Supreme Lodge, Knights of Honor v. Nairn

Benefit associations — Limited by law of incorporation, as to who may be beneficiaries — Certificate—How surrendered for cancellation and re-issue — “Homily relations” defined. 1. A benefit association, incorporated under the laws of a state, cannot abrogate or change the restrictions imposed by such laws as to who may be beneficiaries under certificates issued by such association, nor subject itself to any outside control which will override the laws of its organization as a corporate body. 2. Where a certificate, issued by such association, required every surrender thereof to be made by the member, in writing, and to be 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 re-issue, Held, that such certificate, so far as it goes, is the measure of the rights of all parties and that a conditional surrender of same by the holder, not to take effect until after his death, and not made in the presence of, and attested by such lodge reporter, is invalid. r 3. Where the statute, under which a benefit association is organized, prohibits the payment of benefits to any one not a member of the member’s family, or dependent on him, Held, that an army comrade and intimate friend of such member, who had lived at his house for several years, and had become physically disabled and dependent on others for support, did not fall fairly within the designation of “family relations,” hence was within the prohibition of the statute.

Appeal from St. Clair. (Stevens, J.) The defendant, Richardson, was the beneficiary named in the certificate issued by complainant to one Harry Travel*, deceased, who in his lifetime made an attempted transfer of the same, as stated in the opinion, to her co-defendant, Nairn, the validity of which the beneficiary, Richardson, denies. Complainant filed a bill of interpleader to settle these conflicting claims. The court below decreed that the defendant, Nairn, was entitled to the fund, less fifty dollars awarded to complainant for its expenses, and required him to execute a bond, conditioned for the faithful pro rata application by him of said money, in the manner directed by Travel*, [see opinion], after deducting his necessary costs and expenses. From this decree the complainant and the defendant Richardson, took separate appeals. The remaining facts are stated in the opinion. The laws, rules and regulations of the order were, by the agreement between Traver and his fellow members, made a fundamental part of the contract. Such by-laws and rules are a law unto the members of the order: Red Men v. Schmidt, 57 Md. 98 ; Knights Golden Rule v. Ainsworth, 71 Ala. 436; 17 C. L. J. 413; Natl. Mutual Aid Asso. v. Lupold, 101 Penn. St. 111; 12 Ins. L. Jour. 105 ; 15 Chi. Leg. News, 278 ; Toram v. Howard Benev. Asso. 4 Penn. St. 519 ; St. Patrick's Beneficial Soc. v. McVey, 92 Penn. St. 510; Ballou v. Gile, 50 Wis. 614; Highland v. Highland, 13 Bradw. (Ill.) 510; McMurry v. Sup. Lodge Knights of Honor, 18 Cent. L. J. 372 ; 20 Fed. Rep. 107; Karcher v. Sup. Lodge Knights of Honor, 19 C. L. J. 152; 137 Mass. 368 ; Sup. Lodge P. K. v. Grace et al. 60 Tex. 569 ; Harrington v. The Workingmen's Benev. Asso. 70 Ga. 340; Bown v. Mut. Catholic Ben. Asso. 33 Hun, 263; and determine their rights and may be enforced by the parties or beneficiaries, according to their respective rights as therein provided : Arthur v. Odd Fellows Ben. Asso. 29 Ohio St. 560; May on Ins. sec. 552 ; Bliss on Life Ins. sec. 463. A change in the beneficiary can only be made in the prescribed form and where the privilege is granted, submodo, it must be so exercised : Vollman's Appeal, 92 Penn. St. 50 (1879); National Mutual Aid Asso. v. Lupoid, 101 Penn. St. 111 (1882); Hellenberg v. I. O. B. B., 94 N. Y. 580 (1884); Greeno v. Greeno, 23 Hun, 478 (1881); Splawn v. Chew, 60 Tex. 532 (1883); Harman v. Lewis, 24 Fed. Rep. 97-530. The right of a member in respect to the benefit fund is merely a power of appointment of the beneficiary : Order of Red Men v. Clendinen, 44 Md. 429 ; Arthur v. Odd Fellows Benef. Asso. 29 Ohio St. 557; Splawn v. Chew, 60 Tex. 532; Duvall v. Goodson, 79 Ky. 224; Greeno v. Greeno, 23 Hun, 478; Hellenberg v. I. O. B. B. 94 N. Y. 580; Highland v. Highland, 13 Bradw. 