
    Julia McCloskey, Respondent, v. Supreme Council, American Legion of Honor, Appellant.
    Second Department,
    November, 1905.
    Fraternal benefit society — agreement to abide by amendments in bylaws binding on beneficiaries — rights of such beneficiaries stated— insufficient proof of fraud by society — accord and satisfaction.
    Where the application for insurance in and the certificate issued by a fraternal society contains the agreement by the assured, to conform in all respects to the laws, rules and usages of the order now in force or which may hereafter be adopted, a subsequent aniendment of the by-laws of the society reducing to §3,000 all outstanding certificates exceeding that amount, is binding upon the beneficiaries, although the original policy was issued for §5,000.
    The beneficiaries under a certificate in such society, unlike the beneficiaries in a regular life insurance policy, have no vested rights when they have paid no part of the expenses of membership and when the.rights of the assured are. to be measured by the by-laws, amendments to which, by the terms of the original contract, are to be retroactive. Moreover, the assured, by paying without objection the reduced assessment after the reduction of the amount of insurance, has assented to such reduction.
    
      It seems also that under the terms of said application and certificate a change in the by-laws requiring that an action on the certificate be brought within one year is binding upon the beneficiaries, although there was no such limitation at the time the membership was taken.
    A. finding of fraud on the part of the society which is based on the fact that its ■agents, in; securing the releases of the beneficiaries, did not tell them' of a legal decision holding said by-law reducing the insurance to be invalid, is not warranted, when the proof shows that the by-law was,not referred to by the agents, as a reason for making the reduced payment.-. The society was under no duty to inform the beneficiaries of said decision.
    
      Held, further, that the indorsement of the society’s draft for the sum- paid, together with the indorsement and delivery of the certificate for cancellation and a formal release of- all claims by the beneficiaries, constituted an accord and satisfaction. • .
    Appeal by the defendant, the Supreme Council, American Legion of Honor, from a judgment of the Supreme Court in favor of the plaintiff, entered.in the office of Abe clerk of the county of Kings on the 10 th day of May,' 1904, upon the decision of the court rendered -after a /trial at the Kings County Special Term.
    
      Henry A. Powell, for the appellant!
    
      Lawrence G. Goodhart [ Walter G. Rooney with him on the brief], for the respondent.
   Rich, J.:

Oñ November 3, 1882, one James I). Hall, then being a member in good standing .of the order known' as the American Legion , of Honor,; made an application in writing to St;. John’s Council Nd¿ 391 for the benefits of a sixth grade membership, to be paid upon bis decease to his mother, Catherine Hall. The only benefit certificate appearing in'the record to have-been issued to him is dated February 28, 1891, and is -payable one-half to each of -his sisters Eliza and Julia Hall, the assignors of the plaintiff. It is presumable that a certificate was issued at the time of the application payable to the mother which, nine years later, was superseded by the certificate payable to the sisters.

The application, contained the following-clause : I agree to make punctual payment of all- dues and assessments for- which I may become-liable, and to conform in all respects to the Laws, Rules and Hsages of the Order now in force or which may hereafter be adopted by the same.”. The consideration stated in the certificate issued is “the full compliance with all the by-laws of the Supreme Council, A. L. of H. now existing or hereafter adopted and the conditions herein contained.”

The appellant is a fraternal benefit society, representative in its character, delegates being elected from local councils to the grand councils, and from the latter to the supreme council, its highest body. Its constitution at the time Hall became a member, and at the time said certificate was issued, contained the following, among other provisions: Under the title “The Objects of the Order:” “ 5th. To establish a Benefit Fund, from which, on the satisfactory evidence óf the death of a beneficial member of the Order, who has .complied with all its lawful requirements, a sum not exceeding five ■thousand dollars shall be paid to the family, orphans or dependents as the member may direct.”

