Supreme Court of Independent Order of Foresters of Canada v. Supreme Court of the United Order of Foresters

Pinney, J. 1. It appears, in substance, that certain of the defendants^ February 26, 1893, made and entered into articles of association for the purpose of forming a corporation by the name of the Columbian League, under the laws of Wisconsin, and more particularly under ch. 86, R. S., and the acts amendatory thereof; its business and purpose being the promotion of patriotism and good citizenship, and the mutual relief and assistance of its members, or the widows, orphans, and heirs, beneficiaries or legatees, of deceased members, or those partially disabled from old age; said business to be conducted according to the laws of Wisconsin relating to mutual beneficiary and fraternal corporations, societies, orders, and associations providing insurance on the assessment plan. At this time existing statutes had been modified by ch. 418, Laws of 1891, being “ An act to regulate mutual beneficiary and fraternal corporations, societies, orders and associations, providing insurance on' the assessment plan,” and sec. 1 of this act provides how such organizations might [239] thereafter be effected. By sec. 4 of this act all such corporations are declared to be “ mutual benefit associations, and exempt from the provisions of the general insurance laws of the state, and shall be subject only to the provisions ” of such act; and by sec. o every such corporation, etc., is-required to annually make and file a certain report, as therein prescribed, on or before the 1st day of March in each year. By previous legislation in relation to secret beneficiary, charitable, and benevolent orders, they had been declared not to be life insurance companies, in the sense and meaning of the general laws of the state, and to be exempt from the provisions of such laws. Laws of 1879, ch. 204; Laws of 1889, ch. 334. The defendant corporation seems to have been organized under sec. 1771, E. S., in connection with ch. 418, Laws of 1891; and the purposes for which it was created appear, in view of the acts of 1879 and 1889, to fall within the phrase in that section, “or for any lawful business or purpose whatever, except,” etc. The contention of the plaintiffs is that Ch. 86, E. S., did not authorize the formation of the corporation or association defendant, or the changes of its name, and that, therefore, the injunctional order was rightly granted. There seems to have been adequate authority of law for the organization of the corporation and the changes in its name (E. S. secs. 1771,1774-1791; Merrill v. Wis. Female College, 74 Wis. 418), and there had been a user by the defendant corporation of the rights claimed by virtue of its organization under the law. It is elementary and supported by numerous adjudications, that defects or irregularities in the organization of a corporation can be taken advantage of only by the state upon quo warranto to test its right de jure to be and act as a corporation. If there is a charter or law under which such an association might lawfully be incorporated, and there has been a colorable compliance with the charter or law, and an exercise of the rights claimed under [240] it, then the existence of the corporation de faeto is established, and its existence de jure cannot be inquired into collaterally. Beach, Priv. Corp. § 13. And the rule is applicable to corporations organized under general laws. Id. § 14; 2 Morawetz, Priv. Corp. § 745; Cook, Stock (3d ed.), §§ 632, 637; Ashland v. Wheeler, 88 Wis. 617; Methodist Episcopal U. Church v. Pickett, 19 N. Y. 485; Eaton v. Aspinwall, 19 N. Y. 119; Stout v. Zulick, 48 N. J. Law, 599; Baker v. Neff, 73 Ind. 68; East Norway Lake N. E. L. Church v. Froislie, 37 Minn. 447; Williamson v. Kokomo B. & L. F. Asso. 89 Ind. 389; Renwick v. Hall, 84 Ill. 163. A court of equity, in the absence of statute authority, has no jurisdiction, at the suit of a private party, to try and determine the question whether a corporation defacto is a corporation dejwre, or to decree a forfeiture of its franchises, or its dissolution, or to exclude it from the exercise of its corporate franchises. The remedy in all such cases is at law, and exists only in favor of the state. 