
    Hosea H. Rockwell, Appellant, v. Knights Templars and Masonic Mutual Aid Association, Respondent.
    Third Department,
    November 10, 1909.
    Insurance — change of obligations of contract by amendment of by-laws — when corporation issuing assessment insurance cannot change vested rights of members — payment — duress — court —jurisdiction over foreign corporation doing business here.
    Where a certificate when issued by a foreign corporation conducting a life insurance business upon the assessment plan provided for an initial cash payment and the payment of such further sums “as is provided for in the bylaws of the Association copied on the back hereof,” which by-laws provided a certain rate of assessment dependent upon the age of the insured, but contained no provision with reference to their amendment, the insurer cannot, under the authority of a subsequent statute which allowed it to change its constitution or by-laws, alter such by-laws so as to make a large increase in the assessment payable on the outstanding certificate.
    Although such certificate of insurance contains a statement that the insured will abide by the rules and regulations of the association, it will be construed to mean those rules and regulations existing at the time the policy was issued, in the absence of a reserved power of amendment.
    It is repugnant to the idea of a contract that one of the parties may at his election change the amounts which he is to receive thereunder, or the consideration which he is to render in return. If it be possible to make such contract, the language must permit of no other construction.
    While every corporation has a right to make and change its by-laws in a manner not inconsistent with law, it cannot impair the obligation of outstanding contracts, or impose upon a party contracting with it obligations which he never assumed.
    The fact that a party contracting with a corporation is a member thereof does not entitle the corporation to impair the obligations of the contract by a change in its by-laws.
    The courts will not permit a party to change the terms of his contract because it proves unwise or unprofitable.
    Although the insured paid certain assessments after an amendment of the bylaws not binding upon him, by reason of a threat that his policy would be forfeited if he failed to do so, he is not estopped from asserting the illegality of future assessments, for the former payments were under duress.
    Where such foreign insurance company doing business in this State under oui laws appears generally in a suit brought to compel it to perform its contract according to the original terms, the court has jurisdiction to decree that an amendment of its by-laws affecting the contract is invalid and to require the defendant to accept the proper assessment.
    
