Employee's Ben. Ass'n of Calumet & Arizona Min. Co. v. Johns

• Decision Date: 05 October 1926
• Docket Number: Civil 2492
• Citation: 249 P. 764,30 Ariz. 609
• Parties: EMPLOYEE'S BENEFIT ASSOCIATION OF THE CALUMET & ARIZONA MINING COMPANY, a Domestic Mutual Benefit Association, et als., Appellants, v. ELIZA A. JOHNS, Appellee
• Court: Arizona Supreme Court

249 P. 764

30 Ariz. 609

EMPLOYEE'S BENEFIT ASSOCIATION OF THE CALUMET & ARIZONA MINING COMPANY, a Domestic Mutual Benefit Association, et als., Appellants, v. ELIZA A. JOHNS, Appellee

Civil No. 2492

Supreme Court of Arizona

October 5, 1926

APPEAL from a judgment of the Superior Court of the County of Cochise. Albert M. Sames, Judge.

Affirmed.

Mr. J T. Kingsbury, for Appellants.

Mr Alexander Murry and Mr. Frank Thomas, for Appellee.

Lockwood J. McAlister, C. J., and Ross, J., concur.

OPINION

Lockwood, J.

Eliza A. Johns, hereinafter called appellee, brought suit against Employee's Benefit Association of the Calumet & Arizona Mining Company, a domestic mutual benefit association, and also joined certain individuals as trustees of said association and the Calumet & Arizona Mining Company, a corporation. We will hereinafter refer to the benefit association as appellant, since it was the real party in interest; the other defendants being joined merely for formal legal reasons.

It appears that the employees of the Calumet & Arizona Mining Company, a corporation operating a mine at Bisbee, Arizona, had organized a domestic mutual benefit association for the purpose of mutually insuring each other, and on or about the 1st of November, 1922, adopted certain rules and regulations for its government. Among such rules and regulations are found the following:

"49. Appeal. All questions or controversies of whatsoever character, arising in any manner, or between any parties or persons, in connection with the association or the operation thereof, whether as to any claim for benefits preferred by any member or his legal representative or his beneficiary, or any other person, or whether as to the construction of language or meaning of the rules, or as to any writing, decision, instruction or acts in connection with the operation of the association, shall be submitted within sixty (60) days of the time of the decision from which an appeal is taken, to the superintendent, whose decision shall be final and conclusive, unless an appeal in writing from such decision shall be taken to the board of trustees, within thirty (30) days after notice of such decision to the parties interested.

"50. Hearing. When an appeal is taken to the board of trustees, it shall be heard by the trustees without further notice, at their next stated meeting, or at such future meeting or time as they may designate, and shall be determined by a vote of the majority of the members present at such meeting and the decision of the trustees shall be final and conclusive upon all parties without exception or appeal."

On the sixteenth day of November, 1922, William E. Johns joined the association and in his signed application stated as follows:

"I also agree for myself and those claiming through me to be governed by the regulations providing for final and conclusive settlement of all claims for benefits, or controversies of whatever nature by reference to the superintendent of the association and an appeal from his decision to the board of trustees."

A certificate of membership was duly issued to the said Johns and about the eighteenth day of May, 1923, he died as the result of an accident. Thereafter appellee, being the surviving widow of Johns, filed her claim for compensation with the superintendent of the association. This claim was denied by him and appellee prosecuted her appeal to the board of trustees as provided in the by-laws. On the 31st of July, 1923, the trustees affirmed the decision of the superintendent and refused appellee any death benefits, on the ground that it appeared she was not entitled to any under the rules and regulations of the association. Thereafter she filed suit in the superior court of Cochise county as aforesaid.

The matter came on for trial before a jury, and appellee introduced certain evidence and rested her case. Thereupon appellant moved to take the case from the jury on the ground that it appeared decedent, William Johns, had agreed for himself and those claiming through him to accept the decision of the board of trustees on any claim for benefits arising out of his membership in the association as final and conclusive, without the right of appeal therefrom, and that the board had decided against appellee's claim under this certificate of membership. The motion to take the case from the jury was denied, and a verdict was returned in favor of appellee for the sum of $ 1,500, upon which judgment was duly entered, and appellant brought the matter before us for review.

