Leahy v. Nat'l Building & Loan Ass'n. (In re Langworthy)

• Citation: 100 Wis. 555,76 N.W. 625
• Court: United States State Supreme Court of Wisconsin
• Decision Date: 11 October 1898
• Parties: LEAHY v. NATIONAL BUILDING & LOAN ASS'N. IN RE LANGWORTHY. IN RE EGGLESTON. IN RE WHITE ET AL.

100 Wis. 555

76 N.W. 625

LEAHY

v.NATIONAL BUILDING & LOAN ASS'N.

IN RE LANGWORTHY.

IN RE EGGLESTON.

IN RE WHITE ET AL.

Supreme Court of Wisconsin.

Oct. 11, 1898.

Appeal from superior court, Milwaukee county; George E. Sutherland, Judge.

Action by Thomas W. Leahy against the National Building & Loan Association. From orders on intervening petitions, the receiver appointed in the action appeals. Reversed.

This action was brought by the plaintiff, as a stockholder and creditor of the defendant, for the purpose of winding up its affairs; and such proceedings were had that on March 11, 1897, Martin W. Sherman was appointed receiver. On October 14, 1897, the receiver filed his petition for instructions, in which he set out at length the prior transactions of the company, and asked the court for instructions regarding priority of claims of members against the company, and as to his duty in reference thereto. The receiver's petition sets out that from the time of the organization of the association, May 10, 1887, to August 2, 1895, it issued different classes of shares of stock; some called “100-months stock,” according to the terms of which the member was to pay monthly installments of 70 cents each for 100 months, and the association agreed to pay him $100 per share; other stock was issued, called “96-months stock,” which was to mature in 96 months; still another class was “full-paid stock,” where the members paid 96 installments of 70 cents each, in advance, less a rebate of $9 allowed for interest, and at the expiration of 96 months the association was to pay the holder $100 per share. By article 10 of the by-laws, each member holding shares of the 96 or 100 months' stock was entitled to a loan from the association of $100 for each share of stock held by him as follows: The stockholder was prepaid at the time his loan was made the full amount of $100 per share, upon his executing to the association a bond conditioned to promptly pay the installments due on his stock, and interest on the face of his stock at 10 per cent. in monthly installments for the time the stock was to run, and also upon executing a mortgage on real estate conditioned for the performance of the conditions of the bond. The stock was also assigned to the association as additional security. The petition sets out that other classes of stock were issued, and other complications had arisen, concerning which he desires instructions, but which are not material to the questions here involved. Upon presentation of this petition, the court made an order fixing a time and place for a hearing. Notice was given to all parties interested, and, on the day appointed, several parties intervened with petitions setting out their rights and interests in the association, and asking the court to determine their respective rights in the premises. The receiver made answer to the respective petitions, and the court made findings and entered orders establishing and defining their rights as hereinafter set forth.