Its laws provided: “ Five thousand dollars shall be the highest amount paid by this Order on the death of a member. This sum shall be paid on the death of every sixth_degree member, * * * provided, however, that should a death occur when one assessment on each member would not amount to five thousand dollars, then the sum paid shall be a proportionate amount of one assessment on ' each member in good standing in the Order at the date of death, according to the degree of the deceased member, and such amount shall be all that can be claimed by any one. * * *

“ Applicants shall enter upon their application the name or names of the members of their family, ol* those dependent upon them, to whom they desire their benefit paid, and the same shall be entered in the Benefit Certificate by the Supreme Secretary, subject to such future disposal of the benefit among their dependents as they thereafter direct. * * *'

“ Members may at any time, when in good standing, surrender their certificate and have a new one issued payable to such beneficiary or beneficia/ries dependent upon them as they may direct upon the payment of a Certificate fee of fifty cents.”

Ueither the constitution nor bydaws contained a limitation of the time, for commencing an action on the certificate. In the year 1899 the defendant added to its by-laws one in the following language : “ Ho action at law or in equity in any court shall be brought or maintained, on any clause or claim arising out of any membership or, benefit certificate, unless such action is brought within one year from the time when such action accrues. Such right of action shall accrue 90 days after all proofs, called for, in case of death of a member, shall have been furnished.” And in August of that year the defendant amended its.by-law establishing the amount to be paid on the death of a member (such amendment to take effect on October 1, 1900), so that it read as follows; Two thousand .dollars shall be the highest amount paid by the Order on the. death -of a member, upon any Benefit Certificate, heretofore or hereafter issued. ■ This sum shall be paid on the death of every member holding a Benefit Certificate of two thousand dollars or.over.” •

Hall paid all the assessments called" for by defendant down to October 1, 1900, upon the basis of benefits to the amount of $5,000 (each assessment being for $24) and thereafter to the time • of his death paid assessments. called for on the. basis of benefits of $2,000 (each assessment being, for $9.60) without protest or, complaint against the action of the society in the amendment of such law and its consequent effect on liis certificate. He died March 2, 1902, in good standing. . Proofs of his death were filed with defendant on or before July TO, 1902. In April, 1901, in an. action brought by one Langan against the American Legion of Honor, it was held by the Trial Term that the amended law reducing payments of $5,000 benefit certificates of deceased members to $2,000 was inoperative and void. The defendant learned of- this decision May 3, 1901. Prior to duly 18,. 1902, officers of the local council of'defendant of which deceased was a" member had a conversation with the sisters (beneficiaries) of said Hall-(Julia Hall Loader and Eliza Hall), and the record shows that it was stated to them that the assessments were lowered, and they were obliged to reduce the. five thousand dollar certificates to two. thousand dollars or go into bankruptcy, or give it to a receiver and get nothing. Q. (By the Court) He offered to give you, asked you to take two thousand dollars in full for the loss on the policy ? ■ A. He did not say anything about-being in full to me. He did not propose to give me any more. But he proposed to give me two thousand dollars; * * * Q. Did Mr. Rankin or Mr. Franklin or any person say to you there had been any decision at all declaring or adjudging that the reduction of by-laws was illegal? * * *■ A. Ho. By the Court: He did not tell me that any case had been decided holding that the reduction was void. He did not tell me about the Langan case being decided. Q. Did he tell you of passing the by-law reducing these benefits? A. He did not say anything to me at all.”

As the result of the negotiations then had, the defendant on July tenth issued a written instrument in the following language :

“ $2,000.00. Ho. 14796'
“ American Legion oe Honor.
Benefit Fund.
“ Boston, Jul. 10, 1902..
“ Pay to the order of Eliza Hall and Julia Hall, sisters of late James D. Hall, each, Two Thousand Dollars, in accordance with Benefit Certificate Ho. 152,700 of James D. Hall, late Third Degree member of Acme Council .Ho. 3 A. L. of H., located at Brooklyn, State of Hew York.
“WM. N. DAVEHPORT,
Supreme Commander. “ADAM WARNOCK,
;“ Supreme Secretary.
“ GEO. W. KENDRICK, Jr.,
[seal.] “ Supreme Treasurer.
To Third National Bank, Philadelphia, Pa.”

