plaintiff, his wife, was named as beneficiary. | beneficiaries and shall govern and control The contract provided that the insured the contract in all respects the same as should be bound by the laws of the order though such changes, additions or amendthen in force, or thereafter enacted. On ments had been made prior to and were in December 10, 1912, Ledy committed suicide. force at the time of the application for The laws of the order in force in 1908 pro- membership." § 3544, Gen. Stat. 1913. vided that, if the assured committed suicide within two years after receiving his certificate, the association should be liable for only one fifth the amount of such certificate. By an amendment to such laws, which went into effect in September, 1910, the time during which the above provision should be in force was extended to a period of five years from the issuance of the certificate. Ledy died by suicide about two months before the five years expired. Plaintiff sued for the full amount of the certificate. The trial court held that she was entitled to recover one fifth thereof, and no more. She moved for a new trial and appealed from the order denying her motion. The only controversy is whether she is entitled to recover the full amount of the certificate, or is limited to one fifth thereof by the above provision. In either event, certain deductions are to be made for the benefit of the reserve fund, but these amounts were agreed upon and are not in controversy. The statute in force when the contract was made provided that "any changes, additions or amendments to said charter or articles of association, constitution or laws duly made or enacted subsequent to the issuance of the benefit certificate shall bind the member and his suicide, and which supplanted an earlier by-law which provided for the payment of only one half the benefit in case of suicide within five years, was valid. Kavanaugh v. Supreme Council, R. L. 158 Mo. App. 234, 138 S. W. 359. Generally, as to conflict of laws as to insurance contracts, see notes in 63 L.R.A. 833; 23 L.R.A. (N.S.) 968; and 52 L.R.A. (N.S.) 275. But the court stated that such a by-law would be invalid under the Missouri decisions, which had declined to give effect to these general provisions sufficient to authorize the insurer to reduce, impair, or destroy the indemnity vouchsafed in the certificate. Kavanaugh v. Supreme Council, R. L. supra. And in harmony with the Missouri court of appeals cases set out in the earlier note, although the insured undertook by his contract to be bound by all by-laws in force or that might thereafter be adopted, it was held in the following cases that a subsequently enacted by-law which attempted to abolish the time during which a restricted amount should be paid in case of suicide of the member was invalid, it being held that the insured's agreement did not contemplate that the right to benefits to accrue It is contended that the amendment extending the period during which the suicide provision should remain in force is unreasonable and void as against contracts entered into before its adoption, unless the rule announced in Thibert v. Supreme Lodge, K. H. 78 Minn. 448, 47 L.R.A. 136, 79 Am. St. Rep. 412, 81 N. W. 220; Tebo v. Supreme Council, R. A. 89 Minn. 3, 93 N. W. 513; Olson v. Court of Honor, 100 Minn. 117, 8 L.R.A. (N.S.) 521, 117 Am. St. Rep. 676, 110 N. W. 374, 10 Ann. Cas. 622; Rosenstein v. Court of Honor, 122 Minn. 310, 142 N. W. 331, and Ruder v. National Council, K. L. S. 124 Minn. 431, 145 N. W. 118, has been changed by the above statute; and that the present case turns upon the construction to be given to that statute. We cannot assent to this proposition. Where a fraternal beneficiary association, in the contract for insurance entered into with its members, stipulates that they shall be subject to, and bound by, the subsequently enacted laws and regulations of the order, the rule is well-nigh universal that the association must exercise the power so reserved in a reasonable manner, and that a law of the order enacted under such power, which would make an unreasonable | might be impaired. Zimmermann