There is but one assignment of error, which presents a single proposition of law. The point involved is as follows: Where a mutual benefit association, not organized for profit or gain, declares in its by-laws that the decision of its board of trustees on appeal shall be final and conclusive on all controversies over the alleged rights of members, and where a member of the association, on account of whose sickness or death financial benefits are sought, has expressly agreed to accept such by-laws as binding, may he, or his representative in case of death, after the adjudication of the board has been against him, and there is no claim of fraud or unfair dealing on their part, appeal to the courts for a determination of the very questions on which he agreed to accept the adjudication of the officers of the association as final?

This question of law has been presented repeatedly to the courts of many different states, and we find the decisions to be in hopeless conflict. The state of Maryland probably represents the extreme rule on one side. In Donnelly v. Supreme Council, etc., 106 Md. 425, 124 Am. St. Rep. 499, 67 A. 276, the court says:

"It is sufficient to say that this court has expressly decided that it is competent for the members of an order, such as the defendant, to agree that questions between the members and the order relating to property rights may be referred to and settled by tribunals established within the order, and that the courts will not undertake to inquire into the regularity of the procedure adopted and pursued by those tribunals in reaching their conclusions. Each of these propositions was distinctly established in the case of Osceola Tribe, No. 11, O. R. M., v. Schmidt, Adm'r, 57 Md. 105, in which this court adopted the rule laid down by the Supreme Court of Pennsylvania in Van Dyke's Case, 2 Whart. 312, 30 Am. Dec. 263, in which a beneficial society had decided under its by-laws that a member was not entitled to benefits. Judge Grason, who delivered the opinion in Schmidt's Case, quotes with approval the following language of Chief Justice Gibson:

"'Into the regularity of these proceedings it is not permitted us to look. The sentence of the society, acting in a judicial capacity, and with undoubted jurisdiction of the subject-matter, is not to be questioned collaterally, while it remains unreversed by superior authority.' 'These are private beneficial institutions operating on the members only, who, for reasons of policy and convenience affecting their welfare, and perhaps their existence, adopt laws for their government, to be administered by themselves, to which every person who joins them assents. They require the surrender of no right that a man may not waive, and are obligatory on him only so long as he chooses to recognize their authority. In the present instance, the party appears to have been subjected to the general laws and by-laws according to the usual course, and, if the tribunal of his own choice has decided against him, he ought not to complain. It would very much impair the usefulness of such institutions if they are to be harassed by petty suits of this kind, and this probably was a controlling consideration in determining the manner of assessing benefits and passing upon the conduct of members.'" (Italic ours.)

"The proposition that the member is not precluded from suing at law, after he has exhausted his remedies within the order, unless the contract specifically provides that the decisions of the tribunals of the order shall be final, is supported by the decisions of some states, among which are the states of Illinois and Indiana; but the Maryland rule is otherwise. That rule was expressed with clearness and precision by the learned judge who decided this case below to be that, when the tribunals of the order have power to decide a disputed question, 'their jurisdiction is exclusive, whether there is a by-law stating such decision to be final, or not, and that the courts cannot be invoked to review their decisions of questions coming properly before them, except in cases of fraud. This is true, whether the member does not press his claim at all before the tribunals of the order, or whether he carries it through the final tribunal, or whether he goes through only a part of the hearings which he might have in the order. . . .' The rule contended for by appellant might subject the order to litigation over every question of property right affecting the member, would render the tribunals of the order practically useless, and would defeat the object for which they were established. In Osceola Tribe v. Schmidt, Adm'r, supra, there was no law providing that the decisions of the tribe should be final, and this omission was urged as a reason why the suit could be maintained; but this court applied the rule declared in Anacosta Tribe of Redmen v. Murbach, 13 Md. 94, 71 Am. Dec. 625, to the case, and held that the adverse decisions of the tribunals of the order constituted a flat bar to the plaintiff's right to recover. . . ."

This case probably goes further than any other, but it is supported in general by very respectable authority particularly when it appeared that the member had agreed in advance that...