Sovereign Camp, W. O. W. v. Moraida , 85 S.W.2d 364 ( 1935 )

On Motion for Rehearing. The appellant has filed a motion for rehearing, insisting that the Cameron Case (Tex.Civ.App.). 41 S.W.2d 283, is identically in point and should be controlling in the case at bar. The very able original opinion of Special Chief Justice DAVIS, written in this case, clearly sets out the distinguishing features involved in this case and the Cameron Case. We are unable to see any similarity that would or could govern our decision in the case at bar. In the Cameron Case, the insured's practice was to make payment of his premiums by the last of the month; in this case Moraida had for eighteen months been making payment during the succeeding month, and as late as the eighteenth day thereof, when the contract provided that such payments should be made on or before the last day of the month. Again in the Cameron Case, Mr. Bell, in paying Cameron's dues, concealed from and did not reveal to the local secretary the then critical condition of Cameron; Moraida's wife, the appellee herein, on January 5, 1933, advised the local secretary of the appellant, at the time of making the December payment, that her husband was then sick, and again on February 4, 1933, when she was making the January payment, gave the same information to the secretary, and the secretary actually visited the insured at the hospital on one occasion some time during December or January. Moraida and his wife at all times acted in perfectly good faith. Certainly they were misled into believing that, while the payments were late, it would be satisfactory to the company, and the record shows that not only the appellee herein but all other members of the same lodge were doing the same thing, day after day, month after month, year after year, and upon familiar principles the knowledge thus obtained by the agent became and was in law the knowledge of the principal. Missouri, K. T. Ry. Co. of Texas v. Belcher,88 Tex. 549, 32 S.W. 518; Morrison et al. v. Insurance Company of North America, 69 Tex. 353, 6 S.W. 605, 5 Am. St. Rep. 63; 2 Tax.Jur.pp. 433, 434; Johnson v. Sovereign Camp, W. O. W. (Tex.Sup.) 83 S.W.2d 605. It cannot be gainsaid that a duty of election arose and was owed by the appellant to the policyholder, the performance of which duty of election was not undertaken until after his death, and then it was too late.

The appellee is entitled to recover for two principal reasons:

(1) The practice and custom of accepts ing payment of premiums for eighteen months after the last day of the month in which they were required to be paid waived the strict provisions of the contract of insurance concerning the time of payment and estopped the appellant to set up such grounds of forfeiture.

(2) The candid disclosure on the part of Moraida and his wife to the local secretary of Moraida's sick condition at the time the payments were made operated to impute this knowledge to appellant and to thereby estop it from claiming forfeiture or breach of warranty in failing to remain in good health for thirty days thereafter because of its unconditional acceptance of the payments of the premiums with knowledge of the insured's condition of health.

The appellant, in its motion for rehearing, urgently insists that the constitution and by-laws and article 4846 of the Revised Statutes of 1925, which greatly limit the authority of the local secretary, preclude any right of recovery, and that to hold otherwise is to invalidate such constitution, by-laws, and statute. To this, we cannot agree. The various restrictions and limitations placed upon the subordinate agent's authority are valid and proper within themselves and under certain circumstances are valid and binding, but it must be borne in mind that in construing them the fundamental principles of waiver and estoppel and the underlying rules of agency must necessarily be considered. In other words, these well-settled rules of law often operate, as we believe they do here, to destroy the effect of the strict and rigid provisions of a fraternal benefit policy of insurance. Sovereign Camp, W. O. W., v. Newsom, 142 Ark. 132, 219 S.W. 759, 14 A. L. R. 903.

The record reflects that the Sovereign Camp, for eighteen months, had been consistently, without exception, receiving Moraida's payments after the last day of the month in which they were required to be paid. Its local secretary receipted for such payments and forwarded them to the home office. The books and records of the local secretary were the property of the Sovereign Camp. It had the undoubted right to inspect such records and to dismiss an unsatisfactory secretary at will. An investigation would readily have disclosed the condition of Moraida's practice of payment, but the appellant elected to keep its eyes closed, and to do its investigating only after Moraida's death. The reports of the local secretary to the home office have columns for only the name of the insured, the certificate number, and the rate of payment. Diligence and good faith on the part of the appellant, in determining and ascertaining the exact status of its members, would have required the local secretary to also indicate the date of payment of each member. This, it did not do. Moreover, the rules of the association provide that the local secretary make out such reports by the fifth day of each month. The local secretary invariably and without exception made the reports after such date. This practice within itself put the home office on actual notice that the local secretary might be holding up the forwarding of the report because certain members had not yet made payment. Whatever fairly puts a person upon inquiry is actual notice of the facts which would have been discovered by reasonable use of the means at hand. Hexter v. Pratt (Tex.Com.App.) 10 S.W.2d 692; 31 Tex.Jur. p. 360. But the appellant was content to completely ignore these indications of irregularity, and to later follow in the wake of death — when the grand hailing sign of distress could no longer be heard — with the pious plea of forfeiture.

