Wuerfler v. Trustees of the Grand Grove of Wisconsin of the Order of Druids

116 Wis. 19 | Wis. | 1902

MaRshall, J.

Did the court err in refusing to direct a verdict for plaintiff, upon the undisputed facts of the case ? That proposition raises the only question that need fee discussed on this appeal. It involves though, three minor propositions, which are as follows: (1) Was the certificate or policy of insurance, issued to Wuerfler pursuant to tbe constitution of the order as it stood after the attempted change in 1894, binding upon the parties at the time of the amendment of 1896? (2) Was the change in 1896, pursuant to which the attempt was made to call in all then outstanding certificates, an amendment of the -rules and regulations of the order within the meaning of the certificate in question ? (3) Did the failure of Wuerfler to pay the assessments upon his membership and lodge dues, not payable absolutely until the end of February, 1897, affect the validity of his certificate, since before that time such certificate was declared void by the order, and its attitude in that regard continued till such time of payment expired ?

1. The first question must be answered in appellant’s favor. It is so ruled by the familiar doctrine that when a contract made by a corporation has been so far executed that to allow the corporation to repudiate it would work injustice to the other party thereto, who- has in good faith relied thereon, the doctrine of estoppel applies and prevents such repudiation regardless of whether the corporation had a right to make it or not, unless its act in that regard was in violation of some written law of the state or so-und public policy; that in such circumstances, if the corporation exceeds its- power, it commits a punishable offense against the sovereignty of the people, but cannot itself invoke the doctrine of ultra vires to avoid its act, at the same time inflicting a grievous wrong upon the one who has in good faith relied upon the assumption that it possessed in fact the power which it pretended to have authority to exercised Whether that doctrine should be applied to transactions between benefit societies and their members has been a subject for consideration in many courts, and the decisions in respect thereto are by no means harmonious. But the weight of authority is clearly in favor of treating such societies substantially the same as ordinary insurance companies and other corporations, as regards their insurance contracts. The subject was fully disr cussed here in a very recent case. Ledebuhr v. Wis. Trust Co. 112 Wis. 657, 88 N. W. 607, where the authorities are collated to considerable extent. We will refer to that case instead of going so soon over the subject again.

2. Respondent did not possess unlimited authority to change its plan of insurance, giving the change retroactive effect, under the reserve power, made a part of the insurance contract, to make changes in the rules, by-laws, and regulations' of the order. Such a reserve power is held to warrant only reasonable variances of insurance contracts, — variances required, in the judgment of the order, in those matters of detail necessary or advisable in carrying out efficiently the fundamental principle or scheme of insurance, not changes destroying it. Obviously, changes in the by-laws, rules, and regulations regarding the execution of a plan of insurance are quite different from changing the plan itself and nullifying all contracts entered into under it, as was done in this case. The essential features of the plan of insurance here were that each certificate holder’s beneficiary should receive $1,000 upon and at the maturity of his contract, and that a fund should be accumulated by assessments upon the memberships in the order sufficient for that purpose. The way was undoubtedly open for the order to' make reasonable changes respecting the hazards members might subject themselves to, and in regard to the number and amount of the assessments, the time of payment thereof, the effect of default in such payment, the notice required of assessments to put members in default, and many other matters of detail that might be mentioned. But after a member had paid assessments for a long period of time, contributing to accumulate money to meet the matured obligations of $1,000 each to beneficiaries, a change in the constitution of the order (the word “constitution” is here used as synonymous with-“by-laws”) rendering tbe certificate at. maturity, instead of worth $1,000, worth an indefinite amount and probably not half that sum, cannot seriously be considered a reasonable-change in rules, regulations and by-laws as regards existing, contracts. Such a change is a complete abrogation of the-contract. It was so regarded in this case, as is evidenced by the action of the order formally nullifying all outstanding, certificates and calling them in. It was supposed that the-order possessed power, without consent of the certificate-holders, to declare void the whole plan of insurance, under which it had operated for some two years, during which time-many thousands of dollars had been paid into the death fund by members in the expectation that their beneficiaries-would ultimately receive each $1,000; and that it possessed-such authority either upon the theory that the existing plan was not legally adopted by the order in 1894, or under the reserve power to make retroactive changes in by-laws, rules,, and regulations. The right of a benefit society is no- broader than that possessed by any other corporation as to making: by-laws. The power of every corporation in that regard has-its limits, which are at the boundaries of what is reasonable-under the circumstances of each case. Though that is determinable, primarily, by the corporation, there is this legal-, cheek upon it: If, resolving all fair doubts in favor of its-action, the boundaries of reason have been exceeded, to that extent such action is ultra, vires. Stafford v. Chippewa Valley E. R. Co. 110 Wis. 331, 351, 85 N. W. 1036. It is-laid down as elementary that attempted changes in insurance-contracts between benefit societies and their members, under the reserve power to amend by-laws, rules, and regulations,, which are manifestly unfair, are void, it being presumed/ that in making such reservation both parties contemplated only reasonable variances. Uiblack, Ren. Soc. § 25; 1 Bacon, Ben. Soc. § 91a.. The idea is that the doctrine •that vested rights cannot be disturbed by retroactive laws applies to by-laws changing’ insurance contracts containing the reservation that they shall be subject to future changes in the by-laws, rules, and regulations of the order, society or ■company, obligated under the contract, to this extent: While, since the contract contains such stipulation, no vested right •can grow up under it to be free from such changes, such a right is embodied in the contract as regards unfair variances thereof — those essentially changing the plan of insurance instead of merely changing matters of detail in working out ■such plan.

