
    BENEFICIARIES UNDER CERTIFICATES ISSUED BY MODERN WOODMEN OF AMERICA.
    Common Pleas Court of Montgomery County.
    Modern Woodmen v. Cahill et al.
    Decided June 15, 1926.
    
      Mutual Benefit Societies — Changes in Beneficiaries — Rights of Original Beneficiary Not Affected Where Attempted Change Is Void.
    
    1. The rights of a beneficiary under an insurance certificate are not affected by an attempt by the insurrer to designate another as beneficiary who was not qualified under the by-laws to receive such designation.
    2. When the last designation of a beneficiary fails because invalid under the rules, a previous designation of another beneficiary remains in force if valid.
   SNEDIKER, J.

This case is before the court on the merits of the re-, spective claims of Marie Cahill, Luella Woods, and Mildred L. Dillman to a fund amounting to $1,000 which has been deposited by the Modern Woodmen of America with the clerk of this court with a petition praying that it be permitted to interplead and so deposit the fund, and that the several defendant claimants whom we have named be required to set up whatever right, title, or interest they have or claim to have in the fund or any portion thereof, and so forth.

Marie Cahill by her answer says that she is entitled to the thousand dollars so deposited by the Modern Woodmen of America under a benefit certificate issued by it to Alonzo Homer Dillman, September 29, 1924, in which she is named as beneficiary. Luella Woods in her answer asserts her right to receive the amount deposited on the theory that, having been previously named as the legal beneficiary under a benefit certificate issued to Dillmán, and the certificate in which Marie Cahnl is named as beneficiary being invalid and without force and effect under the rules, regulations and by-laws of the Modern Woodmen of America, she is entitled to the benefit of the certificate in which she was named as beneficiary. MildredDillman makes her claim to the fund as the daughter, only child, and sole heir at law and next of kin of Dillman, on the theory that both the benefit certificate in which Marie Cahill was named as beneficiary and that in which Luella Woods was a beneficiary are of no force or effect.

The hearing of this case consumed a number of days, during which time all of the parties had full opportunity to support their claims by oral and written evidence. After the hearing arguments were made and briefs have been presented.

The Cahill certificate designates her as a first cousin of Alonzo H. Dillman. At the time of its issuance the bylaws of the Modern Woodmen of America, with relation to beneficiaries, provided:

“Sec. 50. Who May Be Beneficiaries. Benefit certificates shall be made payable only to the wife, surviving children, including legally adopted children, or some other person or persons specifically named in said benefit certificate as beneficiary or beneficiaries, who are related to .the member as heir, blood relative (blood relative meaning relationship not further removed than cousin in the first degree), or person dependent upon him, or member of his family whom the applicant shall designate in his application. No payment shall be made upon any benefit certificate to any person who does not bear the relationship as wife, surviving child, legally adopted child, heir, blood relative, or person dependent upon or member of the family of the member at the time of his death * *
“Sec. 51. If Beneficiary Is Disqualified * * *. In the event of the disqualification of the beneficiary under the provisions of Section 50 hereof, and if such member has failed to have another beneficiary named, as provided in Sections 52 and 53 hereof, then the amount to be paid under the benefit certificate to said * * * disqualified beneficiary shall be payable to the surviving beneficiaries, if any there be, share and share alike, or if no beneficiary survives him, then to the widow; if no widow, to his children, including his legally adopted children * * etc.

Section 52 reads:

“Change of Beneficiary — Assignment of Benefits. Any member in good standing who desires to change his beneficiary shall execute the surrender clause on the back of his benefit certificate, designating therein the change desired, and deliver said certificate, together with a fee of 50 cents, to the camp clerk. The execution of such surrender clause shall be in the presence of, and be attested by, his camp, clerk. If the member be so situated that he cannot execute said surrender clause in the presence of his camp clerk, his acknowledgment thereto may be taken by any person authorized by law to administer oaths and the same shall then be forwarded to the clerk of his local camp * * * who shall thereupon issue a new benefit certificate payable to the beneficiary named in said surrender clause, subject to the provisions of Section 50 hereof * * *. Any attempt by a member to change the payee of the benefits of his benefit certificate by will or other testamentary document, contract, agreement, assignment, or otherwise than by strict compliance with the provisions of this section shall be absolutely null and void * * 99

No question is made with respect to a compliance by Dillman with the requirements of Section 52 of the bylaws just quoted other than that in naming Marie Cahill as his beneficiary he violated his privilege under Section 50, a compliance with which is made a requirement under Section 52.