which the beneficiaries received indorsed • on the back as follows: “ Eliza Hall, Julia Hall (Julia Hall Loader) sisters of the late James D. Hall. (Seal),” and the draft was paid by the bank on which it was drawn July 24,1902. Under date of July 18,1902, the beneficiaries indorsed upon the benefit certificate the following, and delivered said certificate to the defendant for cancellation:

“Undersigned Beneficiary named in the within benefit certificate hereby acknowledges having received the amount herein agreed to be paid and this certificate is hereby surrendered to the Supreme Council, American Legion of Honor, for cancellation.
“ JULIA HALL ‘ LOADER,’
“ELIZA HALL. .
“Dated July 18th, A. D. 1902.”
and also signed and delivered the following release:
“ Death Ho. 14,796.
“Release.
“ Know all men by these presents¿ .that we, Eliza Hall and Julia. Hall Loader, beneficiaries of the" late James D. Hall, do hereby remise, release and forever ■ discharge the Supreme -Council, American Legion of Honor, its successors and assigns, of and from, all, and all manner of, actions and causes, of action, suits, debts, dues,, accounts, bonds, covenants, contracts, agreements, judgments, claims and demands whatsoever in law or equity; which against the said Supreme Council, American Legion of Honor, I ever had, now have, or which" my heirs, executors, administrators or assigns, or any' of them hereafter can, shall or- may have for or by reason of any cause, matter or thing whatsoever, from- the beginning of- the world ■ to the date of these- presents,
In witness whereof we have hereunto set our hands-and seals this eighteenth day. of July, in the year of otir Lord one thousand nine hundred and two (1902). ,
“ JULIA HALL LOADER, [l. s.]
“ ELIZA HALL. [l. s.]
“Signed, sealed and delivered in the presence of
“ George B. Heald. [l. s.]:
“ [seal] R. B. Franklin. . [l. s.]
“ Thos. F. Stilliman. [l. s.] ”

On July;8, 1903, said beneficiaries executed and delivered to the respondent the following instrument:;

“ In consideration of the sum of One dollar to us in hand paid by Julia McCloskey, wife of Felix R., McCloskey, of the Borough of Brooklyn, .State of Hew York, We, Eliza Hal] and Julia Hall Loader of the Borough of Manhattan, State as aforesaid, do hereby sell, assign and transfer and set over to the said Julia McCloskey' all our right, title arid interest in and to a certain policy or certificate of' insurance issued by the American Legion of Honor to James D. Hall, the late brother of said Julia Hall Loader and Eliza Hall) which said policy or-certificate is dated . and is for the-sum of Five -thousand ($5,000.00) dollars arid is payable to tiS as .beneficiaries, and in and to any and all causes of -action thereunder. And We do hereby appoint her, the said Julia McCloskey, otir true and lawful attorney to collect the same by suit Or otherwise and in our name or otherwise.
In witness whereof,\ we have hereunto set our hands and seals, this 8th day of July, 1903.
“ELIZA HALL,
“ In the presence of JULIA HALL LOADER.
“Jos. Isaacs.”

Thereafter and on October 24, 1903, this action was commenced. The trial court vacated and set aside the indorsement made • on the benefit certificate, the surrender Of said certificate and said release; declared them null and void, and directed judgment for ’the plaintiff for $3,320, which was later, by stipulation, reduced to $3,166.83. From the judgment entered in accordance with this direction, this appeal is taken. ,

We are called upon to determine, among other questions, the legal effect upon James D. Hall and the beneficiaries named in his benefit certificate (the plaintiff’s assignors), of the amendment adopted by the appellant to its laws reducing all outstanding certificates .exceeding $2,000 in amount to $2,000, and the provision requiring the commencement of an action within one year after the cause of action accrued, which amendment was adopted after the issuance to Hall of the certificate upon which this action is based, and in the consideration of this question we must keep in mind the distinction between the legal rights of the holder of an insurance policy in an insurance, company and the holder of, or beneficiary named in, a benefit certificate in a fraternal order.

