Opinion
April 11, 1949.
1. Injunction — credit union — unlawful expulsion.
At the time complainant joined the credit union he had the privilege to leave in the union his shares and deposits when quitting the sphere of operation of the credit union. Later the union asserted that it had amended this rule to the effect that membership would be limited to actual employees of the local company and that complainant was no longer entitled to the privileges of membership because he had left the employment and had gone to another state, but the amendment had no validity because passed on an unauthorized day and by less than a quorum: Held that a bill to enjoin the union against the complainant's expulsion and for incidental relief stated a good cause in equity.
Headnote as approved by Alexander, J.
APPEAL from the chancery court of Jackson County, D.M. RUSSELL, Chancellor.
Heidelberg Watts, for appellant.
The said original by-laws of appellee corporation provided in Article II, Section 5, as follows, to-wit: "A member who leaves the sphere of operation of credit union may, except as provided in Section 4 of this Article, leave in the credit union his shares and deposits (subject to the rules and regulations governing shares and deposits as contained herein) or he may withdraw from the credit union, in which event he shall receive his shares and deposits together with such fair earnings thereon as the Directors may determine. In no event shall he be permitted to thereafter borrow from the credit union." The appellant did leave the sphere of operation of the credit union, that is, he did leave the employ of the Ingalls Shipbuilding Corporation, Pascagoula, Mississippi, and moved to the State of Florida where it was to his advantage to accept employment with a larger salary and other inducements.
The said appellee corporation did on several occasions attempt to change and amend the original by-laws as adopted by said corporation but the meetings called for the purpose of changing or amending said original by-laws of appellee corporation were not in regular order and therefore, are void and of no effect, as agreed by attorney for said appellee corporation in open court at the time of the hearing in the chancery court.
Appellant alleged in said amended bill of complaint that it was his request, desire and wishes only that he be permitted to leave his funds on deposit and continue as a member of said appellee corporation; and appellant further alleged in said amended bill of complaint that the assets of appellee corporation have now reached a figure in excess of $200,000.00 and that certain members of appellee corporation are desirous of eliminating as many members of said appellee corporation as possible in order that a surplus which has been earned by the funds of former members can be distributed among those favored few members who are still left in the fold of preferred membership; and that appellant is without complete and adequate remedy at law to avoid financial injury, continuous worry and mental fatigue and unless said appellee corporation is enjoined from dismissing, eliminating and expelling the complainant, his loss will be irreparable. Appellant attached to the amended bill of complaint and marked as exhibits thereto, certain letters signed by J.W. Latham, State Comptroller of the Department of Bank Supervision of the State of Mississippi in which there was shown that no assistance could be expected from that department by any individual member of the appellee corporation in an effort to protect his interest in said appellee corporation.
In American Decisions 69, page 154, the case of Bergman v. St. Paul Mut. B. Assoc., 29 Minn. 275, the following is cited: "An association has no power to retire or cancel any part of the stock of a member against his will, and without any default on his part, if no power is reserved so to do in the Articles of Incorporation."
Under the by-laws of the appellee corporation in Article IV, Expulsion, Section 1 provides as follows, to-wit: "At any regularly called meeting the members, by a two-thirds vote of those present, may expel from the credit union any member thereof, but only for cause and after opportunity for a hearing has been granted."
In referring to Clark on Corporations, at page 401, we find the following in reference to the expulsion of members: "A joint-stock corporation has no power to remove or expel its stockholders, unless the power to do so is expressly conferred upon it by its charter or by agreement with its members. In the case of other corporations, however, they have the power to remove members for good cause, provided they do not thereby violate charter or statutory provisions. This power need not be expressly conferred by the charter. It is an incident to every corporation other than a joint-stock corporation. Questions as to the nature and extent of this power have frequently arisen in connection with incorporated clubs, literary and medical societies, benevolent societies, boards of trade, etc."
