Source: https://caselaw.findlaw.com/us-supreme-court/237/531.html
Timestamp: 2019-04-20 11:31:41+00:00

Document:
[237 U.S. 531, 532] Messrs. Howard C. Wiggins, Curtis H. Waterman, John Haskell Butler, W. Holt Apgar, and Joseph A. Langfitt for plaintiffs in error.
[237 U.S. 531, 533] Mr. F. J. Moissen for defendant in error.
'1st. To unite fraternally all white men of sound bodily health and good moral character, who are socially acceptable and between twenty-one and fifty-five years of age.
'2d. To give all moral and material aid in its power to its members and those dependent upon them.
'3d. To educate its members socially, morally, and intellectually; also to assist the widows and orphans of deceased members.
'4th. To establish a fund for the relief of sick and distressed members.
There was power conferred by the constitution and by-laws to subsequently amend such constitution and by-laws in the manner therein provided. The general governing power of the order was vested in the Supreme Ouncil, and the administration of its affairs under the supervision of such council was intrusted to the officers named in the constitution. Authority was given to the Supreme Council to sanction the organization of local lodges or councils, upon whom were conferred certain powers not in any way conflicting with the constitution and by-laws of the order, and the members of such local lodges or councils were required to be members of the order, and [237 U.S. 531, 535] were subject to the duties and responsibilities which resulted from that relation, and enjoyed also the resulting benefits.
At the time this certificate was issued, under the by- [237 U.S. 531, 536] laws the amount of the assessment required to be paid to the corporation to enable it to meet claims coming due under the widows' and orphans' benefit fund was graded according to the age of the member, and the contribution required of Green for this purpose was stated in his certificate to be $1.80 per assessment, and he paid up to 1898 at that rate various assessments called for under the rules of the order. In 1898, by a three-fourths vote of the Supreme Council, the system theretofore prevailing, exacting the payment of assessments as called for, was changed and the duty was imposed to make payment monthly of a sum the amount of which, although still dependent upon the age of the member, was higher than had previously prevailed. Under these new rates the sum due from Green was $3.16 per month, and he met regularly the payments thus exacted until the year 1905. In that year by the action of the Supreme Council, taken in virtue of the requisite three-fourths vote, while the standard of age was continued, the sum to be paid was again increased so that the monthly assessment of Green became $6.87, and from October, 1905, when these new rates became effective, down to February, 1910, it is not disputed that Green paid the amount of the increased assessments monthly, although it was found by the trial court that he did so under protest because of a denial on his part of the right of the Supreme Council, even under the sanction of the requisite vote, and in compliance with the forms of the constitution and laws of the order, to increase the rates.
In the meanwhile, shortly after the going into effect of the increased rates, that is, in November, 1905, sixteen members of the order, holders of certificates under the widows' and orphans' benefit fund, filed a bill in the supreme judicial court of Massachusetts against the corporation in their own behalf and in behalf of all other certificate holders to vacate and set aside the by- [237 U.S. 531, 537] laws by which the rates had been increased, on the ground that the increase was ultra vires of the corporation and violative of contract rights. The case was submitted by agreement of counsel to the whole court upon an agreed statement of facts, and was on May 17th, 1906, decided. The court, after a careful review of the general nature of the corporation, of the character of the fund, of the rights of its members as evidenced by the certificates, of the constitution and by-laws of the corporation, and the laws of the state applicable thereto, decided that the increase complained of was valid, impaired no contract right of the certificate holders, and was entitled to be enforced. Reynolds v. Supreme Council, R. A. 192 Mass. 150, 7 L.R.A.(N.S.) 1154, 78 N. E. 129, 7 Ann. Cas. 776.
On the trial the proceedings and judgment in the Massachusetts court, duly exemplified, as required by the act of Congress, were offered in evidence and excluded [237 U.S. 531, 539] and an exception reserved. The court made what in the record are styled findings of fact, but which embrace every question of law which it was conceived the controversy could possibly involve. The court held that the complainant was not barred by laches in consequence of his having accepted the amendment to the rates made in 1898, and that as he had protested in making the payments during the four years as to the rates fixed under the amendment of 1905, he was not estopped from questioning the validity of that amendment. It was decided that under the law of New York as a certificate holder the complainant had a contract which entitled him to prevent any increase of rate over that established in 1898. So far as the law of Massachusetts was concerned, it was declared that although, if governed by that law, the assessment would be valid, as the complainant was a member of a subordinate council existing in New York and doing business there, the rights of its members were controlled by the New York law, wholly irrespective of the law of Massachusetts. The rights asserted by the complainant were adjudged to exist, and the relief prayed for was granted.