510 ; 16 Chi. Leg. News, 184, 240; Eastman v. Provident Mutual Relief Asso. (N. H.) 20 C. L. J. 266; 14 Ins. L. J. 858; Richmond v. Johnson, 28 Minn. 447; Expressmen's Aid Society v. Lewis, 9 Mo. Ap. 412; Fenn v. Lewis, 10 Mo. Ap. 478; Maloney v. O'Sullivan, (Ill.) 16 Chi. Leg. News, 181; Catholic Mut. Ben. Asso. v. Priest, 46 Mich. 429 ; and such power must be exercised strictly in the prescribed form : 1 Sugden on Powers, §§ 247, 255-6, 274, 285. The rule applies also to cases where an appointment is revocable and the power of revocation must be exercised in the prescribed form : Id. p. 366 [2 Am. Ed.] and equity will not aid in cases of defects which are of the essence or substance of the power: 1 Story Eq. Jur. §§ 97, 173-4-5. Where the mode prescribed by the by-laws is, “thelast will and testament,” it must be by a will specifically referring to the power and purporting to execute it: Greeno v. Greeno, 23 Hun, 478 ; Red Men v. Clendinen, 44 Md. 429 ; Arthur v. Odd Fellows' Benef. Asso. 29 Ohio St. 557; Duvall v. Goodson, 79 Ky. 224; Highland v. Highland, 109 Ill. 375. The member has no estate in the fund, hence cannot make it the subject of an assignment in praesenti, and such a benefit is no part of the personal estate of a member: Catholic Mutual Ben. Association v. Priest, 46 Mich. 429 ; Id. v. Firnane, 50 Mich. 82; Felix v. A. O. U. W. 31 Kan. 81; McClure v. Johnson, 56 Iowa, 620 ; Duvall v. Goodson, 79 Ky. 224; Arthur v. Odd Fellows' Ben. Asso. 29 Ohio St. 561; Bown v. Catholic Mut. Ben. Asso. 33 Hun, 263. Hence, an attempted assignment of the fund, by the member, is void : Basye v. Adams, 81 Ky. 368, and even where the rules of the society allow an assignment of the certificate, its legality has been doubted: Harman v. Lewis, 24 Fed. Pep. 97, 530. Attempts to dispose of the benefit fund by will, as personal estate, are disregarded by the courts : McClure v. Johnson, 56 Iowa, 620 ; Stephenson v. Stephenson, 64 Iowa, 534 ; Weiserf, v. Muehl, 81 Ky. 336; Bown v. Catholic Mutual Ben. Asso. 33 Hun, 263. Naim could not be made a beneficiary; he belonged to an excluded class. He was not “a member of Traver’s family, or a person dependent on him.” The limitations imposed by the charter and established by the by-laws will be enforced by the courts: Kentucky Masonic Ins. Co. v. Miller's Admins. 13 Bush, 489 ; Van Bibber v. Van Bibber, (Ky.) 14 Ins. L. J. 290; Weisert v. Muehl, 81 Ky. 336; State v. Central Ohio Mutual Relief Asso. 29 Ohio St. 399 ; State v. People's Mut. Benefit Asso. 42 Ohio St. 579 ; Mutual Ben. Asso. v. Hoyt, 46 Mich. 473 ; Masonic Asso. v. McAuley, 2 Mackey, 70; McClure v. Johnson, 56 Iowa, 620; Greeno v. Greeno, 23 Hun, 478. There was no delivery of this certificate to Nairn nor anything equivalent to a delivery. He found it among Traver’s papers after the funeral. But if there had been, this was not sufficient to make Nairn a beneficiary. Such certificate is not even a mutual life insurance policy. The K. of H. is a secret organization having among its other objects this special fund for a special purpose. The power of a member over the beneficiary fund is a limited power of appointment and not an estate in himself. Such power must be exercised according to the laws of the association, and when they permit a change of beneficiaries it must be made in the manner therein provided : Natl. Mut. Aid, Soc. v. Lupold, 101 Penn. St. 111; Vollman's Appeal, 92 Penn. St. 50. (Charter, rules and certificate almost the same as those of Knights of Honor ; same provision as to changing beneficiary.) Eastman v. Prov. Mut. Ben. Relief Ass'n, 14 Ins. L. J. 858; 20 Cent. L. J. 266 ; Stephenson v. Stephenson, 21 N. W. R. 19 ; Carman v. Lewis, 24 Fed. Rep. 97, 530. The charter, laws and benefit certificate of the association, constitute the •contract between the association and a member; and the member is presumed to know the laws of the association : Wildey v. Farmer's Mut. Fire Ins. Co. 52 Mich. 446; Am. Ins. Co. v. Stoy, 41 Mich. 385, 395; Hellenberg v. I. O. of B. B. 94 N. Y. 580, 584; Sup. Com'y Knights of Golden Rule v. Ainsworth, 71 Ala. 436, 443-4; Bauer v. Samson Lodge K. of P. 1 N. E. Rep. 571; Sus. Ins. Co. v. Perrine, 7 W. & S. (Penn.) 348; Mitchell v. Lyconning Mut. Ins. Co. 51 Penn. St. 402, 411; Eastman v. Provident Mut. Relief Ass'n, (N. H.) 14 Ins. L. Jour. 858 ; Mut. Fire Ins. Co. v. Miller Lodge, 58 Md. 463, 471; Karcher v. Sup. Lodge Knights of Honor, 137 Mass. 368; Dolan v. Court Good Samaritan, 128 Mass. 437; Treadway v. Hamilton Mut. Ins. Co. 29 Conn. 68; Simeral v. Dubuque Mut. F. Ins. Co. 18 Ia. 319, 322; Coles v. Ia. St. Mut. Ins. Co. Id. 425, 431; Coleman v. Sup. Lodge Knights of Honor, 14 Ins. L. Jour. 635, 639; Robinson v. Ir. Am. Ben. Soc'y, 14 Ins. L. Jour. 790; Harman v. Lewis, 24 Fed. Rep. 97, 530. The money due from such an association, at a member’s death, is not assets of the deceased member’s estate : Cath. Mut. Ben. Asso. v. Firnane, 50 Mich. 82; Vollman's Appeal, 92 Penn. St. 50 ; Ballou v. Gile, 50 Wis. 614; Fenn v. Lewis, 10 Mo. App. 478 ; Felix v. Ancient Order U. W., 31 Kan. 81; and a member