The Supreme Council of Order of Chosen Friends v. Forsinger

• Decision Date: 16 September 1890
• Docket Number: 14,329
• Citation: 25 N.E. 129,125 Ind. 52
• Parties: The Supreme Council of the Order of Chosen Friends v. Forsinger
• Court: Indiana Supreme Court

25 N.E. 129

125 Ind. 52

The Supreme Council of the Order of Chosen Friends v. Forsinger

No. 14,329

Supreme Court of Indiana

September 16, 1890

From the Marion Superior Court.

Judgment reversed.

F. M Finch and J. A. Finch, for appellant.

G Carter and J. N. Binford, for appellee.

OPINION

Elliott, J.

The appellee's complaint is founded upon a certificate of membership issued to him by the appellant. The by-laws of the corporation contain, among others, this provision:

"Should a member become totally and permanently disabled from following his or her usual or other vocation, by reason of disease or accident, such member, upon the receipt and approval of satisfactory proofs, as hereinafter provided shall be entitled to a benefit not exceeding one-half of the relief fund certificate held by him or her."

The certificate issued to the appellee is a contract of insurance, and his right to recover upon it does not depend upon the action of the officers of the society, for if he has performed his part of the contract, and is totally disabled by disease or accident, he has a complete cause of action. A refusal by the officers of the society to allow the claim will not defeat a recovery. The appellee was, of course, bound to comply with the terms of his contract and with the lawful by-laws of the society. The valid provisions of the by-laws do, indeed, form part of his contract, and are of controlling force. Supreme Lodge, etc., v. Knight, 117 Ind. 489, 20 N.E. 479 (496); Pfister v. Gerwig, 122 Ind. 567, 23 N.E. 1041. But while it was necessary for the appellee to comply with the requirements of the valid by-laws of the association, it was not in the power of the officers to defeat his claim by arbitrarily rejecting his proofs as unsatisfactory or by wrongfully declaring that he had not done what his contract and the by-laws of the association required of him. It was not necessary, therefore, for the appellee to do more than appropriately show, by his complaint, the contract with the corporation, performance of the conditions on his part, that he was totally disabled, and that he had made proper proof of his disability. He was not bound to go further and allege that his proofs were such as satisfied the corporate officers. It was enough for him to show that they were such as his contract and the law of the land require. He was not bound to anticipate and avoid defences; it was sufficient for him to make a prima facie case.

The appellant, by way of answer in abatement, sets forth the following by-law:

"Section 6. On receipt of the proper notice of disease or accident disability, under section 4 of this article, the supreme councillor shall proceed to investigate the same. If at any time he deems the facts to warrant it, he may appoint one or more physicians, whose duty it shall be to make a careful examination of the member's condition, and report as to the character and permanence of the disability. If such report shows a disability of an unquestionably total and permanently disabling character, the supreme councillor, supreme recorder and supreme medical director may approve the same, and order the benefit paid. If, however, in the opinion of said officers, there is any doubt concerning the permanence of the disability, they shall postpone the matter for any period they may determine upon, not exceeding one year, and shall then order a new examination either by the same or other physicians. If the result of the second examination be also uncertain, said officers may, in like manner, provide for a third, upon the result of which they shall either pay, or refuse to pay, the benefit claimed. This decision shall be final and conclusive upon the parties affected thereby unless reversed upon appeal by the supreme council in regular session. Any claimant feeling aggrieved may take such an appeal by serving notice thereof upon the supreme recorder within thirty days after receipt of notice by the claimant of the decision, by the claimant, his or her personal representatives. The supreme council shall accord the appellant a hearing at its next regular session, and dispose of the matter."

The answer sets out other provisions concerning appeals and regulating the mode of procedure. Both the complaint and the answer show that the claim was presented to the officers named in the by-laws, that action upon it was postponed, as the by-laws provide, and that it was finally rejected. The trial court held the answer bad, and that ruling is questioned by the assignment of errors.

Our decisions declare that it is not competent for parties in advance of any dispute to oust the jurisdiction of the courts by providing that the decision of persons named in the contract shall be final and conclusive. Louisville, etc., R. W. Co. v. Donnegan, 111 Ind. 179, 12 N.E. 153; Supreme Council, etc., v. Garrigus, 104 Ind. 133, 3 N.E. 818; Bauer v. Samson Lodge, etc., 102 Ind. 262, 1 N.E. 571; Kistler v. Indianapolis, etc., R. R. Co., 88 Ind. 460.

There is some diversity of opinion upon this question, but the weight of authority sustains the doctrine declared by our own decisions. An author, who has given the question full consideration, says: "It is a settled principle of law that parties can not by contract oust the courts of their jurisdiction, and agreements to refer to future arbitration will not be enforced in equity and will not be sustained as a bar to an action at law or a suit in equity." Bacon Benefit Societies, section 450. This principle is asserted by the Supreme Court of the United States, by the English courts, and by other tribunals. Insurance Co. v. Morse, 20 Wall. 445; Scott v. Avery, 5 H. L. Cases, 811; Thompson v. Charnock, 8 Term R. 139; Reed v. Washington Insurance Co., 138 Mass. 572; Stephenson v. Piscataqua F. & M. Ins. Co., 54 Me. 55. The logical conclusion from this long settled doctrine is that parties can not by contract provide for the conclusive settlement of questions before such questions arise, by designating persons to adjudicate upon them, and this conclusion has often been given effect in cases such as this by other courts as well as by our own. Mentz v. Armenia Fire Ins. Co., 79 Pa. 478; Lauman v. Young, 31 Pa. 306; Gray v. Wilson, 4 Watts 39; Wood v. Humphrey, 114 Mass. 185; Rowe v. Williams, 97 Mass. 163; Braunstein v. Accidental, etc., Ins. Co., 1 Best & Sm. 782.

It is obvious that there is a distinction between cases where the agreement that the decision of designated persons shall be conclusive is made after a dispute has actually arisen, and cases where it is made prior to the existence of any controversy. One reason for this distinction is that parties may revoke an agreement to submit to arbitration and appeal to the courts for redress, and this right is one which can not be abridged by an agreement made before either party can know what the nature of the controversy will be. The rule which we approve commends itself by its fairness and justice, for there is nothing unjust in declaring that parties may appeal to the courts of the country for redress, while there is something of unfairness in a provision which makes the decision of interested corporate officers final, and excludes resort to the judicial tribunals of the land. The rule we favor is both expedient and just.

As the provision declaring that the decision of the officers named shall be final is ineffective the answer would not be good as a plea in bar, but if...