Case Name: Smith, Appellant, vs. Northwestern National Life Insurance Company of Minneapolis, Minnesota, Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1905-01-10
Citations: 123 Wis. 586
Docket Number: 
Parties: Smith, Appellant, vs. Northwestern National Life Insurance Company of Minneapolis, Minnesota, Respondent.
Judges: SJiebecKERj J., took no part.
Reporter: Wisconsin Reports
Volume: 123
Pages: 586–598

Head Matter:
Smith, Appellant, vs. Northwestern National Life Insurance Company of Minneapolis, Minnesota, Respondent.
December 15, 1904
January 10, 1905.
Life insurance: Assessment associations: Statutes: Impairment of contract obligations: Glassification of members: Change to stipulated premium: Rights of assessment members: Findings:. Proof of loss: M.aturity of policy: Equity: Interest.
1. An assessment insurance association, assignor of defendant, entered into an agreement with plaintiff that, if he paid the specified assessments as called for up to January, 1902, it would pay him the amount of $2,000, provided eighty per cent, of an assessment, at the specified rates, on all its members, would produce that amount. Oh. 270, Laws of 1899, empowered corporations, like defendant’s assignor, to exercise an election to thereafter make contracts to accept from their members, as the price- of their insurance, a stipulated sum at fixed periods instead of' fixed sums at indefinite periods, as assessments might become-necessary. Sec. 4, of said ch. 270, declared that the adoption of the privileges offered should in -no way annul, modify or change any existing contracts or liabilities of such existing corporations, and that any and all such existing contracts and' liabilities should continue in full force and effect the same as though such corporation had not reincorporated or qualified under that act. Defendant’s assignor took the steps necessary .to authorize it to do business under the provisions of ch. 270, and thereafter received no new members upon an agreement to-pay assessments, hut solely upon an agreement to pay a stipulated premium. Thereupon it induced a large number of its old' members, holding assessment certificates, to surrender them and take out membership upon a basis of a stipulated premium, giving them as an advantage the rate of premium based upon their age at the .time of originally becoming members. After-wards defendant, by contract with its assignor, reinsured all of its insurance outstanding, took over all its assets and members- and assumed its liabilities. Plaintiff never surrendered his original assessment certificate but performed all his part of that contract. Held:
(1) No impairment of plaintiff’s contract was intended by ch. 270. ' ’
(2) Under ch. 270, as applied to pre-existing assessment contracts, there was no authority to make a classification of members, so that the moneys derived from those existing before the act were alone' applicable to the insurance contracts held by them, while the moneys collected from members entering afterward must be exclusively devoted to their insurance.
(3) By taking the stipulated premium from its new members, the corporation must he held to have commuted and collected from them in advance their assessments to meet plaintiff’s policy.
2. A finding of fact on any question is conclusive where no exception is reserved thereto.
3. Plaintiff’s certificate in an assessment insurance association was not payable until sixty days after proof of loss. Within twenty days after maturity of the certificate, plaintiff commenced an action in equity to compel reinstatement of plaintiff’s insurance notwithstanding a forfeiture declared, by defendant, and such reinstatement was adjudged. Held, that it was entirely proper for a court of equity, having obtained jurisdiction over the parties and the controversy, to proceed to enter a money judgment on the reinstated insurance, it having matured before trial.
4. In such case, it not appearing when the proofs of loss would have been made but for defendant’s repudiation of plaintiff’s rights, the court adopts the date of service of the complaint as the time from which the sixty days should he computed, and allows interest from the later date.
Appeal from a judgment of tlie circuit court for Dane county: Wakeew D. Tabeant, Judge.
Modified and affirmed.
