Morton ex rel. Richardson v. Supreme Council of the Royal League

100 Mo. App. 76 | Mo. Ct. App. | 1903

GOODE, J.

The principal controversy in this case is as to whether the suicide by-law of the association, which was in force at the time of Charles Morton’s death, constitutes a defense to plaintiff’s cause of action; but before discussing that quesion it is necessary to consider the proposition advanced by the defendant’s counsel that an insurance policy payable’ to the insured or his estate, or one in a fraternal order (in which the denominated beneficiary had no vested interest) is forfeited by the suicide of the insured while sane, whether the policy so provides or not. That rule, we admit, is supported by much authority as being one phase of the doctrine that a loss on any contract, caused by some act of a party to it which was a violation of the criminal law or inimical to the public weal, affords no right of action; as where a loss on a policy covering property is due to the incendiarism of the owner; or the holder of a life policy payable to his estate is lawfully killed in preventing him from committing a felony. Ritter v. Ins. Co., 169 U. S. 139. There is reason for some applications of the rule, but extending it so as to compass the avoidance of life insurance contracts in the event of suicide, is less obviously reasonable than when it is used to defeat a recovery for the loss of property intentionally burned by the owner; and this is true in several aspects of the matter. If companies could be made to pay for incendiary losses on property, the crime of incendiarism would be encouraged to a far greater extent than self-destruction would be by leaving life insurance valid after suicide, both because of the innate love of life and because most life policies are vested in the beneficiaries and hence good, notwithstanding the suicide of the insured, in the absence of a special proviso to the contrary. Then it is to be remembered that insurance companies dictate their policies and usually include all the exceptions to liability they desire to reserve and that the law will permit. Moreover, self-destruction always indicates, if not insanity, at least an irresponsible state of mind, and may well be considered part of the risk assumed, if not specially excluded. For this reason the doctrine in question is not welcomed by all courts and seemingly not by those of this State, which hold that a company doing a life insurance business takes a risk on an insured person’s life subject to all his human passions and frailties. Admr. v. Ins. Co., 19 Mo. 506; McDonald v. Triple Alliance, 57 Mo. App. (St. L.) 87.

But whatever merit the rule may possess, we need not concern ourselves about it in the present case, for it is clear the defendant association has interpreted its contracts so as to make it inapplicable to them. The by-laws enacted on the subject of suicide import that the company understood its policies or certificates had bound it theretofore to pay stipulated benefits in full, notwithstanding the death of a member by his own hand. Either this is true, or we are driven to the position which no one will contend for, that the society meant to create instead of diminish a liability on its part by those by-laws. Their wording shows too that the company understood its previous obligation was to pay in case of suicide; for they-read, that in the event of the suicide of a member, his beneficiary shall receive only one-half of the face value of the certificate, and the logical meaning of such language is that previously the beneficiary was entitled to the full face value. The company itself having construed its contracts so as to leave no doubt about what it intended to insure against, that construction should be adopted, as it contravenes no policy of the law. Patterson v. Camden, 25 Mo. 13; Brewing Co. v. Water Works Co., 34 Mo. App. (K. C.) 49; Rose v. Carbonating Co., 60 Mo. App. (St. L.) 28; Union Depot Co. v. Railroad, 131 Mo. 291; Williams v. Railroad, 153 Mo. 487; Wetmore v. Crouch, 150 Mo. 671. We hold, therefore, that the doctrine above adverted to has no bearing on the determination of this controversy.

This being an Illinois contract, particular reliance is placed on the decisions of the courts of last resort of that State as making by-laws like those pleaded in the answer applicable to contracts for fraternal insurance entered into prior to tbeir enactment, when the certificate of insurance provides that the insuring party shaLl be bound by future by-laws. Those decisions we have consulted and find some of them support the position of counsel for the defendant. Supreme Lodge v. Trebbe, 179 Ill. 348; Fullenwider v. Royal League, 180 Ill. 626; Supreme Tent v. Hammers, 81 Ill. App. 560; Supreme Legion v. Clark, 88 Ill. App. 600. There are later decisions of the Supreme Court of that State which cast some doubt on whether a certificate worded as Morton’s was would be subject to the effect of a subsequently adopted by-law reducing the benefit if the member committed suicide; for his certificate differs in its language from the one construed in Supreme Lodge v. Trebbe, supra, in that it bound Morton to comply with future by-laws, whereas in the Trebbe case the words were that the contract should he controlled by future laws and regulations. Peterson v. Gilson, 191 Ill. 365; Covenant Assn. v. Kentner, 188 Ill. 431.

