Timberlake v. Supreme Commandery ( 1911 )

Sheldon, J.

The plaintiffs were not parties or privies to the action brought by Knapp and others against the defendant in Tennessee, and are in no way bound by the decision made therein. Rothrock v. Dwelling-House Ins. Co. 161 Mass. 423. Pennoyer v. Neff, 95 U. S. 714. We need not consider whether, if the Supreme Order of the Home Circle (hereinafter called simply the Home Circle) had become subject to the jurisdiction of the Tennessee courts either by having been properly served upon or by having voluntarily entered its appearance in the case, it could be held that Mrs. Timberlake, under whom the plaintiffs claim, was sufficiently represented by that corporation, of which she had been a member. This would require some extension of the doctrine declared in such cases as Francis v. Hazlett, 192 Mass. 137, and Howarth v. Lombard, 175 Mass. 570, in which it was held that under the circumstances there stated the domestic stockholders of an insolvent foreign corporation were bound by the action of the foreign courts in suits to which the corporation was a party. Here the Home Circle, though named as a party defendant in the Tennessee suit, never was served personally with process and did not appear, so that its rights were in no way affected by the decision rendered. Of course it could not be, as it has not been, contended that the subsequent intervention of its receiver in the matter of the accounting had the effect of a previous appearance by the Home Circle itself.

But the decision rendered in Tennessee and affirmed in the highest court of that State is fully set out in the agreed facts upon which the case at bar was heard. That statement of facts agreed was not a case stated, strictly so called, but it was stipulated that the court might draw all proper inferences from the facts agreed. This decision was the only evidence before the court as to the law of Tennessee (R. L. c. 175, § 76), and no other inference could be drawn from it than that by the law of Tennessee the defendant had not the power to unite or consolidate with the Home Circle, and that, as to the defendant at any rate, the attempted consolidation was ultra vires and void. But this consideration is not necessarily fatal to the maintenance of the present action.

The agreed facts, as we have seen, constituted merely the evidence upon which the case was tried. Cunningham v. Connecticut Fire Ins. Co. 200 Mass. 333, 335, and cases cited. Accordingly the question before us is whether, upon those facts and any inferences which the judge at the trial was warranted in drawing therefrom, his finding for the plaintiff can be sustained. Vahey v. Bigelow, ante, 89.

There is . no dispute that the defendant attempted to assume the contract of insurance which had existed between Mrs. Timberlake and the Home Circle. She became a member of a commandery which was organized as one of the defendant’s subordinate commanderies or lodges. She was allowed and enjoyed all the privileges of membership in the defendant’s organization, and was subjected to and bore all the burdens incident thereto. Her right to have a death benefit paid to her beneficiaries as stipulated in her certificate from the Home Circle was recognized by the defendant. Assessments were paid by her to the proper officers of her commandery, and were received from them by the defendant. It properly could be inferred, if indeed any other inference was possible, that these assessments were levied upon her by the defendant itself.» This continued for nearly two years, during which time her payments, so made to and received by the defendant, amounted to a considerable sum, mainly if not wholly paid for the very insurance or death benefit which is now sought to be recovered. How the defendant kept these payments and what application it made of them does not appear to have been known to her, nor is she chargeable with any loches or neglect for having failed to inquire. The facts that have been stated must be construed with reference to the relative positions of the parties. What were these positions ?