      The jurisdiction of the court to make such decree is not affected by the fact that it is powerless to compel the non-resident officers of the corporation to perform the contract, or to adjudge them in contempt on a failure to do so.
    Appeal by the plaintiff, Hosea H. Rockwell, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Chemung on the 20th day of April, 1909, upon the decision of the court rendered after a trial at the Chemung Special Term dismissing the complaint upon the merits.
    The defendant is a corporation organized under the laws of Ohio for the purpose of carrying on the business of life insurance upon the co-operative or assessment plan. In September, 1880, it issued its certificate or policy to the plaintiff, then forty years of age, whereby, in consideration of the representations made in the application, of the sum of $15.25 cash payment “ and such further sum or sums to be hereafter paid as is provided for in the by-laws of the Association copied on the back hereof,” it was to pay to his widow or heirs the sum of $5,000, or such proportion thereof as is provided for in said by-laws. The policy or certificate also provided : “ The by-laws on the back hereof constitute a part of this certificate.” The application provided : “ I further agree, if accepted, to abide by the rules and regulations of the Association.” Several by-laws were printed upon the back of the policy, among which was article 3, section 4, which was the “ Period and Rate Table,” by which members were divided into eight periods according to age, and were to pay as therein stated. The first period included ages from twenty-one to thirty inclusive, and the payment was to be fifty cents upon each $1,000 on the face of the certificate. The third period included the ages from thirty-six to forty inclusive, in which the payments were sixty-five cents on each $1,000 on the face of the certificate. The eighth period included the ages of sixty-one and upwards, and provided a payment of $2 on each $1,000 on the face of the certificate. The section further provided: “ As each member advances in age his assessment shall increase according to the above period of rate. All members reaching the age of sixty-one years shall be members of the 8th period.” Section 1 of article 4, entitled “ Assessments,” provided that “ Upon the death of a member of the Association each holder of a certificate shall he assessed and pay to the secretary a sum according to the period in which he stands at the time of such assessment and according to the amount of his certificate. The Period and Rate Table is drawn for $1,000 and shall be the unit in determining all other certificates.” Article 4, section 2, provided that if a member failed to pay his assessment for ten days after notice thereof, he thereby forfeited his certificate of membership and all benefits therefrom. Section 3 provided that upon the proof of death there should be paid to the beneficiary seventy-five per cent of the amount collected on an assessment, not to exceed the face of the certificate. Section 4 provided that if the amount accruing upon an assessment should be more than enough to settle for the death loss, the surplus should be used in settling for the next death losses, and that no assessment should be made until it was so used. The by-laws contained no provision with reference to their amendments, although the statute of Ohio  provided that every corporation may adopt a code of regulations for its government, not inconsistent with the Constitution and laws of the State, which may be adopted or changed by the stockholders or members. In 1891 the statute of Ohio  with reference to companies organized to transact the business of life insurance upon the assessment plan was amended by providing that no such company shall issue a certificate for a greater amount than it shall be able to pay from the proceeds of one assessment, and that such companies may change or amend their constitution or by-laws by the assent in writing of a majority' of the members, or by a majority of those present in person or by proxy, at a meeting held for that purpose. Thereupon, and in the same year, the defendant amended its by-laws providing that it should have the power to amend its by-laws in the manner therein provided, and in the same year it did amend its by-laws by striking therefrom the period and rate table contained in section 4 article 3, and adopted an entirely different table of assessments based upon a different plan. The notices of assessment contain substantially the provision of the by-laws with reference to a forfeiture of the policy and rights thereunder in case of non-payment, and when notices were sent to the plaintiff for assessment under the amended by-law of 1891 he paid the same. In 1907 the defendant adopted an entirely new and different rate of assessments, based upon a different plan, whereby the assessment due from the plaintiff on each $1,000 of insurance would be $67.68 per year, payable quarterly, instead of the payment of $2 upon each death as provided for in his certificate or policy. The plaintiff protested that such change in the by-laws was unlawful and unjust, refused to pay the same and tendered to the defendant the amount which would be payable under the amended by-laws of 1891, which it refused to receive, and he brings this action asking that it be adjudged that he has fully performed his contract; that the defendant has violated its contract; that the contract is still in force and that he is only liable to pay the assessments as required in his original policy.
    
      Reynolds, Stanchfield & Collin [H H. Rockwell of counsel], for the appellant.
    
      Herbert M. Lovell [Thornton M. Hinkle with him on the brief], for the respondent.
   Kellogg, J.:

It is repugnant to the idea of a contract that one of the parties may, at his election, from time to time change the amounts which he is to receive from the other party under the contract and the consideration which he is to render to the other contracting party, and if it is possible to make such contract, the language used must permit of no other construction. (Ayers v. Order of United Workmen, 188 N. Y. 280.)

The period and rate table indorsed upon the plaintiff’s policy became a part of it, and there is no suggestion in it, or in the policy itself, that that table may be changed. The by-laws deemed material by the defendant were made a part of the policy by indorsing them on the back thereof, and there is no suggestion therein that the defendant had the right to change its by-laws, and in fact it had no by-law permitting such change. Every corporation has the right to make and change its by-laws in a manner not inconsistent with law, but such right does not give it the power to change its written contract, or impose upon a party contracting with it obligations which he never assumed. It is said that the defendant is a member of the corporation' and is, therefore, an insured and an insurer at the same time. But every contract has at least two parties who stand as separate entities, each dealing with the other at arm’s length. The fact that one of the contracting parties is a stockholder or member of a corporation does not permit the corporation by an alleged change of its by-laws to alter the terms or effect of contracts which it has already made. The fact that a contract proves unprofitable, or will bring ruin upon one of the contracting parties is no reason why the courts can permit the party who has made such an unwise contract to change its terms at will and make for itself a more profitable contract. A member of a copartnership who purchases property of the firm in good faith cannot be required to pay a greater consideration than that agreed upon for the reason that the contract is unprofitable to the firm, and that he is a member of the firm and is interested in its welfare.

