Attorney General v. Supreme Council American Legion of Honor

81 N.E. 966, 196 Mass. 151, 1907 Mass. LEXIS 1061

• Court: Massachusetts Supreme Judicial Court
• Decided: June 20, 1907
• Status: Published

Opinion

Loring, J.

1. The first question reserved for our consideration is : “ Are the judgments, as such, payable out of the only' fund held by the receiver, to wit, the trust fund held under sections 7 and 8 of said chapter 119 of the Revised Laws ? ”

The first difficulty which we have in answering this question is that these judgments as such would not be payable by the receiver out of any funds in his hands.

By the decree dated August 12,1904, this court, acting under R. L. c. 119, § 19, adjudged that the further continuance of business by the defendant corporation was hazardous to the public and to its certificate holders ; and it took possession of the funds of the defendant corporation for the purpose of distributing its assets among its creditors and of closing its affairs. . This had no direct effect on pending actions. It had, however, this indirect effect upon them. If the plaintiff in such an action wanted a judgment against the defendant corporation for some purpose other than a right to share in the assets sequestrated by and in the hands of this court, he could go on with his action. But if he wished to establish his right to share in the assets in the possession of this court the further prosecution of that action would not help him. To establish that right he had to prove his claim in this court or get an order from this court that a judgment in the action in the foreign court should establish his right to share in the assets here. It is for the court which has taken the assets of an insolvent into its hands for distribution and for that court alone to determine who its creditors are and what is due to them respectively.

As we have said, it may in its discretion leave that issue to be determined by another court. Lowell, Bankruptcy, § 209. But in the absence of an order to that effect the subsequent judgment binds the insolvent but not the assignee or receiver of the assets of the insolvent as representative of the insolvent’s general creditors.

In the case at bar no order has been made authorizing the receiver to submit to courts of other jurisdictions the question whether the petitioners now before us were creditors of the defendant corporation.

These judgments do not affect the receiver, and these judgments as such cannot be proved against the funds in the hands of this court through its receiver.

2. The second question is as follows : “ May such judgments be so modified by stipulation that only a part thereof is claimed, and still be entitled to the full faith and credit appertaining to judgments ? ”

As we have already pointed out, these judgments are not judgments between the plaintiffs and the receiver representing the general creditors in the distribution of their assets, but judgments between the plaintiffs and the defendant corporation itself as distinguished from the receiver of its assets. As judgments between the petitioners and the defendant corporation as distinguished from the receiver of its assets they are entitled to full faith and credit under the Constitution of the United States.

The receiver has made the contention that the claims of the several plaintiffs have been merged in these judgments and hence no longer exist as claims, and therefore that it is not open to these petitioners to ask this court to examine into the validity of the claims on which the judgments are founded and to allow as a debt due from the defendant so much of the several judgments as represents a valid claim for a debt or disability benefit.

The cases in this Commonwealth have gone very far in holding that a debt is merged in the judgment founded thereon. Sampson v. Clark, 2 Cush. 173. Bangs v. Watson, 9 Gray, 211. Wolcott v. Hodge, 15 Gray, 547. Handrahan v. Cheshire Iron Works, 4 Allen, 396. A like result has been reached where a negotiable note has been given for a debt for necessaries not barred by an insolvency discharge. Rindge v. Breck, 10 Cush. 43. Light v. Merriam, 132 Mass. 283 (as to which see Tallant v. Stedman, 176 Mass. 460, 466).

This doctrine of merger has not received the approval of the Supreme Court of the United States. Boynton v. Ball, 121 U. S. 457, 465, et seq. See also McDonald v. Davis, 105 N. Y. 508; Wisconsin v. Pelican Ins. Co. 127 U. S. 265, 292; Huntington v. Attrill, 146 U. S. 657, 671; Andrews v. Andrews, 188 U. S. 14, 37; Evans v. Sprigg, 2 Md. 457.

In the recent case of Savage v. Shaw, 195 Mass. 571, the converse of the proposition arose, and this court held that it would look behind the judgment to the claim on which it was founded, to determine whether it was or was not a debt. See also in this connection Haggerty v. Amory, 7 Allen, 458, 459; Choteau v. Richardson, 12 Allen, 365; Murphy v. Manning, 134 Mass. 488.