"The power can only be exercised for good cause, and it must be for some offense that has an immediate relation to the duties of the party as a member, or for an offense of an infamous character, indictable at law, and of which the party has been convicted. And a by-law or rule authorizing expulsion for a less cause is void. `It appears to be well settled that when the charter of a corporation is silent upon the subject of expulsion, or grants the power in general terms, there are but three legal causes of disfranchisement: (1) Offenses of an infamous character indictable at common law. (2) Offenses against the corporator's duty to the corporation as a member of it. (3) Offense compounded of the two.'" See also American Jurisprudence, Volume 4, Associations and Clubs, Sections 22 and 23, and 25 R.C.L., page 55, under Societies and Clubs, and 14 Corpus Juris, Corporations, Section 1278, Termination of Relation, and notes and citations thereunder, and 14 Corpus Juris, Corporations, Section 1282, Expulsion.
The reference books and law reports give references and citations to dozens of cases, yes, even hundreds of cases, whereby a member of an association whether it be Building and Loan Association, Beneficial Association, or any other type, the right to withdraw as a member or stockholder of said organization, but there are no cases where forfeiture or expulsion of the member by the organization, except it be for three legal causes of disfranchisement, viz., offenses of infamous character indictable at common law; offenses against the member's duty to the organization; offenses compounded of the two; and the legislators of the many states are without power or constitutional right to authorize an expulsion by statute, which will take away the property right of a member.
In the case at bar, the only offense of the appellant, if indeed "offense" it may be, was that he moved from the State of Mississippi and established residence in the State of Florida, where he accepted a position with a larger income than that received in the State of Mississippi, and as shown in the above citation from American Jurisprudence, there is specifically mentioned the fact that a member cannot be expelled for exercising a constitutional right or performing a duty as a citizen or which takes away a property right in accumulated assets.
Again in American Jurisprudence, Volume 4, Associations and Clubs, Section 7, we find the following: "Nor can by-laws or rules be adjudged reasonable when they compel a citizen to lose his rights in accumulated assets or to forego the exercise of other rights which are constitutionally inviolable."
In the case at bar, the suit originated by bill of complaint for injunction. In substantiating this original procedure, we find the following in American and English Encyclopaedia of Law, Volume 2, page 172 in Beneficial Associations, the following: "3. Constitution and Bylaws. It is customary in all societies to adopt a constitution and by-laws whch set forth the objects of the society, the qualifications for membership, designate the number an character of its officers, and contain such other rules and regulations as may be necessary or may be deemed convenient for the management of its affairs. These, together with the charter in cases of incorporated societies, constitute its fundamental law, and are the source and limit of its life and authority. In their construction the same principles of law are applicable that govern and control other kinds of corporations and associations. A society will not be permitted to do that which is either expressly or impliedly prohibited by its charter and by-laws, and any effort so to do will be restrained by injunction at the instance of any one interested. The charter or constitution may not be altered, amended or rescinded, except with the consent of all the members of the association, in the absence of any agreement or provision of law to the contrary.
"By-laws should contain only such regulations as are necessary for the good government and support of the association and in accord with its charter of constitution and the purposes of its formation. If they go beyond this they are invalid; they must be reasonable; they must not be unlawful, nor opposed to public policy, nor inconsistent with the charter of the association. Bylaws are to be reasonably construed, except where they involve a forfeiture or suspension of the rights of a member, in which case they are to be strictly construed."
Notes: — "Society may be restrained by injunction from illegally expelling a member. Luch v. Committee of Board of Brokers, 2 Brewst. (Pa.) 571; Olery v. Brown, 51 How. Pr. (N.Y.) 92; Smith v. Smith, 3 Des. (S. Car.) 557; Thomas v. Ellmaker, 1 Par. Sel. Cas. (Pa.) 98; Hall v. Sup. Lodge K. of H., 24 Fed. Repr. 450; Altman v. Berry, 27 N.J. Eq. 331."
The constitution provides that the State exists to promote the welfare of its citizens, that is, their peace, happiness and prosperity, and in Article III, Section 14, of the Constitution in Mississippi, provides: "No persons shall be deprived of life, liberty or property, except by due process of law." And again in the Constitution of the State of Mississippi, Article VI, Section 178, under heading Corporations, provides: ". . . the legislature shall have power to alter, amend, or repeal any charter of incorporation now existing and revocable, and any that may hereafter be created, whenever, in its opinion, it may be for the public interest to do so. Provided, however, that no injustice shall be done to the stockholders. . . ." In this instance, the appellee corporation attempts to and has shown its intention to deprive the appellant of his right in certain accumulated assets or property, without due process of law.
