Knapp v. Supreme Commandery, U. O. G. C. of the World

• Decision Date: 01 September 1908
• Parties: KNAPP et al. v. SUPREME COMMANDERY, UNITED ORDER OF THE GOLDEN CROSS OF THE WORLD, et al.
• Court: Tennessee Supreme Court

118 S.W. 390

KNAPP et al. v. SUPREME COMMANDERY, UNITED ORDER OF THE GOLDEN CROSS OF THE WORLD, et al.

Supreme Court of Tennessee.

September Term, 1908.

Appeal from Chancery Court, Knox County; Joseph W. Sneed, Chancellor.

Bill by Charles Knapp and others against the Supreme Commandery, United Order of the Golden Cross of the World, and another. Decree for complainants, and the defendant named appeals. Affirmed.

Webb, McClung & Baker and H. T. Cooper, for appellant. Jourolmon, Welcker & Smith, for appellees.

SHIELDS, J.

The complainant Charles Knapp and some 200 others, members of and holders of benefit certificates in Supreme Commandery, United Order of the Golden Cross of the World, a fraternal beneficiary association, filed the bill in this cause, November 6, 1906, in the chancery court of Knox county, against that association, which for brevity will be called the "Golden Cross," a corporation created and organized under the laws of Tennessee, and having its chief office and domicile in Knox county, Tenn., and the Supreme Council of the Home Circle, which for brevity will be called the "Home Circle," also a fraternal beneficiary association created and organized under the laws of the commonwealth of Massachusetts, and having its chief office and domicile in that state, for the purpose of having a merger and union of the two corporations, which was then being attempted to be made by the executive officers and committees of the same, declared and decreed unauthorized by the charter of the Golden Cross and the laws of Tennessee, ultra vires, and void, to enjoin the Golden Cross and its officers from consummating and executing it, and to have all proper accounts stated and decrees pronounced necessary to place the two corporations in the condition and status in which they were before the attempted union and merger.

The defendant Golden Cross was served with process and made defense by answer. The Home Circle was served with constructive process by publication, as provided by the statutes of this state in suits brought against nonresidents, and, failing to make defense within the time required by the practice of the court, an order pro confesso was duly taken and entered against it. The chancellor, upon a hearing upon the pleadings, the order pro confesso entered against the Home Circle, and the proof offered by complainants and the Golden Cross, sustained the bill and granted the relief prayed. The Golden Cross perfected an appeal from that decree to this court, and assigns error.

The complainants, Charles Knapp and others, sue as members and holders of benefit certificates of the Golden Cross, in their own behalf, as well as that of all others in like case who may desire to unite with them as co-complainants.

The Golden Cross was incorporated July 7, 1876, under the provisions of section 2, c. 142, p. 234, of the Acts of the General Assembly of Tennessee of 1875, providing for the creation of corporations "for the general welfare and not for profit," as an insurance order based upon the principle of mutual assessment of its members, and is what is known to the laws of Tennessee as a "fraternal beneficiary association." When the merger and union complained of was attempted to be consummated in April, 1906, it had about 18,500 members, residing in various states of the Union, more than 5,000 of them being residents of Massachusetts, and was solvent, having in its treasury funds sufficient to meet the death claims of its members as they matured and were presented. It was a strong and prosperous association.

The Home Circle was incorporated under the laws of Massachusetts, and has its domicile and chief office in that state. It was an older, but weaker, association, having only about 1,900 members, chiefly residents of Massachusetts. It was unable to meet the death claims against it as they matured, and on that account was much involved in debt. In this condition, to relieve its embarrassment and that of its members, it sought a union with the Golden Cross.