She had been a member of a fraternal beneficiary associa tian incorporated under R. L. c. 119, and held a certificate therefrom by which it was promised that upon her death there should be paid to her beneficiaries, the present plaintiffs, a certain sum of money, provided among other things that she should duly pay such assessments as should be properly levied upon her. The defendant was a Tennessee corporation, organized for purposes substantially similar to those of the corporation of which she was a member, one of whose principal objects was to make contracts of fraternal insurance with its members. In sub- ■ stance, by its negotiations and final attempted agreement with the Home Circle, and by the notices which it could be found came to her with the consent and by the authority of the defendant, the defendant invited her to join its membership, to pay to it the assessments which it should thereafter levy for her insurance, and to comply as one of its members with its proper and lawful requirements ; and in consideration thereof it promised to pay the amount named in her certificate to her beneficiaries, subject to the contingencies therein stipulated for. If the judge found, as manifestly he could find, that these facts were established, this was none the less an offer to her individually that it was made also to many other persons in the same situation as herself. It could be found that she accepted this offer by joining the defendant’s commandery and paying regularly and promptly to the defendant through subordinate officers the requisite assessments in accordance with its table of rates. It is evident that upon these facts the judge could find that the contract relied upon by the plaintiffs was made between the defendant and Mrs. Timberlake.

But it is contended that this contract was beyond the power of the defendant to make, and so that this action thereon cannot be maintained.

It is said that Mrs. Timberlake could not have become a member of the defendant’s organization, and so that no valid contract of insurance could have been made between her and the defendant, because the formal prerequisites to her admission as a member and to the making of a contract of insurance were not complied with. Most of these requirements are stated in the defendant’s Law XI. She made no application for membership. No ballot was taken upon the question of her admission. She paid no admission fee, and did not present a recommendation from two members of the order. She underwent no medical examination, and her application was not approved by the defendant’s supreme medical director.

It is to be observed that the question is not whether the attempted consolidation of the defendant and the Home Circle was void. That may be assumed. Knapp v. Golden Cross, 121 Tenn. 212. New Orleans, Jackson, & Great Northern Railroad v. Harris, 27 Miss. 517. Bankers' Union v. Crawford, 67 Kans. 449. Whaley v. Bankers' Union, 39 Tex. App. 385. Pearce v. Madison & Indianapolis Railroad, 21 How. 441. The present question is whether the corporation itself, having made such a contract as this, knowing it to have been made without compliance with the provisions of its own regulations, and having received the full consideration for which it stipulated, can after-wards avoid its contract as ultra vires by reason of such noncompliance.

The general rule governing such cases was stated in Davis v. Old Colony Railroad, 131 Mass. 258: “ A corporation has power to do such business only as it is authorized by its act of incorporation to do, and no other. It is not held out by the government, nor by the stockholders, as authorized to make contracts which are beyond the purposes and scope of its charter. ... If it makes a contract manifestly beyond the powers conferred by its charter, and therefore unlawful, a court of chancery, on the application of a stockholder, will restrain the corporation from carrying out the contract; and a court of common law will sustain no action on the contract against the corporation. . . . There is a clear distinction, as was pointed out by Mr. Justice Campbell in Zabriskie v. Cleveland, Columbus, & Cincinnati Railroad, 23 How. 381, 398, by Mr. Justice Hoar in Monument National Bank v. Globe Works, 101 Mass. 57, 58, and by Lord Chancellor Cairns and Lord Hatherley in Ashbury Railway Carriage & Iron Co. v. Riche, L. R. 7 H. L. 653, 668, 684, between the exercise of a power not conferred upon it, varying from the objects of its creation as declared in the law of its organization, of which all persons dealing with it are bound to take notice; and the abuse of a general power, or the failure to comply with prescribed formalities or regulations, in a particular instance, when such abuse or failure is not known to the other contracting party.” The first of these propositions is relied upon by the defendant. Its correctness is not doubted. It is amply supported by adjudged cases. There is no occasion to cite more than a few of these. Attorney General v. New York, New Haven, & Hartford Railroad, 197 Mass. 194, 197. Stevens v. Rutland Burlington Railroad, 29 Vt. 545. Dartmouth College v. Woodward, 4 Wheat. 518, 636. Bank of Augusta v. Earle, 13 Pet. 519. Central Transportation Co. v. Pullman's Palace Car Co. 139 U. S. 24. But the second proposition, the rightful limitation of the application of the general principle, is no less firmly established both in sound reason and authority. Slater Woollen Co. v. Lamb, 143 Mass. 420. Nims v. Mount Hermon Boys' School, 160 Mass. 177, 179. New York Bank Note Co. v. Kidder Press Manuf. Co. 192 Mass. 391, 404. J. G. Brill Co. v. Norton & Taunton Street Railway, 189 Mass. 431, 437. Bissell v. Michigan Southern & Northern Indiana Railroad, 22 N. Y. 258, 289. East St. Louis v. East St. Louis Gas Light & Coke Co. 98 Ill. 415. Bradley v. Ballard, 55 Ill. 413. State Board of Agriculture v. Citizens Street Railway, 47 Ind. 407, cited and followed in Hitchcock v. Galveston, 96 U. S. 341. Citizens State Bank v. Hawkins, 71 Fed. Rep. 369.

