Calkins v. Green

Gbant, J. (after stating the facts). The learned counsel for complainant states the theory upon which complainant seeks a decree as follows: “A large number of persons put money into a common fund. The purposes for which it was paid are illegal. The fund became a trust fund, in which every member [60] who contributed thereto became beneficially interested pro rata the amount of his contribution. Some put in more than others. Equity requires that there should be an adjustment among all the contributors on a fair accounting. A receiver has been appointed to'make the proper and equitable distribution. In order to'clo this, there should be returned to him all amounts which have been taken from the fund in violation of the trust. The holders of matured certificates are not entitled to be paid in preference to other certificate holders.” In support of this theory he cites Burton v. Schildbach, 45 Mich. 504 (8 N. W. 497); Stamm v. Benefit Association, 65 Mich. 317 (32 N. W. 710); Calkins v. Bump, 120 Mich. 335 (79 N. W. 491); In re Youths Temple of Honor, 73 Minn. 319 (76 N. W. 59). All these cases involved the rights and liabilities of the membership of the corporations at the time of dissolution and the appointment of receivers. They relate to the distribution of the assets of the corporations as they existed at that time. Neither one is authority for setting aside settlements with and payments to members which have been made in accordance with the terms of their contracts. It may be very properly said that the scheme to mature these certificates in six years was impracticable, and that it could not be maintained for any length of time; but there was nothing morally wrong in the proposition. All parties acted in good faith. Mr. Green’s certificate was matured and the company paid it while it was a going concern, and more than a year before proceedings were taken to wind up the affairs of the company. There was no fraud in the settlement. Mr. Green had performed his contract. The corporation also performed it, by paying the money. The fact that it was paid by canceling a mortgage is of no consequence. The same principle which would now reinstate the mortgage would also compel Mr. Green to repay the money. Under complainant’s theory (and we presume this is a test case to establish the rule), every person who has once been a member, and received his money upon his matured certificate, can be compelled [61] to repay it into the common fund. The statute of limitations, in that event, would be the only bar to recovery from members who have been paid. Settlements between debtors and creditors, made in good faith and in accordance with the terms of their contracts, cannot be set aside by a receiver. Hyde v. Lynde, 4 N. Y. 387. The learned counsel concedes this rule, but maintains that it is inapplicable to cases of this character, where the contracts are ultra vires, and the funds paid in, therefore, constitute a trust fund to be distributed among the members interested. I do not find that this point has been raised in any of the cases arising out of these mutual benefit associations. Certainly the corporation itself, when a going concern, could not have sued the defendant to recover payments made by the express authority of its articles of association, and contracts based thereon. The members of the corporation deliberately entered into these contracts, hoping to make large returns. Every one undoubtedly expected to make the same profit that Mr. Green did. In six years he invested in his certificate $408, and received back therefor $1,200. Every member knew that this money would be paid to each certificate holder as his certificate matured. Each member made his contract with his eyes wide open. Each, upon reflection, would undoubtedly have concluded that the scheme was wholly impracticable and must fail. Its members are not, therefore, in position to appeal very strenuously to the conscience of a court of equity for relief. Mr. Green was paid just as they agreed he should be paid. If the company itself could not sue Mr. Green to recover the money back, we think that, for the same reason, the receiver cannot do it. If no right of action existed in the corporation against Mr. Green, certainly it was not a part of the assets of which, under the decree of the court, he was appointed receiver. The decree is affirmed. Hooker, O. J., Moore and Montgomery, JJ., concurred. Long, J., did not sit.