, 331; Borland u. GuSey, 1 Grant Cas. 394; Beckwith v. Cheever, 21 N. H. 41, 44; Duncan v. Heller, 13 S. C. 94, 96; White v. Corlies, 46 N. Y 467. 2 Eliasoni). Henshaw, 4 Wheat. 227, 229; Carr». Duval, 14 Pet. 77,81 . s Moulton V. Masonic Mut. Ben. Soc, 64 Kan. 66; 67 Pac. Rep. 533. 4 Jacobs V. New York Life las. Co., 71 Miss. 656; 15 So. R. 639 ; Mil- ler o. Northwestern Muc. L. Ins. Co., 49 C. C. A. 330; 111 Fed. E. 465. 650 CONSUMMATION OF CONTRACT. § 269 cant.i Aa interesting and important case detarmining this point was decided by the Supreme Court of the United States,^ where the facts were these : The applicant, in due form, applied for a policy of life insurance, the premiums on which were to be paid quarterly, and gave his note for the amount of the first payment ; the company accepted the risk, but* changed thfe amount of the premium and ante- dated the policy. The agent received the policy and six days afterwards sent a communication of that fact to the assured, and asked him what he should do with it. It did not appear whether this communication was received by the assured or not, and he died a few days after it had been sent. Suit was brought on the policy, judgment rendered against the company in the Federal court and an appeal was taken to the Supreme Court of the United States, which reversed the case, holding that, owing to the change in the terms of the policy from those contemplated by the appli- cant, the acceptance of the company was a qualified accept- ance, which the applicant was not bound to accept, and that, in the absence of evidence of such acceptance, the company was not held by the policy. In its opinion, the court said : " The mutual assent, the meeting of the minds of both parties, is wanting. Such assent is vital to the existence of a contract. Without it there is none, and there can be none. In this case it is not established by any direct proof and there is none from which it can be in- ferred. * * * If he had received notice of the propo- sition made through the policy, it would have been at his option to give or refuse his assent. He was certainly in no 1 Home L. Ins. Co. v. Myers, 50 C. C. A. 544; 112 Fed. K. 846; Leigh ■u. Brown, 99 Ga. 258; 25 S. E. K. 621. 2 Insurance Co. v. Young, 23 Wall. 85. See also Smith v. Provident Savings F. Soc, 31 U. 8. Aop. 163; 13 C. C. A. 284; 65 Fed. E- 765, where it is held that whether there is an acceptance or not, where the policy is different from that applied for, may be a question for the jury. 651 § 269a CONSUMMATION OF CONTRACT. wise bound until such assent was given. Until then there could be no contract on his part, and if there was none on his part, there could be none on the part of the company. The obligation in such cases is correlative. If there is none on one side, there is none on the other. The requisite assent must be the work of the parties themselves. The law cannot supply it for them That is a function wholly beyond the sphere of judicial authority. As the applicant was never bound, the company was never bound." ^ Of course the applicant is not bound to accept a policy differ- ent from that applied for, and where the application con- tained no hint of a limited risk the applicant is not bound to accept a policy excepting death by smallpox. ^ The ap- plicant is bound to examine his policy when he receives it and, if it differs from that applied for, rescind within a reasonable time or he will be bound as by an acceptance.^ § 269a. Where the Policy or Certificate Differs as to Payee or Otherwise, from Application. — The Supreme Court of North Carolina has held * that where the applica- tion designated as beneficiaries the wife ' ' and children ' ' of applicant and the policy, which was received without objection, was payable to the wife and " her personal representatives and assigns," the application, as modified by the policy, will be deemed to be the contract and the persons named in the policy are the beneficiaries, and says that this is so plain that no citation of authority is neces- sary. The Supreme Court of Michigan, however, has held^ 1 Byrne v. Casey, 70 Tex. 247; 8 S. W. Kep. 38. 2 Mat. L. Ins. Co. of Ky. v. Gorman, 19 Ky. L. Rep. 295; 40 S. W. E. 571. s Bostwick V. Mutual L. Ins. Co., 116 Wis. 392; 92 N. W. R. 246. See also McMaster v. N. Y. L. Ins. Co., 183 U. S. 25; reversing 40 C. C. A. 119; 99 Fed. R. 856. * Hunter v. Scott, 108 N. C, 213; 12 S. E. R. 1027; see also Grand Lodge V. Sater, 44 M. A. 445. 5 Eckler v. Terry, 95 Mich. 123; 54 N. W. R. 704. 652 CONSUMMATION OF CONTRACT. § 270 that where the application was made a part of the contract iind named his wife, or, in case of her death, his son as beneficiaries, and the certificate only contained the name of the wife, the application governed, and the fact that the member retained the certificate without objection woujd no imply his assent to the designation of the wife as bene- ficiary. The court says : " It is insisted that Mr. Eckler, by accepting and keeping the certificate without objection, assented to the designation, and that his representatives are therefore bound by it. If this were so, then it would follow that if both beneficiaries designated in the applica- tion had been omitted from the certificate, and others named therein, the certificate would have been equally con- trolling and binding. This would ignore the rule of con- struction that the entire contract must be considered in determining the intention of the parties." It has been said 1 that in case of conflict between the provisions of the policy and the statements of the application the former will govern. § 270. Delay in Acting upon an Application will not Amount to Acceptance: Company not Bound to Ac- cept. — The company is not obliged to act at once upon the application. The fact that an application has been made for insurance, and a long time has elapsed, and the rejec- tion of the risk has not been signified, does not warrant a presumption of its acceptance. An unreasonable delay is not acceptance.^ There must be an actual acceptance, or there is no contract. "^ In a case where it was claimed 1 Goodwin v. Provident Sav. L. Ass. Soc, 97 la. 226; 66 N. W. R. 157; 32 L. R. A. 473. 2 Brink v. Mercliants, etc., Assn. (S. D.), 95 N. W. R. 929; Missel- horn V. Life Association, 30 Fed. R. 545; Heimann v. Insurance Co., 17 Minn. 153; 10 Am. Rep. 154. 3 Haskin v. Agricultural F. Ins. Co., 78 Va. 707; Markey ». Mut. Ben. Ins. Co., 1( 3 Mass. 92; Haden v. Farmer's & M. F. Ins. Co., 80 Va. 683; Winnesheik Ins. Co. u. Holzgrafe, 53 111. 523. 653 § 270 CONSUMMATION OF CONTRACT. that the delay of the company in acting upon the appli- cation was to be deemed a consent i the court said : " We are not aware of any authority for the proposition that mere delay — mere inaction, can amount to an accept- ance of a proposal to enter into a contract. The opposite is the true doctrine, that if no answer is given to a propo sition for a contract, within a Treasonable time, the proposi- tion is regarded as withdrawn. The principle is stated in Hallock V. Commercial Ins. Co.^ that a contract arises when an overt act is done, intended to signify an accept- ance of a proposition, whether such overt act comes to the knowledge of the proposer or not, and unless a proposition is withdrawn, it is considered as pending until accepted or rejected, provided the answer is given in a reasonable time. If the applicant was dilatory in acting on the proposal, the deceased could have quickened its diligence by demanding prompt action; or, if not assenting to the delaj', he could have retracted his proposal, and reclaimed the money he had advanced and his note. He had no right, without an inquiry as to the cause, without any action on his part, to rely on the supineness of the appellant, no greater than his own, as an acceptance of the proposal."^ The company is not bound to accept if no good cause for rejection exists.* If a mutual organization, the directors may be actuated by other considerations than the quality of the risk.5 The company can reject the application, although part of the premium or all of it has been paid.* This doctrine applies 1 Alabama Gold L. Ids. Co. v. Mayes, 61 Ala. 163. 2 26 N. J. L. 263; 27 N. J. L. 6i5; 72 Am. Dec. 379. 3 Insurance Co. ». Johnson, 23 Pa. St. 72; Bentley v. Columbia Ins. Co., 17 N. Y. 421; Flanders on Ins. 108. * Ins. Co. V. Young, 23 Wall. 85; Ala. Gold Life Ins. Co. o. Mayes, 61 Ala. 163. But see Oliver v. Am. Legion of Honor, and post, § 273. 5 Harp V. Granger's Mut., etc., Ins. Co., 49 Md. 309. 6 Otterbein v. la. State Ins. Co., 57 la. 274; Todd v. Piedmont & Arlington L. Ins. Co-, 34 La. Ann. 63; Supreme Lodge v. Grace, 60 Tex. 569. 654 CONSUMMATION OF CONTEACT. § 270 to mutual companies.^ Where the application and premium were duly forwarded by mail, but the company never re- ceived them or heard of them, so that neither policy was issued nor money returned to the applicant as was provided in the receipt given by'the agent, it was held that no con- tract existed.^ In this case^ the court says: "Counsel for plaintiff contend that, although Baylor was unauthor- ized to execute contracts of insurance, yet that the trans- action became a contract as soon as the company could have an opportunity to accept the risk, and failed to do so or return the premium. If the defendant had received the application and premium, and retained the same, and re- mained silent, it may be that it should be held to have approved the application, but this question is not in the case. The company had no knowledge that, any application had been made and premium paid, and no contract can therefore be implied from any neglect to issue the policy founded upon the knowledge of the defendant that such an applica- tion had been made. The case is very much like Walker v. Farmers' Ins. Co.,^: where it was held that the giving of an application for insurance to an agent of the company authorized to receive applications only, and the execution of a premium note, do not constitute a contract for insur- ance. In that case the agent of the defendant neglected to forward the application and premium note, and the company had no knowledge of their existence until after the prop- erty was destroyed by fire. In this case the agent was not negligent. We think the case is controlled by that above cited, which was followed and approved in Armstrong ■;;. State Ins. Co." ^ 1 Walker v. Farmers' Ins. Co., SI la. 679; 2 N. W. Eep. 583; Arm- strong B. State Ins. Co., 61 la. 212; 16 N. W. Rep. 94. 2 Atkinson v. Hawkeye Ins. Co., 71 Iowa, 340; 32 N. W. Eep. 371. 8 Atkinson v. Hawkeye Ins. Co., supra. 4 51 Iowa, 679; 2 N. W. Rep. 683. 6 61 Iowa, 212; 16 N. W. R. 94. 655 § 272 CONSUMMATION OP CONTEACT. § 271. Company may be Bound tbough Application has been Rejected or not Acted on. — But it is possible under some circumstances for the officers of a company to bind it, although in fact the application has been declined ; as where the secretary and director of a mutual company took the applicant's application, premium note and note for cash premium and promised to notify him if the appli- cation was rejected and in that case to return the notes. The application was rejected. Seven months afterwards the applicant's premises were burned, but he had received no notice of the rejection of his application. In an action on the contract the plaintiff recovered and this judgment was affirmed by a divided court. l So, where on the organi- zation of a company a large number of applications with premium notes were received, and, before the approval of one of them, but the next day after the formal organiza- tion, a loss occurred, it was held that the company was liable.^ § 272. Wben Contract of Insurance Becomes Com- plete. — A contract of insurance never becomes complete until the last act necessary to be done by either party has in fact been done, although one side or the other may con- ditionally bind itself by a proposition which, when uncon- ditionally accepted, ripens the negotiation into a contract. In the case of fire insurance contracts there is often a con- tract before the policy is issued or before it is delivered to the insured, but this is seldom so with life insurance agree- ments, because there is usually, in the applications as well as the policies, a stipulation that the policy shall not be binding until delivery to the assured while in good health, and payment of the premium by him. Such conditions 1 Somerset Co. F. Ins. Co. v. May, 2 W. N. C. (Pa.) 43. 2 Van Slyke v. Trempealeau, etc., Ins. Co., 48 Wis. 683; Chamberlain V Prudential Ins. Co. 109 Wis. 4; 85 N. W. E. 128. 656 CONSUMMATION OF CONTRACT. § 272 are valid and binding and will be enforced. The rule may be briefly expressed as follows : A contract of life insur- ance is not complete until the last act necessary to be done by the insured under the conditions of the contract after acceptance of the application, has been done. The cases are not always in accord and much depends upon the facts, because special conditions may have been waived, or the law of estoppel may apply .1 If so stipulated the con- tract is not complete until the premium has been actually paid.^ Payment of premium by worthless check does not make the policy effective,^ nor unauthorized acceptance a note for the premium.* But unless it is so stipulated de- livery may be on credit. ^ This point was also considered and so held in a case where the meaning was not clear .^ In a recent case ^ the Supreme Court of Indiana thus reviews 1 Bnsher v. New York L. Ins. Co. (N. H.), 58 Atl. R. 41; Stringham v. •Mut. L. Ids. Co. (Oreg.J, 75 Pac. B. 822; Allen v. Mass. Mut. Ace. Assn., 167 Mass. 18; 44 N. E. 10 53; Gallaat o. Metropolitan L. Ins. Co., 167 Mass. 79; 44 N E. R. 1073; LangstafE v. Metropolitan L. Ins. Co., (N. J.), 54 Atl. R. 518; Russell v. Prudential Ins. Co., 176 N. Y. 178; 68 N. E. R. 252; revers 76 N. Y. Supp. 1029; Ray v. Security Trust, etc., Co., 126 N, C. 166; 85 S. E. R. 246; Hawiey v. Mich. Mut. L. Ins. Co., 92 la. 593; 61 N. W. B. 201; Maloney v. N. W. Masonic Aid Assn., 8 App. Div. 574; 40 N. Y. Supp. 918; Sleinle «. N. Y. Life Ins. Co., 81 Fed. R. 489; 26 C. C. A. 491; Hewitt v. American Union L. I. Co., 66 App. Div. 80; 73 N. Y. Supp. 105; reversing 70 N. Y. Supp. 1012; Oliver ». Mut. L. Ins. Co., 97 Va. 184; 33 S. E. B. 586. 2 Armondu. Fidelity L. Assn., 96 N. C. 158; 1 S. E. R. 796; Benefit Assn. ■». Conway, 10 111. App. 348; McClave v. Mutual Reserve, etc., Assn., 56 N. J. L. 187; 26 Atl. B. 78; Quinby v. N. T. L. las. Co., 24 N. Y. Supp. 593; Mut. Reserve P. S. Assn. v. Summons, 46 C. C. A. 393; 107 Fed. R. 418. s Brady?). N. W. Masonic A. Assn., 190 Pa. St. 595; 42 Atl. R. 962. 4 Mutual L. Ins. Co. v. Logan, 87 Fed. R. 637; 31 C. C. A. 172; 57 U. S. App. 18. 5 Jones «. New York L. Ins. Co., 168 Mass. 245; 47 N. E. B. 92. 6 BushawD. Women's, etc., Co., 8 N.Y. Supp. 423. And a decoy policy may be valid witiiout payment of premium. Union L. Ins. Co. v. Haman, 64 Neb. 599; 74 N. W. R. 1090. ' Union Central L. Ins. Co. v. Pauley, 8 Ind. App. 85; 35 N. E. B. 190. 42 657 § 272 CONSUMMATION OF CONTRACT. the law on the subject : " It is undoubtedly true that while, as a general rule, the delivery of the policy and payment of the premium, either in money or by note, both occur when the contract is consummated, still it is also true that there may be a valid and enforceable contract of insurance without payment, or without a manual delivery of the policy. 1 Such contract may also exist without either pay- ment of premiuui or delivery of policy. ^ Yet such cases are recognized as exceptional, and, in order to sustain them, the proof, whether direct or circumstantial, should be of such a character as to reasonably support the assertion. * * * In Cronkhite v. Insurance Co.,^ Brewer,' C. J., says : ' The company should not be called on to pay where it has in fact received nothing, unless there is some clear and positive reason upon which the demand rests.' Keep- ing in mind the well-established rule of our court that, where there is a conflict of evidence, we will not undertake to weigh it, we are still unable to find in the evidence of this case any from which it may be reasonably and legiti- mately inferred that there was here a binding, completed contract of insurance. All of the evidence is consistent with the idea that there were simply negotiations looking towards an insurance. There is no indication of any pur- pose to contract other than by a policy to be made and delivered upon payment of at least half of the premium.* ' Hamilton ». Insurance Co., 5 Pa. St. 339; Cronkhite v. Insurance Co., 35 Fed. Rep. 26; Carpenter v. Insurance Co., 4 Sandf. Ch. 408; Tayloe v. Insurance Co., 9 How. 390; Fried v. Insurance Co., 50 N. Y. 243; Insurance Co. v. Jenks, S Ind. 96, 2 Bragdou v. Insurance Co., 42 Me. 259; Collins v. Insurance Co., 7 Phila. 201; Kohne v. Insurance Co., 1 Wash. C. C. 93; Sheldon «. Insur- ance Co., 25 Conn. 207; Hallock v. Insurance Co., 26 N. J. Law, 268; 27 N. J. Law, 645; Xenos v. Wickham, L. R. 2 H. L. 296; Insurance Co. v. Robinson, 25 Ind. 537. s 35 Fed. Rep. 26. * Heiman v. Insurance Co., 17 Minn. 173 (Gil. 127) ; Markey v. Insur- ance Co., 103 Mass. 78. 658 CONSUMMATION OF CONTRACT. § 272 There is here an entire want of proof that the agent in any manner waived payment, or gave any credit except as to one- half the premium. Counsel for the appellee rely largely upon the postal card for proof that there was a constructive deliv- ery of the policy, and a consummation of the contract. It is urged that by the language 'your policy,' used in this card, the idea is conveyed that the policy then actually belonged to Pauley, and that the agent simply held it as a trustee for him. When all the surrounding circumstances, as to which there is no dispute, are regarded, such a construc- tion seems to us untenable. Such an inference cannot fairly and legitimately follow simply from the language of the card, which, when considered in the light of attendant circumstances, can mean only that the policy written for Pauley had come. Counsel for the appellee supports his proposition that the " contract was executed, there wag nothing further to be done," when the postal card was written, by the cases of Cooper v. Insurance Co.,^ and Tayloe v. Insurance Co.^ In the former of these cases $50 was paid when the application was made, which was, according to the company's regulations, to be applied on the first year's premium, provided the company should conclude to make the insurance. The company did so con- clude, entered its conclusion on its books, and forwarded the policy to the agent, and the money paid thereby became the money of the company, and the beneficiary became entitled to a policy upon complying with the other terms of the con- tract, which she offered to do in strict accordance therewith, although her husband had taken sick and died after the acceptance of the application, and before the delivery of the policy to her. In the Tayloe case, Tayloe applied for insurance. The company wrote the agent it would take it 1 7 Nev. 116. 2 9 How. 390. 659 § 272 CONSUMMATION OP CONTRACT. at a certain rate. The agent so notified Tayloe, telling him if he desired to effect insurance, to send him a check, and the " matter is concluded." On the day after receiv- ing this letter, Tayloe sent a check by mail, with directions to leave the policy at a bank. The insurance was held to take effect from the mailing of the check, the matter being then ' ' concluded ' ' so far as effecting a completed contract was concerned. These cases present very different fea- tures from the one at bar, where there is neither payment nor waiver, nor anything shown to have been accepted as a c6mpliance with the contract. In the cases of Insurance Co. V. Jenks,! and Insurance Co. v. Eobinson,^ there were clear and distinct contracts for insurance, the terms of which were fully complied with by the insured. If the minds of the parties ever met, and an agreement for an insurance was made, it must have been upon the 6th of October, which was the last time that Daily saw Pauley. Whatever the arrangement then made was, whether for $1,000 or $5,000, there is not a scintilla of evidence that there was any waiver of payment of more than half the premium. Pauley then understood he was to pay half cash at least. Word was left with his son on the 14th that the policy had come ; yet he made no move towards pay- ment or consummation of the contract until December 6th. The agent certainly acted with diligence. He wrote him a card about the 10th, and went out in person on the 14th, but no response came from Pauley. We are unable to see that it was incumbent upon the agent to specially urge pay- ment upon Pauley as a condition to his policy becoming effectual ; nor can we hold, as urged by counsel, that his failure to do so is to be deemed a waiver of payment. Presumptively, the payment of the premium and the delivery 1 5 Ind. 96. 2 25 Ind. 536. 660 CONSUMMATION OF CONTRACT. § 272 and effectiveness of the policy would go hand in hand.^ Pauley had no right to expect anything else unless by special agreement. There was, as we construe it, nothing in Daily's postal card which could have tended to raise in Pauley's mind the belief that his policy was inforce, although notpaidfor." Under some circumstances there may be a waiver of this condition by a delivery of the policy, but this question is more properly one of waiver. With benefit societies all these questions may arise, although their habits and course of business are more simple, for necessarily there is the same kind of an application or proposal which is to be accepted, either conditionally or unconditionally, by the directors of the society.^ Unless provided otherwise in the contract, the acceptance of the proposal to insure for the premium offered, is the completion of the negotiation, and after the policy or certificate has been forwarded to the agent of the company for delivery the contract cannot be rescinded without the consent of the party insured.^ It is, of course, different if any act remains to be done by the insured, as payment of premium,* or if it be stipulated that it shall not be binding until delivered by the agent. Thus, where the defendant made an application for insurance to the agent of the company in New Jersey and paid the premium, the policy to be issued and delivered to him if his application was accepted. The application was sent to the company in Pennsylvania and there approved and the policy issued and mailed to the applicant. It was held by the Supreme Court of New Jersey ^ that 1 Heiman ». Insurance Co., 17 Minn. 153 (Gil. 127) . 2 See post, § 273. 8 Hallock V. Insurance Co., 26 N. J. 278; Ala. Gold L. Ins. Co. v. Her- ron, 56 Miss. 643; Shatiuck v. Mut. L. Ins. Co., i Cliff. 698. See also Porter v. Mut. L. Ins. Co., 70 Vt. 604; 41 Atl. R. 970. * Girard v. Metropolitan L. Ins. Co., Rep. Ind. Queb. 20 C.S. 632. » Northampton, etc., Ins. Co. v. Tuttle, 40 N. J. L. 103; 29 N. J. L. 486. To the same effect are: Mut. Res. F. L. Ins. Assn. v. Farmer, 65 661 § 272 CONSUMMATION OF CONTRACT. the contract was made in Pennsylvania and was complete as soon as the application was accepted and the policy deposited in the mail. Other authorities support this view.i And where it was agreed between the agent and the assured that the first premium should be paid by note, and accord- ingly the application was forwarded, accepted by the com- pany and returned to the agent, who refused to deliver it as the assured was sick, it was held ^ that the policy became binding upon the company when it was placed in the mail at the office of the company, if not, then certainly when it reached the hands of the local agent. So, when an appli- cation for insurance received by the agent was sent by him to the home office of the company, and the company ac- cepted it and sent the policy to the agent, it was held by the Supreme Court of Minnesota ^ that it was the duty of the ageat to deliver the policy upon tender of the premium, even though the person whose life was insured had become dangerously ill, unless it was otherwise agreed between the parties, or he was otherwise instructed by the company.* But delivery of the policy under circumstances which amount to fraud on the part of the assured will not change the relations of the parties. Thus, where negotiations were still pending between an agent of the company and the applicant concerning the precise terms of the contract and the mode of payment, a friend of the applicant paid the premium, concealing the' fact that the assured was sick, and the latter in fact died a few hours later, and the agent, in ignorance of the facts, delivered the policy, the Supreme Ark. 581; 47 S. W. B. 850; Triple Link, etc., Assn. v. Williams (Ala.) 22 Sou. E. 19. 1 Adams V. Lindsell, 1 B. &Ald. 681; Mactler o. Fritli, 6 Wend. 103; Tayloe v. Merchants' F. Ins, Co., 9 How. 390; 2 Kent's Com. 477. 2 Yonge V. Equitable L. Ass. Soc, 30 Fed. Bep. 902. 3 Schwartz v. Germania Life Ins. Co., 21 Minn. 215. ^ Schwartz v. Germania Life Ins. Co., 18 Minn. 449. 662 CONSUMMATION OP CONTRACT. § 273 Court of the United States held i that there was no contract. But payment of premium shortly before death of the insured is not of itself fraudulent.^ If the application provided that the policy shall not be in force until it is delivered to the applicant, the contract of insurance will not become binding upon the company until delivered.^ If the policy is not accepted by insured there is no delivery.* Under a statute of Wisconsin it was held that the general agent of a company can contract for immediate insurance although the application declares to the contrary. 5 The question whether there has been delivery is sometimes one of fact for the jury.* § 273. The Same Subject: Contract may be Complete without Delivery o£ the Policy. — A contract of insur- ance, however, may be complete without delivery of the policy, as where it has been made and executed and notice given to the assured,' or where the premium had been i Piedmont, etc., Ins. Co. v. Ewing, 92 U. S. 377. 2 Kendrick v. Mnt. Ben. L. Ins. Co., 124 N. C. 315; 32 S. E. R. 728. 3 Kohen v. Mut. Reserve Fund L. Assn., 28 Fed. Rep. 705; Missel- horn V. Same, 30 Ftd. Kep. 545; Misselliorn v. Same, 30 M. A. 589; Weinfeld v. Same, 53 Fed. R. 208. See also Keese b. Fidelity, etc., Assn., Ill Ga. 482; 36 S. E. R. 637. ■* Hoglien u. Metropolitan L. Ins. Co., 69 Conn. 103; 38 Atl. R. 503; Dicliersonc. Prudential Savings L. A. Soc, 21 Ky. L. 611; 52 S. W. R. 825. 5 Mathers v. Union Mut. Ace. Assn., 78 Wis. 588; 47 N. W. E. 1130. 6 Prudential Ins. Co. v. Sullivan, 27 Ind. App. 30; 59 N. E. R. 873; Smith V. Provident Sav. L. A. Soc, 13 C C. A. 284; 65 Fed. R. 765; Krause v. Equitable L. Ass. Soc, 103 Mich. 329; 63 N. W. R. 440; Union Cent. L. Ins. Co. v. Hallowell, 14 Ind. ApD. 611; 43 N. E. R. 277. When a life insurance policy is found in the possession of the insured there is a presumptioa of delivery. Mass. Ben. Assn. v. Sibley, 158 111. 411; 42N. E. R. 137. Writing that, " your policy has arrived," is not delivery. Union Cent. L. Ins. Co. v. Pauley, 8 Ind. App. 85; 35 N. E. R. 190. ' Sheldon v. Conn. Mut. L. Ins. Co , 25 Conn. 207; 65 Am. Dec. 665; Union Cent. L. Ins. Co. v. Phillips, 41 C. C. A. 263; 102 Fed. 19; revsg. 101 Fed. 33. 663 § 273 'consummation of contkact. paid 1 or if the applicant is notified that his application has been accepted ; ^ and there need not be manual delivery of the policy.^ The acceptance of the application, if noth- ing is left to be done by the insured, makes a completed contract, though the assured die before delivery of the policy.* But where, independent of the policy, there Is nothing to show any acceptancfe of the applicg,tion, or any agreement to insure, the presumption is that while there were negotiations there was no contract, and no pur- pose to contract otherwise than by a policy made and delivered upon simultaneous payment of premium. Where there has been no transfer of the legal manual possession of the policy to the insured, or to any person for him, so as to constitute a delivery in fact, the policy is prima facie incomplete as a contract, and it devolves upon the alleged insured to show that the real intention was to pass the legal title and possession of the policy with- out or before payment of premium, and without delivery in fact, and that though retained by the company's agent, the policy was constructively delivered.^ It is usually a question of fact, depending upon the special circum- stances of the case, whether anytjiing remained to be done to complete the agreement, or if there was, whether doing it was waived.' The proof must be strong to establish such 1 Mut. L. Ins. Co. V. Thompson, 94 Ky. 253; 22 S. W. R. 87. 2 Ala. Gold Life Ins. Go. v. Herron, 56 Miss. 643. 3 Insurance Co. v. Colt, 20 Wall. 660. ^ Lee V. Union Cent. L. Ins. Co., 19 Ky. L. R. 608 ; 41 S. W. R. 319. See also Dailey v. Preferred Masonic, etc., Assn., 102 Micb. 289; 57 N. W. R. 184; 26 L. R. A; 171; New York L. Ins. Co. v. Babcock, 104 Ga. 67; 30 S. E. R. 273; 42 L. R. A. 88. ^ Heiman v. Phoenix Mut. Life Ins. Co., 17 Minn. 153. " Gay V. Farmers', etc., Ins. Co., 51 Mich. 245; Kelly ». St. Louis M. L. Ins. Co., 8 Mo. App. 554; DiboU v. Mina, Life Ins. Co., 32 La. Ann. 179; Fried v. Royal Ins. Co., 50 N. Y. 243; 47 Barb. 127; Cooper «. Ins. Co., 7 Nev. 116; Banker, etc., Assn. v. Stapp, 77 Tex. 517; 14 S. W. R. 168. 664 CONSUMMATION OF CONTRACT. § 273 an agreement and mere urging the insured to call and get his policy is not enough, i but the contract maybe complete when the proof is sufficient. For example, in a case in Ne- vada, the facts shown were that an application was made to the agents of defendant for a policy of insurance on the life of plaintiff's husband; at the time the application was made tifty dollars was paid, according to the regulations of the company, which was to be applied on the first year's premium, provided the defendant should conclude to make the insurance. The application thus made was forwarded to the proper office of the company and a policy made out and sent on to the agent for delivery ; but the insured hav- ing died before it was delivered, the agent refused to deliver it, although demanded and the balance of the premium ten- dered. The court held that this proof justified a conclu- sion that a contract for a policy was completed. It said: ^ " The application for a policy by the assured, with the pay- ment of a portion of the premium, and acceptance of the risi£ by the defendant, left nothing to be done but the delivery of the policy and the payment by the plaintiff of the balance of the premium, which, it appears, was not required by the rules of the company until the completion of the transaction. These facts show a valid contract for a policy between the parties. The moment the com- pany concluded to make the insurance, the fifty dollars paid to its agent became its property, without any further action on its part. It was paid upon the condition that if the company concluded to make the insurance, it should be applied in payment of the premium; when, therefore, the risk was taken, it became the property of the defend- ant, and at the same time the assured became entitled to the policy. Thus, there was the acceptance of the appii- 1 Union Cent. L. Ins. Co. v. Pauley, 8 Ind. App. 85; 35 N. E. R. 190; see extract, ante, § 272. 2 Cooper V. Pacific Mut. Life Ins. Co., 7 Nev. 122. 665 § 273a coNsuMMATiojsr of contkact. cation by the company, and the payment of a portion of the premium, as a consideration therefor, by the plaintiff, which is all that was necessary to make a valid contract between the parties. Such contracts are as available to sustain an action for the amount of the insurance as if the policy had been issued, i Under the terms of a " binding receipt ' ' there may be a liability of the company .until thg application is declined.^ § 273a. The Same Subject: When Contract of Bene- fit Society is Complete. — The same principles govern in construing the contracts of benefit societies as in the case of life insui'ance companies so far as applicable to the special circumstances of the case. In nearly all benefit societies the laws provide for a ceremony of induction into membership and in that case the contract is not complete without initiation.^ Nor even though there has been an initiation, if the benefit certificate has not been delivered.* The relation between a society and its members is a con- tractual one and a certificate is not " issued " until it has been delivered to and accepted by the member if the by- laws so require .5 But delivery may be to an officer of ' Kohne v. Insurance Co., etc., 6 Blnn. 219; 1 Wash. C. C. 93. See also Shields v. Equitable Mut. L. Ass. Soc, 121 Mich. 690; SON. W. K. 793; Lawrence v. Penn. Mut. L. Ins. Co., 112 La. Ann.; 36 Sou. K. 898. 2 Halle V. New York Life Ina. Co., 22 Ky. L. R. 740; 58 S. W. R. 822. But see Mohrstadt v. Mutual Life Ins. Co., 115 Fed. R. 81; 62 C. C. A. 675. 3 Matkln v. Supreme Lodge K. of H., 82 Tex. 301; 18 S. W. R. 306. See supra, § 63a. < McLendon v. Woodmen of the World, 106 Tenn. 696; 64 S. W. R. 36; 62 L. E. A. 444; Roblee ». Masonic L. Assn., 38 Misc. R. 481; 77 N. Y. Supp. 1098; National Aid Assn. v. Brachter (Mich.), 91 N. W. B. 334. In this last case it was held that replevin of the certificate in justice court does not make a delivery. ^ Logsdon u. Supreme Lodge Frat. Union. (Wash.), 76 Pac. R. 292; Wilcox V. Sovereign Camp,, etc., 76 Mo. App. 673. 666 CONSUMMATION OF CONTRACT. § 273a the society for the member. l And where partial pay- ment of dues had been accepted it was held there that there was a waiver.^ Under the by-laws the contract may be complete though no certificate has been issued,'* or if duly signed not delivered.* "Where, in order to become fully admitted to membership, it was necessary that two degrees be conferred and the applicant had re- ceived one degree, but was too ill to receive the other at the time appointed for him to receive it, and soon afterwards died, never having received it, it was held^ that the con- tract was incomplete and that none of the conditions on which beneficiary certificates were issued had been waived. In a case in California,® it was held that mutual benefit societies which undertake to pay money upon the death of the members are in law insurance companies and subject to the same rules. That whenever two constructions equally fair can be given that which gives the greater in- demnity shall prevail. That a contract of insurance is complete when the terms offered are accepted, and the con- tract need not be in writing unless required by statute. That the contract may be made through the mail and the terms offered are accepted upon posting a letter to that effect. In mutual benefit societies the benefit certificate is merely evidence of the contract. That the medical ex- aminer cannot reject applications arbitrarily, if made in 1 Supreme Court Order Patricians v. Davis, 129 Mich. 318; 88 N. W. K. 874; Tracy v. Supreme Court of Honor (Mich,), 93 N. W. R. 702. 2 Home Forum Order v. Jones, 20 Tex. Civ. A. 68; 48 S. W. R. 219; National Union v. Armstrong, 74 HI. App. 482; Taylor ». Supreme Lodge Columb. K, (Mich.), 97 N. W. R. 680. 3 Bishop V. Empire Order M. A., 112 N. Y. 627; 28 N. E. K. 562; reversing 43 Hun, 472. ^ Lorscher v. Supreme Lodge K. of H., 72 Mich. 316; 40 N. W. R. 545. s Taylor v. Grand Lodge A. O. U. W., 29 N. Y. Supp. 773. 6 Oliver v. Am. Legion of Honor, Sup. Ct., San Francisco Pac. Coast L. J., Dfec. 9, 1882; 17 Am. L. Rev. 301. 667 § 274 CONSUMMATION OF CONTEACT. good faith, after compliance with the requirements of the order and where the medical examiner ought to have ap- proved an application, but the applicant dies before he does so, the application will be deemed approved. It is exceed- ingly doubtful if this be a true exposition of the law, for it is wrong on principle for the courts to force a construction against the common sense meaning of the language of the contract. In determining whether or not the contract with a benefit society is complete without issue of a certificate, the laws of the association must be alone regarded. The question is one of construction and the courts will save the contract whenever possible, even though a certificate be not issued. 1 It may be a question for the jury whether a certificate has been delivered the evidence as to delivery being conflicting.^ § 274. Fraudulent Delivery of Policy. — As has been intimated, there may be a delivery of the policy to the assured under circumstances that amount to fraud by the latter. As where the assured was at the time of the pay- ment of premium by a friend, dangerously sick.* The understanding is always, where a proposal is made, that the state of facts therein represented to exist does in fact exist at the time the proposition is accepted. So, if after the application has been made, a material change in the health of the applicant takes place, and which would probably cause the rejection of the risk by the insurer if known to it, it will avoid the contract.* The reason of this 1 See also ante, § 242, for consideration of tiiis subject. 2 Wagner v. Supreme Lodge K. & L. of H., 138 Mich. 660; 87 N. W. B. 903. And parol evidence is admissible when uncertainty as to the time when the contract should become operative exists. Modern Wood- men Ace. Assn. V. Kline, 50 Neb. 345; 69 N. W. R. 943. 3 Piedmont, etc., Ins. Co. v. Ewing, 92 U. S, 377. * Whitley B. Piedmont, etc., Ins. Co., 71 N. C. 480; Wemyssi). Med. Ins., etc., Soc, 11 Ct. of Sess., 2 Ser. 345; Traill v. Barina;, 4 DeGex, J. & S. 318; Edwards ». Footner, 1 Camp. 630. 668 CONSUMMATION OF CONTRACT. § 275 rule is so obvious that it need not be further considered. When, however, a lapsed policy is to be reinstated no state- ment of intermediate changes need be disclosed unless asked for; 1 and so with changes between the date of the policy and the payment of the premium, unless otherwise stipu- lated, for the acceptance of theapplicationand issue of the policy are upon the sole condition of payment of premium.