Sundt v. Mut. Bldg. & Loan Ass'n of Las Vegas.

• Decision Date: 18 November 1932
• Docket Number: No. 3847.,3847.
• Citation: 37 N.M. 1,16 P.2d 394
• Court: New Mexico Supreme Court
• Parties: SUNDTv.MUTUAL BUILDING & LOAN ASS'N OF LAS VEGAS.

37 N.M. 1

16 P.2d 394

SUNDT

v.MUTUAL BUILDING & LOAN ASS'N OF LAS VEGAS.

No. 3847.

Supreme Court of New Mexico.

Nov. 18, 1932.

Syllabus by the Court.

Solvent domestic building and loan association, where not prohibited by charter or by-law, has implied power to borrow money to pay lawfully created existing indebtedness and to meet demands of withdrawing members holding either matured or partially matured shares (Laws 1931, c. 147, §§ 1, 3, 5; Comp. St. 1929, §§ 32-234, 32-235).

A solvent and going domestic building and loan association, where not prohibited by charter or by-law, has implied power to borrow money under resolution of its governing board:

(a) To pay lawfully created existing indebtedness.

(b) To meet the demands of withdrawing members holding either matured or partially matured shares.

Appeal from District Court, San Miguel County; Armijo, Judge.

Suit by Martin Sundt against the Mutual Building & Loan Association of Las Vegas. From the judgment, defendant appeals, and plaintiff cross-appeals.

Affirmed in part and reversed in part and cause remanded with directions.

Solvent domestic building and loan association, where not prohibited by charter or by-law, has implied power to borrow money to pay lawfully created existing indebtedness and to meet demands of withdrawing members holding either matured or partially matured shares. Laws 1931, c. 147, §§ 1, 3, 5; Comp.St.1929, §§ 32-234, 32-235.

Charles W. G. Ward, of East Las Vegas, for appellant.

M. E. Noble, of East Las Vegas, for appellee.E. K. Neumann, Atty. Gen., of Santa Fé, amicus curiæ.

SADLER, J.

The plaintiff, who is cross-appellant on this appeal, as the holder of twenty shares of the capital stock in the Mutual Building & Loan Association of Las Vegas, sought by complaint in the district court of San Miguel county to restrain the association as defendant from making a certain loan from Las Vegas Savings Bank. It appeared from the complaint that defendant, in anticipation of the collection of dues and interest owing to it, desired the proposed loan, which was to be in the sum of $5,000, for three stated purposes, to wit: First, to meet promptly applications for withdrawals; second, to repay borrowed money; and, third, to pay off matured stock in the association. The plaintiff alleged that defendant was without power to borrow said money, that its act in so doing would be ultra vires, and that it likely would result in expensive litigation, to the great injury of defendant's stockholders.

The defendant answered admitting that it proposed to secure the loan for the purposes alleged, but denied that it was without power to do so. On the contrary, while conceding that it was without express power in such behalf, it sought to justify the proposed action as within its implied powers, as necessary and incidental to the purposes of its incorporation. The defendant, as appeared from the pleadings, is a mutual building and loan association organized and existing under the laws of the state of New Mexico. The proposed loan was by authority of a resolution duly adopted by its board of directors. Only one director, the plaintiff, voted against the adoption of said resolution.

The trial court found that the defendant was a solvent and going mutual building and loan association without express authority in its charter to borrow money, but that its by-laws purported specifically to confer such power. The court concluded as a matter of law that the defendant, even in the absence of express statutory power, was authorized (1) to borrow money in order to pay existing indebtedness lawfully created; (2) to pay off matured stock in the association; but (3) that it lacked such power with respect to the demands of withdrawing stockholders. Accordingly, the court confined its injunctive order to restraint against defendant from using any of the proceeds of the proposed loan to pay the demands of withdrawing stockholders. By appropriate exceptions and requests for findings and conclusions, each party reserved below the grounds of review upon which each in this court by appeal and cross-appeal, respectively, seeks to set aside so much of the decree of the trial court as fails to sustain his or its position in entirety.

