LAFOND v. DEEMS

LAFOND v. DEEMS. N. Y. Supreme Court, First Department; Special Term, June, 1876. Dissolution of Voluntary Associations. A voluntary unincorporated association for purposes of mutual benefit, is to be deemed in law, a partnership, within the rule that equity may decree a dissolution, and distribution of assets, in an action between the existing members in case of violent and lasting dissensions. In such a case, a receiver will be appointed. Trial by the court. John Lafond, and two others, trustees of the Washington Tent No. 1, Independent Order of Eechabites, brought this action against Henry W. Deems, and thirty-six others, their fellow members. The society or association was a mutual benefit association or copartnership, which was organized in 1843, under the name above stated; the objects of which were “ mutual benefit in the exercise of temperance, fortitude and justice ; securing to its membership sympathy and relief in times of sickness and distress, and in the event of death, the decent observance of the necessary funeral obsequies ; and is based upon and seeks the extension of the principles of total abstinence from all intoxicating drinks.” In the course of time the association accumulated about five thousand dollars, which was deposited in different banks in the city of New York, and which, according to the allegations of the plaintiffs and some of the defendants, belonged to, and was the property of, all the members equally. The plaintiffs, three in number, were regularly elected trustees, and as such, claimed the care and custody of the funds and the property of the association. In September, 1875, Patricius M. Stackpole, one of the defendants, who claimed to be the chief ruler, served a notice on the various banks, warning them not to pay out any of the money except by order of the Tent. ■ This, and a conspiracy which the plaintiffs alleged was formed by the said Stackpole and other defendants, to deprive various members of the association of their rights, and to gain possession of the funds, gave rise to discord and dissensions among the members; they therefore prayed for a dissolution of the association, the appointment of a receiver, and for an equal distribution of the funds among the members. Eleven of the defendants by their answer alleged that the money in question had not been earned by the association in the regular course of collection of dues and fines, but by the transaction of outside business entirely distinct from the objects of the association, and the motives of its founders. And in the transaction of such business, a feeling of bitter hostility had grown up among the members. They also prayed for affirmative relief, that the association be dissolved, the funds equally divided, and they allowed to organize themselves under such name and rules as they might see fit. Twenty-six of the defendants by their answer denied the copartnership ;■ alleged that the fund was a trust fund for the benefit of the order. They admitted the election of the plaintiffs as trustees, but that they had subsequently been dismissed by a majority vote at. a regular meeting of the association. That the funds, according to the constitution and bydaws, were lodged equally with the chief ruler and recording secretary; and that, if the trustees thought themselves aggrieved by their dismissal, they should have appealed, either to the Tent, to the high chief ruler of the High Tent, or to the High Tent itself, as provided for in the bylaws. The parts of the constitution and by-laws relating to the application of its funds were as follows: “The funds of the High Tent [one of the governing bodies] shall be devoted to the payment of its current expenses. . “Primary Tents shall have power to make such laws for the payment of sick and funeral benefits to their own members, as they -may deem expedient, it being optional with each tent whether it provides any system of benefits or not. “The stocks, securities, investments, funds and. other properties of this tent [The ‘Washington Tent ’] shall not be disposed of, or transferred in whole or in part, over $100, unless by a motion at a regular meeting, &c. ..... “ The treasurer shall hold the moneys so received for the use of the Tent, .... deliver up, when demanded by the Tent, all moneys, vouchers, books, and papers, to whomsoever the Tent may specially appoint to receive them.” A similar clause as to the trustees required them “to deliver to their successors in office, or whomsoever the Tent may appoint, any and all moneys, vouchers, securities and other property and effects of the Tent, which shall come into their hands.” There was also a clause that the Tent should never be dissolved or disbanded except by unanimous vote ; and that no motion to disband should be entertained so. long as’ there were ten members in regular standing. Evidence adduced on the trial showed that the meetings were very turbulent and boisterous, and all gentlemanly instincts were forgotten, while parliamentary rules were utterly disregarded. Walter S. Cowles and Henry C. Banks, for the plaintiffs. George F. & J. C. Julius Langbien, for eleven defendants, argued: I. Washington Tent No. 1 Independent Order of Rechabites, is a voluntary association not sanctioned expressly by the Legislature, pursuant to some general or special law, is no more than an ordinary partnership, and as such is