^ § 275. After Contract is Complete Change in Risk Immaterial. — After the contract is complete, even though the policy has not been delivered or the premium paid, changes in the condition of the risk do not affect the agree- ment, as for example where an application was made for life insurance and the premium tendered, which the agent refused to receive, saying that it made no difference. The policy was issued and received by the agent, who notified the applicant at the place of his residence, that he was insured and that he would bring the policy down the fol- lowing week and get his money. The agent accordingly did go to the applicant's residence, but finding that he wassick, refused to deliver the policy unless the attending physician would certify that the assured was in no immediate danger. This certificate was given and the money again tendered, but was refused and the assured died two days later. Upon an action being brought on the policy the Supreme Court of Georgia held that the contract was complete upon the delivery of the policy to the agent, who could not sub- sequently impose additional terms, and the change in the health of the applicant was immaterial.^ It has been held 1 Day ». Mat. Ben. L. Ins. Co., 1 McArthur, 41. 2 Fourdrinier w. Hartford F. Ins. Co., 15 U. C. (C. P.) 403; Cannings. Farquhar, 16 Q. B. Div. 727. 3 Southern Life Ins. Co. v. Eempton, 66 Ga. 339; Ellis v. Albany, etc., Ins. Co., 50 N. Y. 402; Schwartz v, Germania L. Ins. Co., 21 Minn. 215; Franklin F. Ins. Co. v. Colt, 20 Wall. 660; City of Davenport v. 669 § 276 CONSUMMATION OF CONTRACT. that where aa insurance policy and the application there- for both provide that, if the application is approved and the policy issued, it shall be in force from the date of the application, the provision in such application that the con- tract shall not take effect until the first premium is paid, during the applicant's continuance in good health, is only a provisional agreement, authorizing the company to with- hold delivery of the policy until such payment in good health ; and after actual delivery it is estopped, in the ab- sence of fraud, to assert that the policy is void either on account of non-payment of premium or ill health. ^ It has also been held that where an applicant for life insurance became fatally ill after his application for, but before delivery of, his policy, the fact that he reserved the right to inspect it before paying the first premium would not defeat recovery thereon, provided he waived the right and tendered payment, since the reservation was intended solely for his benefit.^ § 276. There may be a Conditional Delivery of Policy. — A policy of insurance may be conditionally deliv- ered, it being held that, as policies usually are not under seal, the rule that a deed cannot be delivered conditionally to the grantee or his agent has no application.* As where policies were delivered to be returned by the insured if he did not realize a satisfactory amount upon the cancellation of certain other policies.* But where the policy is once delivered Peoria, etc., Ins. Co., 17 In. 276; Welsh v. Chicago Guaranty F. Soc- 81 Mo. App. 30. 1 Grier v. Mutual Life Ins. Co., 132 N. C 542; 44 S. E. 28. See also Mutual Life Ids. Co. v. Moore (Ky.), 79 S. W. R. 219. 2 Going V. Mutual Ben. Life Ins. Co., 58 S. C. 201; 36 S. E. K. 556. 3 Harnlckell v. N. Y. Life Ins. Co., 40 Hun, 658; affirmed 111 N. Y. 390; 18 N. E. R. 632; Benton v. Martin, 52 N. Y. 570. * Harnicbell v. N. Y. Life Ins. Co., supra. See also Ray v. Equitable L. Ass. Soc, 76 App. Div. 194; 44 N. Y. Supp. 743; Westerfleld v. N. Y. Life Ins. Co., 129 Cal. 68; 61 Pac. E. 667. 670 'CONSUMMATION OF CONTRACT. § 276 unconditionally, previous negotiations and stipulations are thereby merged and rendered of no effect. l The question is one of fact as to what was the intention of the parties and of this the jury is the judge . The Supreme Court of Massachusetts has exhaustively discussed this subject in a case that was before it on four different appeals and where it was unable to find a delivery, although the assured had for a time had manual possession of the policy.^ Of course, where the application stipulates that it shall be the basis of the contract, which shall be completed only by delivery of the policy, the latter must be actually and unconditionally delivered in order to make the insurer liable.^ The subject of conditional delivery of the policy was discussed by the Supreme Court of Connecticut in Eogers v. The Charter Oak Life Ins. Co.* There the agent of the company meet- ing the applicant urged him to get his life insured and, after some objection from the latter, an application was made out and signed and the applicant examined by the physician. It was agreed that when the policy was made out by the company and received by the agent the latter should forward it to the assured's address in New York City, who, if it was found to be as agreed, was to send the premium or if not return the policy. When the agent received the policy he mailed it as agreed, but the letter was returned uncalled for. The agent then sent the policy to the place where he supposed the assured might be, but he had died two days before. The court held that there was only an inchoate, not a complete, contract and that no 1 Hodge V. Security Ins. Co., 33 Hun, 583; Grace v. American Cent. Ins. Co., 109 U. S. 278. 2 Hoyt V. Mat. Ben. L. Ins. Co., 98 Mass. 539; Markey ». Same, 103 Mass. 78; Same w. Same, 118 Mass. 178; Same v. Same, 126 Mass. 158. 3 McCnlly v. Phoenix M. L. Ins. Co., 18 W. Va. 782; St. Louis Mut. Life Ins. Co. v. Kennedy, etc., 6 Bush, 450; Collins v. Ins. Co., 7 Phila. 201 ; Faunce v. State M. L. Ins. Co., 101 Mass. 279. 4 41 Conn. 97. 671 § 277 CONSUMMATION OF CONTKACT. liability attached under it. In one case it was held that there was no delivery of the policy though the insured had possession of it for four months. ^ § 277. Uncouditional Delivery of Policy by Agent in Violation of Instractions. — Where there has been an unconditional delivery of the policy in violation of the instructions of the company, the latter will generally be bound. For example, in a case in the Supreme Court of the United States the facts were these : A policy had been taken from agents who had only authority to take applica- tions and submit them to the company, which issued the policies and sent them to the agents to deliver and collect the premium. The agents were instructed not to deliver the policies until the whole premium was paid, but were told if they did so the premium would stand charged to them until it was received by the company or the policies returned. It was the custom of the agents to deliver poli- cies to persons whom they deemed responsible and call for the money when wanted. In this case the policy was sent to the assured by the agents, who wrote him that they would get the money of a third person. Upon therefusal of this third person to pay, the agents so informed the assured, who promised to soon send a draft. Payment being still neglected, and the agents having learned that the person assured was ' ' quite sick ' ' they informed him by letter that the policy was forfeited and returned the premium notes he had given. This letter did not reach the address of the assured until after his death. The court held the company liable, saying:^ "Where the policy is delivered without 1 Poster. Am. Union L. Ins. Co., 52 N. T. Supp. 910; 32App. Div. 189; affd. 165 N. T. 631; 59 N. E. E. 1129. 2 Miller V. Life Ins. Co., 12 Wall. 285. Other cases where the com pany has been held liable, either because of an implied authority of the agent to waiver, or because of the application of the doctrine of estoppel, 672 CONSUMMATION oF CONTRACT. § 277 requiring payment, the presumption is, especially if it is a stock company, that a credit was intended, and the rule is well settled where a credit is intended, that the policy is valid, though the premium was not paid at the time the policy was delivered, as where credit is given by the gen- eral agent and the amount is charged to him by the com- pany, the transaction is equivalent to payment." i In a somewhat similar case in Tennessee the facts were that the assured applied for a policy to one Smithurst, the agent of the company for Louisiana, who sent the application to the home office of the company in Memphis, where it was ac- cepted and the policy issued. Part of the premium was to be paid by note, the remainder in cash, the agent being instructed to deliver the policy only upon the actual pay- ment of the cash part of the premium. On its face the policy acknowledged receipt of the premium, but the ap- plication, shown to be a part of the contract, stipulated that the policy should not be binding upon the company " until the amount of the premium as stated therein shall have been received by said company, or some authorized agent thereof, during the lifetime of the person assured." Smithurst delivered the policy without the cash payment, accepting the note of the assured for the amount. Soon after Smithurst was succeeded by Hatch & Smith as agents, and they found that the policy had been delivered without payment of the cash part of the premium. A draft was drawn for the amount, accepted by the assured, but was not paid and was afterwards surrendered and a note taken which was not paid, although payment was frequently are Home Forum v. Varnado (Tex, Civ. A.), 55 S. W. R. 364; Harrigan v. Home L. Ins. Co., 128 Cal. 531 ; 58 Pac. R. 180; National L. Ins. Co. v. Tweddell, 22 Ky. L. R. 881; 58 S. W. R. 699. J The court cite Golt v. Ins. Co., 25 Barb. 189; Sheldon v. Atlantic F. & M. Ins. Co., 26 N. Y. 460; Wood v. Ins. Co., 32 N. Y. 619; Bragdon v. Ins. Co., 42 M. E. 259; Trustees v. Ins. Co., 18 Barb. 69; 19 N. Y. 306. 43 673 § 277a CONSUMMATION OF CONTKACT, demanded. Soon afterwards the assured died. The court held 1 that the company was liable and that Smithurst was a general agent of the company and, " being a general agent, without special instructions limiting his power, he has the power to determine for himself what he is willing to accept as a payment of the cash premium — when the cash is actually paid to him, the company can only look to him for it — if he chooses to receive something else than cash, it is probable that as between him and his principal, the latter would have the right to treat it as a cash pay- ment to him and hold him responsible accordingly — so that the company would have, if they choose to exercise it, the same right they had before, and the agent only would be the loser." In the case of mutual companies the rule might not apply if there was any by-law of the com- pany to a different effect, for the applicant is supposed to acquaint himself with the laws of the concern. But the question is one of construction and of the intent of the parties.^ § 277a. Rescission. — It is an elemental principle in the law of contracts that one party can rescind upon tendering back the consideration received, whenever he has been in- duced to enter into the contract by the fraud of the other. Such fraud can be either by a fraudulent misrepresentation of a fact or a fraudulent concealment of something that in good faith ought to have been disclosed, and because of the non-disclosure of which the other party has been misled to his injury. This principle applies to its fullest extent to insurance contracts. Two classes of cases are found in the reports where the right of rescission has been considered. 1 Southern Life Ins. Co. v. Booker, 9 Heisk. 606; 24 Am. Kep. .144. 2 Malrey o. Shawmut Mat., etc., Ins. Co., 4 Allen, 116; Badger v. American Popular L. Ins. Co., 103 Mass. 244; .SItua F. Ins. Co. v. Web- ster, 6 Wall 129. 674 CONSUMMATION OF CONTRACT. § 277a In one the company has claimed the right because of the fraud of the insured, generally a fraudulent misrepresenta- tion or concealment. In the other, and the most numerous class of cases, the insured has claimed the right on account of the alleged fraud of the company, generally consisting of untrue representations of over-zealous, or knavish agents, or promises which were not realized. The rule is not one- sided, but should be applied impartially to right a wrong by whomsoever committed. In fire insurance contracts the company generally reserves the right to cancel the policy under certain conditions, or arbitrarily, and this right of rescission, or cancellation, in aid of which the powers of a court of equity are invoked, is a principle of importance also in life insurance law which will be further considered in another place. ^ In life insurance contracts, however, rescission on the part of the company may be attended with this important difference; it is not always possible for the company to put the insured in statu quo because his health may have become impaired so that he is not able to obtain insurance elsewhere.^ The right of cancellation may how- ever be reserved in a life insurance contract and if so reserved can be asserted.^ It is too late to rescind when the con- tract is ended by death.* If the agent of a company, without knowledge of the assured, inserts in the appli- cation such misrepresentations as would, if made by the assured, avoid the policy, the assured may rescind the con- tract although the policy is binding upon the company .5 So where the policy required all applications to be signed 1 Post, § 285. 2 Mutual Benefit L. Ins. Co. v. Bobinson, 5i Fed. R. 580; Kellner v. Mut. Ins. Co., 43 Fed. R. 623. 3 Gerken©. Royal Ben. Soc, 18 App. Div. ,S8; 45 N. Y. Supp. 384; Travelers Prot. Assn. v. Dewey (Tex. Civ. A ), 78 S. W. 1087. 4 Porters. Mut. L. Ins. Co , 70 Vt. 504; 41 Atl. R. 970; Metropolitan L. Ids. Co.». Moore (Ky.), 79 S. W. R. 219. « Michigan Mut. L. lus. Co. v. Reed, 84 Mich. 524; 47 N. W. U06. 675 § 277a CONSUMMATION OF CONTRACT. by the one proposed for insurance as a condition precedent to its validity, and the agent who solicited the plaintiff to insure her father's life for her benefit certified that he had seen and examined the father and recommended his accept- ance when in fact the father's name was signed by the daugh- ter on the agent's representation that she had authority to do so, it was held that the agent's knowledge as to the fail- ure of the father to sign the application was the knowledge of the company, and, as the policy was void ab initio, the plaintiff was entitled to recover back the money paid by her for premiums. It was also held that since the policy was void, neither could revive it without the consent of the other. 1 Generally where a life insurance company violates its contract the assured may elect whether to enforce the contract, or to treat it as rescinded and sue to recover back the premiums paid with interest.^ The same rule applies when payment of premiums has been induced by fraud. ^ Or where demand is made for larger premiums than provided for by the contract.* Or by scaling down the amount agreed to be paid.^ It has been held,® that one who is the agent of an insurance com- 1 Fulton 13. Metropolitan L. Ins. Co., 4 Mise. K. 76; 23 N. Y. Supp. 598; affirming 21 N. Y. Supp. 470; Brewster v. National L. Ins. Co., 8 Timis L. E. 648; Bawden v. London, etc., Co. (Ct. App.), 8 Times L. R. 566; Metropolitan L. Ins. Co. v. Asmus (Ky.), 78 S. W. K. 204. 2 Van Werden v. Equitable L. Ass. Soc, 99 la. 621; 68 N. W. K. 892; Mutual L. Ins. Co. v. Elliot, 93 Tex. 144; 53 S. W. R. 1014; Kt-y ». National L. Ins. Co., 107 la. 446; 78 N. W. R. 68; McCarty o. N. Y. L. Ids. Co., 74 Minn. 530; 77 N. W. R. 426. 3 Hogben V. Metropolitan L. Ins. Co., 69 Conn. 503; 38 Atl. R. 214; Godfrey ». N. Y. L. Ins. Co., 70 Minn. 224; 73 N. W. R. 1. ^Gwaltneyj). Provident Sav. L. Ass. Soc, 130 N. C. 629; 41 S. E. R. 795. 5 Supreme Counc. v. Daix, 130 Fed. R. 101; Blach ». Supreme Counc, etc. (C. C. A.), 123 Fed. R. 650; Mowatt o. Prov. Sav. L. A. Soc, 27 Ont. App. 675; Supreme Counc, etc. ». Batte fTex. C. A.), 79 S. W. R. 629; O'Neill v. Supreme Counc, etc. (N. J.), 57 Atl. R. 463; Lippencott V. Sup. CI., etc, 130 Fed. R. 483. '^ Sengfelder v. Mut. L. Ins. Co. of N. Y., 5 Wash. 121; 31 Pac. E. 428. 676 CONSUMMATION OF CONTRACT. § 277a pany for the purpose of receiving applications for insurance has authority to agree, for the company, that a life policy shall in its second year be reduced one half in amount, and if this agreement is repudiated by the company the assured can rescind and recover back the amount of the first year's premium. If the association changes its system of doing business, so as to reduce the funds to which the member has to look for the payment of the insurance contracted for, he can rescind the contract of insurance and recover back the assessments paid thereon. l Or when a benefit society exceeds its charter powers and engages in an unlaw- ful business in unlawful ways the members can i-efuse to pay further assessments without forfeiting the payments already made and can have the fund accumulated distributed among the certificate holders.^ But where the beneficiary named in a certificate has no insurable interest he cannot recover from the association dues and assessments paid by him for the insurance as for money paid on a considera- tion which has failed, if the association had no notice that the beneficiary, and not the assured, was paying such dues and assessments.^ We append in a note reference to other cases where the right of rescission on the part of the assured has been upheld and recovery allowed.* A policy For a case where It was held that the ageat had no authority: Palmer V. Metropolitan L. Ins. Co., 21 App. Div. 287; 47 N. Y. Supp. 347. ' People, Mat. Ins. Fund v. Bricken, 92 Ky. 297; 17 S. W. 625. 2 Fogg et al. V. Sup. LodgeiGolden Lion, 156 Mass. 431; 31 N. E. 289. 3 Knights & Ladies of Honor v. Burke (Tex.), 15 S. W. 45. See also Nix V. Donovan, 18 N. Y. Supp. 435; Wheeler v. Mutual Kes. F. L. Assn., 102 111. App. 48; Brokamp v. Metropolitah L. Ins. Co., 8 Ohio Dec. 116. 4 McKay «. N. Y. Life Ins. Co., 124 Cal. 270; 56 Pac. Rep. 1112; Delouche ». Metropolitan Life Ins. Co., 69 N. H. 587; 45 Atl. Rep. 414; LaMarche v. Mutual L. Ins. Co., 126 Cal. 498; 58 Pac. Rep. 1053; Home Forum «. Varnado (Tex. Civ. App.), 55 S. W. R. 364; American Union L. Ins. Co. V. Wood (Tex. Civ. App.), 57 S. W. R. 685; Metropolitan Life Ins. Co. v. Smith, 22 Ky. L. R. 868 ; 59 S. W. R. 24 ; McCann ». Metru- 677 § 2775 CONSUMMATION OF CONTRACT. of life insurance is not rescinded by the company merely by offering to return the premium to the assured if the assured himself does not accept such premium and surrender the policy.! If one has insured his life for the benefit of another he cannot rescind without tendering a release from the beneficiary of the policy.^ The question whether the a'Ssured has acted with due diligence in rescinding the contract is one for the jury.^ § 2775. Abandonment. — Closely allied to the subject of rescission is that of abandonment. The question has been considered by the Supreme Court of the United States in a number of cases similar to each other in many respects, where that court held that an agreement to terminate a policy of life insurance made by the insured, who was also beneficiary, after a default in the payment of premiums, will end the contract; and an abandonment and rescission of a contract of life insurance by mutual agreement of the parties, after the insured is in default by the non-payment of premiums, will put an end to the contract, although a forfeiture could not have been declared by reason of failure on the part of the company to compl}' with certain re- quirements of law as to notice of premium.* And where politanL. Iqs. Co., 177 Mass. 280; 58 N. B R. 1026; Sti Iwell b. Cove- nant Life Ins. Co., 83 Mo. App. 215; Benaett v. Mass. Mutual L. Ins. Co., 167 Tenn. 371; 64 S. W. R. 758. Recovery has been allovfed though the applicant r. isrepresenied his occupation. McDonald v. Metropolitan Life Ids. Co., 68 N. H. 4; 38 All. Rep. 500. 1 McCollum V. N. Y. Mut. L. Iqs. Co., 55,Hun, 103 ; 8 N. Y. Supp. 249. 2 Jurgens v. N. Y. Life las, Co., 114 Cal. 161; 45 Pac. R. 1045. 3 Norton v. Gleason, 61 Vermont, 474; 18 Atl. R. 45. In regard to the admissibility of evidence as to dealings with other policy holders and other questions of evidence iu cases of rescission, see Thompson v. N. Y. L. Ins. Co , 21 Oregon, 466; 28 Pac. Rep. 628. * Mutual Life lusurance Co. ». Phinney, 178 U. S. 327. Same Comp- any V. Allen, 178 U. S. 351. Same v. Hill, 178 U. S. 347. Same v. Sears, 178 U. S. 345. See also Love o. Mut. L. Ins. Co. (Wash.), 74 Pac. R. 689. 678 CONSUMMATION OF CONTRACT. § 278 the holder of a life insurance policy refused to pay a mort- uary call on account of dissatisfaction with the rate, and announced that he had " quit," it was held that such action terminated the contract. i Where a policy, however, is pay- able to some one other than the one whose life is insured, it cannot be abandoned without the consent of the bene- ficiary.^ Where, however, the assured can change the beneficiary, and therefore is the onl}' party in interest, his acts are binding on the beneficiary ; because the member can sever his relations with the association at any time.^ The same rules are applied in determining whether an insurance contract has been abandoned as apply to other contracts. The question is generally one of fact. § 278. Court of Equity cau Correct Mistakes in Insur- ance Policies. — "It is well settled," says Chancellor Walworth,* " that a court of equity has jurisdiction to cor- rect mistakes in policies of insurance, as well as in all other written instruments. ^ But the evidence of such mistake, and that both parties understood the contract in the manner in which it is sought to be reformed, should be clear and satisfactory. In policies of insurance, the label or written memorandum from which the policy was filled up, is always considered of great importance in determining the nature of the risk and the intention of the parties." This is the case where the applicant trusts the agent to fill out the pol- icy according to his wishes, although there is a mistake of 1 Ryan v. Mutual Reserve Fund L. Ass'n, 96 Fed. Rep. 796; Haydel B. Mutual Reserve Fund L. Ass'n, 44 C. C. A. 169; 104 Fed. Rep. 718. 2 Washington Life Ins. Co. v. Berwald fTex.), 76 S. W. R. 442; affirm- ing (Tex. Civ. App.), 72 S. W. R. 436. s Seeore«e„§ 111. * Phoenix F. Ins. Co. v. Gurnee, 1 Paige Ch. 278. And see Frank a. Pacific Mut. L. Ins. Co. (Neb.), 62 N. W. R. 454. Unless fraud or mistake are clearly shown the court will not interfere. McConnell v. Provident Savings L. A. Soc, 34 C. C- A. 663; 92 Fed. E. 769. '^ Phil, on Ins. 14. 679 § 278 CONSUMMATION OF CONTRACT. law. Thus, where the plaintiff has been induced to act upon the superior knowledge of the defendant's agent; the fact being that an agreement had been made between the insured and the agent that certain insurance should be granted by the latter on the property of a firm of which the insured was a member. The agent, without fraud, in- duced the insured to have the policy made in his own name, assuring him that in that form it would protect the firm. The Supreme Court of the United States heldl that the policy must be reformed to meet the intention of the parties, on the ground that the insured bad trusted the agent concerning the proper mode of executing the policy. The case therefore was one of trust. So, where a mortgagee applied for insurance through an agent, intending to pro- cure an insurance of his mortgage interest, and so stating to the agent, but the agent drew the application for an in- surance on the property itself, in the name of the mortgagor and as his property, the amount to be payable in case of loss to the mortgagee, and so made the application and had the policy so made in the belief that such was the proper legal mode of effecting an insurance on the mortgage inter- est, it was held by the Supreme Court of Connecticut ^ that the mistake could be corrected by a court of chancery, although it was one of law and not of fact. The principle has been generally adhered to,^ and, in general, equity will reform a policy which does not insure the interest upon which insurance was desired because of an error of law on the part of insurer's agent,* and this even after a loss.^ In ■ Snell V. Insurance Co., 98 U. S. 85. 2 Woodbury Savings Bank, etc. v. The Charter Oak, etc., Ins. Co., 31. Conn. 617. 3 Longhurst v. Star Ids. Co., 19 Iowa, 364; Ben Franklin Ins. Co. v. GUlett, 54 Md. 212; FarmvlUe Ins. Co. v. Butler, 55 Md. 233. * Bailey v. American Cent. F. Ins. 'Co. 4 McCrary, 221 ; 13 Fed. Kep. 250; Sias v. Roger Williams Ins. Co., 8 Fed. Kep. 183; Eelth «. Globe Ins. Co., 52 111. 518; Oliver v. Ins. Co., 2 Curt. C. C. 277. 5 Woodbury Saving Bank v. Charter Oak, etc., Ins. Co,, 31 Conn. 517; 680 CONSUMMATION OF CONTEA.CT. § 278 a recent case the Maryland Court of Appeals said : i " The law is well settled that where the general agent of a com- pany is intrusted with the power to make and issue policies, and the insured fully and frankly discloses all facts material to the risk, and the agent in making out the policy, through fraud or mistake, fails to state such facts, such error or fraud on the part of the agent cannot be relied on by the company in avoidance of the policy, and a court of equity, up'on application, will reform the policy so as to make it express the real contract between the parties. ' ' ^ The court of Errors and Appeals of New Jersey goes farther and says : ^ " If the proposal for insurance be prepared by the agent of the company, and he misdescribe the premises, with full knowledge of their actual condition, and there be no fraud or collusion between the agent and the insured, the contract of insurance may be reformed in equity and made to conform to the condition of the premises as they were known to the agent." * So .in a case where, after the issuing of the pol- icy to the plaintiff, he called the attention of the local agent to the erroneous description of the building insured, but was told that it made no difference, and afterwards the general agent and secretary of the defendant inspected the propert^s with a full knowledge of the description of the Finfe V. Queen Ins. Co., 24 Fed. Eep. 318; Hill v. MlUville Mut. etc., Ins. Co., 39 N. J. Eq. 66. 1 Ben Franklin Ins. Co. v. Gillelt, 54 Md. 212. 2 The court cites Insurance Co. v. Wilkinson, 13 Wall. 222; Ins. Co. V. Mahone, 21 Wall. 152; Saving Bank v. Charter Oak Ins. Co., 31 Conn. 517; Rowley v. Empire Ins. Co., 36 N. Y. 550; Columbia Ins. Co. v. Cooper, 50 Pa. 331; Masters v. Madison Ins. Co., 11 Barb. 624; Peck o. New London Ins. Co., 22 Conn. 575. 3 Franklin F. Ins. Co. v. Martin, 40 N. J. Eq. 574. * The court cites CoUett v. Morrison, 9 Hare, 162 ; In re Universal, etc., F. Ins. Co., L. E. 19 Eq. 485; Malleable Iron Works v. PhcBnix Ins. Co., 25 Conn. 465; Woodbury Savings Bank v. Charter Oak Ins.. Co., 31 Conn. 517; Maher v. Hibernia Ins. Co., 67 N. Y. 283. 681 § 278 CONSUMMATION OF CONTRACT, buildiag, and pronounced the risk a good one, it was held ^ that the policy would be reformed. The court said: " The plaintiff was not careless ; was not thoughtlessly satisfied with the terms of the policy, but sought an emendation thereof, and was baulked of a successful pursuit thereof by the action and declaration of the defendants through their agents and officers." The corurt continues : " It is enough to authorize the reformation of the contract, if it appear that, through the mistake of both parties to it, the intentions of neither have been expressed in it. Now, if a court of equity had a right to find from the evidence that both the insurer and the insured meant to insure the very building that was burned ; and meant to put in the policy no expres- sion as to the character or situation of it different from the facts ; but, by a misconception as to the meaning and effect of language, have used terms which do express that which they did not intend to express, and which did fail to ex- press that which they did intend to express ; such evidence does make a case for a reformation of the policy so as to conform to the intentions and purposes of the parties."^ Where there is a mistake or failure to express the intention of the parties, the jurisdiction of equity to reform is un- questioned and has been often exercised. This has been done where the language of the party who drew the contract failed to adequately or perfectly express the common inten- tion of the parties. As where, in an action to reform a policy of insurance upon the plaintiff's life, which was ex- pressed to be " for the sole and separate use and benefit of his wife, Lina Goldsmith, but in case of her previous death to revert to the insured," it appeared that the policy was drawn by the insurance agent upon general directions by 1 Maher v. Hibernia Ins. Co., 67 N. T. 290. 2 Mauy «. Beekman Iron Co., 9 Paige, 188; Pitcher v. Hennessey, 48 N. Y. 416; McCall ■o. Ins. Co., 66 N. Y. 606; Grand Lodge A. O. U. W. V. Sater, 44 M. A. 446. 682 CONSUMMATION OF CONTEACT. § 279 the plaintiff as to its terms, and the plaintiff's intention then was, that the beneficiary named should have the in- surance, if she was his wife at the time of his death, and that she had since been divorced for adultery. The court held^ that the policy should be reformed so as to run for her benefit so long as she remained a wife. Where in igno- rance of the death of the insured the holder of the policy surrendered it for one paid up, equity will reinstate the first policy.^ § 279. "When Equity will Relieve if Agent has Acted in Bad Faith. — Where there is bad faith on the part of the agent, or where a policy is writtten materially differing from the prior agreement of the parties, equity will always interfere. Though the principle has been generally applied to fire insurance contracts, there seems to be no good reason why it should not be applied to cases of life insurance where the facts are analogous. For example, in a case in New York, the plaintiff having an insurance with the defendant of his interest as mortgagee, took another mort- gage on the same premises and applied to defendant for a renewal of the first policy, with an increase of the insurance to the amount of both mortgages; this was agreed to, and a new policy was issued, which contained a clause, not in the first policy, to the effect that, in case of loss, the as- sured should assign to the defendant all her rights to receive satisfaction from any other person, and that the loss should not be payable until after the enforcement of the original security and defendant should only be liable for so much as could not be collected. The policy was renewed from time to time, and plaintiff did not discover the change until after a loss. Both mortgages contained the usual insur- ance clause, and it was agreed thereby that the mortgagors 1 Goldsmitii v. Union Mut. L. Ins. Co., 18 Abb. N. C. 325. 2 Eeigel v. km. Life Ins. Co., 140 Pa. St. 193; 21 Atl. 392. 683 § 279 CONSUMMATION OF CONTRACT. should pay the premiums and have the benefit of the policy in the payment of the debt. In an action to reform the policy and recover thereon as reformed the court held : ^ that the plaintiff was entitled to relief and that it was bad faith on the part of the defendant to so change the terms without notice and to deliver the new as simply a renewal of the old policy. And furftier, that the negligence of plaintiff in not discovering the change and laches in not sooner seeking relief were only matters making the pro- priety of granting the relief discretionary. In this case the court said: " It was bad faith on the part of the de- fendant to change so radically the terms of the policy and deliver it as a policy simply renewing the old one, without notice of the change. A party whose duty it is to prepare a written contract, in pursuance of a previous agreement, to prepare one materially changing the terms of such pre- vious agreement, and deliver it as in accordance therewith, commits a fraud which entitles the other party to relief, according to the circumstances presented. Equity will re- form a written instrument in cases of mutual mistake, and also in cases of fraud, and also where there is a mistake on one side and fraud on the other. ^ The negligence of the plaintiff in not discovering the change and laches in not sooner seeking relief, are questions which make the pro- priety of granting relief, in a given case, discretionary. The court below, upon the findings of fact, properly exer- cised its discretion in this case in granting relief. Policies of fire insurance are rarely examined by the insured. The same degree of vigilance and critical examination would not be expected or demanded as in the case of some other instruments." To the same effect is the recent case of 1 Hay V. star F. Ins. Co., 77 N. Y. 235. 2 MTelles V. Yates, 44 N. Y. 525; Rider v. Powellj 28 N. Y. 310 and cases cited. 684 CONSUMMATION OF CONTRACT. § 279 Palmer v. Hartford F. Ins. Co./ where the plaintiffs held a policy of insurance of the defendant and, on the policy expiring, applied to the defendants for a renewal policy, to be on the same terms with the expiring one, which the defendants promised to give. The defendants wrote and delivered the new policy and received the premium. The plaintiffs, supposing it to be on the same terras with the first, did not examine it until after the loss of the property by fire three months later, when, on reading it, they discovered an important variance from the former policy, materially affecting their right of recovery. If they had known of the change they would not have accepted the policy. In a suit for the reformation of the policy, and a recovery of what would become due under it, it was held that the plaintiffs could not be regarded as guilty of laches in not examining the policy and applying earlier for its correction, since they had a right to believe it to be in all essential respects like the former one. After a review of a number of authorities ^ the court says : " It is a matter of common knowledge that a policy of insurance against fire, at the present day, is a lengthy contract, which, after speci- fying the main things, namely, the subject, its location, the owner, the amount, the time and the price, embodies very many stipulations and conditions for the protection of the underwriter. If a person desiring indemnity against loss applies to the underwriter and states the main things above enumerated, and says no more, he has knowledge that he has asked for and will receive a contract which, in addition 1 54 Conn. 488; 9 Atl. Eep. 248. 2 Andrews v. Essex Ins. Co., 3 Mason, 10; 1 Story Eq. Jur., § 159; Oliver v. Mut. Com. Ins. Co., 2 Curtis, 277; N. Amer. Ins. Co. v. Whipple, 2 Biss. 419; Phoenix F. Ins. Co v. Gurnee, 1 Paige, 278; Wood on F. Ins., § 484; Van Tuyl v. Westchester F. Ins. Co., 55 N. Y. 667; Nat. Trader's Bank v. Ocean Ins. Co., 62 Me. 519; BuclilaLd ». Adams Exp. Co., 97 Mass. 124; Bidwell v. Astor Ins. Co., 16 N. Y. 263. 685 § 279 CONSUMMATION OF CONTRACT. to those, will contain many limiting conditions in behalf of the party executing it ; and when he receives the policy he cannot avoid seeing and knowing that there are many more stipulations in it than were covered by his verbal request. It may well be that a due regard for the rights of others requires him to .examine tho^e stipulations, and express a timely dissent, or be held to an acceptance thereof. Noth- ing which has previously transpired between him and the underwriter furnishes justification for omission to read them. The underwriter has not invited his confidence by any promise as to what the writing shall contain or omit. But if the underwriter solicits a person to purchase of him indemnity against loss by fire, and if they unite by making a written draft of all the terms, conditions and stip- ulations which are to become a part of or in any way affect the contract, and if the underwriter promises to make and sign a copy thereof, and deliver it as the evidence of the terms of his undertaking, and if a material and variant condition is by mistake inserted, and the variant contract is delivered, and the stipulated premium is received and re- tained, the court will not hear the claim that he is entitled to the benefit of the variant condition, where the other party had neither actual nor imputed knowledge of the change. In his promise to make and deliver an accurate copy, there is justification before the law for the omission of the other party to examine the paper delivered, and for his assumption that there is no designed variance. A man is not, for his pecuniary advantage, to impute it to another as gross negligence, that the other trusted to his fidelity to a promise of that character. The rule of law that no per- son shall be permitted to deliver himself from contract obligations by saying that he did not read what he signed or accepted, is subject to this limitation, namely, that it is not to be applied in behalf of any person who by word or act has induced the omission to read." The latter part of 686 CONSUMMATION OF CONTRACT. § 280 the foregoing remarks apply to applications as well as policies and is a statement of the same principle which has led the courts, in many cases, of which Insurance Co. v. Wilkenson ^ is one, to hold that when the agents of life insurance companies, in soliciting insurance, undertake to prepare the application of the insured, or make any repre- sentations to the insured as to the character or effect of the statements of the application, they will be regarded in doing so, as the agents of the insurance companies, and not of the insured, any stipulation in the policies to the con- trary notwithstanding. § 280. Or if the Policy does not Conform to the Appli- cation. — Where the policy does not conform to the appli- cation it will be reformed and the taking away of the policy without having compared it with the application does not preclude the assured from afterwards objecting to the mis- take.