CHAPTER XXVI.

ACTIONS INVOLVING MEMBERSHIP IN MUTUAL BENEFIT AND VOLUNTARY ASSOCIATIONS.

§ 668. Familiar principles applicable.

669. Manner of suing-Statutory provisions.

670. Qualifications of plaintiff-Demand-Parties, etc.

671. Actions on collateral contracts.

672. Actions to prevent wrongful forfeiture and suspension of contract. 673. Mutual benefit certificates.

674. Limitations upon right to sue and recover.

675. Against voluntary association.

694. Practice-Change from legal to equitable action.

705. Presumptions-Proofs of death and good standing.

§ 668. Familiar principles applicable. With respect to inter se rights of members, non-capital stock corporations and voluntary stock companies are scarcely distinguishable. Though the rights between members of a voluntary association more closely resemble those between the members of a copartnership, yet the proceedings appropriate for obtaining redress for wrongs to the common interest, either by other members or by their common agents, and the occasions when they may resort to the courts for redress, differ but little in these cases from those in which corporate rights and interests are involved.

Whether the association have a capital represented by shares, as in case of an ordinary joint-stock company, or be purely social in its character, or combine social and beneficial features, its members may bring an action in equity to set aside fraudulent transactions and compel an accounting for misappropriations by agents, and to enjoin ultra vires acts. Directors of incorporated associations are liable personally to a member or beneficiary of a matured claim to the extent of all misappropriations and misapplications of assets whereby the association is rendered insolvent.1 A receiver appointed after insolvency may

1 Stewart v. Lee Mut. F. Ins. Ass'n, 64 Miss. 499. In this case the funds in the hands of the company arising from dues and advance assessments had been appropriated by the directors to the payment of its privilege, taxes and attorney's fees, stripping it of its assets and rendering it insolvent. Plaintiff had a policy in a mutual benefit association, payable at her death to her heirs, or to herself, if living, and a member in good standing at a fixed time, and had paid her admission fee and assessments. Defendants were the directors of the association, and dissolved the corporation by consolidating it with another, to which it attempted to turn over its insurance. The latter corporation refused to issue a policy to plaintiff in lieu of the one held by her, alleging that she had contracted a disease rendering her uninsurable. Code Iowa, §§ 1071, 1072, provides that intentional fraud by persons having the management of a corporation, such as the diversion of the assets from their proper uses, whereby insufficient funds remain to meet its liabilities, will constitute a cause of action in favor of any person injured thereby. Held, under said statute, that plaintiff could recover for

maintain such action.1 The action lies in favor of the beneficiaries of an unincorporated association for any deficiency they may be unable to collect by enforcement of the by-laws, where the funds have been misappropriated by the directors.2

§ 669. Manner of suing Statutory provisions.—Similar restrictions upon and qualifications of the member's right to sue apply in these and in incorporated capital stock companies. It will be ground for refusing relief if it appear that the suit is not brought in good faith, but to promote the interests of a rival enterprise.3 The corporation, if there has been incorporation, and the association in other cases, especially if by statute voluntary associations, may sue and be sued in and by a common name, should be joined as a nominal with the real defendants. When the suit is against agents, other members are not proper parties defendant.5 At common law, an action by a member against a voluntary association or joint stock company would fail."

the damages sustained by reason of the consolidation, which would be measured by the amount she had paid into the association. Grayson v. Willoughby, 78 Ia. 83; 42 N. W. 591. The application for insurance to the company with which the defunct corporation was consolidated would not amount to a ratification of the act of consolidation, so as to bar her action for damages.

1 Appeal of McCarty, 110 Pa. St. 379.

2 Hammerstein v. Parsons, 29 Mo. App. 509.

3 Waterbury, etc., Mer. Un. Express Co., 50 Barb. 157.

Id.

Supra, p. 27 n., also n. 2, p. 750. An action for slanderous words, spoken of plaintiff by a mutual aid association of which he was a member when the alleged tort was committed, will not lie against the association sued as a partnership; but the redress, if any, is against the wrongdoers in their individual or non-partnership capacity. Nor does it make any difference in this respect that, in consequence of this slander, plaintiff was suspended from the benefits of membership for a term of years, and that the action was brought pending this term of suspension. Gilbert v. Crystal Fountain Lodge, 80 Ga. 284; 4 S. E. 905. 5 Boody v. Drew, 46 How. Pr. 459.

