Opinion
November 10, 1909.
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.
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 he 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.