^ On the appeal to the court in banc of the Nova Scotia case cited, which was one where the policy did not conform to the application, it was affirmed, the court say- ing: " Admit the validity of the application, slip or label, as variously called, — and it is not sought to be contro- verted ; — admit the policy produced as that executed by defendants and delivered to plaintiffs under the appUca- tion, — and neither party denies it, — and then a simpler, plainer case for the exercise of the powers of an equity court, it would be difficult to conceive." The judge adds ; " Policies of insurance are a class of contracts that require on the part of the assured the utmost good faith, but it should be reciprocal." * The same rule has been applied by the Supreme Court of the United States.* 1 13 Wall. 222. 2 Wylde ». Union Marine Ins. Oo., 1 Nova Scotia Eq. 208; Motteaux V. Gov. & Co. of London Ass., 1 Atk. (54:5) 631; Bostwich o. Mutual L. Ins Co., 116 Wis. 892; 92 N. W. B. 246. 3 Wylde o. Union Marine Ins. Co., 1 Hubs. & Cli. (Nova Sc.) 205. « Equitable Ins. Co. o. Hearne, 20 Wall. 494 (4 Cliff. 192). 687 § 282 CONSUMMATION OF CONTKACT. § 281. Or if the Errors are Manifest. — Especially will equity interpose to correct manifest errors, such as mis- takes in dates or time of beginning or expiration of the risk,^ or as to name of insured,^ or as to the interest to be pro- tected,^ or in description of premises,* or in the amount." And Jthat too whether the member accepted the certificate with knowledge of the mistake or not.* § 282. Reasons for Refusal to Interfere. — If is no rea- son for not reforming a policy that the complainant might enforce payment of the loss in an action at law.' But delay in asking for the relief may be considered to prevent the court acting,^ and if an action at law has failed, the unsuc- cessful party cannot then apply to have the contract re- formed ; " nor if the error is so apparent that there is no necessity for reformation ; ^^ nor if the mistake resulted from the supine negligence of the party, who slept upon his rights, until other duties and responsibilities grew up ; " nor if a new contract would be the result, imposing new liabilities 1 Mercantile Ins. Co. v. Jaynes, 87 111. 199; Knox v. Lycoming F. Ins. Co., 60 Wis. 671; N. Am. Ins. Co. v. Whipple, 2 Bias. 419. 2 Spare v. Home Mut. Ins. Co., 9 Sawy. 142; 17 Fed. Rep. 568. 2 Williams v. North German Ins. Co., 24 Fed. Rep. 625; Fink v. Queen Ins. Co., 24 Fed. Rep. 318; Banks v. Wilson, Nova Sc. Bq. 210. ^ Home Ins., etc., Co. b. Lewis, 48 Tex. 622; Same v. Meyer, 93 111. 271. « Gray v. Supreme Lodge K. of H., 118 Ind. 293; 20 N. E. R. 833. * Gray v. Supreme Lodge, etc., supra. See also Eastman y. Provident M. R. Assn., 65 N. H. 176; 18 Atl. R. 745; Wheeler v. Odd-fellows Mut. B. Assn., 44 Minn. 513; 47 N. W. R. 149. ' Delaware, etc., Ins. Co. v. Gillett, 54 Md. 219. 8 Bishop V. Clay, etc., Ins. Go., 49 Conn. 167; Zallee v. Conn. Mut. L. Ins. Co., 12 Mo. App. Ill; Union Cent. L. Ins. Co. v. Hook, 62 Ohio St. 256; 56 N. E. R. 906. ^ Steinbach v. Relief F. Ins. Co., 77 N. Y. 498; 12 Hun, 641 ; Washburn V. Great Western Ins. Co., 114 Mass. 175. i» Amazon Ins. Co. v. Wall, 31 Ohio St. 628. u Susquehanna, etc., Ins. Co. v. Swank, 102 Pa. St. 17. 688 CONSUMMATION OF CONTRACT. § 282 on the defendant ; ^ nor unless there was a mutual mistake ; ^ nor if it appears that no action is maintainable on the policy because of lapse of time ; ^ nor if the insurer was induced to issue the policy by the false representations of those who claim a benefit under it.* There must be either mutual mistake or fraud.* A policy of. insurance cannot be reformed by parol evidence of mistake on the part of the insured alone, nor to the extent of altering a warranty. Courts will not lightly interfere and reform a contract. As was said by the New York Court of Appeals : ' " The power* of courts of equity to reform written instruments is one in the exercise of which great caution should be observed. To justify the court in changing the language of the instrument sought to be reformed (except in the case of fraud), it must be established that both parties agreed to something differ- ent from what is expressed in the writing, and the proof upon this point should be so clear and convincing as to leave no room for doubt. Losing sight of these cardinal principles, in the administration of this peculiar remedy, would lead to the assumption of a power which no court possesses, of making an agreement between parties to which they have not both assented." ® The presumption is that the contract expresses the will of the parties.^ The rela- tion of a life insurance company to a policy being that of contract and not that of a trustee and cestui que trust 1 Sykora v. Forest City, etc., Ins. Co., 2 Cin. L. B. 223. 2 Gurham v. Fire & Marine Ins. Co., 10 Sawy. 526; 22 Fed. Eep. 468. = Thompson v. Phoenix Ins. Co., 25 Fed. Eep. 296. < Spare o. Home Mut. Ins. Co., 9 Sawy. 142; 17 Fed. Bep. 568. 5 Doniol B. Commercial F. Ins. Co., 34 N. J. Eq. 30. " Cooper o. Farmers' M. F. Ins. Co., 50 Pa. St. 299; 88 Am. Dec. 544. ' Mead o. Westchester F. Ins. Co., 64 N. Y. 455. Miaghan v. Hartford Fire Ins, Co., 12 Hun, 321; Bartholomews. Mercantile, etc., Ins. Co., 34 Hun, 263. ' Harrison v. Hartford F. Ins. Co., 30 Fed. Eep. 862. 44 689 § 283 CONSUMMATION OF OONTKACT. equity cannot direct an accounting between the parties concerning the funds arising from the plan.^ § 283. No Belief when Legal Effect of Plain Terms was Misunderstood. — There cannot be any relief if the party who procured the policy misunderstood the legal effect of plain and unambiguous words, no blame attaching to the other parties thereto. As where a man took out a policy on his wife's life, payable in four years to her, if living ; and if not living to himself. He paid the premiums, retained the policy, and received payments made upon it. She was living at the maturity of the policy, but had filed a petition for divorce. The husband and wife interpleaded for the money. In deciding that the wife was entitled to the fund the court said : 2 <« Does the answer of said Volney show a case of fraud or mistake? There is clearly no fraud alleged. "We do not think the answer shows a case fox relief on the ground of mistake. It does not allege that the policy differs in its terms from what the parties in- tended. It simply alleges that said Volney supposed it was payable to him, according to its terms, and not to his wife, unless he died before it became payable. We do not see how he could have possibly supposed so, for he does not allege any ignorance of the terms ; but if he did sup- pose so, he supposed so because he misunderstood the legal effect of plain and unambiguous words. There is ordina- rily no remedy for such a mistake, if the other parties be not to blame, and here no circumstances are alleged to take the case out of the ordinary rule.^ 1 Uhlman v. New York L. Ins. Co., 109 N. Y. 421; 17 N. E. R. 363. ^ Mina, Life Ins. Co. v. Mason, 11 B. I. 583. See Avery v. Equitable L. Assn., 117 N. Y. 451; 23 S. E. B. 3. s Blackburn's case, 8 De G., M. &G. 177; Rashdall v. Ford, L. B. 2 Eq. Cas. 750; Farley u. Bryant, 32 Me. 483; Dill v. Shahan, 25 Ala. 694; Lanniug v. Carpenter, 48 N. Y. 408; Nelson v. Davis, 40 Ind. 366; Gterald 690 CONSUMMATION OF CONTRACT. § 284 § 284. Application of Foregoing Principles to Benefit Societies. — To what extent equity will aid the defective designation of beneficiary, or reform the certificate when issued, is uncertain. On general principles the same rules should apply to the contracts of benefit societies as to those of life insurance companies wherever the facts are similar. When equity is asked to aid the defective designation, or apparent failure to designate, it might be suggested that the case is one of non-execution of a power as distin- guished from a trust, and again that there is no privity of contract between a benefit society and the beneficiary of its member, but neither of these objections would be insu- perable. There is only one case where the subject was alluded to and there the case was one of evident mistake, for the secretary of the company was in fault. In this case, 1 the Supreme Court of New Hampshire said: "The defendant contracted to pay a sum not exceeding $2,000 as a benefit, upon due notice of the death of Gigar, the ' assured, and the surrender of his certificate of membership to such person or persons as he may, by entry on the record book of the association or on the face of this certifi- cate, direct the same to be paid.' The bill alleges, and the demurrer admits, that, at the time he made application for membership, he stated to the association (which means to its proper officer or officers), that it was his intention that the benefit should be paid to the plaintiff, to whom he was then, and at the time of his decease, betrothed. The prayer of the bill is for a reformation of the contract by inserting in the membership certificate the name of the plaintiff as beneficiary, and that the benefit may be paid V. Elley, 45 la. 322; Story Eq. Jur., §§ 113, 116, 137; Kerr on Fraud and M. 409, 428. 1 Scott V. Provident Mut. Relief Association, 63 N. H. 556; 4 Atl. Eep. 792. And also see Newman v. Covenant M. B. Assn., 76 la. 56; 40 N. W. K. 87. 691 § 285 CONSUMMATION OF CONTEACT. her. Section 3 of article 4 of the by-laws makes it the duty of the secretary to keep a record of the members of the association, and the persons to whom the relief is to be paid. If the fact is found at the trial term that the par- ties understood direction was given to enter the plaintiff's name upon the record-book as the beneficiary to whom the benefit was payable, and that Gigar understood that her name would be so entered without further direction from him, it was the duty of the secretary to enter it ; and the accident or mistake was one which equity will remedy. The accident could not be said to have arisen from the negligence or fault of Gigar, so as to preclude relief,^ nor would it be the case of non-execution of a power as dis- tinguished from a trust, where equity does not afford relief .2 As equity interposes only as between the original parties and those claiming under them in privity * objec- tion may be obviated by an amendment joining Gigar' s administrator as coplaintiff. She may then prosecute this suit in his name, giving him indemnity, if he requires it, against costs and expenses. The bill should also contain a prayer that the plaintiff's name may be inserted in the record-book as Gigar' s beneficiary." § 285. Jurisdiction of Equity to Decree Cancella- tion. — In policies of fire insurance, a clause is usually inserted providing for the cancellation and surrender of the contract at the option of either party. Numerous cases have been decided in the courts of this country and of others involving questions relating to the manner of exercising this option and the time when it becomes effective. It is not necessary to refer to these adjudications. Similar stipula- tions in life policies are not so usual and instances of > 1 story Eq. Jur., § 105. 2 Story Bq. Jur., §§ 169, 170. 3 1 Story Eq. Jur., §§ 106, 165. 692 CONSUMMATION OF CONTRACT. § 285 attempted rescission are comparatively rare. The jurisdic- tion of equity to decree a cancellation upon proper showing has never been doubted, for insurance contracts, like other writings, may be reformed so as to express the intention of the parties, or, in cases of fraud, accident or mistake, be altogether avoided. A broad distinction is made between applications made in the lifetime of the insured, and those that come after the contingency insured against has hap- pened, in the latter event, as we shall see later, it has gen- erally been held that equity will not interfere, because the reasons and facts, relied on for cancellation, would be equally available in defense to an action at law upon the contract. As was said by Lord Bacon, " chancery is ordained to supply the law, not to subvert the law."i In Fenn v. Craig ^ the general rule was laid down that a bill in equity would lie at the suit of a life insurance company to have a policy delivered up to be canceled on the ground of fraud in effecting the insurance, where the instrument is not void upon the face of it. The court seemed to think, that the plaintiffs had a better equity if they brought their bill in the lifetime of the assured than if they waited until after his decease. The later case of London Assurance v. Man- sel,* was one of concealment, and the Master of the EoUs did not seem to question the jurisdiction, but alone dis- cussed the point whether there had in fact been a conceal- ment, and whether it was material. The assured had equivocated about his application to other companies for insurance and rejection by them, and the court held that the policy should be decreed to be delivered up, saying that it was a very plain and clear case. In Connecticut Mutual Life Insurance Company v. The Home Insurance Company * 1 4 Bac. Works, 488, cited Ins. Co. ». Stanchfleld, 1 Dill. C. C. 431. 2 3 Young & Coll. 216. » 11 Ch. Div.363. 4 17 Blatchf . 142. 693 § 285 CONSUMMATION OF CONTRACT. in the United States Circuit Court of Connecticut, the suit was to cancel a policy that the company had already atten)pted to cancel upon the ground that the insured had become so far intemperate as to impair his health, the polic}' stipulating that it should be void if this contingency hap- pened. The owner of the contract refused to agree to the cancellation, but continued to tender the premiums. The bill was filed to definitely determine the rights of the par- ties. A demurrer was interposed to the bill and overruled. Two reasons were alleged why the court should sustain the demurrer; the first was that while a court of equity has power to cancel instruments which are void by reason of fraud in their inception, it has no jurisdiction to cancel instruments which have ceased to be binding since their execution ; second, that while, at the instanceof the assured, a court of equity may compel an insurance company to rein- state a cancelled contract, equity will not interfere to enforce a forfeiture. In passing upon the demurrer Judge Shipman said : " Upon the first proposition, it is true, that a court of equity has not, or will not, exercise jurisdiction to cancel a contract, merely because it has become void or inoperative by reason of some fact which has taken place since its execution. Such an exercise of power would give a court of equity concurrent jurisdiction with courts of law over all contracts which one contracting party may allege to have been broken bj^ the other. i But, while relief from the consequences of fraud is peculiarly the province of a court of equity, it has not refused to cancel contracts which have been performed, or which have become inoperative, when the special circumstances of the case rendered it unjust or oppressive that the contract should be an outstand- ing claim against the plaintiff. The reasonable rule is, that a court of equity will exercise its power of set- 1 Thornton 11. Knight, 16 Sim. 508. 694 CONSUMMATION OF CONTRACT. § 285 ting aside contracts for defects not apparent on their face, although such defects arose after the execution of the contracts, in cases where the special circumstances render it inequitable or unjust, or a hardship, to compel the plaintiff to await a suit at law at the instance of the other party. 1 Chancellor Kent was inclined to think in Hamil- ton V. Cummings,^ that a court of equity had jurisdiction to set aside a bond or other instrument whether the instrument was void for matter appearing on its face, or from the proofs, ' and that these assumed distinctions were not well founded.' He says : ' Perhaps all the cases may be recons ciled on the general principle, that the exercise of thi- power is to be regulated by sound discretion, as the circam- stances of the individual case may dictate, and that the fisort to equity, to be sustained, must be expedient, either because the instrument is liable to abuse from its negotia- ble nature, or because the defense, not arising on its face, may be difficult, or uncertain at law, or from some other special circumstances peculiar to the case, and rendering a resort here highly proper, and clear of all suspicion of any design to promote expense and litigation. If, however, the defect appears on the bond itself, the interference of this court will depend on a question of expediency, and not on a question of jurisdiction.' Second, it is true, that courts of equity will not aid to enforce a forfeiture, or to divest an estate for breach of covenant or condition subsequent, unless, perhaps, under extraordinary circumstances.^ When an estate has been forfeited, or when a pecuniary penalty has been incurred, by reason of the happening of 1 Hamilton v. Cummiags, 1 Johns. Ch. 517; Hoare u. Brembridge, L. K. 8 Ch. App. 22; Hartford v. Chipman, 21 Conn. 488; Ferguson u. Fisk, 28 Conn. 501. 2 1 Johns. Ch. 517. 3 Harsburg u. Baker, 1 Pet. 232; Livingston v. Tompkins, 4 Johns. Ch. 415; 2 Stor. Eq. Jur., § 1319. 695 § 285 CONSUMMATION OF CONTRACT. a condition subsequent, or of the breach of a covenant, there is usually an immediate remedy at law to regain possession of the estate or to recover the penalty. There being such a remedy equity will not interfere. ' The great principle is, that equity will not assist in the recovery of a penalty or forfeiture, when the plaintiff may proceed at law to recover it 'i In this case, there is no estate to be regained, there is no sum in damages to be recovered. The insured is still living, and a cancellation of the contract is the only result which is to be attained. The plaintiff has now no remedy at law and unless it can resort to a court of equity, it must wait and become a defendant at the future suit of the holder of the policy. When such suit will be commenced is a matter of uncer- tainty. The rule is not applicable to the cancellation of a policy of insurance upon the life of a living person." The court then reasons that the relief should be given because of its expediency and in order to be just to the other policy holders. That the foundation of insurance is the law of averages and if the insured are permitted knowingly to indulge in practices that notoriously invite disease the investment of other insured persons is jeopar- dized. The court quotes the language of Justice Bradley^ that " the insured parties are associates in a great scheme. The associated relation exists whether the company be a mutual one or not. Each is interested in the engagements of all, for out of the coexistence of many risks arises the law of average, which underlies the whole business." The objection that the company has already exercised its option of declaring the forfeiture, is disposed of by the answer that it is important for the company to know before the death of the assured whether it has made an error in this ' Livingston v. Tompkins, i Johns. Cli. 432. » N. Y. Life Ins. Co. v. Stratham, 3 Otto (93 U. S.), 24. 696 CONSUMMATION OF CONTRACT. § 285 action or not. That neither party should be left in doubt during a series of years as to his or its pecuniary rights in the policy. In a later case in the United States Circuit Court of North Carolina l it was sought to cancel a policy upon the same ground, the intemperance of the assured, the latter being still living. The court, citing Insurance Co. v. Bailey,^ held that a court of equity would not set aside a policy of life insurance during the life of the assured on the ground that it had been rendered void by something not appearing on the face of the policy, and which could be proved by extrinsic evidence. That if such power existed it was not a case for the ordinary exercise of the discretion- ary power of a court of equity to order a cancellation, because the assured, who is now intemperate, may reform and live out the ordinary expectation of life. In Home In- surance Co, V. Stanchfield,'"' a case that was argued before Judges Miller and Dillon, in the United States Circuit Court in Minnesota, it was said, in the course of discus- sion, that before a loss occurred equity would cancel a pol- icy obtained by false and fraudulent representations of the assured. This, however, would be simply an application of the general rule that whenever a contract is obtained by fraud or deception equity will decree its cancellation. And the rule undoubtedly now is that in a suit brought before loss a court of equity, on a proper showing, will cancel the policy and enforce rescission.* A contract obtained by fraud is void, and the fact that the assured took out a large 1 Connecticut Mut. L. Ins. Co. v. Bear, 26 Fed. Rep. 582. 2 13 Wall. 616. ' 2 Abb. C. C. 1; 1 Dill. C. C. 424; and see also Maine Ben. Assn. v. Parks, 81 Me. 79; 16 Atl. K. 339. ^ Security Trust Co. v. Tarpey, 66 III. App. 590; Jolin Hancock M. L. Ins. Co. V. Houpt, 113 Fed. R 672; Maine Ben Assn. v. Parks, 81 Me. 79; 16 Atl. R. 339; Am. Union L. Ins. Co. v. Judge, 191 Pa. St. 484; 43 Atl. E. 374; New York L. Ins. Co. v. Weaver,24 Ky. L. R. 1086; 70 S. W. R. 628. 697 § 287 CONSUMMATION OP CONTRACT. amount of insurance at the same time is admissible as bear- ing on the question of fraud. l § 286. The Same Subject: Application to Benefit So- cieties. — It might be an objection to this exercise of equity jurisdiction in the case of the contracts of benefit societies that the latter majj expel the member for any fraud, or violation of the terms of the contract, that would justify the interference of a court of equity. The Kentucky Court of Appeals has held ^ that, where the by- laws of the company provide that if the assured misrepresent his habits as temperate, the board of directors, upon hear- ing, may drop his name from membership, the action of the board upon the charge is conclusive and res adjudicata and it cannot be afterwards raised in a suit on the policy after ths death of the assured. In Durantaye v. Societe St. Ignace ^ the court, in a mandamus proceeding, held that a member of a benevolent insurance society was rightfully expelled for suppression of the fact that he was laboring under a pulmonary complaint and falsely representing' at the time of his admission that he was in good health. § 287. The Same Subject: Cancellation after Loss. — After a loss has occurred a court of equity will not inter- fere to order a cancellation of the contract unless some special circumstance exists establishing the necessity of a resort to equity to prevent an injury which may be irrepar- able and which equity alone is competent to avert. It is not sufficient that a defense exists, because it can be set up in an action at law on the policy,* nor that the evidence may be lost,^ nor the inconvenience or risk of a reliance upon legal 1 WMtmore ». Supreme L. K. & L. of H., 100 Mo. 36; 13 S. W. E. 495. 2 Jones o. National Mut. Ben. Assn. (Ky.), 2 S. W. Rep. 447. 3 13 Low. Can. Jur. 1. * Globe Mut. L. Ins. Co. o. Eeals, 79 N. Y. 205. 5 Town of Venice o. WoodrufE, 62 N. T. 462. 698 CONSUMMATION OF CONTRACT. § 287 remedies.! In England it seems that a court of equity will order, upon a proper showing, a policy to be cancelled even though the suit be brought after the death of the insured.^ The same rule seems to prevail in Canada^ and Michigan.* In Home Ins. Co. v. Stanchfield,^ which was heard before Judges Miller and Dillon in the United States Circuit Court, a bill was filed by an insurance company against the assured to enjoin an action at law on the policy, and to cancel the same because it had been procured by false and fraudulent representations, and the court held that it ought to be dismissed because founded solely upon matters which, if true, are a defense to the action at law, and no matters were shown making a resort to equity necessary or expedient. After a full review of the cases, Judge Dillon said: "The cases in the English books show that when bills are entertained, injunctions are refused or dissolved, thus leaving the real litigation to be had at law. If the verdict is for the policy, of course the bill is dismissed. If against it, then the bill may be brought to hearing, and the court will, in proper cases, order the policy to be surren- dered, an order which, after such a verdict, is quite unnec- essary and unless. The English cases referred to are not, as before observed, very satisfactorily reasoned, and are not free from conflict. The old oases are entitled to very little respect as authority, and the modern ones tend to 1 Fowler v. Palmer, 62 N. Y. 533. 2 Whittingham v. Thornburg, Pre. Ch. 20; s. c. 2 Eq. Abr. 635; 2 Vern. 206; 24 Eng. Reprint 11; DeCosta v. Scandret, 2 Eq. Ca. Ab. 636; 2P- Wms. 170; French v. Connolly, 2 Anstr. 45t; British Eq. Ass. Co. v. Great Western Ey. Co., 20 L. T. K. [n. s.] 422; Fenn v. Craig, 3 Y. & Coll. 216; Lindeman v. Desborough, 8 B. & C. 592. 3 North Am. L. Ass. Co. v. Brophy, 2 Ont. L. E. 559; affirmed 32 Can. Sup. Ct. R. 261. * Mactavish v. Kent, etc., 122 Mich. 242; 80 N. W. E. 1086; John Hancock M. L. Ins. Co. v. Dick, 114 Mich. 337; 43 L. B. A. 566; 72 N. W. E. 179. See also Mut. L. Ins. Co. v. Pearson, 114 Fed. E. 395. 5 2 Abb. C. C. 1; Dill. C. C. 424. 699 § 287 CONSUMMATION OF CONTRACT. show that equity will not oust the law jurisdiction, or in- terfere with the legal remedies where there is a full defense at law, and no obstacle in the way of making it. Insur- ance contracts should stand upon the same footing as other contracts with respect to equity interference, else we have an anomaly in law without any reason to justify it." The rule, however, is now as laiddown in Cable v. U. S. Life Ins. Co.i which was followed by the U. S. Court of Appeals for the Eighth Circuit,^ where the court said: "Before the loss under an insurance policy occurs a com- pany has no adequate remedy at law for the fraudu- lent representations or concealments which induce its issue, because an estoppel from denying its validity may arise in favor of third persons who advance their money in reliance upon it and because the time when an opportunity will be offered to establish the fraud as a defense to an action upon the policy is so remote and uncertain that in- dispensable witnesses and evidence may, and probably will disappear before the opportunity will be offered. Hence a Federal court sitting in equity has jurisdiction of a suit in- stituted before the loss under a policy occurs to compel its cancellation and surrender on account of fraud or misrep- resentation in its procurement and after the court has thus acquired jurisdiction by the commencement of the suit be- fore loss it may proceed to a final decree, although the loss occurs during the pendency of the suit and before the final hearing." To the same effect are other cases. ^ 1 191 U. S. 288; reversing U. S. L. Ins. Co. v. Cable, 98 Fed. K. 761; 39 C. C. A. 264 and 111 Fed. R. 19; 49 C. C. A. 216. 2 Riggs V. Union Life Ins. Co. (C. C. A.), 129 Fed. R. 207; reversing Union L. Ins. Co. v. Riggs, 123 Fed. R. 312. 3 Kern v. American Leg. of Honor, 167 Mo. 471; 65 S. W. R. 723; Sctiaermann o. Union, etc., Ins. Co., 165 Mo. 641; 66 8. W. R. 723; . Imperial F. Ins. Co. v. Gunning, 81 111. 236; Des Moines L. Ins. Co. v. Seifert (111.), 71 N. E. R. 849. 700 CONSUMMATION OF CONTRACT. § 288 § 288. General Doctrine as to Interference of Equity Stated. — The conclusien from the cases cited in the pre- ceding sections is that in all cases arising upon insurance contracts, where the equitable jurisdiction is invoked to reform or cancel, or to give any other relief peculiar to courts of chancery, no distinction is to be made between such contracts and those relating to other matters; but, if relief is granted at all, it must be because of the applica- tion to the facts of the broad and fundamental principles of equity. In other words, it is only when the complainant has no remedy at law, and, because of fraud, accident or mistake, injustice would result if the relief asked were not granted, that a court of equity will exercise its powers and by so doing present wrong from being successful. 701 CHAPTEE IX. CHANGE OF BENEFICIARY: ASSIGNMENT. § 289. The Subject of this Chapter. 290. Appointmf nts Under Powers : when Bevocable. 291. Designation of Beneficiary is an Act Testamentary in its Charac- ter. 291a. Beneficiaries Have no Property in Benefit but a Mere Ex- pectancy. 2916, Subject to Certain Limitations Life Insurance Policies can be assigned like other Choses in Action. 292. Vested Rights of Payees in Life Insurance Companies. 293. Opposing Authorities: When Beneficiary in Life Policies can be Changed. 294. Wife's Policy. 294a. The Same Subject: Rights of Husband's Creditors. 296. When the Policy cannot be Assigned or the Beneficiary Changed . 296. When the Policy has not Passed out of Control of Party Effect- ing it. 297. Life Insurance Policies: How Assigned. 298. Assent of Insurer to Assignment. 299. Effect of Assignment. 300. Assignment after Loss. 301. Assignment by Wife of Policy on Husband's Life when Wife dies before the Husband: Rights of Creditor of Wife. 302. The Question of Insurable Interest as Affecting the Validity of Assignments of Life Policies. 303. Validity of Assignment, how Determined : Amount of Recovery by Creditor and Assignee. 304. Distinctions between Certificates of Beneficiary Societies and Policies of Life Insurance in Respect to Asslgnmebt or Change of Beneficiary. 305. Devel.ipmentof the Law Concerning Change of Beneficiary. 306. Present Doctrine. 306a. Member may be Estopped from Changing Beneficiary. 307. Change of Beneficiary must be in Way Prescribed by the Laws of the Society. 308. The Society may Waive Requirements of its Laws as to Change ' of Beneficiary. 702 CHANGE OF BENEFICIARY: ASSIGNMENT. § 289 § 308a. Where no Formalities are Required, Change may be made in any Way Indicating the Intention of the Member. 309. When an Attempted Change of Beneficiary becomes Complete. 310. Jurisdiction of Equity in Aid of Imperfect Cbaage of Beneficiary, 310a. Summary of Law Begirding Change of Beneficiary. 3106. Interpleader and Questions Arising in such Proceedings. 310c. Effect of Illegal or Incomplete Change of Beneficiary on First Designation. 311. Change of Designation Governed by Same Rules in Respect to Beneficiary as Original Appointment. 312. Rights of Creditors in Benefit. § 289. The Subject of This Chapter. — The distinctions between the beneficiary orders, or societies, and the regular life insurance companies nowhere appear more plainly than when we consider the rights of the beneficiary named in ti;ie certificate or policy. This is because of the fundamental differences in the contracts of these two classes of organi- zations which we are about to discuss in this place. In a policy of life insurance the undertaking is with the assured and the stipulated sum is payable to him upon the contin- gency named, — the ending of the life insured. Owing to the form of the contract the rights of the person to whom the insurance is to be paid become at once vested when the policy is delivered and cannot be altered or affected except by his consent.! The member of a beneficiary organization, on the other hand, as we have seen,^ has no property inter- est in the benefit, but only the naked power of designating some one to receive it. This designated recipient also has no property, nor vested rights, in the benefit, because his interest is contingent and uncertain, the power of the mem- ber to revoke the appointment and substitute a new bene- ficiary being specially reserved by the laws of the society, which laws enter into, and form a part of the contract.' 1 Post, § 292. 2 ^Rie, §§236, 237. 3 Ante, §161; post, §291a. 703 § 290 CHANGE OF BENEFICIARY: ASSIGNMENT. It is, however, of course possible for an insurance policy to contain a power of substitution, or revocation of appoint- ment, and also for the contract of a benefit society to stipulate unconditionally that the beneficiary shall not be changed. But such stipulations are unusual. It is seen, therefore, that everything depends upon the terms of each contract. In this chapter we shall consider the right of the member of a benefit society to change the beneficiary named in his certificate; the interest which the beneficiary has in the benefit, or the assured has in a life insurance policy; and the assignability of certificates and policies. § 290. Appointments Under Powers, when Revoca- ble. — Ordinarily, appointments under powers are revoca- ble. In Sugden on Powers ^ it is said: "A power to ap- point includes in itself a power to revoke ; and a power to do an act which can only be effected by an appointment, authorizes an appointment and, therefore, a revocation." In regard to real property Washburn says : " It should be understood, that, when the donee of a power intends to revoke the uses he appoints, he should expressly reserve this right in the deed executing the power. If such reser- vation be not made, the appointment cannot be revoked; and this is especially true where the power has been exe- cuted upon receiving a valuable consideration." ^ Wills are in their own nature always revocable and, therefore, where the power is executed by a will, an express power of revocation need not be inserted, but it may be revoked, and the original power re-executed -fogies quoties.^ "The re- sult of the authorities as to deeds (and the like observa- tions apply to other instruments inter vivos) executing instruments appears to be: 1. That in a Ae&A executing & 1 Vol. 1, p. 238 (ed. 1856J. 2 2 Washb. on Real Prop. 330. 3 Sugden on Powers, Vol. 1, p. 462. 704 CHANGE OF BENEFICIARY: ASSIGNMENT. § 291a power, a power of revocation and new appointment may be reserved, although not expressly authorized by the deed creating the power, and that such powers may be reserved (oties qiioties. 2. That where an appointment under a power is made by deed it cannot be revoked, unless an express power be reserved in the deed by which the power is exe- cuted; a revocation will not be authorized by a general prospective power in the deed creating the first power . i § 291. Designation of Beneficiary Is an Act Testa- mentary in its Cbaracter. — The designation of a benefi- ciary by a member of a benefit society is an act testamentary in its character, and the same rules of construction apply as in the case of other testamentary writings.^ In con- sidering the validity of changes of beneficiary the courts have evidently been influenced by this fact. If, however, the certificate refer to the laws of the society, and these authorize the substitution or change of beneficiaries, it seems plain that the case is one where under the compact the right of revocation of the appointment is secured, and this right is again reserved in the instrument executing- the power, so that no question should arise touching its validity.^ § 291a. Beneficiaries have no Property in Benefit but a Mere Expectancy. — Under the contract entered into be- tween a beneficiary society and the member, or wherever 1 Sugden od Powers, Vol. 1, p. 462. -Duvall V. Goodson, 79 Ky. 228; Washington Ben. Endowment 4ssn. ■J. Wood, 4 Mackey, 19; Continental Life Ins. Go. v. Palmer, 42 Conn. ■A; 19 Am. Rep. 530; Union Mut. Aid Assn. v. Montgomery, 70 Mich. 587; 38 N. W. Rep. 588; Thomas v. Leake, 67 Tex 469; 3 S. W. R. p. 70:'.; National American Assn. o. Kirgin, 28 Mo. App. 80; Chartrand v. Brac'^ 16 Colo. 19; 26 Pac. R. 152; Masonic, etc., Assn. v. Bunch, 109 M(j. iitiO; 19 S. W. R. 25; Aiken v. Mass. Ben. Assn., 13 N. Y. Supp. 379; Knights Templars, etc., Assn. v. Greene, 179 Fed. R 4C!. 3 Ante, § 255. 45 705 § 2916 CHANGE OF BENEriCIARY: ASSIGNMENT. the right to change the beneficiary is reserved in the con- tract, the designated beneficiary has no property in the ben- efit to be paid, but a mere expectancy. The Supreme Court of California has tiaus stated the rule:l " Tlie beneficiary named in the certificate has no interest or pi'operty therein that her lieirs could succeed to. Her interest was a mere expectancy of an incompleted gift. It was revocable at the will of the insured and could not ripen into a right until his death. ^ Her right under the certificate was not unlike that of an heir apparent and that is not to be deemed an interest of any kind." The same doctrine was fully set forth by the Court of Errors and Appeals of New Jersey,^ where the court said: "By the terms of such contracts (those of benefit societies) the beneficiary may be changed by the mere will of the member, and without the beneficiary's consent. In such case the right of the beneficiary is not property but a mere expectancy, dependent on the will of the member to whom the certificate is issued. For this reason the beneficiary's interest in the certificate and con- tract evidenced thereby differs totally from the interest of a beneficiary named in an ordinary life insurance policy, containing no provision for the designation of a new bene- ficiary. The cases, so far as I can discover, are agreed upon this doctrine." This principle is now so well settled that no further authorities need be cited.* § 2916. Subject to Certain Limitations, Life Insurance Policies can be Assigned like other Choses in Action . Life insurance policies can be ordinarily assigned subject 1 Supreme Court, etc., v. Gehrenbach, 124 Cal. 43; 56 Pac. Rep. 640. 2 Hoeft «. Supreme Lodge, 113 Cal. 91; 45 Pac. R. 185; 33 L. R. A. 174; Jory v. Sup. Council, 105 Cal. 20; 38 Pac. R. 524; 26 L. R. A. 733; Hellenbers v. Distrct No. 1, 94 N. Y. 580. 