This case was decided by the trial court upon the principle that the appellant could not by action, taken subsequent to the issuance of the benefit certificate to Hall, adopt an amendment changing the provisions of such certificate by reducing the amount payable, or limiting the time within which an action to compel its payment could be commenced, because the result of such an action would be to impair the vested rights of the beneficiaries named in the certificate, and it was assumed that such beneficiaries had' a fixed and vested right both in the certificate and in the sum required to be paid by its provisions.

The underlying principle of such decision is sustained by many late authorities, including decisions of this court, and is too'well estabtablished to be the subject of controversy in .cases where it is applicable, but I do not . think'it applies to or governs the rights of the parties: to this action for the reason that there is absent the essential elements upon which it rests, viz., a vested right, in the beneficiaries, in the certificate to the ¿xtent of full payment, of which" they could not be deprived without their consent. ' ,

- ■ The constitution and laws of the appellant, the application, and ■the certificate constitute the contract which existed between the appellant and Hall, and construed together measure the rights of these litigants. The beneficiaries are not shown to have paid any part of the expenses incident to the membership of their brother in the society or of the assessments made against him. . By the express terms of both-the application and certificate, Hall agreed to'conform in all respects to the “ Laws, Bules and Usages of the' Order now in force, or which may hereafter be adopted,” and the consideration of the certificate is therein stated to be his “full compliance with all the by-laws of the Supreme Council, A. L. of H., now existing or hereafter adopted?' Under these conditions all by-laws, regularly adopted by the appellant, became retrospective as well as pro^ spective in their, operation and effect upon Hall and his beneficiaries except as to rights which had become fixed' or vested by the terms of the original contract. (Shipman v. Protected Home Circle, 174 N. Y. 398.) If the rights referred to-were not vested in Hall or liis beneficiaries, the amendments recited could legally'be adopted by the society and. were binding Upon its members and their appointees. It was held in Sabin v. Phinney (134 N. Y. 423), in an action upon a certificate of membership issued by a fraternal order to one Sabin, carrying with it • death benefits payable to his wife, the plaintiff, which Sabin subsequently caused to-be changed and made payable to Phinney, the defendant, as follows.: “ The relation which existed between. Sabin and the society subjected him to certain burdens and entitled him to certain benefits during the continuance of his membership, and if he. died while in good standing in the order his appointee became entitled to- a certain sum. This relation could be terminated at any time at the will of the member, and the. appointee was changeable from time to time as he might elect. If We choose to term this, relation a contract and it was established by agreement, the contract gave the right of change of the beneficiary with or without reason. Any pei’son who became an appointee in such a certificate took the position subject to the absolute right of the member to substitute a new one at any moment. The rights acquired by the member by virtue of this relation did pot amount to a chose in action. He had no interest in the society that was assignable or transferable until some right of action had accrued. The appointee had no vested interest in the sum which might in a contingency become 'payable on death of the member.” All of the. facts upon which the court based this conclusion existed in the case at bar. It is inferable from the. facts here that Hall assented to the change made in the by-laws. For seventeen months after it took effect and became operative, he paid the reduced assessments which were $374.40 less than he would have paid for benefits of $5,000. Twenty-six assessments were made during that time. It necessarily follows that on twenty-six different occasions before his death Ms attention was directed by the reduced assessments to the fact that his