
    Isidor Hannes, Respondent, v. Nederland Israelitish Sick Fund, Appellant.
    First Department,
    July 11, 1912.
    Insurance —mutual benefit corporations — amendment of by-laws.
    A mutual benefit insurance corporation may amend an amendment to a by-law, reducing the amount that a sick member is entitled to receive, so long as the amount which such member has actually received is equal to or in excess of the amount due under the by-law as it existed when he became a member of the corporation.
    McLaughlin and Laughlin, JJ., dissented, with opinion.
    
      Appeal by the defendant, Nederland Israelitish Sick Fund, from an order of the Appellate Term of the Supreme Court, entered in the office of the clerk of the county of New York on the 19th day of March, 1912, affirming a judgment of the Municipal Court of the city of New York in favor of the plaintiff rendered on the 22d day of May, 1911.
    
      Alfred D. Lind, for the appellant.
    
      Myron Butler, for the respondent.
   Ingraham, P. J.:

The facts in this case are stated in the opinion of Mr. Justice McLaughlin. It seems to me clear that the contract between the plaintiff and the defendant was that created by the by-laws as they existed at the time the plaintiff joined the society. It is conceded that the defendant had no right without the consent of the plaintiff to abrogate or modify that contract by an amendment of its by-laws, but it is going much beyond any of the reported cases to hold that because a corporation changes its by-laws after a person has become a member and accepted the conditions there imposed such an amended by-law becomes a new contract which a corporation is powerless to change. When the plaintiff joined this corporation,the by-law provided that in the event of a member’s sickness being declared incurable by the physician of the society such member shall receive the sum of three dollars and fifty cents per week for twelve successive months and should thereupon be entitled to no further sick benefits. That was the contract, and it is conceded that the plaintiff has received a much greater sum from the defendant than the contract as between himself and the defendant required. In March, 1902, this by-law was amended by striking out the provision that a member afflicted with an incurable sickness was to be entitled to no further sick benefits than the three dollars and fifty cents per week for twelve successive months. It seems to me clear that by this amendment there was no new contract created. It provided for a gratuity in addition to that provided for in the contract between the plaintiff and the defendant, and so long as such an amended by-law was in force it may be conceded that the plaintiff would be entitled to receive the weekly payments as therein provided. In each of the cases cited in the opinion of Mr. Justice McLaughlin the right of a member of such a corporation is based upon the contract which arose between the parties under the by-laws of the corporation and the certificate of membership at the time the member joined the society. What was decided by the Court of Appeals in Wright v. Knights of Maccabees (196 N. Y. 391) was that the original contract made upon the member joining the society must control and a member’s rights secured thereby could not be impaired by virtue of a subsequent amendment to the by-laws to which the member did not. assent, and in Dowdall v. Catholic Mut. Benefit Assn. (196 N. Y. 405) it was expressly held that the contract of insurance cannot be changed by any act of the defendant, as such contracts are protected by the State and Federal Constitutions and all the cases cited by the court upon which these cases are decided are based upon the original contract entered into when the member joined the society., Certainly these cases are not authorities for the proposition that a new contract arose between each member of the association and the association itself upon each change of by-law which the corporation could not thereafter modify or affect. It is conceded that the amendment of 1905 did not deprive the plaintiff of any benefit which he could have been entitled to receive under the by-laws as they existed at the time he became a member. I can see nothing in the relations between the parties which at all limited the right of the defendant to amend the amendment .so as to reduce the amount that a sick member was entitled to receive so long as the amount which the plaintiff did actually receive was equal to or in excess of the amount due under the by-law as it existed at the time he became a member of the association.

If this view is correct it is evident that the determination of the Appellate Term was wrong and that the judgment must be reversed and a new trial ordered, with costs to the appellant tó abide the event.

Clarke and Scott, JJ., concurred; McLaughlin and Laughlin, JJ., dissented. ..

McLaughlin, J. (dissenting):

Action to recover from a mutual benefit insurance corporation an amount claimed to be due under its by-laws for “sick benefits.”

The sole question presented by the appeal is whether the defendant had the power to amend its by-laws in such a way as to reduce a sick benefit to which the plaintiff would otherwise have been entitled. The defendant’s certificate of incorporation provided that its purpose was to collect funds from members and apply them to their relief in case of death, sickness or other casualty “ as may hereafter be regulated by the by-laws.” The plaintiff became a member in 1883, has since paid his dues and been in good standing. When he joined the association he signed a statement to the effect that he would be “guided” by the by-laws then in existence or thereafter adopted. At that time the by-laws provided that a member should receive “in case of sickness, the services of a doctor, medicine and sick benefit of seven dollars per week for a period not exceeding thirteen weeks within the period of fifteen months; and at the rate of three dollars and fifty cents per week for an additional thirteen weeks during such period of fifteen months.”

“ In the event a member’s sickness is then declared incurable by the physician of the Society, such member shall receive the sum of three dollars and fifty cents per week for twelve successive months; providing the sick member shall not be able to do any light work or business and shall thereupon be entitled to no further sick benefits * *

This by-law was amended in March, 1902, by striking out the last paragraph relating to incurable members. The effect of the amendment was to allow incurable members the same sick benefits to which they would be entitled in case their illness had only been temporary, that is, seven dollars a week for thirteen weeks and three dollars and fifty cents a week for another thirteen weeks in each recurring period of fifteen months. In 1904, while the by-laws were in force as thus amended, the plaintiff became and has since remained incurably sick and unable ,to work. On September 18, 1905, the by-laws were further amended by providing that “No member shall receive more than five hundred dollars sick benefit during his term of membership.”