v. Supreme Tent, K. M. 122 Mo. App. 591; Morton v. Supreme Council, R. L. 100 Mo. App. 76, 73 S. W. 259. It has been held by the supreme court of Missouri in a recent case, however, that where, by the application and certificate, the member agrees to be bound by by-laws and regulations thereafter enacted, a subsequently enacted by-law reducing the amount to be paid in case of suicide is valid, since such an agreement contemplates that the contract might be changed so as to affect the amount of the insurance to be paid, especially in case of suicide. Claudy v. Royal League, 259 Mo. 92, 168 S. W. 593. And in Washington in a case where it was provided in the application, certificate, and by-laws that the insured should be bound by by-laws which should thereafter be enacted, a by-law extending the contestable period in case of suicide from two years to five years was held valid, since under the agreement there was held to be no vested right to have the contract remain unchanged, and since the right to commit suicide was not a right which the law would recognize or enforce. Klein v. Knights & Ladies of Security, 79 Wash. 173, 140 Pac. 72. J. T. W. change in the terms of prior contracts, is void as against such contracts. While the courts differ little as to the general rule, they differ much as to what amendments are unreasonable within the meaning of the rule. They agree quite generally, however, that an amendment which relieves the association, in whole or in part, from liability in case the assured intentionally ends his own life, is not forbidden by the rule, and is valid. Supreme Commandery, K. G. R. v. Ainsworth, 71 Ala. 436, 46 Am. Rep. 332; Fraternal Union v. Zeigler, 145 Ala. 289, 39 So. 751; Scow v. Supreme Council, R. L. 223 Ill. 32, 79 N. E. 42; Knights of Maccabees v. Nelson, 77 Kan. 629, 95 Pac. 1052; Daughtry v. Knights of Pythias, 48 La. Ann. 1203, 55 Am. St. Rep. 310, 20 So. 712; Dornes v. Supreme Lodge, K. P. 75 Miss. 466, 23 So. 191; Lange v. Royal Highlanders, 75 Neb. 188, 10 L.R.A. (N.S.) 666, 121 Am. St. Rep. 786, 106 N. W. 224, 110 N. W. 1110; Tisch v. Protected Home Circle, 72 Ohio St. 233, 74 N. E. 188; Supreme Lodge, K. P. v. La Malta, 95 Tenn. 157, 30 L.R.A. 838, 31 S. W. 493; Clement v. Clement, 113 Tenn. 40, 81 S. W. 1249; Hughes v. Wisconsin Odd Fellows Mut. L. Ins. Co. 98 Wis. 292, 73 N. W. 1015. In the above cases it appeared that the insured committed suicide, but it did not appear that he was insane. While the various amendments considered in those cases purported to bar a recovery whether the insured was sane or insane at the time of the suicide, and the courts held them valid in language which apparently upheld all the provisions therein, the question actually decided was that they were valid as against those claiming under a member who committed suicide while sane. Such amendments have also been held valid where the insured committed suicide while insane. Supreme Tent, K. M. v. Hammers, 81 Ill. App. 560; Court of Honor v. Hutchens, Ind. App. -, 79 N. E. 409; Chambers v. Supreme Tent, K. M. 200 Pa. 244, 86 Am. St. Rep. 716, 49 Atl. 784; Eversberg v. Supreme Tent, K. M. 33 Tex. Civ. App. 549, 77 S. W. 246. Other courts have held such amendments valid where the insured was sane at the time of the suicide, but invalid where he was insane and not responsible for his act. In Weber v. Supreme Tent, K. M. 172 N. Y. 490, 92 Am. St. Rep. 753, 65 N. E. 258, the New York court held that an amendment extending the suicide provision from one year to five years was unreasonable and void as to a member who committed suicide while insane. In the later case of Shipman v. Protected Home Circle, 174 N. Y. 398, 63 L.R.A. 347, 67 N. E. 83, the court approved the decision in the Weber Case, but said that in the Weber Case there was a finding that the insured was insane at the time of the suicide, while there was no such finding in the case then under consideration, and held that the insured was presumed to have been sane, and that the amendment was valid in such cases and barred a recovery. In Supreme Conclave, I. O. H. v. Rehan, 119 Md. 92, 46 L.R.A. (N.S.) 308, 