
    Modern Woodmen of America v. Myers.
    
      Insurance — Fraternal and beneficiary — Change of beneficiaries — Compliance with constitution and by-laws — Illinois member designates Ohio resident — Construction of foreign court controls, when — Defense to action in Ohio.
    
    1. When a resident of a foreign state becomes a member of a fraternal and beneficiary society organized under the laws of such state, and there enters into a contract of insurance, with a requirement for performance there in conformity with the society’s constitution and by-laws adopted under sanction of the laws of the state, in 'determining the rights and obligation of the society and its members, recourse should be had to the significance and effect of its by-laws as construed by the courts of such state. ■
    2. The by-laws of such society contained a clause that “No change in the designation of beneficiary or beneficiaries shall be effective until the old certificate shall have been delivered to the head clerk and a new certificate issued during the lifetime of the member” and that any attempt by a member to change beneficiaries otherwise than by a strict compliance with the provisions of the by-laws relating to change of beneficiaries, should “be absolutely null and void.” An answer, alleging in substance that courts of such foreign state (in this case, Illinois), construing such by-laws, have held that such attempted change of beneficiaries as therein disclosed is ineffective unless a new certificate has been issued during the lifetime of the member, states a good defense.
    (No. 16057
    Decided December 17, 1918.)
    Error to the Court of Appeals of Hancock county.
    Defendant in error, Van R. Myers, brought an action in the common pleas court of Hancock county, Ohio, for the sum of $1500. His petition recited that plaintiff in error was a fraternal benefit society, incorporated under the laws of the state of Illinois, having its principal office in that state, and doing business in the state of Ohio; that on July 21, 1899, the society issued to one Henry Myers, one of the members of a subordinate branch at Decatur, Illinois, a benefit certificate for the sum of $3000, payable in the event of his death to hi's wife, May M. Myers; that his wife died May 4, 1914; that on October 5, 1914, Henry Myers became a resident of Hancock county, Ohio; that after the issuance of said certificate the same was either lost or destroyed, prior to Februarjr 23, 1915, and on that date, being still a member of the camp and desiring to obtain a new certificate and to designate other beneficiaries, Henry Myers made an application in writing, on a form prepared and furnished by the head clerk of the society; and that in this application for a new and substitute certificate, in lieu of the one lost or destroyed, Henry Myers designated the following' beneficiaries to be named in such, new certificate: the defendant in error, Van R. Myers, a brother, to receive $1500; his son, John R. Myers, of Decatur, Illinois, the sum of $1000; and his sister, Jane Nicely, of Findlay, Ohio, the sum of $500. The petition further recited that the application and waiver of all claims under the original certificate were in form and substance as required by the by-laws of the company, duly signed and attested, and with a fee of fifty cents were enclosed in a stamped envelope addressed to the clerk of the camp at Decatur, Illinois, which envelope was deposited in the United States mail at Mt. Blanchard, Ohio, on February 23, 1915; that the society neglected to issue the new certificate to Henry Myers, who died on the 28th day of February, 1915. Defendant in error asked judgment for the sum of $1500, the amount designated in the application for the substitute certificate.
    In its fourth affirmative defense to the petition the society pleaded that it was a corporation organized under the laws of the state of Illinois, with its principal office in that state; that the application for the original certificate was made by Henry Myers, and the certificate issued and delivered to him, in that state,' while a resident thereof; that the contract of insurance was composed of the application, the benefit certificate and the by-laws of the defendant; and that the waiver of the lost certificate was received in the mail of the defendant on February 26, 1915. The defense also set forth a provision of its by-laws with reference to the change of beneficiaries, as follows: “No change in the designation of beneficiary or beneficiaries, shall be effective until the old certificate shall have been delivered to the head clerk and a new certificate issued during the lifetime of the member and until such time the old certificate shall remain in force. * * * 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 relating to change of beneficiary shall be absolutely null and void.” The defendant also alleged in its defense that Myers died before the defendant in the due course of business could issue a new certificate to him; that the original benefit certificate issued by it was in force and was payable to the legal heirs of Henry Myers in the event of the death of his wife; and that Van R. Myers was not a legal heir. The fourth defense also contained the following allegation: “That the contract between the said Henry Myers and this defendant is governed by the laws of the state of Illinois; that the right of said plaintiff to recover in this action is governed by the laws of the state of Illinois; that according to the law of the state of Illinois, the request of the said Henry Myers to this defendant for a change in beneficiaries in his benefit certificate was not effective and was not consummated unless a new benefit certificate were issued by this defendant to the said Henry Myers during the latter’s lifetime, and in accordance with the by-laws of this defendant; that the law of the state of Illinois in this connection is set forth in the case of Hodalski vs. Hodalski, decided by the appellate court of the state of Illinois in April, 1913, and reported in Vol. 181, 111. App., page 158, in which case the law of the state of Illinois is announced as follows:” etc. The opinion of the court in the case of Hodalski v. Hodalski was set forth in said defense in haec verba.
    
    In the trial court plaintiff demurred to this, defense, and the court sustained him. This action was followed by trial, wherein the plaintiff recovered a judgment for the amount asked, and the court of appeals affirmed the judgment. Thereupon plaintiff in error prosecuted error to this court.
    
      Mr. Truman Plant z; Mr. Geo. G. Perrin and Messrs. Vorys, Sater, Seymour & Pease, for plaintiff in error.
    
      Mr. Jacob Line and Mr. C. B. Dwiggins, for defendant in error.
   Jones, J.