Mock v. Supreme Council (121 App. Div. 474) and similar cases are cited by the defendant with confidence. It is not necessary to criticise or refuse to follow the Mock case — we may distinguish it. The record in that case shows that the defendant’s society was formed as a fraternal beneficiary organization, for the purpose of affording fraternal assistance to its members and establishing a widows and orphans benefit fund from which, upon the death of a member, a sum not exceeding $3,000 may be paid to his dependents. The certificate recited that it was upon the condition that the member complied in the future with the laws, rules and regulations now governing the council and fund, or that thereafter may be enacted by the supreme council to govern said council and fund, and the application for membership stated that applicant will “ conform to and abide by the constitution, laws, rules and usages of the said council and order now in force or which may hereafter be adopted by the same,” and the constitution, laws and rules then in force contained a provision authorizing an amendment of the by-laws. In the Mock case the court distinguished the Ayers Case (supra), Evans v. So. Tier Masonic Relief Assn. (182 N. Y. 453), Beach v. Supreme Tent K. of M. (177 id. 100) and similar cases, by saying that these cases related to the rights of the insured as such under his contract, and that in the Mock case the question related to the conduct and rights of the member as a member of a fraternal beneficiary association. The Mock case rests solely upon the reserved power in the by-laws and in the policy, the fact that the terms of the contract contemplate that the by-laws may be changed and the rights of the parties under it may be altered, and that to a greater or less extent the mortuary provision arising from membership was incidental to the fraternal and social advantages intended to be gained by membership. "Defendant's by-laws required that an applicant for insurance must be of sound mind, of good health, between the ages of twenty-one and sixty years, and a knight templar, Scottish right or master mason. An insurance company may select or classify its risks, or may be incorporated for the purpose of accepting only certain specified risks. It may insure lawyers only, or clergymen, odd fellows or masons, but when the policy issues the relations between the company and person contracted with are those of insurer and insured only. There are no fraternal or social relations created by the membership or the policy. The defendant was organized solely as a life insurance company. There is no. suggestion in the policy or in the by-laws or the application that the by-laws or the policy may be changed; the statement in the application that the insured will abide by the rules and regulations of the association evidently means the rules and regulations already in existence, and particularly those which the company had deemed necessary to make a part of the policy.

The payments made by the plaintiff under the amended by-law of 1891 were made under the duress of a threat that his policy would be forfeited unless the same were made. The fact that he has made various payments which ho was not legally obliged to make, furnishes no reason why he should be required to continue such excessive payments. The payments made do not give the defendant liberty to make new and further exactions. The terms of the contract contained in the policy are free from doubt. It is not a question of construction or interpretation; the illegal payments exacted from the plaintiff" cannot operate to estop him from relying upon the plain terms of the original contract and insisting that the by-laws of 1891 and 1907 do not affect his contract.

The defendant is carrying on business in the State of New York and under the laws of this State, and has appeared generally in this action and is defending upon the merits. The court, therefore, has jurisdiction to determine that the alleged amended by-laws do not increase the amounts which plaintiff must pay under his policy; that he has at all times fully performed the contract upon his part; that his policy remains in full force and effect and that the defendant is in default, and to require the defendant to observe the contract- upon its part. (Langan v. Supreme Council Am. L. of H., 174 N. Y. 266, 270.)

It is argued, however, that the court is powerless to compel the non-resident officers of the defendant to perform the contract and to treat the plaintiff as a policyholder. That objection only refers to the manner of enforcing the judgment after it is rendered. The court may be powerless to punish the non-resident officers for contempt if they do not observe its judgment, but while the defendant continues to do business in this State there will -be little difficulty in the enforcement of a proper judgment against it.

The judgment appealed from should, therefore, be reversed upon the law and the facts, and a new trial granted, with costs to the appellant to abide the event.

All concurred, except Smith, P. J., not voting.

Judgment reversed on law and facts, and new trial granted, with costs to appellant to abide event.  