Wolf v. Lutheran Mut. Life Ins. Co.

• Decision Date: 08 May 1945
• Docket Number: 46707.
• Citation: 18 N.W.2d 804,236 Iowa 334
• Parties: WOLF et al. v. LUTHERAN MUT. LIFE INS. CO. et al.
• Court: Iowa Supreme Court

18 N.W.2d 804

236 Iowa 334

WOLF et al. v. LUTHERAN MUT. LIFE INS. CO. et al.

No. 46707.

Supreme Court of Iowa

May 8, 1945

[Copyrighted Material Omitted]

Gamble Read, Howland & Rosenfield, of Des Moines, for appellants.

J R. McManus, of Des Moines, and Burton E. Sweet, Oliver J. Reeve, and Arben L. Young, all of Waverly, for appellees.

OLIVER Justice.

This is a class action brought by plaintiffs (herein referred to as appellees) as policyholders of Lutheran Mutual Life Insurance Company against said company and its directors, to enjoin them from submitting to the voting policyholders, proposed amendments to the articles of incorporation which would change the principal place of business from Waverly, Iowa, to Des Moines, Iowa.

Lutheran Mutual Life Insurance Company was formerly a fraternal beneficiary association. See Lutheran Mut. Aid Soc. v. Murphy, 223 Iowa 1151, 274 N.W. 907. In 1937 it was reorganized as a level reserve premium mutual life insurance company. See sections 8869 to 8884, Code of Iowa 1939. It issues policies to members of a Lutheran Church, only. In 1923 its outstanding insurance totaled about $4,000,000; in 1936 about $50,000,000 and in 1944 about $100,000,000. Its admitted assets increased from about $7,000,000 in 1936 to more than $20,000,000 in 1944. It has about 80,000 policy holders. The parties agree that it is solvent and prosperous and is growing rapidly.

In 1943 the board of directors elected from its membership a relocation committee to investigate and recommend whether the home office and principal place of business of the company should be removed from Waverly, where it had been located for many years. Preliminary reports of the committee were considered at several board meetings and an attorney for certain policyholders appeared and objected to such removal. The complete report of the committee was presented, at a meeting of the board, August 23, 1944, and that part of the report which recommended removal to Des Moines and set out proposed amendments to the articles of incorporation, to that end, for submission to the members of the corporation, was adopted by the board.

This action was instituted August 30, 1944. The petition and amendments allege that the board in offering the proposed amendments did not comply with the provisions of the articles of incorporation and with chapter 226, Acts of the 50th G. A.; that the country is now engaged in war and 10,000 of the policyholders are in the service, most of whom would be deprived of their right to vote upon the question; that the proposed move would entail considerable expense; that the company could operate at Waverly with greater success and at less cost; that president and director J. E. Hegg dominates the company; that there is no reasonable cause for the move and the amendments were not offered in good faith but to eliminate from the affairs of the company the officials who live in Waverly in furtherance of a plan of Hegg and his associates to control the company, and for their personal convenience; and that unless enjoined appellants will have the amendments adopted by the policyholders, to the great and irreparable injury of the policyholders.

The court, without notice to appellants, granted appellees' application for temporary injunction and enjoined appellants from submitting the proposed amendments to the voting members and policyholders and from communicating with or writing them relative thereto and from moving or attempting to move the home office and from doing or performing any act or thing which has for its purpose the removal from Waverly.

November 10, 1944, appellants filed motion to dissolve the temporary injunction. November 21, they filed answer, sworn to by J. E. Hegg, admitting that unless enjoined they will submit the proposed amendments to the policyholders, and denying in detail the charges and conclusions of law and fact alleged by appellees.

Attached to the motion to dissolve are affidavits of J. E. Hegg and others and the minutes of various meetings of the board, including extended reports by the relocation committee discussing various factors involved in changing the headquarters of the company to Des Moines and reasons for its conclusion that such change was advisable. Affidavits of Hegg and others recite that he has devoted himself to the best interests of the company and has administered its affairs efficiently and economically and in accordance with the directions of the board, that he has never dominated or dictated the policies of the board, that he has no personal financial interest in the removal of the home office to Des Moines but believes it will be for the best interests of the company that said office be located in that larger city which is a leading insurance center and where more complete facilities are available.

