Putnam's Handy Law Book for the Layman

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Beneficial Associations. - Beneficial associations possess a varied aspect, they are both social and business organizations. Often the members are bound together by secret obligations and pledges. Trades-unions have a double nature, they are [39]created for both beneficial and business purposes. Originally their beneficial character was the more important feature. Benefit societies may be purely voluntary associations or incorporated either by statute or charter.

The articles of association formed by the members are essentially an agreement among them by which they become bound to do specified things and incur liabilities. They thus establish a law for themselves somewhat like a charter of a corporation. They may adopt such rules as they like provided they are not contrary to the laws of the land. As the members, having made the rules, are presumed to know them, they are therefore bound by them.

The legal status of such associations, their right to sue and be sued, the liability of the members to the public for the debts of the association, though most important questions, are not as well settled as they might be. In many states statutes exist defining their right to sue and be sued, and their liability to creditors. Yet these statutes do not cover all cases. Generally persons who associate for charitable or benevolent purposes do not regard themselves in a legal sense as partners. Nevertheless in fixing their liability to creditors, dividing their property, and closing up their affairs, the courts often, though not always, treat their association as a partnership, and the members as partners. Thus the highest court in New York declared that an unincorporated lodge, which had been mis-managed, was not a partnership. The members sought to dissolve the lodge, and distribute its property. The court said there was no power to compel the payment of dues, and the rights of a member ceased after his failure to meet his annual subscription. On the other hand, the supreme [40]court in the same state held that the members of a voluntary association were liable to its creditors by common law principles. "Where such a body of men join themselves together for social intercourse and pleasure, and assume a name under which they commence to incur liabilities by opening an account, they become jointly liable for any indebtedness thus incurred, and if either of them wishes to avoid his personal responsibility by withdrawal from the body, it is his duty to notify the creditors of such withdrawal."

If one or more members order work to be done or purchase supplies, he or they are personally liable unless credit was given to the association.

What can the members do? They cannot change the purpose for which the association was formed without the consent of all, still less can the executive board convert the association into a corporation. No member has a proprietary interest in the property, nor right to a proportionate part while he is a member, or after his withdrawal. Should an association dissolve, then the members may divide its property among themselves.

Sometimes a quarrel springs up in one of these associations, the members divide, who shall have the property? The members of more than one church organization have fought this question, first among themselves, afterwards in the courts. Suppose a quarrel breaks out in a branch association and two parties are formed, which of them is entitled to the property? The party that adheres to the laws and usages of the general organization is regarded as the true association, and is therefore entitled to the enjoyment of the property. Though that party may be a minority of the faithful few, the members are enough to continue the organization.

[41]Sometimes societies of a quasi religious character exist which persons join, surrendering their property and receiving support. Suppose a member should leave, and afterwards sue to recover his property. This has been attempted, and usually ends in failure.

Are benefit societies charities? This question is important from the taxpayer's view, as charitable associations are taxed less than others or perhaps entirely relieved. An Indiana court has decided that a corporation which promises to pay a fixed sum as a benefit during a member's illness—he of course paying his dues--is not a purely benevolent organization, and therefore not exempt from taxation. Masonic lodges on the other hand, are generally regarded as charitable institutions. "The true test," says a judicial tribunal, "is to be found in the objects of the institution."

Again, a voluntary association may conduct in such a way as to create the impression or belief that it is a corporation, and is forbidden from denying its corporate liability for an injury or loss to a third person. It is a familiar rule that a person who transacts business with a partnership in the partnership name may hold all the members liable as partners, though he did not know all their names. This rule has sometimes been applied to a voluntary association, making it responsible as a corporation.

The articles of association regulate the admission of members. A physician who applied for membership in a medical society was rejected because of unprofessional conduct. A code of medical ethics adopted by the society was declared to be binding only on the members, and therefore did not touch the conduct of one prior to his becoming a member of the society. If the membership of a society is [42]confined to persons having the same occupation, a false representation concerning one's occupation would be a good reason for his expulsion. In admitting a member, if no form of election has been prescribed, each candidate must be elected separately. This must also be done at a regular meeting or at one properly called for that purpose. A call therefore to transact any business that may be legally presented is not sufficient.