3 Golden Star Fraternity u. iWartin, 59 N. J. L. 207; 35 Atl. Rep. 908. * Masonic Ben. Assn. v. Bunch, 109 Mo, 660; 19 S. W. R. 25; Hofman II. Grand Lodge, 73 Mo. App. 47. See also post, § 304 et seq. 706 CHANGE OF BENEFICIARY: ASSIGNMENT. § 292 to the limitations imposed by statute, and subject also to the condition that the assignee must have an insurable in- terest. Usually a policy contains a provision that no assignment thereof shall be binding on the company unless notice of such assignment has been given to it. Sometimes the policy prescribes modes of transfer which are reasonable provisions and generally will be enforced. The assignment must be made by the party having title to the policy. In the case of regular life insurance policies the payee has a vested right in the policy and is a neces- sary party to any assignment, unless the right to change the beneficiary is reserved in the contract. In this respect policies of life insurance are unlike benefit certificates issued by the fraternal beneficiary organizations where, tis we have seen, the designated beneficiary has a conditional interest, or a mere expectancy, which does not ripen into property until the death of the member. In the succeed- ing sections of this chapter we shall discuss the various principles governing the assignment of life insurance pol- icies. The decisions of the courts are not always in har- mony, but the law is reasonably well settled.' An assign- ment procured by fraud will be set aside by proper pro- ceedings brought for that purpose.^ § 292. Vested Bights of Payees in Life Insurance Pol- icies. — When a policy of insurance is taken out payable to some other person than the insured, the beneficiary ordinarily has a vested right in the policy and its proceeds, consequently the assured cannot in any way control or dis- 1 Elaborate notes on the assignability of life insurance policies will be founl in Union Central L. Ins. Co. v. Buxer, 62 Ohio St. 385; 57 N. E. R. 66; 49 L. R. A. 737, and Chamberlain v. Butler, 61 N-ib. 730; 86 N. W. R. 481; 54 L. R. A. 338; 87 Am. St. Kep. 478. 2 McKeldin v. McKeldin, 104 Ky. 345; 47 S. W. R. 246; Plant v. Plant, 76 Miss. 560; 25 Sou. Rep. 151. 707 § 292 CHANGE OF BENEFICIARY : ASSIGNMENT. pose of the policy. A leading writer on the subject says : i ' ' We apprehend the general rule to be that a policy and the money to become due under it, belong the moment it is issued to the person or persons named in it as the beneficiary or beneficiaries, and that there is no power in the person procuring the insurance, by any act of his, by deed or by will, to transfer to any other person the interest of the person named. An irrevocable trust is created. * » « The legal representatives of the insured have no claim upon the money, and cannot maintain an action therefor, if it is expressed to be for the benefit of some one else." And this statement is cited and approved by the Supreme Court of Indiana.^ In a case arising in Massachusetts, where, in pursuance of an understanding with the mother of the in- sured, he took out a policy payable to her, but, upon his subsequent marriage, surrendered it and received a new one payable to the wife, it was held that the mother's rights were not affected. In this case,^ the court said: " There appears to have been a full understanding between him (the assured) and his mother that the policy was to be taken out for her benefit, and afterwards that it had been so done. In point of fact, it was made payable to her, and this was done with the intention of giving to her the benefit of it. This constituted a valid settlement in her favor. Nothing remained to be done by him to complete it. He might, indeed, afterwards fail to pay the annual premiums. This, however, does not prevent it from being a good trust. An unrevoked trust is valid, even though there is an express power of revocation.* In this case the assured reserved to 1 Bliss on Life Ids., §318. 2 Harley «, Heist, 86 Ind. 196; 44 Am. Eep. 285; Holland v. Taylor, 111 Ind. 121. See also Irwin B. Travelers Ins. Co., 16 Tex. C. App. 683; 39 S. W. R. 1097. 3 Plngrey v. National Life Ins. Co., 144 Mass. 381; 11 N. Bast. Eep. 502. < Stone u. Hackett, 12 Gray, 227. 708 CHANGE OF BENEFICIAKY: ASSIGNMENT. § 292 himself no power of revocation, or of changing the ben- eficiary. It is true that he entered into no obligation to continue to pay the premiums ; but the omission to do this did not have the effect to give him an implied power of revocation. His mother might herself continue the pay- ment of the premiums. Moreover, by the terms of the policy, after payment of two full annual premiums, it would not lapse, and certain valuable rights would still exist under it. Under these circumstances the assured could not legally surrender the policy without his mother's consent, and her rights are not affected by such surrender. This seems to us to be the true rule, and it is supported by the weight of authority." ^ So where a husband ex- changes a policy payable to wife and children for one paya- ble differently the new policy will be held to be a continua- tion of the first, ^and so where policyis cha'ngedf rom the hus- 1 Chapin v. Fellowes, 36 Conn. 132; i Am. Rep. 49; Lemons. PhcBnix Ins. Co., 38 Conn. 294; Ferndon ». Caiiflfld, 104 N. Y. 143; 10 N. East. Kep. 146; National Ins. Co. v. Haley, 78 Me. 268; Barry ». Brune, 71 N. Y. 261; Landrum v. Knowles, 22 N. J. Eq. 594; Manhattan Ins. Co. v. Smith, 44 Ohio St. 156; Ricker ». Charter Oali Ins. Co., 27 Minn. 193; 38 Am. Rep. 289; Weston v. Richardson, 47 L. T. (n. s.) 514; Kimball v. Gilman, 60 N. H. 54; City Savings Bank©. Whittle, 63 N. H. 687; AUis V. Ware, 28 Minn. 166; Olmstead v. Masonic Ben. Soc, 37 Kan. 93; 14 Pac. Rep. 449; Wilmaser v. Continental Life Ins. Co., 66 la, 417; Gould V. Emerson, 99 Mass. 154; Waldrom v. Waldrom, 76 Ala. 285; Drake v. Stone, 58 Ala. 133; Pilcher v. N. Y. Life Ins. Co., 33 La. Ann. 322; Pack- ard «. Conn. Mut. Life Ins. Co., 9 Mo. App. 469; Southern Life Ins. Co, V. Booker, 9 ^eisk. 606; Stillwell v. Mut. Life Ins. Co., 72 N. Y. 385; Block V. Valley M. Ins. Assn., 52 Ark. 201; 12 S. W. R. 477; U.S. Casualty Co. v. Kacer, 169 Mo. 301; 58 L. R. A. 436; 69 S. W. R. 370; Andrus v. Fidelity, etc., Assn., 168 Mo. 151; 67 S. W. R. 582; Laughlin v_ Norcross, 97 Me. 33; 53 Atl. R. 834; Franklin L. Ins. Co. v. Galligau (Ark.; 73 S. W, R. 102; Atkins v. Atkins, 70 Vt. 565; 41 Atl. R. 503; Bickel V. Bickel (Ky.), 79 S. W. R. 215; Uaion Cent. L. I. Co. v. Buxer, 62 Ohio St. 385; 57 N. E. R. 66; 49 L. R. A. 737 and note. 2 Hooker v. Sugg, 102 N. C. 115; 8 S. E. R. 919; Mut. Ben. L. Ins. Co. ». Dunn, 106 Ky. 591; 51 S. W. R. 20. 709 § 293 CHANGE OF BENEFICIARY: ASSIGNMENT. band as trustee for his children to his wife ; i nor can the wife's rights in a policy payable to her be affected by an unau- thorized surrender. 2 Where the consent of the wife to a surrender was forged but the policy afterwards lapsed it was held that the wife's rights were lost, the company not being a party to the fraud.' The right ordinarily to as- sign is in the payee.* § 293. Opposing Authorities — When Beneficiary in Liife Policies can be Changed. — There is a class of cases which decide that after the death of a wife, to whom a policy of insurance upon the husband's life was made payable, he may surrender it and take a new one for the benefit of an- other person. It has also been held that where the original beneficiaries of the policy die during the lifetime of the assured, who pays the premiums, such policy reverts to the insured and becomes part of his estate and goes to his administrator. 5 It has, however, also been held that if the husband does not surrender a policy payable to his wife, she dying before him, the presumption is that he wanted her representatives to take.* The reasons for these decisions are various, such as the supposed intention,' want of iusur- 1 Garner v. Germania L. Ins. Co., 110 N. Y. 266; 18 N. E. R. 130. 2 Putnam v. N. Y. Life Ins. Co., 42 La. An. 739; 7 South. R. 602; Duffy V. Metropolitan L. Ins. Co., 94 Me. 414; 47 Atl. R. 905; D'Arcy v. Conn. Mat. L. Ins. Co., 108 Tenn. 567; 69 S. W. R. 768; Sterrit u. Lee, 24 Misc. R. 324; 52 N. Y. Supp. 1132; aff' d 58 N. Y. Supp. 1149; Bn-wn ». Murray, 54 N. J. Eq. 594 ; 35 Atl . R. 748 ; Preston v. Conn. Mat. L. Ins. Co., 95 Md. 101; 51 Atl. R. 838; Lambert v. Pena. M. L. Ins. Co. 50 La. Ann. 1027; 24 Sou. R. 16; Jackson Bank v. Williams, 77 Miss. 398; 26 Sou. R. 965; Webster v. New Eng. Mut. L. Ins. Co., 21 D. C. 227. s Schneider v. U. L. Life Ins. Co., 123 N. Y. 109; 25 N. E. R. 322; reversing 4 N. Y. Supp. 797; Miles v. Conn. M. L. Ins. Co., 147 U. S. 177; 13 S. C. R. 275. * Irwin V. Travellers Ins. Co., 16 Tex. Civ. A. 683; 39 S. W. R. 1097. ' Ryan v. Rothweller, 50 Ohio St. 595; 35 N. E. R, 679; Lamberton v. Bogart, 46 Minn. 409; 48 N. W. R. 230. 6 Waldheim v. John Hancock L. Ins. Co., 13 N. Y. Supp. 577. ' Bickerton v. Jacques, 28 Hun, 119. 710 CHANGE OF BENEFICIARY: ASSIGNMENT. § 294 able interest in the personal representatives of the deceased wife,i and other reasons more or less cogent.^ But in all these the principle of vested rights under a contract seems either to have been lost sight of, or some clause in the contract exempted it from the general rule, and they are, therefore, against the current of authority, except those cases where, from a construction of the policy, some power was reserved to the insured to change the beneficiary. A policy payable to the insured himself is assignable like any other chose in action,'* or he may dispose of it by will to the exclusion of his wife,* and the insured may assign a policy payable to his legal rei)resentatives.^ If the con- tract is made with the insured, and not the beneficiary, the policy can be assigned or the beneficiary changed by the assured,^ and the right to change the payee may be reserved in the contract.' § 294. Wife's Policy. — In pursuance of this doctrine of the vested rights of the beneficiary of a life insurance policy, it has been held that, when the wife is the beneficiary and the husband survives her, the property descends to her representatives as other personalty. Thus, where the deceased insured his life in favor of his wife, who died in- • Gambs v. Covenant Mut. L. Ins. Co., 50 Mo. 44. 2 Foster v. Gile, 50 Wis. 603; Clark v. Durand, 12 Wis. 223; Roberts V. Roberts, 64 N. C 695; Kerman v. Howard, 23 Wis. 108. 3 Stuart V. Sutcliff, 46 La. Ann. 240; 14 So. R. 912. ■» Hamilton v. McQuillan, 82 Me. 204; 19 Atl. R. 167. « Hurst V. Mut. Reserve F. L. Ins. Co. (Md.), 26 Atl. R. 956. See also Cyrenius v. Mut. L. Ins. Co., 26 N. Y. Supp. 248, where it was held that the term "assured" applied to the person whose life was assured and who paid the premiums although the policy was payable to the son. * Denver L. Ins. Co. v. Cram (Colo. App.), 73 Pac. R. 875; Robin- son V. U. S. Mut. Ace. Assn., 68 Fed. R. 825. ' Bilbro V. Jones, 102 Ga. 161; 29 S. E. R. 118; John Hancock M. L. Ins. Co. V. White, 20 R. I. 457; 40 Atl. R. 5; Hopkiajl w. N. W. L. Ins. Co., 40 C. C. A. 1 ; 99 Fed. R. 199. 711 § 294 CHANGE OF BEXEFICIAEY : ASSIGNMENT. testate in his lifetime, leaving an only child, and then the husband died intestate and insolvent, the child survivins, it was held that the proceeds of the policy were, under the intestate laws of Pennsylvania, to be distributed, share and share alike, between the child and the representatives of the husband-' In Olmstead v. Keys et al.^ the policy was payable to the trustee of a ' wife and after her death her husband married again and had the policy changed so as to be payable to his second wife. The husband afterwards died, leaving several children by his first and one by his second wife. The Court of Appeals of New York held that the widow was entitled to the proceeds and applied the common-law right of the husband surviving his wife to her choses in action which he might reduce to possession.^ In another case the same court held that where the policy was payable to wife and children and some die in the life- time of the insured, the proceeds go to the survivors, on the principle that the law of joint tenancy applies where a class is named.* But the better rule is that the beneficiaries are tenants in common and the interest of a deceased bene- ficiary descends to the next of kin, or if there is a widow and children, then to them.^ An assignment to husband and wife creates a joint ownership and the survivor takes the whole.* Where the policy was payable to wife if liv- 1 Anderson's Estate, 85 Pa. St. 202; United Breth. Mut. Aid Assn. v. M Her, 107 Pa. St. 162; Eatwistle v. Travelers Ins. Co., 202 Pa. St. 141; 51 At'l. R. 759. 2 85 N. Y. 593. 3 See also Continental L. Ins. Cot v. Hamilton, 41 Ohio St. 274; Leei'. Murr' 11, 7 Ky. Law Eep. 598; Cole v. Knickerbocker L. Ins. Co., 63 How. P'- 44-'. * Walsh u. Mutual L. Ins. Co., 133 N. Y. 408; 31 N. E. R. 228; revers- i g 15 N Y. Supp. 697; Lane v. DeMetz, 13 N. Y. Supp. 347. 5 Vos- V. Conn. Mut. L. Ins. Co., 119 Mich. 161; 77 N. W. U. 697; 4t L. R. A. 689; Millard u. Drayton, 177 Mass. 633; 59 N. E. R. 436; 52 L. R. A. 117. 6 Arn V. Am, 81 Mo. App. 133. 712 CHANGE or BENEFICIARY : ASSIGNMENT. § 294 ing or if not to the children then living, the death of the wife is the time which fixes the rights of the children.! When the policy is payable to wife and children after-born children are excluded,^ and a child of a second wife ;^ and in a case in Iowa* where the policy was payable to the wife and her legal representatives or, if she were not living, to her children, it was held that on her death the wife's rights were extinguished. In the case of benefit societies, where the right is reserved to the member to control and dispose of the benefit at all times, if the certificate is made payable to the wife and she die before her husband, her interest will be held to have terminated at her death, ^ and under some conditions his representatives will have the preference over hers, as where such appears to have been the intent,* and where the cer- tificate was payable to the wife " or her legal representa- tives " and she died before the husband, it was held by a divided court,' that the trust was intended for the wife alone and upon her death resulted to the husband, upon the principle that where the object of the trust fails there is a resulting trust to the grantor. If the wife die in the life- time of the husband a policy on his life payable to her may 1 U. S. Trust Co. V. Mut. Ben. L. Ins. Co., 115 N. Y. 152; 21 N. E. R. 1025; reversing i N. Y. Supp. 543. 2 Conn. Mut. L. Ins. Co. v. Baldwin, 15 K. I. 106; 23 Atl. R. 105. To the contrary is Roquemore v. Dent, 135 Ala. 292; 33 Sou. R. 178. This on principle w uld not be so in the case of a benefit society. s ^tna L. Ins. Co. v. Clousih, 68 N. H. 298; 44 Atl. R. 520; Smith v. ^ na L Ins. Co. C8 N. H 405; 44 A 1 R. 531. 1 la re Conr.d's Es'ate, 89 la. 396; 66 N. W. R. 535; see also Wald- heim v. John Hancock L. Ins. Co., 28 N. Y Supp. 766. * Richmond v. Johnson, 28 Minn. 447; Tafel v. Knights of the Golden Rule, 12 Cin. L. Bui. 33. But see Riley v. Riley, 75 Wis. 464; 44 N. W. R. 112; Adler». Stoffel (Breitung's Est.), 78 Wis. 33; 46 N. W. R. 891; 47N. W. 17; also §244. ^ Expressmen's, etc., Soc. v. Lewis, 9 Mo. App. 412. ' Washington, etc., Assn. v. Wood, 4 Mack. 19. 713 § 294 CHANGE OF BENEFICIAEY : ASSIGNMENT. become his by being reduced to possession as other per- sonal property of the wife.^ The words legal represen- tatives were held to have no signification different from that which is attributable to those words generally, viz. : persons appointed either by will or by the law to administer upon the estate of a deceased. Under special circum- stances the proceeds of a policy upon the husband's life payable to the wife who dies before her husband will be divided between his estate and hers.^ The words legal representatives have also been held to include assigns, as where a policy was payable to " legal representatives " and the insured assigned it.^ In an assignment to the wife "if living," the words mean if living at the maturity of the policy.* A husband cannot assign a policy on his life payable to the wife if living at the time of his death if not to his estate. ^ Generally, the question is one of construction of the policy and an application of the statutes governing descents, or governing the disposition of policies payable to the wife.^ Under some circumstances evidence of intent will be admissible and control the disposition, as where a policy of insurance was in the name of a wife on the life of her husband and the amount was payable to the wife, her executors, administrators or assigns, if she sur- vived her husband; otherwise to their children for their 1 Handwerker «. Durmeyer, 96 Tean. 619; 36 S. W. R. 869; D'Arcy v. CoiiD. Mut. L. Ins. Co., 108 Tenn, 567; 69 S. W. K. 76j. 2 Estate of Balz, 12 Phila. 29; National Life Ins. Co. v. Haley, 78 Mo. 268. 3 Hurst V. Mutual Reserve F. L. Ins. Co. (Md.), 26 Atl. R. 956. ^ Burton v. Burton, 56 App. Div. 1 ; 67 N. Y. Supp. 338. s Union Cent. L. Ins. Co. v Woods, 11 Ind. App. 335; 37 N. E. R. 180. 8 Ciintinental Lite lus. Co. v. Webb, 54 Ala. 688; Drake v. Stone, 58 Ala. 183; Fearn v. Ward, 65 Ala. 33; Fletcher v. Collier, 61 Ga. 653; Conn. M. Life lus. Co. v. Fisti, 59 N. H. 126; Norris v. Massachusetts M. L. Ins. Co., 131 Mass. 294; Troy v. Sargent, 132 Mass. 408; In re Adams .Policy Trusts, 28 Ch. Div. 525; In re Mellor's Policy Trusts, 6 Ch. Div. 'l27. 714 CHANGE or beneficiary: assignment. § 294 use or to their guardian if under age. The wife did not survive her husband, and the only child was one by adop- tion who was of age. It was held ^ that the children were the sole beneficiaries and the policy was payable to them and that as the only child was one by adoption and the circumstances showed that the parties intended that he should be included in the benefits of the policy, he was entitled to all the proceeds of such policy. Gener- ally a policy payable to a married woman is her separate property and cannot be pledged for her husband's debts nor changed into separate property of the husband by surrender and issue of new policy,^ but the assignee of a wife's pol- icy may be entitled to a return of premiums paid by him.* A policy payable to the wife is usually subject to her debts,* but not when exempted by statute. ^ The contingent in- terest of a wife in a policy on the life of her husband, payable to her if living at the time of his death and if not so living to her children, does not constitute her separate property that can be charged under an assignment by her and her husband of the policy to secure the debt of the latter, even though she collected the policy, and the money so collected is not chargeable under such an assignment.^ A husband cannot withdraw the accumulations of a policy payable to the wife though she be ignorant of the existence of the policy.' A statute providing that a policy payable to a married woman shall inure to the benefit of her sepa- 1 Martin v. ^uia L. lus. Co., 73 Me. 25. 2 Putnam v. N. Y. Life Ins. Co., 42 La. Ann. 739; 7 South R. 602. 3 Conn. Mut. L. Ins. Co. v. Van Campen, 11 N. Y. Supp. 103. 1 Ambergu. Manhattan L, Ins. Co., 171 N. Y. 3U; 63 N. E. R. Ill; reversing 67 N. Y. Supp. 872. '• Ellison V. Straw, 116 Wis. 207; 92 N. "W. R. 1094, 6 Stickton V. Schmidt^ 64 Ohio St. 354; 60 N. E. R. 561. As to com- munity property, Martin v. McAllister, 94 Tex. 567; 63 S. W. R. 624; 56 L. R. A. 585; reversing 61 S. W. 622. ' N. y. Life Ins. Co. v. Ireland (Tex.), 17 S. W. R. 617; Weatherbee v. New York Life Ins. Co., 182 Mass. 342; 65 N. E. R. 383. 715 § 294a CHANGE OF BENEEICIAEY : ASSIGNMENT. rate use and that of her children does not enlarge the rights of the children beyond what are secured to them by the contract.* § 294a. The Same Subject : Rights of Husband's Creditors. — In nearly all the States it is provided by statute that a husband may iiisure bis life for the benefit of wife and children and that the proceeds of such policies shall not be subjected to the payment of his debts. Where such a statute exists it is immaterial that the husband was insolvent at the time the insurance was effected,^ nor is the amount of the insurance material.^ But where the statute limits the amount that may be applied by the husband to the payment of premiums on policies for the wife's benefit the interest of the creditors in the excess of pre- miums so paid may be declared by a court of equity though the policies are not due.* To recover the creditors must show not only that the husband was insolvent at the time but that the payments were made in fraud of existing credit- ors.^ The protection of the statute does not apply to policies taken out by the debtor for his own benefit and assigned by him while insolvent to his wife and children.'' 1 Wirgman v. Miller, 98 Ky. 620; 33 S. W. R. 937. 2 Central Nat. Bk. ?;. Hume, 128 U. S. 195; 9 S. C. R.41; McCutcheon's Appeal, 99 Pa. St. 137. 3 Harvf y c. Harrison, 89 Tenn. 470; 14 S. W. E. 1038; First Natl. Bank v. Simpson, 152 Mo. 638; 54 S. W. R. 506. * Stokes V. Amerman, 121 N. Y. 337; 24 N. E. R. 819; Ins. Co. i. Eckert, 6 Am. L. Eec. 482. 5 W' beri). Paxton,48 Ohio St. 266; 26N. E.E. 1051; Central Nat. Bk- V. Hume, supra; Wagner v. Koch, 4 111. App. 501; Jones v. Patty, 73 Miss. 179; 18 Sou. R. 794. 6 Ionia Co. Sav. Bk. v. McLean, 84 Mich. 625; 48 N. W. R. 159; Cross V. Armstrong, 44 Ohio St. 613; 10 N. E. R. 160; Elliot's App., 50 Pa. St. 75; St-e also Bank u. Ins. Co., 24 Fed. R. 770; Pence u. Makepeace, 65 Ind. 347; Successiooof Hearing, 26 L. Ann. 326; Stisler's Exr. v. Stigler, 77 Va. 163; Thompson ti. Cundiff, 11 Bush 567; Barbour ». Conn. Mut. L. Ins. Co., 61 Conn. 240; Fearn u. Ward, 65 Ala. 33; 80 Id. 555. 716 CHANGE OF BENEFICIARY: ASSIGNMENT. § 294a The rights of creditors depend upon the statutes of the sever- al States and it is not deemed necessary to examine them in detail. These statutes are to have a liberal construction. i It has been held that the endowment insurance is not within the act and creditors can have the same set set aside. ^ It is not clearly settled whether, when the assured has paid out for premiums an amount exceeding that fixed by the statute, creditors are limited to the excess of premiums paid or can share in the insurance proportionately as the excess is to the total amount; or in proportion as the premiums paid while insolvent bear to those paid when solvent.^ In a late case* the Supreme Court of Missouri discusses the question as follows: "Section 5853, Revised Statutes 1889, gives a sister an insurable interest in her brother's life. Without this provision this policy of insurance would be void, and no matter how much premiums were paid neither the sister nor the brother's creditors would be able to collect a cent of the insurance after his death. So hei'e, as in the Judsoa case, the proceeds of this insurance, ' are not the product of premiums alone, but of premiums united with the beneficiary's insurable interest.' For this 1 Felrath u. Schonfleld, 76 Ala. 199; Cole v. Marple, 98 111. 58; Thomp- son V. CundifE, 11 Bush, 567; Hathaway v. Sherman, 61 Mk. 466; Elliott V. Bryan, 64 Md. 368; Earnshaw u. Stewart, Id. 513; Gale v. McLaurln, 66 Miss. 461. As to the Missouri statute see Judson v. Walker, 155 Mo. 166; 55 S. W. E. 1083. 2 Talcott V. Field, 34 Neb. 611; 52 N. W. R. 400; Tompkins v Levy 87 Ala. 263 ; 6 South. E. 846. But see to the contrary Briggs v. McCul- lough, 36 Cal. 550. 3 Supporting the latter proposition Is PuUis v. Robinson, 73 Mo. 203; reversing 5 M. A. 548; also Charter Oak L. Ins. Co. v. Brant, 47 Mo. 419. As to proportion excess i f premiums over statutory amount bears to all. In re Yeager, 5 Ins. L. J. 238. As to statutory limitations, Col v. Marple, 98 III. 68; Ingln.r v. New Eng. L. Ins. Co., 15 Ins. h. J. 557; Brown v. Balfour, 46 Minn. 68; Cross v. Armstrong, 44 Ohio St. 613; Trough's Est , 8 Phil. 214. See also post, § 312. 4 Sternberg v. Levi, 159 Mo. 617; 50 S. W. R. 1114; 53 L. E. A. 438; reversing s. c. 76 Mo. App. 590, 717 § 294a CHANGE OF beneficiary: assignment. reason alone it is clear that the rule laid down in the case of Pullis V. Eobinson,^ is not the true rule now, and was not the true rule even under the statute as it stood then. But if a man is entitled to his salary and certain exemp- tions as the head of a family which his creditors can not touch, and if he chooses to si^end a part of his salary in premiums for life insurance for the benefit of his family after he is gone, his creditors are not thereby defrauded, for be has withdrawn no part of his property which his creditors could touch. Hence the provision added to the statute in 1879 did not change the right of a head of a family under the exemption laws. Under the law as it stood when the Pullis case was decided the head of a family could use his salary and his exempt property up to the value of $300, to pay the yearly premiums on insurance for his family, without defrauding his creditors. Such an use of his exempt property no more defrauded his credi- tors than if he had spent it in riotous and high living or than if he had paid necessary expenses or had given it away. The statute at that time was simply declarative of a right he had before. The amendment of 1879 raised the limit of exemptions, pro hac vice, from three hundred to five hundred dollars, but it did not change the principle involved. Afterwards, as before, it was a fraud for an insolvent to withdraw the excess of his property over his exemptions from the reach of his creditors and invest it in insurance for his family, and such excess, representing the extent of the fraud, with interest, the creditors can reach. But as the premiums did not alone produce the proceeds of the in- surance and it required also an insurable interest to pro- duce such proceeds, and as there is no legal formula for apportioning the proportion of such excess that should be credited to the payment of premiums and the portion that 1 73 Mo. 201. 718 CHANGE OF BENEFICIAR-X : ASSIGNMENT. § 295 should be credited to insurable interest, the courts take the only practical course and do not attempt to work out such formula or distribution, but award the creditor the known sum so fraudulently withdrawn from the reach of the cred- itors, the excess over the exemption, and restore it to the creditors with interest. Thus the creditor is placed in the same position that he would have been in if the fraud had not been perpetrated — he gets all the property of the debtor that he has a right to touch, and the interest allowed is the legal measure of his damages for not getting the money when he should have gotten it." Where life policies were issued to assured who afterwards made an assignment and the policies were treated as of no value he can surrender them and take out others payable to his wife instead of himself.^ A statute authorizing a father to ' insure his life in favor of a minor child does not authorize him to assign to it a policy payable to himself, he being in debt at the time.^ § 295. When the Policy cannot be Assigned or the Beneficiary Changed. — If the policy provides expressly that no assignment thereof shall be made, the stipulation is binding upon the parties.^ Where the laws of a benefit association provide that the benefit shall be paid to the person named in the application of the member, and no provision is made for a change of beneficiary, the rights of the latter are vested and cannot be affected by any act of the member.* In one of these 1 Barbour v. Conn. Mut. Ins. Co., 61 Conn. 240; 23 Atl. 154. 2 Friedman v. Fennell, 94 Ala. 670; 10 South. E. 649. 3 Unity M. L. Ass. v. Dugan, 118 Mass. 219. * Kentucky Masonic M. L. Ins. Co. v. Miller, 13 Bush, 489; Gibsun V. Ky. Grangers, etc., Soc, 8 Ky. L. Kep. 520; Ky. Grangers, etc., Soc. v. Howe, 9 Ky. Law Rep. 198; Olmsteado. Masonic Mut. B. Soc, 37 Kan. 93; 14 Pac. Rep. 449; Basye v. Adams, 81 Ky. 368; Presbyterian Ass. Fund V. Allen, 106 lad. 693; Grand Lodge v. Eisner, 26 Mo. App. 108; 719 § 295 CHANGE OF BENEFICIARY: ASSIGNMENT. cases ^ the Supreme Court of Indiana says : ' ' We can see no way to avoid the conclusion that this charter provision requires the benefit to be paid to the per- son named in the application, or to those specified in the case of the death of those persons, or of some occurrence making it impossible to pay to them. Not only does the charter in direct terms declare that the benefit shall be paid to the persons thus named, but it also declares that if it becomes impossible to pay it to them, it shall go in the manner specified in the charter. The effect of these provisions is that the beneficiaries named must receive the money due on the policy, or it must be disposed of as provided by the charter creating the association. The provisions respecting the mode of disposing of the benefit deprives the insured and the insurer of any right to change the contract, as it leaves only two possible classes of beneficiaries, those named in the application and those specified in the charter, as entitled to take in case the des- ignation in the application is ' changed by death,' or ' otherwise becomes impossible.' " The general rule, how- ever, in the case of benefit societies is that, as the beneficiary has no vested rights in the benefit until the death of the member, the latter can change the beneficiary at any time although the first beneficiary has possession of the certificate and has paid all the assessments.^ If under an agreement with the member the beneficiary pays the assessments, the latter may acquire such a vested right which will prevent a change,^ and an assignment may be conditioned on the Thomas v. Leake, 67 Tex. 469; 3 S. W. Eep. 703; Johnson v. Hall, 55 Ark. 210; 17 S. W. E. 874; Mingeaud v. Packer, 21 Ont. E. 267; aff'd I9 Ou . App. 290. 1 Presbyterian Ass. Fund v. Allen, 106 Ind. 593; 7 N. E, Eep. 317. 2 Masonic Ben. Assn. v. Bunch, 109 Mo. 560; 19 S. W. E. 25; post, §306. 3 Maynard v. Vanderwerker, 24 N. Y. Supp. 932. 720 CHANGE OF BENEFICIARY : ASSIGNMENT. § 296 assent of the original beneficiary.^ When once the policy has matured the claim becomes a debt and is no longer subject to the restrictions of the policy.^ § 296. When the Policy has not passed out of Control of Party effecting it. — If the party who procures and pays for a policy of life insurance, which is by its terms payable to a third party, retains possession of the policy, he may generally surrender it, or revoke the designation of beneficiary and appoint a new person to receive the pro- ceeds. In one case, one Peterson obtained a policy on his own life payable to himself, but afterwards surren- dered it and had a new one issued payable to his betrothed, which he gave to her brother for her and so told her. Afterwards he obtained the policy, surrendered it and had a new one issued payable to a creditor, and then died. The Supreme Court of Connecticut, in holding the lady to whom the insured was betrothed entitled to the proceeds, said : ' " It is not claimed that the mere fact of making the policy payable to Miss Lemon, without more, vested in her a complete title. It is conceded that so long as Mr. Peter- son retained it in his own possession, he might control it as his own. On the other hand it is not doubted that if Mr. Peterson delivered it to Miss Lemon as a gift to her, such delivery would vest in her a complete title." This view has obtained in other cases.* In a New York case^ the constitution of a benefit society provided for a fund to 1 Helfrich v. John Hancock M. L. Ins. Co., 28 N. Y. Supp. 535. 2 Briggs V. Earl, 139 Mass. 473; I N. E. R. 847; Mower v. Reverting Fund Assn., 1 Pa. Super. Ct. 170. 3 Lemon v. Phcenix Mut. Life Ins. Co., 38 Conn. 301. * Penn. Mut. Ins. Co. v. Watson, 3 W. N. C. 513; Weston v. Richard- son, 47 L. T. 514; Garner u. Germania Life Ins. Co., 13 Daly, 255; 17 Abb. N. C. 7; Johnson v. Van Epps, 14 Bradw. 201; 110 111. 551. But see Glanz V. Gloeckler, 10 Bradw. 484; 104 111. 573. ' Durian v. Central Verein, etc., 7 Daly, 170. 46 721 § 296 CHANGE or beneficiary: assignment. be paid upon the decease of a member to his widow or minor children ; afterwards this law was changed so as to allow the member to designate his beneficiary. The mem- ber under the new law, although he had belonged to the society from the first, and under the new constitution as well, designated a woman with whom he was living, de- scribing her as his " wife." • The claim was made by the society in defense to an action by the beneficiary, that the plaintiff was not the widow of the deceased and had not been designated as the beneficiary in accordance with the constitution of the society. In giving judgment for the plaintiff the court said : ' ' The case seems to me to be simply this: the title of Catherine Durian (the true wife) is not protected by the statutes of the State. If she be entitled to the insurance money, it must be because of a contract made between Philip Durian and the defendant, which it was out of their power afterwards to vary, be- cause she had an interest in it which it would be unjust and unlawful to impair. What interest had Catherine in it? Why could it not be modified by the parties who made it ? The counsel of the defendant has not shown. Conceding that Philip intended, at first, that she should receive the insurance money, he had a right to change the direction in which the money should go at any time before he had act- ually placed in her hands, or beyond his own control, the means of enforcing her claim to the money .^ It was com- petent, in my opinion, for Philip and the Verein to modify their agreement in any manner satisfactory to both parties. It was competent for Philip, with the consent of the Ve- rein, to name a beneficiary other than his wife, even though his wife were present. The amended constitution, to which he assented, formed a new contract between him and the Verein, under the terms of which he was at liberty to 1 Lemon w. Phoenix Ins. Co., supra- 722 CHANGE OF BENEFICIARY: ASSIGNMENT. § 297 choose whom be pleased as an appointee. He named Barbara, the plaintiff." This was followed in a later case in the same State.' If the policy expressly covenants that upon the decease of the beneficiary the insured may sub- stitute any other, this stipulation controls, but the option must be exercised within a reasonable time after the death of the first beneficiary. Such substitution cannot be made by will, nor after the payment of the next ensuing pre- mium. The payment of each premium, so to speak, makes a new contract.^ § 297. Life Insurance Policies, How Assigned. — At common law policies of fire or life insurance were not assignable, but the assignee could sue in the name of his assignor.^ The assignee, however, could sue in equity, but latterly it was considered that the remedy at law was adequate and complete.* Life insurance policies are said to be choses in action and may therefore be assigned by indorsement and delivery,^ and a mere verbal assignment with delivery is sufficient,* and so very informal assign- 1 Deady v. Bank Clerks', etc., Assn., 17 Jones & Sp. 216. ' Eiseman v. Judah, 1 Flip. 627. See same case and note In 4 Cent. L. Joar. 345; Roberts v. Roberts, 64 N. C. 695; Robinson o. Duvall, 79 Ky. 84. 3 Jessel B. Williamsburg Ins. Co., 3 Hill, 88; Palmer o. Merrill, 6 Cush. 282; 52 Am. Dec. 782; Hobbs v. Memphis Ins. Co., 1 Sneed, 444; May on Ins., § 377. * Carter w. United States Ins. Co., 1 Johns. Ch. 463. 5 Bashnell v. Bashnell, 92 Ind. 503; Hutson i>. Merrifield, 51 Ind. 24; 19 Am. Rep. 722; Harley v. Heist, 86 Ind. 196; 44 Am. Rep. 285. « New York Life Ins. Co. v. Flack, 3 Md. 341; 56 Am. Dec. 742; Pierce v. Fire Ins. Co., 50 N. H. 297; Powels v. Innes, 11 Mees. & W. 10; Chapman v. Mcll wrath, 77 Mo. 38; Manning v. Bowman, 3 Nova Scotia Dec. 42; Aliens. Hartford C Ins. Co., 72 Conn. 693; 45 Atl. R. 955; Western Ass. Co. v. McCarthy, 18 Ind. App. 449; 48 N. E. R. 265; State V. Tomlinson, 16 Ind. App. 662; 45 N. E. R. 1116; Barnett v. Pru- dential Ins. Co., 86 N. Y. Supp. 482; Grogan v. U. S. L. Ins. Co., 90 Hun, 521; 36 N. Y. Supp. 687; Travelers Ins. Co. v. Grant, 54 N. J. Eq. 308; 33 Atl. R. 1060; Hancock a. Fidelity, etc., Ass. tTenn.), 53 S. 723 § 297 CHANGE OF BENEFICIARY: ASSIGNMENT. ments have been held sufficient to vest in the assignee the equitable right to the proceeds.^ The same rules generally govern as in other cases of personal property.^ It is not always necessary that delivery be made ; any act carrying out the intention of the insured and communicated to the insurer is enough in equity.^ But generally to make a valid assignment there must be a delivery of the policy.* Delivery of the assignment to the company amounts to delivery .5 An assignment is not such an instrument as requires acknowledgment and recording.' Under a gen- eral assignment of all property life insurance policies will pass.' Where an assignee of a life policy reassigned a part of it to the assured and delivered the policy to him with the assignment so negligently attached that it could easily be removed, it was held that he was guilty of such W. K. 958; Embry v. Harris, 107 Ky. 61 ; 62 S. W. R. 958; Box v. Lainer (Tenn.), 79 S. W. R. 1042; Opitz v. Karel, 118 Wis. 527; 95 N. W. E. 948. See cases cited in note 87 Am. State R. 490. As to incomplete transfers see O'Brien v. Continental Cas. Co.| (Mass.), 69 N. E. R. 308; Saling o. Bolander, 125 Fed. R. 701; Weaver v. Weaver, 182 II. 287; 55 N. E. R. 338; Smith v. Hawthorn, 22 Pa. Co. Ct. R. 619; Alvord V. Luckenbach, 196 Wis. 537; 82 N. W. R. 535; Lateer u. Prudential Ins. Co., 64 App. Div. 423; 72 N. Y. Supp. 235. 1 Scott V. Dickson, 108 Pa. St. 6; 66 Am. St. R. 192; Green v. Republic Fire Iris. Co., 84 N. Y. 572; Richardson v. White, 167 Mass. 68; 44 N. B. E. 1072. 2 Potts V. Temperance, etc., Co., 23 Ont. E. 73. 3 Marcus v. St. L. M. Ins. Co., 68 N. Y. 625; Fortesque v. Barnett, 3 Myl. & K. 36; In re Trough, 8 Phila. 214; Chowne v. Bayllss, 31 Beav. 351. " Ballou V. Gile, 60 Wis. 614; Dexter Savings Bank v. Copeland, 77 Me. 263; Falk v. Janes, 49 N. J. Eq. 484; 23 Atl. 813; Travellers Ins. Co. V. Healey, 28 N. Y. Supp. 478; Spooner v. Hilbish^ 92 Va. 333; 23 S. B. R 761. 6 McDonongh v. Mtua, Life Ins. Co., 38 Misc. 26; 78 N. Y. Supp. 217; Appeal Colburn, 74 Conn. 463; 51 Atl. R. 1S9; Hewins v. Baker, 161 Mass. 320; 37 N. E. R. 441. 6 Steeley v. Steeley, 23 Ky. L. R. 996; 64 S. W. R. 642; Mut. Res. F. L. Assn. V. Cleveland, 27 C. C. A. 212; 82 Fed. R. 508; 54 U. S. App. 290. ' Hevylett v. Home, etc., Co., 74 Md. 350; 24 Atl. R. 324. 