Griffith v. Daylight Sav. B. & L. Ass'n

• Decision Date: 17 August 1939
• Docket Number: 1466
• Citation: 36 Pa. D. & C. 169
• Parties: Griffith v. Daylight Saving B. & L. Ass'n
• Court: Pennsylvania Commonwealth Court

36 Pa. D. & C. 169

Griffith v. Daylight Saving B. & L. Ass'n

No. 1466

Common Pleas Court of Philadelphia County, Pennsylvania

August 17, 1939

June term, 1939

Harold D. Saylor, for plaintiff.

William S. Peace, for defendant.

OPINION

Bill in equity.

OLIVER P. J.

This is a bill in equity, filed by a stockholder of a building and loan association which is in course of voluntary liquidation to compel the association to offer to convey its real estate to its stockholders in exchange for their shares of its unencumbered stock. The association appears to be solvent but it holds a substantial quantity of real estate which is burdensome to carry and cannot be sold except at a sacrifice. The answer admits the allegations of the bill. The Department of Banking objects to the granting of the relief prayed for by plaintiff.

Discussion

Defendant building and loan association is being informally liquidated. It appears to be solvent. As of November 30, 1938, it had assets of $ 382,424.84, and liabilities of $ 344,486.42, the difference being made up of reserves and earnings aggregating $ 37,938.42. The cash on hand amounted to $ 13,819.27. Included in the assets were encumbered real estate valued at $ 123,612.15, unencumbered real estate valued at $ 3,000, and real estate improvements valued at $ 14,384.31. Included in the liabilities were installment stock, full-paid stock, matured stock, and withdrawn shares, aggregating $ 342,840.51. It is agreed that all shareholders have an equal status, and that no shareholder has priority over any others.

To facilitate liquidation plaintiff, as the holder of shares of stock of defendant association with a value of approximately $ 2,326, by bill in equity asks that defendant be ordered to offer to all its shareholders to convey any of the association's real estate at its book value or its real or appraised value, whichever is greater, in exchange for unencumbered stock, whether it be full-paid, canceled, matured or withdrawn stock of such shareholders, at the value thereof stated on the books of the association. In event of more than one shareholder making a bid for any particular property, the proposal contemplates that the highest bid, provided it is not less than either the book or appraised value of such property, shall be accepted.

In support of his prayer plaintiff, among other contentions, argues that " It obviously is to the advantage of the association to divest itself of its real estate holdings. It is in informal liquidation by and with the consent of the directors and the Department of Banking. The present depressed condition of the real estate market makes it impossible to follow the normal procedure of selling association real estate. It is impossible in many cases to make a sale except at a great sacrifice. Unless the association is permitted to convey its real estate for shares of its stock and thus cancel its liabilities and realize the book value or better on its real estate assets it cannot liquidate. Moreover, the liability of the association as registered owner of the real estate remains and the association continues to be charged with the payment of taxes on all the real estate it owns. Added to this saving would also be reduction of expenses for repairs and maintenance of properties, including fire and liability insurance. Furthermore, the association is constantly subject to the burden of amortizing the principal of mortgages secured by its real estate. . . . Moreover, the more quickly the association is able to dispose of its real estate holdings and thereby to cancel its liabilities to shareholders the more quickly will it be in a position to use its cash receipts to pay off those shareholders who do not choose to accept real estate. This means that the shareholder who takes real estate in satisfaction of his shareholdings and assumes a burden in so doing, helps his fellow shareholder who waits for payment in cash by accelerating the process of liquidation and thereby bringing to early consummation the final cash liquidation of the association."

The plan proposed has many practical advantages and it is quite possible that it would work to the advantage of every shareholder -- those who might retain their shares as well as those who might submit bids for parcels of real estate. But however attractive such a proposal may appear as a means of facilitating final liquidation and dissolution of defendant association, this court, in the absence of the consent of all shareholders, cannot lend its support to a method of distribution which violates the fundamental rule that any distribution in liquidation, in the absence of an express agreement by all shareholders to the contrary, must be pro rata as to amount and equal in time.

While technically this association may be solvent, it is not certain that shareholders will ever receive the full value of their shares. Plaintiff, as the basis for his...