State ex rel. Auditor v. Iowa Mutual Aid Ass'n

X. Life Insurance: mutual aid association: how far subject to statutory control. A mutual aid association, organized under section 1160 of Code, for the insurance of its own members from loss by-death, sickness or accident (and the defendant is held to be such an association), need not comply with the provisions and requirements of chapter 5, title 9, of the Codé, relating to life insurance eompanines properly so called. In order to give force and effect to section 1160, the word “ every ” in section 1161 must be limited to the stock and mutual companies referred to in the sections which follow. 2. -:-: liability for annual report. The defendant association was not organized until April, 1881, and was not required to • make an annual statement until January 1, 1882; held that an action begun in August, 1881, to wind up the business of the defendant, could not be sustained, on the ground that it had failed to comply with the law in regard to making an annual report.

Appeal from Wapello District Court. On tbe 17 th day of August, 1881, tbe plaintiff ex rel. W. Y. Lucas, auditor of State, filed a petition in tbe Wapello. Circuit Court in substance alleging: That tbe Iowa Mutual Aid Association claims to be a corporation organized and existing for tbe purpose of affording financial aid and benefit to' tbe families of deceased members, and assistance to members personally, in case of sickness or disability, with its principal place of business at tbe city of Ottumwa, Wapello county, Iowa; that on the 4th day of April, 1881, W. B. Bonifield, George W. Tool, J. E. Fence, George-Haw, J. Willamson and Messrs. Moore & Hammond, signed and acknowledged before a notary public of said county a certain certificate, which said persons called “ Articles of Incorporation of the Iowa Mutual Aid Association of Ottumwa, Iowa;” that said certificate so signed and acknowledged was filed with the recorder of Wapello county, Iowa, .April 7, 1881, and recorded, but has not been elsewhere filed with any officer of the State of Iowa; that said association adopted by-laws; that the defendant is an association composed of the persons aforesaid as officers, and E. H. Stiles, Frank Durgan, A. P. Peterson, W. E. Chambers, R. A. Wilson, M. DeCaskey, S. M. Robinson and Christopher How as directors, and exists only under section 1091 of the Code of 1873, which provides only for the organization of incorporations other than for pecuniary profit, and only for the purpose set forth in said section; that the defendant has at no time had any capital stock subscribed, in the sum of $100,000, or any other sum; nor has it at any time had- $2.5,000, or any other sum of stock paid up; or any sum in any way invested in stock, bonds or mortgages of any kind; that it has deposited with the Auditor of the State no securities at anytime; that before issuing policies the said defendant did not have, and has not now, and at no time has had, applications on two hundred and fifty lives for an average of one thousand dollars each, but wholly disregarding- section 1163 of the Code of 1873, immediately upon filing said certificate with said recorder, commenced to issue policies or certificates of membership, without any observance of section 1163 of the Code; that defendant is now, and at all times since its organization has been, acting entirely independent of any of the laws, regulations and provisions of chapter 5, title 9 of the Code of 1873; that said company, its officers and servants refuse to recognize the Auditor of the State as having any control or supervision over it, or any of its business or interests; that said company and its officers fail and refuse to make any reports to said auditor of its business and management; that neither it nor any of its officers or agents has any certificate of any kind from the Auditor of State, and that in each and every particular it has failed and refused to comply with any of the provisions of said chapter 5, title 9 of the Code. That some of the officers of defendant receive large salaries for their time and services; that the defendant has issued a large number of polices of insurance, by it called certificates of membership, on the lives of the people of the State; that said contracts of life insurance were not given by said persons organizing defendant, only, but by said persons together with a large number of other persons in no way associated together by business or other ties, and entire strangers to said association, who, since said organization, have-been induced to enter into said contracts; and defendant threatens to continue to issue said certificates to all persons of the State, both male and female, the only conditions being that applicant pass an examination as to soundness of health, of mind and body, and pay the required fees and dues; that defendant insists upon the right to so continue business, and will do so unless restrained; that the auditor of- State examined into the condition of defendant, and, finding it unsatisfactory by reason of absence of funds, securities, etc., he requested defendant to comply