It is the contention of the appellant that he is the owner of certain property rights in the appellee corporation and in this connection, we cite Stephenson v. New Orleans Northeastern Railroad Company, a Mississippi case, in 177 So. 509; and in this case it is held that under the Constitution of the United States, as well as the constitution of the State of Mississippi, that "an employee's seniority rights constitute `property' within the 5th amendment to the Federal Constitution." In another Mississippi case, we cite Cherry v. Bivens, 185 Miss. 329, 187 So. 525.
At the time of the hearing in lower court, an attempt was made to apply the statutes as pertaining to an incorporated agricultural association to the case at bar, and in this instance we cited Avon Gin Company v. Bond, 198 Miss. 197, 22 So.2d 362, and we quote as follows, under Constitutional Law: "A member of incorporated agricultural association who became ineligible to hold his stock was not deprived of his property without due process of law by the taking up his stock by association at par value as provided by statute under which association was organized since member was charged with notice of such statute when he acquired stock." And again under Agriculture in the same case, we quote: ". . . The rights of shareholder in incorporated agricultural association are controlled by the law under which the association was organized which must be read into his contract of purchase of stock."
We cite this case for the purpose of showing that it does not apply in the case at bar. The court in examining the case above cited, brings out the purposes of the agricultural association law as defined by Section 4478, Code of 1942, as being, "to promote the general welfare of agriculture; to enable producers of agricultural products in the State of Mississippi, to cooperate in the production, process, packing, distribution, financing and marketing of agricultural products, and the elimination, speculation, and waste therein; to enable such producers to organize incorporated associations with or without capital stock and not for profit but for service to their members by the organization and operation of such corporation by a simplified and inexpensive procedure for the promotion and accomplishment of such corporation and the general welfare of agriculture."
Again we repeat, that the above case is cited for the purpose of showing its in-application in the case at bar, as a credit union association organized under Chapter 177 of the Laws of 1924, which law is the one in which appellee corporation was organized, was created for a different purpose as set out in said law as follows, to-wit: "An act to encourage thrift and create a means whereby small loans for provident purposes may be obtainable and providing for the creation and operation of credit unions and for the regulation and administration of the same."
There was an attempt in the lower court on the part of the learned counsel for appellee corporation to show that the superintendent of banks has authority to take charge and rule in the case at bar; and in support of this contention the learned counsel cited Section 5401 of the Mississippi Code of 1942. The appellant has examined Section 5401 together with preceding sections of the Mississippi Code of 1942, and shows unto this honorable court that said Section 5401 is to be taken with and construed in connection with several preceding sections, namely, Nos. 5398 to 5401, inclusive.
There is attached to the amended bill of complaint letters signed by J.W. Latham, State Comptroller of the Department of Bank Supervision, Jackson, Mississippi, which letters are dated January 20, 1947, and September 12, 1947, respectively; and we draw to the particular attention of this honorable court the contents of the said letters in which the State Comptroller or Superintendent of Banks offers no consideration or assistance to the appellant after said appellant in good faith and as a member of the appellee corporation sought help and consideration from the said State Banking Department. This statement is made not with the intent of any criticism of the said superintendent or comptroller of State Banks, as we believe that he was in his legal rights and there are no statutes providing for his actions in assisting individual members of credit unions as in the case of the appellee corporation; it can readily be seen that should the law have intended that the State Comptroller or Superintendent of Banks be required to consider the complaints or petitions of each member of the several credit unions throughout the State, it would be necessary to have a large corps of workers to handle this phase of the work of the banking department alone. As it is, the State Comptroller or the Superintendent of Banks is primarily charged with the supervision of banks in the State of Mississippi, and secondarily with other organizations or associations such as the appellee corporation.