724 CHANGE OF BENEFICIARY : ASSIGNMENT. § 298 negligence as would prevent his recovery against the bona fide assignee of a paid-up policy issued on the surrender of the old.^ The validity of the assignment is determined by the law of the place where it is made.^ The objection that the assignment is irregular can be raised by any one claim- ing an interest.' A partial assignment can be made.* Or a qualified assignment.' § 298. Assent of Insurer to Assignment. — It has been said that the reasons requiring the assent of the under- writer to make assignments of fire insurance policies valid do not apply to cases of insurance upon human lives.® Where the assent of the insurer to an assignment was required by the policy, but there was no provision that an assignment without the consent of the company should avoid it, a parol transfer with delivery was held valid.'' Where the assent of the company to an assignment is expressly required, such a stipulation is valid and will be enforced and must be obeyed like any other condition. And where the contract so provides an assignment without the consent of the company, even by way of collateral security, confers no title.^ This assent may be given by the secretary, or any other person who is held out to 1 Bridge a. Conn. Mut. L. Ins. Co., 152 Mass. 342; 25 N. E. K. 612. 2 Union Cent. L. Iqs. Co. v. Woods, 11 Ind. App. 335; 37N. E. R. 180; Lee ». Abdy, 17 Q. B. D. 309; Miller ». Campbell, 140 N. Y. 457; 35 N. E. K. 651; Grouse ». Ins. Co., 56 Conn. 176; 14 Atl. R. 82. * Travelers Ins. Co. v. Healy, 86 Hun, 524; 33 N. Y. Supp. 911. 4 StoU o. Mut. Beu. L. Ins. Co., 115 Wis. 558; 92N. W.R. 277; Mut. Ii. Ins. Co. B. Houchias, 52 La. Ann. 1137; 27 Sou. R. 657. s Burgesso. N. Y, Life Ins. Co. (Tex. Civ. A.), 53 S. W. B. 602; Bar- rett V. N. W. Mut. L. Ins. Co., 99 la. 637; 68 N. W. R. 906. 6 New York Life Ins. Co. v. Flack, 3 Md. 341; 56 Am. Dec. 742; Carter v. Mut. Reserve F. L. Ins. Assn. (Md.), 26 Atl. E. 959. ' Marcus v. St. Louis Mut. L. Ins. Co., 68 N. Y. 625. 8 Wallace v. Bankers' Life Assn., 81 Mo. App. 102; McQuillan v. Mut. Reserve F. L. Assn., 112 Wis. 665; 87N. W. R. 1069; 88 N, W. R. 925; 56 L. R. A. 233. 725 § 298 CHANUE OF BENEFICIARY: ASSIGNMENT. the public as having the requisite authority, and may be in any form.^ This assent is a matter between the company and the person asserting the claim under the policy, and consequently an assignment may be good between the parties, although the assent of the company is required by the terms of the contract and has not been obtained.^ If the assignment is good under the law of the place where made it is good everywhere,* and the consent once given cannot be withdrawn * unless given un- der a mistake or because of misrepresentation. ^ A general assignment of all insurance policies, where the assignor has some which are assignable and some which are not will not carry those which are not assignable nor such as would be made void by assignment. The general words of an as- signment are restrained by the particular words creating the subject of the assignment. ° An assignment by way of pledge will not avoid the policy ; ' and consenting to an assignment estops the company from objecting to its validity.^ But does not preclude the company from any 1 Hubbard «, Stapp, 32 111. App. 541; Linder v. Fidelity, etc., Assn., 62 Minn. 304; 54 N. W. K. 96; Tremblay v. Mtna. L. Ins. Co., 97 Me. 547; 55 All. R. 609. ' Marcus v. St. L. Mut. Life Ins. Co., 68 N. Y. 625; Lee v. Murrell, 9 Ky. L. Rep. (Ky. Superior Court) 104; Blcbardson v. White, 167 Mass. 68; 44 N. E B. 1072. 3 Lee V. Abdy, 17 Q. B. Div. 309. " Grant ». Ins. Co., 75 Me. 203. ° Eastman v. Carroll Co., etc., 45 Me. 307; Merrill ». Farmers', etc., Ins. Co., 48 Me. 285. 6 Armstrong v. Mutual Life Ins. Co., 11 Fed. Rep. 573; Lazarus v. Commonwealth Ins. Co., 19 Pick. 81; ante, § 298. ' Mahr v. Bartlett, 7 N. Y. Supp. 143; citing Griffey v. Ins. Co., 100 N. Y. 417; 3 N. E. R. 309; Dickey ». Pocomoke N. B., 89 Md. 280; 43 Atl. R 33. 8 Smith ». Old Peoples, etc., 19 N. Y. Supp. 432; Hewins ». Baker, 161 Mass. 320; 37 N. E. R. 441. But see Morrill w. Manhattan L. In^. Co., 183 111. 260; 55 N. E. R. 666. 726 CHANGE OF liKMCFICIAUY : ASSIGNMENT. § 299 defense it may have as against the assignor. i By paying the money into court the company assents to the assign- ment.^ § 299. Effect of Assignment. — The effect of an as- signment of a policy with the consent of the insurer is to place the assignee in the same condition and position with respect to all rights and liabilities under it, that the insured occupied before the transfer. It amounts only to the sub- stitution for the assured of the assignee as a party to the policy ; it is the same as a] reissue of the policy to another party upon precisely the same terms and conditions as in the original.^ An agreement between the company and the insured and beneficiary for a sealing down of the amount of the policy is binding on the assignee.* The assignee can only take that which the assign- ment gives him," nor can the transfer be attacked when the company does not object.* An assignment ob- tained by fraud will be set aside in proper equitable proceedings for that purpose ' and it has been held that an assignor of insurance policies may maintain an action to recover the policies or their value on the ground that he 1 N. W. Mut. L. Ins. Co. v. Montgomery, 116 Ga. 799; 43 S. E. R. 79; Mut. Ben. L. Ins. Co. o. First Nat. Bk. (Ky.), 74 S. W. R. 1066. 2 Tbornbnrg v. Mlna. L. Ins. Co., 30 Ind. App. 682; 66 N. E. R. 922; Opitzs. Karel, 118 Wis. 627; 95N. W.E.948; McGlynno. CHrry,82App. Div. 431; 81 N. Y. Supp. 855. See also as to waiver of notice, Corcoran V. Mut. L. Ins. Co., 179 Pa. St. 132; 36 Atl. R. 203, and as to estoppel of company, John Hancock Mut. L. Ins. Co. v. White, 20 R. I. 457; 40 Atl. R. 5; Corcoran «. N. Y. Mut. L. Ins. Co., 183 Pa. St. 443; 39 Atl. R. 50; Mut. life Ins. Co. ». Hagerman (Colo. App.), 72 Pac, E. 889 3 Ins. Co. V. Garland, 108 111. 220; 9 Bradw. 571; Harley v. Heist, 86 Ind. 196; Bowen v. National L. Assn., 63 Conn. 460; 27 Atl. R. 1069; Atlantic Mat. L. Ins. Co. v. Gannon, 179 Mass. 291 ; 60 N. E. R. 933. 4 Leonard v. Charter Oak L. Ins. Co., 65 Conn. 529; 33 Atl. R. 511. s DifEenbach v. Vogeler, 61 Md. 376. « Diffenbach v. Vogeler, supra. ' Collins V. Hare, 2 Bligh (n. s.), 106. 727 § 299 CHANGE OF BENEFICIARY : ASSIGNMENT. was incapacitated by drunkeuness to make the assign- ments without first having the assignments set aside by a suit in equity.^ An assignment once made cannot be revoked if it is completed by delivery,^ equity having no jurisdiction in such cases; but it will be set aside if made in fraud of creditors.^ An assignment to certain creditors who were to pay the premiums and on the maturity of the policy to pay the surplus above the debts to the heirs, is not in fraud of the other creditors, and if the administrator of insured afterwards collects the surplus the heirs can recover it from him.* The rights of creditors, however, in life insurance policies carried or assigned by the debtor, depend largely upon the statutes of the place where the assured resides.* The exemption of life insurance from the demands of creditors applies to policies issued by a foreign as well as a domestic insurance company.^ Where a policy is wrongfully surrendered the rights of the bene- ficiary attach to the substituted policy.' An assignee of a life policy is not liable for allowing it to lapse, no agreement Bursinger v. Bank of Watertown, 67 Wis. 76; 30 N. W. Rep. 290. 2 Crittenden v. Phoenix Mat. L. Ins. Co., 41 Mich. 442. 3 ^tna Nat. Bk. v. Manhattan L. Ins. Co., 24 Fed. Rep. 769. See also Malburg v. Metropolitan L. Ins. Co., 127 Mich. 568; 86 N. W. R. 1026. * Johnson v. Alexander, 125 Ind. 573; 25 N. B. R. 706. * PuUis V. Robison, 73 Mo. 202, as modified by First Natl. Bk. a, "Simp- son, 152 Mo. 638; 54 S. W. R. 506, and Judson v. Walker, 155 Mo 166; 55 S. W. R. 1083; Cole v. Marple, 98 11. 68; Thompson v. Cundiff, 11 Bu~h 667; Baron c. Brummer, 100 N. Y. 372; Stigler?). Stigler, 77 Va 163; Ex parte Dever, 18 Q. B. Dlv. 660. » Cross V. Armstrong, 44 Ohio St. 613. ' Chaplin v. Fellowes, 36 Conn. 132; Lemon v. Phoenix Mut. L. Ins. C'l., 38 Conn. 298; Singer v. Charter Oak Ins. Co., 22 Fed. Rep. 774; Uuion Mut. L. Ins. Co. o. Stevens, 19 Fed. Rep. 671; Stillwell v. Mut. L. I 8. Co., 72 N. y. 385; Whitehead v. N. Y. Life Ins. Co., 102 N. Y. 143; reversing 33 Hun, 425; Timayenis v. Union Mut. L. Ins. Co., 22 Blatchf. 4C5; 21 Fed. Rep. 223, 728 CHANGE OF BKNEFICIARY : ASSIGNMENT. § 300 to pay the premiums being shown. ^ The rights of as- signees of life insurance policies will be further considered under the subject, Maturity of Contract.^ § 300. Assignment after Loss. — A provision in an in- surance policy avoiding it in case of its assignment without the consent of the company, applies only to an assignment made before a loss.^ Assignment after loss passes the legal title and invests the assignee with the exclusive right to sue upon it. In his hands, however, it is subject to every defense which could have been set up against it in the hands of the previous owner before notice of the assignment was given to the company. The fact that the assignment was made as a collateral security for a debt will not vary the rule.* Nor that the consideration was fictitious. ^ An as- signment of an insurance policy made before loss, but not delivered until afterwards, does not take effect until delivery 1 Killoran v. Sweet, 25 N. Y. Supp. 295. 2 Post, §§ 397 and 398. The following cases also deal with questions as to effect of assignment: Crocker v. Hogan, 103 la. 243; 72 N. W. K. 411; Lamb ». Mut. Res. F. L. Assn., 106 Fed. R. 637; Towne ». Towne, 93 ni. App. 159; First Nat. Bb. v. Terry Adrar. Speece, 99 Va. 194; 37 S. E. R. 843; Hirsch v. Mayer, 165 N. Y. 236; 59 N. E. R. 89; affg. 54 N. Y. Supp. 1075; Terry ». Mat. L. Ins. Co., 116 Ala. 242; 22 Sou. 532; Brown v. Equitable L. A. Soc, 75 Minn. 412; 79 N. W. R. 968; Penn. M. L. Ins. Co. V Union Trust Co., 83 Fed. R. 891; In re Hamilton, 102 Fed. R. 683; Clark v. Fast, 128 Cal. 422; 61 Pac. R. 72. As to undue influ- ence in procuring an assignment, Penn. Mut. L. Ins. Co. v. Union Tr. Co., supra. 3 Dogge !7. Northwestern, etc., Ins. Co., 49. Wis. 501; Roger Williams, etc., Ins. Co. v. Carrington, 43 Mich. 252; Combs v. Shrewsbury, etc., Ins. Co., 32 N. J. Eq 615; Supreme Assembly, etc., v. Campbell, 17 R. I. 402; 22 Atl. R. 307; Commonwealth v. Order of Solon, 193 Pa. St. 240; 44 Atl. R. 327; Biiggs u. Ea 1, 139 Mass. 473; 1 N. E. R. 847. * East Texas F. Ins. Co. v. CofEee, 61 Tex. 287; Perry v. Ins. Co,, 25 Ala. 360; Archer v. Ins. Co., 43 Mo. 434; Wetmore v. San Francisco, etc., 44 Cal. 294; Carter v. Ins. Co., 12 la. 292; N. Y. L. Ins. Co. v Fiack, 3 Md. 341. « Metropolitan L. Ins. Co. v. Fuller, 61 Conn. 252; 23 Atl. R. 193. 729 § 301 CHANGE OF BENEFICIARY : ASSIGNMENT. and then is the assignment of a money demand against the insurers. 1 A provision in a policy of fire insurance that the same shall not be assigned after the money thereon becomes due is void, being inconsistent with the covenant of indemnity and contrary to public policy.^ § 301. Assignment by wife of policy on Husband's Liife. — In cases where a policy of life insurance on the husband's life has been made payable to the wife, her power to assign has often come in question. The decisions of the courts upon this subject have not been uniform, for in many States statutes exist -regulating to a greater or less extent the rights of the wife, and the conclusions of the judges have been influenced largely by the provisions of those statutes and the supposed policy of the law. In the absence of statutory restrictions a wife can assign a policy on her husband's life just as any other chose in action and if her assignment has been obtained by fraud it will be set aside. ^ One of the leading cases on the subject is Eadie v. Slimmon,* where the Court of Appeals of New Yorii held that a policy of life insurance, payable to the wife for her benefit, and that of her children in case of her death, could not be transferred so as to divest the interest of the wife or her children. This was under the supposed effect of the statute of the State which distinguished between a policy of life insurance payable to the wife and an ordinary chose in action. The court said: "The provision is special and peculiar, and looks to a provision for a state of widowhood, and for orphan children ; and it would be a violation of the 1 Watertown Ids. Co. o. Grover, etc., Co., 4:1 Mich. 131. 2 Alkan V. N. H. Fire Ins. Co., 53 Wis. 136; Spare v. Home Mut. Ins. Co., 9 Sawy. 142; 17 Fed. Rep. 568; Goit v. Ins. Co., 25 Barb. 189; West Branch Ins. Co. v. Helfenstein, 40 Pa. St. 289. 3 Cockrell v. Cockrell, 79 Miss. 569; 31 Sou. R. 203. •• 26 N. T. 9; see also Brick u. Campbell, 122 N. Y. 337. 730 CHANGE OF BENEFICIARY : ASSIGNMENT. § 301 spirit of the provision to hold that a wife, insured under this act, could sell or traffic with her policy as though it were realized personal property or an ordinary security for money." l But this reasoning was held not to apply to an endowment policy under alater statute authorizing a transfer of a life insurance policy by a married woman with the con- sent of her husband.^ Where the wife, under the New York statute , could not assign the policy, a subsequent removal of the disability will not validate a prior assignment;^ and where the policy assigned was an endowment policy and the husband survived the endowment period it was held that an assignment made by the husband and wife during such period was valid as to the former, and made so as to the wife by her husband's survival, because by his survival the interest of the wife ceased, the policy being payable to her or to the husband if living at the end of the endowment period.* Under the present law a beneficiary, though a wife, can assign a policy .^ If the written assent of the husband is by statute required an assignment without such consent is void.^ A mere pledge by husband and wife does not transfer the policy.'' If a statute provides that a policy on the husband's life shall be for the benefit of " wife and 1 Wilson V. Lawrence, 76 N. Y. 585; 13 Hun, 238; Barry v. Equitable Life Ass. Soc, 59 N. Y. 587. 2 Brummero. Cohn, 86 N. Y. 11; 9 Daly, 36; 58 How. Pr. 239; 6 Abb. N. C. 409, 57 How. Pr. 386; DeJonge v. Goldsmith, 14 Jones & 8p. 131. ' Brick V. Campbell, 122 N. Y. 337; 25 N. E. R. 493. i Millers. Campbell, 140 N. Y. 457; 35 N. E. R. 651; af£g. 22 N. Y. Supp. 388. See also Miller v. Campbell, 140 N. Y. 457; 35N. E. R Pol. 5 Spencer o. Myers, 26 N. Y. Supp. 371; 150 N. Y. 269; 44 N. B. R. 982; 34 L. R. A. 175; Travelers Ins. Co. v. Healey, 19 Misc. 584; 44 N. Y. Supp. 1043. See also Morschauser u. Pierce, 64 App. Div. 558; 72 N. Y. Supp. 328. « Danhauser v. Wallenstein, 52 App. Div. 312; 65 N. Y. Supp. 219; reversing 23 Misc. 690; 60 N. Y. Supp. 50. ' Travelers Ins. Co. v. Healey, 164 N. Y. 607; 58 N. B. R. 1093; affg. 49 N. Y. Supp. 29. 731 § 301 CHANGE OF BENEFICIARY : ASSIGNMENT. children," even after the death of the husband the wife can- not dispose of the interest of the children and it is doubt- ful if she can assign at all.^ The wrongful assignment of the policy is voidable at the wife's option; ^ and where the assignment by the wife was obtained by fraud the assign- ment will be held invalid, as where the wife was ignorant and the assignment was procured by the husband as secur- ity for his debt, she not knowing what the effect of the paper was that she signed.^ The fact of an assignment must be fairly shown and a doubt will be solved in favor of the wife.* The fact that the assignment was made without the State does not affect it if the contract of insurance was made in the State. » The Supreme Court of Connecticut, 6 while inclined to adopt the view of the New York court, seemed to believe that if the wife paid the premiums on the policy out of her own estate that would materially influence the case, for she ought under those circumstances to have the same right to dispose of a life insurance policy as any other chose in action. And where the wife pays the premiums out of her own money the policy is absolutely hers regardless of its amount.' The assignment of a policy on the husband's life by the wife as a security for his debt has been held void under a statute forbidding the wife to become surety for her hus- 1 Wanschaff v. Masonic, etc., Soc, 41 M. A. 206; Pratt v. Globe M. L. Ins. Co. (Tenn.), 17 S. W. R. 352. In Ellison v. Straw, 116 Wis. 207; 92 N. W. R. 1094, it was held that the wife had no power to assign. 2 Frank w. Mutual Life Ins. Co., 102 N. Y. 266; modifying 12 Daly, 267; Milhous v. Johnson, 4 N. Y. Supp, 199. 8 Mut. Benefit L. Ins. Co. v. Wayne Savings Bank, 68 Mich. 163; 35 N. W. R. 858; Cockrell o. Cockrell, 79 Miss. 569; 31 Sou. R. 203. ^ Weinecke v. Arbin, 88 Md. 182; 40 Atl. R. 709; 41 L. R. A. 142. ^ Mutual Ins. Co. v. Terryj 62 How. Pr. 325; but see Bloomingdale V. Liberger, 24 Hun, 355. 6 Counecticut Mut. L. Ins. Co. v. Burroughs, 34 Conn. 305. ' In re Goss' Est., 71 Hun, 120; 24 N. Y. Supp. 623. 732 CHANGE OF BENEFICIARY: ASSIGNMENT. § 301 band,i and the wife's assignments have often been avoided when made under duress or undue influence,^ or obtained by fraud, ^ or if made have been released under principles of law applicable to sureties, as by extension of time of payment of the debt without her knowledge.* Under a statute of Georgia it has been held by the Supreme Court of that State that a wife cannot assign to a creditor of the husband a policy on the latter'slife, nor without other con- sideration ratify the assignment after his death. ^ It has been held that the statutes of New York in force at the ti^me of the assignment 6 did not apply to policies made payable to the wife "or her assigns."^ A policy of insurance upon the life of the husband for the benefit of the wife, may be pledged as collateral security by her for the debt of the husband or assigned by her absolutely, unless pro- hibited by local statute, the policy being a writing obli- gatory for the payment of money and assignable at law as well as equity. " This," says the Supreme Court of Col- orado,' " is; we think, settled by the great weight of authority."^ The policy may be assigned by the wife by 1 Stokell 17. Kimball, 59 N. H. 13. 2 Conn. Mut. Life Ins. Co. v. Westervelt, 52 Conn. 576; Whitridge v. Barry, 42 Md. 140; Barry v. Bruae, 71 N. Y. 261; 8 Huu, 395; Barry v. Equitable Life Ass. Soc, 59 N. Y. 587. 3 McCutcheon's Appeal, 99 Pa. St. 133. See also Miller u. Powers, 119 Ind, 79; 21 N. E. R. 455. ^ AUis V. Ware, 28 Minn. 166. 5 Smith V. Head, 75 Ga. 755. 6 1868. ' Robinson v. Mut. L. Ins. Co., 16 Blatchf. 194. 8 Collins et al. v. Dawley, 4 Colo. 140. » DeRonge ». Elliot, 23 N. J. Eq. 486; Charter Oak Ins. Co, v. Brant, 47 Mo. 419; Chapin v. Fellowes, 36 Conn. 132; Merrill u. N. E. Mat,. L. Ins. Co., 103 Mass. 245; Pomeroy o. Manhattan L. Ins. Co., 40 111. 398; Damron v. Penn. Mut. L. Ins. Co., 99 Ind. 478; Pence v, Makep> ace ' 65 Ind. 345; Scobey o. Waters, 10 Lea, 561; Mente v. Townsend, 68 Ark. 391; 59 S. W. R. 41; Rathborne v. Hatch, 90 App. Div. 161; 85 N. Y. Sopp. 775. 733 § 301 CHANGE OF BENEFICIARY: ASSIGNMENT. mere indorsement and delivery ^ and without the consent of the husband.^ The assignment, however, must be in writing,^ and need not, under a statute requiring recording of transfers between husband and wife, be recorded.* An assignment by the wife of a policy on her husband's life payable to her cannot be avoided by her creditors, either on' the ground that it was not assignable, or because it was fraudulently assigned, the right to avoid can only be exercised by the wife or her personal representatives .^ Upon the theory that a vested estate, even though liable to be defeated by a condition subsequent, is trans- missible and devisable, it has been held that, where a wife insured the life of her husband, the amount payable to herself if living, if not, to their children, and she died before her husband, and one of the chidren died befoie him, leaving a child, a transmissible interest vested in the children upon the issuing of the policy, and that the child of the deceased child took by descent the interest of its parent and was entitled to the portion of the fund which its parent would have received if living. ^ In a prior case on a similar policy in the same court,' where the life of the husband was insured for the benefit of the wife, and in case of her death, of the children, and the wife assigned the policy to a creditor and died during the lifetime of the hus- ' Conn. Mat. L. Ins. Co. v. Westervelt, 52 Conn. 586; Norwood ». Guerdon, 60 111. 253. 2 Whltridge v. Barry, 42 Md. 140. 3 Travelers Ins. Co. v. Healey, 28 N. Y. Supp. 478. * Morehead v. Mayfleld, 109 Ky. 51; 58 S. W. R. 473. See also Miller v. Manhattan L. Ins. Co , 110 La. Ann. 652; 34 Sou. E. 723. 6 Smillie v. Qulnn, 90 N. Y. 492; 25 Hun, 332. * Continental L. Ins. Co. v. Palmer, 42 Conn. 64. See also Cent. National Bank o. Hume, 128 U. S. 195; 9 S. C. E. 41; Stokes v. Amer- man, 121 N. Y. 337; 24 N. E. E. 819; Harvey v. Harrison, 89 Tenn. 470; 14 S. W. E. 1083. ' Conn. Mut. L. Ins. Co. v. Burroughs, 34 Conn. 305; 19 Am. Rep, 530. 734 CHANGE OF BENEFICIARY: ASSIGNMENT. § 301 band, it was held that the intei'ests of the children were unaffected by the assignment. But if there had been no children then the assignment would have been good and the right of the wife's representatives would not have been affected by her divorce nor by the fact that the husband paid the premiums.^ The interest of the husband in a policy payable to the wife is on her death purely equitable and his creditor cannot garnish ; ^ but where the policy was payable to the " wife, her heirs and assigns " and she died before her husband, it was held that the proceeds were sub- ject to his debts and did not go to her children ; ^ so where the wife and children had assigned their interest to the husband the policy on his death is assets of his estate.* The title to a policy payable to the wife " or her represen- tatives," or if not living to " their children " does not pass under a will by the wife to her husband of all her personal property; ^ it would pass, however, under such a will if she were childless.® A father as guardian cannot assign a paid up policy payable to his children.' And where an endow- ment policy was payable to the husband if living at its maturity and if not to his wife if living, otherwise to his estate or assigns, it was held that its delivery vested the title in the whole in both husband and wife and neither the husband or the wife could divest it by assignment because his act cannot divest her interest and her act under the Ind- iana statute is void.' The proceeds of a policy on the life 1 Phoenix Mut. L. Ins. Co. v. Dunham, 46 Conn. 79; Brown's App., 125 Pa. St. 303; 17 Atl. R. 419. 2 Mins ». Ferd (Mass.), 85 N. E. K. 100. 3 Tompkins v. Levy, 87 Ala. 263; 6 South. E. 346. * Boyden v. Mass. M. L. Ins. Co., 153 Mass. 544; 27 N. B. R. 669. » Evans v. Opperman, 76 Tex. 293; 13 S. W. R. 312. Harvey v. Van Cott, 25 N. Y. Supp. 25. 1 Pratt V. Globe M. L. Ins. Co. (Tenn.), 17 S. W. R. 352. " Union Cent. L. Ins. Co. a. Woods, 11 Ind. App. 335; 37 N. E. R. 180. 735 § 302 CHANGE OF BENEFICIARY : ASSIGNMENT. of a husband in favor of his wife have been held to not be subject to the claims of her creditors,^ upon the ground that the statute ^ was intended to secure something for the sustenance of the wife or children, and the object of the statute would be thwarted if creditors could take it from them. It has been held differently in New York. ^ Ordina- rily a policy on the life of the husband payable to the wife can be assigned by the joint act of them both,* and it makes no difference that it is an endowment policy .^ But if the policy on the life of the husband is payable to the wife, if living at the time of his death and if not to her children she has only a contingent interest and her death before that of her husband ends the interest of her assig- nee. ^ If the assignors have received the benefits of a void sale of the policy they may be estopped from setting up the illegality of the transaction, and the rule applies to married women.' § 302. The Question of Insurable Interest as Affecting' the Validity of Assignments of Life Policies. — In assign- ments of policies of life insurance the question of insurable interest again arises, and on this question there is more than the usual conflict of authorities ; some holding that a policy is a mere chose in action, that may be passed from hand to hand like any other chattel, while others insist that a life insurance contract cannot be assigned to any one who has ' Brosard v. Marsonin, 17 Low. Can. Jur. 270; Vilbon v. Same, IS Id. 249. 2 Queb.,33Vic., c. 21. 8 Crosby V. Stephan, 32 Hun, 478. * Wirgman v. Miller, 98 Ky. 620; 33 S. W. R. 937. « Lockwood V. Mich. Mut. L. Ins. Co., 108 Mich. 334; 66 N. W. R. 229. ' Mut. L. Ins. Co. V. Hagerman (Colo. App.J, 72 Pac. R. 889; Stevens v. Germania L. Ins. Co. , 26 Tex. Civ. A. 1 56 ; 62 S. W. R. 824 . ' N. y. Life Ins. Co. v. Rosenheim, 56 Mo. App. 27. 736 CHANGE or beneficiary: assignment. § 302 not an insurable interest in the life insured. ^ The Supreme Court of Massachusetts thus reviews the authorities and deduces what is the most approved rule:^ "In England the question was raised whether the assignment of a life insurance without interest was prohibited by the statute of 14 Geo. III., c. 48, which forbids any insurance on the life of a person in which the person for whose benefit the insurance is made has no interest, or by way of gaming or wagering, and it was held that such an assignment was valid. ^ Shadwell, V» C, said: ' It appears to me that a purchaser for a valuable consideration is entitled to stand in the place of the original assignor, so as to bring an action in his name for the sum insured.' The same has been held in New York, where a similar statute exists.* It has been decided in New York that insurance on a life in which the assured has no interest is void at common law, and that the statute of 14 Geo. III., c. 48, so far as it prohibits such insurance, is a declaratory act.^ In Rhode Island, in a well considered case, decided in 1877, a sale and assignment of a policy of life insurance to one who had no interest in the life, made, not as a contrivance to circumvent the law, but as an honest and bona Jide transnGt'ion, was held valid. ^ In Cunningham v. Smith,' a person took out an insurance on his own life, and paid for it with the money of the defend- ants, intending to assign the policy to the defendants, and 1 As to assignments to relatives, see Adams v. Reed, 18 Ky. L. R. 858; 38 S. W. R. 420; 35 L. R. A. 692; reversing 36 S. W. R. 568; Beard v. Sharp, 100 Ky. 606; 38 S. W. R. 1057; King v. Cram (Mass.), 69 N. E. R. 1049. 2 Mut. Life Ins. Co. v. Allen, 138 Mass. 31. 3 Ashley v. Ashley, 3 Sim. 149. ^ St. John V. American Ins. Co., 13 N. Y. (3 Kern) 31; Valton ». National Fund Ass. Co., 20 N. Y. 32. « Ruse V. Mutual Ben. Ins. Co., 23 N. Y. 516. " Clark V. Allen, 11 R. I. 439. ' 70 Pa. St. 450. 4T 737 § 302 CHANGE OF BENEFICIAEY : ASSIGNMENT. did SO assign it. The assignment was sustained. The court say that the defendants may have had such an interest in the life insured as would have entitled them to insure his life in their own name, although this was doubtful ; but that the assured had an interest in his own life, 'and if he was willing to insure himself with their money and then assign the policy to them, there is no principle of law which can prevent such a transaction.' This transaction is ob- viously more open to objection than the assignment of the interest in a valid subsisting policy. In iEtna Ins. Co. •?;. France,^ a brother procured an insurance on his life for the benefit of his married sister, who was in no way dependent upon him. It was held to be valid, and that it was imma- terial what arrangement was made between them for the payment of the premium. In delivering the opinion of the court, Mr. Justice Bradley, referring to the case of Con- necticut Ins. Co. V. Schaefer,^ in which he delivered the opinion, said: 'Any person has a right to procure an insur- ance on his life and to assign it to another, provided it be not done by way of cover for a wager policy ; and where the relationship between the parties, as in this case, is such as to constitute a good and valid consideration in law for any gift or grant, the transaction is entirely free from any such imputation.' Several cases have been cited as decid- ing that any assignment of a life policy to one who has no interest in the life is void. We will notice them briefly. Cammack v. Lewis ^ and Warnock v. Davis* were both cases in which the policies were taken out, by the procurement of the assignees, in order that they might be assigned to them, under such circumstances as that they might well be held to be in evasion of the law prohibiting gaming policies. 1 94 U. S. 661. ■^ 94 U. S. 457. 3 15 Wall. 643. * 104 U. S. 775. 738 CHANGE OF BENEFICIARY: ASSIGNMENT. § 302 The remark of Mr. Justice Field in the latter case that ' the assignment of a policy to a party not having an insur- able interest is as objectionable as the taking out of a policy in his name,' was not necessary to the decision. In Frank- lin Ins. Co. V. Hazzard,^ the assured had failed to pay the premiums, and had notified the insurers that he should not keep up the policy. He afterwards assigned it for $20, the insurer assenting and receiving the premiums. The assignment was held void, the court saying that such poli- cies are assignable, but not ' to one who buys them merely as matter of speculation without interest in the life of the assured.' Neither of these cases decides whatever dicta may have accompanied the decision, that all assignments without interest are illegal. The case last cited is affirmed in the case of Franklin Ins. Co. v. Sefton,^ in which Chief Justice Worden, quoting from the opinion of the court in Hutson V. Merrifield^ — that ' the party holding and own- ing such a policy, whether on the life of another or on his own life, has a valuable interest in it which he may assign, either absolutely or by way of security, and it is assignable like any other chose in action,' — says that it is not stated that it is assignable to a person incapable of receiving an assignment; and adds, 'It may be added that where the policy bolder dies before the death of the party whose life is insured, perhaps the administrator of the holder could, for the pupose of converting the assets into money and settling up the estate in due course of law, sell the policy to any one who might choose to become the purchaser. ' Mis- souri Vall&y Ins. Co. v. Sturges,* assumes and decides that the same objections lie to an assignment with interest as to an original insurance with no interest. The distinction 1 41 Ind. 116. 2 53 Ind. 380. 3 51 Ind. 24. * 18 Kan. 93. 739 § 302 CHANGE OF BENEFICIARY: ASSIGNMENT. between the two transactions is not considered. Basye v. Adams,^ seems to decide, on the authority of Warnock v. Davis; Cammack v. Lewis; Franklin Ins. Co. v. Hazzard, and Missouri Valley Ins. Co. v. Sturges, ubi supra, that an assignment without interest is void as against public policy. The case of Stevens v. Warren,^ decided in 1869, has been supposed to hold that an assignment of the right of the assured in a life policy to one who has no interest in the life is void without regard to the circumstances and character of the particular transaction, and has been referred to in some of the cases just cited as an authority to that effect. We think that decision has been misunder- stood, and that in connection with other decisions of this court, it shows that the law in this Commonwealth accords with that laid down in Clark v. Allen." ^ The court then examines Campbell v. New England Ins. Co.,* Stevens v. Warren,^ Palmer't;. Merrill,^ and Troy i;. Sargent,' to show that assignments of life policies have been upheld when not covers for gambling transactions and concludes thus : ' ' The general rule laid down in Stevens v. Warren, supra, 'that no one can have an insurance upon the life of another, un- less he has an interest in the continuance of that life,' and from which the inference that an assignee of a party must have an insurable interest seems to have been drawn, we think, is not strictly accurate, or may be niisleading. An insurable interest in the assured at the time the policy is taken out is necessary to the validity of the policy, but it is not necessary to the continuance of the insurance that 1 81 Ky. 368. 2 101 Mass. 561. 3 11 K. I. 439. 4 98 Mass. 381. 5 101 Mass. 564. 6 6 Cush. 282 . ' 132 Mass. 408. 740 CHANGE OF BENEFICIARY: ASSIGNMENT. § 302 the interest should continue ; if the interest should cease, the poHcy would continue, and the insured would then have an insurance without interest.^ The value and permanency of the interest is material only as bearing on the question whether the policy is taken out in good faith, and not as a gambling transaction. If valid in its inception, it will not be avoided by a cessation of the interest. The mere fact that the assured himself has no interest in the life does not avoid or annul the policy." It is believed that this doc- trine is supported by the weight of authority, although some cases bear to the extreme that policies, of life insur- ance are mere choses in action and others insist that the assignee must have an insurable interest in the life insured. In one case,^ it was held that wager policies were not prohibited by the laws of New Jersey. In Maryland life insurance policies are held to be mere choses in action and assignable asany other contract.^ And so in other States.* Divorce has been held to end the interest of a woman in a policy assigned to her by her husband.* Premiums paid cannot be recovered on a void policy.* And the incontes- table clause in a policy does not apply to a defense of want of insurable interest.' The second assignee stands in the 1 Dalby v. India & London Assn. Co., 15 C. B. 366; Law v. London Policy Co., 1 Kay & J. 223; cited in Loomis v. Eagle Ins. Co., 6 Gray, 396; Conn. Mut. Llle Ins. Co. v. Scliaefer, supra; Rawlsw. American Ins. Co., 27 N. T. 282; Provident Ins. Co. v. Baum, 29 Ind, 236. 2 Trenton Mut. L. & F. Ins. Co. v. Jolinson, 24 N. J. L. (4 Zab.) 576. 3 Sonder «. Home Friendly Soc, 72 Md. 511; 20 Atl. R. 137; Insurance Co. V. Flack, 3 Md. 341; Whitridge v. Barry, 42 Md. 150; Clogg v. Mc- Daniel, 89 Md. 416; 43 Atl. R. 795. * Croswell v. Conn. Ind. Assn., 51 S. C. 103; 28 S. E. R. 200; Allen v Hartford L. Ins. Co., 72 Conn. 693; 45 Atl. R. 955; Brown v. Greenfield L. Assn., 172 Mass. 498; 53 N. E. R. 129; Strike u. Wisconsin, etc., Assn., 95 Wis. 583; 70 N. W. R. 819. 5 Hatch V. Hatch (Tex. Civ. A.), 80 S. W. R. 411. 6 Am. Mut. L. Ins. Co. v. Bertram (Ind.), 70 N. E. R. 258. ' Clement u. N. Y. L. Ins. Co., 101 Tenn. 22; 46 S. W. R. 561; 42 L. R. A. 247. 741 § 302 CHANGE OF BENEFICIARY: ASSIGNMENT. shoes of the first. ^ Where the certificate, or policy, is payable to the metnber or assured he may devise it to one not having an insurable interest, such party taking under the will and not as assignee.^ In Kansas the Su- preme Court held that a policy of life insurance, assigned for a valuable consideration to one who did not have an insurable interest, was worthless and void not only in the hands of the assignee but in the hands of the beneficiaries and their assignee.^ But though a second assignment by » Brown v. Equitable L. Ass. Soc, 75 Minn. 412; 78 N. W. B. 103. 2 Stoelker v. Thornton, 88 Ala. 241; 6 South. R. 680; Catholic Knights, etc., v. Eubn, 91 Tenn. 241; 18 S. W. B. 38S. s Missouri Valley Life Ins. Co. ■». McCrum, 36 Kan. 146; 12 Pac. Rep. 517, also to the same effect, Kessler v. Kuhns, 1 Ind. App. 611 ; 27 N. E. R. 980; Hoffman v. Hoke, 122 Pa. St. 377; 15 Atl. R. 437; Stambaugh v. Blake (Pa. St.), 15 Atl. R. 705. In the following cases the assignments of policies of life insurance have been sustained, although to one not having an insurable interest: Palmer v. Merrill, 6 Cush. 282; 52 Am. Dec. 782; St. John v. American, etc., Ins. Co., 2 Duer, 419; 13 N. Y. 31; Valton v. Natl. Fund L. Ins. Co., 20 N. Y. 32; Rawls V. American L. Ins. Co., 36 Barb. 357; 27 N. Y. 282; Olmstead v. Keys, 85 N. Y. 593; Hogle v. Guardian L. Ins. Co , 6 Robt. 567; Fair- child w. Northeast M. L. Ins. Co., 51 Vt. 613; Ashley v. Ashley, 3 Sim. 149; Lamont v. Hotel Men's, etc., Assn., 30 Fed. Rep. 817; Murphy v. Bed, 64 Miss. 614; 1 South. Rep. 761; Bloomiugton M. L. Assn. v. Blue, 120 111. 131; 11 N. East. Rep. 331; N. Am. Ins. Co. v. Craigen, 6 Buss. & G. (Nov. Sc.) 440; Eckel v. Renner, 41 Ohio St. 232; Mut. L. Ins. Co. ■». Allen, 138 Mass. 24; Cannon v. N. W. Mut. L. las. Co., 29 HuD, 470; Conn. Mut. L. Ins. Co. v. Schaefer, 94 U. S. 457; N. Y. Mut. L. Ins. Co. V. Armstrong, 117 U. S. 591; Clark v. Allen, 11 B. I. 439; Bursinger v. Bank of Watertown, 67 Wis. 76; Chamberlain v. Butler, 61 Neb. 730; 86 N. W. R. 481; 54 L. R. A. 338; Metro- politan L. Ins. Co. V. Brown (Ind.), 65 N. E. R. 908; Steinback v. Diepenbrock, 158 N. Y. 24; 52 N. E. B. 662; 44 L. R. A. 417; affg. 1 App. Div. 417; 37 N. Y. Supp. 279; Mechanics' Nat. Bk. v. Comins, 72 N. H. 12; 55 Atl. B. 191; Dixon v. National L. Ins. Co., 168 Mass. 48; 46 N. E. K. 430; Prudential Ins. Co. u. Liersch, 122 Mich, 436; 81 N. W. R. 258; Fuller V. Kent, 13 App. Div. 529; 43 N. Y. Supp. 649. In Langdon v. Union Mut. L. Ins. Co., 14 Fed. Rep. 272, it was left to the jury to say whether the policy was a wagering one or not. In the following cases the want of insurable interest was held to vitiate the assignment : Frank- 742 CHANGE OF BENEFICIARY: ASSIGNMENT. § 303 the first assignee may be void tiie latter may sue for the proceeds. 