cannot direct that his debts be paid from the beneficiary fund, nor can lie dispose of it by will: McClure v. Johnson, 56 Ia. 620 ; Bown v. Cath. Mut. Ben. Asso. 33 Hun, 263; Wilmaser Exrs. v. Cont. Ins. Co. 23 N. W. R. 903. The rules of some of these associations provide that beneficiaries may be appointed by will: Cath. Mut. Ben. Asso. v. Firnane, 50 Mich. 82 ; but, even then, the will must be specific; the fund does not pass as a part of the estate by the residuary clause: Md. Mut. Ben. Society v. Clendinen, 44 Md. 429 ; Greeno v. Greeno, 23 Hun, 478, 482. The payment of the assessments, if made by Nairn, did not entitle him to the fund : Meier v. Meier, 15 Mo. App. 68, National Mut. Aid Soc. v. Lupold, 101 Penn. St. 111. It is contended that, as Nairn was not a relative of Traver, he could not be made a beneficiary of the fund, and reliance is placed upon a section of the laws of the order, claimed to coniine payments to relatives or dependents. This provision does not apply, because adopted after the issue of Traver’s certificate. At the time of such issue, payment was to be-made to his family, “ or as he may direct,” and under this language Nairn could be made.a beneficiary : Highland v. Highland, 109 Ill. 366; and Traver could not be deprived of the right of so naming him : Becker v. Farmer's Ins. Co. 48 Mich. 610. But Nairn and Traver were members of the same family within the meaning of that term: Carmichael v. Northwestern Mutual Ben. Asso. 51 Mich. 494. They lived together and treated each other as brothers, each contributing to the common fund for years, and each was a “ dependent ” within the meaning of the danse. Assuming that Nairn might properly be named as beneficiary, was this-fund subject to control by assured, in his lifetime, and could he change the original beneficiary at will without her consent ? If so, must each change be in strict literal accord with the rules of the order, or is substantial compliance sufficient ? The authorities are in conflict upon the first question, but the sounder doctrine is, that the beneficiary has an inchoate interest in the policy, but that his ultimate enjoyment of its proceeds depends on the will of the assured. That a person who insures his life for the benefit of another, who pays the premiums and keeps possession of the policy, may change the beneficiary at will; that the policy is a chose in action, which the assured has expressed an intention to give to the beneficiary named, which intention he may recall, at will, at any time before his death, on the happening of which the gift becomes complete, and not before: Clark v. Durand, 12 Wis. 223; Kerman v. Howard, 23 Wis. 108 ; Foster v. Gile, 7 N. W. Rep. 267 (555, bottom paging). To the same effect are Gambs v. Covenant Mut., 50 Mo. 44; Swift v. R. P., etc., Asso., 96 Ill. 309 ; Laudrum v. Knowles, 22 N. J. Eq. 594; U. M. L. I. Co. v. Stevens, 19 Fed. Rep. 671; Garner v. Germania L. I. Co.. 32 Alb. L. J. 91; Splawn v. Clew, (Tex. Sup. Ct.) 18 Am. Law Rev. 737-8 ; Valley Mut. Ins. Co. v. Burke, (Virginia) S. C. 12 Ins. L. J. 337 ; Richardson v. Kentucky Granger's Ben. Soc., 1 Ky. L. Rep. & J. 735 ; Bickerton v. Jacques, 28 Hun 119. Did Traver dispose of the fund? The contract relation existing between complainant and Traver, is to be gathered from the certificate and the complainant’s rules, in existence when he became a member, or accepted this certificate. The naming of a beneficiary in Traver’s application is, by the law of the order, “ subject to such future disposal of the benefit as the member may thereafter direct, in accordance with the laws of the order.” There-is no rule or law of complainant denying the right of dealing with this fund, on the part of the assured, in any way recognized as valid by the law of the land. The rules provide a method for procuring a new certificate, but the language as to the disposition of the fund is in no way restrictive. In Cath. Mut. Ben. Asso. v. Priest, 46 Mich. 429, the rule of the society was, that the fund was to be paid “to the person or persons as named by the deceased and entered by him on the will-book,” yet this Court recognized the right of the assured to dispose of the fund by will in ordinary form, and it seems to us that that case rules this one. In determining who is entitled to receive the benefit of the provisions made by a society of this kind, the court should construe its rules and regulations liberally, to effect the benevolent purposes of the order, and not so as to defeat such purposes, unless the meaning of such rules and regulations is so clear and certain as to admit of no other reasonable construction : Ballou v. Gile, 7 N. W. R. 563.