.For a number of years prior to 1893 there had existed a mutual insurance assessment company under the laws of Wisconsin, known as the Northwestern Mutual Relief Association of Madison, Wisconsin, hereinafter called the “Madison Company.” That company reorganized under the provisions of ch. 440, Laws of 1891, and while so existing issued to the plaintiff its policy or certificate of membership dated February 24, 1893, agreeing, among other things, that upon January 18, 1902, he being then alive, they would pay to him eighty per cent of an assessment levied and collected therefor, not exceeding $2,000. The by-laws provided for assessment upon all members of the association upon the maturity of any certificate, according to a specified table graded according to the amounts of the respective policies and according to the age of the members. These assessments were, by the bylaws, to be divided, twenty per cent, to a reserve fund, out of which was to be paid the expenses of the company, and eighty per cent to a relief fund, out of which was to be paid the policyholder an amount not exceeding such eighty per cent, nor exceeding the stipulated maximum of his policy. In 1899, by ch. 210, Laws of 1899, authority was given to existing companies like the Madison Company, upon declaring their intention so to do, to conduct business upon a stipulated premium basis. At that time the Madison Company had a membership such that eighty per cent, of an assessment upon all its members, at the rates specified in the by-law tables, largely exceeded the maximum amount payable to1 a certificate bolder; but the amounts wbicb bad been accumulated into the reserve and relief funds at that time are not shown. The. Madison Company took the steps necessary to authorize it to do business under the provisions of ch. 210, and thereafter received no new members upon an agreement to pay assessments, but solely upon the agreement to pay stipulated premium; and, shortly after such reorganization, induced a large number of its old members holding assessment certificates to surrender them and take out membership upon the basis of stipulated premium, but gave them, as an advantage resulting from their, old membership, a rate of premium based upon their ages at the time of originally becoming members instead of at the higher rate which would have pertained to their ages at the time they made application for the change. It was stipulated, for the purposes of this case, that the average per capita assessment upon the assessment basis wTas eighty-two cents to meet each maturing certificate-like plaintiffs, and that the . average monthly stipulated premium was eiglity-two cents.
On Aug. 29, 1901, the defendant, a Minnesota corporation, originally authorized to write insurance on the assessment plan, but afterwards on the stipulated premium plan, and which then had no members upon the assessment plan, entered into a written contract with the Madison Company, which recited that the two companies had agreed to consolidate, and that the defendant reinsured all of the insurance outstanding* against the Madison Company, took all the assets of that company, and took over all its members as members of the defendant. The findings 'declare, without exception by the defendant, that the defendant “thereby assumed all liabilities under the terms and conditions of the plaintiff’s certificate of membership above mentioned.” There is no evidence as to the amount of the assets of the Madison Company, either in its reserve, relief, or mortuary funds, which were taken over by the defendant. At the time of such consolidation and reinsurance there were about 8,400 members of the Madison Company, of whom about 300 held assessment certificates ,generally like the plaintiff’s, and the rest held stipulated premium policies or certificates. Eighty per cent, of an assessment, according to the table of rates upon all of the members of the Madison Company existing on April 12, 1902, would have produced a sum largely in excess of the $2,000 maximum of plaintiff’s certificate. Eighty per cent, .of an assessment merely upon those members who held the assessment certificates would have produced $188.60. It was -conceded upon the trial by the defendant’s attorney that the defendant was willing to pay the amount which an assessment would produce on the membership of the Madison Company, but contended that no assessment could be levied upon 'the stipulated premium members. The trial court held in accordance with this contention, and rendered judgment in plaintiff’s favor for the $188.60, with interest from January ■20, 1902, from which judgment plaintiff appeals. There were also allegations, prayer, and judgment for relieving plaintiff from a forfeiture and requiring his reinstatement, from which neither party appeals.
