
    Case 16 — PETITION ORDINARY
    April 27.
    National Mutual Benefit Ass'n v. Jones, &c.
    APPEAL PROM LOUISVILLE CHANCERY COURT.
    1. Insurance — Waiver of Forfeiture. — If the practice of an insurance company and its course of dealings with the insured, and those known to him, have been such as to induce the belief that so much of the contract as provides for a forfeiture in a certain event will not be insisted upon, the company will not be allowed to set up such forfeiture as against one in whom their conduct has induced such belief.
    A member of appellant failed to pay an assessment within thirty days, as required by its charter in order to prevent a forfeiture, but afterwards paid it, and the secretary, whose duty it was to receive assessments, gave him a receipt therefor. The seeretai-y afterwards accepted from him payment of other assessments. It had been the custom of the company, through its secretary and treasurer, to receive from members over-due assessments without question or condition. Held — That the company is estopped to insist upon a forfeiture, although its charter provides a special mode in which a member may be reinstated.
    2. Amendment of Pleadings. — It was not error to set aside the order of submission, and permit an amended answer to be filed to conform to the facts proved, and in furtherance of justice.
    HELM & BRUCE for appellant.
    1. Forfeitures provided by the charters of insurance companies for the failure.to pay assessments promptly will be strictly enforced. (St. Louis Mu. Life Ins. Co. v. Grigsby, 10 Bush, 315; Cators v. Am. Life Ins. Co., 33 N. J. L„ 489.)
    2. In order that a custom may form part of a contract, it must be certain and uniform, and it must appear that the parties contracted with reference to it. (Caldwell vs. Dawson, 4 Met., 125; Kendall v. Russell, 5 Dana, 502.)
    
