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WALKER v. THE GRAND LODGE I.B.P.O. ELKS OF THE WOR

January 3, 1957

William H. WALKER, Plaintiff,
v.
The GRAND LODGE I.B.P.O. ELKS OF THE WORLD, a corporation, Robert H. Johnson, Grand Exalted Ruler, William C. Hueston, Grand Secretary, Perry B. Jackson, Treasurer, Hobson R. Reynolds, Grand Commissioner Civil Liberties, Charles P. McClane, Grand Director of Shrine and Public Relations, and George W. Lee, Grand Commissioner Education, Defendants



The opinion of the court was delivered by: MORRIS

The complaint states that the plaintiff is a resident of the District of Columbia and a member of and the grand traveling auditor of the defendant fraternal order, which was incorporated under the laws of the State of New Jersey and does business 'in its lodge organization and set-up' in the District of Columbia, that the individual defendants are officers of the order, and that the plaintiff represents others similarly situated. After reciting a futile effort to obtain relief from waste, mismanagement and fraud in the order from the grand exalted ruler, the complaint alleges a scheme on the part of the officers to perpetuate their tenure of office, accomplished by an illegal amendment to the constitution changing the secret ballot for the election of officers to election by viva voce vote, and a fraudulent control of the delegates' votes through payments of money having no relation to, but designated as, 'mileage' to the conventions after faithful performance by such delegates, gross mismanagement and waste through other illegal amendments authorizing the grand secretary, with approval of the grand exalted ruler, to transfer funds from any department of the order to the general fund, annual office expenses of $ 2,000 for three of the officers, although such expenses in larger amounts have always been paid from the general fund, and this item is carried on the books as 'travel expense' rather than 'office expense,' and traveling expenses (even for meetings held in their own offices) are paid to the officers in greater amount, leaving the actual use of the $ 2,000 for these officers questionable, failure of the officers to answer inquiries, to answer mail, to make adequate reports or to keep records as required by the constitution and by-laws of the order, resulting in a substantial diminution of the membership, fraudulent reports respecting income from the sale of badges which all delegates and members are required to wear in order to participate in the social or business functions of the conventions, untimely and inadequate minutes and reports required by the constitution, and other detailed incidents amounting to gross mismanagement and waste of funds of the order by the officers, and seeks injunctive relief from further waste and mismanagement, vacation of the offices of grand exalted ruler and grand secretary, holding the election of the present incumbents to be null and void, and the appointment of a receiver to conduct the affairs of the order and to preserve its assets. Defendants have moved to dismiss the complaint upon the ground that this Court lacks jurisdiction to grant the relief sought, and further that there is no showing that this is a genuine class action.

Since the hearing in this matter on October 16, 1956, plaintiff learned from the reported case of Grand Lodge I.B. & P.O.O. Elks of World v. Grand Lodge I.B. & P.O.O. Elks, Inc., 4 Cir., 50 F.2d 860, 861, *fn1" that defendant order had also obtained a charter in the District of Columbia, and filed a photostat copy of said charter, showing recordation on January 22, 1908, following which defendants filed a photostat copy of the charter whereby it was incorporated in the State of New Jersey on July 30, 1906. The name given the corporation is identical on each of the charters. The charter issued in the State of New Jersey has a much broader scope than that issued in the District of Columbia, namely:

 '2. The purpose for which it is formed is the social and recreative enjoyment of its members and to promote friendly and fraternal relations between them and to provide for the relief of destitute members of their families, and to maintain a fund for that purpose, and to contract with its members to pay death benefits according to the rules or by laws adopted by it or by any subordinate lodge, and to agree to pay the same to the husband, wife, father, mother, son, daughter, brother, sister or legal representative of such member after his or her death.

 '3. The said corporation shall have the power to organize, conduct and supervise subordinate lodges throughout the United States and Canada, which lodges shall have the same powers as are herein conferred, but shall be subject to and under the control of the Grand Lodge herein incorporated.

 '4. The corporation is to be located and its principal business to be conducted in the City of Jersey City in the County of Hudson and State of New Jersey.

 '5. * * *

 '6. The corporation may have an office or offices outside of the State of New Jersey for the convenience of the Grand Officers and Trustees or the officers and trustees of subordinate lodges, where meetings may be held at such places as may be determined or authorized by the Grand Lodge herein incorporated.

 '7. The corporation shall maintain an office in the State of New Jersey in accordance with the requirements of the statute in such case made and provided, * * * and Frank J. Higgins shall be the resident agent in charge of said office upon whom process against said corporation may be served.'

 The District of Columbia charter provides in pertinent part as follows:

 'Second: That the term of its existence shall be perpetual.

 'Third: That its objects shall be and are benevolent, social and altrustic, to promote and encourage manly friendship and kindly intercourse; and to aid, protect and assist its members and their families and to do and perform every lawful act and thing necessary or expedient to be done, or performed for the efficient and profitable conducting of said business as authorized by the laws of Congress, and to have and to exercise all the powers conferred by the laws of the District of Columbia upon corporations organized under the aforesaid sub-chapter three (3).'

 The Court now is confronted with the question of whether, for the purposes of this suit, the defendant corporation is to be treated as a foreign or a domestic corporation. The question of citizenship of corporations which have been incorporated in more than one state has arisen in instances where the corporation has been licensed to do business in a second state, or 'domesticated' by statute, where the corporation has been incorporated by compulsory statute, and where, as here, the corporation has voluntarily been incorporated in the second state. The cases all seem to have arisen under diversity of citizenship jurisdiction of federal courts, the amenability of a corporation to attachment against its property as a non-resident in a second state of incorporation, taxation of the corporation by the second state, and for acts committed by the corporation in the second state, and no case has been called to the attention of, or located by, the Court dealing with the specific question of whether a court in the second state has jurisdiction which requires it to entertain a suit calling for supervision of the internal affairs of a corporation which is denied in the case of foreign corporations.

 The case of Grand Lodge I.B. & P.O.O. Elks of World v. Grand Lodge I.B. & P.O.O. Elks, Inc., supra, was a suit brought by this defendant corporation to enjoin the use of its name by a Virginia corporation composed of ex-members of defendant corporation. And from excerpts of a book on the history of defendant corporation, set forth in a memorandum filed by the defendants, it appears that the District of Columbia charter was procured by the persons who had seceded from the defendant corporation and incorporated in Virginia, and it also appears that the two factions have since united. This situation makes it especially applicable to refer again to the opinion of Judge Parker, wherein quotation as follows was made from the case of Nashua & L.R. Corp. v. Boston & L.R. Corp., 136 U.S. 356, 10 S. Ct. 1004, 34 L. Ed. 363:

 "There are many decisions, both of the federal and state courts, which establish the rule that, however closely two corporations of different states may unite their interests, and though even the stockholders of the one may become the stockholders of the other, and their business be conducted by the same directors, the separate identity of each as a corporation ...


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