Grand Lodge K.P. of Alabama v. Shorter

• Decision Date: 22 January 1931
• Docket Number: 6 Div. 659.
• Citation: 222 Ala. 404,132 So. 617
• Parties: GRAND LODGE K. P. OF ALABAMA ET AL. v. SHORTER ET AL.
• Court: Alabama Supreme Court

132 So. 617

222 Ala. 404

GRAND LODGE K. P. OF ALABAMA ET AL. v. SHORTER ET AL.

6 Div. 659.

Supreme Court of Alabama

January 22, 1931

Rehearing Denied March 12, 1931.

Appeal from Circuit Court, Jefferson County; William M. Walker Judge.

Bill for appointment of a receiver, etc., by Phillip Shorter and others against the Grand Lodge of Knights of Pythias of Alabama and others. From a decree for complainants respondents appeal.

Affirmed.

Fort Beddow & Ray and G. Ernest Jones, and J. S. Edson, all of Birmingham, and Hill, Hill, Whiting, Thomas & Rives, of Montgomery, for appellants.

Altman & Koenig, of Birmingham, and Inzer, Inzer & Davis, of Gadsden, for appellees.

BOULDIN J.

The appeal is from a decree appointing a receiver or fiscal agent of the endowment funds of a fraternal insurance company.

The equity of a like bill was declared as early as January 19, 1928, in these words: "Its object is the protection and preservation of a trust fund, which is being depleted and dissipated fraudulently and wrongfully, to the irreparable injury of policyholders who have a property right interest in such funds. Very clearly, a policyholder under these circumstances has the right to invoke equity's jurisdiction for the protection of trust funds, and may maintain a bill of this character: Howze v. Harrison, 165 Ala. 150, 51 So. 614; Jasper Land Co. v. Wallis, etc., 123 Ala. 652, 26 So. 659; 1 Pom. Eq. Jur. (4th Ed.) § 151; Thos. A. Edison v. Edison Phonograph Co., 52 N. J. Eq. 620, 29 A. 195; Chicago Mut. Life Ass'n v. Hunt, 127 Ill. 257, 20 N.E. 55, 2 L. R. A. 549." McCall, Atty. Gen., v. Grand Lodge Knights of Pythias, 217 Ala. 196, 115 So. 254, 255. That bill was not sustained because filed by the Attorney General.

The present bill, filed by policyholders, was considered on appeal from ruling on demurrer, and its equity sustained by the full court in Grand Lodge K. of P. v. Shorter, 219 Ala. 293, 122 So. 36.

But for rather persistent references of appellant's counsel to certain features of that decision as the views of the minority, it would seem unnecessary to note that the division in the court related solely to the necessity to make parties respondent the officers of respondent corporation charged with the breaches of trust outlined in the decision.

On reversal for want of these necessary parties, they were brought in by amendment, and the proceeding for a receiver heard de novo, all parties being accorded a full hearing.

The law of the case, fully considered and stated in our former decisions, supra, and reargued on this appeal, is here now reaffirmed. We see no need for further discussion of same.

As for the facts, the record on this appeal, including pleadings, proceedings of the insurance department, reports of actuaries and accountants, and many affidavits on both sides, consists of 1,074 pages, with a printed copy of the Constitution and by-laws of the order attached.

This record fully sustains the showing made on former appeal, reviewed on page 297 of the opinion of 219 Ala., 122 So. 36, 40, and held to present a proper case for a receiver.

The diversion and misappropriation of mortuary funds, trust funds for policyholders, aggregating $57,219.63, at the date of former appeal, is shown to have grown and accumulated from year to year despite the orders and warnings of the insurance department and its actuaries.

Finally, it appears this has been charged off as an available fund for payment of death claims, and a scheme of amortization devised.

We deem it proper to take note of this amortization plan.

The endowment fund, arising from payment of a monthly assessment or premium of $1 from each policyholder, is segregated into an expense fund, and a mortuary fund, the latter being the permanent trust fund held and invested for payment of death claims.

The amortization plan by which the expense fund is increased to 30 cents out of each dollar, and a payment of 10 cents back into the mortuary fund to repay said misappropriations is, in no sense, a reinstatement of the funds so misappropriated. It is a mere bookkeeping device by which the...