SOME JURISDICTIONAL QUESTIONS ARISING IN CONNECTION WITH FRATERNAL BENEFICIARY SOCIETIES. By GEORGE W. MILLER, CHICAGO, ILL. Read before meeting, Detroit, Mich., Aug. 16, 1910. A legal paper is dry enough at best and yet where prepared to be read before an audience composed of lawyers only and as one of a number of papers to be read the writer may console himself with the thought that his will not be the only dry paper to which his audience must listen. The task of the writer is more difficult where the audience is mixed and yet there are many questions within the range of the law of insurance an understanding of which will be of much service to the managers of insurance companies and of fraternal beneficiary societies because some of them relate to problems arising frequently in the management of these institutions, and it has been the aim of the writer to devote a portion of this paper to some such questions. TRIBUNALS OF THE ORDER. Many, if not all, of the societies create tribunals and make provision for submission to and determination by these tribunals of controversies which arise in the respective societies and of claims against them either in favor of the living members or the beneficiaries of the deceased members. These provisions of the laws in every case it is thought deal with matters of internal policy and discipline and in many cases relate to contract or property rights. In some societies it is provided that all claims shall be presented to some managing officer or committee composed of managing officers or to the board of trustees or directors or managers as they may be termed, with provisions that appeals may be taken to higher bodies, or, as in some cases, with provisions that appeals shall be taken from the decisions of the officer, committee or boards referred to and in many instances it is provided that these decisions, unless appealed from, shall be final and that when appealed from, the decision of the last tribunal passing upon the controversy or claim shall be final and conclusive upon the parties, while in other in stances there is no provision making decisions final and conclusive and in some cases societies have gone so far as to expressly provide that resort shall not be had to the courts but that all such matters shall be determined by the tribunals of the society. These various provisions of constitutions and by-laws have given rise to many interesting questions as to which much learning appears in the decisions of the courts and as to which there has been a wide difference of opinion among the courts. Speaking now of contract or property rights as distinguished from matters of internal policy or discipline, the courts of the state of Michigan have gone farther in sustaining the validity of such by-laws, not only where the requirement is that claims be submitted to the tribunals of the society as a condition precedent to bringing suit in the courts, but where it is provided that the decisions of such tribunals shall be final and conclusive, than any other state in the union, certainly farther than most of the states for in Michigan these provisions of the laws of the societies are treated as contract matters merely and the idea that they involve questions of public policy and should be stricken down on the theory that a sound and healthy public policy forbids that parties should contract away the right to seek redress in the courts of the land, has not found favor, and it is now well established in Michigan that where the by-laws of a society. provide tribunals and require submission thereto by members or their beneficiaries of claims against the society either as a condition precedent to bringing suit in the courts for the recovery of the money claimed to be due or requiring such submission with provision that the decisions of such tribunals shall be final and conclusive upon the parties, these by-laws are valid and binding as matters concerning which parties are competent to contract and courts will respect them and enforce them provided of course the tribunals of the societies act in good faith and there is no taint of fraud. The views which obtain in the courts of Michigan will be best expressed by a few brief quotations from decisions of the Supreme Court of that state, and they will serve to indicate as well the views of those courts which have adopted the views which obtain in Michigan. In an early case in dealing with a claim for sick benefits, Judge Champlin writing for the court said, (63 Mich. 378): "In a society comprising a numerous membership, deriving its revenues from small monthly contributions, it is of the utmost importance that its business should be carried on inexpensively, and with a proper regard to the object sought to be accomplished. It is necessary that there should be some mode of determining the question of when relief should be given and denied, and the method provided in the by-law seems well adapted to the circumstances and needs of such a society. There is nothing oppressive in the terms of the by-law, and it contains nothing which the policy of the law forbids. If it is enforced in good faith, and with impartiality, which the members pledge themselves to do, it must result in benefit to sick members, and at the same time protect the funds of the society from depletion by the undeserving." At a later date where it was urged upon the court that such provisions were contrary to public policy in that their purpose was to oust courts of jurisdiction, the court replied, (87 Mich. 626): "It is claimed on behalf of plaintiff that the provision above quoted, which makes the decision of the Great Camp final, is contrary to public policy, and void, in that it ousts the court of jurisdiction. These organizations are purely voluntary, and it may well be considered by their members important that claims of this character should be determined by methods more inexpensive than resorts to the courts." Van Poucke vs. St. Vincent De Paul Soc., 63 Mich. 378. Hembeau vs. Knights of Maccabees, 101 Mich. 