      3. The evidence relied on to establish the custom pleaded by plaintiff is hearsay, and, therefore, incompetent. (Greenleaf on Evidence, 7th ed., vol. 1, sections 130, 135.)
    4. The assured must be presumed to have known the provisions of the charter of the association, and, therefore, must have known that he had forfeited his membership and had never been reinstated. (Morawetz on Private Gorporations, sections 64, 149, 255; Zottman v. San Francisco, 20 Cal.; Murphy v. City of Louisville, 9-Bush, 189; Brisdy v. The Mayor of New York, 16 How.)
    5. The assured, in making payments to the secretary after he had forfeited his membership, was a mere volunteer, and can not set up such payments as a waiver by the company. (Burton v. American Mnt. Life Ins. Go., 25 Oonn., 554; Catoir v. Am. Life Ins. Go., 33 IS. J. L., 487; Belleville Mut. Ins. Co. v. Van Winkle, 1 Beasley’s Ch’y, N. J., 333.) ■
    6. Even if there was a uniform custom in the office of the association to receive overdue assessments, it was never ratified by the association, and was, therefore, not binding upon it. The requisites of a valid ratification are wanting. (Kerr on Fraud and Mistake, page 297, et seq.; Butler v. Haskell, Desaus. Eq., volume 4, page 651; 3 Wait’s Actions and Defenses, 470, article V; Bispham's Prin. of Equity, 3d ed., section 259.)
    7. The statement by the assured in his application that he did not use alcoholic spirits at all, when, in fact, he did use them, being known by him to be false, was fraudulent, and, therefore, avoids the policy.
    8. The contract being to pay the beneficiaries such sum as might be realized upon assessment, it was error to render judgment for a gross amount upon the allegation that the beneficiaries were damaged in that sum by the failure to make an assessment. The court should have directed the company to make an assessment, and to pay over to the beneficiaries the sum realized by that assessment, less twenty per cent.
    BULLITT & HARRIS of counsel on same side.
    STERLING B. TONEY for appellees.
    1. The court erred in not rendering judgment for $4,000 in favor of appellees and for this error the judgment should be reversed on cross-appeal.
    2. It was an abuse of discretion to set aside the submission, a,nd allow an amended answer to be filed.
    3. The allegations of the petition not being specifically denied, must be ' taken as true. The denials must be specific and not merely by inference. (Bullitt’s Code, sections 114, 126; Ourlin v. Battoe, 6 J. J. Mar., 336; Blight v. Banks, 6 Monroe, 195; Talbott v. Sebree, 1 Dana, 56; Preston v. Roberts, 12 Bush, 581; King v. Spencer, 1 Bibb, 290; Harris v. Ogg, 1 J. J. Mar., 410; Morton v. Warring, 18 B. Mon., 82; Corbin v. Commonwealth, 2 Met., 390; Trustees Ky. F. O. School v. Fleming, 10 Bush, 236; Thurston v. Oldham, 6 Bush, 18; Clark v. Finnell, 16 B. Mon., 329; Webb v. Jeffries, 2 Bush, 221.)
    4. If the practice of an insurance company and its course of dealing with the insured, and others known to the insured, have been such as to induce a belief that so much of the contract as provides for a forfeiture in a certain event will not be insisted on, the company will not be allowed to set up such forfeiture as against one in whom their1 conduct has induced such belief. (N. W. Mut. Life Ins. Co. v. Fort’s Adm’r, 6 Ky. Law Rep., 275; St. Louis Mut. Life Ins. Co. v. Grigsby, 10 Bush, 317; Story’s Equity, sections 1314, 1316-18; Roberts v. New England Ins. Co., 1 Disney, 355; Lewis Phcenix Mut. Life Ins. Co., 44 Conn., 72; Union Ins. Co. v. Pottker, 33 Ohio, 459; Girard Life Ins. Co.' v. Mut. Ins. Co., 10 Ins. L. J., 257; McLean v. Piedmont Ins. Co., 7 Ins. Law Journal, 380; Mayers v. Mutual Life Ins. Co., 38 Iowa, 304; May on Insurance, sections 361 and 510; Helme v. Philadelphia Life Ins. Co., 61 Pa. St., 107; Buckhee v. U. S. Ins. & Trust Co., 18 Barb., 541; Hodsdon v. Guardian Life Ins. Co., 97 Mass., 144; Globe Mut. Life Ins. Co. v. Wolff, 95 H. S., 326; Ins. Co. v. Eggleston, 96 U. S., 577; Hoxie v. Providence Mut. Fire Ins. Co., 6 R. I., 517; Fuller v. Boston Fire Ins: Co., 4 Mot. (Mass.), 206; Cumberland Yalley Mut. Protection Ins. Co., 29 Pa. St., 31; Hale v. Mechanics’ Mut Fire Ins. Co., 6 Gray, 169; Reynolds v. Pitt, 19 Yes., 140; Lilly v. The Fifty Associates, 101 Mass., 432; Gregg v. Landis, 4 C. E. Green, 356.)
    ■ 5. Insurance companies are bound by the acts of their agents, .although in violation of their private instructions. (May on Insurance, sections 132, 134, 136, 139, 142, and 143; Campbell v. Mer. and F. Mut. Ins. Co., 37 N. H., 35; Peck v. New London Co. Mut. Fire Ins. Co., 22 Conn., 575; Union Mut. Ins. Co. v. Wilkinson, 13 Wall., 222; American Ins. Co. v. Mahone, 21 Wall., 152; Eames v. Home Ins. Co., 94 U. S., 621; Bebee v. Hartford Ins. Co., 25 Conn., 51; Lycoming Ins. Co. v. Schollenberger, 8 Wright (Pa.), 259; Beal v. Park Ins. Co., 16 Wis., 241; Davenport v. Peoria Ins. Co., 17 Iowa, 276; Piedmont & Arlington Life Ins. Co. v. Young, 58 Ala., 482-3; Miller v. Mut. Benefit Life Ins. Co., 31 Iowa, 216, 226; Bliss on Insurance, 281, 287-8; Lightbody v. North Amer. Ins. Co., 23 Wend., 18; Plumb v. Cattaraugus Co., 18 N. Y., 390; Corcelis v. Hannibal Savings Co., 43 Mo., 148; Hodgkin v. Farmers’ Mut. Ins. Co., 34 Barb., 218; Wood-bury Savings Bank v. Charter Oak Ins. Co.,' 31 Conn., 517; Hanitz v. ' Equitable Ins. Co., 40 Mo., 557.)
    6. Circulars, prospectus, and pamphlets on which insured relied in taking out policy form a part of insurance contract and control its terms (Wood vs. Dwarris, 11 Exch., 493; Wheelton v. Hardisty, 92 E. O. L. . 231; Oollett v. Morrison, 9 Hare, 173; Central Railway Co. v. Kisch, 2 H. L. Cases, 99; Salvin v. James, 6 East, 571; Walsh v. .¿Etna Life Ins. Co., 30 Iowa, 333; Rorschneider v. Knickerbocker Ins. Co., 8 Ins. L. J., 338; Reese v. Mutual Benefit Life Ins. Co., 23 N. Y., 516; Smith v. Continental Ins. Co., 3 Ins. L. J., 63.)
    7. An action at law is the proper remedy, and money judgment the proper judgment, against a mutual insurance company, notwithstanding the assessment feature in certificate of membership. (Nersldn v. Northwestern Endowment Legacy Asso., 30 Minn., 406; Burland v. Northwestern Mutual Benefit Asso., 47 Mich., 424; Fairchild v. Northwestern Mutual Aid Society, 51 Vt., 613; Heischl on the Law of Fraternities and Societies; Curtis v. Mutual Benefit Co., 48 Conn., 98.)
   •JUDGE LEWIS

DELIVERED THE OPINION OP THE COURT.

Appellees, tlie widow and children of Thomas Jones, deceased, brought an action to recover on a policy of insurance issued for their benefit in his name February 18, 1879, by appellant, The National Mutual Benefit Association, a corporation created by act of the General Assembly, approved April 27, 1878, and ’ judgment having been rendered in their favor for '$3,317.48 the company has appealed, and they also prosecute a cross-appeal.

As the amended answer conformed to the facts proved, did not substantially change the defense, and the filing of it was clearly in furtherance of justice, the Chancellor did not err in setting aside the order of submission and permitting it to be filed, particularly as time was afforded to the plaintiffs to take additional evidence bearing upon the question. Moreover we are inclined to think that even without the amendment the, plaintiffs could not have, under the charter, recovered more than was adjudged. For •admitting, as stated in the petition, that the assessment would have produced $4,000, a deduction of twenty per cent, is required by the charter therefrom.

