Solon Lodge No. 9 Knights of Pythias Co. v. Ionic Lodge Free Ancient & Accepted, Masons No. 72 Co. , 247 N.C. 310 ( 1957 )

101 S.E.2d 8 (1957) 247 N.C. 310

SOLON LODGE NO. 9 KNIGHTS OF PYTHIAS COMPANY, Twin-City Lodge No. 5 Knights of Pythlas Company, and Maseo Knights of Pythlas Lodge No. 14 Company,
v.
IONIC LODGE FREE ANCIENT AND ACCEPTED MASONS NO. 72 COMPANY.

No. 390.

Supreme Court of North Carolina.

December 11, 1957.

Ingle, Rucker & Ingle, Winston-Salem, for respondent, appellant.

William S. Mitchell, Winston-Salem, for intervenors, appellees.

JOHNSON, Justice.

The chief assignment of error urged by the respondent Corporation is that the court below erred in denying its motion for judgment as of nonsuit at the close of all the evidence. The respondent contends that the motion for nonsuit should have been allowed on either or both of these grounds: (1) that the transactions in 1929, by which the capital stock in the Corporation was allocated to its members, terminated the trust relation which previously existed between the Corporation and the unincorporated Lodge, by merging in the Corporation both the equitable and the legal title to the property, and (2) that in any event, the intervenors failed to offer evidence sufficient to repel the bars of the statutes of limitations set up by the respondent. We discuss separately the grounds urged by the respondent for nonsuit.

1. The question whether the intervenors should have been nonsuited on the ground that the trust was terminated by the issuance and allocation of the stock in 1929. In determining this question, these things must be kept in mind: (1) that the intervenors, assuming the role of plaintiffs, alleged, and offered evidence sufficient to show, that the respondent Corporation held title to the property as trustee for the unincorporated Lodge; and (2) that the Corporation, answering, set up as an affirmative defense the plea that the trust was terminated in 1929 by the allocation of the corporation stock to the members of the Lodge. Thus the burden of proof was on the respondent to establish its affirmative defense. In a situation of this kind, where the relief demanded by the plaintiff stands prima facie proved, nonsuit is available to the defendant only where the plaintiff's evidence establishes the affirmative defense as a matter of law. Jarman v. Offutt, 239 N.C. 468, 80 S.E.2d 248; Butler v. New York Life Ins. Co., 213 N.C. 384, 196 S.E. 317; Hedgecock v. Jefferson Standard Life Ins. Co., 212 N.C. 638, 194 S.E. 86.

In order to establish the respondent's affirmative defense that the trust was terminated by the allocation of stock to the members of the Lodge, it was necessary to show that such allocation was made by the unanimous action of all the members of the Lodge. 7 C.J.S. Associations § 14b (2). The rule is that where property is vested in a trustee for the use and benefit of an unincorporated association, like the instant fraternal benefit Lodge, the association, acting in conformity with the will of the majority of its members, ordinarily has a right to devote the property to the objects of the association, but it has no right to apply it to other uses, except by the unanimous consent of the members. Venus Lodge No. 62, F. & R. M. Acme Benevolent Association, 231 N.C. 522, 58 S.E.2d 109, 15 A.L.R. 2d 1446; Solon Lodge No. 9 Knights of Pythias Co. v. Ionic Lodge, supra, 245 N.C. 281, 95 S.E.2d 921.

The evidence adduced below discloses that the action of the members of the Lodge in attempting to divide up the property by issuing the stock was never unanimous. It is noted that Thomas H. Martin, who was then Worshipful Master of the Lodge, testified in part: "At this time the Lodge wasn't making any progress, almost at a standstill; sometimes a few members would come sometimes they wouldn't. * * * Some of the older men began to clamor for stocks. I didn't think too much of the idea. * * * But they kept forcing the issue and finally I appointed a committee * * *. They brought back recommendations for it. * * * I decided to put it to a vote. * * * The original motion was carried 13 to 12. * * * In fact, the feeling was so strong on both sides I didn't want to ever let it come up. I tried to keep it out. Through this period of 1928 and 1929 it was about equally divided. There wasn't too many for it and too many against it; about equal. * * * I don't think our membership was over 50 or 60." When the stock was issued, there were about 15 certificates that were never taken by the members to whom they were issued. These certificates remained in the stock book and were exhibited at the trial.