If a society requires a ceremony of initiation, is the election of a member so complete that he is entitled to benefits without proper initiation? In one of the cases the court said: "The entire system, its existence and objects, are based upon initiation. We think, there can be no membership without it, and no benefit, pecuniary or otherwise, without it."

Controversies concerning property rights of religious societies are generally decided by one of three rules: (1) "was the property a fund which is in question devoted to the express terms of the gift, grant or sale by which it was acquired, to the support of any specific religious doctrine or belief or was it acquired for the general use of the society for religious purposes with no other limitation; (2) is the society which owned it of the strictly independent or congregational form of church government, owing no submission to any organization outside of the congregation; (3) or is it one of a number of such societies, united to form a more general body of churches, with ecclesiastical control in the general association over the members and societies of which it is composed."

Many benefit societies provide for the payment of money to their sick members. The rules providing for the payment of these may be changed at any time as the constitution or articles of association of [43]a society may prescribe. Consequently an amendment may be made diminishing the weekly allowance to a member who is sick, and also the time of allowing it. Of course in applying for the benefits a member must follow the modes prescribed.

The power to expel members is incident to every society or association unless organized primarily for gain. Gainful corporations have no such power unless it has been granted by their charter or by statute. The revision of the list of members by dropping names is equivalent to the expulsion of those whose names are dropped, and by a majority vote or larger one as the rules of the society may require. Nor can the power of expulsion be transferred from the general body to a committee or officer. The power to expel must be exercised in good faith, not arbitrarily or maliciously, and its sentence is conclusive like that of a judicial tribunal. Nor will a court interfere with the decision of a society except: first, when the decision was contrary to natural justice and the member had no opportunity to explain the charge against him; secondly, when the rules of the association expelling him were not observed; thirdly, when its action against him was malicious. Nor will a court interfere because there have been irregularities in the proceedings, unless these were of a grave character.

The charges must be serious, a violation of a reasonable by-law is a sufficient charge. To obtain, by feigning a qualification which did not exist, membership in a trades-union is sufficient cause for expulsion; so is fraud in representing one's self in his application for membership when in fact he has an incurable disease. On the other hand, the following charges are not sufficient to justify expulsion or suspension: slander against the society, illegally [44]drawing aid in time of sickness, defrauding the society out of a small sum of money, villifying a member, disrespectful and contemptuous language to associates, saying the lodge would not pay and never intended to pay, ungentlemanly conduct. In harmony with a fundamental rule of law, a member who has once been acquitted cannot be tried again for the same offense.

As subordinate lodges of a benefit society are constituent parts of the superior governing body, there may be an expulsion from membership in a subordinate lodge for violating laws which generally caused expulsion from the society itself, and there may be a conditional expulsion or suspension. If an assessment is not paid at the fixed time, its non-payment, by the laws of the order, works a suspension, though a member may be restored by complying with the laws of the order.

An appeal by a member of a subordinate lodge from a vote of expulsion does not abate by his death while the appeal is pending. If, therefore, the judgment of the lodge is reversed, the beneficiary of the member is entitled to the benefits due on the member's death. A member who has been wrongfully expelled may be restored by a mandamus proceeding issued by a court. Before making the order the court will inquire into the facts and satisfy itself whether in expelling the applicant the society has properly acted in accord with its rules. Unless some rule or statute forbids, a member of a voluntary association may withdraw at any time. When doing so, however, he cannot avoid any obligations incurred by him to the association. On the other hand, it cannot, after his withdrawal, impose any other obligations on him.

It has often been attempted to hold the members [45]of an association liable personally for a promised benefit in time of sickness. Says Bacon: "It may be a question of construction in each particular case whether the members are personally liable or not. The better rule seems to be that the members are not held personally liable."

An association cannot by its constitution or by-laws confer judicial powers on its officers to adjudge a forfeiture of property rights, or to deprive lodges or members of their property and give it to another, or to other members. To allow associations to do this is contrary to public policy. For the same reason an agreement to refer future controversies to arbitration cannot be enforced; it in effect deprives a party of his rights under the law. He may do this in a known case, this indeed is constantly done, but one cannot bar himself in advance from a resort to the courts for some future controversy of which he has no knowledge at the time of the agreement. This is a rule of law of the widest application.

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