Bros. v. Yazoo Building & Loan Ass'n

• Decision Date: 02 June 1913
• Docket Number: 16,179
• Citation: 62 So. 1,105 Miss. 78
• Parties: WISE BROS., et al., v. YAZOO BUILDING & LOAN ASSOCIATION
• Court: Mississippi Supreme Court

62 So. 1

105 Miss. 78

WISE BROS., et al., v. YAZOO BUILDING & LOAN ASSOCIATION

No. 16,179

Supreme Court of Mississippi

June 2, 1913

APPEAL from the chancery court of Yazoo county, HON. H. G. LYELL Chancellor.

Suit by Wise Brothers and others against the Yazoo Building & Loan Association. From a decree for plaintiff, defendant appeals.

The facts are fully stated on the opinion of the court.

Reversed and remanded.

Holmes & Holmes, for appellants.

On hearing of this case before the chancellor our friends contended that cash was the very lifeblood of a building and loan association. Lea v. Cutrer, 51 So. 808, was a case where the capital stock of a bank had been paid for, not in money, but in property and services. The charter of the corporation provided that the stock "may be paid for in cash or in monthly installments." But our court held that this provision was not intended to designate the medium of payment, but was used as a term meaning the opposite of credit. In the case at bar, the charter of the association says nothing about cash. No case can be found more in point than Lea v. Cutrer, but see also, Fardason v. Mercantile Co., 78 Miss. 65; Watts Mercantile Co. v Buchanan, 92 Miss. 540; City Bank of Columbus v Bruce, 17 N.Y. 507; N. A. Building Assn. v Sutton, 35 Pa. St. 463; Taylor v. South & N. A. Co. (C. C.), 13 F. 152; Marion Trust Co. v. Cresent Loan & Investment Co., 27 Ind.App. 451, 61 N.E. 688, 87 Am. St. Rep. 257. Monographic note to Robertson v. Homestead Association, 69 Am. Dec. 158; Johnson v. Tabor, 57 So. 365.

On the proposition that the privilege of withdrawal from an association is a valuable right that cannot be withheld, see Fuller v. Salem, 10 Gray 94.

The case of Bohn v. Boone Building & Loan Association, 112 N.W. 109, is a striking authority in our favor, and we hope the court will read it in full before deciding the case. It was a case where a holder withdrew his matured stock in an association and was given the association's note for the same. Shortly afterwards the association went into liquidation, and it was claimed that the note was invalid, claiming that he had not paid cash for the note. The stockholder claimed that he had loaned the corporation the withdrawal value of his stock and was entitled to priority over the other members who had remained members subsequent to the transaction. The court said: "If he had received the money in his hand, and then passed it back as a loan, taking a promissory note therefor, no one would question the regularity of the transaction, providing, of course, they were acting within the apparent scope of their authority. Such being the case, no reason occurs to us why the same effect is not to be accorded to the giving of the note without the idle form of passing the money over the table; secretary only to pass it back again."

The association went into liquidation voluntarily on May 27, 1907, nearly two years after the issuance of the stock here sued on, and began the distribution of its assets among all its members, but refused to pay complainants first, paying them like common stockholders their pro rata share of each distribution of the assets, but always figuring the amount of the distribution on the basis of the preferred stock, for instance Mrs. Hyatt was given her percentage on two thousand dollars and Wise Brothers on six thousand dollars. When the amount due complainants had thus been reduced by piecemeal to a little over half, they filed this suit claiming (1) that they were holders of preferred stock and were entitled to a lien on all the assets of the association to enforce payment, (2) that if the stock were held invalid, they were qualified creditors of the association from the date of their withdrawal therefrom, and as such creditors were entitled to be paid before the stockholders who had remained members after complainants withdrew, and (3) that if mistaken in the first or second relief asked, that they be given a personal decree against the officers who issued them the invalid certificates.

The chancellor denied the complainants any relief whatever, and dismissed their bill, taxing them with the costs. As above stated, he held the stock to be invalid because not paid for in cash. But he gave no reason for denying us the second and third relief asked, and we submit that no valid reason can be given. Members become creditors upon withdrawal.

We sincerely contend the preferred stock was valid and wholly paid for when issued but, if wrong in this, one thing is certain, Mrs. Wyatt withdrew her stock on August 5, 1906, and was entitled to one hundred and thirty-seven dollars and forty cents which has not been wholly paid to her. In addition to this she paid into the treasury of the association two dollars and sixty cents cash, making the sum of two hundred dollars due her by the association, for which they pretended to give her preferred stock certificate. Now, if that stock certificate is void, as the lower court held, what is her attitude with respect to the association. Is she a creditor or a member? Her relationship must be fixed as of August 5, 1905. If the stock is void now, it was void when issued. She withdrew on August 5, 1905, and her withdrawal was recognized by the association and so entered on the books. We think she became a creditor, and all the authorities so hold. She became a creditor in a qualified sense, that is she was not entitled to priority over other existing creditors, but she was entitled to priority over stockholders who remained members and continued the business. See 6 Cyc., p. 132, sec. 4 and notes.