An issue was made in the case as to the truth of the statement made by Dillman to the Modern Woodmen of America and of the statement contained in the benefit certificate issued on September 29, 1924, to the effect that Marie Cahill is related to Dillman as first cousin. The evidence was principally with regard to this issue.

In order to lay out of the case all claims of Marie Cahill, it is only necessary for us to say that we regard her as having utterly failed to establish any relationship to Dillman and as therefore being disqualified under the by-laws of the Modern Woodmen of America from being named by him as his beneficiary.

This leaves to us the determination as to the rights of Mildred L. Dillman and Luella Woods. At the time of the issuance of the certificate of September 29, 1924, Dill-man surrendered a certificate which he had theretofore obtained from the Modern Woodmen of America for a like amount, in which Luella Woods was named as beneficiary, of whom he was a nephew and who therefore could properly be made his beneficiary under the by-laws of the order. It is now the contention of counsel representing Luella Woods that the certificate of September 29, 1924, being invalid by reason of non-compliance with the bylaws, Luella Woods is entitled to recover under the surrendered certificate. On the other hand, Mildred Dillman, through her counsel, contends that the certificate in which Mrs. Woods was made beneficiary having been surrendered at the time of the issuance of the Cahill certificate, she as the daughter and only heir at law of Dillman ought to receive the amount now in the hands of the clerk.

Under the by-laws, Section 52, “any attempt by a member to' change the'payee of the benefits of his benefit certificate * * * otherwise than by a strict compliance with the provisions of this section shall be absolutely null and void.”

The attempt to designate Marie Cahill was “otherwise than by a strict compliance with the provisions” of Section 52 of the by-laws. The act of surrender of the certificate for that purpose and' all subsequent acts were, under the contract between Dillman and the Modern Woodmen of America, absolutely null and void. Being so, they were without force or effect and in no sense deprived Luella Woods of her right to the benefit of the certificate which had been previously issued to Dillman and in which she was so named as beneficiary.

It is stated generally by Joyce in his work on Insurance, at Section 752:

“If a mutual benefit society names certain classes from which the beneficiary must be chosen and the insured member designates some one who is not of those classes, the fund will, where the society admits a liability to some one, be paid to those who sustain the requierd relation to the member, for a designation of a beneficiary not within the classes specified is, as already stated, invalid. So, where the designation of a new beneficiary is illegal under the by-laws, the original beneficiary is entitled to the benefits.”

In the case of Sturges, etc., 126 Kentucky Reports, p. '80, the court hold:

“A beneficiary’s rights under an insurance policy are unaffected by a void attempt to substitute beneficiaries.”

In the body of the opinion the court refers to the rule laid down in 4 Cooley’s Brief on Insurance, p. 3776, as follows:

“ ‘If, however, the attempted change is invalid and ineffectual for any reason, the rights of the original beneficiary are not affected and the original designation remains in force.”

Going forward, the court say:

“It seems to us that that must be the sound rule, because otherwise an act inseparable would be held to be valid for one purpose though invalid for the purpose for which it was intended. The result would be to disappoint every manifest intention of the actor and to substitute beneficiaries for his bounty whom he never contemplated by any expressed intention in his life.”

In the case of Mary A. Smith v. Boston & Maine R. R. Relief Association, 168 Mass., p. 213, the second syllabus is:

“Where the last designation of a beneficiary in a certificate of membership in an association fails, a previous designation of another beneficiary remains in force, if valid.”

