Ericson v. Supreme Ruling, Fraternal Mystic Circle ( 1912 )

In the year 1884 a corporation was created under the laws of the State of Ohio by the name of the Fraternal Mystic Circle, empowered to organize subordinate lodges which should receive members and issue contracts or policies by which the corporation agreed to pay a stated sum at the death of the member to a named beneficiary, the members to be assessed given sums according to age, payable at stated times, in order to accumulate a fund to pay losses.

In the year 1893 that corporation established a lodge in Austin, Texas, and Ericson became a member, receiving a contract by which the order agreed to pay his wife $3,000.00 upon his death, he agreeing to pay any assessment made upon him, which was fixed at $3.30 each month at that time. The wife died and the children were substituted.

In 1895 the order incorporated in Ohio became involved with the authorities of that State and five of those persons who were concerned in the organization of the corporation in Ohio, acting with citizens of the State of Pennsylvania, in that State, secured a charter for the "Supreme Ruling of the Fraternal Mystic Circle."

A witness testified: "It is a fact that the Fraternal Mystic Circle was first incorporated under the laws of the State of Ohio, in December, 1884, but it is not a fact that that organization was afterwards, in 1895, moved to the State of Pennsylvania and there reincorporated or reorganized under the laws of that State with practically the same officers. The records show that only five of those who were concerned in the organization of The Supreme Ruling of the Fraternal Mystic Circle, the Pennsylvania corporation, in 1895 were officially connected with the Fraternal Mystic Circle of Ohio. The new corporation succeeded to all of the assets and assumed all of the liabilities and contracts of insurance that were in force with the original Fraternal Mystic Circle, and has ever since said time collected assessments due by all members of the old concern, holding certificates or contracts by it to them, and has paid death losses arising out of the issuance of certificates issued by the Fraternal Mystic Circle of Ohio as the same accrued."

On June 5, 1895, The Fraternal Mystic Circle of Ohio adopted these resolutions:

"Whereas, the Supreme Ruling of the Fraternal Mystic Circle has been issuing certificates to members of the Fraternal Mystic Circle, under which the payments of benefits are and have been provided for; and

"Whereas, the said Supreme Ruling is an unincorporated body and voluntary association; (the association was incorporated but its legislative body was not) and

"Whereas, the Supreme Ruling of the Fraternal Mystic Circle is a corporation organized under the laws of the State of Pennsylvania; and

"Whereas, it is deemed to be for the best interest of all such certificate holders, and of all other persons concerned, that the business of said association be carried on by an incorporated body; therefore

"Be it resolved that all the memberships, assets and property of every kind and description belonging to it, be and the same are hereby transferred, set over and assigned in perpetuity to the said The Supreme Ruling of the Fraternal Mystic Circle, a corporation as aforesaid, in consideration of which the corporation assumes and agrees to discharge all liabilities of whatever kind appertaining to this body.

"Resolved further, that the trustees of this body be and they are hereby empowered and directed to make transfer of all their right to and control over the assets and securities of all kinds, held by them for the use and benefit of said certificate holders, to the said The Supreme Ruling of the Fraternal Mystic Circle, the corporation aforesaid.

"Resolved, further, that the Supreme Mystic Ruler and the Supreme Recorder are hereby authorized to execute in behalf of this body, such instruments of writing as may be necessary to carry into effect the purposes and intent of the premises, and to sign such instrument or instruments officially, and affix the seal of this body thereto.

"Resolved, further, that the transfers, assignments and assumption, hereinbefore mentioned, shall take effect and be in force upon concurrent evidence of acceptance thereof being given by resolution or otherwise by the said The Supreme Ruling of the Fraternal Mystic Circle, a corporation aforesaid."

The Pennsylvania corporation adopted these resolutions:

"Whereas, the Supreme Ruling of the Fraternal Mystic Circle, a voluntary association, at its regular annual session, holden in the city of Columbus, Ohio, on the fifth day of June, A.D. 1895, adopted certain resolutions with preamble, of which the following is a copy." The resolutions as copied above are then set out, and concludes:

"Now, therefore, be it resolved by this body, the Supreme Ruling of the Fraternal Mystic Circle, that in consideration of the transfer by said association of all its membership, property and assets, we hereby assume all the liabilities of every kind and description of said association in accordance with the resolutions hereinbefore set out, and we hereby agree to faithfully discharge all obligations due to persons holding certificates issued by said association, and their beneficiaries."