Franlc F. Parlcinson, for the appellant,
contended, inter ■alia, that a corporation cannot amend or change its charter or its by-laws or its contract of insurance, and thereby change -or destroy the substantial rights of its members, unless such power is expressly reserved or unless the member shall give his express consent. Morrison v. Wis. Odd Fellows’ M. L. Ins. Go. 59 Wis. 162; Parish v. N. Y. Produce Exchange, 169 N. Y. 34, 61 N. E. 977, 979; Pedlaj Citizens’ Nat. G. L. F. & P. Go. v. Orr, 27 Ind. App. 1, 60 N. E. 716; Stats. 1898, sec. 1748, subd. 5; Benton v. Brotherhood B. B. Brakemen, 146 Ill. 570, 34 N. E. 939; Covenant Mut. L. Asso. v. Kentner, 188 Ill. 431; Seiverts v. Nat. Ben. Assu. 95 Iowa, '710, 64 N. W. 671; Pangan v. Am. Leg. of Honor, 70 N. Y. .Supp. 663. When the appellant’s right to eighty per cent. -of an. assessment on all the members was once fixed in the . by-laws and his certificate of membership, no- retroactive bylaw or other retroactive act of the company would be tolerated to destroy his right. Peterson v. Qibson, 191 Ill. 365; Voigt v. Kersten, 164 Ill. 314; Covenant Mut. L. Asso. v. Tuttle, 87 Ill. App. 309. Not even will legislative authority validate the act of any company attempting by by-law, or by any other act, to reduce or change the rights of its members. Becker v. Farmers’ Mut. F. Ins. Go. 48 Mich. 610; Peterson v. Gibson, 191 Ill. 365; Covenant Mut. L. Asso. v. Kentner, ' 188 Ill. 431. The member’s consent cannot be taken by implication. It must be founded upon express, positive, clear agreement. Benton v. Brotherhood B. B. Bralcemen, 146 Ill. 570, 34 N. E. 939; Philadelphia •& B. B. Co. v. Love, 125 Pa. St. 488; Middlesex Turnpike Co. v. Bwan, 10 Mass. 384; Starling v. Supreme Council, 108 Mich. 440, 66 N. W. 340. Not only are amendments to the by-laws forbidden, but any and all other acts destroying contract rights ai*e equally forbidden. Becleer v. Farmers’ Mut. F. Lis. Co. 48 Mich. 610; Ins. Co. v. Connor, 17 Pa. St. 136; Great Falls Mut. F. Ins. Co. v. Harvey, 45 N. H. 292; Hamilton Mut. Ins. Co. v. Ilobert, 2 Gray, 543; N. E. Mut. F. Ins. Co. v. Butler, 34 Me. 451; Bevere v. Boston Copper Co. 15 Pick. 351, 363; Am. Bank v. Baker, 4 Met. 164, 176; Angelí & Ames, Corp. 339, 345. The “good of the order” does not warrant radical changes or change of contract rights, no matter how laudable the change. It is a question of reserved power and not of good faith. Gaut v. Am. Leg. of Honor, 107 Tenn. 603, 64 S. W. 1070; Union Locks & Canals v. Towne, 1 N. H. 44; Middlesex Turnpike Co. v. Swan, 10 Mass. 384; Langan v. ' Am. Leg. of Honor, 70 N. Y. Supp. 663; State ex rel. Atty. Gen. v. Monitor Fire Asso. 42 Ohio St.- 555. The express power to raise money by assessment excludes every other power or plan. Kennan v. Bundle, 81 Wis. 212, 225; Bochester Ins. Co. v. Martin, 13 Minn. 59; Farmers’ & M. Bank v. Baldwin, 23 Minn. 198; Dietrich v. Madison Belief Asso. 45 Wis. 19 ; Thomas v. B. B. Go. 101 U. S. 11; Jemison v. Citizens’ Savings Bank, 122 N. T. 135; Penn. B. Go. v. St. Louis, A. <& T. H. B. Go. 118 U. S. 630; Central Transfer Go. v. Pullman P. G. Go. 139 U. S. 24. The legislature under no pretense whatever, directly or indirectly, has any power to invade the vested rights of a contract. And much less has it the power to authorize or to license the board of directors of a corporation to do so. U. S. Const., art. 1, sec. 9; N. Y. & N. E. B. Go. v. Bristol 151 U. S. 556; Lawman v. Lebanon Valley B. Go. 30 Pa. St. 42; Becker v. Farmers’ Mut. F. Ins. Go. 48 Mich. 610; Covenant Mut. Life Asso. v. Kminer, 188 Ill. 431; The People v. Empire Mut. L. Ins. Go. 92 N. T. 105; Peterson v. Gibson, 191 Ill. 365. Consolidating corporations cannot enter into contracts limiting their liability on the obligations of the old corporations. It would be intolerable that one company by consolidating with another should acquire its rights and property and then escape its liabilities. Cleveland, O. G. & St. L. B. Go. v. Prewitt, 131 Ind. 551; Lauman v. Lebanon Valley B. Go. 30 Pa. St. 42; Louisville, N. A. & G. B. Go. v. Boney, 111 Ind. 501; Polhemus v. Fitchburg B. Go. 123 N. T. 502; Thompson v. Abbott, 61 Mo. 176; Grenell v. Detroit Gas Go. 112 Mich. 70, 70 N. W. 413; Golumbus, O. <& I. G. B. Go. v. Skidmore, 69 Ill. 566; Western Union B. Go. v. Smith, 75 Ill. 496; Indianapolis, G. & L. B. Go. v. Jones, 29 Ind. 465.
Por the respondent there-was a brief by Burr W. Jones, attorney, and Brown & Kerr, of counsel, and oral argument by Mr. J ones.