But attention to the answer will disclose that the defendant has failed to plead the laws of Illinois on this subject. The answer several times avers the defendant is an Illinois corporation operating under the laws of said States and other States, including Missouri, and duly licensed to operate in said States as a fraternal association. Further, that in accordance with the laws of Illinois, it is organized for the sole benefit of its members and not for profit, has a lodge system, a ritual, and a representative form of government, makes provision for the payment of benefits in case of death only to the insured’s family or.persons dependent on him and operates and conducts its business under the laws of the State of Illinois as a fraternal society, never having done business anywhere or at any time as a life insurance corporation. The answer also shows the contract of insurance in controversy was an Illinois contract made and performed in that State. But nowhere is reference made to the laws of Illinois or any decisions of its courts concerning the effect of a by-law such as is pleaded in the answer on prior contracts of insurance. The motion for judgment on the pleadings was in the nature of a demurrer to the answer, and we recognize the rule that liberal treatment must be accorded the allegations of the answer and whatever construction most favorable to the defendant they are susceptible of given to them. But it is also true that if there is an entire absence of averment concerning the law of Illinois on the point in hand, it must be decided without particular reference to that law.

The senseless rule of practice still obtains that, where an action or defense rests on a foreign law, even if it be one of a sister State of the Union, such law is a fact which a court can not take notice of unless it is pleaded and proven. Garrett v. Conklin, 52 Mo. App. (K. C.) 654; Banchor v. Gregory, 9 Mo. App. (St. L.) 102; Thatcher v. Mars, 11 N. Y. 437; Finney v. Finney, 17 How. Pr. 197; Bean v. Briggs, 4 Iowa 469. The Federal courts have long since rid themselves of this technicality, which forces State courts to control contracts made in another State by the general doctrines of ,the common law when they know perfectly well the contracts were entered into with reference to other laws, .and know, too, or can easily ascertain, what those laws are. It is well to require proof of foreign laws which are neither familiar nor accessible, like those of European or Asiatic States; but there can be no good reason for forbidding courts to take judicial notice of the laws of the States of this Union. The rule is the other way and we must be governed by it; and, as the answer ■contains no averment in regard to the decisions of the courts of Illinois on the crucial question of the case, we can not determine it solely by the decisions of those courts, but must be governed by the weight of authority.

Certificates in fraternal associations for indemnity in tfi© event of death, are contracts for insurance, subject to all the rules of law which control the'interpretation of contracts generally, create and enforce their obligations and prohibit their impairment or subsequent alteration without the consent of both the contracting parties. State v. Benevolent Society, 72 Mo. 146; Commonwealth v. Weatherbee, 105 Mass. 149. And it is a universal principle that one competent party to a legal contract can not rescind, annul or impair it, but must perform the full obligation it carries unless excused by his obligee; as it is also a universal principle that in ascertaining the extent of the obligation assumed, preference will be accorded to an interpretation that yields just and reasonable consequences and squares with the ordinary actions and motives of men, pver one that leads to results unreasonable, unjust and inconsistent with those actions and motives.

With these premises in mind let us turn to the suicide by-law of the appellant company in force when Charles Morton died and consider its meaning and effect according to the usual canons of interpretation and without regard to any statute of this State, conceding (but not deciding) that the company enjoyed immunity, when it issued the certificate, from the general insurance laws of Missouri and hence from the statute in regard to the defense of suicide.,

Tt will be observed that the by-law as passed March 28, 1893, and the first amendment thereof April 2, 1895, do not affect appellant’s liability on its certificate because, as first adoptéd, the by-law only reduced the amount to be paid on a benefit certificate provided the insured died by his own hand two years after becoming a member, and the first amendment only in case that kind of a death occurred within five years after he became a member. Morton became a member originally in 1889 and lived until May, 1900, the certificate in suit having been issued in 1893.

