Opinion ID: 731288
Heading Depth: 2
Heading Rank: 4

Heading: Mutual Guaranty's authority to increase the withdrawal penalty

Text: 40 CKCU contends that Mutual Guaranty lacked authority to increase to one hundred percent the proportion of a member's capital contribution forfeited upon withdrawal. Although CKCU concedes that it agreed in the contract of insurance to be bound by Mutual Guaranty's bylaws, including subsequent amendments, it cites a 1933 Tennessee Supreme Court case which holds that the power reserved by a mutual benefit society to amend its laws does not authorize it to decrease the benefits to which a member is entitled by the terms of his contract. Hazelwood v. Railroad Employees' Mutual Relief Society, 166 Tenn. 556, 64 S.W.2d 15, 16 (1933); see also Gaut v. Supreme Council Am. Legion of Honor, 107 Tenn. 603, 64 S.W. 1070 (1901). 41 The district court rejected this argument, holding that Hazelwood represents a narrow exception taken by some courts to what is otherwise a broad general rule. Aplt's Br., Addendum at 26. The general rule, the court held, is that where a member of a mutual society  'agrees to be bound by subsequent changes or amendments, his agreement will or may be enforced, even though his rights are thus injuriously affected.'  Id. (quoting 36 Am.Jur.2d Fraternal Orders and Societies § 20 (1968)). Like the district court, Mutual Guaranty also attempts to distinguish Hazelwood and Gaut from this case, on the grounds that in both of those cases the bylaw amendments held to be unenforceable affected a vested right. Aple's Br. at 25. 42 We agree with the district court that these cases are not dispositive, but we reach this conclusion for different reasons. In both of the cited cases, a mutual benefit society amended its bylaws so as to reduce substantially the life insurance benefits owed to the beneficiary upon the death of the member. See Hazelwood, 64 S.W.2d at 15; Gaut, 64 S.W. at 1074-75. Here, by contrast, CKCU does not allege that its insurance benefits would have been reduced had it remained a member of Mutual Guaranty; nor had the plaintiffs in the cited cases unilaterally sought, as CKCU has, to withdraw from their insurance contracts. More recent authority suggests that Hazelwood 's narrow rule does not apply to this kind of situation. See Lee v. Occidental Life Ins. Co., 40 Tenn.App. 265, 291 S.W.2d 273, 276 (1956) (holding that the Hazelwood case is not authority where the certificate issued to the plaintiff stated that it was subject to subsequent bylaw amendments). We decline to extend the holdings in Hazelwood and Gaut to the facts of this case. 43