In re Western States Building-Loan Ass'n

• Decision Date: 05 June 1931
• Docket Number: No. 16455.,16455.
• Citation: 50 F.2d 632
• Parties: In re WESTERN STATES BUILDING-LOAN ASS'N.
• Court: U.S. District Court — Panama Canal Zone

50 F.2d 632 (1931)

In re WESTERN STATES BUILDING-LOAN ASS'N.

No. 16455.

District Court, S. D. California, Central Division.

June 5, 1931.

Gold, Quittner & Kearsley, of Los Angeles, Cal., for petitioning creditors.

Dryer, Castle, McConlogue & Richards, of Los Angeles, Cal., for alleged bankrupt.

Bicksler, Smith, Parke & Catlin, of Los Angeles, Cal., for intervening creditor.

JAMES, District Judge.

An involuntary petition was filed herein, being verified by three alleged creditors. The description of the debt of each creditor is set forth in the following terms, there being a difference in the names and amounts only: "The claim is for moneys deposited with the alleged bankrupt, which moneys the alleged bankrupt agreed to return upon demand (subject to the provisions of the laws of the State of California regarding building and loan associations and the bylaws of the alleged bankrupt applicable thereto.) That an account stated was rendered by the alleged bankrupt and the petitioner in the sum of ______ and said sum was agreed to be due, owing and payable from the alleged bankrupt to the petitioner herein."

The act of bankruptcy alleged is that, within four months preceding the date of filing the involuntary petition, respondent being then insolvent, an equity receiver was appointed and put in charge of its property. A motion is made on behalf of the alleged bankrupt and an intervening creditor to dismiss the petition on the ground chiefly that petitioners are not shown to be creditors holding provable claims. The argument in support of the motion to dismiss is mainly to the point that the contract relationship of the alleged creditors with the alleged bankrupt is that of certificate holders or shareholders, as to whom the right to have payment made is contingent and not certain — hence that the claims of such creditors are not presently provable. Section 59b of the Federal Bankruptcy Act, 11 USCA § 95 (b) describes parties who are permitted to file an involuntary petition as follows: "Three or more creditors who have provable claims against any person which amount in the aggregate, in excess of the value of securities held by them, if any, to $500 or over. * * *"

The law of the state of California which authorizes the formation of building and loan associations requires that the articles of incorporation shall state that the association is formed to encourage "industry, frugality, homebuilding, and savings among its shareholders and members; the accumulation of savings; the loaning to its shareholders and members of the moneys and funds so accumulated, with the profits and earnings thereon, and the repayment to each of his savings and profits, whenever they have accumulated to the full par value of the shares, or at any time when he shall desire the same or when the corporation shall desire to repay the same, as it may be provided in the by-laws. * * *" Civ. Code Cal. § 633.

It is provided by the California law that building and loan associations shall have what is known as "guarantee stock," which becomes permanent capital, and is required to remain as such, and is subject to the liabilities attached to paid-in capital stock of other classes of commercial corporations. It is provided that the guaranty stock "shall protect and guarantee all other stockholders and creditors against any loss. * * *" (Civ. Code Cal. § 634 (d). With the capital stock as a supporting basis, building and loan associations invite public patronage in investments, and, while these patrons might conventionally be called depositors, their deposits are applied in the purchase of other classes of shares listed as "installment shares," "full paid shares," "pass book shares." The depositor or shareholder receives interest on his investment or deposit.

It is to be noted that the contract relationship established does make the association the debtor of its shareholder, for the latter is entitled to receive back his money, and cannot be compelled to remain a shareholder against his will. It is provided in the law (section 642, Civ. Code Cal.) that, if the stockholder-investor shall decide to withdraw his investment, he may be...