In view of the foregoing testimony, it is manifest that the intervenors' evidence does not establish as a matter of law that the trust was terminated in 1929 by allocation of stock in the Corporation to the members of the Lodge. Accordingly, the respondent was not entitled to nonsuit on that ground.

2. The question of the statute of limitations. Here the respondent makes a twofold contention. First, the respondent points again to the events of 1929, when the corporation charter was amended and the capital stock was allocated to the members of the Lodge, and makes the contention that if the events surrounding the allocation of stock were not sufficient in law to work an immediate termination of the trust, because of lack of unanimous consent of all the members, nevertheless, it asserts that such action shows a disavowal or repudiation of the trust which set the statute of limitations to running against the unincorporated Lodge, and that the evidence here shows that the bar of the statute, whether it be the statute of three or ten years, became absolute as a matter of law long before the intervenors set up their instant claim in this action in November, 1952, and that therefore the case should have been nonsuited at the close of the evidence. Next, the respondent points to the phase of the evidence tending to show that some years after the stock was allocated among the members in 1929, the officers of the Corporation (who were also officers of the Lodge) started collecting rent from the Lodge and paying dividends on the stock. This evidence the respondent insists was sufficient to set the statute of limitations in motion and establish as a matter of law the bar of the statute against the Lodge.

In passing on these contentions of the respondent it is necessary that we keep in mind and apply certain basic principles relating to the burden of proof and nonsuit in cases where the statute of limitations is pleaded:

1. While the plea of the statute of limitations is a positive defense and must be pleaded, even so, when it has been properly pleaded, the burden of proof (except in certain cases not applicable here) is then upon the party against whom the statute is pleaded to show that his claim is not barred, and is not upon the party pleading the statute to show that it is barred. Lee v. Chamblee, 223 N.C. 146, 25 S.E.2d 433; Rankin v. Oates, 183 N.C. 517, 112 S.E. 32.

2. "Ordinarily, the bar of the statute of limitation is a mixed question of law and fact." Currin v. Currin, 219 N.C. 815, 817, 15 S.E.2d 279, 280. Nevertheless, where the party against whom the statute has been pleaded fails to sustain the burden on him to show that limitations had not run against his cause of action, it is proper for the court to grant a motion fon nonsuit. Hooper v. Carr Lumber Co., 215 N. C. 308, 1 S.E.2d 818; Hargett v. Lee, 206 N.C. 536, 174 S.E. 498.

3. However, where the facts are in doubt or in dispute and there is any evidence sufficient to justify the inference that the cause of action is not barred, the trial court may not withdraw the case from the jury. Garrett v. Stadiem, 220 N.C. 654, 18 S.E.2d 178; Majette v. Hood, 208 N.C. 824, 179 S.E. 23; Fort Worth & D. C. R. Co. v. Hegwood, 198 N.C. 309, 151 S.E. 641.

In deciding the question of nonsuit based on the plea of the statute of limitations here raised, it would serve no useful purpose for us to restate the evidence favorable to the respondent. It may be conceded there was ample evidence to support a jury-finding in favor of the respondent on its plea of the statute of limitations of three years, G.S. § 1-52. Decision here requires only that we determine whether the intervenors' evidence was sufficient to show prima facie that their cause of action was not barred. Hence, the scope of decision is narrowed to a treatment of the evidence favorable to the intervenors in the light of certain principles of law which may be stated in summary as follows:

