Supreme Lodge Knights v. Wellenvoss

DAY, Circuit Judge, after making the foregoing statement of facts, delivered the opinion of the court. In the view that we take of this case it may be conceded that by the law of the order, binding upon the membership, in order to maintain the rights conferred by the insurance certificate, it was necessary to continue membership in good standing in the subordinate lodge of which insured was a member. It may also be granted that the Supreme Tribunal had the right to try Wellenvoss for the offense of which he was convicted, and that it was of sufficient gravity to warrant a suspension from the privileges of the order for the term of two years within the rules and regulations lawfully enacted. It may also be granted that the various acts of incorporation had only the effect to continue the corporate body as a single existence with its laws and regulations in continual force, except as modified from time to time. These questions have been elaborately argued. In our judgment the case may properly turn on the interpretation of the legal effect of the suspension of Wellenvoss on the right of the beneficiary to recover on his certificate. The rights of such organizations as the Knights of Pythias to control their internal management, and determine for themselves who shall be members of the organization, so far as the fraternal and social features are concerned, is not before us in this case. An examination of the adjudicated cases will show the general disposition of the courts to permit to such bodies full liberty to deal with those features of the organization, and to determine; by tribunals of their own, rights and obligations of membership in these secret and fraternal bodies. We are dealing in this case, not with these social and fraternal rights and obligations, but with contractual rights under a certificate of insurance upon the life of the insured in favor of the beneficiary who brings this action. In this respect these organizations are business corporations. They do not issue policies of insurance strictly speaking, but the benefit certificate is a contract of insurance none the less, and the assessments are levied in lieu of premiums to keep the contract alive. The corporation agrees, in consideration of the payment of the assessments and the fulfillment of the other requirements, to pay a stipulated sum upon the death of the certificate holder to the [675] beneficiary named. Bac. Ben. Soc. §§ 3-52. We have, then, to deal with a contract of insurance which provided that Wellenvoss should comply with the laws governing the Endowment Rank, in force or enacted after the issuance of the certificate, and maintain good standing under the laws of the society. The regulation under which Wellenvoss was suspended provided for a hearing and a sentence of expulsion or suspension from the order for a definite period. He was convicted of a violation of his obligation to the order in publishing and printing a ritual in an unauthorized manner. The conviction was under authority of section 405 of the Supreme Statutes of 1894, regulating the insurance branch. Under that section his sentence of expulsion or suspension could only be pronounced after due notice and trial. Its provisions were not self-executing, and such as ipso facto avoid the contract of insurance, as does the nonpayment of dues and assessments. Unless the society instituted proceedings which, upon conviction, would terminate the rights of the member, he continues in good standing. Upon the insurance contract the effect of such conviction is to end his right of recovery under his insurance certificate, or to suspend it, if suspension is the sentence imposed. In other words, it works a forfeiture of his right of insurance in whole or during the period of suspension. Conceding the right of the society to pass a judgment of this character, which shall work a forfeiture of the contract of insurance, as well as terminate the social and fraternal rights, of the member, are there no limitations upon the exercise of this right? Forfeitures are not favored in the law, and he who would insist upon the exercise of the right must act in strict accordance with the terms of the contract which gives the privilege. It has been repeatedly held in ordinary contracts of insurance that the receipt of a premium after the accruing of a cause of forfeiture of which'the company has knowledge is a waiver of the right to insist upon it. Insurance Co. v. Raddin, 120 U. S. 196, 7 Sup. Ct. 500, 30 L. Ed. 644. We perceive no good reason why the general principles of the law governing forfeiture should not apply to the insurance contracts of benefit associations. Bac. Ben. Soc. § 431. In Stylow v. Insurance Co., 69 Wis. 224, 34 N. W. 151, 2 Am. St. Rep. 738, Judge Taylor, speaking for the court, says: “Where no fraud has been practiced by the insured in concealing his state of health at the time the payments are made, and the company receives such payments out of time, when it might refuse payment and declare the insurance forfeited, it cannot accept the money, and keep it, and still insist upon a forfeiture.” In Modern Woodmen of America v. Jameson, 48 Kan. 718, 30 Pac. 460, it was held that the forfeiture of such contracts was not to be favored. In Supreme Lodge v. Kalinski, 163 U. S. 289, 16 Sup. Ct. 1047, 41 L. Ed. 163, the court said: “Aside from this, the continued receipt of assessments upon Kalinski’s certificate up to the day of his death was a waiver of any technical forfeiture of the certificate by reason of the nonpayment of the lodge dues. Granting that the continued receipt of premiums or assessments, after a forfeiture has occurred, will only be construed as a waiver when the facts constituting a forfeiture are known to the company (Insurance Co. v. Wolff, 95 U. S. 326, [676] 24 L. Ed. 387; Bennecke v. Insurance Co., 105 U. S. 355, 26 L. Ed. 990), this is true only of such facts as are peculiarly within the knowledge of the assured. If the company ought to have known the facts, or with proper attention to its business would have been apprised of them, it has no right to set up its ignorance as an excuse.” These contracts are relied upon as a means of providing for wife and children. In many of these societies only such as are near in relation or kinship can be beneficiaries. If the right to enforce them is to be taken away, good faith requires such action to be taken with reasonable promptness, that the insured may