benefits had been reduced correspondingly, notwithstanding which he is not shown to have made any complaint or protest or taken any action indicating his dissent from the action of the society. In this the case at bar is' distinguishable from the Langan, case, in which the member refused to assent to the action of the society and tendered the assessments upon the basis of an insurance of $5,000, notifying it that he would keep the tender of payment of all assessments, legally called in the future, good on that basis. (Langan v. Supreme Council Am. L. of H., 174 N. Y. 266.) . In Shipmam, v. Protected Home Circle (supra), an action based on a certificate of a co-operative life insurance company, which amended its by-laws after the issuance of the certificate, the court again considered this question, and Judge Werner, after stating the principle's applicable to holders of policies of insurance, says: “ It is undoubtedly true that in the case of a contract valid at its inception such vested rights cannot be affected or impaired by the subsequent fraud or wrong of the insured. But what are the vested rights of a beneficiary under a certificate like the one held by the plaintiff herein ? The argument in her behalf proceeds upon.the theory that there is a strict analogy between regular life insurance and co-operative or assessment life insurance, and this is where we think the inherent weakness q£ plaintiffs ease becomes apparent, ' Under the ordinary life insurance, policy taken out by the insured for the benefit of a third person, or by a third person for his own benefit on the life of the insured, the beneficiary takes a vested interest in the policy and the fund payable thereon, from the moment that the policy is delivered. His rights when once thus vested cannot be defeated by the subsequent acts of the assured. The assured has no power of disposition_over the same without the consent.of the beneficiary, and, upon the death of the insured, neither his personal representatives nor his creditors hav'e any interest in the proceeds of such a contract. * * * A contract of insurance based upon membership in a benefit society rests upon radically different legal principles than those which govern the ordinary life insurance policy.” After citing and quoting from Bacon on Benefit Societies (§ 321) and the case of Sabin v. Phinney, to which I have hereinbefore referred, the opinion continues: “So the plaintiff, as the beneficiary named in. the certificate herein, took it subject to change in accordance with the-constitution and by-laws of the defendant, and, therefore,>- she acquired no vested interest in either the certificate or the money to bepadd upon it. The foregoing views as to the effect of such a contract as -the one at bar do not depend wholly upon the authority of the reported cases, for the statute itself (Ins. Law, sec. #38 ) provides in express terms that a member of a benefit society has the right to change the beneficiary named in the certificate without the consent of a previously named beneficiary. Plaintiff’s rights were subject to revocation; they could be affected by the acts of her husband; they were dependent upon the limitations of the contract by which her husband was bound and, in short, were no greater than those of the husband’s personal representatives would have been in an ordinary contract of insurance wherein they might have been named as beneficiaries.” In the case at- bar the facts are substantially the same. The application and certificate contain the same provisions as do the by-laws and constitution of the two societies, and the principles there enunciated control the disposition of the issues presented here to the extent of requiring a decision that the' amendment adopted and limitation added, if valid, regular and in accordance with the provisions of appellant’s constitution, were not void or inoperative because of rights in Hall or his beneficiaries which had become, fixed .or rested in them by the terms of the original contract. ■ In the absence of evidence or a finding to the contrary, we must assume, such validity and' regularity. (Brundin V. Supreme Council, 13 App. Div. 147, 149 ;. Shipman v. Protected Home Circle, supra.) They became part of the contract between appellant and-Hall, bound him and his beneficiaries, and, therefore^ require a reversal of this judgment.