Wise Brothers likewise became creditors on September 20, 1905, and were due six thousand dollars. Under the by-laws, members withdrawing were entitled to interest on the withdrawal value of their stock from the date of withdrawal. If they were not creditors, why pay them interest on the amount due them. Neither were they entitled to vote as members. Let the court always remember that at the time of these withdrawals the association was perfectly solvent. If the association had been insolvent, they could have obtained no priority by withdrawing. But every member has the right to withdraw from a solvent building and loan association, and this right cannot be denied him by the officers. See, Haigh v. U. S. B., etc., Assn., 19 W.Va. 792; U. S. B. & L. Assn. v. Silverman, 85 Pa. St. 394; Hogsett v. Aetna Building & Loan Assn., 96 P. 52; Armitage v. Walker, 2 Kay. & J. 211; In re Wm. Brown Building & Loan Assn., 12 Week, Notes Cas. 207; Printers Building & Loan Assn. v. Paxton, 33 S.W. 389.

That stockholders withdrawing from a solvent building association are to be paid in full in the order in which they perfect their withdrawals, see Hoyt v. Interocean Building Association, 58 Miss. 345, 60 N.W. 678. That the right to withdraw is a vested right and a member cannot be deprived of it, Holyoke Building & Loan Association v. Lewis, 1 Col. App. 127, 27 P. 872. See, also, People v. N.Y. Building & Loan Banking Company, 104 N.Y.S. 892; 119 A.D. 830; Watkins v. Commonwealth Savings & Loan Association, 64 A. 751; People v. N.Y. Building & Loan Banking Co., 82 N.E. 1131, 189 N.Y. 547.

Under this view of the case, Wise Brothers are entitled to a personal decree against the association for two thousand, four hundred and two dollars and twenty-one cents, with interest from the same date. We insist that the lower court erred in denying us a decree for this amount.

Campbell & Campbell and Barbour & Henry, for appellees.

Appellants are attempting to fasten a prior lien on all the assets, to the prejudice of the other stockholders. Can this be done, in the manner it has been done? We think not; because it is destructive of the very basic principle of a building and loan association, and is violative of the mutuality and equality of these associations, which is peculiarly the law governing them. On this point we cite and quote from the following authorities: The first authority to which we cite the court is the case of Bingham v. Marion Trust Company, reported in 61 N.E. Rep., page 29.

The money ordinarily paid by Mr. Wise into this association was for stock, and not a loan. He was never a creditor of this association, and has never been, and cannot be converted into one. The mere fact that he exchanged one kind of stock for another kind of stock does not make him cease to be a member of the association, but he continues to be a member of the association, and is not a creditor.

"The fact that appellant gave notice of withdrawal, in compliance with the by-laws, before the appointment of the receiver, would not place her in any better position than stockholders. Finance Co. v. Tharp, 24 Ind.App. 84; 56 N.E. 265, and cases cited; Reddick v. Association (Ky.), 49 S.W. 1075; Forwood v. Eubank, supra; Leahy v. Association, supra."

We also call the court's attention to the case of Sumrall et al. v. Commercial Bldg. Trust's Assignee, et al., reported in 50 S.W. 69, and also reported in 44 L. R. A. 659; and 90 A. S. R. 223. King v. Investment Union (Ill. Sup.), 48 N.E. 677; Trowbridge v. Hamilton (Wash.), 52 P. 328; Wierman v. Investment Union, 67 Ill.App. 550; Latimer v. Investment Co., 81 F. 776; Forwood v. Bubank, 50 S.W. 255; Reddick v. U. S. Building & Loan Assn's Assignee, 49 S.W. 1075; Sumrall v. Commercial Bldg. Trust's Assignee, 50 S.W. 69; Loan Co. v. Ecklar, Id. 50; Walker v. Terry, 35 So. 466; Fort Smith Building Assn. v. Cohn, 87 S.W. 1172; Colin v. Welford, 102 Am. St. Rep. 859; Columbus Bldg. Association v. Kriets, 192 Ill. 128, 61 N.E. 510.

Counsel for complainants cite the case of Lea v. Cutrer, 51 So. 808, but not reported in the Mississippi Reports, being an unreported case, which he claims settled the validity...