103 A.D. 153 | N.Y. App. Div. | 1905
A careful consideration of the articles of association leads us to the conclusion that the possible insolvency of the association was not in the contemplation of the incorporators or of the members of the association in changing the articles of association from time to time. The articles of association seem to have been prepared with entire confidence that the somewhat intricate system of stock certificates and the numerous classes of stock would be attractive to many investors, and that money would be received and continued with the association and so invested that the profits therefrom would not only be sufficient to pay an expense account out of all proportion to the business transacted, but also sufficient to leave a large net balance for distribution. All classes of stockholders were given the right to withdraw from the association at the times and on the terms expressly stated in the articles of association.
By the express terms of the articles of association withdrawals by stockholders (all classes) were to be paid in the order of filing notice of intention to withdraw, but the association could not be required to pay withdrawing members in any month more than one-half of the receipts of the loan fund for that month. So long as the association remained solvent no question could ever be raised in regard to a preference in the payment of the full or withdrawal value of-the different classes of stock, either while the association continued in business as an association, or in case of its dissolution. There is not a word in the articles of association in any way expressly referring to the question of the distribution of the assets of the association in case of insolvency, and nothing that in our judgment can be construed as having any reference to such possible insolvency. Every person having a share of stock in the association became a
The contract with the installment stockholders is as sacred and binding as that with the full paid stockholders. When the association ceased to exist as an association all contracts were equally incapable of being fulfilled, and equity now steps in to wind up its affairs and make a ratable distribution of its assets among its members. The general principles relating to the distribution of the assets of insolvent building and loan associations -are well stated in the Cyclopedia of Law and Procedure (Yol. 6, p. 165), as follows: “ After the ordinary costs of winding up the association are paid, interested parties occupying the position of general creditors are entitled to be paid, in preference to those whose claims are founded • upon the relation which they sustain to the association as members thereof, unless the irregular acts of the creditor caused the insolvency ; but the courts are inclined to treat the rights of all those holding the relation of stock-holders as equal and to allow no priorities in their claims. This is true, notwithstanding the stock-holder has given notice of withdrawal, although such notice has matured and he has received orders from the treasurer for the payment of the withdrawal value of his stock; but where the rules and by-laws of the association are held to govern the distribution in insolvencjq the same as when the association was a .going concern, the rule may be otherwise.” An application of the principles thus stated to this case sustains the order of the Special Term. The claimants assert that from the articles of association it should be held that it was the
We do not think that the Special Term so abused the discretion
Order unanimously affirmed, without costs to either party.