There is another reason why the-judgment cannot stand. Although the complaint alleged and the trial court found as a fact that “ with the purpose of cheating and defrauding the said Eliza Hall and Julia Hall Loader and to induce- them to surrender the said policy or benefit certificate aforesaid for less than its face value and to discharge the liability of this defendant thereon, the defendant falsely stated and represented to thé' said Eliza Hall and Julia Hall Loader that a certain by-law had been passed by thé defendant providing that the amount payable under the aforesaid benefit certificate or policy of insurance, held by the said James D. Hall, to wit, the sum of Five thousand ($5,000) dollars had been reduced by the defendant to the sum of Two thousand ($2,000) dollars, was at said time, to wit, at the death of said James D. Hall on the-second day of March, 1902, a good, valid, subsisting, legal an'd existing by-law, and in full force and effect in the State of Hew York, and that it applied to and affected said certificate; that the said by-law as amended was in all respects legal and authorized and binding upon the plaintiff, and applied to and affected the said benefit certificate held by her, and that the said amended by-law was in full force and effect; that the said representations and each of them so made as aforesaid by . the defendant were false, and weré by it known to be false, and were known to be false by the officers of the defendant, who made the same when the same were made.” Such and similar statements and representations are found by the court to have been made in his other findings of fact. There was no evidence given which sustains such findings; on the contrary, the evidence expressly negatives the existence of such facts. The only witness' testifying upon the subject was Eliza Hall, one of the beneficiaries. The only statement testified to by her as having been made was that “ the assessments were lowered, and they were obliged to reduce the five' thousand dollar certificates to two thousand dollars, or- go into bankruptcy or give it to a receiver and get nothing.” The witness testified that nothing was said to her about the passing of the amended by-law or' its existence. This evidence not only fails to support' the findings, but there is no proof that the statement she says was made was not true in fact. The reduction was the formal act of the appellant, under legal advice, and at a time when a decision of this State (Hutchinson v. Supreme Tent, etc., 68 Hun, 355) held such action to be legal. It was over two years after the amendment had been adopted when the Court of Appeals, in Weber v. Supreme Tent of K. of M. (172 N. Y. 490), announced a- different doctrine where the amendment was held to be unreasonable and to deprive the insured of the benefit of his contract. The amendments under consideration in this case. cannot be said to be unreasonable; the one reducing the amount to be paid on a $5,000 certificate operated to reduce the' assessments made after it took effect in the same ratio that the payment was reduced, which seems to have been perfectly satisfactory to the member whose certificate it affected, and in the Weber case it did not appear, as it does in the case at bar, that by the- terms of the original contract the rights of the member and his appointees were expressly dependent upon the by-laws of the society then existing or thereafter adopted.

There is no evidence in the record establishing fraud as the result of any representations or statements made by the appellant or its officers, and the findings of fact referred to are wholly without sustaining evidence. It is true that defendant’s representatives did not at the time of the settlement disclose to the beneficiaries that the Trial Term had .held in the Zangan case that appellant’s amended .by-law of 1900, reducing the amount payable oh outstanding $5,000 certificates to $2,000, was void, but it is equally true - that the defendant had not asserted the existence of an amended by-law or that any amended by-law it had adopted was valid, or in any ■manner affected the rights of the beneficiaries or constituted a legal right of the society to insist that the beneficiaries were entitled to the payment of .$2,000 only on their certificate. An entirely different case is presented here than was before this court in Simon v. Supreme Council (91 App. Div. 390), and the' decision in that case is not an authority for holding 4h.at defendant’s failure to advise. the assignors of respondent, at the time of the settlement, of the decision in the Lcmgan case constituted fraud, entitling the plaintiff to the relief she obtained in the trial court, lío duty rested upon the appellant- under the circumstances • proven in, this action to inform the beneficiaries of the decision in the Lcmgan case, consequently fraud cannot be predicated thereon, and such omission does not present a case entitling plaintiff to equitable relief.

The exceptions-taken to the findings of fact and of law based thereon were well taken.

The fraud alleged in the complaint not having been' established, the disposition of the appeal is controlled by the decision of the Court of Appeals in Simons v. American Legion of Honor (178 N. Y. 263), and the evidence establishing all of the essential elements of an accord and satisfaction within the principles established by that decision, this action cannot be maintained. ‘

The judgment appealed from must be- reversed, and a new trial gran ted, costs to abide-the event.

Jenks, J., concurred; Hirschberg, P. J., Bartlett and Miller, JJ., concurred in the result, on the ground .that there was no evidence given establishing the scope and effect of the decision in the Lcmgcm case, and hence no basis for a finding of fraud.

Judgment reversed and new trial granted, costs to abide the final award of costs. 
      
      
         Langan v. American Legion of Honor (34 Misc. Rep. 629).—[Rep. ’
     
      
      Laws of 1893, chap, 690, § 388, as amd.— [Rep.
     