not, by'the failure of the society to assert'the right, be lulled into assurance that the fault is condoned, so far, at least, as his insurance is concerned, and the sum intended will be available to his beneficiaries in the event of his death. .If this is not law, such associations, with the full knowledge that a cause of forfeiture has arisen-, may go on indefinitely levying and collecting assessments, until the assured by reason of age or disease can no longer procure a contract of insurance in favor of those who have a natural claim upon him for such provision. While these societies are peculiar in their organization, and are conceded the fullest right to control their membership and regulate for themselves their internal affairs, as insurance companies we perceive no reason why they should not be held to act upon those principles of equity and fair dealing which the law requires of other companies whose business is that of insurance. Nor is this view, so entirely just in itself, lacking authority for its support. In Nib. Ben. Soc. (2d Ed.) § 565, the author says: “Knowledge on the part of the society of a breach of one of the conditions of the contract by the member, and the subsequent collection of assessments, is a waiver of the right to forfeit the contract for that cause.” In Bac. Ben. Soc. § 431, the rule is thus stated: “But it seems that good faith would require the company, when it becomes aware of a right of forfeiture, to avail itself of it within a reasonable time, and if, after such knowledge, it collects a premium, it should be held to have waived forfeiture.” This seems to be a reasonable statement of the rule. Applying it to the facts in this case, what is the result? Let it be assumed that Wellenvoss, by his participation in the movement of June, 1893, had so far violated the obligations of the order, in participating in and directing the movement to print the ritual in defiance of the order of the duly constituted authorities of the society, as to justify proceedings for his expulsion or suspension, and the consequent loss of his insurance, no such action was taken. The first action of the association was in 1894, when the report of the supreme chancellor was-filed. The recommendation of that officer was that steps be taken for the expulsion or suspension of the offending officers from further membership in the Grand Lodge. No steps were then taken to expel him from the order or suspend his membership, and none were suggested. In 1896, when the report of the past supreme chancellor was made who had investigated the conduct of the recalcitrant officers, his recommendation as to Wellenvoss was that he be suspended from the order, and his name be erased from the membership of the Supreme Lodge. Wellen [677] voss’ name was stricken from the list of past grand chancellors. No proceedings were then instituted to expel him from the order. From this decision Wellenvoss appealed to the Supreme Tribunal, and that body in 1898 restored his name to the roll of past grand chancellors. Upon hearing of this decision, upon the motion of certain memfeers of the Supreme Lodge, it was ordered that charges be filed before the Supreme Tribunal, which resulted in the conviction of Wellenvoss of violation of his obligations to the order in participating in the movement for the German ritual in 1893, and his suspension for two years from the order, with the consequent forfeiture for that period of all rights under his insurance certificate. During this suspension, and within a few months, Wellenvoss died. He was sick with a fatal disease when he was suspended. During all these years, and until official notice of his suspension, the society continued to receive his assessments. When suspended, he was no longer a fit subject for insurance. He could not pass a physical examination. He was likely to soon pass away, and did die long before the period of his suspension had passed. Not only had the society failed to take any action looking to suspension or expulsion for these five years, but it received his assessments for that entire period. It sought to punish him for the offense committed by striking his name from the list of past grand chancellors, and it was only when this action was reversed by the Supreme Tribunal that the proceeding was instituted which resulted in his suspension. It may be true that no statute of limitations would prevent the society from ridding itself of undesirable members, and we are not here dealing with the right of the society to exclude a member from its social and fraternal privileges. We have before us a contract of insurance, which, assuming it to be subject to forfeiture, was so because of facts known to the society for five years without effectual steps to avail itself of the right, receiving payment upon it periodically, and declaring a forfeiture after the assured had reached a state of health preventing the purchase of other insurance. Upon the plainest principles of justice and settled law applicable to such a situation, we think the right of forfeiture, if it existed, is waived as against the beneficiary. It is urged that Wellenvoss should have sought a remedy within the society for his suspension, and that class of cases is cited which hold that a member of a fraternal organization who claims to have been \yrongfully deprived of membership must seek the redress provided for in the order to which he belongs. If this doctrine can have application to a case like the present, it is to be noted that Wellenvoss was convicted by the highest tribunal of the order. The judgment was unanimously rendered by that body. It would have been vain to have filed a petition for rehearing, which was the only recourse left to the assured. Loubat v. LeRoy, 40 Hun, 546-549. It is further contended that by the terms of the' certificate of insurance Wellenvoss’ beneficiary could only recover in the event that he continued in good standing until his death. It certainly can be no defense to an action on the certificate that the society wrongfully deprived the member of “good standing.” If that be so, the unwarranted action of the society might be made to protect it from just liability. [678] This w.ould be to permit it to take advantage of its own wrong. Wellenvoss did all that he could do to maintain his contract rights by a tender of the assessments after the society refused to receive them. We find no error in the direction of a verdict for the plaintiff below. Judgment affirmed.