85 Atl. 1035, Ann. Cas. 1914D, 58, the court, after discussing the authorities, says: "We therefore hold upon what we regard as the safer, sounder, and more reasonable rule upon this question, that the after-enacted by-law before us is not binding upon the plaintiff, if her husband took his own life while insane, but that it is binding upon her, if he committed suicide while sane." In Plunkett v. Supreme Conclave, I. O. H. 105 Va. 643, 55 S. E. 9, it did not appear affirmatively that the insured was insane. The court held that he must be deemed to have been sane, and that the by-law was therefore valid and binding, but say they do not determine whether it would be binding in case the member had been insane. In Olson v. Court of Honor, 100 Minn. 117, 8 L.R.A. (N.S.) 521, 117 Am. St. Rep. 676, 110 N. W. 374, 10 Ann. Cas. 622, this court held that the by-law there under consideration was not valid or binding in a case where the member was insane, and under treatment for insanity, at the time he took his own life. Whether an amendment enacting a suicide provision is valid and binding in a case where the insured committed suicide while sane does not appear to have been considered or determined by this court. A few courts have held such amendments void (Lewine v. Supreme Lodge, K. P. 122 Mo. App. 547, 99 S. W. 821; Sautter v. Supreme Conclave, I. O. H. 72 N. J. L. 325, 62 Atl. 529); but, as shown by the cases hereinbefore cited, the great majority of courts hold them valid. The reasons assigned are various. Attention is frequently called to the fact that, at common law, suicide was a crime which entailed forfeiture of property; that, while the successful perpetrator is beyond the reach of the law, he commits an act which is malum in se and which the law tries to prevent by all the means in its power; that he has no moral, legal, or other right to commit such an act; that the law cannot say that a provision which prevents him from fastening liability upon the association by his own criminal act voluntarily committed is unreasonable; and that such a provision not only invades no legal or vested right, but takes away a possible incentive to commit a heinous offense. In the instant case there is no claim president conveyed by indorsement, said note to one of its directors. Held, in a suit thereon by him against the makers, that he was not a purchaser in good faith, and hence the court erred in sustaining a demurrer to the evidence in support of that plea. Notice by director of affairs of cor poration. that the insured was insane, and he is presumed to have been sane. 2 Dunnell's Dig. § 4516. The fact that he committed suicide is not, in itself, sufficient to establish insanity. Wilkinson v. Service, 249 Ill. 146, 94 N. E. 50, Ann. Cas. 1912A, 41, and cases cited in note. We think there is a wide distinction between a case where 2. A director of an industrial corporadeath results from the irresponsible act of tion is chargeable with knowledge of everyan insane person, and a case where it re-thing it is his duty to know concerning sults from the intentional act of a person commercial paper belonging to the corporain his right mind; that the amendment in tion which he undertakes, as a director, question cannot be declared unreasonable, to sell. either upon principle or authority, when applied to a case in which the insured committed suicide while sane, even if the stat ute quoted should be construed as merely a The present note is supplementary to the note on the same subject appended to McCarty v. Kepreta, 48 L.R.A. (N.S.) 65. HARDIN V. DALE, holding that a director in an industrial corporation who purchases from it for value a negotiable instrument not yet due cannot be a holder thereof in due course, so as to take the paper free from equities of the maker that could have been claimed against it had it remained the property of the corporation, seems to be the only decision in point since the earlier note. (February 23, 1915.) County to review a judgment in plaintiffs' favor in an action brought to recover the amount alleged to be due on a promissory note. Reversed. RROR to the Superior