Opinion:
Dodge, J.
The Madison Company entered into an agreement with plaintiff that, if he paid the specified assessments as called for up to January, 1902, it would pay him the amount of $2,000, provided .eighty per cent, of an assessment, at the specified rates, on all its members, would produce that amount. Plaintiff bas performed bis part of tbe agreement, and defendant now contends, and tbe trial court bas beld, that be must be satisfied to receive tbe amount of an assessment on only about one tenth of all tbe members. Tbe inquiry is at once suggested, wbat bas occurred to accomplish such modification ? Not much aid is offered by respondent's brief in discovering an answer to that query. Tbe burden of tbe argument is east in support of tbe contention that it might have been accomplished by a by-law or by a statute without invasion of constitutional prohibition against impairing obligation of contract; tbe former under reserved power to make or change by-laws, tbe latter under reserved power in legislature to change corporate charters. As to tbe first of these it is sufficient to note, first, that the' reservation of power to change by-laws is expressly limited so that "tbe amount of the benefit shall not be reduced;" but, further, there is no evidence that tbe by-laws of tbe Madison Company ever were changed after 1892. If modification of plaintiff's contract rights is to be ascribed to any statute, none is suggested, except cb. 210, Laws of 1899, which, generally speaking, einpowered corporations 'like the Madison Company to exercise an election to thereafter make contracts to accept from their members, as the price of their insurance, a stipulated sum at fixed periods instead of fixed sums at indefinite periods, as assessments might become necessary. In construing such statute it must be remembered that the state has only reserved power to modify the contract between itself and the corporation which is involved in the latter's charter or franchise, and that the constitutional prohibition against impairing the obligation of contracts was in full force in protection of any contracts which a corporation might have made with others. Nazro v. Merchants' Mut. Ins. Co. 14 Wis. 295; Kenosha, R. & R. I. R. Co. v. Marsh, 17 Wis. 13, 18. In the law in' question, however, we find the legislature expressly declaring that the adoption of the privilege it offers to such corporations "shall in no way annul, modify or change any existing contracts or liabilities of such existing corporation, and any and all such existing contracts and liabilities shall continue in full force and effect the same as though such corporation had not reincorporated or qualified under this act." (Sec. 4.) So we must conclude that the legislature intended no impairment of plaintiff's contract, and any discussion of its powers in that resjoeet is but academic.
Counsel seem to assume that the act of 1899 authorized, if not required, an existing corporation, availing itself of the privileges thereby granted, to make a classification of its members so that the moneys it derived from those existing before the act were alone applicable to the insurance contracts held by them, while the sums collected from members entering afterward must be exclusively devoted to their insurance. They press upon our attention ca'ses of which Supreme Lodge K. P. v. Knight, 117 Ind. 489, 20 N. E. 479, is perhaps the strongest, where a fraternal order, having at first only one class of members, afterward, by by-law, established other classes, each by itself mutual, but having no interest in the funds of any other class. Conceding, without deciding, that .some such legislation or by-law might have been valid, we find nothing of the sort in the act of 1899, and, as already stated, we find no by-law. That statute, while preserving unimpaired and unmodified the agreement to pay to each old member the sum specified out of an assessment to be collected from all its members, authorized the corporation to contract with new members for payment of the sum estimated to be sufficient to meet all expenses and insurance obligations of the company, at an agreed time and rate, with power of further assessment if the estimate shordd at any time prove Inadequate. In this is nothing to indicate that the sums so •collected from the new members could not be applied to the old obligations of the corporation; no authority to so agree. True, it is required that there be accumulated and maintained a reserve fund of certain minimum to meet the life policies written under the new system, but there is no requirement that tbe premiums upon such policies shall be entirely devoted to that end. They might be fixed at such a rate as to produce a greater amount. Nor was there any requirement that such reserve be accumulated exclusively from the stipulated premiums. Any receipts of the corporation, except on limited payment policies (section Y), might be carried to such reserve, including assessments collected from old policy holders. True, it is in evidence that no assessments ever have been so used, but we find nothing in the statute to prevent it. After most careful study of ch. 2Y0 as applied to pre-existent assessment companies, we can find nothing to warrant any independence of one class of members from another. The methods of the collection of the price of the insurance differed, but all sums collected, by whatever method, became the funds of the corporation, subject to be-used to discharge its obligations as they matured.
