Modern Woodmen of America v. White

• Decision Date: 06 June 1921
• Docket Number: 9818.
• Citation: 199 P. 965,70 Colo. 207
• Parties: MODERN WOODMEN OF AMERICA v. WHITE.
• Court: Colorado Supreme Court

199 P. 965

70 Colo. 207

MODERN WOODMEN OF AMERICA v. WHITE.

No. 9818.

Supreme Court of Colorado, En Banc.

June 6, 1921

Error to District Court, Morgan County; L. C. Stephenson, Judge.

Action by Myrtle May White against the Modern Woodmen of America. Judgment for plaintiff, and defendant brings error.

Affirmed.

Walter S. Coen, of Ft. Morgan, and Truman Plantz and Geo. G. Perrin, both of Rock Island, Ill., for plaintiff in error.

Leonard Anderson, of Brush, and Allen & Webster, of Denver, for defendant in error.

ALLEN J.

This is an action brought by Myrtle May White against the Modern Woodmen of America, to recover upon a benefit certificate which had been issued by the defendant to Adolphus Irwin White, with plaintiff as beneficiary. Plaintiff obtained a verdict and judgment, and defendant brings the cause here for review.

The defendant, Modern Woodmen of America, is a fraternal beneficiary society making provision for the payment of benefits in case of the death of any of its beneficial members. The certificate sued on in the instant case was issued on January 29, 1908, and was payable to the plaintiff as beneficiary, in the event of the death of the beneficial member Adolphus Irwin White.

The complaint alleges, among other things, that White disappeared on June 11, 1911, and further facts are alleged in order to raise the common-law presumption of death which arises from the unexplained absence of a person from his last or usual place of residence for a sufficiently long period of time without having been heard of during such period.

The answer contained a general denial, and also several affirmative defenses. The defendant for one of its defenses alleges, among other things, that the contract sued on by plaintiff is evidenced by three instruments, namely, the application for membership, the benefit certificate, and the by-laws of the society. It is then alleged that its by-laws in force since September 1, 1908, have provided as follows:

'Sec. 66. Disappearance No Presumption of Death.--No lapse of time or absence or disappearance on the part of any member, heretofore or hereafter admitted into the society, without proof of the actual death of such member, while in good standing in the society, shall entitle his beneficiary to recover the amount of his benefit certificate, except as hereinafter provided. The disappearance or long-continued absence of any member unheard of, shall not be regarded as evidence of death or give any right to recover on any benefit certificate heretofore or hereafter issued by the society until the full term of the member's expectancy of life, according to the National Fraternal Congress Table of Mortality, has expired within the life of the benefit certificate in question, and this law shall be in full force and effect, any statute of any state or country or rule of common law of any state or country to the contrary notwithstanding. The term 'within the life of the benefit certificate,' as here used, means that the benefit certificate has not lapsed or been forfeited, and that all payments required by the by-laws of the society have been made.'

The by-law, if enforceable against the plaintiff, would deprive her of the right to rely upon the presumption of death, and, as the record shows, would defeat her action. The defense based on the by-law above quoted was stricken from the answer, on motion of the plaintiff, and at the trial the court refused to admit the by-law in evidence.

The principal question upon this review is whether the by-law pleaded by the defendant is valid and enforceable as against the plaintiff.

The by-law in question was adopted September 1, 1908; the benefit certificate sued upon was issued prior to that time, namely, January 29, 1908. In the application for membership White agreed, among other things, that the certificate should be void if he failed to comply with any of the by-laws then in force or thereafter adopted. The benefit certificate recites, among other things, that the benefit shall be paid to the beneficiary in the event of the death of the member:

'Provided, * * * that * * * all the by-laws of this society as the same now exist or may be hereafter modified, amended or enacted shall be fully complied with.'