Court for Logan The facts are stated in the opinion. Messrs. J. F. McKeel and C. G. Hornor, for plaintiffs in error: The provisions in the note sued on, and especially the one providing that the time may be extended without notice, destroy its negotiable character. Rossville State Bank v. Heslet, 84 Kan. 315, 33 L.R.A. (N.S.) 738, 113 Pac. 1052; City Nat. Bank v. Gunter Bros. 67 Kan. 227, 72 Pac. 842; Sykes v. Citizens' Nat. Bank, 69 Kan. 134, 76 Pac. 393, 78 Kan. 688, 19 L.R.A. (N.S.) 665, 98 Pac. 206; Overton v. Tyler, 3 Pa. 346, 45 Am. Dec. 645; Woods v. North, 84 Pa. 407, 24 Am. Rep. 201; Mitchell v. St. Mary, 148 Ind. 111, 47 N. E. 224; Glidden v. Henry, 104 Ind. 278, 54 Am. Rep. 316, 1 N. E. 369; Rosenthal v. Rambo, 28 Ind. App. 265, 62 N. E. 637; Merchants' & M. Sav. Bank v. Fraze, 9 Ind. App. 161, 53 Am. St. Rep. 341, 36 N. E. 378; Öyler v. stockholder as well. So, the decision in HARDIN V. DALE, based upon the doctrine, the conclusion apparently being reached independently of the McCarty Case, is some indication that the present trend is toward holding corporate officers to a strict accountability for neglect of duty. Some of the early cases cited by the court in HARDIN V. DALE support the general proposition that an officer of a corporation will be deemed to have knowledge of facts or corporate acts which the performance of his official duty would necessarily disclose to him, but the applicability of that doctrine to the holder of a negotiable instrument which he has in good faith purchased from the corporation is not involved. For example, in Re Newcastle-upon-Tyne MaIn McCarty v. Kepreta, 24 N. D. 395, rine Ins. Co. 19 Beav. 97 (see quotation 48 L.R.A. (N.S.) 65, 139 N. W. 992. Ann. in opinion) the question was whether or Cas. 1915A, 834, the court announced not a director who had sold his stock and and applied the doctrine later adopted ceased to be a member before the insolvency in HARDIN V. DALE, to the president of of the corporation could be made a contribua bank, who was, of course, director and tory on the ground that all the formalities Bank v. Tobin, 39 Okla. 96, 134 Pac. 395; Cedar Rapids Nat. Bank v. Bashara, 39 Okla. 482, 135 Pac. 1051; Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. 329, 3 Mor. Min. Rep. 688; Borland v. Haven, 37 Fed. 394. Turner, J., delivered the opinion of the court: McMurray, 7 Ind. App. 645, 34 N. E. 1004; | McPherrin v. Tittle, 36 Okla. 510, 44 Matchett v. Anderson Foundry & Mach. L.R.A. (N.S.) 395, 129 Pac. 721; First State Works, 29 Ind. App. 207, 94 Am. St. Rep. 272, 64 N. E. 229; Woodbury v. Roberts, 59 Iowa, 348, 44 Am. Rep. 685, 13 N. W. 312; Second Nat. Bank v. Wheeler, 75 Mich. 546, 42 N. W. 963; Smith v. Van Blarcom, 45 Mich. 371, 8 N. W. 90; Krouskop v. Shontz, 51 Wis. 204, 37 Am. Rep. 817, 8 N. W. 241; Coffin v. Spencer, 39 Fed. 262; Citizens' Nat. Bank v. Piollet, 126 Pa. 194, 4 L.R.A. 190, 12 Am. St. Rep. 860, 17 Atl. 603; Union On June 28, 1911, Frank Dale, defendant Stock Yards Nat. Bank v. Bolan, 14 Idaho, in error, sued E. W. Hardin and six others, 87, 125 Am. St. Rep. 146, 93 Pac. 508; Dan. as makers on their past-due promissory note Neg. Inst. 5th ed. 49; Eaton & G. Com. for $1,495.65, made, executed, and delivered Paper, 71, 220, 354; Hodge v. Farmers' on September 16, 1909, to Guthrie School Bank, 7 Ind. App. 94, 34 N. E. 123; Lamb & Office Furniture Manufacturing Comv. Story, 45 Mich. 488, 8 N. W. 87; Evans v. Odem, 30 Ind. App. 207, 65 N. E. 755; Miller v. Poage, 56 Iowa, 96, 41 Am. Rep. 82, 8 N. W. 799; 2 Am. & Eng. Enc. Law, 2d ed. 253. The directors of a company, being the executive officers of the company and charged with the duty of conducting its affairs, would be presumed to have knowledge of them. Williams v. Cheney, 8 Gray, 206. Messrs. Dale & Bierer, for defendants in error: A person may deal in the purchase of commercial paper with a corporation of which he is a director the same as any other individual may deal with such corporation. Mann v. Second Nat. Bank, 30 Kan. 412, 1 Pac. 579; Fox v. Bank of Kansas City, 30 Kan. 441, 1 Pac. 789. The court did not err in its ruling on the demurrer