The case then went to the appellate division of the second department. The court, considering the character of the corporation, the provisions of its Constitution and by-laws, and the powers which they conferred on the corporation, as well as the application for membership and the certificate issued pursuant thereto, decided that the amendment as to rates was not ultra vires of the corporation, but, on the contrary, was within its powers, and violated no contract rights of the complainant. Without deciding whether the case was controlled by the law of Massachusetts, and without passing upon the action of the trial court in seemingly rejecting the offer of the Massachusetts judgment, the court, treating that judgment as before it, and considering besides the Massachusetts law as open [237 U.S. 531, 540] for its consideration, held that the law of that state and the judgment there rendered served additionally to sustain the view taken as to the significance of the constitution and by-laws of the order, and thus served additionally to demonstrate that error had been committed by the trial court in holding that under the law of New York there was a right to relief. 144 App. Div. 761, 129 N. Y. Supp. 791. The case then went to the court of appeals, where the judgment of the appellate division was reversed and that of the trial court affirmed on the ground that the law of New York governed and established under the circumstances disclosed the right of the complainant to the relief which had been awarded him. 206 N. Y. 591, 100 N. E. 411.
It is not disputable that, disregarding details, all the rights asserted under the assignments of error come to one contention, that a violation of the full faith and credit clause of the Constitution of the United States resulted from refusing to hold that the rights of the parties were to be determined by the Massachusetts law and to apply that law, and in further refusing to give due effect to the decree rendered in Massachusetts concerning the subject of the controversy.
By a motion to disimiss it is urged that this question is not open for consideration because it was not raised below. But, as we have seen, the fact the charter was a Massachusetts charter, and the controlling character of the laws of that state on its operation and effect, were asserted by way of defense over and over again in the pleadings. It is, indeed, true that in none of the averments concerning the duty to apply the Massachusetts law and the validity under that law of the provision of the constitutions and by-laws which was assailed was any express reference made to the full faith and credit clause of the Constitution of the United States; but this was not the case as to the Massachusetts judgment which was expressly pleaded, accompanied with an explicit averment that not [237 U.S. 531, 541] to give it due effect would be a violation of the full faith and credit clause of the Constitution of the United States. And as what was the due effect to be given to the judgment depended, as we shall hereafter more particularly point out, upon whether the Massachusetts law controlled the parties, since if it did, the judgment would be entitled to one effect, and if it did not, to another effect, it follows that the claim as to constitutional right concerning the judgment also involved deciding whether the Massachusetts law controlled. It follows that in both aspects the claim of full faith and credit under the Constitution of the United States was asserted, and whether the court below erred in holding that the clause was inapplicable because the contract was a New York contract governed by New York law is the question for decision. And the solution of that question involves two considerations: first, was the controversy to be determined with reference to the Massachusetts charter and laws and judgment; and second, if yes, did they sustain the right of the corporation to make the increased assessment complained of?
Before coming to consider the subject in its first aspect as controlled by authority, we briefly contemplate it from the light of principle in order that the appositeness of the authorities which are controlling may be more readily appreciated.
In addition it was by the application of the same principle that a line of decisions in this court came to establish: First, that the law of the state by which a corporation is created governs in enforcing the liability of a stockholder as a member of such corporation to pay the stock subscription which he agreed to make; second, that the state law and proceedings are binding as to the ascertaining of [237 U.S. 531, 544] the fact of insolvency and of the amount due the creditors entitled to be paid from the subscription when collected; and third, that putting out of view the right of the person against whom a liability for a stockholder's subscription is asserted to show that he is not a stockholder, or is not the holder of as many shares as is alleged, or has a claim against the corporation which at law or equity he is entitled to set off against the corporation, or has any other defense personal to himself, a decree against the corporation in a suit brought against it under the state law for the purpose of ascertaining its insolvency, compelling its liquidation, collecting sums due by stockholders for subscriptions to stock and paying the debts of the corporation, in so far as it determines these general matters, binds the stockholder, although he be not a party in a personal sense, because by virtue of his subscription to stock there was conferred on the corporation the authority to stand in judgment for the subscriber as to such general questions. Selig v. Hamilton, 234 U.S. 652 , 58 L. ed. 1518, 34 Sup. Ct. Rep. 926; Converse v. Hamilton, 224 U.S. 243 , 56 L. ed. 749, 32 Sup. Ct. Rep. 415; Bernheimer v. Converse, 206 U.S. 516 , 51 L. ed. 1163, 27 Sup. Ct. Rep. 755; Whitman v. National Bank, 176 U.S. 559 , 44 L. ed. 587, 20 Sup. Ct. Rep. 477; Hawkins v. Glenn, 131 U.S. 319 , 33 L. ed. 184, 9 Sup. Ct. Rep. 739.
