48 W. Va. 512 | W. Va. | 1900
The Improvement Loan and Building Association of Martins-burg is a West Virginia corporation. It made one contract with tne Middlesex Knitting Company by which it sold to said knitting company a lot of land in Martinsburg at the price of ten thousand dollars, and also advanced said knitting company twenty-five thousand dollars, making thirty-five thousand dollars indebtedness, for which the knitting company gave to the building association seventy notes, fifty bearing six per cent, interest, and twenty, those representing the ten thousand dollars purchase money for the land, hearing five 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 eighty-eight dollars a share should be paid thereon, and when such payments should be com-jileted the shares of stock were to be assigned by the knitting company to the building association issuing them, which were to be cancelled, and thus operate in full payment of the said seventy 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 shg.ll 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 seventy 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 twenty-five thousand dollars to the Kilbourne Knitting Machine Company upon like stipulations with those above given. Afterwards, owing to unfartunate loans made by the building association, before the notes of the said two knitting companies,
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 re-hearing, assigning various errors in the decrees; but, except as to the two matters, the court held its decree right and refused relief as asked by the petition for re-hearing. 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 provide 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
It results from the above position that insolvency cancels the contracts so far as they remain executory, that the debts due from the borrowing members must be at once called in to pay creditors and wind up the business, though those debts have not yet become payable. Thomp. on Corp. Yol. 7, s. 8796, says: “The effect upon borrowing members of a premature dissolution, or what practically amounts to the same thing, requires some notice. In return for the undertakings of the borrower in the transaction of loan or advancement, as they have been pointed out, there is an implied undertaking on the part of the association that the borrower shall have the advantage of the building association scheme m the liquidation of the whole of his indebtedness; i. e., that it shall be by means of gradual payment, and that he shall participate, and have the opportunity of reducing his liability by his participation, in the profits of a continuing business to be carried on to a fixed end. Where, through bad management, financial misfortunes, loss of membership, or any other cause, the career of the association is brought to a premature close, the borrower is compellable forthwith to pay the balance due from him on his security,'although in terms only given for installments. He is, therefore, deprived of some proportion of the advantages, the prospect of which induced him to assume the burden of his original obligation. There remains nothing to compensate him for his liability to make up the premiums, to keep up stock payments, to pay lines, etc. The consideration of the liability failing, the liability itself must, in a proportionate degree, fail also. In other words, there remains, on the one side a claim, on the other a liability, to be measured by the amount of money actually advanced. In such cases all the borrowers can be held for, (on the theory of a recission of at least part of his contract and remitting the parties, as to the rest, to the position of the ordinary lender and borrower) is the amount received by him from the association with legal interest.” Volume 4, page 1082, Am. & Eng. Ency- L. (2 Ed.) says, “In any case, the borrower is necessarily compelled to pay up at once.” “Mortgages given to secure loans (are) due and enforceable at once, without regard to their terms, even
Another question. Seeing that upon insolvency of a building association, it must be wound up, and to that end that its borrowing members, though their debts are not yet payable, must pay up at once, the question is one of account between them and the association. How shall they be charged? I answer, with debt and interest. Endl. Build. Asso. ss. 531, 528. With what shall they De credited ? I answer, with payments made expressly on such indebtedness, and with fines and premiums, butnot with periodical dues paid on stock. Endl. Build. Asso. s. 477.
The Middlesex Knitting Company and the Kilbourne Knit-tining Machine Company contend that when they gave their'notes and entered into the contracts, with provision for periodical payments on an amount certain and fixed to be applied in liquidation of the principal sum until such weekly payments amounted to the principal sum, as provided in the contract, and adopted the by-laws as to penalties, in case of default, they can in no event be held as members of the association. So the brief of their counsel puts the proposition, and they say “the reason is apparent, the test simple: suppose the association had gone on to a final and successful conclusion, will it be contended that the appellants, under these contracts, could have demanded and received a share in the profits ? The proposition is preposterous. Then if the appellants could not have, in that event, under these contracts participated in the profits, by what process of reasoning can they be held liable for losses ?” So the brief of counsel propounds their proposition.
1 think the result they would deduce from the premise is a non sequitur, even on that premise; but that premise does not exist in this case, because the 'association did not go on to success, and whatever would be the rights of a borrowing stock
Counsel for the knitting companies say, as above stated, that when those companies made the contracts of loan and assigned their stock for security for the debt, and the contract gave them power to pay dues on stock updo a certain amount, and thereby cancel their indebtedness, they were not members in future and cannot be held to be still paying dues on stock, that such payments are not to be credited on stock, as would be the case of non-borrowing members, but all payments of dues must go on their indebtedness. The proposition that they ceased to be members is not sound in law. They still continued members of the association. Thomp. Corp. Vol. 7, ss. 8772, 8773, where it is stated that only Virginia and the District of Columbia have held that the relation of stockholder ceases under the circumstances stated above. See same work, page 332, saying, “The member as a borrower is still a member with all his rights, except as pledged. He may vote, hold office, transfer his shares subject to the lien, and do everything another shareholder may- do.” Lister v. Log Cabin Association, 38 Md. 115, holds the same doctrine. So. Endl. Build. Asso. s. 123. See 5 Am. & Eng. Dec. in Equity 234.
To sustain the proposition that when these borrowing members gave their bond for the advance of money and assigned their stock as collateral, they ceased to be members and were absolved from all obligation to sustain any share of losses, we are cited in Endlish on Building Associations, s. 81, reading thus: “The liability to contribute to expenses ceases with the cessation
Being still a member after such borrowing, the party occupies the two-fold character of debtor and stockholder, and his payments on debt are payments on debt, and his payments on stock are payments on stock — so intended in both cases. When insolvency comes he is still a member of this association organized as well for his benefit as that of other members, and other members not borrowing are entitled to call upon him to still occupy the status of a member and help bear the burden oif disaster. He has no right to apply his stock payments on his indebtedness. When insolvency comes the original plan of the association is defeated. Such operations as were contemplated by all members, borrowers and non-borrowers, are unavoidably frustrated, they cannot be accomplished. The association cannot demand further payments on stock, because its business being stopped, it cannot apply such payments to effect the design for which they were stipulated to be made, and the consideration for their payment has ceased. Close up the affairs of the association is the only alternative. To do this, outstanding debts must be paid, chiefly from debts due from members, though not yet mature, because the association owns these debts as material assets and indispensable to pay outstanding debts, and then to be divided among stockholders. The member who is a borrower, as such occupies the position of a borrower — the relation between the association and him makes him its debtor for the money advanced to him, and he must pay it at once to enable the association to do the only thing it can do, wind up. Out of
The case of Strauss v. