
    Lindquist v. Glines, as Receiver, et al.
    (Supreme Court — New York County, Special Term,
    April, 1893.)
    A foreign benevolent corporation with local branches in this state became insolvent and receivers therefor were duly appointed. The by-laws of the corporation provided that twenty per cent of the amount received by each branch on each assessment should be set aside as a reserve fund, be the property of the parent company and subject to its control. Plaintiff was a member of a New York-city branch and at the time of the appointment of the receivers it had a reserve fund of several thousand dollars. It did not appear that there were any creditors of the corporation within this state except those claiming by virtue of membership. Held, that the reserve fund of each local branch should be repaid to the members thereof whose assessments had contributed to make up the same and in the proportion that each member’s payment had to the total fund.
    Application by a member of a local branch of the “ Order of the Iron Hall,” for an order directing distribution of the reserve fund of his branch to the members thereof who had paid the same.
    
      Woodward <& Mayer, for plaintiff.
    
      Frones i& Findley, for defendants.
   Ingraham, J.

The “ Order of the Iron Hall,” a corporation organized under the laws of the state ,of Indiana, was incorporated as a benevolent corporation, to assist its members; to improve the condition of its members morally and materially ; to establish a benefit fund from which the members of the order should receive a benefit as should be fixed by its bylaws, and to establish a life fund from which, upon the death of a member of the order, a certain sum should be paid to a designated beneficiary.

The scheme provided for the establishment of local branches of the order, to be under the general control of what was known as the “ Supreme Sitting of the Iron Hall.”

By one of the laws of the supreme sitting, it was provided That twenty per cent of the amount received by each branch on each assessment shall be set aside and retained as a reserve fund, which fund is the property of the supreme sitting, and shall be subject to its control at all times, as thereinafter provided.

The laws also contain various provisions for the investment by each branch, of this reserve fund. Many branches were organized in this state, among others a local branch, Ho. 417, located in this city. Of that branch the plaintiff became a member, and with other members duly paid his assessment. This local branch, under the provisions of the laws before mentioned, deducted twenty per cent received by the branch on each assessment, which, at the time of the appointment of the receiver of the corporation, amounted to the sum of $2,634.44.

It appears that on or about the 31st day of August, 1892, the Superior Court of Marion county, in the state of Indiana, appointed a receiver of the corporation on the ground that the same was insolvent and unable to meet its obligations, and since that time the corporation has ceased transacting any business. Subsequently, an application was made in this state for the appointment of a receiver of the property in this state, and the defendant George E. Glines was appointed receiver of such property, and under that order the amount of the reserve fund in the hands of the local branch Ro. 41Y was paid to him.

This action is brought by plaintiff as a member of the lower branch, on behalf of himself and other members thereof, and asks that this reserved fund of the local branch of which he was a member be returned to the members of the local branch who had paid it to the society.

I do not think it material to determine whether or not this coloration could legally transact business in this state without a certificate from the superintendent of the insurance department, as it seems to me that this reserve fund must be returned to those whose assessments paid to the local branch made up the fund.

It does not appear that there are any creditors of the corpoo ration within this state, except those claiming by virtue of their membership. This being so, there are three ways in which this reserve fund could be disposed of: First, by remitting it to the receiver appointed by the courts of Indiana of the parent corporation; second, by distributing it among all of the various local branches within this state; and, third, by repaying it to those whose assessments uaid to each branch had created the fund.

The controlling fact is that the scheme, to carry out which , the corporation is organized, has failed. The corporation, therefore, cannot carry out its agreement with its members, and it would certainly appear to be inequitable to take this fund from this state and send it to a foreign jurisdiction, to he distributed among the members of the order, when, by the very terms of the law creating thé reserve fund, it was to be retained by each branch and invested by it, and to allow this money to be paid into a foreign jurisdiction, merely for the purpose of distribution, would be to appropriate the money, paid for the purpose of establishing a reserved fund for their own benefit, to be applied to the use of other members of the corporation.

I can see no principle that requires that this fund should be divided among all of the branches within this state. It is apparent that the members have not contributed equally to the fund, as the older members would pay more assessments than the younger members, and it would seem to me that an equitable disposition of the fund would be to direct the reserve fund held by each local branch to be repaid to the members whose assessments had contributed to make up the fund in the proportion that each member’s payment had to the total fmid.

There can be no difficulty about carrying out such a distribution, and as the money is at present in the hands of a receiver appointed by the court, I see no necessity for appointing a new receiver.

The judgment can direct the amount of this reserve fund to be applied by the present receiver, as hereinbefore indicated.

If the parties cannot agree as to the amount to be paid to each member of this local branch, an order of reference can be had to ascertain the amount due to each member.

The decision and judgment to be settled on notice.  