• Habicht v. Pemberton, 4 Sandf. 657; Ewing v. Medlock, 5 Port. (Ala.) 82; Pipe v. Bateman, 1 Iowa, 369; Schmidt v. Gunther, 5 Daly, 452. Members of a voluntary association will be enjoined from incorporating themselves under

But by statute in New York, California, and perhaps in a few other states, persons are authorized to do business and to sue in and by a common name; and in New York, a member may sue the association or company in the same manner that a stockholder in a corporation may sue it.1

§ 670. Qualifications of plaintiff-Demand-Parties, etc.— Substantially the same principles govern actions between

the name of the corporation at the suit of the association's president, until the determination of a disputed question of fact as to whether or not they are acting in pursuance of authority conferred by the association. McGlynn v. Post, 21 Abb. N. C. 97. Certain members of an unincorporated association subscribed to the stock. From the money thus raised realty was bought for the purposes of the association, the deed being taken in trust for the association, and for those composing it. Certificates were issued to the subscribers. Held, that the holders of the certificates, and not the whole association, were entitled, in equity, to the property. Crawford v. Gross, 7 Pa. Co. Ct. Rep. 419.

1 Code Civil Proc. sec. 1919; Westcott v. Fargo, 61 N. Y. 542; Saltsman v. Shults, 14 Hun, 256. Gen. St. Minn. 1878, c. 66, § 42 (Rev. St. 1851, c. 70, § 38), provides that where two or more persons associated in any business transact such business under a common name, "the associates may be sued by such common name, the process being served on one or more of the associates, and the judgment shall bind the joint property of the associates as if all had been named defendants, and had been sued on their joint liability. Held, that an individual judgment against associates personally served, in an action against them under the common name, is not void for want of jurisdiction. Gale v. Townsend (Minn.), 47 N. W. 1064, In Connecticut it is held that where persons, desiring to secure provisions for themselves without the costs of middlemen, associate themselves together without incorporation, open a store under a distinguishing associate name, viz., "Bridgeport Co-operative Association," and conduct the business through their own managers, who are authorized to go into the market and buy provisions in the associate name, which are resold at cost to the members and the public generally, the members of such association are liable, as individuals, for goods so bought by the managers, although they never held themselves out as partners, and credit was not given to them as such, or as individuals. Davison v. Holden, 55 Conn. 103; 10 A. 515. Under Code Civil Proc. N. Y., § 1919, providing that the president or treasurer of an unincorporated association of seven or more persons may sue on any cause of action accruing to all of the associates, the right of the treasurer of such an association, formed in pursuance of a charter granted by a general organization of such associations, to sue upon a note executed to such treasurer, is not impaired by an order of the executive board of the general organization, revoking such charter. Wells v. Monihan, 13 N. Y. S. 156.

members and agents, and between members with respect to inter se wrongs; the same limitations upon the right to sue and restrictions as to non-interference with internal management, and the same requirement as to previous demand upon the directors apply as in the case of capital stock corporations.1

§ 671. Actions on collateral contracts.-In capital stock corporations, the principal pecuniary interest of members is inseparably connected with the contract of membership; or it would be more proper to say that a property right is the only subject of and consideration for the contract. For this reason, the right to sue at law in the member's own right seldom arises. But in non-capital stock corporations and voluntary associations, membership often carries with it the right to make important collateral contracts which are really distinct from the contract of membership, but dependent upon the continuing existence of the latter.

These collateral contracts are affected and modified, as we have seen,2 by the by-laws and charter, if the association be incorporated, and if not, by the articles

1 Supra, Chapters XXIII. and XXIV. Members of an association cannot withdraw from the regular meetings on account of opposition to the authority under which officers act, or irregularity in the performance of their functions, and meet for the purpose of expelling its regularly elected officers, declaring their offices vacant, and constituting themselves their successors in office. McCallion v. Hilbernia Sav. & Loan Soc., 70 Cal. 163; 12 P. 114. A voluntary association, whose members consist solely of employés of a certain corporation, organized for the purpose of furnishing aid to its members in case of sickness, etc., each member being required to pay to the society a certain sum weekly, and the corporation also contributing a weekly sum, is in no sense a public charity; and, on its dissolution, the accumulated fund must revert as a resulting trust to the contributors. Coe v. Washington Mills, 149 Mass. 543; 21 N. E. 966.

2 Supra, Chapter XIV. The beneficiary in a certificate of membership cannot be heard to assert, in an action to recover the amount of the certificate, that the provision in the certificate that death must happen within 90 days after the accident is not authorized by defendant's constitution. She cannot thus accept one part of the contract and reject another. Palmer v. Commercial Travellers' Mut. Acc. Ass'n, 6 N. Y. S. 870; 53 Hun, 601.