Kennedy v. Grand Fraternity
| Citation | 92 P. 971,36 Mont. 325 |
| Parties | KENNEDY v. GRAND FRATERNITY. |
| Decision Date | 16 December 1907 |
| Court | Montana Supreme Court |
Appeal from District Court, Silver Bow County; Jeremiah J. Lynch Judge.
Action by Mary Kennedy against the Grand Fraternity. From a judgment for plaintiff, defendant appeals. Reversed, and new trial granted.
This is an action to recover upon a policy of life insurance. With a single exception, it may be said that there is not any dispute as to the facts, which, as disclosed by the pleadings and undisputed testimony, are: Prior to March, 1905, Patrick Kennedy became a member of the Grand Fraternity, a fraternal insurance society or company, organized under the laws of Pennsylvania, and with the head offices at Philadelphia. Frederick Gaston was president, and W. E. Gregg secretary of the grand lodge or body. Subordinate lodges or societies were instituted in different communities, one being located in Butte, of which Kennedy was a member. Upon the approval of his application for membership there was issued to Kennedy a policy of life insurance, denominated "death benefit certificate," for $2,000, payable at his death to Mary Kennedy, his wife. The premium on this policy was $5.60 payable monthly. This policy contained a provision that if the insured "shall fail to pay the dues as requited, *** this certificate shall be null and void," and also referred to the constitution and by-laws of the order, which are made a part of the policy. Among other provisions of the constitution and by-laws are the following: Kennedy failed to pay any dues for the month of April or the month of May, 1905. On June 29th Kennedy made application for reinstatement in the order, tendering with the written application all fees then due, including the dues which would be required for the month of June in case he was reinstated. This application and these dues were delivered to one Hutchinson, the collector of the local lodge in Butte, who retained the dues and forwarded the application to the secretary of the grand lodge at Philadelphia. On June 24th the secretary of the grand lodge disapproved the application for reinstatement. On June 30th Patrick Kennedy died, and on the same day, after his death, notice of the action of the grand lodge was given to the beneficiary by Hutchinson. Because of the failure of the company to pay the amount of the policy, or any part thereof, this action was commenced by the beneficiary named in the policy. The plaintiff recovered judgment for the amount of the policy, and from the judgment and order denying it a new trial the defendant appeals.
Kirk, Varnum & Kirk, for appellant.
Peter Breen, Jesse B. Roote, and A. C. McDaniel, for respondent.
The complaint, among other things, alleges: "(6) That at the time of his said death, as above set forth, the deceased was a member in good standing of the said corporation known as The Grand Fraternity, defendant above named." This is denied in the answer.
The solution of this controversy depends upon the answer to the question, what was the effect upon Kennedy's membership of his failure to pay the dues for April and May, 1905? The policy of insurance, together with the provisions of the constitution and by-laws of the order applicable, constitute the contract between the parties. 25 Cyc. 744; 3 Am. & Eng. Ency. Law (2d Ed.) 1080, 1081; O'Connor v. Grand Lodge A. O. U. W., 146 Cal. 484, 80 P. 688; 5 Current Law, 1528. The constitution and by-laws, quoted above, provide that if the assured, denominated "frater," shall fail to pay his monthly dues on or before the last secular day of the month for which the same are due and payable, he shall "thereupon become suspended by his own act, and his benefit certificate or certificates shall be absolutely void," and such failure shall forfeit all right of the insured, or beneficiary, to any death benefit from the defendant fraternity, and such failure to pay shall forfeit all privileges and benefits of membership of the insured, and upon such failure to pay, all liability of the defendant fraternity to the insured, or beneficiary, because or on account of the certificate or policy, shall "thereupon end and be forever determined." These provisions seem too plain to admit of construction or interpretation. The mere failure of Kennedy to pay his dues for April and May, ipso facto worked a forfeiture of his membership and an abrogation of the contract between the parties. That it is perfectly competent for the parties to make a contract of this character, which provides that the failure to make payment of dues within the time allowed shall work a forfeiture, without notice to or demand upon the insured, is beyond controversy. 25 Cyc. 831, and cases cited. It is a general rule of the law of life insurance that if the contract of insurance contains a provision like the one in controversy, by which it is void if payment of the dues or premium is not made at an appointed time, then time is of the essence of the contract, and a failure to make payment on or before the appointed time works an absolute forfeiture. 19 Ency. Law (2d Ed.) 44, 47, and cases cited; Butler v. Grand Lodge A. O. U. W., 146 Cal. 172, 79 P. 861; 2 Bacon on Benefit Societies and Life Insurance (3d Ed.) §§ 354, 385. Under the terms of this contract, then, Kennedy forfeited his membership in the society and any right which he or his beneficiary had by virtue of the policy.
But it is further alleged in the complaint that on June 19, 1905 the insured paid to the defendant all dues, fines, and penalties due to July 1, 1905, which sum "was accepted by the defendant herein as payment in full of all dues, fines, and penalties of said beneficiary certificate for said period of time, and the said defendant reinstated the said deceased, Patrick Kennedy, and the said Patrick Kennedy then by reason of said payment so made by him and accepted by said defendant became in good standing in said organization, defendant above named, and entitled to all the rights and benefits accruing to him under the said certificate set forth." These allegations are also denied in the answer; and plaintiff is now seeking to recover upon the theory that Kennedy was reinstated in the society and his contract of insurance revived prior to his death. In other words, the plaintiff is relying upon the performance by Kennedy of a condition subsequent, and, having pleaded and relied upon his reinstatement, it is well settled that she assumed the burden of proof upon that question, since it is denied in the answer that Kennedy ever was reinstated. Brun v. Supreme Council A. L. of H., 15 Colo. App. 538, 63 P. 796; 2 Bacon on Benefit Societies and Life Insurance, § 469. In this connection respondent relies upon the first paragraph of section 4, article 8, of the constitution and by-laws of the order, which provides: "Any frater, who shall have forfeited his benefit certificate or certificates by a default in the payment of dues, if then in good health, may be reinstated and his benefit certificate revived, by presenting an application to the collector of the branch, or to the secretary, accompanied by the amount in arrears, together with a fine of not exceeding 15 per cent. additional." And it is said, in effect, that all that could be demanded of Kennedy was that he file with the collector of the local lodge a proper application for reinstatement, which he did, and accompany it with the necessary fees then in arrears, which he did (no fines were demanded), and therefore, having met all the requirements of this paragraph, Kennedy was thereby reinstated in the society, and neither the society nor its officers could arbitrarily refuse to recognize such reinstatement, and, if the premise upon which this conclusion is based is correct, the conclusion is uncontrovertible. But the remaining paragraph of that section reads as follows: "In every such application, the applicant shall furnish satisfactory proof that he is in good health, and, if no charges of any kind are pending against him (and the application shall be approved by the secretary) the applicant shall thereupon become reinstated and his benefit certificate revived and again in force." But respondent contends that, notwithstanding this last paragraph, the first paragraph above provides a complete method for reinstatement of a delinquent member, with all the terms of which Kennedy fully complied. But we are not able to agree with this construction. We think the entire section must be read together; that it provides only one method for the reinstatement of a delinquent member, and the plaintiff, having relied upon Kennedy's reinstatement, assumed the burden of...
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