Pennsylvania Co. v. Reager's Adm'r

• Decision Date: 18 March 1913
• Parties: PENNSYLVANIA CO. et al. v. REAGER'S ADM'R.
• Court: Kentucky Court of Appeals

154 S.W. 412

152 Ky. 824

PENNSYLVANIA CO. et al. v. REAGER'S ADM'R.

Court of Appeals of Kentucky.

March 18, 1913

Appeal from Circuit Court, Jefferson County, Common Pleas Branch First Division.

Action by J. H. Reager's administrator against the Pennsylvania Company, Trustee, and others. Judgment for plaintiff, and defendants appeal. Reversed and remanded.

Charles H. Gibson, of Louisville, for appellants.

Bennett H. Young and Henry G. Bedinger, both of Louisville, for appellee.

CLAY C.

In April, 1899, the various railroad companies comprising the Pennsylvania Lines west of Pittsburg entered into an agreement which led to the formation of what is known as the Voluntary Relief Department of the Pennsylvania Lines West of Pittsburg. The purpose of the department was to provide accident and sick benefits for the employés of the railroad companies, whether injured through negligence or not. Membership in the department is optional with the employés. The department is under the management of a superintendent subject, however, to the final control of the advisory committee. The advisory committee is composed of six members selected by the employés from among themselves, and six members selected by the company. The fund out of which the benefits are paid is derived from monthly contributions from the wages of the members of the Relief Department. In the event there is not sufficient money in the treasury of the Relief Department to pay the benefits as they accrue, the deficit is made up by the railroad company. The Pennsylvania Railroad Company is the trustee for the Relief Department and as such receives and disburses all moneys. Members are classified according to the monthly wages received.

On October 6, 1890, J. H. Reager, a car inspector for the Pittsburg, Cincinnati, Chicago & St. Louis Railway Company one of the Pennsylvania Lines west of Pittsburg, became a member of the third class of the Voluntary Relief Department. Members of this class are made up of employés receiving wages not less than $60 nor more than $80 a month. Members of this class contribute $2.25 a month, and, in the event they are disabled on account of accident while in the performance of duties in the service of the company, they are paid benefits at the rate of $1.50 a day during the first 52 weeks of disability, and at the rate of 75 cents a day so long as the disability continues. In case a member or his legal representative brings suit against any of the companies associated in the Relief Department for damages on account of injury or death of such member, payment of benefits from the Relief Fund on account of same shall not be made until such suit is discontinued. If prosecuted to judgment or compromised, any payment of the judgment or amount in compromise shall preclude any claim upon the Relief Fund for such injury or death.

From the time J. H. Reager was admitted to membership in the Relief Department up to May 17, 1893, he contributed $2.25 a month to the Relief Fund, and was always a member in good standing. On May 17, 1893, Reager was caught between the ends of two cars, and his knee was injured and his hip dislocated. Thereupon the Relief Department paid to Reager the sum of $1.50 per day for the first 52 weeks he was disabled, and then at the rate of 75 cents a day for over 10 years. The total amount so paid was something over $3,000. On July 31, 1904, payment of benefits was stopped. Thereupon Reager brought this action against the Pennsylvania Company as trustee, the Pittsburg, Cincinnati, Chicago & St. Louis Railway Company, and the Voluntary Relief Department for the Pennsylvania Lines West of Pittsburg to recover benefits from the date they were stopped up to the filing of the suit. Several years later Reager died, and the action was revived and thereafter prosecuted in the name of Edith I. Reager, administratrix. On January 8, 1912, a trial was had, and the jury returned a verdict for plaintiff in the sum of $1,908, which amount represented the benefits at the rate of 75 cents a day from July 31, 1904, to July 20, 1911, when Reager died. From the judgment entered thereon this appeal is prosecuted.