1 § 303. Validity of Assignment, how Determined: Amount of Recovery by Creditor and Assignee. — The validity of the assignment is determined by the law of the domicile of the parties or the place where made.^ Proof that the assignee of a life insurance policy caused the death of the insured by felonious means is sufficient to defeat a recovery on the policy.^ It has been held, under the prin- ciple that a policy valid in its inception remains so, that it is enough if the assignee has an insurable interest at the time of the assignment.* Unless there is a gross discrep- lin Life Ids. Co. v. Sefton, 53 Ind. 380, approving Franklin L. Ins. Co. v. Hazzard, 41 Ind. 116; Settle v. Hill, 5 Ky. L. Rep. 691; Keystone Mut. Ben. Afsn. v. Norris, 115 Pa. St. 446; 19 W. N. C. 248; 8 Atl. Rep. 638; Ala. Gold L. Ins. Co. v. Mobile Mut. Ins. Co., 81 Ala. 329; 1 South. Rep. 561; Price v. Knights of Honor, 68 Tex. 361 ; 4 S. W. Rep. 633; Downey u. Hoffer, 16 W. N. C. 184; Wegman w. Smith, Id. 186; Stoner ». Line, Id. 187; Meily v. Hershberger, 16 W. N. C 186; Warnock ». Davis, 104 U. S. 775; Cammack v. Lewis, 15 Wall. 643; Missouri Vail. L. Ins. Co. V. Stnrgis, 18 Kan. 93; N. Y. Life Ins. Co. v. Parent, 3 Que. L. R, 163; Same v. Talbot, lb. 168; Michaud». British Med. Assn., Ramsey's App. Cas. (Low. Can ) 377; Basye v. Adams, 81 Ky. 368; Missouri Vail. L. lus. Co. V. McCrum, 36 Kan. 146; 12 Pac. Rep. 517; Ruih v. Kattermac, 112' Pa. St. 251; 3 Atl. Rep. 833; G Ibert ». Moose, 104 Pa. St. 74; Mc- Farland v. Creath, 25 M. A. 113; Quinn v. Supreme Court, etc., 99 Tenn- 80; 41 S. W. R. 343; Schlampc. Berner, 21 Ky. L. R. 324; 51 S. W. R. 312; Wilton V. N. Y. Life Ins. Co. (Tex. Civ. A.), 78 S. W. R. 403; Dugger V. Mut. L. Ins. Co. (Tex. Civ. A.), 81 S. W. R. 335; Tbomburg v. Aetna L. Ins. Co ,30 Ind. App. 682; 66 N. E. R. 922; Moore ». Chicago G. Soc, 178 111. 202; 52 N. B. R. 882. 1 Hoffman v. Hoke, supra. 2 Mut. L. Ins. Co. V. Allen, 138 Mass. 24; Miller v. Manhattan L. lus. Co., 110 La. 652; 34 Sou. R. 723. 3 New York Mut. L. Ins. Co. v. Armstrong, 117 U. S. 591. But only to the extent of the interest assigned to him. N. Y. Life Ins. Co. V. Davis, 96 Va. 737; 32 S. E. R. 475; 44 L. R. A. 305. See for further discussion of this subject, post, § 397 et seq. * Manhattan L. Ins. Co. v. Hennessy, 39 C. C. A. 625; 99 Fed. R. 64. 743 § 303 CHANGE OF BENEFICIARY: ASSIGNMENT. ancy between the amount of the policy and the debt, the assignee of the policy can recover the full amount of the latter .1 If the debt is small and the insurance large the insurance will be treated as security or indemnity only,^ and the personal representatives may recover the excess over the debt.^ Where a certificate for two thousand dol- lars was assigned for the censideration of three hundred dollars, the assignee agreeing to pay the assessments, it was held that the transaction would not be deemed a wager in the absence of proof of the expectancy of the life of the assured,* but a transfer of a certificate for $2,000 for a debt of $50 has been held void.^ Where the creditor insured the debtor's life and afterwards made a general assignment but kept the policy which he afterwards 1 Bi vin V. Conn. Mat. L. Ins. Co., 23 Conn. 244; Trenton Ins. Co. t». Johnson, 24 N. J. L. 581; Amick v. Butler, III Ind. 578; 12 N. East. Eep. 518; Grant v. Kline, 115 Pa. St. 618; 9 Atl. Rep. 150; Hoyt v. N. Y. Life Ins. Co., 3 Bosw. 440; St. John v. Am. Mut. Ins. Co., 2 Duer, 419; Miller V. Eagle Ins. Co., 2 E. D. Smith, 268; Grattan v. Na 1. L. Ins. Co., 15 Hun, 74; Ferguson v. Mass. Mut. L. Ins. Co., 32 Hun, 306; afEd. 102 N. Y. 647. 2 Cammack v. Lewis, 15 Wall. 643; Am., etc., Ins. Co. v. Bobertshaw, 26 Pa. St. 189 ; Courtnay v. Wright, 2 Giff. 337. See Hebden v. West, 3 Best & S. 579; 9 Jur. (n. s.) 747; 32 L. J. Q. B. 85; 7 L. T. (n. 8.) 854, where it is held that where two policies of life insurance are founded on the same insurable interest recovery on one bars recovery on the other. s Siegristo. Schmolz, 18 W. N. C. (Pa.) 321; 6 Atl. Rep. 47; Helme- tag V. Miller, 76 Ala. 183; Tateum v. Ross, 150 Mass. 440; 23 N. E. E. 230. For examination of a special case where question was whether the firm or individual parties were entitled to the policy: Hurst v. Mutual Reserve F. L. Ins. Co. (Md.), 26 Atl.R.956; Crotly v. Union L. Ins. Co.. 144 U. S. 621; 12 S. C. R. 749, where it was held that. a recital in the policy of the fact is only an admission that the relation of debtor and creditor existed at thetime the policy wa^ issued and proof that the rela- tion silll exists •must be made at the maturity of the policy. See also C.ieeves v. Anders, 87 Tex. 287; 28 S. W. R 274. * Nye V. Grand Lodge A. O. U. W., 9 Ind. App. 131; 86 N. E. R. 4?9. And $5,000 for a debt of $1,900. Wheeland v. Atwood, 192 Pa. St. 237; 43 Atl. K. 946. " Schonfleld v. Tamer, 75 Tex. 324; 12 S. W. R. 626. 744 CHANGE OF BENEFICIARY: ASSIGNMENT. § 303 assigned to a third party it was held that the administrator of the assured could not recover the proceeds from such transferee on the grounds that the creditor had no right to transfer it.^ Where the creditor retains the policy after he has accepted fifty per cent of the debt secured thereby and continues without objection from the debtor to pay the premiums, such policy is subject to the payment of the bal- ance of the indebtedness.'' It has, however, been strongly insisted that the rights of a creditor to a policy of life in- surance on the life of his debtor are always limited to the amount of the debt.^ In Armstrong v. Mutual Life Ins. Co.* it was said: "The assignment could not rise higher than the instrument assigned and further the instrument itself limits the rights to be passed to the assignees. Such right could not extend beyond an interest in the life of the assured which could be proved. If the interest was that of a creditor it would be limited by the amount of his probable debt. As no debt is shown no interest is shown, and nothing is shown to have passed to the assignee."' When 1 Shaak v. Meily, 136 Pa. St. 161 ; 20 Atl. R 515. See as to questions of evid> nee, pleading and set-off in actions by the administrator: Bren- uan V. Franey, U2 Pa. St. 301; 21 Atl. 803; Sliore v. Shore, 79 Wis. 497; 48 N. W. R. 647; Vaaormer ». Hornberger, 142 Pa. St. 575; 21 Atl. U. 887. 2 Shacklelord v. Mitchill, 19 N. Y. Supp. 122. 3 McDonald v. Birss, 99 Mich. 329; 58 N. W. R. 359; Riner u. Kiner, 166 Pa. St. 617; 31 All. R. .S47; Culver v. Guyer, 129 Ala. 602; 29 Sou. R. 779; Widaman v. Hubbard, 88 Fed. R. 806. * UFed. Rep. 573. 5 The court cites Cammaclj v. Lewis, 15 Wall. 643; Thatch v. Metro- pole Ins. Co., 11 Fed.. Rep. 29. This case cited in the text was after- wards reversed by the Supreme Court of the United States, N. Y. Mut. L. Ins,. Co. V. Armstrong, 117 U. S. 591, but chiefly on account of errors in admission of testimony. The court said that life insurance policies are assignable if not made to cover speculative risks, and payment thereof may be enforced f >r the benefit of the assignee. See to the same < ffect Lewy V. Gil aid, 76 Tix. 400; 13 S. W. R. 304; Cawthon v. Perry, 76 T. x. 383; 13 S. W. R. 268; and also posJ, § 396, ef seg., for further d scussion 'f the subject. 745 § 304 CHANGE OF BENEFICIARY: ASSIGNMENT. the debt is paid tlie debtor is entitled to a reassignment of the policy although the policy has been reassigned to a third party ,^ and an absolute assignment may be shown to have been a pledge.^ An assignment may be to secure future advances ^ which must be paid before the policy can be demanded.^ If a policy be assigned to one without interest, or if, for any reason, the assignment is held void or imperfect, so that it does not pass the fund to the assignee, the latter has in equity a lien on the policy for the amount of premiums he has paid, with interest.^ But payments made by a stranger to the contract give him no lien or claim to the insurance money .^ An assignment will hold against a levy of a judgment creditor, though the com- pany had no notice of such assignment/ § 304. Distinctions between Certificates of Beneficiary Societies and Policies of Life Insurance in Respect to Assignment or Changes of Beneficiary. — It is well set- tled that the beneficiary in a benefit certificate issued by a fraternal beneficiary association has no vested interest in the lifetime of the raembeK,-in this respect benefit certifi- cates being unlike regular life insurance policies, unless possibly where the by-laws do not authorize a change.* 1 Bohleber v. Waldon, 23 N Y. Supp. 391. 2 McDonald v. Birss, 99 Mich. 329; 58 N. W. B. 369; Boiler v. Moore, 86 Va. 512; 10 S. E. E. 241. s Curtiss V. Mtna, L. Ins. Co., 90 Cal. 245; 27 Pac. E. 211. * Oilman v. Curtis, 66 Cal. 116. s Conn. Mut. Life Ins. Co. v. Burroughs,;3t Conn. 305 ; Welsert v. Muehl, 81 Ky. 341; City Savings Bank w. Whittle, 63 N. H. 587; Unity Association v. Dugan, 118 Mass. 219; Matlack «* Seventh Nat. Bk., 180 Pa. St. 360; 36 Atl. K. 1082. s Lock wood V. Bishop, 51 How. Pr. 221; Burridge v. Eowe, 1 Y. & C. C. C. See ante, § 248 et seq.; post, §§ 312, 397. ' Columbia Bank v. Equitable Life A. Soc, 61 App. Div. 394; 70 N. Y. Supp. 767. » On the latter point see Hill v. Groesbeck, 29 Colo. 161; 67 Pac. E. 167. On the first proposition see Hoeft v. Supreme Council, etc., 113 746 CHANGE OF BENEFICIARY: ASSIGNMENT. § 304 The Supi'eme Court of Indiana ^ points out the fundamental difference between a certificate of membership in a benefit association and an ordinary policy of life insurance so far as the change of beneficiary and assignment are concerned. As regards the former the designation is an appointment, subject generally to revocation ; in the latter one party to a contract exercises his rights under such contract. In the above men- tioned case the court says : " "Whatever rights beneficiaries have in life policies, they have by virtue of the contract between the insurance company and the assured. In the case of an ordinary insurance policy, the right of the beneficiaries in the policy, and to the amount to be paid upon the death of the assured, is a vested right, vesting upon the taking effect of the policy. That right cannot be defeated by the separate, or the combined, acts of the assured and insurance company without the consent of the beneficiary.^ As in other cases, so here, whatever right or power Taylor, the assured, had to and over the certifi- cate was by virtue of the terms of the certificate and the by-laws of the order, which together constituted the con- tract between him and the order. And whatever rights the beneficiary, Anna Laura, had, or now has, to the fund to be, and in this case paid, upon the death of the assured, her father, she had, and has, by virtue of the same con- tract. It should be observed that the Royal Arcanum is not a domestic corporation, and hence not affected by Cal.91; 45Pac.E.185; 33L.R.A.174; Fischer ». Am. Legion of Honor, 168. Pa. St. 279; 31 Atl. K. 1089; Kirkpatrick v. Modern Woodmen, 103 Ills. App. 468; Lahey v. Lahey, 174 N. Y. 146; 66 N. E. K. 670; 61 L. R. A. 791; Bunyan v. Reed (Ind. App.), 70 N. B. R. 1002; Lamb v. Mut. Reserve F. L. Assn., 106 Fed. E. 637. i Holland ». Taylor, 111 Ind. 125; 12 N. East. Rep. 116. See also Tate V. Commerolal Bldg. Assn., 97 Va. 74; 33 S. E. R. 382; 45 L. R, A. 243. 2 Harley u. Heist, 86 Ind. 196; 44 Am. Rep. 285; Damron o. Penn. Mut. L. Ins. Co., 99 Ind. 478. 747 § 304 CHANGE OF BENEFICIARY : ASSIGNMENT. § 3848 E. S. 1881.1 jf then the Eoyal Arcanum were to be treated as an ordinary life insurance company, and the certificate as an ordinary life policy, it would be clear that Taylor, the assured, had no authority, by will or otherwise, to change the beneficiary, or in any way affect her rights without her consent. For many, and iadeed for most purposes, mutual benefit associations are insurance com- panies, and the certificates issued by them are policies of life insurance governed by the rules of law applicable to such policies. There are, however, some essential differ- ences usually existing between the contracts evidenced by such certificates andtheordinary contract of life insurance.^ The most usual difference is the power, on the part of the assured in mutual benefit associations, to change the bene- ficiary. But as in either case the rights of the beneficiary are dependent upon and fixed by the contract between the assured and the company or association, there seems to be no reason why the assured should have any greater power to change the beneficiary in one case than in the other, except as that power may be inherent in the nature of the association, or is reserved to him by the constitution, or by the laws of the association or by the terms of the certifi- cate. In the case before us, the right and power of the assured, Taylor, to change the beneficiary was reserved to him by the by-laws of the order, and recognized in the certificate. Because of that reservation, the beneficiary, Anna Laura, did not have a right in and to the certificate, and the amount to be paid upon the death of the assured vested in such a sense that it could not be defeated. But it would be saying too much to say that she had no rights. She was the beneficiary named in the certificate. The 1 Presb. Mut. Ass. Fund v. Allen, 106 Ind. 593. 2 Presb. Mut. Ass. Fund v. Allen, supra; Elkhart Mut. Aid. Assn. v. Houghton, 103 Ind. 286; 53 Am. Kep. 514; Bauer v. Sampson Lodge, etc., 102 Ind. 262. 748 CHANGE OF BENEFICIARY: ASSIGNMENT. § 305 t executors, so far as shown by the terms of the certificate, had no right at all either in or to the certificate, or to the amount to be paid by the association. So far as shown by that certificate, they were mere trustees to collect the amount for the use and benefit of the real beneficiary, Anna Laura. So long as the contract remained as executed, she had the right of a beneficiary, subject to be defeated by a change of the beneficiary by the assured. So long as the certificate remained as executed, the assured had reserved to himself the power to change the beneficiary, and that was the extent of his right in, or power over, the certificate, or the amount agreed to be paid at his death. He had no interest in or to either the certificate or the amount agreed to be paid, that would have gone at his death to his personal representatives. By virtue of the by-laws and the certificate, which, as we have seen, con- stituted the contract between him and the Eoyal Arcanum, he had power to change the beneficiary." § 305. Development of the Law Concerning Cbange of Beneficiary. — In one of the earliest cases involving the right of a member of a benefit society to change his designation of a beneficiary ,1 the change was allowed for two reasons: one being that the laws of the organization permitted it and the second being the same given by the Supreme Court of Connecticut in sustaining an alteration and substitution of beneficiaries in a policy of life insurance, ^ viz. : that the evidence of the contract, the policy, had not been delivered to the beneficiary so as to become an executed settlement in favor of the latter.^ The doctrine of executed settle- ment was the stumbling block in the way of holding from 1 1877, Durian o. Central Verein, 7 Daly, 168. 2 Lemon u. Phoenix M. L Ins. Co., 38 Conn. 301. 3 See Deady v. Bank Clerks' M. B. A., 17 Jones & Sp. 246; Johnson ». Van Epps, 14 Bradw. 201; 110 111. 651. 749 § 305 CHANGE OF BENEFICIAEY : ASSIGNMENT. the first that p, member of a benefit society might at pleasure change the beneficiary to another than the one first desig- nated ; but in a later case ^ it was avoided in the same way aa in the New York case just cited, by holding that there was no valid executed transfer by delivery. In this case the Supreme Court of Tennessee said : " By the charter of the Knights of Honor, as we have seen, the benefit fund of a member * shall be paid to his family, or as he may direct,' and by the constitution he may direct the payment 'by will, entry on the reporter's record book, or benefit certifi- cate.' Of course, a direction by will may be changed at any time before the death of the party, and the constitu- tion of the order expressly provides for a similar change in the case of an entry on the record book. The benefit certificate only certifies the fact that the member named is entitled to the benefit fund, and the form in the lower left hand corner, when filled up, is only a direction to whom payment is to be made. There is no reason for supposing that such a direction in the certificate should have any other effect than a direction on the record book, or a will. In fact, the form is a will. ' It is my will ' that the benefit shall be made to the person named. Such an instrument, attested by two witnesses, might be proved as a will of the fund under our law.^ No doubt the language was adoptedf or the express purpose of obviating a difficulty which might arise upon a simple direction as to whether it could have effect as an assignment without delivery. The execution of such an instrument, without more, would not divest the member of his interest in the fund, nor vest the fund in the person to whom it is directed to be paid. It would still be the fund of the member and subject to his disposal. This court has held that a husband who takes out a policy of 1 Tennessee Lodge v. Ladd, 5 Lea, 716. ^ McLean v. McLean, 6 Humph. 1S2. 750 CHANGE OP BENEFICIARY: ASSIGNMENT. § 305 insurance on his own life in his own name, is entitled to treat it as his property and dispose of it by will.^ If he take the policy in the name of his wife, intending to give her the benefit of it, she would thereby acquire a vested in- terest of which he could not afterwards deprive her.^ The same rule would undoubtedly apply where he voluntaril}'^ assigned to his wife, by an executed contract, a policy taken out payable to himself.^ A benefit certificate, like the one before us, would be governed by the same rule, and would remain the property of the husband, subject to disposition by will unless previously assigned for a valuable consider- ation, or voluntarily transferred by an executed contract.* In this view, the ' will ' of W. E. Ladd, in the direction on the face of the last certificate, would carry the right to his daughter, unless the evidence shows a valid executed transfer to the wife of the first certificate. Her testimony fails, unfortunately, to establish either the necessary inten- tion or the requisite delivery." About the same time the Supreme Court of Illinois came to a similar conclusion for a different reason. In this case the certificate and laws of the society provided that the benefit might be disposed of by will, if not so disposed of it should go first to the widow, or if he had no widow, then to his heirs. The member made his will leaving thebenefitto his two daughters; afterwards, by a paper held to amount to an equitable assignment, he gave the benefit to his wife if she would pay certain assess- ments. In holding the assignment good the court said : " It is strenuously insisted that this contract was of such a character that it could not be assigned, even equitablj^ by 1 Kison ». Wilkerson, 3 Sneed, 565; Williams o. Carson, 2 Tenn. Ci\ 269; affirmed on appeal. 2 Goslin V. Caldwell, I Lea, 454. 3 Fortescue v. Barnett, 3 Myl. & K. 36. * Weil V. Trafeord, 3 Tenn. Ch. 103. ' « Swift V. Railway, etc., Ben. Assn., 96 111. 309. 751 § 306 CHANGE OF BENEFICIAKY : ASSIGNMENT. Clark Swift. We think otherwise. Neither the wife nor children had any vested interest, conditional or otherwise, in this insurance money so long as Clark Swift lived and owned and controlled this contract. The contract was be- tween the association and himself. The children paid nothing for their supposed interest. The certificate had not been delivered or sold to them. The delivery to "White made him bailee for Swift. It was a contract which was capable of being rescinded by Clark Swift, with the assent of the association. It is not conceived that he had not complete control over it, to the same extent that he might have controlled a promissory note payable to him. The will, of course, was of no effect until he died. At the time of his death, he held no interest in that part of the money to arise from the contract relating to his death, which could pass to the executor by the will. That interest has been sold. It was assignable in equity, and had been assigned to and paid for by the wife." In 1881 the Supreme Court of Minnesota held that the benefi- ciary under a membership in a benefit society could be changed at the pleasure of the member because the contract permitted it, the reservation of such power being made in thelawsof the society. In this case ^ the court said: "Here is not an ordinary contract of insurance, made between an insurance company and another person, the rights of the parties to be determined exclusively by the policy. The rights of Charles H. Richmond, and of any one claiming through him, depended, not on the certificate alone, but rather on his membership in the association ; and such rights were defined and controlled by its constitution and by- laws." § 306. Present Doctrine. — And the accepted doctrine, now generally approved by all the authorities, is that the 1 Bichmond v. Johnston, 28 Minn. 449. 752 CHANGE OF BKNEFICIARY : ASSIGNMENT. § 306 beneficiary may be changed if the laws of the order so pro- vide, or if, when such transfer is not prohibited by the laws of the society, the certificate or policy has not been deliv- ered to the beneficiary. 1 The Supreme Court of New Hamp- shire goes further and ^ holds that from the nature of the power given members of benefit associations the right of its free exercise requires its continuance until death. The court .says: " The contract, though one of life insurance, must bo interpreted according to its terms, in view of the laws of the 1 Cases, supra; Holland v. Taylor, 111 Ind. 121; Ireland v. Ireland, 42 Hun, 212; Supreme Lodge ». Martin, 13 W.N. C. 160; Splawnu. Chew, 60 Tex. 532; Highland v. Highland, 109 111. 366; Coleman o. Knights of Honor, 18 Mo. App. 189; Baub v. Mut. E. Assn., 3 Mackey, 68; Lamont u. Hotel Men's Assn., 30 Fed. Rep. 817; Barton v. Provident Mut. R. Assn., 63 N. H. 535; Schillinger v. Boes, 9 Ky. L. Rep. 18; 3 S. W. Rep. 427; Masonic Mut. Ben. Assn. v. Burkhardt, 110 Ind. 189; 11 N. Bast. Kep. 449; Sup. Council Catholic Mut. Ben. Assn. v. Priest, 46 Mich. 429; Gentry v. Sup. Lodge, 23 Fed. Rep. 718; 20 Cent. L. J. 393; Supreme Council Am. Leg. of Honors. Perry, 140 Mass. 580; Luhrs v. Luhrs, 123 N. Y. 367; 25 N. E. R. 388, reversing 7 N. Y. Snpp. 487; Supreme Conclave, etc., v. Qapella, 41 Fed. E. 1; Hopkins o. Hopkins, 92 Ky. 324; 17 S. W. R. 864; Metropolitan L. Ins. Co. v. O'Brien, 92 Mich. '584; 52 N. W. R. 1012; Beatty v. Supreme Commandery, etc., 154 Pa. St. 484; 25 Atl. R. 644; Appeal of Beatty, 122 Pa.t;St.428; 15Atl. B. 861; Fleeman v. Fleeman, 15 N. Y. Supp. 838; Sabin v. Grand Lodge, 8 N. Y. Supp. 185; Mulderich v. Grand Lodge A. O. U. W., 155 Pa. St. 505; 6 Atl. 663; Schoneau v. Grand Lodge, etc., 85 Minn. 349; 88 N. W. R. 999; Carpenter v. Knapp, 101 la. 712; 70 N. W. R. 764; 38 L. R. A. 128; Sofgeo. Supreme Lodge, etc ,98 Tenn. 446; 39S. W. R. 853; Hamilton, V. Royal Arcanum, 189 Pa. St. 273; 42 All. R. 186; Carpenter ». Knapp, 101 la. 712; 70 N. W. B. 764; 38 L. R. A. 128; PoUak v. Sup. Counc. K. A., 40 Misc. 274;81N. Y. Supp. 942; Hoffman o. Ins. Co., 56 Mo. App. 301; Masonic Ben. Soc. v. ToUes, 70 Conn. 537; 40 Atl. R. 448; Fischer ». Fischer, 99 Tenn. 629; 42 S. W. R. 448; Lane v Lane, 99 Tenn. 639; 42 S. W. E. 1058; Tepper v. Sup. Council, etc., 59 N. J. Eq. 321; 45 Atl. R. Ill; Supreme Council A. L. H. v. Adams, 68 N. H. 236; 44 Atl. R. 380; Belknap v. Johnston, 114 la. 265; 86 N. W. R. 267; Crocker u. Hogan, 103 la. 243; 72 N. W. E. 411; Voight v. Kersten, 164111. 314; 46 N. E. B. 543. 2 Barton v. Provident B. Assn., 63 N. H. 535; and see also Thomas V. Grand Lodge, etc., 12 Wash. 500; 41 Pac. 882. 48 753 § 30G CHANGE OF BENEFICIAKY : ASSIGNMENT. defendant association and of theevident understanding of the parties. The by-laws provide that ' when a member dies the association shall pay within sixty days, to his direction as catered upon his certificate of membership, the sum of two thousand dollars,' if the death assessments amount to that sum. The certificate of membership provides that ' in ac- cordance with the provisions and laws governing said asso- ciation, a sum not exceeding $2,000 will be paid by the association as a benefit, upon due notice of his death and the surrender of the certificate, to such person or persons as he may by entry on the record-book of the association or on the face of this certificate, direct, said sum to be paid provided heis in good standing when he dies.' The power of direction as to the object of the benefit is given to the member both in the by-law and in the certificate of membership, and there is nothing in either tending to show that the power is to be exercised at the time of becoming a member, or that, whenexercisedthepowerisexhausted and another beneficiar}' cannot be substituted. The power of selection is unlimited as to persons and is limited in time only by the death of the member. The certificate remains in the possession and control of the member until death, and the provision for paying the benefit to the person named in the certificate at the death of the member, as then appears, leaves the power to appoint the beneficiary continuous until that event. The power of apjDointment is the one thing in the contract which is given to the member, and over that power no other person has any control. The right of its free exercise requires its continuance until death. The appointment by Barton of the plaintiff, his wife, to the benefit at the time he became a member, was no bar to his right to appoint another or others by a subsequent change. She was no party to the contract, and acquired no vested right in the benefit. The contract was between Barton, her husband, and the defend- ant, which, on the performance of the conditions of member- 754 CHANGE OF BENEFICIARY: ASSIGNMENT. § 306 ship, agreed to pay the benefit to auj person whose name might appear by his entry on the record-book or the face of the certificate at his death. The power of appointment being free and continuous, no right to the benefit could vest in the plaintiff until it became certain that her name remained in the certificate as beneficiary, at her husband's death. If by the entry of her name as beneficiary, the plaintiff acquired any interest whatever in the benefit it was only a contingent interest, which her husband had the power to defeat, and which he has defeated by exercising the power of substitution in the appointment of other beneficiaries." The principle declared in the preceding case ^ is undoubtedly correct, and follows most closely the precedents relating to the execution of powers. If designating a beneficiary is like executing a will, a stronger argument in favor of the rule is found, for from its very nature a will, whether executing a power, or disposing of ordinary property, is ambulatory and liable to be revoked.^ And in the best considered cases this characteristic of a benefit appurtenant to membership in a benefit society is recognized.^ The beneficiary may be changed in accordance with a law adopted after the issue of the certificate where the law in force at the time of such issue required the assent of the first beneficiary.* The right to change the beneficiary is not affected by the fact that the first beneficiary paid the assessments of the member and the change was made with- 1 Barton ». Provideat R. Assn., supra. 2 In re Davies, 13 Eq. Cas. 163; Oke v. Heath, 1 Ves. 135; Easum v. Appleford, 6 M. & C. 56 ; Lord Godolpnin's Case, 2 Ves. 78. s Relief Association v. McAuley, 2 Macljey, 70; Masonic Mut. Ben. Soc. V. Burkhardt, 110 Ind. 189; ante, § 291. ^ Supreme Council Cath. Knights, etc. v. Morrison, 16 R. I. 468; 17 Atl. R. 57; Supreme Council, etc. v. Franke, 137 Ills. 118; 27 N. E. R. 86; afEg. 34 111. App. 651; Catholic Knights, etc. v. Kuhn, 91 Tenn. 214; 18 S. W. R. 385. 755 § 306a CHANGE OF BENEFICIARY: ASSIGNMENT. oat his consent, 1 or that possession of the certificate was obtained by fraud. ^ The surrender of the old certificate is not essential.* Wherever a member could have avoided the change of beneficiary because of mental incapacity the beneficiary can do so.* § 306a. Member May be Estopped from Changing Beneficiary. — Although it is settled law that the benefi- ciary named by the member of a fraternal organisation has no property in the benefit agreed to be paid, nor vested right therein, so as to deprive the member of the right to change the beneficiary at will, yet there may be conditions under which it would be held that the beneficiary has acquired equitable rights in the benefit, which will be recognized and protected, and the member become estopped from exercising his rights under the contract. In these cases it is not held that, under the contract, the beneficiary has acquired a vested right, but the member has parted with a right which he otherwise might have exercised. A leading case is Jory v. Supreme Council,^ in which the court said: "The principle here under consideration is the most recent growth of mutual benefit association law, a branch of the law which in itself is young in years ; and we know of nothing in the law which deprives a person contemplating membership in a mutual benefit association ' Fisk V. Equitable Aid Union (Pa.), 11 Atl. Rep. 84. See also Masonic Mut. Assn. v. Buncti, 109 Mo. 560; 19 S. W. E. 25; Grand Lodge, etc. v. McGrath (Mlcli.), 95 N W. R. 739; Spengler v. Spengler (N. J.), 55 Atl. R. 285; Heasliy ». Heasley, 191 Pa. St. 539; 43 Atl. R_ 364; Fincb v. Grand Grove, etc, 60 Minn. 308; 62 N. W. R. 384. '^ Brown V. Grand Lodge, etc., 80 la. 287; 45 N. W. R. 884; Hirschl v. Clark, 81 la. 200; 47 N. W. R. 78; Isgrlgg v. Schooley, 125 Ind. 94; 25 N.B. R. 151. 3 Delaney «. Delaney, 70 111. App. 136; affirmed 175 111. 87; 61 N. E. B. 961. 4 Wells «. Covenant M. B. Assn., 126 Mo. 630; 29 S. W. R. 607. » 105 Cal. 20; 26 L. R. A. 733; 38 Pac. Rep. 524. 756 CHANGE OF BENEFICIAKY : ASSIGNMENT. § 306a from s») contracting with the proposed beneficiary as that, when such certificate is issued, equities in favor of the beneficiary are born, of such merit that the insured member has no power to defeat them. The few au- thorities shedding light upon this question declare the rights of the beneficiary are such as to create a vested interest in the proceeds of the certificate. ^ Pos- sibly this is not a correct declaration of the principle of law applicable to the conditions, for a second bene- ficiary might be substituted, wholly innocent of the contractual relations existing between the insured and the first beneficiary, and his substitution give rise to the cre- ation of equities in his behalf all-controlling upon a judicial disposition of the rights of the parties concerned. If the original beneficiary's interest was vested, no subsequent conditions could possibly arise, which would defeat his right; and, for this reason, we think it can hardly be termed a vested interest. The whole matter seems to be rather a question of equities, and the stronger and better equity must prevail. The illustration we have used does not arise in the present case, for we here have no clash of equities. The second beneficiary possesses no equities. He is a volunteer pure and simple. His status during the life of the insured is well described in Smith v. Society, supra, where the court said: ' The designation was in the nature of an inchoate or unexecuted gift, revocable at any moment by the donor, and wholly within his control.' We think a court of equity should declare the insured estopped from substituting a second beneficiary of the character there involved, whenever sound equities are extant in favor of the first beneficiary ; and, such estoppel being^in force against the insured, it is equally in force and may be suc- 1 Smith V. Society, 123 N. Y. 85; 25 N. E. 197; 9 L. R. A. 616; Nix V. Donovan (City Ct. N. Y.). 18 N. Y. Supp. 435; Maynard v. Van- derwerker (Sup.), 24 N. Y. Supp. 932. 757 § 306a CHANGE OP beneficiary: assignment. cessfully urged against the volunteer beneficiary. The re-' spondent is a volunteer beneficiary, and it only remains for us to ascertain from the record what the appellant's equities are, as disclosed by the evidence. She claims by her an- swer that she and her mother entered into a mutual agree- ment whereby each should join a mutual benefit society and make the other a beneficiary under the certificates issued, and that said agreement was carried out. Appellant further alleges that she paid all initiation fees, dues, and assessments upon the benefit certificate taken out by her mother. If these moneys were paid out by appellant under and by virtue of a contract between the parties, and in pursuance of this agreement and scheme for mutual insurance, then she has equities which entitle her to recognition in a court of justice, for it would be gross imposition and fraud upon her to allow the insured to change her beneficiary under these circumstances. Though wrong and injustice form an unpleasant sight to a court of equity, yet that court will never close its eyes because the sight is an unpleasant one, but rather, with vision all the keener, will reach out its strong arm to pro- tect the wronged and innocent party." In another case in Illinois,^ the facts were, that the member had agreed with his wife that she should advance him a certain sum of money, and in consideration thereof he would make her his beneficiary. In pursuance of this agreement she paid her husband the money, and he turned over the certificate to her. Afterwards, he made affidavitthat the certificate was lost and obtained a new one, payable to his daughters. The court held that the member was estopped from chang- ing the beneficiary. The court said: "If Tracy had entered into no contract with his wife, and received no money from her on a pledge of the benefit certificate, but 1 Supreme Council R. A. o. Tracy, 169 111. 123; 48 N. E. R. 401. 758 CHANGE OF BENEFICIARY: ASSIGNMENT. § 307 merely designated her as his beneficiary in the certificate, we would not hesitate to hold that he had the right to sur- render the certificate at any time he saw proper, and have the organization issue a new one with other beneficiaries. In such case the wife could have no vested interest in the certificate. This case, however, rests upon a different state of facts, and must be governed by a different principle. After Tracy, in consideration of a large sum of money to him paid, pledged the benefit certificate to his wife, she ac- quired equitable rights in it, which may be protected in a court of equity." In another case ^ it was held, that under the circumstanc,es, the wife's equity was so strong that it could not be overcome, even if a new designation of bene- ficiary were properly made. There are cases other than those cited where, for various reasons, it has been held that the member could not change the beneficiary, and the per- son first designated had rights of which he could not be deprived.^ § 307. Change of Beneficiary must be In Way Pre- scribed by the Law ot the Society. — Although the mem- ber of a benefit society is thus generally left free to revoke his designation of beneficiary and appoint a new one, he must do so in the way pointed out by the laws of the 1 Supreme Council Cath. Benev. Leg. v. Murphy (N. J.), 65 Atl. Eep. 497. " Adams «. Grand Lodge, 105 Cal. 321; 38 Pac. Rep. 914; Anderson v. Groesbeck, 26 Col. 3; 55 Pac. Kep. 1086; Conselyou v. Supreme Council, 3 App. Div. 464; 38 N. Y. Supp. 248; McGrew u. McGrew, 190 111. 604; 60 N. E. R. 861 ; aflSrming 98 111. App. 76; Leftwich v. Wells (Va.), 43 S. E. R. 364; Grimbley v. Harrold, 125 Cal. 24; 57 Pac. Rep. 558; Goodrlcli V. Bplian (Tenn.), 52 S. W. R. 1105; Kimball v. Lester, 167 N. Y. 570; 60 N. E. R. 1113; Benardj). Grand Lodge, etc., 13 S. Dak. 132; 82 N. W. R. 404. For cases militating against the doctrine, or where the member was held not to be estopped, see Clark v. Supreme Council, etc., 176 jVIass. 468; 57 N. E. R. 787; Webster ». Welch, 67 App. Div. 558; 68 N. Y. Supp. 58; Cade v. Head Camp, etc., 27 Wash. 218; 67 Pac. R. 603. 759 § 307 CHANGE OF BENEFICIAEY : ASSIGNMENT. organization. It is but carrying out the rule laid down in regard to powers, that if a method of revocation of an appointment is created by the instrument conferring such power, this direction must be complied with. If the laws of the society prescribe certain formalities to be observed in the change of beneficiary, or if the assent of the society- to a transfer is required, k\l the requirements must be obeyed. The Supreme Court of Indiana says ^ that the same contract that permits the change " fixed the mode and manner in which that change might be made, and we think that, taking the by-laws and the certificate together, the mode and manner of changing the beneficiary was fixed as definitely, and was as binding upon the assured as was the right to make such change binding upon the association and the beneficiary. In other words, under the contract, the assured had a right to change the beneficiary, provided he made the change in the manner provided in the con- tract." So, the Supreme Court of Iowa says:^ "The contract between the association and Robert Stephen- son was that the former should pay the insurance to the persons named in the certificate of membership, unless he should change the name of the beneficiaries ; and the manner in which this should be done formed a part of the contract of insurance * * * Until the contemplated change was made on the books of the association, and a new cer- tificate issued, the obligation to pay the beneficiary whose name appeared on the books of the association continued to exist. * * * Counsel for the plaintiffs insist that where a power is reserved, and no mode of executing it is provided, it may be executed by will. Possibly this is so, but whether so or not, it will be conceded for the purpose 1 Holland v. Taylor, 111 Ind. 127. " Stephenson v. Stephenson, 64 la. 534; 21 N. W. Kep. 19. See also Haiaer v. Legion of Honor, 78 la. 245; 43 N. W. K. 185; Jinks v. Banner Lodge, 139 Pa. St. 414; 21 Atl. R. 4. 