The next amendment adopted June 18, 1897, does not in terms apply to certificates theretofore issued, and under the rule of strict construction of provisions for forfeitures, will not be construed to apply to prior-certificates. The important amendment is the one adopted April 11, 1899, which purported to bind members theretofore as well as thereafter admitted and provided that if any member should die by his own hand, whether sane or insane, his beneficiary should only receive one-half of the face value of his certificate. This by-law is asserted to have become part of the contract of insurance between the Royal League and Charles Morton, by virtue of a term of the certificate providing that the order was only bound to pay the full amount of the certificate in case, among other things, the insured complied with “the laws, rules and regulations now governing the said order and fund or that may hereafter be enacted by the supreme council to govern said council and fund, all of which are also made a part of this contract.”

We are referred to decisions that by-laws like the one in question affect prior insurance when the certificate contains a proviso that it shall be subject to future by-laws. In weighing the authority of the different eases in which that ruling is made the language of the certificates ought to be attentively noticed in order to ascertain the exact scope of the stipulations, and to see how pertinent the opinion is to the particular case in which it is cited.

But there- are numerous well-considered opinions in which it is ruled that subsequent by-laws undertaking to reduce the amount to be paid in certain contingencies, do not take effect on previous contracts; and that a stipulation to comply with future regulations means the member will comply with such as relate to his duties as a member, but does not mean that the society may interfere with the essential purpose of the contract, namely, the indemnity covenanted to be paid. Hysinger v. Supreme Lodge, 42 Mo. App. (St. L.) 635; Knights Templar, etc., v. Jarman, 104 Fed. 638; Supreme Council v. Getz, 112 Fed. 119; Pokrefky v. Assn. 121 Mich. 456; Becker v. Benefit Society, 144 Penn. St. 232; Nesler v. Connor, 17 Penn. St. 136; Hale v. Ins. Co., 31 Atl. (Pa.) 1066; Becker v. Mutual Benefit Ins. Co., 48 Mich. 610; Wiler v. Equitable Union, 36 N. Y. Supp. 734; Langan v. Legion of Honor, 70 N. Y. Supp. 663; Newhall v. Legion of Honor, 63 N. E. (Mass.) 1; Wist v. Grand Lodge A. O. U. W., 22 Oregon 271; Gaut v. Legion of Honor, 64 S. E. (Tenn.) 1070; Strauss v. Mutual Reserve Fund, 128 N. C. 465; Bregaw v. Knights of Honor, 38 S. E. (N. C.) 905.

Whatever the rule may be in other jurisdictions, in this one it is that by-laws of the kind involved in this controversy do not materially alter or impair prior contracts of insurance, whatever the proviso of the certificate may be in regard to future by-laws, on the theory above stated, that the intention of such a provision is to bind the insured simply by administrative or regulative enactments; not such as go to the reduction or withdrawal of the consideration for which assessments are charged. We think this interpretation is not only reasonable and just, but is the only one consistent with the very words of the particular certificate under consideration, which bound Morton do comply with all the by-laws in force when he took the insurance or that might thereafter be enacted; and words are to be appraised at no more than their real value when a forfeiture is invoked in their name. Complying with a by-law, or any other law, means obeying it, and obedience in its nature and essence calls for intelligent action by a sane being. As was said in the Wist case (22 Cregon, supra) an agreement to comply with future bylaws means such as the member can comply with. The by-law invoked against the respondent’s right is that if Morton committed suicide while sane or insane, the amount of the policy should be reduced by one-half. Said by-law does not call for obedience or compliance on the part of a member — is not one which a member is supposed to obey; but is a mere proviso that in case he takes his own life a certain consequence shall result. But if it did call for obedience, how can Morton be rationally held to have agreed, years in advance, that he would not commit suicide if insane? Such a contention is extravagant. Compliance with a by-law must be the act of a sound mind which is able to know the by-law has been adopted and to comprehend and observe its commands. The law compels us to scrutinize this certificate and refuse to permit its annulment unless the plain meaning of its term forces that result; and a fortiori must we refrain from seeking an unnatural meaning to bring about such a result. McCullom v. Ins. Co., 61 Mo. App. (St. L.) 352. Common sense tells us at once that Morton never intended to bind himself to comply with a law that might be enacted while he was insane or to control his acts while in that state, as it tells us also he did not intend to empower the association to abrogate part of its liability.