Appellees filed resistance to the motion to dissolve the temporary injunction with affidavits tending to show that the proposed move is inadvisable and appellants filed supplemental affidavits. Tables of statistics are set out in affidavits on both sides.

November 22, the motion to dissolve was submitted upon the affidavits filed by both sides. December 3, 1944, J. E. Hegg died and A. C. Ernst became acting president of the corporation. January 22, 1945, the court overruled the motion to dissolve.

January 25, 1945, the court, without notice to appellees, entered a supplemental ruling and order that the temporary injunction 'is in force as against the defendants (except J. E. Hegg, who is now deceased) relative to all proceedings in the matter of amending the articles of incorporation under and by virtue of the proceedings and actions held by the board * * * on the 23rd day of August, 1944, it being the opinion of the court that said actions and proceedings did not comply with Article XV of the articles of incorporation * * *. The defendants * * * are not enjoined from taking future action to amend the articles * * * conforming strictly to the provisions of Article XV * * * and to that extent the ruling and orders of this court filed January 22, 1943, and the order for temporary injunction filed August 30, 1944 are hereby modified.'

January 29, 1943, appellees filed amendment to petition and the court made two ex parte orders which were recorded January 30, 1945. One of said orders canceled and set aside the order of January 25, 1945. The other order granted a temporary injunction which restrained the acts forbidden by the injunction of August 30, 1944, and also specifically forbade the consideration of any resolution which had for its purpose the removal from Waverly.

February 5, 1944, we granted defendants an appeal and on February 26, they filed notice of appeal.

I. The articles of incorporation provide that every person insured in the corporation for not less than $500 and who has attained the age of sixteen years shall be a voting member, entitled to one vote. Article XV provides in part that the articles of incorporation may be changed or amended at any annual meeting of the corporation or at any special meeting called for that purpose. The board of directors may propose a change or amendment to the articles of incorporation. The proposed amendment must be filed with the president or secretary 90 days prior to said annual or special meeting. A majority vote of the members voting thereon is required for the adoption of an amendment. A ballot in a prescribed form must be mailed each voting member in a prescribed manner not less than 30 nor more than 90 days prior to the meeting. The articles provide for voting in person or by ballot.

The minutes of the meeting of the board of directors of Auguat 23, 1944 set out in full the report of the relocation committee, signed by its four members, which states in part, (1) that the company should not move from Iowa, (2) that the principal office of the company should be moved to Des Moines, (3) that the board should adopt a resolution submitting to the policyholders two amendments to the articles of incorporation, set out in full in the report, which would change the principal place of business from Waverly to Des Moines and change the corporate seal accordingly, and (4) that if the policyholders approve the amendments the board should direct the officers to accomplish the movement to Des Moines.

A motion to adopt this part of the report was carried by a vote of 6 to 3, one director who was present, not voting.

Article XV provides the Board may 'propose' amendments. From the context it appears this means to offer them for vote of the policyholders. The record shows the board 'adopted' part of the report of its relocation committee. As thus used the word 'adopt' means to take or receive as one's own, what is not so naturally.

We are unable to agree with the contention of appellees that the action of the board of directors in adopting paragraphs 1 to 4 of the report of its relocation committee was insufficient to constitute a 'proposal' of the amendments by the board. The proposal amendments are precisely set out in the report. They are in proper form. By adopting the report of its subcommittee the board made the offer of the amendments its own proposal. We are satisfied the procedure employed sufficiently complies with the articles of incorporation to constitute a proposal of the amendments by the board of directors.

II. Section 8360, Code 1939, provides that amendments to articles of incorporation may be made at any annual meeting of the stockholders or special meeting called for that purpose, etc.

Chapter 226, Laws of the 50th G.A., provides in part as follows:

'Section 1. Section eight thousand three hundred sixty (8360), Code, 1939, is amended by adding thereto the following:

'Its articles of...