Temperance Mutual Benefit Ass'n v. Home Friendly Society

40 A. 1100, 187 Pa. 38, 1898 Pa. LEXIS 1095

• Court: Supreme Court of Pennsylvania
• Decided: July 21, 1898
• Docket: Appeal, No. 395
• Status: Published

Opinion

Opinion by

Mr. Justice Fell,

The finding of the learned judge that the consideration for the conveyance of the property in question did not pass to the plaintiff as a corporation, but to such of its members as dissolved their connection with it and became members of the corporation defendant, is fully warranted by the testimony, and it is conclusive of the controversy which has arisen. Both corporations are mutual life insurance associations. The plaintiff had acquired property by the accumulation of receipts for1 admission to membership, from annual dues and from assessments of the members. This property was a trust fund for the security of the certificate holders. It was within the power of the directors to sell this property for the purposes of the corporation and to use the money received in carrying on its affairs. They could not, however, close up the affairs of the corporation or transfer its property for the benefit of a portion of its members. This was in effect what they attempted to do. The agreement upon which the conveyance is based provides for the transfer of “the franchises, organization, property and control ” of one corporation to the other. It was an attempt to merge one corporation into another without legislative authority and without any previous action of the members. That this could not be done is too clear to admit of doubt: Lauman v. Lebanon Valley R. R. Co., 30 Pa. 42; Bedford, etc., R. R. Co. v. Bowser, 48 Pa. 29; Balliet v. Brown, 103 Pa. 554.

The conveyance cannot be sustained on the ground that it was the consideration of a contract of reinsurance. No reinsurance was effected or intended. The purpose was to transfer the entire membership and property of one corporation to another, and it was attempted to effect this by the action of the board of directors alone.

As the question raised relates to the power of the directors of the corporation to make the conveyance, inquiry as to the consideration upon which it was based is not precluded by the fact that the deed is regular on its face. The plaintiff was attempting to set aside, not its own act, but the unauthorized act of its directors.

The judgment is affirmed.