The Pennsylvania corporation, in 1907, adopted a constitution which contained this provision:

"Whenever members taken over from another society are permitted to retain the benefit certificates issued to them * * * by the society of which they were formerly members; or if the rate of assessment paid by any member is lower than the rate charged by the corresponding benefit plan of the Fraternal Mystic Circle * * * the members may be re-rated by the Supreme Executive Committee so that perfect equality shall be maintained between the members of the order."

When Ericson became a member he was forty-eight years old and his rating was $3.30 a month, which he paid until the rate was changed.

In 1908 the Executive Committee adopted a resolution requiring all of those who had been admitted into the order prior to March 1st, 1901, to be re-rated according to their ages January 1st, 1908. The ratings of members who joined the order after March 1st, 1901, were not changed.

The re-rating of Ericson placed his age at 63 years and resulted in raising his rate from $3.30 to an assessment of $23.16 per month, which he refused to pay. He instituted this suit to recover what he had paid into the order with interest, upon the ground that the order had repudiated its contract. The court gave judgment for the sum of $1,049.88, amount paid to the corporation, and $399.07, interest on the payments.

The Honorable Court of Civil Appeals reversed the judgment of the District Court and rendered judgment for The Supreme Ruling of the Fraternal Mystic Circle, and the case is before this court on writ of error.

The authority for re-rating Ericson rests solely upon the amendment to its constitution by the Supreme Ruling in 1907, copied above. The plaintiff in error claims that the amendment does not support the re-rating, because, first, he was an original member of the corporation and was not "taken over from another society"; second, because the amendment authorized the re-rating of members thereafter "taken over from another society," and not of members previously "taken over."

When a corporation is consolidated with another or becomes merged therein whether a new corporation is thereby created or the old corporation is continued will depend much upon the intention of the parties. Marshall on Corp., 467; 2 Clark Marshall on Corp., p. 974-975; Austin v. Bank, 59 Am. St. (note), 547; Miller v. English, 21 N.J.L. 317; First Society, etc., v. Brownell, 5 Hun, 464.

The facts show with reasonable certainty that the Pennsylvania charter was procured for the purpose of receiving the membership and assets of the Ohio corporation. In fact, the entire membership and assets of the Ohio concern were transferred bodily to the Pennsylvania organization and all of the liabilities of the first were assumed by the second corporation. The new corporation became by this transaction the head and superior of the existing subordinate lodges including that at Austin; therefore Ericson was not received from another body but was a member of the original organization under the Pennsylvania charter. The amendment of 1907 to the constitution did not confer authority upon the Executive Committee to re-rate those who were then members and their act was void as to Ericson.

The language of the amendment of 1907 did not include members theretofore taken over from other orders. Its very terms are plainly prospective, and courts will not give retroactive effect to language which is fairly susceptible of a construction which would give the law a prospective operation. Lewis, Stat. Constr., p. 1157, para. 644; Ancient O.U.W. v. Stumpf, 24 Texas Civ. App. 309[24 Tex. Civ. App. 309]; 58 S.W. 840.

The amendment to the constitution, if applied to members "taken over, etc.," after its adoption, would be valid, but we need not decide whether it would be void if it embraced Ericson and those in his class. The provision in Ericson's policy by which he agreed to comply with the orders and by-laws adopted in future is invoked to sustain the re-rating by the committee, but that had reference only to such regulations as have reference to the members, duties and conduct as a member and did not embrace an act that would produce a radical change in his rights. Morton v. Supreme Council, etc., 100 Mo. App., 76, 73 S.W. 259.

The re-rating of Ericson's policy without authority whereby the assessment against him was so greatly increased was a repudiation of his contract and gave him a right to recover the sums paid with interest. Sup. Council Am. Leg. Honor v. Batte, 34 Texas Civ. App. 456[34 Tex. Civ. App. 456], 79 S.W. 629.

We deem it wholly unnecessary to discuss the necessities and policies of the corporation nor the moral right of the body to call upon Ericson and his class to contribute to the creation of a fund to secure the contracts of the younger members. We are concerned only with the law as applicable to existing conditions. We have no jurisdiction of fact questions as the Court of Civil Appeals had.

We are of opinion that the Court of Civil Appeals erred in reversing the judgment of the District Court and in rendering judgment against the plaintiff in error, therefore, the judgment of the Honorable Court of Civil Appeals is reversed and the judgment of the District Court is affirmed.

Reversed and judgment of District Court affirmed.