Though to a large extent voluntary associations are independent of judicial control, when they proceed so arbitrarily .as to manifestly violate the private rights of their members they are amenable to the law the same as any other person, natural or artificial. In matters of discipline and policy not manifestly violating private rights they are as supreme within their own field as a religious society. But when they go beyond that, attempting to nullify their contracts of insurance .and to substitute others therefor on an entirely different plan under the guise of changing by-laws, rules, and regulations for the efficient administration of a plan, they cross the line and enter upon a field where the right to proceed may be successfully challenged before judicial tribunals. Supreme Lodge K. of P. v. Knight, 117 Ind. 489, 20 N. E. 479.

We apprehend that the action of respondent would not have been taken except upon the theory that all outstanding certificates of insurance issued under the attempted amendment of the constitution of the order in 1894 were void. It was probably supposed, looking to the situation prior to such attempted amendment, under which beneficiaries were entitled to only $500, that the amendment of 1896 would not result in yielding materially less than such sum, and so would not exceed the reserved power. Had the outstanding certificates been considered, valid, we apprehend no attempt would have been made to make sncb a radical change as to-declare them void without consent of the holders, and to-substitute contracts of an entirely different character in their-places. Our conclusion is that the action of the order, under.the circumstances, was manifestly arbitrary and unfair,— one clearly not within the contemplation of the parties to the certificate in question, and an invasion of the vested rights-therein.

3. The last proposition is ruled in plaintiff’s favor by Guetzkow v. Mich. Mut. L. Ins. Co. 105 Wis. 448, 81 N. W. 652. It was there held upon principle and authority that am insurance company cannot be sustained in taking a stand as regards one of its policies which, if maintained, would render a tender of payment thereon by the policy holder useléss,. because the money would not be accepted as a compliance-with the insurance contract, and then successfully plead failure to make such payment as a defense to the policy. The-action of respondent in notifying Wuerfler, while he yet had ample time to pay his dues to the order, that his certificate-would not be recognized as in force, effectually waived fur-thér payments thereon so long as its attitude in that regard: continued.

A point is made that the judgment is right irrespective of" whether the assignments of error are well taken, because of a by-law of the order which formed a part of the insurance: contract, providing:

“In case any differences of opinion arise between any member and his lodge, or between the heirs of a member and his lodge, concerning benefits coming to such member or his heirs, such brother and his heirs shall have the right and the-duty to apply to the grand lodge of the state of Wisconsin before he or they commence any.action in 'any court of law.”'

There- are several reasons why that does not affect appellant’s right: (1) On its face it does not appear to cover controversies respecting whether a person is or is not a member-•of tbe order. It is confined to controversies witbin tbe order as between it and acknowledged members thereof or tbe heirs •of such members. (2) Compliance with it is plainly not made a condition of a right bnt a condition of invoking judicial remedies to enforce a right; hence such compliance was waived by not complaining of noncompliance by answer, since there was no opportunity, by reason of the way the complaint was framed, to do so by demurrer. Gatzow v. Buening, 106 Wis. 1, 81 N. W. 1003. (3) The by-law, in •efliect, bound the beneficiary, if at all, to submit the controversy as to what her rights were to arbitration, and was waived by the unqualified denial by respondent of all lia'bility under the certificate. 2 May, Ins. 495; Joyce, Ins. % 3257.

The result is that at the close of the testimony appellant was clearly entitled to the direction of a verdict for the amount claimed, less the unpaid assessments, aggregating -$2.40, with interest from the maturity of the claim, August 26, 1897, and to judgment accordingly.

By the Gourt. — The judgment is reversed and the cause •remanded for a new trial.

Upon the ground that the facts were undisputed and indisputable, and hence that a new trial was unnecessary, the appellant moved that the direction as to remanding the cause be so changed that the cause should be remanded to the court below either with a direction to enter judgment in favor of the plaintiff for $997.60 and interest from August 26, 1897, «or with a direction to proceed according to law.

The motion was denied January 13, 1903.