The principle of construction to be applied to the enáctments of an order intended to operate retrospectively is, that they shall have an effect on previous contracts such as may, with probability, be assumed to have been contemplated by the contracting parties, instead of one in the nature of confiscation. Ibis doubtless competent, and may be wise, for insurance companies to refuse to indemnify against suicide; but the usefulness of such a policy is outweighed by the evil of allowing obligations assumed and paid for through years to be impaired or swept away at the will of the party which has so far received all the consideration. If companies can reduce their liability in case of suicide by half, they can totally wipe it out; and the unjust result will be that part of the indemnity for which the insured long paid premiums, will cease to exist without the restoration of any portion of his payments.

This case is identical with Smith v. Knights of Pythias, 83 Mo. App. (St. L.) 512, in all its facts and is conceded to be, appellant asserting that that precedent had been disregarded and practically overruled by the later decision of Morton v. Royal Tribe of Joseph, 93 Mo. 78. All the last-named case decided was that the Royal Tribe of Joseph is a fraternal beneficial association, and as such exempt from the provisions of the general insurance laws of the State, so that suicide was a good defense to an action on one of its certificates. The entire contention was as to whether said company was a fraternal society or a general insurance company; nor was there any point made that the by-law or constitutional clause invalidating certificates if the assured suicided, was enacted after the certificate was issued, nor, in fact, any proof to show it was. The opinion in Smith v. Knights of Pythias, supra, was not adverted to in the opinion because the two cases had nothing in common. In Richmond v. Supreme Lodge 100 Mo. App. (St. L.) 8, the certificate was for a sum not to exceed two thousand dollars and expressly provided that the right of the beneficiary should be determined by the certificate and by-laws in force when the benefit became payable.

The doctrine of this court that a proviso in a benefit certificate, by which the insured agrees to comply with future rules and regulations, goes no further than to grant a permission to the company to bind the member by amendments of its constitution and rules in matters relating to his membership duties and the society’s internal economy and mode of transacting business, is approved and expounded with convincing logic and learning by eminent judges in the cases we have cited. Those cases involved, in principle, the essential point at issue here, namely: the effect of an agreement in a mutual insurance policy that the member will be bound by or comply with future amendments of the order’s constitution and rules, on the society’s power by a subsequent by-law to diminish the amount of its liability in certain contingencies.

In Knights Templars etc., v. Jarman, the certificate bound the company to pay Jarman’s wife and children the amount named and all money paid on the policy in assessments, subject to certain limitations contained in the constitution of the order. Jarman had agreed to abide by the constitution, rules and regulations of the company as they were when he took the insurance, or might be made thereafter. A .properly enacted by-law exempted the company from returning assessments on policies and it was held to have no effect on the J arman policy, which antedated the by-law.

In Supreme Council v. Getz, an agreement was made by the deceased member when he joined the order (American Legion of Honor) “to conform in all respects and be bound by the existing laws and all future adopted amendments and enactments.” Held, not an agreement by the insured to accept a by-law reducing the amount of insurance to be paid by the Legion at his death.

In Pokrefky v. Firemen’s Fund Assn., the charter of the association provided that its affairs should be governed by trustees who might change its by-laws at pleasure. This charter authority was ruled not to empower the trustees to change a by-law in force when the plaintiff’s decedent joined the association, which provided that said decedent’s beneficiary was entitled to the entire amount of one assessment on all the members, so as to entitle the beneficiary to only part of an assessment.

