Case Name: Katherine Coulson et al., Appellants, v. Bernard G. Flynn, Respondent, Interpleaded by the Supreme Council of the Catholic Mutual Benefit Association
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1905-02-21
Citations: 181 N.Y. 62
Docket Number: 
Parties: Katherine Coulson et al., Appellants, v. Bernard G. Flynn, Respondent, Interpleaded by the Supreme Council of the Catholic Mutual Benefit Association.
Judges: 
Reporter: New York Reports
Volume: 181
Pages: 62–73

Head Matter:
Katherine Coulson et al., Appellants, v. Bernard G. Flynn, Respondent, Interpleaded by the Supreme Council of the Catholic Mutual Benefit Association.
1. Mutual Benefit Association — Ultra Vires Waiver of Rule as to Beneficiaries. A certificate issued by a mutual benefit association designating as the beneficiary one who was neither a relative of nor a dependent upon the insured, with “whom he lives and upon whom he depends, or such other persons as the rules and regulations of said association shall determine,” entitles the beneficiary named, upon the death of the insured, to the sum designated therein, notwithstanding the provisions of a by-law of the association restricting the designation of beneficiaries to relatives and dependents only, where it appears that the act under which it was incorporated (L. 1879, ch. 496, § 7) authorized others to be named as beneficiaries, and that the association, with knowledge that the beneficiary designated was not within the class embraced in the by-law, accepted the member and thereafter received his dues and assess ments, and, therefore, must be deemed to have waived any defense of ultra vires founded upon such by-law.
2. Objection ov Ultra Vires Available to Association Only. Assuming, however, that the issuing of such certificate was ultra vires, the question can be raised by the association only, and, therefore, in an action against it brought by the brother and sisters of decedent to recover the amount named therein, in which the beneficiary named was inter-pleaded, the association paying the money into court and not defending, the plaintiffs cannot raise it, inasmuch as they have no certificate at all, and have no contract basis for any claim whatever.
Coulson v. Flynn, 90 App. Div. 613, affirmed.
(Argued February 2, 1905;
decided February 21, 1905.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered February 16, 1904, affirming a judgment in favor of defendant entered upon a decision of the court on trial at an Equity Term.
The nature of the action and the facts, so far as material, are stated in the opinion.
George II. Kennedy for appellants.
The act of incorporation of the Catholic Mutual Benefit Association does not authorize the members thereof to name beneficiaries who are not relatives or dependents. (Sanger v. Rothschild, 50 Hun, 157; 123 N. Y. 577; Simon v. O’Brien, 87 Hun, 165 ; McCord v. McCord, 40 App. Div. 275; Di Messiah v. Gern, 10 Misc. Rep. 30; Sargent v. Knights of Honor, 158 Mass. 557; Tyler v. O. F. M. R. Assn., 14 Mass. 134; Coudell v. Woodward, 29 S. W. Rep. 614; Hanna v. Hanna, 30 S. W. Rep. 820; Alexander v. Parker, 144 Ill. 355; N. O. P. II. Society v. Wilson, 52 N. E. Rep. 41.) The question here is not whether the association alone can raise the objection that the beneficiary is not of the class designated by the constitution of the association, but whether the constitution of the association is to govern the rights of these claimants. (Palmer v. Welch, 13 Ill. 14 ; B. M. L. B. Assn. v. Blue, 112 Ill. 331; N. O. P. H. Society v. Wilson, 52 N. E. Rep. 41 ; Sanger v. Rothschild, 123 N. Y. 577; Lahey v. Lahey, 174 N. Y. 146.) The insured Bartholomew Savage had no power over the beneficiary fund except the power to appoint a beneficiary within section 15 of the beneficiary fund law, and if lie failed to do that the money was to be distributed under the distribution clause of said section. (Hellenberg v. District No. 1 of L. O. of B. B., 94 N. Y. 580.) The learned trial court erred in holding that because the association could not avoid payment of the certificate by maintaining a defense to the claim of the defendant as the designated beneficiary, that therefore, the. plaintiffs cannot recover this money under the contract with the insured. (Story v. W. M. M. B. Assn., 95 N. Y. 474.)
William F. Wierling and Jt \n J. Sullivan for respondent.
Under the act incorporating ti.o C. M. B. A. the members thereof are authorized to name beneficiaries who are not relatives or members of their families or dependents. (L. 1879, ch. 496, § 7; Massey v. M. R. Society, 34 Hun, 254; 102 N. Y. 523; Sabin v. Phinney, 134 N. Y. 423; Levin v. Ritz, 17 Misc. Rep. 737; Brown v. Brown, 6 Misc. Rep. 433.) If the beneficiary named by the deceased was not of the class designated by the rules and by-laws the association alone can raise the objection. (Maguire v. Maguire, 59 App. Div. 143; Markey v. Supreme Council, 70 App. Div. 4; Luhrs v. Supreme Lodge, 27 N. Y. S. R. 88; Knights of Honor v. Watson, 64 N. II. 517; Johnson v. Knights of Honor, 53 Ark. 255; Story v. W. M. M. B. Asnn., 95 N. Y. 474; Massey v. M. R. Society, 102 N. Y. 523.) By accepting the application of deceased, with full knowledge of the alleged imperfect designation, and by issuing its certificate in conformity therewith, and by paying the benefit into court, the association itself effectually waived any and all defects. (Davidson v. O. P. M. B. Society, 39 Minn. 303; Benefit Assn. v. Blue, 120 Ill. 121 v. Smith v. P. M. B. Society, 64 Hun, 534; Kimball v. Lester, 43 App. Div. 27; Tramblay v. Supreme Council, 90 App. Div. 39 ; Lindsey v. W. M. A. Society, 84 Iowa, 734.)