The executive committees of the two associations, after conference and negotiation, on April 12, 1906, agreed upon a consolidation of the two corporations, the terms of which were reduced to writing and signed by the members of those committees. These terms need not be set out in full. They provided for a consolidation of the two associations, whereby the Golden Cross absorbed the Home Circle, accepting and admitting to membership in it, in a body and without medical examination, the entire 1,900 members of the Home Circle, conceding and according to certain officers of the Home Circle certain rank and privileges in the Golden Cross, and certain of the members rights and benefits which they had as members of the Home Circle, but could not have obtained if admitted as members of the Golden Cross in the usual way, received and took over all of the assets of the Home Circle, and assumed and agreed to discharge all its obligations. This contract, made by the executive committees of the two associations, is called therein a "merger" or "union," and is such in form and substance, and is so treated in the subsequent proceedings attempting to carry the same into effect.

A meeting of the members and holders of benefit certificates of the Golden Cross, to be held in the city of Boston June 21, 1906, was called by the officers of that association, notice of which was given to all the members by a circular letter, in which was set out in full the terms of the proposed merger, for the purpose of considering the agreement made, and approving or rejecting the same. The meeting was held, and the proposed merger approved, to take effect August 1, 1906; but in some financial matters it was not to be complete and effective until January 1, 1907. There were present in person and by proxy at this meeting 4,482 members, of which 3,464 voted in favor of the merger, and 1,018, among whom were the complainants, protested and voted against it. After this, July 21, 1906, Edward S. Kemper, a member of the Golden Cross, and one of those who opposed the proposed merger, brought his bill in the Circuit Court of the United States for the Southern Division of New York, against the two associations, for the purpose of enjoining the proposed union, for want of authority of the Golden Cross, under its charter and the laws of the state creating it, to consolidate with another corporation, and, further, if such power exists, that it had not been lawfully exercised; but, for want of jurisdiction by that court over the Golden Cross, his bill, on September 27, 1907, was dismissed.

Complainants, having first demanded of the Golden Cross that it bring a bill for the purpose of having the said merger and union declared void, and to enjoin the consummation of the same, which demand was peremptorily refused, on November 6, 1906, filed the bill in this cause and obtained a temporary injunction enjoining further action under the proposed consolidation; and such proceedings were had that the accounts of the two associations have been kept separate and distinct, so that the funds due them or their members can be ascertained and restored to them. No benefit certificates have been issued by the Golden Cross to the members of the Home Circle, admitted by the consolidation to membership in the former order, and the affairs of the two associations are in such condition that the respective rights and interests of all parties can be protected.

Complainants' contention is that the Golden Cross was and is wholly without power or authority, under its charter and the general laws of Tennessee, to make and enter into the merger and union attempted to be consummated with the Home Circle, and that its action in the premises is ultra vires and void, and that as members and holders of benefit certificates of the Golden Cross they have a right to maintain this bill in the courts of Tennessee to have it so declared, and the corporation and its officers enjoined from carrying it and any subsequent proceedings had by them thereunder into effect.

The validity of the merger is also challenged upon a number of other grounds; but, in the view we have taken of the case, it is not necessary that they be here stated. There is also much in the record in regard to the advantages and disadvantages which will accrue to the members of the Golden Cross from the proposed consolidation, which we have not stated, because these are all matters of policy for the officers and members of the two associations to consider, and with which courts have nothing to do.

The Golden Cross denies that the agreement, merger, and union made by it with the Home Circle was ultra vires and invalid. It insists that both of these corporations, the Golden Cross by the laws of Tennessee, and the Home Circle by those of Massachusetts, had full power and authority to merge and consolidate, and that, having done so in a proper manner, the merger is valid and binding upon all of their respective members.

Before considering the question thus made we will dispose of the one challenging the jurisdiction of the chancery court of Knox county to grant complainants the relief they seek, for want of proper parties before the court. This contention is predicated upon the insistence that the object of the bill is to cancel and annul a contract or agreement made by the two defendants, a proceeding in personam, to which both of the defendants are necessary parties, and must be brought before the court by personal service of process, and the constructive service by publication upon the Home Circle is insufficient to give the court jurisdiction over it, and bind it by any decree made in the cause.

The jurisdiction of the chancery court of Knox county of the subject-matter of the litigation cannot be controverted.

It is well settled that courts of equity have jurisdiction to define and determine the extent and limitations of the powers of corporations, and to...