Weiditschka v. Supreme Tent Knights of Maccabees of the World

Supplemental Opinion.

Per Curiam.

Appellant suggests, in its petition for rehearing, that the conclusion reached in the opinion destroys the principle of uniformity, as between the members, and the members and the association, but does not explain how this will be brought about, save by citing Supreme Council of the Royal Arcanum v. Brashears, 89 Md. 624 (43 Atl. 866). On the trial of that case, the beneficiary named in the certificate of insurance, suing for indemnity stipulated therein, offered in evidence a duly certified copy of Chapter 281 of the Acts of 1895 of the state of Massachusetts, relating to misrepresentation in applications for membership in fraternal beneficiary associations, which read:

“When any certificate is issued to a resident of the commonwealth by any fraternal beneficiary corporation organized under the laws of or admitted to do business in this Commonwealth, no oral or written misrepresentations or warranty made by the assured or in his behalf in the application for such certificate, or in the negotiation of the contract, shall be deemed material or defeat or void the certificate or prevent its attaching, unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter misrepresented increased the risk of loss.”

The court held that this was admissible, for that a certificate was issued by. a Massachusetts corporation, and therefore the statute in question' was applicable thereto, even though-the act apparently applied only to cases where certificates of membership were issued to residents of Massachusetts, the court saying:

“The mutuality and fraternity which form the basis of mutual benevolent associations and kindred organizations require that all of their members shall be treated alike. It would be fatal to the whole benefit scheme of the Royal Arcanum if, when the case of the beneficiary of a Massachusetts member of the organization were on trial, his or her rights should be measured by a more favorable standard than would be applied to the beneficiary of a Maryland member. The regulations contained in the constitution and by-laws of the society .contemplate like treatment of all of its members of the same class, without special favor or advantage to any, under a similar state of facts.”

Otherwise, a certificate of insurance valid in Massachusetts must have been adjudged invalid in Maryland, and in Pennsylvania. Fidelity Mut. Life Assn. v. Ficklin, 74 Md. 172 (21 Atl. 680). It is to be noted, however, that there was no statute in Maryland interfering with this conclusion. In Missouri, a statute provided that, in suits on insurance contracts, suicide by the insured shall not constitute a defense, unless contemplated when application therefor was made, notwithstanding that a stipulation in the policy to the contrary uniformly has been held applicable to suits on certificates issued by foreign fraternal associations. Schmidt v. Supreme Court U. O. of F., 228 Mo. 675 (129 S. W. 653). This, of necessity, allows a defense in one state not available in another, and thereby seems to tolerate the inequality denounced in the Maryland decision, though doubtless on the ground that the foreign association, in doing business in Missouri, undertook to conform to its laws. Appellant also relies on Supreme Council of Royal Arcanum v. Green, 237 U. S. 531, where the power of fraternal beneficiary associations to increase the assessments required to be paid was involved. Although the Supreme Judicial Court of Massachusetts had ruled, in Reynolds v. Supreme Council of Royal Arcanum, 192 Mass. 150, that the increase of assessments, was within the power of the company, the Court of Appeals of New York, in Green v. Supreme Council of Royal Arcanum, 206 N. Y. 591, ruled otherwise; and in this last case, on"appeal to the Supreme Court of the United States, 237 U. S. 531, Chief Justice White, in the course of his opinion, observed that:

“An assessment which was one thing in one state and another in another, and a fund which was distributed by one rule in one state and by a different rule somewhere else, would, in practical effect, amount to no assessment, and no substantial sum to be distributed. It was doubtless not only a recognition of the inherent unsoundness of the proposition here relied upon, but the manifest impossibility of its enforcement, which has led courts of last resort of so many states, in passing on questions involving the general authority of fraternal associations, and their duties as to subjects of a general character concerning all their members, to recognize the charter of the corporation and the laws of the state under which it was granted, as the test and measure to be applied.”