760 CHANGE or beneficiaky: assignment. § 307 of this case. One difficulty in the application of such a rule to this case is, that a mode of executing the reserved power is provided in the contract, and it is conceded that such a mode was not adopted. It was perfectly ctnnpe- tent for the parties to contract as they did, and the mode of executing the reserved power provided in the contract cannot be regarded as an idle ceremony, because substan- tially a newcontract was made upon its being complied with, and thereby all doubt upon the part of the association as to who was the beneficiary was removed. Because such mode was not adopted in this case, creates the doubt we are called upon to solve. W§, therefore, think the mode agreed upon in the contract, whereby the name of the beneficiary should be changed, was made a matter of substance, and should be complied with." In most of the cases where the method of change of beneficiary was drawn in question the member had attempted to either divert the benefit by will, or the assent of the society to the change was required and had not been obtained, and thereby the attempted change was abortive. The rule above laid down has been generally accepted.^ So a mere delivery of the certificate is insuffi- 1 National Mutual Aid Society v. Lupoid, 101 Pa. St. Ill; Gentry v. Knights of Honor, 23 Fed. Rt-p. 718, 20 C. L. J. 393; Ireland v. Ireland, 42 Hun,212; Kuights of Hoaorn. Nairn, 60 Mich. 44; 26 N. W. Eep. 826; Vollman's Appeal, 92 Pa. St. 50; Elliott «. Whedbee, 94 N. C. 115; High- lani1 V. Highland, 109 111. 366; Greenoi;. Greeno, 23 Hun, 478; Kentucky Masonic M. Ins. Co. v- Miller, 13 Bush, 489; Manning v. Supreme Lodge A. O. U. W., 86Ky. 136; 5 S. W. Rep. 385; 7 Ky. Law Rep 751; Renk V. Herrman Lodgf, 2 Deraar. 409; Olmstead v Masonic Mat. Bfn. Soc, 37 Kan. 93; 14Pac Rep. 4t9; Ba»ye». Adams, 81 Ky. 363; Danii-ls v. Pratt, 143 Mass. 216; Barman v. Lewis, 24 Fed. Rep. 97, 530; Eastman v. Provi- dent Mut. A8sn,62N. H. 552; 20 C. L.J 266; Hotel Men's M. B.n. Assn. V. Brown, 33 Fed. Rep. 11 ; Supreme Counc. A. L. H. v. Smith, 45 N. J. 466; 17 Atl. R. 770; Rollins v. McHattan, 16 Colo. 208; 27 Pac. R 254; Masonic, etc , As-n. v. Jones, 154 Pa. St. 107; 26 Atl. R. 255; McCarihy o. New EnglandOrder, etc., 153 Mass. 314; 26 N. E. E. 866; Gladdins u. Gladding, 56 Hun, 639; 8 N. Y. Supp. 88ii; Charch v. Charch, 57 Ohio St. 561; 49 N.E. E. 408; Fiukc.Fink, 171N. Y.616; 64N. E.506; revers. 761 § 307 CHANGE OF BENEFICIARY: ASSIGNMENT. cient when the laws provide for certain formahties/ nor by writing the change on the certificate, the laws requiring it to be surrendered. ^ An agent can make the change under a provision that the change may be in writing filed with the association,^ and the change is valid though the secretary of the lodge attested the signa- ture without seeing the member sign.* The mention of one method of change has been held to impliedly or ex- pressly exclude all others on the ground that, " expressio unius est exclusio alierius." ° And the first beneficiary has a right to object to the change because the requirements of the laws had not been complied with.^ Where a member of a benefit society becomes suspended for non-payment of assessments, he may, in his application for re-instate- 68 N. T. Snpp. 80; Moore v. Chicago, etc., Soc, 76 111. App. 433; Con- way V. Supreme Counc, etc., 131 Cal.437; 63 Pac. R. 727; Modern Wood- men v. Little, 1141a. 109; 86N. W. R. 216; Natl. Exchange Bk. v Bright, 18 Ky. L. 588; 36 S. W.R. 10; Heado. Supreme Counc, etc., 64 Mo. App. 212; Shuman v. AncientOrder U. W , 110 la. 642; 82 N. W. R. 331; Clark o. Supreme Counc, etc., 176 Mass. 468; 57 N. E. R. 787; Schoneau ». Grand Lodge, etc., 85 Minn. 349; 88 N. W. R. 999; Bellman v. Supreme Lodge, etc. (Tex. Civ. A.), 63 S. W. R. 702; Smiths. Supreme Counc, etc., 127N. C. 138; 37 S. E. R. 159; Grand Lodge, etc. v. Fisk, 126 Mich. 356: 85 N. W. R. 875. 1 Rollins V. McHatton, 16 Colo. 203; 27 Pac. R. 264. But see Brown V. Mansus, 64 N. H. 39; 5 All. R. 768, where delivery was held gooil. 2 Thomas v. Thomas, 131 N. Y. 205; 30 N. E. R. 61; afEg. 15 N. T. Supp. 16. 3 Bowman ». Moore, 87 Cal. 306; 25 Pac. R. 409; Depee v. Grand Lodge, etc., 106 la. 747; 76 N. W. R. 798. * Simcoke v. Grand Lodge A. O. U. W., 84 la. 383; 51 N. W. R. 8; Donnelly ». Burnham, 177 N. Y. 546; 69 N. E. R. 1122; affg. 86 App. Div. 226; 83 N. Y. Supp. 669. * Coleman v. Knights of Honor, 18 Mo. App. 189; Oimstead v. Masonic Mut. Ben. Soc, 37 Kan. 93; Brown v. Grand Lodge A. O. U. W. (Pa. St.), 57 Atl. R. 176; McCarthy v. Supreme Lodge, etc., 153 Mass. 314; 26 N. E. R. 866; 11 L. R. A. 144; 25 Am. St. R. 637; Grand Lodge v. Ross, 89 Mo. App. 621 ; McLaughlin v. McLaughlin, 104 Cal. 171 ; 37 Pac. R. 865. 8 Browu V. Grand Lodge (Pa. St.), 57 Atl. R. 176; Grand Lodge, etc., V. Frank (Mich.), 94 N. W. K. 731. 762 CHANGE OF BENEFICIARY: ASSIGNMENT. § 307 ment, designate a new beneficiary, and the society in readmitting him acquiesces in the change. l Inasmuch as the beneficiary has no vested rights in the certificate of a benefit society resulting from the assured's membership therein, not being a party to the contract, he cannot com- plain that a by-law, in existence at the time the certificate was issued, providing the member may surrender the cer- tificate, and receive a new one, with the consent of the beneficiary, was amended so as to allow such surrender and change without the consent of the beneficiary, the constitu- tion of the society providing that its by-laws might be amended at anytime.^ All the requirements must be complied with and if one, for example the payment of the fee, is omitted the change is incomplete.^ A benefitcertificate, subject by the laws of the order to change at will, on the compliance with certain formalities and the surrender of the old certificate, may be changed in the prescribed way, although it had been delivered to a third party who paid the assessments and was obtained from him without his consent.* A by- law requiring the member to give reasons for a change is reasonable and will be enforced.' The benefit is not part 1 Davidson v. Knights of Pythias, 22 Mo. App. 263. But see Mason V. Mason, 160 lud. 191 ; 65 N. E. R. 585. 2 Byrne ». Casey, 70 Tex. 247; 8 S. W. Rep. 38; Supreme Council Oath. Knights v. Morrison, 16 R. I, 468; 17 Atl. R. 57; Supreme Coun- cil V. Franke, 137111.118; 27 N. E. R. 86; Cath. Knights «. Kuhn, 91 Tenn. 214; 18 S. W. E. 385. And a creditor who has been designated as bene- ficiary acquires no separate standing so as to exclude as against him the subsequent declarations of the assured, for the latter r.-mnins the con- tracting party. Smith u. National Ben. Soc, 123 N. Y. 85; 25NE.197; Supreme Council A. L. H. v. Stewart, 36 M. A. 319; Bagley v. Grand Lod^e A. O. U. W,, 131 111. 498; 22 N E. R. 487. s Stonigham t>. Dillon, i> Oreg. 63; 69 Pac. R. 1020; Independent Order Foresters t!. Ki-liher, 30 Oreg. 501; 59 Pac. R. 324-1109; Williams V. Fletcher, 26 Tex, Civ. A. 85; 62 S. W. R. 1082. " Fisk V. Equitable Aid Union (Pa.), 11 Atl. 84. ^ Murphy B. Metropolitan, etc., Assn., 25 Misc. 751; 55 N, Y. Supp. 620. 763 § 308 CHANGE OF BENEFICIARY: ASSIGNMENT. of the member's estate and cannot pass under a will.^ The mere fact that the member in an application for a change of beneficiary falsely stated that the benefit certificate was lost will not invalidate the change.^ § 308, The Society May Waive Kequirements of its Laws as to Cliange of Beneficiary. — Although the rule is settled that change of beneficiary must be made in the man- ner prescribed by the laws of the society with some excep- tions ^ it is also now equally well settled that the society may waive compliance with the required formalities. In Splawn V. Chew,* which was a controversy between the original beneficiary, named in the certificate, and the devisee of the same benefit] in the will of the member subse- quently made, the Supreme Court of Texas said: "The right to change the disposition of [the] monej' being established in the member, the next question is, how is it to be exercised? It is contended by appellees that it can be exercised only in the manner pointed out in the third section of the third by-law, which reads as follows : ' Members may at any time, when in good standing, sur- render their certificate, and have a new one issued, payable to such beneficiary or beneficiaries dependent upon them as they may direct, upon payment of a certificate fee of fifty cents.' This section is in further recognition of the right to make the alteration, and it seems to be admitted that a surrender of the old certificate and the issuance of a new one under this section would effect a change in the beneficiaries of the policy. But is this the only way in 1 Hutson V. Jenson, 110 VFi8. 26; 85 N. W. K. 689; Grand Lodge e. Fisk, 126 Mich. 356; 85 N. W. R 875; Slice v. Carter, 23 Ky. L. R. 915; 63 S. W. K. 770; Vance w. Park, 7 Ohio Dec. 564; Schardt ». Schardt, 10" Tenn. 276; 45 S. W. R. 340. 2 Spengleri;. Spengler (N. J.), 65 Atl. R. 285. 3 Post, § 310. * 60 Tex. 632. 764 CHANGE OF BENEFICIARY: ASSIGNMENT. § 308 which such a change can be effected ? The right to make the change is given by a different section of the by-laws, and exists in the insured so long as he remains a member of the order. A method by which he may accomplish it to the satisfaction of the order is pointed out in the section last recited, but we do not consider this as exclusive of all other ways of effecting the same object. The design of this sec- tion is to protect the interests of the corporation. The company are entitled to know who are the parties entitled to the benefit money, and this is an effectual and certain means of giving that information. But like all such pro- visions in the by-laws of private corporations, it may be waived at the option of the corporation, being for its bene- fit alone. This has been held in reference to such provi- sions when prescribed in mandatory terms. If they pan be waived in such cases, much stronger would seem to be the reason why this can be done when the course to be pursued is directed, as in this instance, in permissive language alone. * » « j^g a by-law of the order this provision entered into the understanding between the company and the member effecting the insurance, and the rights of inter- ested parties are not strengthened by the fact that the same provision is found in the certificate. It is still a condition for the benefit of the company, to be insisted upon or waived according to their election." In a Kentucky case,i the laws of the order provided that a member might at any time change the beneficiary by revoking the first designation and designating a new beneficiary in a form given on the back of the certificate, having the same attested by the recorder of the subordinate lodge with its seal there- to attached, and paying a fee of fifty cents for a new certifi- cate, which was thereupon to be issued by the supreme lodge 1 Manning v. Ancient Order of United Workmen, 86 Ky. 136 ; 5 S. W. Bep. 385. 765 § 308 CHANGE OF BENEFICIAKT : ASSIGNMENT. upon receipt from the local lodge of this old certificate, the attested revocation and the fee. In this case the member had left the certificate in charge of the local lodge. Sub- sequently he married and wrote the lodge inclosing his dues and requesting the officer to send him the certificate made out to his wife. No fee was sent and the officer of the lodge wrote to him for it. * Nothing was done until after the death of the member when the recorder of the lodge certified the letter to the supreme lodge, which issued the new certificate as requested and afterwards paid it. The suit was by the first beneficiary; judgment was given by the lower court for the defendant and in affirming this the Court of Appeals said : ' ' The appellant had but a contingent right to the benefit; not a vested and absolute one. It was subject to be defeated at the will of the assured. The law of the order, as above cited, provides how this shall be done. The regulation is a reasonable one; but the question arises whether it shall govern as between claimants to the benefit, the order has seen fit to waive it. We think not. Its object, beyond doubt, was to prevent the appellee from becoming involved in litigation with outside claimants. Upon this idea it was held in the case of Aid Society v. Lupoid, ^ that where the certificate provided, ' This certificate may be as- signed and transferred only by and with the consent of the association indorsed thereon,' and it was done without such approval, that it was a part of the contract, and that the society had a right to insist upon the protection which it was intended to afford. The direction by the insured to change the benefit was, in the case now under consideration, given through the proper channel. The subordinate lodge re- ferred it to the proper authority and it saw fit to waive the regulations intended for its benefit, and comply with the direction although made in an informal manner and without 1 101 Pa. St. 111. 766 CHANGE OF BENEFICIARY: ASSIGNMENT. § 308 the payment of the fee. The intention of the insured was to change the benefit. He so directed in writing ; and now, because he did not do so in the formal manner prescribed by the law for the benefit of the order, it is asked by a third party, whose interest in the insurance was liable to end at any time at the will of the assured, that his intention shall be defeated, although the party, for whose benefit the form was prescribed, has seen proper to waive it. Such a rule would sacrifice substantial justice to mere form; it would tend to defeat the benevolent aim and purpose of the organ- ization, and the desire and intention of the insured. Mem- bers of the order may be remote from their lodge ; they may not have their certificates with them, and therefore be unable to make the indorsement thereon as directed or to have it attested by the recorder of their lodge, or its seal attached thereto. If the appellee chooses to waive these formalities, it does not lie in the mouth of a third party to complain. The order is entitled to know who is entitled to the benefit fund, and the formal mode of changing its direc- tion is for its benefit ; while, upon the other hand, the right of the beneficiary rests in the mere will of the assured. * * * Inour opinion, fehe letter of June 5, 1879, operated to change the direction of the benefit, inasmuch as the appel- lee saw fit to waive its informality ; and, as the assured had therefore done all that was needed on his part, the fact that the appellee issued the new certificate after his death, does not affect the right of the parties. If the appellee were in court with the fund, asking that the conflicting rights of the claimants to it be determined, and was silent as to the informality of the direction to change the benefit, it seems to us that the widow ought to prevail." The facts of the above case, however, would seem to have justified the inter- ference of equity to carry out the intention of the member, so clearly expressed, but imperfectly executed. ^ This doc- 1 Post, § 310. 767 § 308 CHANGE OF BENEFICIAEY : ASSiaNMENT. trine is now well settled by a decided weight of authority. ^ In some cases considered the change was held good not on the doctrine of waiver but because the contract authorized the change in the manner made. In Kaub v. Belief Asso- ciation,^ it was held that a by-law requiring the assent of the society to any change of beneficiary, was void because the charter gave the right t6 dispose of the benefit by will and without the assent of the lodge. In Catholic Benefit Association v. Priest,^ a disposition by will was sustained because the record did not show any law of the society taking away such right. In a Georgia case,* a defective transfer to a wife was upheld on the ground of estoppel, for though the assent of the company was required to make an assignment valid, the agent of the company had agreed to attend to it. The officers of a subordinate lodge, however, have no power to waive. ^ Nor can there be any waiver after the death of the member when the rights of the beneficiary have attached.^ 1 Titsworth v. Titsworth, 40 Kans. 571; 20 Pac. R. 213; Marsh v. Supreme Council A. L. of H , 144 Mass. 512; 21 N. E. E. 1070; South. Tier Masonic, etc., Assn. v. Laudenbach, 5 N. Y. Supp. 90; Martin v. Stubbings, 126 111. 387; 18 N. E. R. 657; JKnights or Honor v. Watson, 64 N. H. 617; 15 Atl. B. 128; Anthony v. Mass. Ben. Assn., 158 Mass. 322; 33 N. E. R. 577; Adams v. Grand Lodge A. O. U. W., 105 Calif. 321; 38 Pac. R. 914; Schardt v. Schardt, 100 Tenn. 276; 45 8. W. R. 340; Fan- ning V. Supreme Counc, etc., 84 App. Div. 205; 82 N. Y. Supp. 733; Grand Lodge v. Reneau, 75 Mo. App. 402; Schoneau v. Grand Lodge, 85 Minn. 349; 88 N. W. R. 999; Kimball v. Lester, 43 App. Div 27; 59 N. Y. Supp. 540; Allgemeiner Arbeiter Bund «. Adamsou (Mich.), 92 N. W. K. 786. 2 3 Macbey, 68. s 46 Mich. 429. 4 Nally V. Nally, 74 Ga. 669. 6 Giand Lodge A. O. U. W. v. Connolly, 58 N. J. Eq. 180; 43 Atl. E. 286. 6 McLaughlin ». McLaughlin, 104 Cal. 171; 37 Pac. R. 865; Fink u. Fiuk, 171 N. Y. 616; 64 N. E, R. 506; rever. 68 N. Y. Supp. 80; Smith ■». Hirman, 28 Mis*. 681; 69 N. Y. Supp. 1044. 768 CHANGE or BENEFICIARY: ASSIGNMENT. § 308a § 308a. Where no Formalities are Required Cbange ean be made in any way Indicating the Intention of the Member. — If no formalities are required by tlie laws of the society for change of beneficiary it may be made in any manner indicating the intention of the member as by will.^ In the leading case just cited the court says : ^ "As we have already seen, neither constitution nor by-laws of plaintiff prescribed any formalities whatever for a change of beneficiary. In the absence of such, any clear, definite desig- nation of a different beneficiary will sufiice. So we think that the designation of a trustee by his last will formally executed and duly probated wrought an effectual change, particularly as he was authorized by the charter to give it to his devisees." It may also be made by a paper signed by the member, expressing the intention and mailed to the society and received after his death although the certificate is not surrendered but remains in the hands of the first ben- ficiary.^ In this case* the court says: " And it is to be observed that there is no requirement in the contract that the certificate shall be surrendered in order to effect a change of the beneficiary. It does not even provide that it is necessary to notify the association of the change at the time it is made. By the very terms of the contract the change of the beneficiary is a mere direction to the asso- ciation which it is bound to obey. The disposal of the benefits may be made by the mere direction of the insured. This act does not require the assent of the association. It is not a new contract between the insurer and the insured. If the association received notice of the change in the beneficiary before it has been in any way prejudiced, it would seem that it would be bound to obey the direction. 1 Masonic Mut. Assn. v. Bunch, 109 Me. 560; 19 S. W. R. 25. 2 Masonic Mut. Assn. v. Bunch, supra. 3 Hirschi v. Clark, 81 la. 200; 47 N. W. R. 78; 9 L. R. A. 841. ^ Hirschi v. Clark, supra. 49 769 § '608a CHANGE OF BENEFICIAEY : ASSIGNMENT. These views appear to us to be founded on sound reason. We look in vain for any law, rule or regulation enacted by the association with which Burrows failed to comply. It is true that the blank on the back of the certificate indi- cates that the manner of conducting the business of the association was to surrender the first certificate, and issue another to the new beneficiary, and the evidence :?hows that this was the practice of the company. But this was a mere regulation for the convenience of the company of which its members had no notice. It was no part of the constitution or by-laws of the association ; and rules or regulations adopted by the officers of the company, in regard to the transaction of business, and which do not enter into the constitution of the company as provisions of its charter or by-laws are not. embraced in the certificate. They are such rules as fix the rights of members of the company and are parts of the laws of the institution which are to be regarded as parts of the contract.* The case of Stephenson v. Stephenson,^ is in no sense in conflict with the views we have expressed. In that case the by-laws which were made part of the contract, made that specific provi- sion as to the manner of changing the beneficiary. It is there said that the manner in which this should be done formed a part of the contract of insurance. We have set out the facts attending the execution of the paper by Bur- rows and the time of its reaching the association with more particularity than may have been necessary. In our opinion the fact that Burrows died before the association received the instrument is not a material question. Under this contract Burrows could have changed the beneficiary by an assignment on the certificate, or by a separate paper, and it was complete, at least so far as Mary Burrows was 1 Walsh V. Insurance Co., 30 la, 133; and the authorities there cited. 2 64 la. 534; 21 N. W. Rep. 19. 770 CHANGE OF BENEFICIARY : ASSIGNMENT. § 309 concerned, when it was delivered to Clark, the trustee. Notice to the insurer of the assignment was not necessary unless required by the contract of insurance. Where a policy is assignable or where a benefit certificate authorizes chanoje of beneficiaries, which isthe same thing in effect as an assignment, notice of the assignment is not necessary to its validity, unless required by the contract of insurance.. The execution of the instrument by Burrows, directiag that the money be paid to his mother and brothers and sisters, operated as an equitable assignment. The consent of Mary Burrows was not necessary to effect the object. And she could not defeat it by refusing to deliver the certificate when it was demanded. She had no vested right in the paper nor in the insurance. If it had been procured from her by fraud and a new certificate issued to another bene- ficiary she would have had no right to complain." ^ And a change of beneficiary in accordance with the custom of the association will be valid, the by-laws providing no method.^ § 309. When an Attempted Cbauge of Beneficiary Be- comes Complete. — It often becomes important to know when an attempted change of beneficiary becomes com- plete. In general, the method is for the member to fill out a blank form on the back of the certificate, revoking his former and making a new direction of payment, and have the same attested by the secretary of the lodge, who for- wards the same to the superior authorities, who thereupon cancel the old and issue a new certificate payable as re- quested. It is possible for the member to die before the various steps in the transaction 'have all been takeu. The general rule is that if the member does all in his power, 1 Brown v. Grand Lodge, 80 la. 27; 48 N. W. Eep. 884. 2 Schmidt v. New Braunfelser, etc., Verein (Tex. Civ. A.)i 73 S. W. R. 568; Waldum v. Homstadt (Wis.), 96 N. W. R. 806. 771 § 309 CHANGE OP beneficiary: assignment. that is, does all things required of him under the con- tract to effectuate the change, it will be held complete although the new certificate has not in fact been issued.^ In one case ^ the member requested a friend to take his cer- tificate to the secretary of the lodge and have him attest and complete the change ; but before this was done and before the old certificate was delivered to the secretary, the mem- ber died. It was held that the change was incomplete and the old beneficiary recovered. In a Michigan case^ the Supreme Court of that State, in declining to pass fully on the question, said: " By the express terms of that certifi- cate, it is provided that Mrs. Richardson shall have the money unless the certificate is surrendered and cancelled and a new one issued ; and the form of surrender printed on the back conforms precisely to the clause also inserted in the constitution, requiring every surrender and new direction to be signed by the member, and attested by the reporter under the lodge seal, he being the officer into whose hands it must be placed for transmission to the home office for reissue. Under this arrangement, the purpose is evident that the corporation shall always be in written contract relations with a member who is alive and in good standing, which will show them the identity of the beneficiary to 1 See, in addition to cases cited infra in tliis section, Heydorf v. Conracb, 7 Kan. App. 202; 52 Pac. E. 700; Berkley jj. Harper, 3 App. D. C. 308; Waldum ». Ilomstadt (Wis.), 96 N. W. R. 806; Collins a. Collins, 30 App. Div. 341; 51 N Y. Supp 932; Dorinel y o. Burnham, 86 App. Uiv. 226; 83 N. Y. Sapi) 659; Brierly i;, Equitibn Aid Union, 170 Mass. 218; 48 N. B. R. 1090; Coyne v. C.>yue, 23 App Uiv. 261 ; 48 N. Y. Supp. 937; Fiak ». Delawtre, etc., Assn., 57 App Div. 507; 68 N. y. Supp. 80; Sapreme Lodge, etc. v. Terr 11, 99 Fe^l. R. 330; McG .wan V. Supreme Court I. O. F., 104 Wis. 173; 80 N. W. R 603; Grand Lo.lj.ej elc. V. Kohler, 106 Mich. 121 ; 63 N. W. R. 897; Jory ». Supreme C..uncil, etc., 105 Cal. 20;, 38 Pac. R. 524; 26 L. R. A. 733; Bera; v. Damkoehler, 112 Wis. 587; 88 N. W. R. 606; Hofman v. Grand Lodge, etc., 73 Mo. A)ip. 47. 2 Ireland v. Ireland, 42 Hun, 212. 3 Knights of Honor v. Nairn, 60 Mich. 44. 772 CHANGE OF BENEFICIARY: ASSIGNMENT. § 309 whom they are liable. It is possible — and we need not consider under what circumstances — that when a member has executed and delivered to the reporter his attested sur- render, in favor of a competent beneficiary, his deiith before a new certificate is rendered, may leave his power of designation so far executed as to eaable a court of equity to relieve against the accident. But in the present case the facts show conclusively that Traver did not mean to have any surrender made until after his death." In a case in Missouri,^ a member of a benefit society was severely in- jured and desired a friend to taiie his certificate to the sec- retary of the lodge and have it changed. The friend did this, and the next day called at the central office and received the new certificate. At the time of issue of the latter the member was dead. The court held that, it not appearing that the officers who issued new certificates to members had any right to refuse, if the request was in form, but had merely ministerial duties in that respect, the transfer was good ; for the member had done all that lay in his power to effect the change before he died. To the same effect is the case of Luehrs v. Luehrs,^ where the Court of Appeals said : ' ' The deceased had expressed his desire in the premises as fully as it was possible for him to do. He had himself complied with all the requirements imposed by the supreme lodge as necessary for him to per- form in order to obtain another certificate * * * Xhe question is whether the valid and proper direction of the member shall be complied with when he has done everything that was required of him to do in order to effectuate his intention and all that remains to do is a purely formal piece of business, and one in doing of which there is not (upon the facts in this case) one particle of discretion remaining in the 1 National Am. Assn. v. Kirgin, 28 Mo. App. 80. 2 123 N. y. 367; 25 N. E. K. 388; reversing 6 N. Y. Supp. 51. 773 § 310 CHANGE OF BENEFICIAKY : ASSIGNMENT. officers of the supreme body, or in any other body. * * * We think these questions may fairly be answered in the affirmative." Where by collusion the seal of the lodge was not affixed but the society approved the change it was held effectual ; ^ so also where the change was signed by the agent of the member, the latter dying before the new cer- tificate was issued.^ The Supreme Court of Pennsylvania has held,* that a new benefit certificate issued to change the beneficiary, upon application made in accordance with the by-laws of the association and signed by the proper officers of the supreme lodge and sealed with its seal, is not invalid because not signed and sealed by the officers of the subordinate lodge. Where a by-law provided that the change of beneficiary should not be complete until delivery of the new certificate, and the old certificate with the attempted change did not reach the office of the asso- ciation until after the death of the member and the issue of the new certificate was then refused, it was held that there was no change.* And where the member was also secretary of his council and the certificate was found in his desk after his death never having been forwarded to head- quarters as required by the by-law it was held that there Wtis no change.^ An arbitrary refusal of the directors to approve a change will not invalidate it.* § 310. Jurisdiction of Equity in Aid of Imperfect Change of Beneficiary- — The inquiry is suggested by the last section and tlie cases therein cited, to what extent equity will aid an imperfect change of beneficiary. In a recent 1 Marsh v. Supreme Counc. A. L. H., 144 Mass. 512; 21 N. E. R. 1070. 2 Schmidt v. la. Kaights of Pythias, 82 la. 304; 47 N. W. R. 1032. ' Fisk ». Equitable Aid Union, 11 Atl. Rep. 84; Mayer v. Equitable Reserve, etc., Assn., 2N. Y. Supp, 79. * Counsman v. Modern Woodman (Neb.), 96 N. W. R. 672. « Hamilton v. Royal Arcanum, 189 Pa. St. 273; 42 Atl. R. 186. 6 Sanborn v. Black, 67 N. H. 537; 35 Atl. K. 942. 774 CHANGE or BENEFICIARY : ASSIGNMENT. § 310 case the Supreme Court of Michigan considered the sub- ject. ^ The facts of the case were as follows : By the laws of the order a member might at pleasure revoke his appoint- ment of a beneficiary and designate a new one by signing a declaration to that effect on the back of the certificate ; such declaration was to be attested by the recorder of the subordinate lodge and the lodge seal affixed ; it was then to be sent by such recorder, with the prescribed fee, to the grand lodge officers, who canceled the old and issued a new certificate as requested. One Child became a member and designated his betrothed as beneficiary, he having a son then living. The certificate was exhibited to the beneficiary ; but retained by the member and afterwards lost. Sixteen months after the issue of the certificate the lady designated as the beneficiary married another person than Child. The latter afterwards continued to pay his assessments and tried, by a written document, to change the designa- tion and make his son the beneficiary, but the grand lodge refused to recognize the change, or issue a new certificate unless the first one was surrendered; the subordinate lodge, however, advised the written document, expressing the intention of the member, and consented to it. After the death of the member the grand lodge filed a bill of interpleader against the first beneficiary and the son and paid the money into court. In awarding the fund to the son the court said: "It clearly appears that the deceased, while living, never intended, after Miss Drury married O'Connor, that she should remain the beneficiary in the certificate. He continued to pay his dues and assess- ments until the time of his death, and within two years after she rejected his suit he undertook, and didallthathe could, and all that he was required in equity to do, to change the 1 Grand Lodge A. O. U. W. v. Child, 70 Mich. 163; 38 N. W. Rep. 1. And also in Grand Lodge, etc., v. Noll, 90 Mich. 37; 51 N. W. R. 268; 15 L. E. A. 350 and note. 775 § 310 CHANGE OP BENEFICIAKY : ASSIGNMENT. donee in the certificate named to that of his son. The rules of the order allowed him to do this, and it was not in the discretion of the order to prevent it. It was a right, under the rules of the order, of which he could not be de- prived, upon his complying with the conditions prescribed for such action, and which he performed so far as it was in his power to perform, and for these reasons it would be most unjust and inequitable for a court to disregard such action and such intention of the deceased, before he died, and award his property to the claimant who had forfeited all claim to his bounty and whom he had discarded. * * * All contracts are presumably made in view of the law governing their construction, and the rules of evidence ap- plicable when the contract is sought to be established and applied. The law never requires impossibilities, and tbe rules of the order which required the certificate to be sur- rendered when a change of the beneficiary was made, that it might be indorsed upon the certificate, could only be construed as requiring that to be done when the certificate was in existence. The existence of the right to share in the benefits of the order, and to direct who should receive the fund in case of the death of the member, was a right vested in the member as soon as he became entitled thereto, and the certificate was only evidence of the existence of that right, and where that evidence was lost the right remained, and its existence could be established by any other compe- tent evidence, and the same is true of the existence of the change, directed by the member of the beneficiary. Mr. Child did all he could do in making the change, and it should have been allowed and done by the order. Equity will con- sider that done which ought to have been done. For the purpose of determining the rights between these defend- ants, the proceeding is governed by equitable principles. The fund is held in trust by the order for the person to whom it belongs. And it is true in this, as in every other 776 CHANGE OF BEXEFIOIAKY : ASSIGNMENT. § 310 case, equity follows the law as far as the law goes in secur- ing the rights of parties, and no further; and when the law stops short of securing the object, equity conlinues the remedy until complete justice is done. In other words equity is the perfection of the law, and is always open to those who have just rights to enforce when the law is inad- equate. Any other conclusion would show our system of jurisprudence not only a failure, but a delusion and a snare. Justice alone can be considered in a court of chancery and technicalities never be tolerated, except to attain, and not to destroy it; and the greater equity should always be allowed to prevail. There can be, it seems to me, no doubt in this case, where it lies." In another case, a member before marriage agreed to substitute his second wife a^ beneficiary, but died without doing so, it was held ^ that equity would treat the change as having been made, and the court awarded the fund to the wife. In that case the court said : " We then have the sister nominally the payee in the certificate. The member, under the rules, had the right at any time to name another in her stead. She was a mere volunteer, having given no consideration, and, it must be presumed, had full knowl- edge that her brother could at any time strike out her name and substitute that of another, as he did when he struck out his first wife's name and substituted hers. He promised to substitute that of the second wife when she married him. She did marry him He did not substitute, formally, her name. We have no reason to doubt this omission was from neglect, not because of willful wrong. But the moment the marriage contract was complete, the wife had an equitable claim to the certificate, or to the benefit it rep- resented. It was not that sort of a mutual contract which 1 Pennsylvania Eailway Co. v. Wolfe, 203 Pa. St. 269; 52 Atl. Rep. 247. 777 § 310 CHANGE OP beneficiary: assignment. eoiild be very coavenieiitly performed by each party at the same time. Marriage, the condition, must almost neces- sarily follow after the promise, and she had no right to substitution until after marriage. But when she married him, she had a vested right in the benefit, — a right not dependent on his v^ill or whim, but one no longer in his power, as between him and* her, to confer or withhold. She could not take back the consideration she gave. He could not give it back to her. He could only formally transfer to her that which by the consummation of the contract was hers. He ought, in form, the day of the marriage, or immediately after, to have done that. Equity will now treat that as done which ought to have been done. To illustrate the application of the principle, suppose the intended wife had made the promise and the intended husband then had, regularly, under the rules of the association, appointed her the beneficiary, and then she had refused to marry him, and before he had time to create a new appointee he died; would equity, assuming the association did not interfere, have permitted her to re- ceive the fruits of her fraud? There is no more reason why she should suffer the penalty of his neglect." In another case,^ very informal acts on the part of the mem- ber were held to constitute a change, the court saying : ' ' Seay having repeatedly declared his intention that his sister, Mrs. Emma Allen, should be the substituted bene- ficiary, and having actually done all he could in his condi- tion to accomplish that purpose, and to accomplish it in the very mode prescribed by section 66, his acts being partly in writing and partly in parol, equity will treat that as done which ought to have been done, and decree as if the change had been made in conformity with said section. It will perfect his imperfect and incomplete, but partly 1 Hall V. Allen, 75 Miss. 175; 22 Sou. Eep. i. 778 CHANGE OF BENEFICIARY: ASSIGNMENT. § 310a accomplished, purpose and act, and deal with it as per- fected, as between these claimants. The case falls strictly within the second and third exceptions to the general rule pointed out by Justice Brown, now of the United States Supreme Court, in Supreme Conclave v. Capella, 41 Fed. 1, cited in 1 Bac. Ben. Soc, sec. 310a; and in such case it is well settled that the death of the assured before the com- pletion of the change in the beneficiary makes no differ- ence." And the delivery of a certificate with verbal direc- tions for a change has been held effectual.