Modern Woodmen of America v. Tevis

• Decision Date: 28 August 1902
• Docket Number: 1,514.
• Citation: 117 F. 369
• Parties: MODERN WOODMEN OF AMERICA v. TEVIS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

117 F. 369

MODERN WOODMEN OF AMERICA v. TEVIS et al.

No. 1,514.

United States Court of Appeals, Eighth Circuit.

August 28, 1902

Syllabus by the Court.

A principal may limit the authority of his agent, and when he does so the latter cannot bind his principal beyond the limits of his authority by contract, estoppel, or waiver, to those who know the limitations upon his power.

Insurance companies and beneficial associations may limit the authority of their agents by provisions in their policies, or by by-laws which are a part of their contracts; and an agent whose powers are thus limited cannot bind his company beyond the limits of his authority by contract, estoppel, or waiver to those who know the limitations upon his powers.

The insured and the beneficiaries under contracts with insurance companies and beneficial associations are charged with knowledge of the limitations upon the powers of the agents of the companies which are found in the policies or certificates or in the by-laws or applications which are a part of their contracts, and they are bound by these limitations.

The by-laws of the Modern Woodmen of America, which constitute a part of the contracts with its members and beneficiaries provide that a member who fails to pay a benefit assessment at the time specified for its payment is ipso facto suspended, and his benefit certificate is thenceforth void that he may be reinstated within a certain time, if in good health, by furnishing a warranty of that fact, and paying his arrearages; that the clerk of the local camp shall collect and remit to the head camp the assessments paid in accordance with the by-laws; that he shall report to the head camp suspended members; that he is the agent of the local camp and not of the head camp; and that no act or omission by him shall create any liability or waive any immunity or right of the society. Held: (1) The clerk of the local camp is the agent of the head camp to collect and remit the benefit assessments in accordance with the terms of the by-laws. (2) His authority is limited by the by-laws, and the members and beneficiaries are charged with knowledge of these limitations, because they are a part of their contracts. (3) The clerk of the local camp has no authority by contract, estoppel, or waiver to bind the society to its members or beneficiaries either by extending the time of payment of a benefit assessment, or by waiving default in its payment, or by reinstating a suspended member without a warranty of good health, in the absence of notice or knowledge of such acts and acquiescence therein by some of the principal officers of the head camp.

Stipulations to insure the prompt payment of benefit assessments constitute the substance and the essence of insurance contracts of beneficial associations.

The by-laws of the Modern Woodmen of America constitute a part of its contracts with its members and beneficiaries, and a service of a notice of assessment by mail in accordance with the terms of the by-laws is sufficient and effective.

L. C. Krauthoff and E. C. Ellis (J. W. White, John Sullivan, Frederick H. Bacon, and J. G. Johnson, on the brief), for plaintiff in error.

James H. Harkless (John O'Grady and Charles S. Crysler, on the brief), for defendants in error.

Before SANBORN and THAYER, Circuit Judges, and LOCHREN, District judge.

SANBORN Circuit Judge.

This is the second hearing of this case; the decision at the former hearing rested upon the opinion in Supreme Lodge v. Withers, 177 U.S. 260, 20 Sup.Ct. 611, 44 L.Ed. 762, which cited with apparent approval Whiteside v. Supreme Conclave (C.C.) 82 F. 275, a case which ruled the question involved in this action, Modern Woodmen of America v. Tevis, 111 F. 113, 119, 49 C.C.A. 256, 262. After the former decision of this case the supreme court handed down its opinion in Northern Assur. Co. v. Grand View Bldg. Ass'n, 22 Sup.Ct. 133, 145, 151-153, 183 U.S. 308, 46 L.Ed. 313, and thereupon a rehearing of this case was granted, and it has now been again argued and submitted.