with the insurance laws of Iowa, as set forth in said chapter 5, title 9 of the Code, and that defendant fails and refuses to comply with said request. The plaintiff prays for an injunction restraining the defendant from doing an insurance business, and that the affairs and business of the defendant be wound up. The petition sets out the articles of incorporation of the defendant, its by-laws, application for membership and certificate of membership. From the articles of incorporation it appears that the defendant is organized under the provisions of title 9, chapter 2 of the Code. Article four says: The object of this association is one oí charity, benevolence and mutual aid among its members, and is intended to render assistance to its members, their families and their friends, by the collection and disbursement of fees and assessments, less the cost of maintaining the association. Article two, section 1, of the by-laws says: The business and objects of this association shall be to afford financial aid and benefit to the families and beneficiaries of deceased members, and assistance to the members personally in case of sickness or disability. Article four, provides for the election of a board of directors and the appointment of a general agent. Article six provides: The expense of procuring business must be met from the admission fees and annual dues. Any portion of such fees and dues not used in procuring business may be placed to the credit of the surplus fund. Article seven provides that applications for membership shall be upon-printed blanks, accompanied by a fee of $10, for certificate of membership, and $5 additional as annual dues. It also provides for a local medical examination for which a fee of one dollar is to be paid by the associatian out of the admission fee, if the application is accepted; but if the application is rejected at the home office, the applicant is to pay for the local medical examination. Article eight provides that the members may be divided into two or more divisions, limited to $2,000 benefit in case of death, and $6 weekly benefits in case of total disability from sickness or accident, for a term not exceding twelve weeks in any one year. It also provides that each division shall be divded into five classes, according to age. Article nine provides that upon proof of the death of a member the directors shall pay to his heirs or legal representatives the net result of an assessment, not to exceed $2,000 in any one division. Article ten provides that upon receipt of proofs of death of a member, each member of the division to which the deceased member belonged shall be assessed and shall pay to the secretary of the association a sum according to the class of which he is a member at the time, as follows: Members of the first class $ .75; of.the second class $1.00; of the third class $1.50; of the fourth class $2.00, of the fifth class $3.00. Article eleven provides for the payment of weekly benefits to members, for a term not exceeding twelve weeks in one year, upon proper certificate of their total disability from sickness or accident. Article twelve provides that when necessary the directors shall cause an assessment to be made to provide for the payment of weekly benefits in the same manner and sums as for death benefits. Article fifteen provides as follows: “A permanent fund may be raised in the following manner: First, from admission fees and annual dues. Second, from that portion of assessments not used for the payment of benefits, which sum shall be securely invested by the board of directors, and shall be for the following purposes: To pay benefits without an assessment, in which case the secretary shall notify all members ; for printing, and all the necessary expense of management.” Article nineteen provides that upon proof of the death of a member, notice shall be mailed to each member of the assessment due, and a failure of a member to pay within thirty days after such notice, forfeits his policy. The application for membership is. substantially the same as is used by stock life insurance companies. The certificate of membership is similar to an ordinary life insurance policy. The defendant demurred to the petition upon the following grounds: 1. Because the allegations of the petition show that defendant was duly and legally incorporated under and by virtue of the provisions of the Code of 1873, particularly under section 1091, and other sections in regard to corporations other than pecuniary profit. 2. Because the allegations of the petition show that defendant is a mutual aid association, duly organized under the laws of Iowa, and that the so-called contracts of insurance in the plaintiff’s petition mentioned, are the mutual obligations of the members of the association for the mutual benefit of such member. 3. Because the allegations of the petition' show that defendant is not suck an insurance company as is contemplated by sections 1161, 1162 and 1163 of the Code of 1873, and that the provisions of chapter 5, of title 9, of the Code of 1873, do not apply to defendant.” The court sustained this demurrer. The plaintiff appeals.