2 Morawetz, Priv. Corp. §§ 1040, 1041; Cook, Stock, §§ 629, 632, 637. Aside from a few exceptions not material to the present case, no private person is allowed to assert, as a party litigant, that the corporation is illegal, that its franchises have been forfeited, or that the corporation is dissolved, or its incorporation is illegal, until after it has been so adjudged by a court, in proceedings instituted for that purpose by the state. Strong v. McCagg, 55 Wis. 624; Jersey City G. L. Co. v. Consumers Gas Co. 40 N. J. Eq. 427; Folger v. Columbian Ins. Co. 99 Mass. 267; Renwick v. Hall, 84 Ill. 163. The complaint, therefore, stated no cause of action to warrant an injunction against the corporation, and it was wholly insufficient for that purpose as against its co-defendants, who were acting in the premises as the officers and agents of the corporation. The corporation could act, in carrying on its general business, only by and through its officers and agents, and it would be a mere [241] evasion of the rule to deny the right of a court of equity in suck a case as the present to restrain a corporation, and yet sustain it as to its officers and agents. 2. The effect of the injunction was to suspend the ordinary business of the defendant corporation. It required the defendant, its officers, agents, etc., “ to strictly refrain from doing or transacting any business as a fraternal or beneficiary corporation, order, or association for the relief of its members and beneficiaries furnishing life and casualty insurance and indemnity upon the mutual plan, except with members of the Columbian League, or Columbian Life, on and prior to August 24, 1894.” The injunction operated to suspend the business the corporation was organized to transact. It was granted without notice, and by a court commissioner, in direct violation of the statute (R. S. sec. 2780), which declares that “an injunction to suspend the general •and ordinary business of a corporation shall not be granted, .except by the court or presiding judge thereof, nor shall it be granted without due notice of the application therefor to the proper officers of the corporation, except when the state is a party,” etc. The injunction operated practically to suppress the defendant company, and it precluded it from transacting any business, except in relation to matters that •had occurred prior to August 24, 1894. It is not perceived that an unauthorized payment to the defendants of dues and assessments belonging to the plaintiffs, or imminent •danger of such collection and payment, would warrant an injunction, for the rights of the plaintiffs in such event would not be prejudiced, and the payment would be void. The order appealed from, in so far as it vacated and dissolved the injunctional order, is correct. 3. The part of the order directing a reference to ascertain the damages of the defendants was, we think, premature and erroneous. The statute (sec. 2778) provides for giving :an undertaking upon the part of the plaintiff “ to the effect [242] that the plaintiff will pay to the parties enjoined sack damages, not exceeding an amount to be specified, as be may sustain by reason of the injunction, if the court shall finally decide that the plaintiff was not entitled thereto. The damages may be ascertained by a reference, or otherwise, as the court shall direct.” An order sustaining a motion to vacate or dissolve an injunctional order is not a final decision, within the meaning of this statute. The complaint may be amended so as to warrant an injunction, or the court may at the trial decide that the plaintiff was entitled to it, or it may be so decided on appeal. The reference should not be ordered until after judgment has been rendered and the cause disposed of. Although cases may occur where it will be manifest, upon the order vacating the injunction, that the plaintiff’s claim to it can, in no event, be sustained, yet we apprehend that it will be better to have a uniform rule of practice on the subject. "Whether the decision of the court, in any such case, will be final, is, to a certain extent, speculative, and still in doubt. This is in conformity with the previous decisions in this state, and in New York under a statute in the same terms as our own. Parish v. Reeve, 63 Wis. 315; Kane v. Casgrain, 69 Wis. 430-432; Avery v. Ryan, 74 Wis. 601; Johnson v. Elwood, 82 N. Y. 362; Palmer v. Foley, 71 N. Y. 106; Pacific Mail S. S. Co. v. Toel, 85 N. Y. 646. By the Oourt.— That part of the order appealed from dissolving the injunction is affirmed, and the part directing a reference is reversed. Neither party is to recover costs on this appeal, but the appellants are to pay the fees of the clerk of this court.