That the doctrines thus established if applicable here are conclusive is beyond dispute. That they are applicable clearly results from the fact that although the issues here presented as to things which are accidental are different from those which were presented in the cases referred to, as to every essential consideration involved the cases are the same and the controversy here presented is and has been, therefore, long since foreclosed.
The controlling effect of the law of Massachusetts being thus established and the error committed by the court below in declining to give effect to that law and in thereby disregarding the demands of the full faith and credit clause being determined, we come to consider whether the increase of assessment which was complained of was within [237 U.S. 531, 545] the powers granted by the Massachusetts charter, or conflicted with the laws of that state. Before doing so, however, we observe that the settled principles which we have applied in determining whether the controversy was governed by the Massachusetts law clearly make manifest how inseparably what constitutes the giving of full faith and credit to the Massachusetts judgment is involved in the consideration of the application of the laws of the atate, and therefore, as we have previously stated, how necessarily the express assertion of the existence of a right under the Constitution of the United States to full faith and credit as to the judgment was the exact equivalent of the assertion of a claim of right under the Constitution of the United States to the application of the laws of the state of Massachusetts. We say this because, if the laws of Massachusetts were not applicable, the full faith and credit due to the judgment would require only its enforcement to the extent that it constituted the thing adjudged as between the parties to the record in the ordinary sense, and on the other hand, if the Massachusetts law applies, the full faith and credit due to the judgment additionally exacts that the right of the corporation to stand in judgment as to all members as to controversies concerning the power and duty to levy assessments must be recognized, the duty to give effect to the judgment in such case being substantially the same as the duty to enforce the judgment.
Additionally, before coming to dispose of the final question it is necessary to say that, in considering it in view of the fact that the appellate division treated the Massachusetts judgment as in the record and considered it, and that the court below made no reference to its technical inadmissibility, but, on the contrary, treated the question as being one of admissibility, but of merits, we shall pursue the same course and treat the judgment as in the record upon the hypothesis that the action of the trial [237 U.S. 531, 546] court did not amount to its technical exclusion, but only to a ruling that as it deemed the law of Massachusetts inapplicable, it so considered the judgment, and therefore held it merely irrelevant to the merits.
Coming, then, to give full faith and credit to the Massachusetts charter of the corporation and to the laws of that state to determine the powers of the corporation and the rights and duties of its members, there is no room for doubt that the amendment to the by-laws was valid if we accept, as we do, the significance of the charter and of the Massachusetts law applicable to it as announced by the supreme judicial court of Massachusetts in the Reynolds Case. And this conclusion does not require us to consider whether the judgment per se as between the parties was not conclusive in view of the fact that the corporation, for the purposes of the controversy as to assessments, was the representative of the members. ( See Hartford L. Ins. Co. v. Ibs, this day decided [ 237 U.S. 662 , 59 L. ed . --, 35 Sup. Ct. Rep. 692].) Into that subject, therefore, we do not enter.
Before making the order of reversal we regret that we must say something more. The printed argument for the defendant in error is so full of vituperative, unwarranted, and impertinent expressions as to opposing counsel that we feel we cannot, having due regard to the respect we entertain for the profession, permit the brief to pass unrebuked or to remain upon our files and thus preserve the evidence of the foregetfulness by one of the members of this bar of his obvious duty. Indeed, we should have noticed the matter at once when it came to our attention after the argument of the case had we not feared that by doing so delay in the examination of the case and possible detriment to the parties would result. Following the precedent established in Green v. Elbert, 137 U.S. 615 , 34 L. ed. 792, 11 Sup. Ct. Rep. 188, which we hope we may not again have occasion to apply, the brief of the defendant in error is ordered to be stricken from the files and the decree below in accordance with the [237 U.S. 531, 547] views which we have expressed will be reversed and the cause remanded for further proceedings not inconsistent with this opinion.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.