Langan v. Supreme Council American Legion of Honor , 174 N.Y. 266 ( 1903 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] It is assumed by the plaintiff that there had been such a breach of the defendant's contract of insurance, as to entitle him to bring an action for the recovery of damages therefor. That assumption, however, is incorrect. The obligation of the defendant under its contract, as evidenced by the benefit certificate, was to pay to the wife of the holder a sum not exceeding $5,000, upon the event of his death. Until that event occurred, that contract continued; unless, and until, it was avoided by some act of the plaintiff. The action of the defendant, in the attempted amendment of the by-law, which was in force when the plaintiff joined the association and received his certificate, was wholly ineffectual to deprive him of any rights which had become vested. It was beyond the power of the defendant to affect the obligation expressed in the certificate, without the consent of its holder. (Weber v. Supreme Tent of K. of M., 172 N.Y. 490.) If, therefore, the amendment was void and inoperative, the contract of insurance remained unaltered and unimpaired. Its enactment constituted no breach of the contract. Upon its promulgation, however, the plaintiff had two courses open to him. He could notify the defendant that he refused to assent to its action and could tender to it the assessments upon the basis of an insurance of $5,000. He did so and notified it that he would keep the tender of payment of all assessments, legally called in the future, good. In that situation, he might remain quiescent and the contract of insurance would mature upon his death in favor of his wife, the beneficiary named. The contract, in that case, with the insured performing all the conditions required of him during his life, would have been perfectly good.

But he was not obliged to remain, thus, quiescent and to incur apprehended risks, which might present themselves to his mind as possibly consequent upon the illegal act of the defendant. He was, fairly and justly, entitled to know his rights and to have such protection against apprehended consequences, as the courts might afford him. He could invoke the exercise of the power of a court of equity to protect his rights, by compelling the defendant to receive his assessments, upon a basis of an insurance of $5,000, and to recognize the contract as in force. With just grounds to fear the consequences of the illegal corporate act, he could demand the issuance of a writ of prevention to accomplish the ends of precautionary justice by restraining the defendant from carrying out the amended by-law. Though the defendant was a foreign corporation, it was, nevertheless, in this state for the purpose of any action upon its contract and such an action would be clearly maintainable.

In Cohen v. N.Y. Mutual L. Ins. Co. (50 N.Y. 610), the plaintiff sought equitable relief, in a decree declaring her policy to be valid. There had been a failure to pay the premiums, owing to the fact that, during the prevalence of the Civil war between the southern states and the government of the United States, she had been a resident of the state of Georgia and, therefore, had been prevented from making the necessary payments. It was, among other things, objected that, as there had been no loss, there was no cause of action upon the policy. But the equitable doctrine was asserted that where the peculiar circumstances make a proper case for the intervention of a court of equity, it is justified, if necessary to the preservation of right and for the purpose of declaring the rights and the obligations of suitors. In Meyer v. Knickerbocker L.Ins. Co. (73 N.Y. 516), which was a suit in equity to have the court declare existing and in force a contract of insurance upon the life of the plaintiff's husband, which was claimed by the defendant to have lapsed, it was held that such a suit could be maintained, when it was necessary for the parties to know at once their reciprocal rights and obligations. To like effect was the decision in Gray v. Chapter General, (70 App. Div. 156), where it was held that a court of equity will intervene to protect the rights of a member, which were endangered by an ineffectual act of the defendant.

I reach the conclusions, therefore; that there was no breach of contract in this case, which justified an action for damages; that the action of the plaintiff, after the passage of the amended by-law, in refusing to acquiesce in it and in tendering payment of his assessments, preserved the contract of insurance as it was; that he was not, thereupon, compelled to a course of inaction, but might resort to a court of equity and, upon the facts, ask its intervention in a decree which would compel the defendant to live up to its contract and which would restrain it from proceeding under its void by-law.

Upon a new trial, the plaintiff will be in a position to apply to the court for an amendment of his pleading setting up his equitable rights.

The judgment appealed from should be reversed and a new trial should be ordered, with costs to abide the event.

O'BRIEN, CULLEN and WERNER, JJ., concur; PARKER, Ch. J., BARTLETT and MARTIN, JJ., dissent.

Judgment reversed, etc.