The chief complaint of the defendants grows out of the alleged error of the trial court in sustaining a demurrer to the second paragraph of the answer which they filed. It appears that, upon becoming a member, each applicant agrees in writing to the regulations of the department, containing the following clauses: "I also agree for myself and those claiming through me, to be especially bound by regulation number 65, providing for final and conclusive settlements of all disputes by reference to the superintendent of the Relief Department, and an appeal to the advisory committee." Regulation No. 65 is as follows: "All questions or controversies of whatsoever character arising in any manner, or between any persons in connection with the Relief Department, or the operation thereof shall be submitted to the determination of the superintendent of the Relief Department, whose decision shall be final and conclusive thereof, subject to the right of appeal to the advisory committee within thirty days after notice, to the parties interested, of the decision. When an appeal is taken to the advisory committee it shall be heard by said committee without further notice at its next stated meeting, or at such future time as they may designate, and shall be determined by a vote of the majority of a quorum, or more, present at such meeting, and the decision so arrived at by the advisory committee shall be final and conclusive upon all parties without exception or appeal." Regulation No. 45 is as follows: "Payments on account of disablement by accident will only be made upon the disablement being shown to have resulted solely from accidents occurring to members in the performance of duty in the service and to which they were assigned, or which they were directed to perform by proper authority, or in voluntarily protecting the property of the company in whose employ they are. This shall include accidents occurring to members at points upon the employing company's property which they necessarily pass, when going to or from work, and which do not result from their voluntarily or unnecessarily exposing themselves to danger. There must be exterior or other positive evidence of injury, and satisfactory evidence that it incapacitates the person from performing his duty in the service, or, when of a permanent character, to earn a livelihood in an employment suited to his capacity. Disablement from accident occurring otherwise than as aforesaid, will be classed with sickness. Questions as to the permanent character of disability and the continued payment of benefits on account of the same, shall be determined by the advisory committee."

Setting out the foregoing regulations, the second paragraph of the answer alleges, in substance, that prior to August 24, 1904, a dispute arose between Reager and the Relief Department as to whether Reager's disability continued, or whether he was able to earn a livelihood in an employment suited to his capacity, and whether or not he was entitled to receive any further benefits from the Relief Department by reason of his membership therein, and the injury he had received, and that the superintendent of the Relief Department, after investigation, decided that Reager's disablement did not incapacitate him from earning his livelihood in an employment suited to his capacity, and that on the 24th day of August, 1904, he advised Reager by letter, which the latter duly received, of such decision, and that the Relief Department had no authority to continue paying benefits to him beyond July 31, 1905; that upon being advised of the decision of said superintendent, Reager, on September 4, 1904, sent a written appeal to the advisory committee, complaining of said decision and requesting the advisory committee to consider and review said decision and set it aside; that said appeal was duly considered and reviewed by the advisory committee, and by a vote of the majority of the committee the decision of the superintendent above set out was approved and sustained; that on October 29, 1904, Reager was duly advised of the action of the advisory committee on his appeal from the decision of the superintendent. It was further alleged that Reager's claim was considered and settled in the manner provided in the contract between the parties, and that defendant relied upon and pleaded said settlement in bar of the action.

The question presented is: Are regulations Nos. 45 and 65 valid and is the action of the advisory committee taken pursuant thereto conclusive of plaintiff's right to maintain this action? It may be conceded that a large number of the courts, particularly in cases of mutual benefit or fraternal insurance societies, have held by-laws or regulations giving to a certain board or committee of the society the right finally to determine all questions or disputes between the members and the society to be invalid. Various reasons are assigned for so holding. Some of the courts base their conclusion on the fact that such by-laws and regulations deprive the courts of their jurisdiction in matters involving property rights, and are, therefore, contrary to public policy and void. Others place stress on the fact that such provisions are agreements to refer future disputes to arbitration, and therefore cannot be enforced in equity or sustained in bar to an action at law or a suit in equity. Others take into consideration the fact that such boards or committees are appointed by the society itself, and that an agreement to submit disputes to arbitration before a board or committee selected by the society, and therefore a partial and interested...