Bearing these facts in mind, and considering that equity "abhors a forfeiture," we turn now to the doctrines of waiver and estoppel. In case of Sovereign Camp, W. O. W., v. Johnson et al. (Tex.Civ.App.)64 S.W.2d 1084, 1087; Id. (Tex.Sup.) 83 S.W.2d 605, is this definition of estoppel: "The principle of estoppel is a salutary one, promoting justice and fair dealing. It is essentially an appeal to the conscience of the court, and it ordinarily involves some element of wrongdoing on the part of the person sought to be estopped which would render it inequitable to permit him to take advantage of his prior conduct. It applies to insurance companies and fraternal benefit societies to the same extent, and to the same extent only, that it applies to natural persons."

And in 21 Corpus Juris 1113 is this definition: "This (equitable) estoppel arises when one, by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts."

It cannot be gainsaid that Moraida was lulled into a false sense of security by the acts and conduct of the appellant in regularly accepting his payments subsequent to the required date of payment. "The letter of the law killeth, but the spirit maketh alive." This custom and practice — general in its nature — of accepting these delayed payments time after time constituted a waiver and consequent estoppel of the strict letter and provisions contained in the contract for time of payment. Supreme Lodge, K. P., v. Hooper (Tex.Civ.App.) 282 S.W. 867; Southern Travelers' Ass'n v. Masterson (Tex.Civ.App.) 48 S.W.2d 771.

There remains the question of the local secretary's limited authority, as provided under the by-laws and under article 4846, so as not to bind the association by his representations or acts constituting waiver. The original opinion herein by Special Chief Justice DAVIS, and the authorities therein cited, are conclusive on this point. It is true that, as a general proposition of law, the local agent or secretary, in his own right and under his own power, as an agent, had no authority by acts done or words spoken or otherwise to waive the provisions of the contract; nevertheless, while acting as a channel of information between the association and the insured, the knowledge he thus acquired and gathered while in the actual performance of the delegated duties imposed upon him is in law imputed to his principal, and this regardless of whether he actually conveys such information to his principal or not. Restrictions and limitations of authority in the contract here involved have relation to the agent only, and not to the association. They present no obstacle to waiver by the association in any manner it might choose. Law v. Texas State Mut. Fire Ins. Co. (Tex.Com.App.) 12 S.W.2d 539. To hold otherwise would be to destroy and undermine the very pillars upon which rest the fundamental doctrines applying to principal and agent. It is presumed that the agent properly performed his duty, and made known to his principal all pertinent information relative to the transaction. The local secretary constituted the one and only means of contact provided for and existing between the association and the assured. His duties were to collect and receipt for payments, and to make monthly remittances and reports to the home office. His capacity was largely that of any local agent, yet the appellant contends that the provisions of forfeiture should be held good because the by-laws of the order by express provision do not create a local agent of the ordinary, full-fledged, black land, garden variety type, but by studiedly and designedly written by-laws attempt to bring into legal existence some species of hybrid, mal-formed creature, hobbling about performing his functions in a form bearing all the earmarks of an agent, for all intents and purposes to an ordinary layman, but whose cloak of authority is rudely ripped from his body when death stalks in the forests of the "woodmen," thus, for the first time, revealing to the beneficiaries of deceased brethren the ghastly skeleton of a synthetic agent, without power, without authority, and without dignity, whose conduct and acts within the circumscribed sphere of his activities, from a legal standpoint, do not even merit, and should not receive, as the appellant in effect contends, "the cold respect of a passing glance." This species of ghost-like fictitious nonentity, denominated an agent on paper by the appellant, is discussed by the United States Supreme Court in the case of Supreme Lodge, Knights of Pythias, v. Withers, 177 U.S. 260, 20 S. Ct. 611, 614, 44 L. Ed. 762: "The position of the secretary must be determined by his actual power and authority, and not by the name which the defendant chooses to give him. To invest him with the duties of an agent, and to deny his agency, is a mere juggling with words. Defendant cannot thus play fast and loose with its own subordinates. Upon its theory the policy holders had absolutely no protection. * * * The reports are by no means barren of cases turning upon the proper construction of this so-called `agency clause,' under which the defendant seeks to shift its responsibility upon the insured for the neglect of Chadwick [its agent] to remit on the proper day. In some jurisdictions it is held to be practically void and of no effect; in others, it is looked upon as a species of wild animal, lying in wait and ready to spring upon the unwary policyholder, and in all, it is eyed with suspicion and construed with great strictness."