But it is said the plaintiff is only entitled to eighty per cent, of what the company can collect by an assessment, and, except as to the sum of $188.60, the company can collect nothing by an assessment, because it is bound by- contract with.the later members to acceptance of stipulated premiums; also it is objected that the by-laws existing when plaintiff's policy was issued declared that his only, form of action should be to compel the levy of an assessment. These objections are superficial. If the contract had been made by an individual to pay the amount he could collect by assessment at .a specified rate upon a certain list of persons, we apprehend no one would doubt his liability to a money action if it appeared that such individual had entered into a subsequent agreement with some of his other policy holders to accept certain stipulated amounts in satisfaction of their liability to assessment and had received such amounts. None would doubt that, in legal effect, he had collected the assessments. We cannot view the situation of tbe Madison Company differently. By tbe act of 1899 it was given tbe power to make exactly sucli an agreement as tbat above supposed, and did make it witli all tbe new members. Indeed, as to 2,960 of tbem, wbo bad formerly been assessment members, it allowed tbem a credit, or benefit because of tbeir interest in a fund wbicb bad been accumulated out of tbe excess of assessments wbicb plaintiff and others bad paid up to tbat time. Tbis, if done for tbe purpose of inducing tbem to withdraw from tbe assessment, class in order to reduce tbe amount of plaintiff's demand against tbe company, would be such bad faith as to close tbe company's mouth to any defense based thereon. We think it plain tbat, by taking tbe stipulated premiums from its new members, tbe Madison Company must be held to have commuted and collected from tbem in advance tbeir assessments to meet tbe plaintiff's policy.
It is further contended tbat, although tbe Madison Company might have been liable for tbe whole amount of plaintiff's certificate, tbe respondent is not so liable because of limitations imposed in tbe contract of consolidation made between tbe two corporations. We pass tbe question whether tbe defendant could take over all tbe property, mortuary funds, reserve, and the like of another insurance company, and at tbe same time, by contract with tbat company, limit or diminish tbe existing rights of its policy holders. In tbis instance tbe consolidation agreement expressly assumes all the liabilities of tbe Madison Company, subject only to the-articles and by-laws of tbe defendant; but no such articles or by-laws were offered in evidence, except a statute of Minnesota wbicb, perhaps, enters into tbem, and wbicb provides tbat in case of consolidation tbe new company shall be liable-for tbe payment of all obligations of tbe consolidated companies. Hence there is no proof to limit tbe complete assumption by defendant of tbe Madison Company's liability to-plaintiff. Any such question is, however, foreclosed by tbe finding of the fact that such assumption -was made, since defendant reserved no exception thereto.
Since it is conceded that eighty per cent, of an assessment at the agreed rates upon all the members of the Madison Company still members of the defendant company, or even upon those who, as we hold, have already paid their assessments in the commuted form of stipulated premiums, would considerably exceed the $2,000 maximum of plaintiff's certificate, we can find no escape from the conclusion that defendant was and is liable to him for that amount.
Some objection is suggested to plaintiff's right to recover upondhe certificate because, by its terms, it was not payable until sixty days after proofs of loss. No formal proofs of loss had been made, because' the defendant declared the certificate forfeited and refused to send blank's for proofs. This action, however, was commenced within about twenty days after maturity of certificate, viz., February 7, 1902. This might be a serious obstacle to the maintenance of an action at law upon the certificate, but the fact is that this action was primarily one in equity to compel reinstatement of plaintiff's insurance notwithstanding a forfeiture in August, 1901, and such reinstatement is adjudged without appeal by defendant. For these reasons it is entirely proper for the court, in equity, having acquired jurisdiction over the parties and the controversy, to proceed to do complete justice, though part of the relief consists of mere money recovery, and, the money being due before trial, no insuperable obstacle to judgment for its recovery exists. We find no sufficient evidence as to when proofs would have been made but for defendant's repudiation of plaintiff's right; hence we adopt the date of the service of the complaint, February 20, 1902, since that document gave all needed information for adjustment. The actual payment should have been within sixty days from that date, to wit, April 21st; hence interest should then commence. Laycock v. Parker, 103 Wis. 161, 187, 79 N. W. 327.
By the Court. — Judgment appealed from is modified as of its date by changing the amount of damages from $206.45 to $2,265, and the total to $2,310.49, and as so modified is affirmed; appellant to recover costs in this court.
SJiebecKERj J., took no part.