In our opinion the doctrine of Sampson v. Clark and similar cases does not apply to the case now before us.

When the defendant corporation denied the right of a beneficiary residing in another State to recover more than $1,900 under a certificate originally issued for $5,000, on the ground that by-laws 55 and 72 were valid and binding on the certificate holder, what was he to do ? The first thing be had to do was to establish his right to a benefit of $5,000 in place of a benefit of $1,900. When he had done that, that is to say, when he had obtained judgment for that amount, it became the duty of the defendant corporation to pay that judgment, or so much thereof as represented the death benefit, out of the emergency fund if there were not general assets of the corporation applicable thereto. The corporation recognized that duty by this provision in its by-law numbered 58: “But it shall be lawful to pay out of said fund the amount of any judgment obtained against the Supreme Council upon a benefit certificate.” If the corporation did not do. what it ought to have done the plaintiff’s remedy was to file a bill in equity to procure payment out of the emergency fund. See Palmer v. Northern Relief Association, 175 Mass. 396, 398.

It follows that if these actions had gone to final judgment before August 12,1904, they would have been entitled to full faith and credit under the Constitution of the United States, and would have been provable as such against the emergency fund now in the hands of this court.

The real objection to the proof of these death benefits is that they have gone to judgment since the date of the sequestration of the funds by this court, and that by reducing the several demands to a judgment against the corporation the petitioners have elected not to prove them against the assets in the possession of this court. See in this connection Lowell, Bankruptcy, §451.

Where the bankrupt is an individual who after his bankruptcy may acquire new assets, it may well be the object of a creditor pressing for judgment after the adjudication of bankruptcy to look to the future assets of the bankrupt, hoping that in such a case he can hold the defendant in case he has not pleaded his discharge on the ground that by not pleading it he intended to waive it, a point not directly considered in Boynton v. Ball, 121 U. S. 457. But that could not have, been the intention of the petitioners here. In a case like this, where the defendant corporation has come to an end in every way and for all purposes the subsequent judgment cannot be taken to have been an election to look to the future property of the corporation.

In answer to the second question we are of opinion that so much of the claim on which these judgments are founded as appears to this court to be due to the petitioner for a death or disability benefit (if anything appears to be due) may be proved to be paid out of the emergency fund in the possession of the receiver.

3. This answers the third question, to wit, (c) : “ Assuming that said judgments are not to be proved, as such, and are not entitled to be classed and paid as death claims in accordance with the prior decree of this court in this cause, are the claims as herein set out of such a character as to warrant their allowance as being equitably entitled to a participation in a division of the said assets now in the possession of the receiver ? ”

4. The fourth question reserved for our consideration is as follows: “ Is the fact that most of the suits upon which the judgments above noted were obtained were instituted after the period of time named in the by-law of limitation (No. 68) now open for consideration upon the question of the allowance of the claims, either in the form of judgments, as aforesaid, or under request numbered (c) ? ”

All but four of the certificates here in question were issued before August, 1899, when by-law 68, promulgated on October 25,1899, was adopted. That by-law provided that: “ No action at law or in equity, in any court, shall be brought or maintained on any cause or claim arising out of any membership or benefit certificate, unless such action is brought within one year from the time when such action accrues. Such right of action shall accrue ninety days after all proofs called for, in case of a death of a member, shall have been furnished. In all cases where no proof of death has been furnished by a beneficiary, as required within twelve months after such death, all claims that might have been made shall be regarded as abandoned, and no proof shall thereafter be received or any claim made thereon.”

It is not now necessary to consider whether as matter of construction this by-law covers an action the effect of which is (1) to get rid of paying assessments levied on a $2,000 certificate ; (2) to avoid the effect of release; and (3) of the surrender of the certificate for cancellation on payment of the $1,900, and to recover the difference between $1,900 (the sum paid on the ground that by-laws 55 and 72 were valid) and $5,000 (the sum named in the original certificate), for we are of opinion that this by-law is invalid as against certificates issued before it was promulgated. See Butler v. American Legion of Honor, 186 N. Y. 514, affirming S. C. 105 App. Div. 164.

This by-law does not undertake to deal with the duties of the member during his membership, as in Reynolds v. Royal Arcanum, 192 Mass. 150, but with the contract rights between the beneficiary and the company after his decease, and so comes within Newhall v. American Legion of Honor, 181 Mass. 111.

