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The Grand Lodge, Knights of Phthias of Iowa v. Star of West Lodge No. 1, Star of West Co.

Court of Appeals of Iowa

July 6, 2017

THE GRAND LODGE, KNIGHTS OF PHTHIAS OF IOWA, d/b/a GRAND LODGE, KNIGHTS OF PYTHIAS OF THE DOMAIN OF IOWA, Plaintiff-Appellee,
v.
STAR OF THE WEST LODGE NO. 1, STAR OFTHE WEST COMPANY, DONN LANG, and MARK LANG, Defendants-Appellants.

         Appeal from the Iowa District Court for Linn County, Kevin McKeever, Judge.

         Defendants appeal the district court decision finding plaintiff was entitled to the proceeds from the sale of property by Star of the West Company.

          Larry J. Thorson of Ackley, Kopecky & Kingery, L.L.P., Cedar Rapids, for appellants.

          Mark A. Roeder of Roeder Law Office, Manchester, for appellee.

          Considered by Mullins, P.J., and Bower and McDonald, JJ.

          BOWER, Judge.

         Defendants appeal the district court decision finding The Grand Lodge, Knights of Pythias of Iowa (Grand Lodge) was entitled to the proceeds from the sale of property by Star of the West Company (Star of the West). We find a decision of the Grand Tribunal, which is part of the Grand Lodge, is binding on Star of the West only if Star of the West is an ancillary entity of Star of the West Lodge No. 1 (Lodge No. 1). Under the rules of the organizations, the property of an ancillary entity, such as Star of the West, reverts to the Grand Lodge if a subordinate lodge, such as Lodge No. 1, ceases to exist. We conclude the district court properly determined the property of Lodge No. 1 and Star of the West should be turned over to the Grand Lodge.

         I. Background Facts & Proceedings

         The Supreme Lodge Knights of Pythias is a national charitable fraternal organization, governed by Supreme Statutes. The Grand Lodge is an associated state-wide organization, governed by its own Grand Statutes and the Supreme Statutes. Lodge No. 1 was chartered by the Grand Lodge in 1887. As a subordinate lodge, Lodge No. 1 is subject to the Supreme Statutes and the Grand Statutes.

         On July 3, 1911, members of Lodge No. 1 created Star of the West, a non-profit corporation. The articles of incorporation stated all members of Lodge No. 1 constituted the membership of Star of the West. If the charter of Lodge No. 1 was suspended, Star of the West would continue, with the membership consisting of the members of Lodge No. 1 at the time of the suspension. The purpose of Star of the West was to acquire and hold property for its own use and the use of Lodge No. 1. Star of the West had the authority to purchase, encumber, and sell investments, real estate, and personal property. Star of the West owned the property Lodge No. 1 used for meetings, and Lodge No. 1 paid rent to Star of the West. Other organizations also paid rent to Star of the West for the use of the building. Star of the West sold this property on February 4, 2010, for $170, 000.

         Lodge No. 1 did not account for the proceeds from the sale in its annual report to the Grand Lodge. The Grand Lodge requested a complete report concerning the sale of the real estate. Lodge No. 1 refused, stating Star of the West had owned the property and it was an independent corporation, so the Grand Lodge was not entitled to the information. The Grand Lodge engaged in internal proceedings, including a decision by the Grand Lodge's adjudicatory body, the Grand Tribunal. The Grand Lodge suspended the charter for Lodge No. 1 on February 24, 2012. The Grand Lodge then stated under the terms of the Grand Statutes, upon the suspension of Lodge No. 1, Lodge No. 1 was required to deliver to the Grand Lodge all of its property, including the property of Star of the West. Lodge No. 1 and Star of the West disagreed with the claims of the Grand Lodge.

         On July 25, 2012, the Grand Lodge filed a petition in equity against Lodge No. 1, Star of the West, and two officers of Lodge No. 1 (referred to collectively as defendants), requesting an order confirming the suspension of Lodge No. 1 and stating all property of Lodge No. 1, including the property of Star of the West, reverted to the Grand Lodge based on the internal rules governing the relationship between the parties. The Grand Lodge filed two motions for summary judgment, which were denied by the district court.

         A hearing was held on March 15, 2016. The district court found Star of the West was the alter ego of Lodge No. 1, stating "The assets of Star of the West Company were in effect the assets of Star of the West Lodge No. 1." The court concluded Star of the West was under the control of Lodge No. 1, and, since Lodge No. 1 was subject to the rules and regulations of the Grand Lodge, so also was Star of the West. The court determined under these rules and regulations, after Lodge No. 1 was suspended by the Grand Lodge, Lodge No. 1 and Star of the West were required to turn all property over to the Grand Lodge. Defendants appeal the decision of the district court.

         II. ...


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