It has been said by the opposing attorney in citing Section 5397 of the Mississippi Code of 1942, that membership in a credit union should be limited to those who are employees of the Ingalls Shipbuilding Corporation and that the appellant lost all rights as a member of the appellee corporation upon leaving the employment of the Ingalls Shipbuilding Corporation and moving from the sphere of said Ingalls Shipbuilding Corporation. We agree that upon the organization of credit unions, it is necessary that there be a demand for such type of organization or association within groups that have a common bond of occupation, association or residence within a well defined neighborhood, small community or rural district. In the case at bar, the appellee corporation was organized within the group of employees of the said Ingalls Shipbuilding Corporation, and the appellant was an employee of said shipbuilding corporation at the time of the organization of the credit union and was an employee of the Ingalls Shipbuilding Corporation at the time that appellant became a member of the appellee corporation; however, appellant had an opportunity to move to the State of Florida whereby he could render service to another organization thereby exercising more of his professional talent and earning a larger income. O.K. Wiesenburg, for appellees.
These facts are admitted, and we specifically note them here since it is our contention that Article 2, Section 5, must be construed in pari materia with Article 2, Section 1, and with the legislative intent which restricted membership, both initial and continued, in a closely knit group. The appellant's position, which he had maintained consistently in the court below and in this court, is that his original membership in the cooperative conferred upon him vested rights which could not be abridged by any subsequent act of the cooperative, or change in his status, either because of the termination of his employment with the Ingalls Shipbuilding Corporation or because of his leaving the sphere of operation of the cooperative.
If one thing is clear, it is that the credit union, under the statute by which it is organized, and by virtue of its charter and by-laws, is a cooperative association. That is expressly announced in Section 2 of the original by-laws of the Ingalls Employees Credit Union, upon which appellant Hall relies. It is not a money making organization, nor an association promoted for the purpose of making a profit for those who are fortunate enough to leave their money on deposit in the credit union so that they may thrive from substantial dividends paid by less fortunate members who have to borrow from the credit union. The elaborate citation of authority by able counsel for the appellant deals with two categories of associations. First: Those entirely corporate in nature controlled by the stockholders for the express purpose of making a profit, monetary in nature and with the usual rights that accrue under our constitution and laws to anyone having a vested monetary right, and secondly: To voluntary associations organized for purposes not necessarily cooperative in character. Appellant's suit for a mandatory injunction strikes at the very base of the statutory scheme of credit unions or any cooperative, and is in direct contravention of the announced objectives of the Ingalls Employees Credit Union stated by its by-laws in Section 2. Appellant Hall admits that he has left the employ of the Ingalls Shipbuilding Corporation, and does not aver that he is a member of the immediate family of any employee thereof, yet he says that he is entitled to remain a member of this cooperative, and that because he was a lawful member at the time the cooperative was organized, he cannot be lawfully expelled from membership in the credit union, notwithstanding the fact that he can now contribute nothing to the cooperative; that he neither spins nor sows nor toils, yet still insists that he be permitted to share dividends resulting from the efforts of others who do the work, while he sits back and demands the profit.
It will be noted under the statutory scheme that many members of this cooperative are necessary to insure its successful operation. Under Section 5393 of the Mississippi Code of 1942, the following are required: A Board of Directors, which number shall not be less than 5; a credit committee of not less than 3; a supervisory committee of not less than 3. The duties of the Board of Directors, credit committee and supervisory committee are fully set out in the statutory scheme and are complete and comprehensive in nature, each specific performance requiring the personal attention and the personal efforts of those members who serve in that capacity, and without any provision for compensation. Indeed, compensation is expressly prohibited by Section 5405 of the Code of 1942. To successfully do what the statute says they must do, they must be within the sphere of the operation of the corporation, which in this case happens to be the Ingalls Shipbuilding Corporation. Appellant Hall obviously is in no position to assume such duties or obligations, nor from the pleadings before this court has he ever evidenced such a desire, yet he says that by virtue of his "constitutional rights" he is entitled to reap a profit from the cooperative efforts of others. That expulsion from a cooperative of a member who can no longer perform acts which are cooperative in character is a legitimate ground for expulsion and is not in contravention of his constitutional rights or any rights acquired at the time of his joining or becoming a member of the cooperative is well established. This exact position was passed upon in Avon Gin Co. v. Bond, 198 Miss. 197, 22 So.2d 362, wherein the court held: "Nor do we think that the construction contended for by the appellant, has the effect of violating any constitutional right of the appellee in depriving him of his property without due process of law. Upon becoming a member of the association he was charged with notice that his income from such stock while the association is a going concern is limited to the dividends that may be payable thereon, not in excess of 8% per annum, and the return of his money at the par value of this stock, unless the association should elect to redeem said stock at its appraised value. The rights of such a shareholder are controlled by the law under which the association was organized and which must be read into his contract of purchase of the stock. This law imposes upon such an association the absolute duty of taking up and paying for his stock when he ceased to be a producer of agricultural products and is unable to transfer the same to some other producer, whereas no such duty is imposed upon an ordinary business corporation organized for profit."