interposed at the conclusion of the evidence offered on behalf of plaintiffs, and which ruling resulted in a judgment in favor of plaintiff, Frank Dale. Forbes v. First Nat. Bank, 21 Okla. 206, 95 Pac. 785; Swift v. Tyson, 16 Pet. 1, 10 L. ed. 865; City State Bank v. Pickard, 35 Okla. 243, 129 Pac. 38; T. S. Reed Grocery Co. v. Miller, 36 Okla. 134, 128 Pac. 271; of a regular transfer had not been observed by him when he sold. It was held that a director must know the rules and by-laws of the company, hence he could be made a contributory. In Greenville Gas Co. v. Reis, 54 Ohio St. 549, 44 N. E. 271, the bond in question was issued by the corporation and placed in the hands of the president to sell for it. A director received the bond from him as collateral security for an indorsement for the president as an individual, and after paying the note indorsed, claimed the bond. It was held that he was chargeable with knowledge of the fact that the president held the bond in trust for the company, and he could therefor be compelled to deliver to it the bond. In Nelson v. Wellington, 5 Bosw. 178, the plaintiffs sued pany, as payee, and by the company indorsed to the plaintiff Frank Dale. The petition alleged that plaintiff acquired the note in good faith for value and before maturity. For answer defendants, in effect, admitted the execution of the note and its indorsement as pleaded, and that plaintiff had paid value therefor before maturity, but set forth facts sufficient to constitute a failure of consideration, and denied that plaintiff was a purchaser in good faith. There was trial to a jury and judgment for plaintiff, and defendants bring the case here. To maintain the issues on his part, plaintiff introduced the note in evidence and rested. Whereupon defendant demurred to the evidence, which was overruled. There was no error in this. In Forbes v. First Nat. Bank, 21 Okla. 206, 95 Pac. 785, we said: "Plaintiff's possession of the draft, indorsed by the payee in blank, was prima facie evidence that it acquired the same in good faith for value, in the usual course of business, before maturity. . . .” Although the note contained the following: "The makers and all indorsers hereof severally waive presentment for payment, protest, and notice of protest, and consent that time of payment may be extended without notice thereof ."-the same "as trustees of an express trust," for the corporation or its creditors, and not as purchasers for value. As trustees they signed the agreement under which the notes were given, and transacted the business of the corporation. Other cases are sufficiently explained by the court in HARDIN V. DALE. No effort has been made to exhaust the list of this class of cases, as they are not in point on the particular question of applicability of the doctrine to officers who purchase negotiable instruments from the corporation in good faith and without actual knowledge of the infirmities. Only those cited by the court in HARDIN V. DALE and not fully explained are here discussed. J. W. M. was negotiable. Missouri-Lincoln Trust Co. | thority, when it comes to uttering negotiav. Long, 31 Okla. 1, 120 Pac. 291. There is no conflict in the testimony. Assuming the burden of proof upon the issue of failure of consideration and want of good faith, defendants introduced evidence tending to prove that the note was given in payment for school furniture, and, before it was due, the payee indorsed the same in blank to plaintiff. The indorsement was for value, and reads: "The Guthrie School & Office Furniture Mfg. Co., by E. M. Hegler, Pres." It was made October 9, 1909. Prior thereto the consideration of the note failed, and the payee knew it, and also knew that the makers would resist payment on that ground. At that time plaintiff was a director in the company and also a stockholder. On October 4, 1909, defendants wrote the payee thus: "The whole lot of furniture is unsatisfactory, and unless some adjustment is made, the state will refuse to take it, and the payment of the note will be protested." ble paper to which, in the hands of innocent holders, there can be practically