The power to fix and collect assessments is fundamental in the organization of fraternal mutual insurance companies, and the court ruled that the New York court, in not giving to the charter, as amended, and the laws of Massachusetts, as announced by its Supreme Judicial Court, full effect, disregarded the full faith and credit clause of 'the Constitution. The soundness of the decision is beyond question. Any other ruling would impinge upon the principle of mutuality between members which is basic in the organization of all fraternal associations, and would destroy that equality as between members which is essential to their continued existence. The trouble with appellant’s contention lies in the assumption that any question touched in the cases cited is involved in ascertaining who is entitled to the stipulated indemnity. Tt is of no concern to other members whether, upon the death of a member, the benefit is paid to a beneficiary of one class or another. Nor is this material to the association. Its sole concern is that it reach the person entitled thereto. The different classes from whom the member may choose are designated by statute, but he alone may select from these; and his choice, or any change therein, cannot well affect the relations between him and other members nor those between the members and the association. For these reasons, it cannot well be said that the naming of specified beneficiaries is essential to the organization of a mutual benefit association, nor that the power to define who shall be entitled to benefits rests solely with the society, or with statutes of the state where organized. The case on which appellants seem to rely, United Order of the Golden Cross v. Merrick, 165 Mass. 421 (43 N. E. 127), construes certain statutes of Massachusetts, which declare, in substance, that a foreign fraternal association may do business in the state “by conforming in other respects to the foregoing provisions,” among which was one declaring that “the corporation may also provide in its by-laws for the payment, from time to time, of a fixed sum by each member to be.paid to the beneficiaries of the deceased member in such amount and manner as shall be fixed by said by-laws and written in the benefit certificate issued to said member, and payable to the husband, wife, child, relatives of, or persons dependent upon, such member.” The court held that, inasmuch as this did not expressly prohibit naming a beneficiary other than oí one of these classes, such beneficiary named in a certificate of an association organized in Tennessee, where there are no statutory restrictions, was entitled to the benefits. This seems in conformity with o-ther decisions. See cases collected in 1 Bacon on Benefit Societies 561. Also, see Gruber v. Grand Lodge A. O. U. W., 79 Minn. 59 (81 N. W. 743). Our statute prohibits the issuance of a certificate of insurance when a beneficiary other than one of the classes named is designated, and therein differs from that of Massachusetts, and possibly other states. It was competent for the lawmakers to prescribe under what conditions foreign mutual associations might engage in business in this state. Scottish Union & Nat. Ins. Co. v. Herriott, 109 Iowa 606; New York Life Ins. Co. v. Cravens, 178 U. S. 389. This rule was recognized in Dworak v. Supreme Lodge, W. B. Frat. Assn., 101 Neb. 297 (163 N. W. 471). The defendant in that case was organized finder the laws of this state, but the court held that the statute of Nebraska specifying the classes from which the beneficiaries must be chosen, controlled, saying:

“The statutory provision limiting and defilning the classes of persons to whom death benefits should be paid became as much á part of the contract of insurance as if it had been written therein, and it declared the policy of the state with respect to such contracts.” >

In referring to Supreme Council Royal Arcanum v. Green, supra, as being relied on by appellant, the court observed that:

“The question in this case is so different that the opinion in that case does not control its decision. The question there involved the relation existing between the corporation and its members, and between the members themselves, with respect to uniformity of assessments in different states. Here, we are not concerned with such questions, since such relations have all been terminated by the maturity of the contract.”

In Dennis v. Modern B. of A., 119 Mo. App. 210 (95 S. W. 967), the court held .that, “where a society may depend for its power to do business on the statutes of two states, one where it is organized, and the other wherein it is permitted to do business as a foreign corporation, the statute of the latter will control as to who can become beneficiaries in cases originating in the latter,” the court observing that, “since no foreign association could do business here without the authority of this state, it must bring itself within the terms of such authority. That is to say, it must bring itself within the description of the local associations in this state, which means they must have for their object the benefit of the same class or classes of beneficiaries that are named in our statutes.”

In Baltzell v. Modern W. of A., 98 Mo. App. 153 (71 S. W. 1071), and Herzberg v. Modern B. of A., 110 Mo. App. 328 (85 S. W. 986), the legal representatives of the assured were named as beneficiaries; and, after noting that legal representatives might not be named as beneficiaries under the Missouri statute, though this might be done in the state where organized, the court ruled that such representatives might not recover. In Wilson v. Supreme Conclave Imp. Ord. of Heptasophs, 174 N. C. 628 (94 S. E. 443), it was held that such a certificate, when a North Carolina contract, was governed by the statute of that state, although the company was organized in Maryland. In Supreme Court I. O. of F. v. Fisher, 172 Ill. App. 454 after reviewing the decisions of that state, the court reached the conclusion that a statute of that- state, defining the classes from which beneficiaries were to be chosen, controlled, rather than the certificate of a foreign association. We have discovered no decision to the contrary, nor has any been cited. The certificate considered in Belknap v. Johnston, 114 Iowa 265, was held to be an Illinois contract, and therefore to be construed according to the laws of that state. Enough has been said to dispose of the contention that the full faith and credit clause of the Constitution is being violated. To enforce a statute of this state and uphold its policy will not be construed to evidence an indisposition to accord to those of another state full faith and credit. 0:ur offense, if it be such, lies in holding that the controversy is ruled by the Iowa, rather than the Michigan, statute.

The association, organized in the state of Michigan, upon being permitted to engage in business in this state, undertook to do so in accordance with its laws. It might have proceeded without issuing a certificate of insurance with indemnity payable to a beneficiary of a class not sanctioned in this state, though allowed under the laws of Michigan. Other classes from which to choose were common to the statutes of both states; and surely, in holding that such an association, after undertaking to comply with the requirements of this state as a condition to engaging in business therein, may be compelled to perform what it has undertaken, we do not ignore the constitutional requirement that full faith and credit be accorded the public acts of’ Michigan, but rather, exact that compliance with the laws and policy of this state which defendant had promised to carry out upon being permitted to engage in business in Iowa. The ruling does not draw the statutes of Michigan into question. The opinion is adhered to, and the petition for rehearing overruled.

WeaveR, C. J., Ladd, Evans, Preston, and Salinger, JJ., concur.