^ § 310a. Summary of the Law Kegarding Change of Beneficiary with Exceptions to General Rule. — luarecent case,^ Judge Henry B. Brown, then presiding in the Circuit Court of the United States for the Eastern District of Michigan, reviewed the law regarding change of beneficiary, and his statement of the principles involved will probably always be followed. After, referring to the right of the member to make a change of beneficiary the court says : "In making such change of beneficiary, however, the insured is bound to do it in the manner pointed out by the policy and the by-laws of the association, and any material devia- tion from this course will invalidate the transfer. Thus, if the certificate provides that no assignment shall be valid unless approved by the secretary, an assignment without such approval will be invalid.^ So, if it be provided that such change must be made on a prescribed form or blank the signature to which shall be attested before a notary, and the change entered upon the books, an assignment to a creditor as collateral security not made upon the prescribed blank, and of which the association had no notice until after the death of the member, was held to be fatally 1 Loc'kett V. Lockett CKy.)j 80 S. W. R. 1152. 2 Supreme Conclave Royal Adelphia v. Cappella, 41 Fed. Rep. 1. 3 Herman v. Lewis, 24 Fed. Rep. 97, 530. 779 § 310a CHANGE OP BENEFICIAKY : ASSIGNMENT. defective.^ So, where the certificate required every sur- render to be in writing, attested by the reporter under the lodge seal, it was held that a conditional surrender of the same by the holder, not to take effect until after his death, and not made in the presence of, or attested by, such lodge reporter, was invalid.^ So if the by-laws fix defin- itely the manner of changing the beneficiary by his action during his life, an attempt to divert the benefit by will has usually been held to be abortive.^ There are, how- ever, three exceptions to this general rule, requiring an exact conformity with the regulations of the association : (1) If the society has waived a strict compliance with its own rules, and in pursuance of a request of the insured to change his beneficiary has issued a new certificate to him, the original beneficiary will not be heard to complain that the course indicated by the regulations was not pursued . This naturally follows from the fact that having no vested interest in the certificate during the life-time of the assured he has no right to require that the rules of the association , which are framed alone for its own protection and guid- ance, are not complied with.* The case of Wendt v. Legion of Honor, ^ appears upon its face to lay down a 1 Association v. Brown, 33 Fed. Bep. 11. 2 .Supreme Lodge v. Nairn, 60 Mich. 44; 26 N, W. Eep. 826; see aU© Wendt «. Legiou of Honor, 72 la. 682; 34 N. W. R. 471; Elliott ». Whedbt-e, 94 N. C. 115; Mellows v. Mellows, 61 N. H. 137; Highland v. HiflhliDd, 109 111. 366. 8 Holland©. Taylor, 111 Ind. 121; 12 N. E. Eep. 116; Stephenson v Step enson, 64 la. 634; 21 N. W. R. 19; Insurance Co. v. Miller, IS Bu^h, 487; Vollmm's Appeal, 93 Pa. St. 50; Renk v. Herman Lodge, ;: Dim Sur. 409; Daniels v. Piatr,, 143 Mass. 216; 19 N E. R. 166. i M-irliuD. S ulibiugs, 126 111 387; 18 N. E. R. 657; Splawu v. Chew, 60T. X. 532; Mmning v. Ancient Ordt-r, 86 Ky. 136; 5 S. W. R. 385. Society ». Lupoid, 101 Pa. St. Ill; Brown u. Mansus, 64 N. H. 39 ; i All. Rep. 768; Knights of Honor v. Watson, 64 N. H. 517; 15 Atl. Rep. 125; Byrne », Casey, 70 Tix. 247; 8 S. W. Kep. 38; Titsworth u. Tits- worth, 40 Ktn. 571; 20 Pac. Rep. 213. 6 72 la. 632; 34 N. W. R. 470. 780 CHANGE OF BENEFICIARY: ASSIGNMENT. § 310a different rule, but, upon examination, it will be seen that the change was attempted to be made by a paper which the insured called his last will, but which was no will in law, and the court held that, the interest of the beneficiary having become vested by the death of the insured, they had acquired rights which could not be cut off, except in the manner prescribed in the contract. This case, evi- dently, has no application to a change made prior to the death of the insured. (2) If it be beyond ^he power of the insured to comply literally with the regulations a court of equity will treat the change as having been legally made. Thus in the case of Grand Lodge v. Child, ^ the insured made his betrothed the beneficiary and subsequently lost Ms certificate. His beneficiary having married another, he made a statement of the loss, and applied for a reissue of the certificate, making his son the beneficiary. His appli- cation was refused. The rules of the organization required the change to be indorsed on the original certificate, but by the advice of the officers, he attempted to make the change of beneficiary by giving a power of attorney to another to collect the amount which should accrue under the certificate. It was held that such acts constituted an equitable change of beneficiary, and that the son was entitled to the fund. The court held that the insured had done all that he could, and all that he was required in equity to do, to change the donee of the certificate. ' The rules of the order allowed him to do this, and it was not in the discretion of the order to prevent it. « * * The law never requires impossibilities and the rules of the order, which required the certificate to be surrendered when a change of beneficiary was made, that it might be indorsed upon the certificate, could only be construed as requiring that to be done when the certificate was in exist- 1 70 Mich. 163; 38 N. W. Rep. 1. 781 § 310a CHANGE OF BENEFICIAET : ASSIGNMENT. ence. The existence of the right to share in the profits of the order, and to direct who shall receive the fund in case of the death of a member, was a right vested in the mem- ber as soon as he became entitled thereto, and the certifi- cate was only evidence of the existence of that right, and' whenr that evidence was lost, the right remained, and its existence could be establistied by any other competent evidenee ; and the same is true of the existence of the change directed by the manner of the beneficiar}. ' (3) If the insured has pursued the course pointed out by the laws of the association and has done all in his power to change the beneficiary, but before the new certificate is actually issued, he dies, a court of equity will decree that to be done which ought to be done, and act as though the certificate had been issued. The case of Association v. Kirgin,^ is an illustration of this exception. In this case, the insured having met with a fatal accident, called a friend and requested him to take his certificate to the association and surrender it, pay the fee of fifty cents, and request them to issue a new one, payable to his wife. This was done and a minute of the transaction was made on the records of the association for that day. On the following day the insured died. It was held that in doing this he had done all that the laws of the order required to be done on his part in order to have a new certificate ; that his right to make the change was absolute, and that the association had no right to refuse his request ; and further that the fact that the certificate was issued after his death was im- material, since the certificate was not the right itself, but merely the evidence of the right. ^ The case of Ireland v. 1 28 Mo. App. 80; and also] see Luhrs v. Luhrs, 123 N. Y. 367; 25 N. B. R. 388. 2 See, to the same efiE-'ct, Mayer ». Association, 2 N. Y. Supp. 79; Su- preme Lodge V. Nairn, 60 Mich. 44; 26 N. W. K. 826; Kepler v. Supreme Lodge, 45 Hun, 274; St. Louis Police, etc., Assn. v. Strode (Mo. App.)^ 77S. W. R. 1091. 782 CHANGE OF EKXEFICIARY : ASSIGNMENT. § 310 Ireland,! jg distinguishable f lom these iu the fact that the insured made no written request for a change, as required by the rules, but merely delivered the certificate to a friend, telling him he wanted it changed. This was mani- festly insufficient." In accord with the principles laid down in the foregoing opiniouare several other cases. For example, where the member complied with all the regula- tions of the society iu making the change except that he did not surrender the certificate as required by the by- laws, being unable to do so because the certificate had been wrongfully taken from him, the change was held effectual.^ So where the application for membership directed payment of the benefit to the applicant's wife, " subject to such further disposal as he might thereafter direct," and the benefit certificate was made payable to the wife, naming her, and no mode of changing the beneficiary was specified by the laws of the association, or certificate, although the custom was to require a surrender of the old certificate, it was held that the paper signed by the member expressing his surrender of the certificate and directing payment to the new beneficiary and mailed to the officers of the associa- tion just before his death is a valid change, although the certificate remains in the hands of the wife who refused to deliver it up.^ And so where a few hours before his death the member sent the certificate to the president of the lodge with the request that it should be transferred to the new beneficiary, it was held that an indorsement of the cer- tificate made by the president of the lodge in accordance with the verbal message of the owner of the certificate was enough to effect the change.* In this case the court says : "He (the member) showed his intent clearly by sending 1 42 Hun, 212. 2 Isgrigg V. Schooley, 125 Ind. 94; 25 N. E. K. 151. ' HirscW V. Clark, 81 la. 200; 47 N. E. R, 78. * Schmidt v. lowaK. of P., 82 la. 304; 47 N. W. 1032. 783 § 3106 CHANGE OF BENEnCIARY : ASSIGNMENT. the certificate to Wing witli verbal instructions to make the indorsement necessary to effect the change of beneficiary which he desired. His intention and the authority he gave having been ascertained, the acts of his agent in carrying them into effect should be enforced." But where the mem- ber, in a letter to the association, indicated a substitution of beneficiary which he desired to make, sending his certi- ficate for that purpose, but the certificate was returned to him with directions to sign a formal revocation and reap- pointment of beneficiary indorsed on the certificate, which he did not do, but retained it without further action, it was held that the change was not effectual.^ And so a delivery of the certificate to a third person for the benefit of the member's son is not a change of beneficiary. ^ And so where a power of attorney was given to a creditor to tran? fer a membership in the New York Cotton Exchange, which power was not exercised, it is not such a sale as will relieve the exchange from liability.' And the designation of a substitute as a beneficiary, in a written order not witnessed, directing "the association," not naming any, to pay the benefit to the substitute who was a brother, which order was not brought to the attention of the association until after the holder's death, was held invalid.* § 3106. Interpleader and Questions Arising in Such Proceedings. — Where the fund due from a beneficiary society on the death of a member, is claimed by two or more parties adversely to each other, it is usual for the association to absolve itself by interpleader proceedino-s in ' Hall o. Northwestern Endowment, etc., Assn., 47 Minn. 35; 49 N. V R 524. 2 Rollins V. McHatton, 16 Col. 203; 27 Pac. Rep. 254; but see to the contrary, Brown v. Mansus, 64 N. H. 39. 3 Dillingham v. N. Y. Cotton Exchange, 49 Fed. E. 719. * Gladding v. Gladding, 56 Hun, 639; 8 N. Y. Supp. 880. 784 CHANGE OF BENEFICIARY: ASSIGNMENT. § 310& a court of equity, asking, as a mere stakeholder, to pay the money into court and be discharged, leaving the adverse claimants to litigate between themselves for the fund so paid into court. Interpleader proceedings are not to be regarded as actions in rem, and therefore, to give the court jurisdiction, personal service must be had on each of the claimants, or any one not served must volun- tarily submit himself t(> the jurisdiction of the court. In holding that such proceedings are not actions in rerii the Supreme Court of Iowa has said:^ "If they were, the courts of a State may, by process of attachment against the property of a non-resident, or by the garnishment of a debt due to such person, appropriate the property, or debt, to the payment of the claim of the creditor, but in such case the judgment merely affects the property or thing seized. The action in chancery, relied upon in this case, was not in any sense a special proceeding in which it was sought to seize the property of a non-resident and apply it in payment of a debt; it was an attempt to adjudicate a mere personal right to a money demand claimed by the plaintiff herein." Conditions upon which a bill of interpleader may be filed have been stated as fol- lows: ^ " The same debt, fund, or thing must be claimed by hostile parties under adverse title derived from a common source. The interpleader must be a mere stakeholder, with no interest in the subject-matter ; must have incurred no liability to either of the claimants personally; and must stand exposed to the risk of being vexed by two or more suits for the fund or other subject-matter in dispute. It is not, of course, necessary that he shall be liable to two judgments, for he cannot be unless he has assumed incon- sistent obligations, and in that instance a bill of interpleader 1 Gary v. N. W. Masonic Aid Assn., 87 Iowa, 25; 50 N. W. K. 27; 53 N. W. E. 1086. 2 Supreme Council L, of H. v. Palmer (Mo. App.), 80 S. W. R. 699. 50 785 § 3105 CHANGE OF BENEFICIARY: ASSIGNMENT. will not lie. The essential purpose of the bill is to protect an indifferent holder of a fund or bailee of an article from the annoyance and expense of separate actions to recover what he is willing to pay. These views are taken from 3 Pomeroy, Eq. Jur.i and 2 Story, Eq. Jur." ^ In another case,^ it was said by the Court of Appeals of New York: " It was not necessary for the plaintiff to decide at his peril, either close questions of fact or nice questions of law, but it was sufficient if there was a reasonable doubt as to which claimant the debt belonged. When a person, without collusion, is subjected to a double demand to pay an acknowledged debt, it is the object of a bill of inter- pleader to relieve him of the risk of deciding who is en- titled to the money. If the doubt rests upon a question of fact that is at all serious, it is obvious that the debtor can- not safely decide it for himself, because it might be de- cided the other way upon an actual trial ; while if it rests upon a question of law, as was said in Dorn v. Fox,* ' so long as a principle is still under discussion it would seem fair to hold that there was sufficient doubt and hazard to justify the protection which is afforded by the benefi- cent action of interpleader.' ^Although the claim of Mr. Goodrich has since been held untenable by this court ^ it does not follow that no doubt existed when this action was commenced, because the Supreme Court, both at special and general terms, held it was valid, and attempted to enforce it. This conflict in the decisions of the courts shows that the adverse claims of the defendants involved a difficult and doubtful question, and is a conclusive answer 1 2 Ed., sec. 1319 e« seq. 2C. 20. 8 Crane v. McDonald, 118 N. Y. 648; 23 N. E. E. 991. See also Woodmen of the World v. Wood, 100 Mo. App. 655; 76 S. W. R. 377. * 61 N. Y. 264. 6 Goodrich v. McDonald, 112 N. Y. 157; 19 N. E. E. 649. 786 CHANGE OF BENEFICIARY: ASSIGNMENT. § 310J to -the coiitentiou of the appellant that the plaintiff did not need the aid of an action of this character. Was it possi- ble for him to safely decide a point so intricate as to cause those learned in the law to differ so widely? " It has also been said '.i " The remedy by interpleader is so beneficial, has been resorted to so commonly in cases of this sort, and the somewhat analogous, but not identical, jurisdiction under bills for instruction by trustees, has been carried so far in this commonwealth, that we are disposed to resolve any doubts in favor of plaintiff. ' ' ^ Under the well settled prin- ciples of equity jurisprudence if the bill is properly filed, and if the plaintiff has acted in good faith, he is en- titled to an allowance for his costs, out of the fund in controversy, which costs, as between the defendants, ultimately must be paid by the unsuccessful party.* Where a stakeholder pays money into court he cannot be held for subsequent accruing interest and costs.* In most, if not all, of the cases cited in the last three pre- ceding sections, the association had paid the money into court, which was called upon to dispose of the fund. When the association pays the money into court it waives the right to question the validity of the assignment.^ It follows that the court, having possession of the fund, will dispose 1 Supreme Commandery v. Merrick, 163 Mass. 374; 40N. E. R., 183. 2 See also Sullivan v. Kaights of Father Mathew, 73 Mo. App. 43 ; Funk V. Avery, 84 Mo. App. 490. 3 Pomeroy Eq. Jur., § 1328, and cases cited; Glaser v. Priest, 29 Mo. App. 1; 2 Daniel's Chan. PI. & Pr., § 1569. Also Franco-Am. Bldng. Assn. V. Joy, 56 Mo. App. 433; Woodmen of the World v. Wood, supra; and Supreme Council L. of H. v. Palmer, supra. As to other questions, arising in interpleader cases, see Supreme Council, etc. ». Green, 71 Mil. 263; 16 Atl. Rep. 1048; Britton v. Supreme Council, 46 N. J. E. 102; 18 Atl. R 676; Davidsons. Hough, 165 Mo. 561; 65 S. W. R. 731; and, as to notice, Feldman v. Grand Lodge, etc., 19 N. Y. Supp. 73. * Lambert v. Penn. Mut. L. Ins. Co., 50 La. Ann. 1027; 24 Sou. R. 16. 5 K. of H. V. Watson, 64 N. H. 517; 15 Atl. R. 126, and also cases cited in last section. 787 § 3106 CHANGE OF beneficiary: assignment. of it in accordance with the principles of equity, and the limitations imposed by the statutes of the forum. If the designation of beneficiary is an act testamentary in its nature it would seem that equity requires that the inten- tion of the member should be carried out if possible. ^ It has been held that the limitations in the constitution of a society limiting the beneficiary cannot aid theclaimant when the money is paid into court ;^ but opposed to this is the better reasoning of the Missouri Court of Appeals,^ where the coui-t held that when the society brings the fund into court, it does not thereby confess the right of either party to the money and it is the duty of the court to see that the money is paid out as directed and required by the rules and regulations of the society and to determine who is the proper person to receive it. In awarding the fund the court will often take into consideration the equities of the case with- out regarding the strict legal technicalities. As whiere a certificate was payable to the wife of the member and aftepr wards, on separation by divorce, the certificate was given to her as her property and for two years or more she paid all the assessments thereon. Thereafter, on making an affidavit that the certificate was not in his possession, the member changed the designation and obtained a new certificate pay- able to his sons by a former marriage. The money being paid into court it was held,* that the first beneficiary, the 1 Hoffman v. Grand Lodge, etc., 73 Mo. App. 47. s Johuson V. Supreme L. K. of H., 53 Ark. 255; 13 S. W. E. 794. Anil in support of this view are; Taylor v. Hair, 112 Fed. R. 913 ; Markey v. Supreme Council, etc., 70 App. Dlv. 4;74N.Y. Supp. 1069; Hallti. Allen, 75 Miss. 175; 22 Sou. E. 4; Teppem. Supreme Council, etc., 61 N J. Eq. 6:i8; 47 Atl. E. 460; reversing 46 Atl. E. Ill; Schoales v. Order, etc., 206 Pa. St 11; 55 Atl. E. 766. 3 Keener v. Grand Lodge A. O. U. W., 38 Mo. App. 543; Sofge ». Su- preme Lodge K. of H., 98 Tenn. 446; 39 S. W. E. 853; Hoeft v. Grand Lodge, etc., 113 Cal. 91; 45 Pac. E. 185; 33 L. E. A 174. * Leaf V. Leaf, 92 Ky. 166; 17 S. W. 354, also 854. See also Woodmen of the World v. Eutledge, 133 Cal. 640; 65 Pac. E. 1105. 788 CHANGE OF BBXEFICIAKY : ASSIGNMENT. § 310c divorced wife, should take the fund although, if the society had paid the money to the second beneficiary, such pay- ment would have been upheld. The court said: "The wife had intercepted the fund before it reached the children who are named as the beneficiaries and her equity is so great that no chancellor should withhold a judgment in her favor." Where the society wrongfully files an interpleader suit, on notification by a claimant not to pay to the as- signee of the original beneficiary, the right of the latter being clear, it will be adjudged liable for all costs. ^ § 310c. Effect of Illegral or Incomplete Ctaange of Beneficiary on First Designation. — The question occurs as to the effect on the rights of the beneficiaries first desig- nated by an attempted change of beneficiary which is incomplete, or where the change, being effected by compli- ance with the required formalities and the issuance of a new certificate, is illegal because the second beneficiaries are not entitled to take. While it seems to be taken for granted in the cases cited in the preceding sections that if the attempted change of beneficiary is not complete the rights of the first beneficiaries are not affected, because the revocation is not made complete by the issuance of the new certificate, it is now settled that if for any reason the change of beneficiaries is invalid the rights of the first beneficiary remain in force. ^ It has been held,* that a designation may be revoked without appointing a new beneficiary. Upon principle, where the designation of a new beneficiary is illegal, it would seem that the revocation should be held complete and that the benefit should be disposed of as in case of failure to desig- 1 In re Carrull's Policy, 29 L. R. Ir. 86. 2 Elsey V. Oddfellowi Mut. E. Assn., 142 Mass. 22t; 7 N. E. R. 844. Smiihu. Boston & Maine R. Assn., 168 Mass. 213; 46 N. E. R 626; Offi.I V. Supreme Lodgt^, etc. (Tenn ), 4(; S. W. R. 758. See also Delaney v. Delatiev, 175 111. 87; 51 N. E. R. 961; aff,'. 70 111. App. 130. 3 Cullen V. Supreme Tent K. O. T. N., 28 N. Y. Supp. 276. 789 §'310c CHANGE OF BENEFICIARY: ASSIGNMENT. nate.^ The Supreme Court of Wisconsin in a recent decision lays down a rule which we cannot believe is right. In that case,2 the holder of a certificate in a beneficiary society applied for a change of beneficiary, stating that the former certificate was thereby returned and surrendered for the purpose of the change, and that the new certificate should be made payable to such peBsons as he might name in his will. The new certificate was accordingly issued but no beneficiaries were ever designated by will or otherwise. In holding that no change of beneficiary took place, the court said: "In Mr. Grace's ' application for change of beneficiary,' made on that day, it is stated in effect, that the former certificate is thereby returned and surren- dered ' for the purpose of securing a change of beneficiary ; ' and that the association in consideration thereof, would issue and forward to him a new certificate, payable to such person or persons as he should designate and name in his last will and testament. The certificate was issued accordingly but no person was ever designated or named as such beneficiary by last will and testament or otherwise. The proposed change was never 'in fact effected by reason of such failure of Mr. Grace to so name or designate. Since the former certificate was so returned and surrendered for the sole purpose of securing such change, and since no such change was ever in fact, effected by reason of such failure, the question recurs whether such return and sur- render of such former certificate operated as a complete cancellation and extinguishment of the same, or whether such return and surrender remained inchoate, depending upon such change being made complete by such designa- tion or naming of new beneficiaries or beneficiary. Upon careful examination we are constrained to hold that such 1 See ante, §§ 24:3a and 2436, and also Carson v. Vicksburg Bank, 75 Mi-8. 167; 22 Sou. R. 1; 37 L. R. A. 559; Dolierty a. Ancient Order etc., 176 Mass. 285; 57 N. E. R. 463. 2 Grace v. Northwestern Mut. Relief. Assn., 87 Wis. 562; 58 N. W. K. 1041. 790 CHANGE OF BENEFICIARY: ASSIGNMENT. § 311- return and surrender so remained inchoate and dependent. It is very much the same in principle as where attempts have been made to alter portions of a will by erasures with- out obliteration and by way of substituting new words by interlineation, which fail to go into effect for want of re- attestation, and hence as there was no intent to revoke, except by way of such substitution which so failed, the courts have generally held that the attempted alteration is ineffectual.^ So here we must hold that the attempted change of beneficiaries was left incomplete and hence, in- effectual ; and that the contract of insurance must be re- garded the same as though the former certificate had never been returned and surrendered." It is hard to seehowthe conclusions arrived at by the court in this case can be sus- tained by reason or authority, unless we consider that the arbitrary powers of a court of equity were exercised and, on the assumption that the first beneficiaries were the most deserving and had a great moral claim to the consideration of the court, it awarded the fund to them on the same theory adopted by the Court of Appeals of Kentucky in a recent case.^ By the execution of the revocation and the surrender of the certificate the designation was revoked and the new certificate was made payable according to will. No will being made, a lapse of designation resulted, and a resulting trust followed for the benefit of those entitled to take in such case under the laws of the society, or if the laws made no provision for such cases, for the next of kin.* § 311. Change of Designation Governed by Same Rules in Respect to Beneficiary as Original Appointment. — If the charter of the society, or its by-laws, or the statutes of the State, limit the beneficiaries of members to certain classes of persons, so that at first the certificate can only 1 Will of Ladd, 60 Wis. 193, 194; 18 N. W. 734, and cases there cited. See also Short©. Smith, i Bast, 419: Soar v. Dolman, 3 Curt. Ecc. 121; Brooke v. Kent, 3 Moore P. C. 334; In re Parr, 6 Jur. (n. s.) r6. 2 Leaf V. Leaf, 92 Ky. 166; 17 S. W. 3S4, also 854. 3 See ante, § 243a. 791 § 311 CHANGE OP BENEFICIAEY:. ASSIGNMENT. be made payable to one of such classes, an assignment of the certificate cannot be made to one not of the prescribed classes, nor be changed so that one not of the class can become the beneficiary. If this could be done it would be possible to do indirectly what could not be done directly, and in that way the law of the State or society would be made of no effect. 1 If no restrictions »are placed upon the designa- tion of beneficiary the certificate may be changed at the will of the member and as often as he pleases and made payable to any one the member selects, unless, possibly, the law of insurable interest may be applied so as to exclude some.^ It has been held, however, that the law of insurable interest does not apply to beneficiary societies where the contract is made with the member himself,^ but this we apprehend must be taken with some modification, for if the transaction is one in which a speculator agrees in advance to pay the assessments the rule ought to apply as in the case of regular life policies. In a suit by the assignee of a benefit certificate the burden is on him to show that he is of the class named in the charter.* One having no insur- able interest to whom a certificate has been assigned cannot recover the assessments paid by him, the society havino- no 1 Knighxs of Horror v. Nairn, 60 Mich. 44; American Legion of Honor , V. Pirry, 140 IVIass. 580; Elsey v. Odd-fellows' Relief Assn., 142 Mass. 224; Daniels v. Pratt. 143 Mass. 216; Ky. Masonic Ins. Co v. Miller, 13 Bush, 489; Weisert v. Muehl, 81 Kv. 336; Basye v. Adams, 81 Ky. 368; National Mut. Aid Assn. v. Gonstr, 43 Ohii>St. 1; Stateo. Standard Life Assn., 38 Ohio St. 281; Folmer's Appeal, 87 Pa. St. 133; In re Phillips' Insurance, 23 Ch. D. 235; 61 L. J Ch. 441 ; 48L. T. 81; 31 W. E. fill, C. A. See also Maneeley v. Knights of Birmingham, 115 Pa. St. 305; Prire V. Supreme Lodge, etc., 68 Tex. 361; 4 S. W. R. 633; Schunfleld v. Turner, 75 Tex. 324; 12 S. W. E. 626; Lyon v Rolfe, 76 Mich. 146; 42 N. W. R. 1094; Kul v. NeNon, 24 Misc. 20; 53 N. Y. Snpp. 95. 2 Basye o. Adams, 81 Ky . 368 ; Sabin v. Grand Lodge, 6 N. Y. St. 151 ; Mtssey «. Mut. Rt-1. Aisn., 102 N. Y. 523; 34Huti, 254; Lamont ». Hotel Men's Mut. B. Assn., 30 F.d. R'p. 817; La nonti). Iowa Lesion of Honor 31 Fe.1. Rep. 177; Bio ■mington Mut. Ass-n. v. Blue, 120 111. 127. 3 IiigersoU V. Kuights of the Golden Rule, 47 Fed. R. 272; Sabin v Piiinney, 134 N. Y. 423; 31 N. E. R. 1087; affg. 8 N. Y. Supp. Igg; Masonic Mu\ Assn. v. Bunch, 109 Mo. £60; 19 S. W. R. 25. ■« Nye V Grand Lodge A. O. U. W., 9 Ind. App. 131; 36 N. E. R. 429 792 CHANGE OF BENEFICIARY: ASSIGNMENT. § 312 notice of that f act.^ If the statute has been amended after the issue of the certificate any change is governed, as to lim- itations as to beneficiaries, by the amended statute.^ § 312. Rights of Creditors in Benefit. — It follows that where the beneficiaries are limited to the " family, widows, orphans or other dependents" of the members, or indeed to any class as heirs, legatees or devisees, creditors are ex- cluded and they not only have no claims on the benefit but cannot obtain any. This is doubly the case where benefit societies are organized under statutes restricting the bene- ficiaries to certain classes. As was said by the Supreme Court of Massachusetts : ^ "If the fund were subject to tes- tamentary bequest, then, upon the decease of the member, it might go into the hands of his executor, or the adminis- trator of his estate and become assets thereof, liable to be swallowed up by the creditors. If there were no creditors, the member by his will could divert it from the three classes named in the statute. In either case, this would defeat the purpose for which the fund was raised and held and would be in direct conflict with the object of the statute for which the association was formed, and would set aside the con- tract entered into between the member and the corpora- tion;"* and the same court said in another case : ^ "A person whose only relation to the deceased member is that of a creditor is not a person dependent upon him within the meaning of these statutes ; and the promise to pay the plaintiff is void. Such a promise is beyond the powers of the association, and contravenes the intention of the statutes under which the association was organized. The plaintiff cannot, therefore, maintain an action on this promise, 1 Knights anil Lidies of Honor v. Burke (Tex.), 15 S. W. R. io; Nix V. Donovan, 18 N. Y. Sup . 435. 2 Gri-and LoJge, etc. V McKinstry, 67 Mo. App. 382. 3 American Legion of Honor v. Perry, 140 Mass. 580. * Daniels v. Pratt, 143 Mass. 216. See also National M. Aid Assn. v. Gonser, 43 Ohio St, 1. « Skillings v. Mass. Ben. Assn., 146 Mass. 217; 15 N. Eist. Rep. 566. 793 § 312 CHASTGE OF BENEFICIARY: ASSIGNMENT. either for his own use or that of any other person." The general rule may be therefore laid down that a beneficiary fund payable on the death of a member of an association to persons named by him, is not to be treated as a part of his estate, subject to his debts, and does not go to the administrator, but should be paid directly to the benefi- ciaries who take directly from such association. ^ It is now expressly provided by statute that the benefit to be paid by a fraternal beneficiary association shall not be liable for the debt, of either the member or beneficiary.^ And an agreement by which a person paying the assessments, in consideration of having a share in the benefit, is void.* A creditor, who has advanced money to pay the assessments of the member, who has had the certificate renewed in his name to secure a loan and payments made by him and has paid subsequent assessments, has the right on the death of the member to be repaid his loan and the assessments paid, the surplus going to the member's representatives.* In the absence of a contract payments of assessments for another are gratuitous and give the person paying no lien.^ Where there is no one in existence qualified to become a beneficiary of a member of a fraternal beneficiary associa- tion no equitable rights accrue, either to the creditors or the estate of the member.® It has been held that where ' Sup. Council Catholic Mut. Ben. Assn. v. Priest, 46 Mich. 429; Sup. Conocil Catholic M. Ben. As-'n. v. Firnane, 60 Mich. 82; Kuights of Honor v. Nairn, 60 Mich. 44; Felix v. Grand Lodge A. O. U. W., 31 Kan. 81; Briggs v. Earl 139 Miss. 473; Swift v. San Francisco Stock & Ex- change Board, 67 Cal. 567 ; Durian o. Central Verein, 7 Daly, 168 ; Rich- mond V. Johnson, 28 Minn. 447; Brown v. Catholic Mat. Ben. Assn., 33 Hun, 263; Worley o. Northwestern Mas. Aid Assn.,3McCrary, 53; 10 Fed. Rep. 227; Schmidt B. Grand Grove, 8 Mo. App. 601; Fenn». Lewis, 81 Mo. 259; 10 Mo. App. 478. 2 Revised Statutes of Mo. 1899, § 1418. s Spies V. Stikes, 112 Ala. 584; 20 Sou. R. 959. * Levy V. Taylor, 66 Tex. 652; Schonfleld v. Turner, 75 Tex. 324; 12 S. W. R. 626. 5 Leftwich v. Wells (Va.), 43 S. E. R. 364. » Warner v. Modern Woodmen QNeb.), 93 N. W. R. 397; 61 L. R. A. 603. 794 CHANGE OP beneficiary: ASSIGNMENT. § 312 the member and beneficiary join in an assignment the latter is estopped from denying its sufficiency.^ But the better rule is that no one who cannot directly become a benefi- ciary, because not within the statutory classes, can indirectly become a beneficiary.^ Hence a contract to pay to a trus- tee for a creditor is invalid.'' Where no limitations are placed upon the choice of beneficiary the member may have an unlimited range and then creditors may take,* and this by devise.* Life insurance is regarded by the courts in the nature of a provision for a man's family and they are reluctant to divert it from that destination. In most, if not all, of the States, statutes exist exempting policies of insurance upon the life of the husband or wife from the demands of creditors, and allowing every person to appropriate annually for the purpose of life insurance for the benefit of wife or children a sum not exceeding $500. Under a statute of this kind in Iowa, the Supreme Court of that State has held that even where the policy was payable to the assured, " his executors, administrators and assigns," that the wife took the entire fund free from the demands of creditors,^ and the fact of insolvency is immaterial.' In Illinois the Supreme Court has held^ thiit it is competent for the parties to contract so as to exclude creditors, and the same ^doctrine has been laid down in California.' In Texas, in a case where the policy was payable to the "heirs or assigns" of the deceased and had not been assigned by him, it was held^" that the 1 Conway v. Supreme Council, etc., 131 Cal. 437; 63 Pac. 727. 2 Gillam v. Dale (Kan), 76 Pac. R. 861. 3 Bloodgood u. Mass. Ben. Assn. 19 Misc. 460; 44 N. Y. Supp. 563. * Maneely u. Kuights of Birmingham, 115 Pa. St. 305; Bloomiiigt n Mut. Ben. Assn. v. Blue, 120 III. 127. « Stoelkeru. Tliornton, 88 Ala. 241; 6 South. R. 680; Martin v. Stub- biugs, 126 III. 387; 18 N. E. R. 657. s Rhode V. Banli, 52 la. 375. ' Masonic Mut. L. Assu. v. Paisley, 111 Fed. R. 32. s People, etc. v. Phelps, 78 111. 147. 9 Swift V. San Francisco Stock & Exch. Board, 67 Cal. 567. 1 Mullins V. Thompson, 51 Tex. 7. 71') § 312 CHANGE OF BENEFICIARY : ASSIGNMENT. proceeds did not form a part of the estate of the deceased so as to be liable to the debts of the deceased, but went directly to the heirs. It is only upon the clearest proof of fraud, if at all, can the premiums paid by an insolvent upon a life policy for the benefit of his wife and children be recovered by creditors'. And even then the recovery is limited to the amount of such^remiums, or the excess over the sum allowed by the statute to be expended for life in- surance for the debtor's family, where such statutes exist.' An assignment by the wife of a policj^ of insurance upon- her husband's life for her benefit will not be decreed at the suit of creditors, nor its avails be appropriated in advance by operation of law.^ These statutes do not affect the right of a solvent man to apply as much of his means as he likes to the payment of premiums upon policies of life insurance for his wife's benefit.^ As between creditors seeking to have a common fund appropriated to the pay- ment of their demands, he who files his bill first is entitled to priority.* 1 Pence a. Makepeace, 65 Ind. 3i5; Stone v. Knickerbocker L. Ins. Co., 52 Ala. 589 ; Stigler v. Stigler, 77 Va. 173; Levy v. Taylor, 66 Tex. 652 ; ^tna Nat. Bk. v. U. S. Life Ins. Co., 24 Fed. Eep. 770; Central National Bank!;. Hame, 3 Mackey, 360; Pullis v. Robinson, 73 Mo. 202; 5 Mo. App. 548; Conn. M. L. Ins. Co. ». Eyany 8 Mo. App. 535; Mut. L. Ins. Co. V. Sandfelder, 9 Mo. App. 285; Coleo. Marple, 98 111. 58; Filrath «." Schonfleld, 76 Ala. 199; Thompson v. CundifE, 11 Bush, 567. 2 Baron v. Brummer, 100 N. Y. 373. s Pullis V. Robinson, 73 Mo. 202. * Pullis V. Robinson, supra; George v. Williamson, 26 Mo. 190; U. S. Bank V. Burke, 4 Blackt. 141; Hills u. Sherwood, 48 Cal. 393. See also arate, § 294a, and post, § 399. 796 Date Due Library Bureu 1 Cat. No. 1137 KF 1175 B12 igO^^- Author Vol. Bacon, Frederick Hampden Title A treatise on the law of copy benefit societies and life . . .