Catherine Langworthy's petition: As to the issue presented on the petition of Catherine Langworthy, the court found substantially as follows: That April 7, 1890, the petitioner made a written application for 20 shares of 96-months stock, which stock was issued May 1, 1890; that, at the date of her application for stock, she also applied for a loan upon her stock of $2,000. The loan was approved, and the required bond and mortgage was delivered, conditioned to pay the association the said sum of $2,000 in monthly installments of $14, with 10 per cent. interest monthly from May 1, 1890, to May 1, 1898, and the stock certificate was also assigned to the association; that petitioner paid the monthly installments on the stock until the receiver was appointed, making 82 payments in all; that, under the contract of membership, the association agreed that if petitioner would pay the monthly installments of $14, and all fines, membership fees, and charges for 96 months, then it would pay her $100 for each share of stock held by her, which would include a profit on each share of $32.80; that the association did not earn the said profit, but sustained losses and incurred expenses during that period, by reason of which the investment earned very much less than the estimated profit; that article 22 of the by-laws provided that, “should any shareholder under 96 months' contract desire to withdraw from the association, he may do so by giving thirty days' notice in writing to the secretary, and he shall receive the amount paid by him with legal interest thereon, less entrance fees and other charges due the association; that the association did not earn a profit equal to the legal interest on the amount paid in by the petitioner; that on August 2, 1895, the association amended its articles of organization, and became a mutual loan and building association, under the laws of this state, and afterwards acquired a large number of members who paid on their stock, and who were chargeable with their proportionate share of losses and expenses, and were entitled to share in any profits earned, and whose contracts were in force when the receiver was appointed; that, since petitioner became a member, a large number of other persons became members under similar contracts, but who did not obtain loans, and whose shares of stock have not been prepaid; that, since petitioner became a member, the association acquired a large number of members under the 100-months plan, who were in good standing at the time the receiver was appointed, on March 11, 1897; that the association was insolvent at that time, and for a long time prior thereto. As conclusions of law, the court found that the contract between petitioner and the association was valid and binding; that, upon the appointment of the receiver, the association became unable to carry out its contracts, and thereupon the bond and mortgage mentioned “became due and payable in solido.” Thereupon the court made an order directing the receiver to charge the petitioner with the amount of $2,000 and legal interest from the date of the loan to the date of the appointment of the receiver, and credit her with the amount of each payment made by her during that period, with legal interest from the time when made to the date of the appointment of the receiver; and, upon payment of any balance, the receiver was to release the said bond and mortgage. From this order, the receiver takes this appeal.

Sarah A. Eggleston, petitioner: Upon the issue made by the petition of Sarah A. Eggleston, the court made findings that the association made a contract with her, as follows: “This is to certify that Sarah A. Eggleston * * * is the owner of nineteen shares of stock, of the maturity value of one hundred dollars each, in the National Building and Loan Association, * * * and that said Sarah A. Eggleston has paid * * * the sum of $1,105.80, being 96 installments of 70 cents each upon each share of said stock, less a rebate of $9 upon each share for the full time. And, in consideration of the aforesaid payment, the association hereby agrees to pay the said Sarah A. Eggleston * * * the sum of $100 for each of said shares at the end of eight years from the date hereof. This certificate is issued to and accepted by the holder upon the following express terms and conditions: (1) The said shareholders shall not have any claim or interest in the affairs, assets, or funds of the association except as above set forth, and assume no liability of any kind except as hereuntofore described. (2) It is understood and agreed that these shares may be surrendered at any time after two years from date of issue, upon 90 days' notice, and the owner shall receive the sum actually paid with 6 per cent. simple interest from date until payment. (3) This certificate may be assigned by indorsement in writing upon the back hereof, but no assignment shall be valid as against the association unless the same shall have been approved by the secretary.” That said contract was entered into in pursuance of a by-law of the association (article 29), which says that “the board of directors may offer for sale prepaid stock or stocks upon which installments may be fully paid in advance, at such rates of discount as may be determined, and may issue certificates of deposit to its members, or interest-bearing stock, in such sums and under such rules and regulations as shall be for the best interests of the association.” That petitioner is the owner of said certificate. That the association never had any fund or capital excepting the installments received from its members in payment on their shares of stock, and its only means of earning profits was in loaning the same on interest. That, during the time the petitioner held said certificate, the association incurred expense and sustained losses, so that it never earned the profit it agreed to pay on said contract. That, at the time of the appointment of the receiver, there was a large number of members who had paid large sums of money to the association, and who had borrowed large sums on bond and mortgage. As conclusions of law, the court found that the petitioner never became a member of said association under said contract, and is not chargeable with any of its losses or expenses, and that said contract is not a valid certificate of stock; that the contract is a valid obligation to pay petitioner the sum of money therein mentioned, being the amount paid by petitioner, with interest at 6 per cent.; that, under and by virtue of said contract, petitioner is a creditor to the amount she has paid, with interest, and is entitled to be paid said sum in preference to the claims of stockholders, and in common with other creditors. From the order entered in pursuance of these conclusions, the receiver appealed.

F. H. White's and Sarah Van Pelt's petition: Upon this petition the finding of the court shows that on July 24, 1889, one George C. White,...