1. The general rule is that a trustee's repudiation of a trust and his assertion of an adverse claim of ownership is not sufficient to start the statute of limitations to running, unless and until such repudiation and claim are made known to the beneficiary of the trust. The trustee's "repudiation and adverse claim must be clear, open, and unequivocal, and must be so clearly made known to the cestui que trust as to require him to assert his rights." 54 C.J.S. Limitations of Actions § 182b (3), p. 171. In Teachey v. Gurley, 214 N. C. 288, 293, 199 S.E. 83, 87, the Court said: "As long as the relation of trustee and cestui que trust is admitted to exist, and there is no assertion of adverse claim or ownership by the trustee, no refusal on demand to comply with the terms of the trust, and no repudiation or disavowal of the trust, no cause of action rests in the cestui que trust. The cause of action arises when and only when there has been some assertion of adverse claim or ownership, or a refusal to comply upon demand, or a disavowal or repudiation of the trust. (citation of authorities) * * * the statute begins to run when the trust is closed or when the trustee disavows the trust with the knowledge of the cestui que trust, or holds adversely to the claim of those he represents. If a trustee repudiates a trust by clear or unequivocal acts or words and claims thenceforth to hold the estate as his own, not subject to any trust, and such repudiation and claim are brought to the notice or knowledge of the cestui que trust in such manner that he is called upon to assert his rights, the statute will begin to run from the time that such knowledge is brought home to the cestui que trust and he will be completely barred at the end of the statutory period."

2. However, in determining when the owner of real estate must assert his rights against an adverse claim, the rule it that an owner in possession is not required to take notice of a hostile claim. Accordingly, the hostile act or claim of a person not in possession ordinarily does not start the statute of limitations to running against an owner in possession and occupancy. 54 C.J.S. Limitations of Actions § 118. The foregoing rule applies to an equitable owner in possession of land, and so long as he retains possession, nothing else appearing, the statute of limitations does not run against him. Bowen v. Darden, 241 N.C. 11, and cases cited at bottom of page 17, 84 S.E.2d 289, 294.

3. Nevertheless, where it appears that the relation of landlord and tenant has been established between trustee and cestui que trust, evidenced by voluntary payment of rent by the cestui que trust to the trustee, such relation ordinarily suffices to set the statute of limitations to running against the cestui que trust. But where, as here, the object of the trust is to hold and preserve title for the benefit of an unincorporated association, whose personnel is constantly in flux and subject to future change, the mere establishment of the relation of landlord and tenant and the collection of rent by the trustee, without more, is not enough to start the statute to running. To set the statute in motion we think it necessary to show that all the members of the Lodge had knowledge, or in law were charged with knowledge, that the Corporation was exacting and the officers of the Lodge were paying rent. See Venus Lodge No. 62, F. & A. M. v. Acme Benevolent Association, supra, 231 N.C. 522, 58 S.E.2d 109; Solon Lodge No. 9 Knights of Pythias Co. v. Ionic Lodge, supra, 245 N.C. 281, 95 S.E.2d 921.

4. The general rule is that the relation of principal and agent exists between the members of an unincorporated association and its officers, so that knowledge obtained by the officers concerning vital business dealings is ordinarily imputed to the members. However, there is a well recognized exception to the general rule that knowledge of the agent is imputed to the principal. The exception is stated this way in Federal Reserve Bank of Richmond, Va. v. Duffy, 210 N.C. 598, 603, 188 S.E. 82, 84: "Where the conduct of the agent is such as to raise a clear presumption that he would not communicate to the principal the facts in controversy, or where the agent, acting nominally as such, is in reality acting in his own business or for his own personal interest and adversely to the principal, or has a motive in concealing the facts from the principal, this rule does not apply. (citing authorities) Where the agent is dealing in his own behalf, or has personal interest to serve, the knowledge of agent is not imputable to the principal."