Opinion:
Bartlett, , J.
The plaintiffs are the surviving sisters and brother of Bartholomew Savage, deceased, who brought an action on April 8tli, 1903, to recover the sum of two thousand dollars upon a benefit certificate issued to him by the defendant association. On the 13th day of April, 1903, the defendant Flynn, as the beneficiary named in .the certificate, com-' menced a similar action against the defendant association.
By an order of the court made April 16th, 1903, upon the application of the defendant association, it was permitted to pay the amount of the benefit certificate into court and the action brought by defendant Flynn against the association was thereupon discontinued and he was interpleaded as a defendant in this action. The case was tried at Special Term and resulted in a judgment in favor of the defendant Flynn, which was unanimously affirmed by the Appellate Division..
There are two principal questions presented by this appeal. The first one, whether the plaintiffs have any standing in court enabling them to sue upon this benefit certificate, and the other, whether the complaint, assuming the plaintiffs have the right to litigate, sets up a cause of'action.
In considering these questions a few facts must be stated. The defendant association was incorporated under the Laws of 1879, chapter 496. Section seven thereof provides, among other things, as follows: " Such beneficiary fund as may be. ordained suitable by said corporation may be set apart and provided to be paid over to the families, heirs, or representatives of deceased members, or to such person or persons as such deceased members may, • while living, have directed." Section.three provides that the corporation shall have power to make, from time to time, such constitution, by-laws, rules and regulations as they shall judge proper for the due conduct of its business.
The certificate of insurance issued to Bartholomew Savage, deceased, contains this language: " Which sum shall, at his death, be' paid to Barney Flynn with whom he lives and upon, whom he depends, or such other person as the rules and regulations' of' said association shall determine."
The contention of the plaintiffs is that while the language of the certificate constituting Barney Flynn the beneficiary is in' conformity with' the act of incorporation, yet the same is void for the reason that section fifteen of the Beneficiary Fund Law, enacted in pursuance of the provisions of the said act, has changed the rule as to the power of the insured to name beneficiaries. That section provides that the insured may make the certificate payable " to his wife, his children or any child by legal adoption, his father, mother, his brothers or sisters, blood relations or persons dependent upon him for maintenance, sustenance and support."
It is by reason of these facts that the brother and sisters of the deceased insist that the amount due from the defendant association on the benefit certificate should be paid to them rather than to the defendant Flynn.
It is to be kept in mind that this action, as tried, was between the brother and sisters' of the insured and Flynn, the beneficiary named in the certificate ; that the defendant association is not defending and holds itself ready to pay such person as the court may determine is the legal beneficiary.
It has been frequently held in tjre lower courts that if the defendant association's act in issuing the certificate was ultra vires, persons in the position of these plaintiffs cannot take advantage of it, inasmuch as they come into court having no certificate at all and without a contract basis for any claim whatever. (Markey v. Supreme Council C. B. L., 70 App. Div. 4.) (See, also, Luhrs v. Supreme Lodge, Knights and Ladies of Honor, 27 N. Y. State Repr. 88; Maguire v. Maguire, 59 App. Div. 143; see, also, Story v. Williamsburgh M. M. B. Assn., 95 N. Y. 474.)_
The.question of ultra vires could only be raised by the association even if it existed as a defense. In the case at bar, under the findings of fact and the unanimous affirmance by the Appellate Division, it is very clear that even as to the defendant association the defense of ultra vires would not be available as it has waived the same and is estopped from pleading it. The association had repeated notice of the fact before issuing its certificate that the insured proposed that it should be issued to the defendant Flynn with whom he lived and upon whom he depended. This appeared in the written application made to the association by the insured ; again in the report of the medical examiner; once more when these papers were filed with the supreme recorder, whose duty it was to keep a record of the names of all members and their beneficiaries, and finally in the' certificate as issued.
The findings disclose that the insured never married and left him surviving no wife or children, no father or mother, and the plaintiffs are his only sisters and brother; that at the time he became a member of said association, and for many years prior thereto and up to the time of his death, he lived as a boarder with the defendant Flynn, and when the certificate of membership was issued to him by said association he delivered the same to the wife of the defendant Flynn, who retained it until the death of the insured.
We are of opinion that these plaintiffs have no standing in court for the reasons already stated ; and, further, that if the allegations of the complaint had been set up by the association in the action brought by Flynn they would constitute no defense, as the beneficiary named in the certificate was authorized by the act of incorporation, and the association is shown to have repeatedly waived any right it might have had to insist that the Beneficiary Fund Law, so called, did not contemplate the beneficiary named.
The association practically said to the insured, we note the name of your beneficiary and approve the same, notwithstanding our Beneficiary Fund Law fails to cover the case but our act of incorporation does. We will, therefore, issue a certificate and you can pay your dues and assessments in full confidence that in the event of death your beneficiary Will receive the amount of insurance. The insured acted upon this representation and paid dues and assessments, as did the defendant Flynn ; these facts clearly establish waiver and estoppel.
. The judgment appealed from should be affirmed, with costs.