It is the insistence of the defendant in error that under the facts developed by the pleadings and conceded by the demurrer the judgments of the lower courts should be affirmed, since the pleadings, including the fourth affirmative defense, disclose that the insured, before his death, had done all in his power to change the beneficiaries in the manner pointed out by the by-laws of the association, and, furthermore, for the reason that his application for the substitute certificate had been addressed to the clerk of the camp at Decatur, Illinois, and received by him two days before the death of the insured. In support of that insistence, counsel for defendant in error have cited a number of authorities to the effect that when the insured has done all that he was required to do by the by-laws of the society, the court, upon principles of equity, will regard the change of beneficiaries to have been validly effected according to the manifest purpose of the insured. In the list of authorities cited, however, it does not appear that in any of them the fraternal association made the special defense pleaded in this case, viz., that the contract of insurance composed of the application, benefit certificate and by-laws of the defendant, was entered into by the insured, a resident of a foreign state, with a society organized under the laws of that state, and that according to the law of such state, under which the by-laws of the society were construed, the change in the original certificate was not consummated.

In support of its defense the defendant society relied upon the case of Hodalski v. Hodalski et al., 181 Ill. App., 158, wherein it was claimed that the courts of the state of Illinois, upon substantially the same facts disclosed in this record, and in construing the by-laws in question, decided that the acts of the insured were insufficient to consummate a change of beneficiaries.

In the case of Supreme Council of the Royal Arcanum v. Green, 237 U. S., 531, it is held: “The rights of members of a corporation of a fraternal and beneficiary character have their source in the constitution and by-laws of the corporation, and can only be determined by resort thereto, and such constitution and by-laws must necessarily be construed by the law of the State of its incorporation.”

In the case of Heaton v. Eldridge & Higgins, 56 Ohio St., 87, it is held: “Contracts receive their sanction from the law of the place where they are executed and to be performed, and their interpretation is controlled by that law.”

The reason for this principle is at once apparent. It permits a single and unified obligation due from such association to its various members, ascertainable according to the law of the state where the contract is made and is to be consummated, and where the corporation is organized and the contracting parties reside, so that there may be a unified liability only and not diverse liabilities arising from divergent construction of contracts by courts of different jurisdictions. The possibility arising from the fact that courts of various states may have divergent rules for the distribution of funds of this character has led the courts of last resort, as. stated by Chief Justice White in Royal Arcanum v. Green, supra, “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 question therefore remains whether under the facts conceded by the demurrer the laws of the state of Illinois touching the by-laws of this society relating to the substitution precluded the defendant in error from recovering on the attempted change of certificate. The by-laws of the society, which became part of the insurance contract, provided that there should be no change in the designation of the beneficiary until the old certificate should have been delivered to the head clerk and a new certificate issued during the lifetime of the member, and that any attempt by a member to change his beneficiary otherwise than by a strict compliance with the provisions of that by-law should be absolutely null and void. The by-law having stipulated that the change should not take effect until the new certificate was issued, what is the law of the state of Illinois as declared by the courts of that state in the construction of the by-law involved?

The case of Hodalski v. Hodalski et al., supra, related to a benefit certificate of insurance issued by the Modern Woodmen, and involved the construction of the same by-law, of the same society, pleaded in the fourth affirmative defense in this case. The only dissimilarity of fact between that case and this is that the certificate in the Hodalski case was received by the head clerk after the death of the insured. Counsel for the defendant in error insist that that was the controlling feature that led the Illinois court to uphold the validity of the original certificate. We do not concur in that view, since it is evident that the Illinois court there decided that under the by-law in question no change in the designation of beneficiaries should be effective until the old certificate had been delivered and “a new certificate issued during the lifetime of the memberThe quoted clause was italicized by the Illinois court, and in the opinion, immediately following that clause, the court used the following language: “The contract of insurance regarding the change of beneficiaries was not complied with in the lifetime of the insured, and the court below was right in decreeing that appellees were entitled to this fund under the old certificate.”

It also appears in the fourth affirmative defense that the waiver received from Henry Myers about February 26, 1915, contained a stipulation that the insured agreed that the original certificate should “become and be null and void from the date of the new certificate hereby applied for * * * if such neiv certificate shall be so issued during my lifetime." This clause having been incorporated in the usual forms issued by the society, was no doubt contained in the form used in the Hodalski case and probably influenced that court in its decision.

One of the defenses in this action alleged that John R. Myers, a resident of Illinois, brought an action on the original certificate issued in this case, claiming to be the sole beneficiary thereunder as an heir. That case was appealed from the circuit court of Macon county, Illinois, to the appellate court of the third district of that state, and an opinion was filed by the latter court on April 16, 1917. Although that case was decided after the trial of the Ohio case in the court of common pleas, and was not therefore proffered as the substantive law of Illinois, we have the right to examine this case, since it involves exactly the same facts, for the purpose of elucidation of the Hodalski decision.

The case of John R. Myers v. Modern Woodmen of America, 205 Ill. App., 45, discloses that the plaintiff recovered judgment for the full amount claimed, and from the opinion of Mr. Justice Graves it unqualifiedly appears that, under the by-laws referred to, no attempted change of beneficiary could be effective until a new certificate had been issued, during the lifetime of the member, in which a new beneficiary was named, and that the decision in the case of Hodalski v. Hodalski, supra, was to the same effect.

The judgments of the court of common pleas and the court of appeals are reversed, and the case remanded to the former with instructions to overrule the demurrer to the fourth affirmative defense.

Judgments reversed.

Nichols, C. J., Wanamaker, Matthias, Johnson and Donahue, JJ., concur.  