In his brief, appellant strongly urges that this case does not apply in the case at bar. We believe that the case is not only controlling, but the same logic that applies to a member of an incorporated agriculture cooperative applies to an incorporated cooperative operating under the credit union statute. It is obvious in reading through appellant's brief, that he is under a misconception. He states in his brief that the Bond case should not apply since the credit union is intended to be a profit making organization, and is to be construed in the same light that any other corporation organized for private gain. If anything is clear as to the intent of the legislature with regard to the credit union, the credit union was never designed nor intended to be a profit making organization, and this is expressly stated in the by-laws of the Ingalls Employees Credit Union. That fact that it did make profits and that substantial dividends were declared was only incidental to its main purpose, which was making available to members of the cooperative small sums of money at reasonable interest rates, and to encourage thrift and the saving of money. That a cooperative of this nature is not a "corporation for profit" was expressly decided by our Supreme Court in American Cotton Coop. Assn. v. V.C. Ware Co., 7 So.2d 537, 193 Miss. 43, where in considering the analogous provisions of the by-laws of that cooperative, the court said: "A corporation organized pursuant to federal statute authorizing the formation of associations of producers of agricultural products for the sole purpose of providing control marketing facilities and sales service to cotton growers, all of the stock of which was owned exclusively by regional and state cooperative cotton marketing associations, was not a `corporation for profit' within statute requiring such corporation to file a copy of its charter with Secretary of State as prerequisite to doing business within the State. Code of 1930, Sec. 4164; 7 U.S.C.A. Secs. 291, 292; 12 U.S.C.A. Sec. 1141."
It will also be noted that this credit union, under the statute, paid the Secretary of State the same $10.00 Charter fee required by non-profit corporations, and that its every act was made subject to the regulation and control of the State Comptroller, even to making his approval necessary before any by-laws of the credit union could become effective. This credit union is soley a creature of the staute that created it, and the rights and liabilities of its members are not determined by abstract law applicable solely to private corporations or non-cooperative voluntary associations, but are determined solely by reference to the statute itself, one of the most comprehensive in the entire code. It will be noted that the credit union law comprises an entire chapter, and some thirty-eight sections of the Mississippi Code of 1942. It is one of the most complete statutory schemes thus far adopted by the legislature.
It is our contention here, a contention sustained by the court below, that a member of this cooperative who leaves the sphere of operations of the cooperative forfeits his membership in the cooperative, and that this was the clear purpose of the statutory scheme as well as is reflected in the original by-laws of the cooperation on which appellant relies.
Any other contention would defeat the very purpose of the act. Suppose the operations of the Ingalls Shipbuilding Corporation decrease to the point that the shareholders of the credit union within the sphere of operations become so few in number that the functions of the credit union could not be carried out, but that each shareholder leaving the sphere of operations of the credit union insists he has a right to leave his deposit with the credit union, and is entitled, as appellant Hall claims he is, to "good standing in the membership of the Ingalls Employees Credit Union on the same basis and with the same privileges as the other members". Who then will perform the duties the statute says shall be performed? The statute not only did not contemplate absentee membership, but expressly forbade it. Section 5397 of the Mississippi Code of 1942 expressly provided as to membership: "Credit unions shall be organized only within such groups which have a common bond of occupation, association or residence within a well defined neighborhood, small community, or rural district."
Section 1 of Article II of the orginal by-laws of the Ingalls Employees Credit Union, enacted in compliance with Section 5397 of the Mississippi Code of 1942 provided that: "Membership in this credit union is limited to those who are employees of the Ingalls Shipbuldng Corporation and members of their immediate families."
