Continental Nat. Building & Loan Ass'n v. Miller

• Decision Date: 22 December 1902
• Citation: 44 Fla. 757,33 So. 404
• Court: Florida Supreme Court
• Parties: CONTINENTAL NAT. BUILDING & LOAN ASS'N et al. v. MILLER et al.

33 So. 404

44 Fla. 757

CONTINENTAL NAT. BUILDING & LOAN ASS'N et al. v. MILLER et al.

Florida Supreme Court

December 22, 1902

Appeal from circuit court, Alachua county; William A. Hocker, Judge.

Bill by D. A. Miller and others against the Continental National Building & Loan Association and others. Decree for complainants, and defendants appeal. Modified.

Syllabus by the Court

SYLLABUS

1. When one building and loan association absorbs another, parties seeking relief solely by virtue of being stockholders in the absorbing association cannot obtain relief which could be granted only to members of the association illegally absorbed.

2. Notice of withdrawal given by a member of a building and loan association does not sever his relation so completely as to preclude him from bringing a suit for the appointment of a receiver and for other equitable relief against the association, when it has failed in its duty to set apart a fund to meet its obligations to withdrawing members, and its directors have taken such action as to justify such proceedings under ordinary equity rules.

3. A withdrawal member of a building and loan association is not required to obtain a common-law judgment and to exhaust all legal remedies before proceeding against the association in equity.

4. Courts of equity are authorized to appoint receivers upon the application of minority stockholders in extreme cases only and where milder methods are clearly of no avail.

5. Where a competing building and loan association takes over all the assets of another building and loan association then in failing circumstances, treats the latter's assets as its own, reduces the valuation thereof, uses the funds realized therefrom to pay an indebtedness contracted for the purchase of a third association, seeks to force the monority stockholders thereof to accept a transfer or surrender of stock, refuses to pay off withdrawal members thereof, charges to its own profit and loss account lapses of stock in the latter company, and brings about such a condition of affairs that the absorbed association ceases to be a going concern and becomes insolvent, a court of equity is authorized to set aside such a transaction, and to appoint a receiver on behalf of the minority stockholders of the association so absorbed to take charge of its assets and settle its affairs.

6. A building and loan association is insolvent when its available and collectible assets are below the level of the stock already paid in,--when it cannot pay back to the stockholders the amount of their contributions dollar for dollar.

COUNSEL Horatio Davis, for appellants.

Anderson & Hocker, for appellees.

OPINION

COCKRELL J.

Appellants have filed the amended entry of appeal as required by the order of this court (Association v. Miller, 41 Fla 418, 26 So. 725), and the cause is before us on final submission upon the amended abstract, which has not been excepted to.

The bill alleges that D. A. Miller, F. P. Gaffney and H. C. Groves have been stockholders in the Continental National Building & Loan Association since November 1, 1895, and that Alexander McIntyre is a stockholder of the Florida National Building & Loan Association on the withdrawal list; that the Continental was organized under the laws of this state governing building and loan associations, with its office at Gainesville, Fla., and that C. M. Ackerman, G. W. Hyde, and Jas. M. Graham are officers of said association, the said Hyde and Graham are officers of the defendant the National Bank of Gainesville, the said Ackerman, Hyde, and Graham are also officers of the defendants Florida National Building & Loan Association and of the Fernandina Building & Loan Association, corporations under the laws of Florida, and that all of the said corporations have their principal place of business at Gainesville; and, further:

(1) That in November, 1895, the Continental purchased all the assets and securities of the Florida Association, which up to that time had done business at Ocala as its charter required, and at the same time the Continental assumed the liabilities of the Florida. In August, 1896, the Continental purchased the assets and assumed the liabilities of the Fernandina Building & Loan Association, and since said transfers the Florida and the Fernandina have ceased to do business, making no loans, receiving few payments on stocks, paying no withdrawals, and discharging no debts, and that such transfers violate the charters of said associations and the laws of the state.

(2) That Ackerman, Graham, and Hyde have so conducted the affairs of the associations in their extravagance, misappropriation of funds, and violations of law that the purposes for which the associations were formed have been defeated, and the stock will not mature as planned; that the Continental had collected, since it began business, in December, 1894, up to August 8, 1896, from its members, $45,406.05, and on said August 8th there was in the hands of the treasurer $613.74, and the loans amounted to $13,899.11; that there was credited to the loan fund the sum of $30,454.38, so that there should be assets either in cash or in mortgage securities for the difference of $16,000, or thereabouts, but the said company has no assets to represent this sum; that the net cash receipts to the credit of the expense fund amounted to $3,054.61, but there has been paid out for expenses $4,933.59, an overdraft that unlawfully was paid out of the loan fund.

(3) That since August 10, 1896, Hyde, Graham, and Ackerman have been the only directors of the said association, and that Ackerman has been paid, contrary to its by-laws, a salary in advance out of the loan fund; that stated meetings, at which money in the treasury should be offered to the stockholders, have not been held as required by law, and the officers have discouraged the making of loans, and diverted the funds that should have been used for that purpose.

(4) That said officers borrowed over $4,000 from the defendant bank, of which two of them were officers, pledging for said loan $25,665.49 of the mortgage securities of the association, and created other named debts, and that said borrowing and pledging are void, in violation of law and its charter.

(5) That there are notices of withdrawals of stock to the amount of $6,000, which were filed before November 1, 1895, for which payments are demanded and refused; that said officers are seeking to purchase stock so filed at 50 per cent. of its real value, and refuse to set aside, as required by law, one-half of the receipts credited to the loan fund to meet such withdrawals, and postpone such payments so as to compel an acceptance of their offers to purchase; that the Continental has taken all the assets of the Florida, and has collected large sums from its assets and securities, and the directors of the Continental held a meeting without notice to any member of the Florida, and arbitrarily reduced the valuation of the latter's assets 15 per cent., and have done all in their power to lessen the value of its stock, and vexatiously and vigorously, without shadow of justice, defend all pending suits seeking to withdraw stock, so as to be able to purchase said stock for a trifle.

(6) That there is imminent danger of an unlawful disposition of the assets, if notice of application for an injunction be given, by reason of the intimate relations between the officers of the association and the bank; that the three associations are each insolvent, and that such insolvency has been brought about by the unlawful management of the officers seeking to make profits on the losses of the members; that the assets of the Continental and the Florida have been illegally used in buying up the Fernandina association and in repaying the bank loan, which has been used in that speculation; and that the functions of the corporations as building and loan associations had been wholly defeated.

The prayers are that a decree be entered declaring the acts of the officers illegal and the associations insolvent; that the affairs of the associations be liquidated by a receiver, and the assets realized on for the benefit of the members; that the loans from the bank be declared void, the contract by which the Continental purchased and took possession of the assets of the two other associations be declared void, and the assets returned to the associations; that the said officers be restrained from disposing of the assets, or altering or erasing the papers, books, or records; that a receiver be appointed to take possession of the property of the associations, under orders of the court, to collect the moneys and realize on the assets, and to make distributions, and for general relief. The bill was sworn to.

A restraining order was issued as prayed.

An answer was filed by the three associations, in which they admit that Miller, Gaffney, and Groves are stockholders of the Continental, but say that the Florida books do not show that McIntyre is a stockholder; admit their incorporation under the laws of Florida, but say the Florida has its principal place of business at Ocala, and the Fernandina at Fernandina. They deny the Continental purchased all the assets of the Florida, but say it did transfer...