Young v. Improvement Loan & Bldg. Ass'n
| Decision Date | 15 December 1900 |
| Citation | 38 S.E. 670,48 W.Va. 512 |
| Parties | YOUNG et al. v. IMPROVEMENT LOAN & BUILDING ASS'N et al. [1] |
| Court | West Virginia Supreme Court |
Syllabus by the Court.
1. When a building association becomes insolvent and unable to go on with its business, and its affairs must be wound up, the debts of a borrowing member are at once collectible, though not yet payable by their terms; and the obligation of members to pay dues on stock ceases, as the loan contract is abrogated by the insolvency, so far as the contract remains unexecuted.
2. A borrowing member of a building association, assigning his stock to it as collateral security for his loan, and agreeing to pay periodical dues on his stock, still continues a member of the association.
3. Upon the insolvency of a building association the dues paid on stock by borrowing members are not to be credited on the debts of such members.
4. Upon insolvency of a building association, in winding up its affairs a borrowing member must be charged with his debt and interest, and credited with all moneys paid in by him, except dues on stock. After payment of debts he gets his share of residue, in the final distribution of what remains after payment of expenses of winding up and debts. If it be safe to all interests and practicable to ascertain the present value of the stock, the court may, for the present relief of a borrowing member, credit that value of his stock on his indebtedness, without deferring its application till the final wind-up.
5. A deed of assignment by an insolvent corporation for the benefit of creditors and stockholders is presumed to have been made by the authority of its stockholders, until it is shown to be without such authority.
6. Where an assignment by an insolvent building association of its assets for the benefit of creditors and members is made by order of the directors, without authority of stockholders is acquiesced in for a considerable time, or acted under by positive acts of stockholders, and its impeachment would disturb the state of things arising under the assignment such stockholders will be barred by laches and acquiescence from contesting the validity of the assignment to the prejudice of other parties.
7. The statute relating to a building association, and its by-laws so far as they touch its loans, are a part of the contract of loan made by it; and wherein the contract of loan violates such statute or by-laws it is void, and the contract is construed according to the statute or by-laws, and so enforced, as every borrowing member is charged with the knowledge of the same.
Appeal from circuit court, Berkeley county; Forrest W. Brown Special Judge.
Bill by Charles A. Young and another against the improve ment Loan & Building Association and others. Decree for complainants, and defendants the Kilbourne Knitting-Machine Company and others appeal. Affirmed.
Faulkner, Walker & Woods and H. H. Emmert, for appellants.
Flick, Westenhaver & Noll and A. C. Nadenbousch, for appellees.
The Improvement Loan & Building Association of Martinsburg is a West Virginia Corporation. It made one contract with the Middlesex Knitting Company by which it sold to said Knitting Company a lot of land in Martinsburg at the price of $10,000, and also advanced said knitting company $25,000, making $35,000 of indebtedness, for which the knitting company gave to the building association 70 notes, 50 bearing 6 per cent. interest, and 20 (those representing the $10,000 purchase money for the land) bearing 5 per cent. interest. All said notes were to be paid as follows: The knitting company agreed to subscribe for shares of stock in the usual manner and form transacted by the building association, and pay weekly installments of dues till the sum of $88 a share should be paid thereon; and when such payments should be completed the shares of stock were to be assigned by the knitting company to the building association issuing them, which were to be canceled, and thus operate in full payment of the said 70 notes. It was provided that, if the knitting company failed to pay dues and interest, the notes might be treated by the association as matured, but "in that event the withdrawal value of the shares shall be credited on the notes." The contract provided that the shares of stock in the building association should be assigned by the knitting company to said association as collateral security for the said 70 notes. The said building association afterwards made a further loan to the said knitting company on like terms. The said building association also made a loan of $25,000 to the Kilbourne Knitting-Machine Company upon like stipulations with those above given. Afterwards, owing to unfortunate loans made by the building association, before the notes of the said two knitting companies, and also before said stock in the building association, matured, the said building association became insolvent, and executed a deed assigning all its assets to Adrian C. Nadenbousch and C. A. Young, as trustees, for the payment--First, of costs of executing the trust; next, to pay debts of the association; next, to pay the residue to the stockholders of the association as their interests might be legally established. The trustees filed their bill in the circuit court of Berkeley county against the building association, its stockholders, and said two knitting companies, setting up the many matters involved in these important transactions, alleging complications in the administration of their trust, and their inability to execute it without the aid and guidance of a court of equity, and praying that the court might adjudicate the various matters involved in the administration of the trust under said assignment, and give said trustees aid and guidance in the administration of the trust. The case was before a special commissioner in chancery several times. The court rendered several decrees in the case. The said knitting companies, being dissatisfied, presented a petition to the circuit court for a rehearing, assigning various errors in the decrees; but, except as to two matters, the court held its decrees right, and refused relief as asked by the petition for rehearing. Later the said knitting companies filed an answer, and took some testimony to sustain their answer; but the court, being of opinion that the matters put in issue by the answer had already been adjudged in former decrees, declined to pass on the matters set up in the answer. From all the decrees in the case the said Kilbourne Knitting-Machine Company and the Middlesex Knitting Company took this appeal.
The vital controversy in this case may be stated thus: The building association, in the purpose designed in its incorporation, contemplated that subscribers to its stock should, through a series of years, pay periodical dues until such time as, by means of such dues, and interest on loans by the association to its members, its shares should reach par value, and that those of its members borrowing money from it should, by the surrender to it of their shares of stock, cancel and pay their notes for money lent. The contracts of loan to the two knitting companies in this case did not provided for the payment of dues until their stock should reach par, let that be when it might, but provided that when, by such dues, the two knitting companies should have paid $88 per share, then the stock should be surrendered, and the debts of the two knitting companies to the building association should be canceled. The general plan of the association was frustrated by the insolvency of the company, owing to its losses. Long before the debts of the knitting companies had matured and said companies had, by payment of dues, paid the $88 per share of their stock, as provided in the contracts, insolvency befell the building association. The said knitting companies had paid considerable money in dues on their stock. They paid some dues after the deed of assignment. Those companies contend that they are entitled to a specific performance of their contracts with the building association; that, notwithstanding the disaster of total insolvency which fell upon the building association, they are entitled, under said contracts, to go on paying the weekly dues until they shall pay $88 per share on their stock and then have their indebtedness canceled, or, if this cannot be allowed, that the said knitting companies must be allowed credit on their indebtedness (on their notes) for all moneys paid by them by way of dues on their stock, and that said dues must not be applied on their stock, thus depriving them of the right claimed by them to have the moneys paid as dues credited on their said notes of indebtedness. They thus deny the right of the trustees, in the interest of the general creditors and non borrowing stockholders of the building association, to collect from said knitting companies at once, and before maturity of the loan notes of the knitting companies, the said loan notes; and they deny the right of said trustees to apply the moneys paid by them as dues only on their stock liability, and claim that it shall go, at the several dates of payment, as credits on their loan indebtedness. Is either of these positions taken by the knitting companies sound?
First as to the claim that the contracts must be kept alive and specifically performed,--must go on until weekly payments under them shall make up $88 per share of stock, and then the stock, by surrender thereof, cancel the debts: Insolvency defeated the whole scheme and plan of the building association. That plan contemplated the issuance of stock, and the loaning of its money to its members by way of advances, to be repaid by way of interest and dues on stock through a number...
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