Barton v. International Fraternal Alliance
| Decision Date | 06 January 1897 |
| Citation | 36 A. 658,85 Md. 14 |
| Parties | BARTON ET AL. v. INTERNATIONAL FRATERNAL ALLIANCE OF BALTIMORE CITY ET AL. |
| Court | Maryland Court of Appeals |
Appeal from circuit court of Baltimore city.
Bill by David Barton and others against the International Fraternal Alliance of Baltimore city and others. From a decree for defendants, complainants appeal. Affirmed.
Argued before McSHERRY, C.J., and BRYAN, BRISCOE, RUSSUM, FOWLER ROBERTS, PAGE, and BOYD, JJ.
George Whitelock, Howard Bryant, D. Eldridge Monroe, and Joseph C France, for appellants.
Charles Marshall, John P. Poe, C. L. Wilson, and A. S. J. Owens, for appellees.
The complainants in this case pray: (1) That the defendant company, its officers and attorneys, may be restrained from disposing of its assets, and from buying or collecting further assessments; (2) that it may be declared insolvent and adjudged to be dissolved; (3) that a receiver may be appointed; and (4) such other relief as the case may require. The grounds upon which they rely may be briefly summarized as follows: (1) The alleged insolvency of the corporation; (2) frauds alleged to have been committed in the management of its affairs, particularly as to its dealings with the several complainants; and (3) the whole scheme of the corporation is alleged to have been changed, in violation of the rights of the complainants, and, moreover, is impracticable.
The respondents' first objection to the granting of the relief prayed for is that the bills and answers thereto do not make out a case within the jurisdiction of the court. This objection, it may be said, without quoting at large from the record, is raised by the defendants in all the answers. It is the first question, therefore, to be determined by this court. There can be no question that the granting of the relief asked would necessarily result in the dissolution of the corporation, and a forfeiture of its charter. "Apart from statutory power, a court of equity cannot dissolve a corporation." "The remedial power exercised by courts of equity in such cases [that is, where fraud, mismanagement, and collusion on the part of the corporate authorities are alleged] extends no further than the granting of an injunction against any special misconduct on the part of the corporate officers; and, although the facts shown may be sufficient foundation for such an injunction, the court will not enlarge its jurisdiction by taking the affairs of the corporation out of the management of its own officers, and placing them in the hands of a receiver." Mason v. Supreme Court of Equitable League, 77 Md. 485, 27 A. 171. The question is therefore narrowed down to this: Is there any statute that confers upon a court of equity power to appoint a receiver and decree a dissolution in a case like the one at bar?
Let us first examine into the nature of this corporation. The "Order of the International Benevolent and Fraternal Company of Baltimore City" was incorporated in June, 1888. The business of this corporation, including its liabilities, was assumed by the "Order of the International Fraternal Alliance of Baltimore City," incorporated on the 4th January, 1889. The last-mentioned association was formed "for social or fraternal beneficial purposes, or both"; and, to carry this out, its charter authorized it to enact a constitution and laws prescribing its government, its methods of conduct, and the various means whereby it could improve and benefit its members, their families, and those having "a legal interest therein." It provided, also, that the members of the order "shall convene in assemblies (or local bodies), and conduct their operations by and according to the ritual of the order," etc. Upon its organization, it adopted numerous by-laws, and proceeded to conduct the business particularly described and commended by this court in a former case, wherein this order and its transactions were the subject under consideration. Order of International Fraternal Alliance of Baltimore City v. State, 77 Md. 547, 26 A. 1040. The court, in its opinion in that case, after contrasting its operations with its charter powers, said they regarded it as clear that the company has assumed, and is now engaged in, the exercise of franchises and privileges not allowed by its certificate of incorporation, and is transacting and conducting an insurance business not by law allowed to be assumed or exercised by it. But instead of striking down its charter, whereby disaster would be entailed upon many persons, the court directed that it confine its affairs to the exercise of its powers as a social or fraternal beneficial order, or amend its charter, under the provisions of the Code, and "bring itself within the provisions of the insurance laws of the state." In accordance with this decision, the "amended certificate of incorporation," bearing date the 26th of June, 1893, was obtained. By this charter, the name was changed to the "International Fraternal Alliance of Baltimore City." Its objects were declared to be for social or fraternal beneficial purposes, or both; to grant insurance on lives on the mutual assessment or co-operative plan provided for in section 127, art. 23, Code; to provide for loans to its members, policy or certificate holders; and to provide a social method of convening its membership in assemblies or lodges, under such parliamentary rules as may be contained in the by-laws and ritual of the order. The capital stock was limited to 100 shares, of the par value of $100 each, and the management of the company was deposited in a board of 10 managers, who were named for the first year, or until the ensuing or general meeting. Being thus incorporated, by-laws were adopted, establishing a form of government, by which, while the real control of the company was vested in the stockholders, "a cabinet," an annual congress, and sundry committees were created, and invested with various duties and powers in the affairs of the company. Grand and local assemblies were also included in the scheme, and, to secure a policy, it was made requisite for the applicant to belong to one of these bodies. The policies issued by the corporation include mortuary, weekly disability, total disability, partial permanent disability, and what are known as "Golden Cycle Certificates." The last mentioned (the class to which the policies of the appellants belong) provide for sick, accident, and death benefits, and "a cash dividend surrender benefit at the end of every seven years." The meaning of the last phrase, as appears from the policies filed in this case, is that, in consideration of the payment of certain monthly assessments, the sum of $700 shall be paid at the end of each seven years during the continuance of the policy.
A corporation of this character is clearly within the terms of the act of 1894 (chapter 295). Its charter authorizes it to be, and it is, a fraternal beneficial association, operating on the lodge system, and carried on for the sole benefit of its beneficiaries. Moreover, it is an association operating on the lodge system, and having ritualistic work, whose business it is, in part, to pay, at the expiration of a period of more than five years, a sum not exceeding the...
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