This action rests upon a benefit certificate issued on March 31, 1899, by the Modern Woodmen of America, to M. W. Tevis, one of its members, who died on August 10, 1899. The defense of the society is that Tevis was suspended, and his certificate was void on August 10, 1899, when he died, because he had not paid an assessment upon him which fell due on August 1, 1899. Under the certificate the by-laws of the association constituted a part of the contract of membership and of insurance. Those by-laws provided that, if any beneficial member failed to pay any benefit assessment on or before the first day of the month following the date of the notice thereof, he was thereby ipso facto suspended, and his benefit certificate was 'absolutely null and void during such suspension. ' Tevis failed to pay on August 1, 1899, or at any time before his death, an assessment the notice of which was dated July 1, 1899. The by-laws provided that the clerk of the local camp of which Tevis was a member should collect, receive, and report to the head camp all the benefit assessments paid in accordance with the provisions of the by-laws (section 201); that he should report to that camp as delinquent and suspended all members of his local camp who failed to pay any benefit assessment on or before the 1st day of the month following the date of the notice of its levy (sections 260, 261, 263); and that any suspended member in good health might be reinstated within 60 days from the date of his suspension by paying all arrearages due and furnishing a written warranty that he was in good health (section 49). It had been the invariable custom of the clerk of this local camp to accept payments of benefit assessments from its members at any time within 20 days after they became due, without any warranty of good health, and without reporting them delinquent or suspended; and Tevis had paid one assessment on June 2, 1899, one day after it became due, in accordance with this custom. There was, however, no evidence that the head camp, or any of its officers, had any notice or knowledge of this custom, or of the fact that Tevis had made a payment when it was overdue without any warranty of good health. The by-laws provided that the clerk of the local camp was the agent of that camp, and that he was not the agent of the head camp; that no act or omission on his part should have the effect of creating a liability of the society, or of waiving any right or immunity belonging to it (section 271); and that no officer of the society or of any local camp could waive any provision of the by-laws which related to the substance of the contract for the payment of benefits (section 34). In this state of the case the trial court charged the jury that the clerk of this local camp was the agent of the head camp or of the society in collecting and receiving the benefit assessments; that his acts in connection therewith were the acts of the society, and were binding upon it, whether the head camp or its officers had notice of them or not; and that the company was estopped by the acts of this clerk in accepting overdue assessments, without warranties, from defeating this action on the ground that Tevis had failed to pay his July assessment when it was due.

At the former hearing in this court the question whether the clerk of the local camp was the agent of that camp or of the head camp was carefully considered, and the conclusion was reached that in the collection, receipt, and remittance of the benefit assessments the clerk of this local camp was the agent of the head camp, and not the agent of his local camp only. That position is not assailed on this rehearing. But it is earnestly contended that the terms of the contract with the beneficiaries of this insurance evidenced by the by-laws so limited the power of this agent that he could neither extend the time of payment of an assessment, waive a default in its payment, nor reinstate a suspended member without a warranty of good health; that the beneficiaries knew these limitations, because they were a part of the agreement of insurance which they accepted; and that no act of this agent beyond the limits of his authority prescribed by these by-laws either bound his principal or charged it with notice of his unauthorized acts. The by-laws are unquestionably a part of the contract, and they furnish a broad and substantial basis for this contention. They declare that this local clerk 'shall receive and receipt for all moneys paid in accordance with the provisions of these laws' (section 261); that 'no act or omission on his part shall have the effect of creating a liability on the part of this society, or of waiving any right or immunity belonging to it' (section 271); and that 'no officer of this society, nor any local camp or officer thereof, is authorized or permitted to waive any of the provisions of these laws, or of any other laws of this society which relate to the substance of the contract for the payment of benefits between the members and the society, whether the same be now in force or hereafter enacted ' (section 34). The argument of counsel for the defendants in error that the waiver of a default in the payment, or the extension of the time of payment, of an assessment, which results in the establishment of a liability for the entire amount of a certificate, where no liability would have existed in the absence of such a waiver or extension, is not of the substance of the contract for the payment of benefits, is unworthy of serious consideration. Its statement is it refutation. Fraternal insurance is temporary insurance, -- insurance from the maturity of one assessment to the maturity of another,-- and stipulations to insure...