Massachusetts Charitable Mechanic Ass'n v. Beede
| Decision Date | 07 January 1947 |
| Citation | 70 N.E.2d 825,320 Mass. 601 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | MASSACHUSETTS CHARITABLE MECHANIC ASSOCIATION v. E. JEFTS BEEDE & others. |
October 11, 1946.
Present: FIELD, C.
J., DOLAN, RONAN WILKINS, & SPALDING, JJ.
Corporation By-laws, Charitable corporation. Charity. Trust, Charitable trust. Massachusetts Charitable Mechanic Association.
A vote of a charitable corporation amending its by-laws by abolishing the offices of trustees of its charitable fund, transferring custody of that fund under a new name to the corporation's treasurer, creating an investment committee and placing investments of the fund under its direction, as well as making other structural changes in the matter of its "charity fund," was invalid where it appeared that the by-laws provided that no change should be made therein unless it had been proposed at a previous meeting of the corporation and referred to a committee, and that the proposal at the "previous meeting" had been merely for "a change in the by-laws by which money may be transferred from the charity to the general fund."
Upon the record of a suit in equity reported to this court upon an agreed statement of facts, it appeared that dismissal of the bill was required; but, the case having previously been before this court in another aspect and the fundamental issues having been fully argued, this court announced as its opinion that so called trustees of the "charity fund" of the Massachusetts Charitable Mechanic Association were not set up as independent trustees in the legal sense but were mere officers and agents of the corporation, and that the corporation owned the fund on the same basis as it owned its other assets, subject to the provisions of its statutory charter.
BILL IN EQUITY filed in the Superior Court on June 6, 1946. The case was reserved and reported by Williams, J., upon the pleadings and an "agreement as to all material facts constituting a case stated."
W. P. Lombard, (W.
C. Lombard with him,) for the plaintiff.
E. F. McClennen, for the defendants Soule and another.
This bill in equity by a charitable corporation chartered by special act describes the defendants as "members of the investment committee" of the plaintiff, and seeks to require them to turn over to the treasurer of the plaintiff (1) the sum of $106,073.98 "from the security fund" for the purpose of paying overdue taxes on Mechanics Building, Huntington Avenue, Boston, owned by the plaintiff and (2) the entire "security fund [which] was formerly known as the charity fund." The defendants in their answer deny the plaintiff's right to the money, and allege in substance, among other things, that the fund is still the charity fund and not the security fund, and that they hold it in the capacity of trustees and not as members of the investment committee. The case was submitted on agreed facts, and the judge, without decision, reported the case to this court for determination. G. L. (Ter. Ed.) c. 214, Section 31.
The plaintiff was incorporated by St. 1805, c. 75. The statute provides that the corporation "shall have power . . . to make bye-laws for the election of their members and officers; the collection of assessments; the regulation of their meetings, and the appropriation of their funds for charitable uses; but shall not have power to make bye-laws or regulations for any other purposes whatsoever" (Section 1). The corporation can hold "any personal or real estate, within this Commonwealth" (Section 2). The "annual income . . . shall only be employed for the purpose of relieving the distresses of unfortunate mechanics and their families, to promote inventions and improvements in the mechanic arts, by granting premiums for said inventions and improvements, and to assist young mechanics with loans of money" (Section 3). By St. 1825, c. 88, the Legislature authorized the corporation to "establish schools and libraries for the use of apprentices, and the improvement of the arts." [1]
More than sixty years ago the corporation purchased land on Huntington Avenue, Boston, and on it erected Mechanics Building. This was a proper use of its funds. Richardson v. Massachusetts Charitable Mechanic Association, 131 Mass. 174 . The building now represents an investment of about $700,000 and is the only real estate the corporation owns. Taxes of about $106,073.98 for the years 1943, 1944, and 1945, are unpaid, and the city of Boston holds a tax title. Notice of proceedings in the Land Court to foreclose the right of redemption has been given. The corporation also needs money for the maintenance of the building, which since November, 1945, has been operated at a profit, but which for the preceding fifteen years was operated at a loss except in 1933 and 1935. The corporation is without funds except those which it has placed in the charity fund, as hereinafter discussed.
In 1886 the corporation voted to establish the charity fund, the income of which was to be paid to the committee of relief set up from its membership in 1812. On April 18, 1889, the following by-law was passed, Seven persons have contributed a total of $25,000 which was put in the charity fund. The principal of the charity fund was $54,505.02 in 1910, is now $427,000, and was derived for the most part in the first instance from the operations and activities of the corporation such as the rentals of Mechanics Building. From 1920 to 1930 "tremendous sums were realized" in this way, and in those years $172,929.35 was "transferred" from rentals to the fund, increasing it from $160,450 in 1920 to $333,379.35 in 1930. From time to time bank accounts and unexpended income from investments in securities have been transferred and added to the principal of the fund by vote of the members.
The by-laws provided for the election by the corporation of three members as trustees of the charity fund. On December 15, 1898, there was added to the by-laws: This limitation was removed in 1907 by a by-law in terms the same as article VII, Section 5, of the by-laws adopted in 1927, quoted below.
For many years the trustees have held the securities in their names as trustees and in a deposit vault not accessible to other officers. The bank accounts have been in their names as trustees. The by-laws for years have provided that For many years all bills of the trustees, such as deposit box rental and auditing, have been paid directly by the treasurer. For several years the trustees have made payments from the income of the charity fund to the treasurer to reimburse him for amounts paid to persons whose applications have been approved by the committee of relief, and who, under the by-laws, must be master mechanics or their families and dependents. Such payments always have been less than the income of the fund, and the trustees have added the unexpended income to principal. This course was pursued for over fifty years with the general knowledge of the corporation, its members and officers, and was never questioned until July 8, 1944, when the corporation filed a petition in the Probate Court seeking to compel payment of the real estate taxes out of this fund. That petition was dismissed for lack of jurisdiction. Massachusetts Charitable Mechanic Association v. Hersey, 318 Mass. 518.
The last comprehensive set of by-laws was adopted July 20, 1927. They continued in effect with immaterial amendments until November 28, 1945, and whether they continued in effect thereafter is one of the questions for our determination. Pertinent portions of those by-laws will be found in a footnote. [1]
The first steps toward amending the by-laws in respects now material occurred on October 17, 1945, at a quarterly meeting of the association. Notice was seasonably given as required by the by-laws, but it contained no reference to changes to be made in the by-laws or to any action on the subject. The minutes of the meeting state the following: ...
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