An agreement on the part of a member to be bound by all future changes in the by-laws of the society that it may see fit to enact is subject to the implied condition that they must be reasonable. 19 R.C.L. 1204, § 21. In Roblin v. Supreme Tent of Knights of Maccabees, 269 Pa. 139, 112 A. 70, the court said:

'True, the certificate provides that the member shall abide by by-laws thereafter enacted, and that is valid in so far as his rights depend upon by-laws; but substantial rights which rest upon the contract cannot be abrogated by new by-laws, even where the power to make them is reserved. * * * The right to rely upon the presumption of death is substantial, as it may be the only means by which a beneficiary can ever recover, and a policy holder cannot be deprived of such right by a new bylaw. * * *'

The defendant cites section 8, c. 139, p. 422, Sess. Laws of 1911, wherein it is provided that----

'Any changes, additions or amendments to * * * the constitution or laws [of the society] duly made or enacted subsequent to the issuance of the benefit certificate shall bind the member and his beneficiaries, and shall govern and control the agreement in all respects the same as though such changes, additions, or amendments had been made prior to and were in force at the time of the application for membership.'

The statute does not, however, validate every by-law that might be adopted. For example, it could not render effective a by-law which would change the contract so as to impair vested rights, or deprive a member of substantial rights conferred expressly or impliedly by the contract itself. The reason is that 'the obligation of every contract is protected from state interference by the federal Constitution.' 19 R.C.L. 1207, § 23. So far as concerns amended by-laws, the statute contemplates only by-laws or amendments thereto that are reasonable, and does not intend to make valid any amendment which otherwise would be void on the ground of being unreasonable.

The statute may, therefore, be eliminated from further discussion, and the question left to be determined is whether, so far as plaintiff is concerned, the by-law involved in the instant case is invalid as unreasonable or for some other reason.

In 19 R.C.L. 1205, § 22, it is stated that amendments to by-laws may be reasonable as to future members on the ground that they assent thereto on becoming members, and unreasonable as to pre-existing members who have not given their assent to the modification of their contract. In the instant case, the plaintiff is the beneficiary of a pre-existing member.

The identical by-law involved in the instant case has been passed upon by appellate courts in other states recently, and a majority of such courts have held the by-law to be invalid and unenforceable as against the beneficiary of a member whose certificate was issued, as in the instant case, prior to the adoption of the by-law.

The Supreme Court of Wisconsin held this by-law invalid in Sweet v. Modern Woodmen of America, 169 Wis. 462, 172 N.W. 143. The Supreme Court of Nebraska arrived at the same conclusion in Garrison v. Modern Woodmen of America (Neb.) 178 N.W. 842. In Boynton v. Modern Woodmen of America (Minn.) 181 N.W. 327, the court said:

'We concur in the ruling of the learned trial court that the new by-law substantially changed the contract between the parties, and is unreasonable and void. * * * The amended by-law not only abrogates that rule of evidence, and that method of proof of death, in which the insured perhaps can have no vested right, but materially changes the contract in point of substance by imposing upon the beneficiary the burden of continuing the payment of dues and assessments for a long period of time after the lapse of the seven years' disappearance, namely, during the period of the insured's life expectancy. That the change is unreasonable seems the only fair conclusion. * * *'

The Supreme Court of Iowa, consistent with several of its previous decisions on the same subject, held this by-law to be invalid. In Haines v. Modern Woodmen of America (Iowa) 178 N.W. 1010, the by-law was regarded as unreasonable, and therefore invalid, upon each of two grounds, one being in accord with the reasoning in Hannon v. Grand Lodge, 99 Kan. 734, 163 P. 169, L.R.A. 1917C, 1029, to the effect that the by-law interferes with one of the functions of a court in the matter of determining issues of fact. The Iowa court said:

'To say the very least, the right to thus deprive the court of the exercise of its ordinary functions, and to add to or take from a proved fact the probative force and effect to which it is otherwise naturally entitled, is one which will be hedged within very narrow bounds. To hold otherwise, and permit the insurer to restrict its liability by arbitrarily enlarging or minimizing the effect of competent evidence, is to arm it with power which renders practically worthless the protection which it professes to furnish to the insured.'

The court held the by-law unreasonable also for a reason expressed as follows:

'When the contract was made, it was and still is competent under the law of the state to establish the fact of death by proof of certain facts from which such a presumption arises.

This right was a material element or factor in the value of the promised benefit to the member and his beneficiary. Permit the insurer by its own arbitrary act to declare that it will not pay the benefit upon such legitimate proof as...