Ft. Smith Building Ass'n v. Cohn

• Decision Date: 27 May 1905
• Citation: 87 S.W. 1172
• Parties: FT. SMITH BUILDING ASS'N v. COHN.
• Court: Arkansas Supreme Court

Page 1172

87 S.W. 1172

FT. SMITH BUILDING ASS'N v. COHN.

Supreme Court of Arkansas.

May 27, 1905.

Appeal from Circuit Court, Sebastian County, Ft. Smith District; Styles T. Rowe, Judge.

Action by William J. Cohn against the Ft. Smith Building Association, No. 2, Permanent. Application by Mrs. E. Hunt and another to compel the receivers of the association to pay certain notes executed by the association to petitioners. From the judgment granting the relief prayed for, the receivers appeal. Reversed.

On the 5th day of March, 1900, the Ft. Smith Building Association, No. 2, Permanent, was declared insolvent by the Sebastian chancery court, and receivers were appointed to administer its assets under the orders of the court. On April 24, 1902, Mrs. E. Hunt filed an application in the cause, alleging: That the said association was indebted to her in the sum of $1,066.40, with interest thereon at 8 per cent. per annum from December 1, 1897, until paid. That said indebtedness was evidenced by a promissory note of said association, as follows: "Fort Smith, Ark. Feby. 25, 1899. February 25 1900, after date, without grace, The Fort Smith Building Association, No. 2, Permanent, promise to pay to the order of Mrs. E. Hunt, Fort Smith, Ark., Ten Hundred and Sixty-six and 40-100 Dollars, for value received, negotiable and payable without defalcation or discount at the First National Bank of Fort Smith, Arkansas, with interest from December 1, 1897, at the rate of 8 per cent per annum until paid. And in the event payment is not made at maturity, further agree to pay the additional sum of ten per cent of this note as attorney's fees, and all other expenses incurred in enforcing collection of this note, and its interest, or any part that may remain due and unpaid. [Signed] S. A. Williams, President. J. E. Weaver, Secretary." That the receivers of the association had money enough in hand to pay all the general creditors of said association. That she had made demand for the payment of said note, with interest, and that said receivers had refused to pay same. She prayed that the receivers be ordered to pay her said note and interest. The receivers filed a response, setting up, in substance, that prior to December, 1897, the applicant was a stockholder of the defendant association; that under some by-law or other rule of said association a member had the right to withdraw the value of his stock from said association upon certain conditions; that the applicant undertook to withdraw the value of the stock owned by her, and that the note held by her was given by the president and secretary of said association for the supposed value of her stock. Further answering, they say that neither upon the 1st day of December, 1897, nor upon the 25th day of February, 1899, the date of the note aforesaid, was the stock owned by the applicant worth the amount of the note, nor was it worth more than half the face of the note; that the president and secretary of defendant association had no authority, directly or indirectly, to execute the note, and that the same had no binding effect upon said association, and can have none upon these receivers. They allege that they find from the books and records of said association that profits had for some years prior to their appointment been credited upon the stock of the members of the association which had never been earned, and which had no existence; that these supposed profits had been credited upon the stock of the applicant, so that the apparent value of the stock was not its real value; that there are members who still hold their stock, and have filed the same as claims against the association, and occupy same relation to said association as the applicant, except that they had not asked to withdraw the value of their stock, who will receive upon the winding up of the affairs of the association under the orders of the court much less than the face value of their stock, though they have been members as long as the applicant. They deny that applicant is a creditor of said association otherwise than as a stockholder, deny that she is entitled to receive the face of the note set out, with interest, according to its tenor and effect, deny that the association was indebted to her at the time of the execution of said note in the sum named in said note, deny the authority of the persons who signed said note as president and secretary to enter into any such obligation for said association, and deny the right of applicant to maintain a claim against said association save as a stockholder; and pray that, to the end that the assets of said association may be ratably distributed to the members of said association according to the real value of their stock, applicant be ordered to file her claim for the real value of her...