In Becker v. Beneficial Society, plaintiff had joined the defendant society when a by-law was in force granting Weekly benefits to a named amount to a sick member. Years afterwards it reduced the amount by bylaws then adopted in accordance with the' constitution of the order. Held, that even after the adoption of said by-laws, plaintiff when sick, was entitled to the amount of weekly benefits allowed when he joined the society.

In Becker v. Farmers Mutual Insurance Company, 48 Mich. 610, the contract was for fire insurance in a mutual company, the policy stipulating that it was subject to the charter and by-laws. Becker was notified of the enactment of a by-law vacating the policy if the premises remained vacant twenty days. Held, a contract once made with a member can not be changed in its essence without his consent, and whatever force new by-laws might have, they could not be allowed to destroy express contracts.

In Hale v. Equitable Aid Union, the certificate recited that “it was subject to such laws, rules and regulations as now exist or may hereafter be adopted. ’; The insured was to receive one-half the amount of the certificate in twelve years if she was then living and in good standing, and was ruled to be entitled to that benefit regardless of a subsequently adopted by-law confining the benefit, in the case of previous as well as present policy-holders, to those who should live to the expectation of life and limiting the payment then to be made to ten per cent of the amount of the certificate.

In Wiler v. Equitable Aid Union, the applicant for a policy agreed to accept it subject to future regulations, but was nevertheless held entitled to receive the amount of the policy in eleven years according to its terms, although a by-law was enacted later which restricted payment to such members as lived to the expectation of life — the same decision as in the Hale case.

In Langan v. Legion of Honor, 70 N. Y. Supp. 663, the change of rules reduced the amount payable on any benefit certificate; the member had promised full compliance with present and future laws, but the policy was enforced as written.

In Newhall v. Legion of Honor, tbe decision was to the same effect.

In Wist v. A. O. U. W., 22 Oregon 271, the insured bad promised compliance with future regulations and requirements a.s the express condition on which he was to participate in the beneficiary fund, -taking out a policy for plaintiff who was not a member of his family nor dependent on him. A subsequent by-law had limited beneficiaries to relatives and dependents, of which change the insured had notice. Held, the new rule did not become part of the agreement nor affect the right of plaintiff to recover.

In Strauss v. Life Assn., 126 N. C. 971, 128 Id. 465, it was held that an agreement that the constitution and by-laws of the association might be amended, did not authorize an amendment taking away a member’s substantial rights.

To the same effect is the later North Carolina case of Bregaw v. Knights & Ladies of Honor, 38 S. E. 905.

The foregoing cases were all decided on the theory that subsequent by-laws, despite the member’s agreement to comply with them, can not defeat or abridge the essential rights created by the policy, but affect only the member’s duties as such; not his interests as a contracting party. In all of them we find the same argument here advanced and accepted by some courts, that the business experience of companies shows them what regulations ought to prevail and that it is necessary that they be permitted to avail themselves of the teachings of experience by enacting new regulations, as needed, to bind all members and control all agreements. There is some merit in that argument and it is pertinent to any legislation respecting contracts. It has not been thought, however, sufficiently meritorious to permit State Legislatures to impair obligations, and we think it not sufficiently so to permit insurance societies.

What has always been a leading decision to support the appellant’s position is Supreme Lodge v. LaMalta, 95 Tenn. 157; but the authority of that case seems to be shaken by the later one of Gaut v. Supreme Council, supra, wliich determined a point not materially different from the one involved in the LaMalta case, it seems to us. But the point was decided the other way and all the foregoing authorities, including Smith v. Knights of Pythias, which repudiate the doctrine that by-laws can be passed to impair previous contracts, were approvingly cited.

The motions to intervene were filed after judgment and were properly overruled.

"We find no cause to be dissatisfied with the former rulings of this court in similar actions, our review of the authorities having strengthened and reinforced the conviction that they were sound and just; and as the judgment of the court below was in conformity to them it is affirmed.

Blancl, P. -J., and Beyburn, J., concur.