The lamented Chief Justice Fly, of this court, in the case of The Maccabees v. Johnson (Tex.Civ.App.) 273 S.W. 612, adopted the "wild animal" theory in disposing of that case and we here, as he there, are constrained to believe that under the facts of this case the local agent here may be likened unto some species of wild animal, whose legal existence should be carefully caged and watched and his operations kept within due bounds ere the creature, if allowed to roam at will, might tear asunder the very foundations upon which rest the doctrines of principal and agent. This creature of the association was for some eighteen months a tame and docile animal in the extensive forests and camps of the appellant, but the proof of death, when filed, caused a metamorphosis, much akin to that of Dr. Jekyll and Mr. Hyde.

The actual point of contact between an agent and his principal, in cases such as this, has been gradually cut down and narrowed by the appellate courts, the statute, and the by-laws of insurance companies and fraternal benefit societies, until at this time the principal is bound as, if, and only when the agent acts and speaks, or fails to act and speak when he should, while in the actual discharge and performance of his delegated duties and within the actual scope thereof, and it is only in that narrow channel when so acting are his acts, conduct, and knowledge imputed to his principal. Yet, this narrow line and point of contact is a golden thread that links the conscience of a court of chancery to the Ark of eternal right and justice. All the words in the language, however written or arranged in the constitution or in the by-laws, should not so operate or be construed by the court to remove or destroy that channel or point of contact. A study of the Texas cases reveals that year after year, when appellate decisions are written fixing liability under a given state of facts, that soon thereafter new, changed, and other by-laws are substituted to meet the decisions, designed to defeat liability in a like case should it arise again. This character of agency provision is both dangerous and detrimental to the public welfare. Its complete sanction by the judiciary would undoubtedly result in chaos and injustice. If justice is the dictate of right and the virgin gold of the mine that passes for its intrinsic worth in every case, subject to a varying value according to the scales through which it passes (Duncan v. Magette, 25 Tex. 245), then that justice must be preserved by the judiciary of Texas, and the conscience of the court should be developed, broadened, and enlarged to keep pace with the age, so as to meet, keep, and preserve the public policy of the state as now established, by retaining and keeping within due bounds the limitations and curtailments of authority attempted to be placed upon the agent. The relationship of principal and agent, circumscribed as it is now, should not be further reduced by the operation of so-called "agency clauses," but kept within the confines of established jurisprudence; otherwise, in many such cases in the future, justice cannot be properly administered.

Under the general practice and custom of payment shown to exist, Moraida could and would have gone on through the years, but for his death, as the facts show he had been doing for more than eighteen months prior to his death, cherishing the belief that he was each month buying security and protection for his family, while the appellant during all of those months accepted these payments unconditionally, awaiting the fatal day when careful investigation would be in order and the local agent would be exposed to the world as a man of straw, without life and without vitality, whose only function was, it appears, to "take the cash and let the credit go." Certainly such practice on the part of the appellant was "keeping the word of promise to his ear and breaking it to his hope." The authorities cited in the original opinion fully support our holding, that the knowledge of the local agent or secretary acquired, as it was, while acting within the actual scope of his delegated duties, is in law imputed to the appellant, and that the doctrines of waiver and estoppel removed from the case the provisions of forfeiture and the effect of article 4846 of the Revised Statutes of 1925.

The by-laws and this statute do not abrogate the well-established rules of the law of agency, by which the agent, by imputed knowledge, acts, or conduct, representations, making of records, by omissions of duty, or in any manner within the actual scope of his delegated duties, may bind his principal, either by waiver or estoppel or by both. Johnson v. Sovereign Camp, W. O. W. (Tex.Sup.) 83 S.W.2d 605. The power and authority of the agent, under this statute, to bind his principal is simply expressly limited to the scope of his employment. Our courts have uniformly refused to permit organized bodies of any kind or individuals to receive benefits derived from their agents without at the same time accepting a just and full measure of legal responsibility corresponding to and commensurate with the advantages received.

Finding nothing in the motion for rehearing to cause us to change our original opinion, the motion is accordingly overruled.