It is the earnest insistence of the appellant Hall that since he was originally an employee of the Ingalls Shipbuilding Corporation and a member of the Ingalls Employees Credit Union that he acquired vested rights under the original articles of association and by-laws of the credit union by virtue of his deposits which could not be affected by his subsequently leaving the employ of the Shipbuilding Corporation, and leaving the "sphere of operations" of the credit union. He says that Section 5 of Article II of the credit union by-laws permitted him to leave the sphere of operation of the credit union, and yet leave in the credit union his shares and deposits, and that he took advantage of that by-law, yet is being denied the right to continue in effect a right established by the original by-laws.
It is our contention that Section 5 of Article II of the original by-laws conferred upon the appellant a permissive right to leave his deposits if he so desired, but did not deny to the credit union the right to return his deposits to him, together with fair earnings and dividends, whenever it became necessary to reduce the working capital of the credit union. Again, any other construction would lead to chaos in the actual administration operattion of the cooperative. Furthermore, the same original by-laws upon which appellant Hall relies expressly provided in Section 3, Article VIII that: "Section 3. The Board of Directors shall have the general management of the affairs, funds, and records of the credit union. It shall be the special duty of said Board: (1) To act upon all applications for membership and on the expulsion of members. . . . (3) To fix the maximum number of shares which may be held by and the maximum amount which (subject to the provisions of these by-laws) may be loaned to any one member. . . . (7) To have charge of the investment of the funds of the credit union, etc. . . ."
The third and fourth ground of demurrer are: "(3) That it is manifest from the allegations of the amended bill of complaint that the complainant has not exhausted an adequate rememdy at law, the complainant having failed to make application to the State Comptroller of the Department of Bank Supervision for reinstatement as a member of the Ingalls Employees Credit Union by virtue of his claimed unlawful expulsion therefrom. The correspondence attached to the bill of complaint manifestly relates to a totally disconnected subject, to-wit: The validity or invalidity of certain by-laws."
"(4) That before complaint can call upon this court to exercise the extraordinary remedy of mandatory injunction, he must clearly and definitely show to the court that he has exhausted every remedy at law, including the administrative remedy specifically provided by Section 5401 of the Mississippi Code of 1942, and it manifestly appears on the fact of the amended bill of complaint that the complainant has never invoked such remedy, much less exhausted it."
The same grounds of demurrer were interposed to the original declaration, and again bring out the impropriety of the appellant's demand for a mandatory injunction against the appellee. As was observed by the learned chancellor in the court below, it is unthinkable that the legislative scheme pertaining to credit unions, as complete and comprehensive as it is, made no provision against any alleged ultra vires acts of the cooperative other than to jump into a court of equity and to resort to the most prerogative and extraordinary remedy known to our jurisprudence. The statute sets out a clear, plain, complete and comprehensive administrative remedy that appellant could have availed himself if he so desired. As no other creature of the statute, the credit unions are entirely under the control, supervision and direction of the State Comptroller, such powers being formerly vested in the Superintendent of Banks. Section 5398 of the Code of 1942 provides: "Credit unions shall be subject to the supervision of the state banking department. . . ." Section 5399, Code of 1942, provides: "Each credit union shall be examined at least annually by the said banking department. The superintendent of banks may order other examinations and the said superintendent or examiners of this department shall at all times be given free access to all the books, papers, securities and other sources of information in respect to said credit union . . ."
It will immediately be noted by the court that the administrative remedy provided by Section 5401 not only applies where "a credit union has violated any of the provisions of this chapter or its by-laws", but that the statute expressly provides for a hearing and gives the state comptroller even a more drastic method of enforcement of his orders than could be applied by this court if it granted the application for mandatory injunction, even to taking "possession of the business and property of the credit union and retain possession until such time as he may permit to resume business after having corrected such irregularity or improper condition". That such hearing before the State Comptroller would be exhaustive and complete is so obvious by reference to Section 5165, Mississippi Code of 1942, wherein he is authorized to "employ assistants to be known as State Bank Examiners, to aid him in the discharge of the duties imposed upon him by law", and Sections 5176 to 5178 of the Mississippi Code of 1942 which provide the complete mechanics for a hearing before him, including the powers to issue supoenas, compel attendance, administer oaths, and to preserve the testimony of witnesses by keeping a written transcript of the proceedings.