In the case of Pettus v. Hendricks et al., 113 Va., p. 326, the 4th syllabus reads:

“If a beneficiary of a certificate in a benefit society has been lawfully designated, but subsequently a change is sought to be made in the beneficiary, if for any reason the change is invalid the rights of the first beneficiary remain in force.”

In his decision, Judge Keith quotes Bacon on Benefit Societies, Sec. 310c:

“ ‘The question occurs as to the effect on the rights of the beneficiaries first designated by an attempted change of beneficiary which is incomplete, or where the change, being effected by compliance with the required formalities and the issuance of a new certificate, is illegal'because the second beneficiaries are not entitled to take. While it seems to be taken for granted in the cases cited in the -proceeding sections that if the attempted change of beneficiary is not complete the rights of the first beneficiary are not affected, because the revocation is not made complete by the issuance of the new certificate’, it is -now settled that, if for any reason the change of beneficiaries is invalid, the rights of the first beneficiary remain in force.’ Citing.a number of authorities. See also Grace v. N. W. Mut. Relief Association, 87 Wis., 562, 126 Ky., 80, 142 Mass., 224.

In the case of Marsh v. Supreme Council American Legion of Honor, 149 Mass., p. 512, the court refers to 142 Mass., 224, saying:

“In this case, a member of the association, in his application for membership, designated his wife as a person to whom the benefit was to be paid at his death. A bylaw provided that the benefit should be paid ‘to the person or persons designated by the member, in his application for membership, or last legal assignment, provided such person or persons are heirs or members of the decedent’s family.’ The member afterwards attempted to change the designation from his wife To his mother, who was not living with him, but who was living with her husband in another town and county. It was held that the attempted designation was ihvalid, that the original designation to the wife remained in force, and that she was entitled to the fund.”

Keeping in mind that the attempt to substitute Marie Cahill was void and of no effect under the by-laws,- the decision of Grace et al., Appellants, v. N. W. Mut. Relief Assn. and Another, 87 Wis., p. 562, becomes pertinent in this case.

(Syllabus) “A member of a mutual benefit society surrendered his certificate ‘for the purpose of securing a change of beneficiary,’ directed that the new certificate be made payable to such person or persons as he should designate in his will. The new certificate was issued accordingly, but no new beneficiaries were ever designated by will or otherwise. Held, that the attempted change was incomplete and ineffectual and that the contract remained as though the former certificate had never been surrendered.”

The last case to which we wish to refer, and which we think is in accord with the authorities already quoted from, is Supreme Catholic Benevolent Legion v. McGinnis, 59 O. S., p. 531. In this case Judge Spear used the following language:

“The classes of persons to be benefitted being designated in the charter, it is clear that the member would be without power to select as a beneficiary one not so designated, and the corporation equally without power to accumulate a fund for persons other than those of the classes so named. To attempt, therefore, to designate one who is neither of the family of the member, nor dependent upon him, being inconsistent with the charter and the laws, was wholly ineffectual to accomplish that purpose. Nor can we assume that the deceased member intended the procuring of the second certificate to operate as a revocation of the first in the event of its invalidity,” etc.

This opinion of our supreme court was followed in the case of Huber v. Sahm, 70 O. S., 433, and has not since been reversed, and is quoted with approval and as authority in the case of Sturges v. Sturges, 126 Ky., pp. 80-89.

Surrender has always been held to be a requirement for the sole benefit of. the insurer. Then, when coupled with a void transaction, it ought not to be construed of itself to operate as a disqualification of either the insured or his beneficiary.

It is our opinion that, this being the law of the case at bar, Luella Woods is entitled to the benefit of the certificate in which she was named as beneficiary and which was in no way affected by the void attempt of Dillman to substitute Marie Cahill.

Finding in favor of the contention of Luella Woods, we necessarily dispose of the claim of Mildred Dillman adversely.

An entry may be drawn in conformity with this opinion.  