320 Mass. 601 | Mass. | 1947
This bill in equity by a charitable corporation chartered by special act describes the defendants as “members of the investment committee” of the plaintiff, and seeks to require them to turn over to the treasurer of the plaintiff (1) the sum of $106,073.98 “from the security fund” for the purpose of paying overdue taxes on Mechanics Building, Huntington Avenue, Boston, owned by the plaintiff, and (2) the entire “security fund [which] was formerly known as the charity fund.” The defendants in their answer deny the plaintiff's right to the money, and allége in substance, among other things, that the fund is still the charity fund and not the security fund, and that they hold it in the capacity of trustees and not as members of the investment committee. The case was submitted on agreed facts, and the judge, without decision, reported the case to this court for determination. G. L. (Ter. Ed.) c. 214, § 31.
The plaintiff was incorporated by St. 1805, c. 75. The statute provides that the corporation “shall have power ... to make bye-laws for the election of their members and officers; the collection of assessments; the regulation of their meetings, and the appropriation of their funds for charitable uses; but shall not have power to make bye-laws or regulations for any other purposes whatsoever” (§ 1). The corporation can hold “any personal or real estate, within this Commonwealth” (§ 2). The “annual income . . . shall only be employed for the purpose of relieving the distresses of unfortunate mechanics and their families, to promote inventions and improvements in the mechanic arts, by granting premiums for said inventions and improvements, and to assist young mechanics with loans of money” (§ 3). By St. 1825, c. 88, the Legislature authorized the corporation to “establish schools and libraries for the use of apprentices, and the improvement of the arts.”
In 1886 the corporation voted to establish the charity fund, the income of which was to be paid to the committee of relief set up from its membership in 1812. On April 18, 1889, the following by-law was passed, “There shall be established and maintained a charity fund, of which Levi L. Wilcutt, Charles Whittier, and Erastus B. Badger, or their successors, shall be trustees; and all donations to this association, not otherwise especially set apart for specific purposes by their donors, shall be paid into this fund; the income only of which shall be expended, and that only in maintaining the charitable work of the association as now or hereafter may be provided in the by-laws. The donations as received, if not already invested in the bonds of this association dated May 1, 1885, and secured by a mortgage made by the association of tb,e same date to the Boston Safe Deposit and Trust Co., and also the proceeds of any such bonds belonging to this fund when paid, shall be invested in such securities as are prescribed for the savings banks of this Commonwealth.” Seven persons have contributed a total of $25,000 which wa,s put in the charity fund. The principal of the charity fund was $54,505.02 in 1910, is now $427,000, and was derived for the most part in the first instance from the operations and activities of the
The by-laws provided for the election by the corporation of three members as trustees of the charity fund. On December 15, 1898, there was added to the by-laws: “The trustees of this fund shall pay the annual income to the treasurer of the association, which sum shall be credited by him to the committee of relief, and shall be in excess of the annual appropriations for this work. At the end of each year, the unexpended balance, if any, standing on the books of the association to the credit of this committee shall be paid by the treasurer to the trustees of the charity fund, until the amount of said fund shall reach the sum of fifty thousand dollars.” This limitation was removed in 1907 by a by-law in terms the same as article VII, § 5, of the by-laws adopted in 1927, quoted below.
For many years the trustees have held the securities in their names as trustees and in a, deposit vault not accessible to other officers. The bank accounts have been in their names as trustees. The by-laws for years have provided that “the committee on finance shall have the general oversight of the finances of the association, examine its expenditures and if found correct approve the same. They shall examine the accounts of the treasurer, secretary, committee of relief and trustees of the charity fund as often as they may elect, either as a committee, or individually, and annually by the employment of a certified public accountant, rendering a report to the association at the annual meeting.” For many years all bills of the trustees, such as deposit box rental and auditing, have been paid directly by the treasurer. For several years the trustees have made payments from the income of the charity fund to the treasurer to reim- ’ burse him for amounts paid to persons whose applications
The last comprehensive set of by-laws was adopted July 20,1927. They continued in effect with immaterial amendments until November 28,1945, and whether they continued in effect thereafter is one of the questions for our determination. Pertinent portions of those by-laws will be found in a footnote.
On November 21, 1945, there was seasonably mailed in accordance with the by-laws a notice of a special meeting of the corporation to be held on November 28.