Appellee is a credit union organized and operating under Chapter 5, vol. 4, Miss. Code 1942, Sections 5391 to 5428 inclusive. Appellant, while an Ingalls employee, became a member and made savings deposits therein which, together with earnings, had amounted to $2,038.88. Appellant later left the employment of Ingalls and moved to another state. Thereupon the Union sent him its check for his deposit which was returned by the payee on the ground that he was still a member and desired his deposit to remain. A second remittance was made and the check therefor held by the payee.
Hall bought bill for injunction against expulsion and to compel retention of the deposit and recognition of his membership. The bill exhibited the charter and the by-laws of the Union. From a decree sustaining a demurrer and dismissing the bill as amended, Hall appeals.
The Union seeks to justify its resistance to the prayer of the bill by an alleged amendment to its original by-laws, which amendment was sought to be passed at a meeting held Tuesday, January 11, 1944, and is as follows: "Membership in this Credit Union is limited to those who are actually employees of the Ingalls Shipbuilding Corporation and who maintain their relationship as employees of said company". Similar action was taken on January 13, 1947, and it was then provided that "A member who leaves the employment of the Ingalls Shipbuilding Corporation shall thereupon automatically terminate his membership in the Ingalls Employees Credit Union", under which circumstances his credit balance would be paid to him. The original by-laws provided for expulsion by a two-thirds vote of those present "but only for cause". No sufficient cause is shown apart from the provision for automatic termination of membership.
Let us trace the authority for the Union's action back to the orginal by-laws. These provided as follows:
"Section 5. A member who leaves the sphere of operation of the Credit Union may, except as provided in Section 4, of this article, leave in the credit union his shares and deposits (Subject to the rules and regulations governing shares and deposits as contained herein) or he may withdraw from the credit union in which event he shall receive his shares and deposits together with such fair earnings thereon as the Directors may determine. In no event shall he be permitted to thereafter borrow from the credit union."
It is further provided that: "The fiscal year of the credit union shall end at the close of business on the thirty-first day of December. The annual meeting of the members shall be held at Pascagoula, Mississippi on the second Monday of January in each Year."
It is further stated in Section 4 thereof: "A majority shall constitute a quorum. If a quorum is not present at the date of the first appointed for a regular or special meeting of the credit union, the meeting shall be adjourned for ten days and a second notice mailed to all members, containing the date of the adjourned meeting. Those then present shall constitute a quorum for the transaction of business."
Amendments to the by-laws are provided for in Article XVII, Section 1, which is as follows: "These by-laws may be amended by a three-fourth vote of the member or members present (which number must constitute a quorum) at any meeting, . . ."
It is seen therefore that the annual meeting must be held on the second Monday of January. This was not done. The action then taken was therefore void, and especially so since it is alleged that only twenty-five members were then present, whereas the by-laws required a majority of the membership which is asserted to number over three thousand. Although Article XII, Section 4, provides that in default of such quorum the meeting may be adjourned ten days and after due notice thereof "those then present shall constitute a quorum", no such meeting was held.
There is no occasion therefore to consult the minutes of succeeding meetings seeking to reduce the number requisite to a quorum and to provide for automatic suspensions, since authority therefor must be deraigned from a lawful meeting. The original by-laws had not been properly amended so as to diminish the requirements as to a workable quorum. At none of the succeeding meetings were there present more than thirty-six members.
The Union was hence bound to act only under authority of its original by-laws until amended at a proper meeting and no amendment could be made except pursuant to the authority of Articile XII, Section 4, and Article XVII, Section 1.
(Hn 1) We are of the opinion that the bill stated grounds for equitable relief and that no full and adequate remedy at law was available to the ends sought. It is true that if upon remand complainant shall prevail he may exult in only a Pyrrhic victory since the defendant can, conformable to its by-laws, properly amend them. We are, however, engrossed only in the circumstance that, so far as the bill shows, such amendment has not been made.
Reversed and remanded.