The question presented is whether the limitation of $500 to which the plaintiff never consented, though he had due notice of the meeting at which it was adopted, applies to him. If it does, then he has received all he is entitled to, because he received more than $500 prior, and also moire than $500 since the amendment. He has not, however, received within the period of fifteen months immediately preceding the commencement of this action, SI a week for thirteen weeks and $3.50 a week for another thirteen weeks, as provided by the by-laws under the amendment of 1902, and which was in force when he became incurably ill. He had a recovery in the Municipal Court of the city of New York for $56, and on appeal to - the Appellate Term the same was affirmed, and by permission defendant appeals from such determination to this court.

The law now seems to be well settled that a mutual benefit association cannot, by an amendment of its by-laws, decrease the benefits which it has contracted to give or furnish to its members when they became such, even though a general power to amend is expressly reserved. (Wright v. Knights of Maccabees, 196 N. Y. 391; Dowdall v. Catholic Mut. Benefit Assn., Id. 405; Shipman v. Protected Home Circle, 174 id. 398.)

Here no certificate of membership was issued, and the contract between the parties was embodied in the charter of the corporation and the by-laws as they existed when plaintiff became a member. (Hellenberg v. District No. One of I. O. of B. B., 94 N. Y. 580; Bishop v. G. L. E. O. of M. A., 112 id. 621.) The charter provides that the funds are to be applied as may hereafter be regulated by the by-laws,” and when the plaintiff became a member the by-laws then in force fixed his rights. His agreement to be “guided” by the by-laws which might thereafter be adopted had reference to matters of administration, and not to his rights which were then fixed and vested. (Beach v. Supreme Tent K. of M., 177 N. Y. 100; Evans v. Southern Tier Masonic Relief Assn., 182 id. 453.)

This view is not supported by, but is somewhat in conflict with, Berg v. Badenser Understuetzungs Verein (90 App. Div. 414). In that case, as in the present, there had apparently been no certificate of membership issued, and after the plaintiff became a member the association amended its constitution so as to decrease the sick benefits, the decrease being reasonable in view of the financial condition of the association. The amendment was held valid, in view of the financial condition of the association, even though it did not appear that any right to so amend had been specifically reserved. The decision in that case was cited with approval in Lewin v. Koerner Benevolent Association (125 App. Div. 91). But in the more recent cases of Wright v. Knights of Maccabees (supra) and Dowdall v. Catholic Mut. Benefit Assn. (supra), the Court of Appeals held, reversing two of the decisions relied upon in Lewin v. Koerner Benevolent Association (supra), that the by-laws could not be amended so as to deprive one of benefits accorded to him at the time he became a member, and this irrespective of the financial condition of the association, unless there were a specific reservation to the effect that such amendments might be made.

In the Wright case the rule laid down in Ayers v. Order of United Workmen (188 N. Y. 280) is quoted with approval. It is: “An amendment of by-laws which form part of a contract is an amendment of the contract itself and when such a power is reserved in general terms the (parties do not mean, as the courts hold, that the contract is subject to change in any essential particular at the election of the one in whose favor the reservation is made. It would be not reasonable and hence not within their contemplation, at least in the absence of stipulations clearly specifying the subjects to be affected, that one party should have the right to make a radical change in the contract, or one that would reduce its pecuniary value to the other. A contract which authorizes one party to change .it in.any respect that he chooses would in effect be binding upon the other party only and would leave him at the mercy of the former, and we have said that human language is not strong enough to place a person in that situation.”

The amendment of 1905 did not, it is true, as pointed out by the defendant’s counsel, deprive the plaintiff of any benefits which he would have been entitled to receive under the by-laws as they existed when he became a member. Under such by-laws he would have been entitled, by reason of incurable illness, to at most $7 a week, for thirteen weeks; $3.50 per week for an additional thirteen weeks, and $3.50 a week for twelve months thereafter, making in all $318.50, and he has already received largely in excess of that. But the amendment of 1905, however, did deprive him of benefits to which he was entitled under the amendment of 1902, which was in effect at the time he became incurably ill. The benefit to which he became entitled when he became incurably ill, under the by-laws then in force, could not thereafter be decreased by amendment. His rights had at that time become fixed and it did not he with the defendant to deprive him of them without his consent. Under such by-laws he was entitled to receive $136.50 during each recurring period of fifteen months. This he was deprived of by the amendment of 1905 limiting the total amount which he was entitled to receive to ■ $500.

It seems to me the same rule should be applied to the 1902 amendment that would be applicable to the by-laws as existing when he became a member of the association. The amendment of 1902 was assented to by the plaintiff. He paid his dues as provided therein and accepted the benefits to which he was entitled thereunder. This was, in effect, an amendment to the original contract. (Ayers v. Order of United Workmen, supra.) He did not consent to the amendment of 1905 and the fact that the association thereafter paid him for a certain period more than he would have been entitled to under the amendment of 1902 cannot be tortured into a consent on his part that the amendment of 1905 might be made.

He could not be deprived of the rights accorded to him under the orignal contract, without his consent, and I am unable to see, for the same reason, how he can be deprived of. the rights given to him under the amendment of 1902, which was in effect at the time when he became incurably ill.

The determination of. the Appellate Term is, therefore, affirmed, with costs.

Laughlin, J., concurred.

Determination and judgment reversed and new trial ordered; with costs in all courts to appellant to abide event.  