Court Opinion

ID: 8190596
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:13:32.596781+00
Date Added: 2024-06-11T16:40:35.839966
License: Public Domain

TimliN, J.
Had the corporation proceeded to amend its “Constitution and By-laws” in the manner there provided for amending the same, so as to repeal existing regulations and *582create in their stead new rules and by-laws providing for the payment of a percentage of the first twelve assessments to be paid by a new member as a commission for obtaining that member, such action might be within the corporate power and not violative of the corporate contracts with its members, because the assessments on such new members would necessarily have to be loaded so as to include this cost, unless they were much too high in the first place. But under the circumstances appearing in this case, with the “Constitution and By-laws” forming a compact between the corporation and its members, to be modified, if at all, only in the mode and to the extent and by the authority there agreed upon, the corporation could not disregard its obligations to preserve the “Assessment Eund,” less three per cent., for the purpose for which it was collected. There was another mode provided for raising the money necessary to pay the expense of obtaining new members and this mode should have been followed. The action of the grand council or central verein was by resolution, and did not purport, as we understand it, to establish a permanent modus, but left the “Constitution and By-laws” in force and attempted to legalize and approve their disregard. • The only question before us is upon the prospective effect of such action of the grand council. We are satisfied that it does not authorize future and further disregard of the constitution and bylaws. Such corporation has the power to amend or repeal its by-laws and in many cases to suspend their operation in an emergency. The law treats this subject with liberality. But this power of amendment, repeal, or suspension cannot be carried so far as to authorize a breach of contract by the corporation. To attempt the suspension or repeal of a by-law in some forbidden way might be a breach of contract, even though the power of repeal might have been otherwise lawfully exercised. The by-law here disregarded was contractual. The Gesell-schaft in effect said to its members: all sums derived from assessments except three per cent, shall be held in a fund and *583not otherwise disbursed than for the payment of benefit certificates, and this condition shall continue until changed by amendment in the manner provided for amending the by-laws. To this the holders of the benefit certificates assented when they became members. Thereby not only a by-law but also a contract was created, which could be modified only by proceeding to modify it in the manner there stipulated or by subsequent mutual consent The proceedings of the central verein were not in the nature of an amendment or attempt to amend the by-law, but rather a suspension thereof for the time being. We think the relief granted by the learned circuit judge against future diversion of this fund in such manner and under such authority was well within the law and must be upheld. Flaherty v. Portland L. B. Soc. 99 Me. 253, 59 Atl. 58; Baltimore & O. R. Co. v. Baltimore & O. E. R. Asso. 77 Md. 566, 26 Atl. 1045; Mutual Aid &. I. Soc. v. Monti, 59 N. J. Law, 341, 342, 36 Atl. 666; Bagley v. Reno Oil Co. 201 Pa. St. 78, 50 Atl. 760, 56 L. R. A. 184; Thibert v. Supreme Lodge, 78 Minn. 448, 81 N. W. 220, 47 L. R. A. 136.
2. Upon the second point made by appellants, the learned circuit court, in its opinion disposing of the case, stated that were the question an open one he might be disposed to accept the views of appellants’ counsel with reference to the right of defendants to reimburse themselves out of corporate funds in their hands for their expenses incurred by them in unsuccessfully defending a mandamus action for reinstatement by two officers removed by defendants. But he considered that the decision of this court in State ex rel. Weingart v. Board, 144 Wis. 516, rather bound him to the contrary conclusion. In this we think he was in error. To the case last cited the corporation was not a party and costs could not have been adjudged against it. The decision as to costs in that case had relation to the issues presented by that case and the parties there before the court. The attempted removal was arbitrary, *584in that it was made without notice of the charges and opportunity for hearing and defense. But this does not necessarily imply bad faith toward the corporation in making the removal or in defending the cause. It does not even necessarily imply bad faith toward the persons removed. There was a fundamental error of procedure, and for this in that case the re-lators were reinstated. Every corporation has at common law, as incident to its existence, the power of amotion. 2 Kent, Comm. 298; Neall v. Hill, 16 Cal. 145, 76 Am. Dec. 508. Generally this power can be exercised only for cause and after notice and hearing, but the statute, or the articles where the statute does not forbid, may provide otherwise. O’Dowd v. Boston, 149 Mass. 443, 21 N. E. 949; People ex rel. Gere v. Whitlock, 92 N. Y. 191. But grants of such power are strictly construed. State ex rel. Graham v. Chamber of Commerce, 20 Wis. 63. The appellants, in the matter of such attempted removal, acted upon advice of an attorney at law. They apparently believed such removal to be in the interest of the corporation. The corporation, if it did not ratify the disbursement, recognized the good faith of the officers attempting to make the removal by offering the aid of the association to raise the money to cover such disbursements. We refer to the resolutions of August 13, 1910. We think the case in this respect is ruled by North Hudson Mut. B. & L. Asso. v. Childs, 82 Wis. 460, 52 N. W. 600. See, also, Spering’s Appeal, 71 Pa. St. 11; Hodges v. New England S. Co. 1 R. I. 312, 53 Am. Dec. 624.
3. The costs of this suit in equity might, in the discretion of the circuit court, have been awarded against the corporation solely or against the other defendants, or both, or denied to the plaintiffs. The learned circuit court, in the exercise of such discretion, awarded costs in favor of the plaintiffs and against the defendants, who were officers of the corporation. We perceive no ground for reviewing such discretion.
■No other questions, we think, merit attention.
*585By the Court. — Tbe judgment of the court below is modified by eliminating therefrom all provisions authorizing the recovery from the defendant’s officers of $1,957.79 with interest, and as so modified affirmed; the appellants to recover costs in this court.