Here the evidence favorable to the intervenors discloses: that the unincorporated Lodge remained in possession and continued to hold its meetings in the Lodge hall until it was sold—as one witness put it, "up to date"; that when those who advocated the allocation of stock gained control and issued the stock, by bare majority action, in 1929, it was their announced purpose that the Lodge should remain in possession of the property, rent free; that the stated purpose of this group was to prevent the property from passing to the State Grand Lodge and thereby save it for all the members in the event the local charter should be revoked or suspended; that in 1928 and 1929 the Lodge was finding it hard to keep current with obligations to the State Grand Lodge; that the State Masonic Code provided that in case of "suspension or demise" of a lodge, its property would "forthwith vest in the Grand Lodge"; that "In order to keep this from happening, the men felt like in issuing the stock they could hold theirs in fee simple"; that "It was a precaution against failure of our Lodge which would, under the Masonic Code, cause the title to go to the Grand Lodge"; that the building was under the management of twelve trustees, three elected from each of the four ownerlodges; that the trustees leased the stores on the first floor of the building and also some of the offices in other parts of the building, and collected the rents, paid for upkeep and repairs, and turned over the surplus to the owner-lodges; that the three trustees representing the intervenor Lodge were elected by the Lodge; that these trustees made financial reports from time to time to the Lodge in session and turned in to the Lodge treasurer its share of the surplus rentals from the building; that this plan of handling the surplus rents continued to be followed for a long time after the stock was allocated to the members; that the deed of trust on the Lodge property was not paid off until January, 1939; that after 1929 the membership increased considerably—from about 64 to approximately 100; that nevertheless, "the members of the fraternal Lodge who held certificates of stock were in control of the fraternal Lodge itself," with the elected officers of the Lodge serving also as officers of the Corporation; that, according to the testimony of the witness Martin, who was a member from prior to 1929 until he left the city of Winston-Salem in 1940, at first all business was transacted in regular lodge meetings, but that later "Because of some other matters pertaining to bills owed, * * * we would call the Lodge off and then take care of those bills"; that, according to the further testimony of witness Martin, from the time he joined the Lodge in 1913 "up until pretty close to 1940" the Lodge paid no rent; that, according to the testimony of witness Potts, "We'd have our Lodge meeting, dismiss, and re-assemble for this other. We had it in the same place, and most of the same people were present"; that according to the testimony of the Rev. George W. Moir, who came into the Lodge in 1941 and served as Worshipful Master from 1944 until 1949: "When I came in the Lodge in 1941, the brethren who held certificates of stock in the stock company were in controlling power of the Lodge. I heard something about the stock when I went in in 1941, but I never could get any information concerning it until I became Master. When I became Master in 1944, we couldn't get any information concerning the certificates of stock and the Lodge was paying rent. We decided to go into the matter and see. So, we asked the Trustees for a report and I could not get one. * * * it took some time to find out the full facts concerning this real estate; it was approximately 1947 when me and my fellow officers found out what the various claims were concerning this real estate"; that after this investigation the fraternal Lodge continued to utilize the building and the real estate and at the meeting of July 27, 1947, "the Lodge voted to discontinue paying rent"; that after the Lodge stopped paying rent in 1947, a proceeding in ejectment was instituted at the instance of the trustees against the unincorporated Lodge, which resulted in a judgment in favor of the unincorporated Lodge.

The foregoing testimony and other evidence of like import relied on by the Lodge justifies these inferences: (1) that when the capital stock in the Corporation was allocated among the members of the Lodge in 1929, the allocation was made under circumstances not amounting to a clear, open, and unequivocal repudiation of the trust; (2) that when and after the stock was issued, a substantial number of the members of the Lodge were without notice that the members who accepted the stock intended to make and did make adverse claim to the property; (3) that later, after the officers began collecting rent from the Lodge for the benefit of the holders of stock in the Corporation, a substantial number of the members of the Lodge were without actual knowledge that rent was being so collected and paid; (4) that the officers of the Lodge, in withdrawing the rent money from the Lodge treasury and in distributing it among the holders of stock, were acting adversely to the interest of the Lodge and in furtherance of their own personal interest, so that in law their knowledge of the rental arrangement was not imputed to their fellow members of the Lodge; and (5) that as soon as the rental arrangement was discovered by the aggregate group in 1947, prompt action was taken to terminate it.

With the evidence being susceptible of the foregoing inferences, the court properly overruled the motion for nonsuit and submitted to the jury the issue on the statute of limitations of three years. The trust here was based on an agreement or transaction operating as an express trust. Hence the limitation applicable was the statute of three years. G.S. § 1-52. Teachey v. Gurley, supra, 214 N.C. 288, 199 S.E. 83. Manifestly, then, no harm came to the respondent from the submission of the further issue based on the statute of ten years, G.S. § 1-56.

It necessarily follows from what we have said that the court correctly declined to direct a verdict in favor of the respondent on both issues of the statute of limitations.

The other exceptions brought forward have been examined. Prejudicial error has not been made to appear. The verdict and judgment will be upheld.

No error.