At the meeting of November 28 the motion contained in the notice was voted in some form, but this vote is agreed to be of no validity in this case because it preceded action on the amendment of the by-laws. It was further voted to change the name of the fund in one of the proposed amendments from “surplus” to “security.” Mr. Soule objected to the validity of the votes. It was then voted twenty-seven to eight that “the motion as printed” and as amended be adopted.
On January 16, 1946, at a meeting of the corporation, duly called, it was unanimously voted to adopt the following recommendation: “Under section 5 of article VII of the by-laws as amended November 28, 1945, the board of
We first consider whether the amendments to the by-laws were properly adopted. We pass by the question whether the subject was properly before the meeting of October 17, 1945. We do not know what were the provisions of the by-laws as to notices of meetings, nor do we know the exact wording of the notice. See People’s Mutual Ins. Co. v. Wescott, 14 Gray, 440, 442; Cray v. Christian Society, 137 Mass. 329, 331, 332; Downs v. Bowdoin Square Baptist Society, 149 Mass. 135, 139. The by-laws, however, do provide that no amendment shall be made unless proposed at a previous meeting and referred to a committee “whose report in detail shall be borne upon the notices for the meeting at which it is to be considered.” “By-laws constitute in effect a contract between the different members and the corporation.” Bushway Ice Cream Co. v. Fred H. Bean Co. 284 Mass. 239, 245, and cases cited. It is clear that the only proposal made at the meeting of October 17 was “a change in the by-laws by which money may be transferred from the charity to the general fund.” If we assume that the surplus fund referred to in the report of the committee is the general fund, and that no substantial change was made by changing the name to security fund, it is nevertheless the fact that the amendments to the by-laws which were adopted included much more than any matter proposed
In view of the fact, however, that this is the second attempt to obtain a decision from this court upon the question whether the charity fund is irrevocably dedicated to charitable purposes, the while the corporation is unable to meet tax obligations on its real estate, it is appropriate that we should express our opinion on the merits of that question, which have been fully argued. See Wellesley College v. Attorney General, 313 Mass. 722, 731. The corporation had been in existence over eighty years before it first voted to establish a charity fund. Three years later, in 1889, it adopted a by-law defining the fund, and authorizing the expenditure of income only, and “that only in maintaining the charitable work of the association as now or hereafter may be provided in the by-laws.” This provision was substantially unchanged thereafter. The defendants contend that the by-laws, in whatever way amended, could not lawfully divert the money from the charitable work of the corporation; that this would preclude the payment from the fund of taxes on the real estate, which was never an object but merely a method of' carrying out the charitable work; and that “the ‘charitable work’ of the association is the real owner of the fund.”
Attempts to transfer the powers and duties of charitable trustees or charitable corporations, or to merge their activities or their assets, often beget difficult legal questions. In general, the trustees of a charity may not delegate their powers and duties to others, much less substitute new trus
The present case relates to a charitable corporation rather than to a charitable trust created by will or gift. It is true that they are comparable in many respects. Sears v. Attorney General, 193 Mass. 551. Smith v. Livermore, 298 Mass. 223, 236. Animal Rescue League of Boston v. Assessors of Bourne, 310 Mass. 330, 334. Wellesley College v. Attorney General, 313 Mass. 722, 724. Old Ladies’ Home Association v. Grubbs’ Estate, 191 Miss. 250. Scott on Trusts, § 348.1. But the purposes for which a charitable corporation holds its own property not given to it on any express trust (Chase v. Dickey, 212 Mass. 555, 561-562) are determined by general statute or by its charter rather than by contract with some founder or his estate. Animal Rescue League of Boston v. Assessors of Bourne, 310 Mass.
