Colin v. Wellford

• Decision Date: 17 March 1904
• Citation: 102 Va. 581,46 S.E. 780
• Parties: COLIN . v. WELLFORD.
• Court: Virginia Supreme Court

46 S.E. 780

102 Va. 581

COLIN .

v.WELLFORD.

Supreme Court of Appeals of Virginia.

March 17, 1904.

BUILDING ASSOCIATIONS—WITHDRAWING MEMBER—INSOLVENCY—COMPROMISE OP CLAIM.

1. A withdrawing member of a building association which was insolvent at the time notice of withdrawal was given, though no legal steps had been taken to wind up its affairs, and whose insolvency, though in fact existing, was not then notorious, does not by the act of withdrawal become a creditor entitled to satisfaction before other members, nor does an agreement entered into between himself and the association, compromising his claim, change his status.

Appeal from Chancery Court of Richmond.

Petition of one Colin against one Wellford, receiver of the United Banking & Trust Company, for allowance of claim. From a decree denying the prayer of petitioner, he appeals. Affirmed,

Legh R. Page, for appellant.

B. Rand. Wellford, for appellee.

KEITH, P. The record in this case discloses the following state of facts: The appellant was the owner of certain certificates of installment and prepaid stock in the United Banking & Trust Company, and, in the exercise of his right under the charter and by-laws of the company, on the 25th of January, 1901, he gave written notice of the withdrawal of his certificates of stock, which notice was duly served on the company, and accepted by it as sufficient and regular in every respect. On the 28th of March, 1891, 60 days (the period required under the bylaws) having expired, he made demand upon the company for the sum due him, and was promised payment at an early day. The promise was not kept. He was put off from time to tame, and on or about the 22d of May, 1901, was informed that the board of directors rejected his demand for the payment of his claim in full, and offered $4,605.-75 in compromise and settlement, to be paid in 13 monthly installments, bearing interest at the rate of 3 per cent per annum. This proposition was accepted by appellant, and, upon the receipt of the obligations of the company, as provided by the settlement he surrendered his certificates of stock, which were marked "cancelled and withdrawn, " and appellant's name was stricken from the books of the company as a shareholder. The first of the 13 monthly installments was paid at maturity, but before the second became due a bill was filed to wind up the affairs of the company, and on the same day receivers were appointed, who refused further payment to appellant

In July, 1902, appellant filed his petition, asking to be placed upon the footing of a creditor of the company for the amount of the 12 matured and unpaid obligations above referred to, and the matter was referred to a commissioner, who reported adversely to appellant's claim. The exceptions to that report were overruled by the court a decree was entered denying the prayer of petitioner, and the case is before us for review.

The report of the commissioner proceeds upon the theory that the company was insolvent at the date of the notice of withdrawal, and the opinion of the learned chancellor is to the same effect. There is a strong presumption in favor of the correctness of this finding of fact on the part of the commissioner, thus approved by the court, and there is nothing in the record to lead us to a contrary conclusion. We shall therefore proceed with the consideration of the case, taking the insolvency of the company, at least as early as January, 1901, as a fact established. The term "insolvency, " as here used, has no reference to outside creditors, for there are none, but to the inability of the company to satisfy the demands of its own members.

We have had no adjudication in this state upon the precise question here involved.

In Andrews v. Building Association, 98

Va. 445, 36 S. E. 531, 49 L. R. A. 659, we held that a withdrawing member of a building association does not lose all of his rights and interests as such in the association. Though he is not, strictly speaking, a creditor of the association, he can maintain no suit to recover the withdrawal value of his stock until a fund for its payment has been provided, and until then the act of limitation does not begin to run against his demand. On the other hand, it is the duty of the association to provide such a fund, in accordance with its charter and by-laws, and in default thereof the member may ask the appointment of a receiver, and, it may be, a winding up of the affairs of the association.

In Eastern Building & Loan Ass'n v. Snyder, 98 Va. 710, 37 S. E. 298, it was held that a solvent building association, in the absence of bad faith on its part, is not in default, and cannot be sued by a withdrawing member, until there are funds in the treasury of the association out of which he is entitled to be paid.

We are in this case called upon to define the rights of a withdrawing member of a building, association which was insolvent at the time notice of withdrawal was given, though no legal steps had been taken to wind up its affairs, and whose insolvency, though in fact existing, was not then notorious.

As shown in Andrews v. Building Association, supra, the tendency of the English courts, while recognizing that withdrawing members are not creditors of the association in the ordinary sense of the word, has been to allow them a preference over those who have given no withdrawal notice. Sibun v. Pearce, L. R. 44 Ch. Div. 354.

It was held, however, in Re Sunderland, Queen's Bench Div. 24 L. R. 394, that the rule of the company provided only for withdrawal from the societies while they were or were believed to be solvent, and that, therefore, notices of withdrawal which were given or which matured at a time when the societies were known to be insolvent, though before the actual date of the winding-up order in each case, did not entitle the shareholders who had given them to be paid the amount of their subscriptions in priority to other shareholders in the winding-up.

The strong preponderance of the authorities in this country, where insolvency exists, seems to be in accord with the decision of the Supreme Court of Pennsylvania in Christian's Appeal, 102 Pa. 184. The court said: "While, in a qualified sense, withdrawing stockholders may be considered creditors of the association, their rights, as against those with whom they have been associated, are very different from those of...