subject to the supervision of a court of equity (Austin v. Searing, 16 N. Y. 112 ; Collyer on Partnership, §§ 25, 553, 624, 626, 627; Gow on Partnership [part 2nd], 227; Wells v. Gates, 18 Barb. 554; Dennis v. Kennedy, 19 Id. 517). II. The law is the same with regard to joint stock associations (Allen v. Sewall, 2 Wend. 327; Moss v. Oakley, 2 Hill, 265 ; Bailey v. Backer, 3 Id. 188; Harger v. McCullough, 2 Denio, 119 ; S. C., 1 N. Y. 47; Townsend v. Goewey, 19 Wend. 424; Cross v. Jackson, 5 Hill, 478; Cumpston v. McNair, 1 Wend. 457 ; Chase v. Barrett, 4 Paige, 148 ; Opinion of Lord Chancellor St. Leonards, in the case of the St. James Club [an ordinary club] reported in 13 Eng. Law & Eq. 592, holds the same doctrine). III. Voluntary clubs or associations have always been regarded as, and dealt with in courts of equity as partnerships (Greenwood’s Case, 23 Eng. Law & Eq. 422; Richardson v. Hastings, 29 Eng. Ch. 323; Beaumont v. Meredith, 3 Ves. & Bea. 180 ; Gorman v. Russell, 14 Cal. 531; Lloyd v. Loring, 6 Ves. 773 ; Cock-burn v. Thompson, Id. 322 ; Pierce v. Piper, 17 Id. 8 ; Raab v. Reade, 5 Rawle, 151). Stewart & Townley, for twenty-six defendants, argued: I. “ Washington Tent No. 1 Independent Order of Rechabites,” is a voluntary unincorporated association, and as such, is bound by its rules when not in conflict with the law of the landand the courts can interfere no further than to hold the association to a fair and honest administration of these rules. It is not a copartnership within the operation of equitable remedies afforded by the courts for the protection of the rights of partners as between themselves (White v. Brownell, 2 Daly, 329). In addition to cases cited in the report as to voluntary societies, see L. 1851, c. 455, extending L. 1849, c. 258 ; Boody v. Drew, 2 Supm. Ct. (T. & C.) 69; Frothingham v. Barney, 6 Hun, 366; De Witt v. Chandler, 11 Abb. Pr. 459; Waterbury v. Mer. Union Express Co., 3 Abb. Pr. N. S. 163 ; Westcott v. Fargo, 61 N. Y. 542. Compare also, Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566 ; Oliver v. Liverpool, &c. Ins, Co., 100 Mass. 531; Fargo v. McVicker, 55 Barb. 437; Taft v. Ward, 106 Mass. 518; Birmingham v. Gallagher, 112 Id. 190. [MAJORITY — Lawrence, J.] Lawrence, J. The claim made by the defendants’ counsel that the plaintiffs have an appropriate remedy under the constitution and by-laws of the Tent, for the wrong which they allege they have suffered, cannot I think be maintained. I am convinced, from the testimony, that Exhibit B contains the constitution and general laws of the High Tent, and that Washington Tent No. 1, when instituted, recognized the superior authority of the High Tent; and I do not find that the evidence sufficiently preponderates in favor of the plaintiffs, to warrant me in holding that the constitution and general laws have for many years been regarded by the Washington Tent as of no binding force. There are various provisions in the by-laws, which are admitted by all parties to be valid and existing, which clearly recognize the superior body known as the High Tent. Section 5 of article 11 of the by-laws, evidently contemplates the right of an expelled or suspended member to appeal from the decision of Washington Tent. Section 4 of article 3 of the general laws, provides for an appeal from the Primary Tent to the H. C. R, and for a further appeal from his decision to the High Tent (see also section 5 of article 5 of the constitution, as to the appellate jurisdiction of the H. C. R). No one, I think, can doubt that this is the appeal which is referred to in section 5 of article 11 of bylaws. Again, by article 6 of the by-laws, it is provided “ that the officers of this Tent shall be such as are prescribed in article 6, section 3 of the constitution, and shall be elected for a term of six months.” Upon turning to Exhibit B, introduced in evidence by defendants, it will be found that section 3 of article 6 prescribes the names of the officers of the various Tents which may be organized under the constitution. It appears, however, that there has been no meeting of the High Tent since 1860, and there is no evidence showing that any such meeting is likely to be held in future, nor does it appear that there is, at present, such an officer in existence as the H. O. JR., to whom the notice of appeal provided for by the bylaws and general laws, just adverted to, could be given. Granting then, that if the High Tent could be convened or the II. Q. JR. could be appealed to, the plaintiffs might be protected by appeal, it is quite apparent that there is no way at present open to the plaintiffs, by which such appeal can be taken, or made effectual. Again: the appeal just mentioned seems to be limited to cases in which a member complains of unjust expulsion or suspension, and does not embrace such grievances as those of which the plaintiffs complain in this action.. The complaint is framed upon the theory that the members of the Washington Tent No. 1 are partners as to the assets and the property of the Tent, and particularly as to the fund therein mentioned; that a conspiracy has been formed between the defendant Stack-pole, the chief ruler, and the defendants represented in this action by Messrs. Stewart & Townley, with the design of unlawfully getting possession of the funds mentioned in the complaint, and of converting- the-same to their own use. The