The defendant association was organized under the provisions of chapter 108, Laws 1889, appearing as chapter 18, Comp. 1929 (section 18-101 et seq.). All of the provisions of said chapter 18, in so far as they related to domestic building and loan associations, except sections 123 to 125, calling for reports to and examinations by state bank examiner, were expressly repealed by chapter 147, § 15, Laws 1931. It is to this act, and to the general corporation laws of the state in so far as made applicable to building and loan associations by sections 32-234 and 32-235, Comp. 1929, as well as to the implied powers appertaining to associations of this kind, that we must look for the purpose of finding the power here sought to be exercised, if it exists at all. Section 3 of chapter 147, Laws 1931, among other things, provides: “Any stockholders wishing to withdraw from the corporation shall have power to do so by giving notice thereof at a stated meeting of the Board of Directors, and thereupon shall be entitled to receive at the next stated meeting of such Board the amount paid for dues, and such interest thereon, or so much of the profits thereon, as may be fixed by the By-laws; provided, that at no time shall more than one-half of the funds in the Treasury of the corporation be applicable to the demands of withdrawing stockholders without the consent of the Board of Directors, and no stockholder shall be entitled to withdraw whose stock is held in pledge for security.” The right of withdrawal, conferred by the foregoing section, is in substantially the same language as when it appeared as a part of section 18-103, Comp. 1929, which the 1931 act repealed.

Section 18-113, Comp. 1929, gave such associations express power to borrow money in the following language, to wit: “Any such association may allow reasonable compensation to its auditing committees for their services as such, and may for the legitimate purposes of such association, on a vote of a majority of all its directors, borrow money in anticipation of payment of dues.” This section was repealed by section 15, chapter 147, Laws 1931, and no substitute for it was carried forward into the new act.

The general corporations laws of the state are by section 32-234, Comp. 1929, extended to building and loan associations as well as to certain other corporations organized under special acts. However, the extent of the application of the general laws is somewhat neutralized by the language of section 32-235, declaring such laws applicable only in so far as same could be enforced consistently with the special acts under which the enumerated corporations were created, and by the proviso: “Provided, however, that the powers to be exercised by corporations already incorporated under the special acts under which they may be incorporated or by the articles of incorporation, shall not be held to be extended by this provision. (L. '05, Ch. 79, § 132; Code '15, § 1015.)”

Express power to borrow is not to be found in chapter 147, Laws 1931. However, by section 5 of said act, such associations are given the power to purchase at any sale real estate upon which they may have a mortgage or a loan. And with respect thereto, it is provided in said section: “And the real estate so purchased may be conveyed, leased or mortgaged, at the pleasure of the corporation.”

Among the enumerated powers conferred upon such associations by section 1 of chapter 147, Laws 1931, will be found the following, to wit: “*** Said certificate shall be executed *** and *** filed *** and thereupon said corporation shall be deemed fully organized and shall be a body corporate and politic for the period for which it is organized, may sue and be sued, may have a common seal, which it may alter, or renew at pleasure, and shall possess all other powers incident to, or necessary for, the purpose of properly carrying on its business.”

First, we determine the effect of the repeal by the 1931 act of section 18-113, Comp. 1929, granting express authority to borrow money in anticipation of dues for the legitimate purposes of the corporation. The new act is not in purported amendment of the old, though it re-enacts many of its provisions. It covers the entire field relating to domestic building and loan associations, except that embraced by sections 123 to 125, Comp. 1929, providing for reports to and examinations by the state bank examiner. We do not feel called upon to determine whether, while in force, its effect was merely declaratory of whatever implied power of borrowing otherwise existed, or whether it was a limitation on such power. In either event the repeal left unimpaired such incidental power of borrowing as associations of this kind otherwise possessed. Therefore, the question should in our view be determined from the provisions of the new act and a consideration of the inherent nature and purpose of such associations, uninfluenced by the repeal of the section mentioned.

Mutual building and loan associations are sui generis in the corporate family.

“Building and loan associations are peculiar corporations. In none other is it admissible that the capital shall be withdrawn at the will of the stockholder. But in these it is expressly provided that any stockholder may withdraw, on giving 30 days' notice thereof, and receive ‘the amount paid in and such proportion of the profits as may have accumulated.’ The only limitation upon the privilege found in the charter is that but one-half of the funds in the treasury is subject to such demands without the consent of the directors.” Circuit Judge Lurton in Wilson v. Parvin (U. S. C. C. A., 6th Cir.) 119 F. 652, 659.

“Building and loan associations have been well...