The principle last stated is decisive here. The contract with Mrs. Timberlake was not beyond the general scope of the authority given to the defendant by its charter and the law of its organization. It was a contract of the very kind which the defendant was created for the purpose of making. There was simply a failure to comply with certain regulations of its own framing, never communicated to her. No statute of Tennessee or judicial decision made in that State forbidding such a contract was in evidence; and no such statute or decision has been called to our attention. Under these circumstances the defendant has not the right to take the benefits of the contract by receiving Mrs. Timberlake’s money as assessments upon a valid contract of insurance, and then to avoid the contract by reason of its failure to enforce its own private regulations unknown to her.

If it were necessary to consider that question, there is authority for saying that whatever might be the limits of the power of any one or more of its officers (Burbank v. Boston Police Belief Association, 144 Mass. 434; McCoy v. Boman Catholic Mutual Ins. Co. 152 Mass. 272; Kocher v. Catholic Benevolent Legion, 36 Vroom, 649), the corporation itself could waive the compliance by an intended member with any of its requirements not prescribed by its charter or the law of the State, for his admission to membership and the conclusion of a binding contract of insurance. Watts v. Equitable Mutual Life Association, 111 Iowa, 90. Morrison v. Odd Fellows Mutual Life Ins. Co. 59 Wis. 162. Wiberg v. Minnesota Scandinavian Belief Association, 73 Minn. 297.

The defendant did not mingle the money received from Mrs. Timberlake and other former members of the Home Circle with its other funds, but used them solely for the payment of death benefits upon certificates formerly issued by the Home Circle. As already intimated, we do not regard this circumstance as material. She neither knew nor was bound to know anything of what the defendant did with her money. It applied that money as it chose, or as it found itself compelled by the court of Tennessee to do. But her rights were affected neither by the defendant’s voluntary action nor by the orders of the Tennessee court made in a suit to which she was neither party nor privy and of which so far as appears she had no knowledge.

Some decisions have been made in the courts of other States under circumstances somewhat similar to those now before us. The defense here set up prevailed, as according to our reasoning it should have prevailed, in cases in which it was not shown that an intended member had paid any money to the defendant under the new contract of insurance, or that he had in any other respect changed his position in reliance upon that contract to the gain of the defendant or to his own detriment. Bankers’ Union v. Crawford, 67 Kans. 449. Twiss v. Guaranty Life Association, 87 Iowa, 788. Whaley v. Bankers’ Union, 39 Tex. App. 385. Where, however, as in the case at bar, it appeared that assessments or premiums had been regularly paid under the new contract, we have found no case in which this defense has been sustained. See the elaborate opinion in Cathcart v. Equitable Mutual Life Association, 111 Iowa, 471. The same fundamental principle was involved, though under different circumstances, in Bloomington Mutual Benefit Association v. Blue, 120 Ill. 121, 128, and Wuerfler v. Grand Grove of Wisconsin of the Order of Druids, 116 Wis. 19.

These plaintiffs may sue in their own names upon the defendant’s contract with Mrs. Timberlake, of which they were expressly made the beneficiaries. Dean v. American Legion of Honor, 156 Mass. 435.

No question is raised before us as to the amount which the plaintiffs are entitled to receive.

The judgment for the plaintiffs must be affirmed.

So ordered.