161. The same views prevail in Maryland and Pennsylvania. Improved Order Red Men vs. Murbach, 13 Md. 91. Sanderson vs. Brotherhood of R. R. Trainmen, 204 Pa. St. 182. The view of the Maryland court is well expressed in the following language (13 Md. 91): "These are private beneficial institutions operating on the members only, who for reasons of policy and convenience, affecting their welfare and perhaps their existence, adopt laws for their govern ment, to be administered by themselves, to which every person who joins them assents. They require the surrender of no right that a man may not waive, and are obligatory on him, only so long as he chooses to recognize their authority. In the present instance, the party appears to have been subjected to the general laws and by-laws according to the usual course, and if the tribunal of his own choice has decided against him he ought not to complain. It would very much impair the usefulness of such institutions, if they are to be harassed by petty suits of this kind, and this, probably, was a controlling consideration in determining the manner of assessing benefits, and passing upon the conduct of members.” There is, however, a jealousy of jurisdiction, if it may be so termed, on the part of courts which leads judges to scrutinize with a critical eye all contractural provisions which have a tendency to oust courts of their jurisdiction. The creation of courts is a sovereign power and running through bills of rights and constitutions is the idea. that courts shall ever be open to the citizen to afford him redress for any wrong and to settle disputes particularly where contract or property rights are involved. These considerations have led courts in most of the states where these questions have arisen to take a contrary view, at least to some extent, to the views adopted by the courts of Michigan, Maryland and Pennsylvania. It has been said in some instances that courts will scrutinize such provisions critically with a disposition to avoid giving to them a construction which will oust courts of their jurisdiction and that wherever the language of the by-laws involved is open to a construction which will save to the claimant the right to resort to the courts, such a construction will be adopted and in some instances even a strained construction of language has been adopted to accomplish that end. Where the by-laws create tribunals to which parties may submit their claims and from whose decisions may appeal, but do not provide that such claims must be submitted and such appeals must be taken before suit may be brought in the courts these provisions are held to be permissive only, giving the claimant a cumulative remedy only and leaving it to his option to avail himself of the remedies provided in the society first and then failing, to resort to the courts or to bring suit in the courts at once. In most states where the courts refuse to sustain the validity of provisions requiring submission of claims to the tribunals of the society and providing that the decision of such tribunals shall be final and conclusive insofar as the latter provision is concerned, it is held that in view of the nature and character of these institutions it is a reasonable requirement that before suit be brought in the courts claims be first submitted to some tribunal or tribunals of the society in order that an opportunity be afforded to carefully investigate and consider the claim and by paying it avoid the expense and trouble of litigation and that such provision must be complied with before the claimant will be permitted to resort to the courts. The right of parties to submit a controverted matter to arbitration under an agreement to be bound by the decision of the arbitrator is as old as the law itself and where parties dealing at arm's length enter into such an agreement and the arbitrators act in good faith their decision will be binding, but in these instances parties are agreeing to submit to some tribunal of their own selection a claim then existing and the arbitrators are not parties having an interest in the subject-matter of the controversy, while in the cases here under consideration the tribunals of the society are composed of officials who represent one party to the contract and hence an interested party in the subject-matter and the agreement relates to controversies not in existence at the time such agreements are made but which are to arise in the future and it is the disinclination of courts to sustain contracts which, if enforced, will permit one party to the contract to be the final judge of the rights of the parties which arise under the contract, which in part leads courts to hold that such provisions, particularly insofar as they undertake to make the decisions of the tribunals final and binding, will be disregarded by the courts. The views which have dictated the lines of decisions now being considered have been well expressed by the supreme court of Kansas (57 Kas. 647) where after recognizing the rules announced by the courts of Michigan, Maryland and Pennsylvania it is said that, "Other cases are to the effect that it is not competent for societies, in advance of a dispute, to make a by-law or stipulation which will deprive a member of the right to resort to the ordinary legal remedies for the protection or enforcement of his contract. or property rights, nor to oust the jurisdiction of the courts by a provision that the decision of the organization itself or one of its tribunals shall be final as to such rights. Courts are created by the sovereign power, and, when established, should be open and accessible to all for the protection of their civil or property rights. Societies like the plaintiff in error cannot be regarded as purely charitable organizations, nor the benefits promised by them gratuities. The members pay for insurance, and the certificates issued to and accepted by them are, in effect, contracts of insurance. Although the insured is a member of the organization, and must generally be held |