The Legislature, in chartering the corporation, made it the sole custodian, manager, and almoner of its funds. What the defendants argue has been done goes far beyond the assistance of one charitable corporation by another. See Enos v. Church of St. John the Baptist, 187 Mass. 40, 44-45; Chase v. Dickey, 212 Mass. 555, 562; Harvard College v. Attorney General, 228 Mass. 396, 407; Boston Safe Deposit & Trust Co. v. Stratton, 259 Mass. 465, 475-476. We think that any action of the corporation, at least in the absence of statutory authority, whereby it attempted to divest itself of a large part of its assets by creating a charitable trust with individuals as trustees, must be deemed beyond its powers and ineffectual. Hobbs v. Board of Education of Northern Baptist Convention, 126 Neb. 416, 435. Northwestern University v. Wesley Memorial Hospital, 290 Ill. 205, 214-215. If the trustees of the charity fund are not mere officers and agents of the corporation and constantly subject to its control, they have no right to hold and manage the fund and should restore it to the corporation. But since regularity and lawfulness in corporate acts are to be presumed (Moroni v. Brawders, 317 Mass. 48, 52-53, and cases cited), we are of opinion that by its equivocal acts the corporation did not intend or undertake to set up the trustees of the charity fund as an independent body, that such trustees are not trustees at all in the legal sense but are mere officers and agents of the association and subject constantly to its control, and that the corporation owns the charity fund just as it does its other assets, subject to the provisions of its statutory charter.
Bill dismissed.
The statutory charter, at first temporary, was by St. 1825, c. 88, made to continue “during the pleasure of the Legislature.” The amount of property which the corporation might hold was gradually increased, apparently to $4,600,000. St. 1805, c. 75, § 2. St. 1825, c. 88. St. 1848, c. 49. St. 1869, c. 270. St. 1880, c. 234. St. 1925, c. 28.
“Article IV. Officers and committees. Section 1. The officers of this association shall be a president, a vice-president, and thirteen trustees, who shall together constitute the ‘board of government of the Massachusetts Charitable Mechanic Association’; a secretary-treasurer who shall be the same person, an assistant secretary-treasurer who shall be the same person, a committee of relief, a committee on finance, a committee on building, a committee on nominations and trustees of the charity fund.” “Article VII. Duties of officers and committees. Section 5. The charity fund already established shall be maintained by the trustees of said fund and their successors, the income only of which shall be expended, and that only in maintaining the charitable work of the association, as now or hereafter may be provided by the by-laws. All money belonging to this fund shall be invested by the trustees in such securities only as are prescribed by the statute for the investment[X] of the savings banks of this Commonwealth. The trustees of this fund shall add the accumulated interest, or any part thereof, to the principal as often as may be found practicable. For adequate cause any trustee may be removed at any regular meeting of the association by a vote of three fourths of the members present and voting, provided that notice of such proposed action is given on the notices of such meeting. Any trustee who from any cause ceases to be a member of this association shall thereupon cease to be a trustee. The trustees shall make a written report of the condition of their trust at each annual meeting of the association, their accounts having first been audited by the finance committee or by a certified public accountant employed by them for that purpose. The trustees of the charity fund shall act as trustees of the sum of eight thousand dollars bequeathed to this corporation by the will of Charles R. McLean, to be known as the Charles R. McLean fund, shall keep the same safely invested and pay out the income thereof upon the order of the board of government in accordance with the terms of said will.” “Article XII. Amendment or repeal of these by-laws. Section 1. The foregoing bylaws may be amended or repealed whenever three fourths of the members present and voting at any meeting of the association shall so determine, but no such . alteration shall be made unless the subject shall have been proposed at a previous meeting, and in the meantime referred to a committee whose report in detail shall be borne upon the notices for the meeting at which it is to be considered.”
The notice described the meeting as being “for the purpose of transacting the following business: 1. To act on the following motion: ‘Under authority granted in section 5, article VII, of the by-laws of this association and all other power and authority, for adequate cause and by reason of a change in the policy of the association, the trustees of the charity fund be and are hereby directed to transfer into the custody of the treasurer of this association all the bonds, stocks, and all other property and assets belonging to the association in their custody or under their direction, within ten days of the passage of this vote, and that the trustees of the so-called charity fund shall act as investment committee until their successors are elected.’ 2. To act on the report of the committee appointed at the quarterly meeting, October 17, 1945, to consider proposed changes in the by-laws. 3. To transact any other business that may legally come before said meeting.”
The report of the committee was, in brief, as follows: 1, Strike from article III, § 5, a provision that sums forfeited to the association when uncalled for by widows and children of members should be paid by the treasurer to the trustees of the charity fund. 2. Add to article V, § 2, relative to the terms of officers and committees and their election, provisions for an investment committee, and for the removal of officers and members of the board of government and of committees, and striking out the provision, “The trustees of the charity fund shall be chosen by the association at the next regular