The first ground of defense to the action is, that the deceased defrauded the company in falsely representing himself, at the time he applied for membership, and the policy was issued, as being a man of sober habits.

Even if there was sufficient evidence to sustain the allegation, it would not necessarily follow that the company, after having received and appropriated for an interrupted period of five years all fees and assessments it was entitled under its charter to collect of the insured, could, after his death, resist payment to the beneficiaries mentioned in the policy. But it is not necessary to determine that question, as there is a failure of proof to establish the fraud alleged.

The principal ground of defense is the failure on the part of the assured, Jones, to pay, within the-time required by the charter, an assessment made, notice of which he received February 2, 1883.

By section 6 of the charter, it is provided that on notification by the secretary of the death of any member, each surviving member shall pay into the treasury, within thirty days from the date of the notice, the mortuary fee stipulated in the certificate of membership, which sum constitutes a fund to be paid within sixty days from the date of proof of loss to-the legal heirs or beneficiary of the deceased member, less twenty per cent, to be deducted for permanent fund and expenses.

And section 7 provides, that any member failing to pay his assessment within thirty days, as provided in section 6, shall forfeit his membership and all benefits arising therefrom; but he may be reinstated by the board if an application is made in writing, accompanied with a medical certificate of continued good health, within twelve months from date of forfeiture.

Jones, the deceased member, did not pay the assessment in question on March 3, 1883, which was the-last day of payment under the charter, and, according to the literal terms thereof, his membership was forfeited; nor was an application in writing to be reinstated ever made by him in due form, for he died on April 17, 1883. There is also evidence tending to show that he was not in good health when the forfeiture occurred, being afflicted with a fatal malady contracted a few months previously, and of which he died.

But he did pay the assessment on the thirty-first of March, 1883, and the secretary of the company, whose duty and business it was to receive assessments, gave to him a written receipt therefor-. There were also other assessments afterwards made upon him which he paid and obtained a receipt for from the secretary, the last one being made April 10, 1883.

The simple inquiry then is, whether a forfeiture having occurred, the insurance company did any thing thereafter which should be regarded as a waiver of it, or by which it should be now held estopped to resist payment to the beneficiaries of the policy.

The evidence is conclusive that Jones did, in person, on March 31, pay off the assessment made February 2, 1883, and Keller, who was the custodian of the books, records, and funds of the company, and invested with authority to receive and receipt for all money, gave him a receipt, acknowledging in full and without condition the acceptance of the payment, and the company thereafter appropriated and used it, never offering to return it, or the subsequent payment, until after his death and the commencement of this action.

It is true Keller testifies that, at the time of the payment' on March 31, there was a verbal agreement made by Jones that he was in good health, -and that the payment was made on the faith of such assurance by him.

He undertakes to explain his failure to insert in the receipt the condition upon which the payment was received, by stating that the stamp which was used to print on each receipt the condition that the member was in good health, was on that occasion lost or mislaid, and that, although he was unacquainted with Jones at the time, and now expresses some doubt as to his identity, he accepted the payment without any condition or assurance than the mere verbal declaration of a stranger that he was in good health.

If the testimony of the secretary and treasurer is to be accepted as true, there has evidently not been such system and strict adherence to the charter in the conduct of the business of the company as is now asked to be enforced against the beneficiaries of the deceased member. And there is no reason why we should doubt the testimony of numerous witnesses given in this case, showing that it was the custom of the company, through its secretary' and treasurer, to receive from members who had forfeited, their policies ' overdue assessments without question or condition. •

It does not now avail the company to say, in defense of this • action, that the charter provides a special mode in which a member may be reinstated, and that the act of the secretary and treasurer in receiving assessments after forfeitures had occurred was not authorized by the president and board of directors. For he has done so in so many cases, and so uniformly since the organization of the company, as to render it certain the chief officers were-aware of and approved it, and it has come to be so generally the practice and • custom, as that it can not now be disavowed of avoided without bad faith towards those who have been misled by it.

It has been often and justly said that forfeitures are so odious in law that they will be enforced only where there is the clearest evidence that such was the intention of the parties.

And “if the practice of the company and its course of dealings with the insured, and others known to the insured, have been such as to induce a belief that so much of the contract as provides for a forfeiture in a certain event will not 'ipe insisted on, the company will not be allowed to,-,set up such forfeiture as against one in whom their. conduct has induced such belief.” (May on Insurance, ,361.)

In our opinion, the proof clearly authorizes the application of that rule in this case. For not only did the company accept from Jones the - overdue assessment, but subsequently recognized him as a member in good standing, and received from him other assessments which he was notified to pay and did pay. All of which we are bound to presume was done with the knowledge and by the direction of the chief .officers, or else assume that the business is conducted carelessly and in bad faith to the members.

As the company refused to pay to appellees the amount due them on the policy, the Chancellor properly rendered judgment therefor.

Wherefore, the judgment is affirmed on the appeal and cross-appeal.  