no defense, a strict rule applies. The agent must either have express general authority to issue such paper, or express authority to issue the particular paper, or there must be implied general authority arising from such frequent exercise of the power by the agent, followed by ratification, as to constitute a custom of the corporation." Being authorized so to do by a vote of the board, each and every member thereof, including plaintiff, was at the time of the sale and indorsement in question chargeable with knowledge that the consideration of this note had failed, and that it would be worthless, should that defense to a suit thereon against them be interposed by the makers. A director of an industrial corporation is chargeable with knowledge of everything it was his duty to know concerning commercial paper belonging to the corporation which he undertakes, as director, to sell. In Re Newcastle-upon-Tyne Marine Ins. Co. 19 Beav. 97, Sir John Romilly, master of the rolls, said: "A person, when he becomes a director, accepts a trust which he undertakes to perform for the benefit of the company. If, in the due performance of that trust, he must necessarily have acquired certain knowledge, it appears to me to be but fit that he should be charged with the knowledge of those facts which it was his duty to have become acquainted with. It is merely saying that a person should be held to know that which it was his bounden duty to know." About three days thereafter the payee sold and indorsed the note to plaintiff. On this state of the evidence the court sustained a demurrer thereto and directed a verdict for plaintiff. This was holding that the legal effect of the evidence did not reasonably tend to prove that plaintiff was not a purchaser in good faith. The court erred. From this evidence it may be fairly inferred that here is an industrial corporation, the payee in a promissory note, with knowledge on its part, and that of each and every one of its directors, that the consideration for the note had failed, acting through the same board, presumably by vote, selling that note to one of the board. Can it be said that such member of the board took it in good faith? We think not. We say this note was sold by vote of the board for the reason that, as no one questioned the authority of Hegler to indorse it in blank, as he did, it is fair to presume, as this corporation was not dealing in commercial paper, but in manufacturing, that Hegler was duly authorized so to do. And how was he authorized? As there is no evidence tending to prove that he had express general authority to indorse such paper, and no evidence tending to prove any implied general authority so to do arising from such frequent exercise of the power, we are forced to conclude, as stated, that he was In that case, the husband of respondent authorized to make this indorsement by ex- having a suit pending against him on a press authority of the board, which could promissory note payable to the defendant only be done by vote of the board. In corporation, she, to settle the same, conElwell v. Puget Sound & C. R. Co. 7 Wash. veyed to it certain lands upon condition 489, 35 Pac. 377, it is said: "Whatever that the corporation would hold the title in else the general agent of an industrial cor- trust for her and sell the same at the best poration may do to bind his principal by price obtainable, but not for less than a contracts made by virtue of his implied au- sum certain, pay the demand out of the In Gay v. Young Men's Consol. Co-op. Mercantile Inst. 37 Utah, 280, 107 Pac. 237, the court, quoting approvingly from 21 Am. & Eng. Enc. Law, 896, said: "As a general rule, an officer or director of a corporation is chargeable with knowledge of all matters relating to the affairs of the corporation which he actually knows or which it was his duty to know. Thus, in actions by strangers against an officer or director, the defendant will generally be charged with knowledge of all facts relating to the condition and business of the company which he might have known by the exercise of due diligence, whether actually known to him or not." |