evidence reveals a state of feeling among the members which is much to be deplored. The association was formed in 1842, for the purpose, as the second article of the constitution declares, of “mutual benefit in the exercise of temperance, fortitude and justice; securing to its membership sympathy and relief in times of sickness and distress, and in the event of death, the decent observance of the necessary funeral obsequies; and is based upon, and seeks the extension of the principle of total abstinence from all intoxicating drinks.” The members seem to me to have departed very much from the object of the association, except in respect to abstinence from the use of intoxicating drinks. No ordinary partnership or commercial venture could reasonably be expected to succeed, when the persons engaged in it entertain such feelings towards each other, as have been exhibited by the members of the association; and I am satisfied that the usefulness of the association has departed. The evidence establishes that in the years 1844, 1845, and 1846, as many as three or four hundred persons attended the meetings of the association ; now the whole membership has dwindled down to thirty mine, with an average attendance of from twelve to twenty-five members at each meetifig: A careful perusal of the testimony obliges me to conclude that each of the factions into which the association is divided has been guilty of conduct which cannot meet with the approval of the court. I can find no justification for the trustees (the plaintiffs), in refusing to produce their books, when they were called for by the Tent, nor do I see what objection there was to -the trustees attending the meetings of the Tent, subsequent to the passage of the resolution of October 19, 1875, by which the Tent resolved itself into a committee of the whole on the books. The plaintiffs were present at that meeting, and the resolution seems to have been unanimously passed. It would appear that if a spirit of conciliation had been encouraged after the passage of that resolution, all the difficulties of the association might have been amicably arranged. On the other hand, the defendants, who are alleged to have been in collusion with the chief ruler, seem to have been unnecessarily harsh in their conduct and expressions towards those who sympathized with the trustees and their faction. The-fact of any conspiracy to divert the fund, or to appropriate it to their own use, is explicitly denied by the defendants in their answer and in their evidence, and I do not find that it has been established. The action of Stackpole in notifying the savings bank not to pay moneys on the orders of the trustees, seems to have been based upon statements made that the trustees could and would draw the moneys from banks at their pleasure. If this case, therefore, rested wholly on the allegation of a conspiracy on the part of the defendants represented by Messrs. Stewart and Townley, to deprive the minority of their rights under the constitution and by-laws, I should feel constrained to dismiss the complaint; but in another point of view, it appears to me that, the plaintiffs have made out such a case as requires a court of equity to intervene. In my opinion, the plaintiffs are right in their position that, as respects the fund now in possession of the Tent, the members of the association are to be regarded as partners. In Wells v. Gates (18 Barb. 557), Clerke, J., delivering the opinion of the court, says: “Companies, or societies which are not sanctioned expressly by the legislature, pursuant to some general or special law, are nothing more than ordinary partnerships; and the laws respecting them are the same” (See also Dennis v. Kennedy, 19 Barb. 526; Beaumont v. Meredith, 3 Vesey & B. 180; Collyer on Partnership, § 53). It appears from the testimony that the fund now in the hands of the association is mainly derived from the rental of rooms, and that the dues do not amount to enough or more than enough to pay the annual run- . ning expenses. The renting of rooms was certainly no part of the object or purpose of the association, and in entering upon that business, the association has departed from the design of its founders. If it be true, that as to this fund the members of the association are partners, I think'that, in accordance with the principles of several adjudications, the court should decree a dissolution of the partnership and distribution of the fund. While a partnership will not ordinarily be dissolved for mere defect of temper in some of the members of the copartnership, the existence of violent and lasting dissensions is a ground upon which a court of equity will decree a dissolution. So, too, when the whole scheme is found to be visionary or founded upon erroneous principles (Collyer on Partnership, § 397; 3 Kent Com. 68, and cases cited). The state of feeling between the members of this association shown by the evidence appears to me to bring this case with the authorities referred to, and to call for the appointment of a receiver, for an adjustment of the accounts of the association, and for a decree of dissolution. As. I have found that the dissolution is necessary on account of the acts of both of the factions in the association, no costs allowed. As to by-law against intoxication, see St. Mary’s Beneficial Soc. v. Burford, 70 Pa. St. 321; Nash v. Bussell, 5 Barb. 556.