There are four cases where certificates bear date after the adoption of by-law 68, although the members joined the order originally before that date and afterwards exchanged their certificates for a certificate which contained this by-law. Assuming as matter of construction that by-law 68 covers such a suit, the question whether the by-law is or is not binding on these petitioners depends upon the question whether these four members did or did not assent to the new by-law as matter of contract. That question is not now before us.

In general, whether a debt sought to be proved is or is not barred by time depends upon its status on August 12,1904, the date of the decree of this court sequestrating the assets of the defendant corporation. Lowell, Bankruptcy, §§ 205, 211.

The case, of American Legion of Honor v. McAlarney, 135 Fed. Rep. 72, relied on by the receiver, does not bear on the questions before us. The member there sought to disaffirm his contract, while here the petitioner seeks to recover the full amount named in the certificate by getting the court to set aside releases and the exchange for certificates in the new form.

It follows that a decretal order should be entered directing the receiver to pay so much of the claims on which judgments have been recovered since August 12, 1904, as represents a death or disability benefit, provided such benefits were then due to the petitioners at law or in equity.

5. The fifth question is as follows: “ Do not the facts in some of the cases as set out in the said receiver’s third report constitute an accord and satisfaction, and, if so, may that matter now be considered upon the question of the allowance of the claims, either in the form of judgments, as aforesaid, or under request numbered (c) ? ”

If there has been an accord and satisfaction or a release or other matter of defence which the petitioner in question cannot get rid of on the ground of fraud or mistake or otherwise, that defence can be set up now and the claim cannot be proved.

The single justice in his discretion has reserved one further question for our consideration, namely, whether “ the facts in some of the cases as set out in the receiver’s third report constitute an accord and satisfaction.” We proceed to answer that question in two of the cases referred to. in the receiver’s report.

The first case we take up is the Mandeville case. This case is dealt with separately in the report of the single justice. The single justice finds the facts and reports to the court this single question, namely: “ Whether under the laws of the State of New York there was an accord and satisfaction.”

Under these circumstances we answer this question without deciding whether it is decisive of the right of the beneficiary to prove. We do not intimate any opinion on the question of what the effect is of the fact that “ From the date of the passage of by-law No. 55 to the date of his- death, Mandeville paid assessments as upon a certificate of $2000 instead of upon a certificate of $5000.”

In our opinion under the law of the State of New York there ■was no accord and satisfaction in this case. The petitioner’s attorney in accepting the $1,000 “ said, in substance, £ you must understand that we accept the draft as a payment on account ■ only and do not waive our rights to the full amount.’ ” Further, he signed a receipt that the amount received was ££ two fifths of the amount herein agreed to be paid, less five per cent,” and the words “for cancellation” were stricken through at the end of the receipt that “ This certificate is hereby surrendered to the Supreme Council of the American Legion of Honor for cancellation.” The case comes within Komp v. Raymond, 175 N. Y. 102, and not within Simons v. American Legion of Honor, 178 N. Y. 263.

The other case is the Skinner case. The sole question reported for our consideration is whether in this case there was an accord and satisfaction. We are of opinion that there was not. Payment of a less sum in discharge of a greater is not at common law an accord and satisfaction. Tyler v. Odd Fellows’ Relief Association, 145 Mass. 134. The common law of Texas, in the absence of proof, is presumed to be the same as that of this Commonwealth. Kelley v. Kelley, 161 Mass. 111, 114. Cherry v. Sprague, 187 Mass. 113. We have not been asked to decide whether there was a release of this claim.

Whether the fact that the member paid assessments on a $2,000 certificate after October, 1900, is a bar to the beneficiary named in that certificate recovering the larger sum, and whether the surrender of a certificate for cancellation is a bar and, if they are, whether the effect of these matters or the effect of a release where one was given can be got rid of on the ground of a mutual mistake as to the validity of by-laws 55 and 72, are matters not now before the court.

If it is the fact that the receiver has in fact (although not authorized so to do) contested one or more of these twenty-seven claims in the courts of another State to final judgment, there is nothing to prevent this court from entering an order nunc pro tune submitting the question so litigated to that court and allowing the judgment so obtained to be proved so far as it covers a death or a disability benefit.

Decree accordingly.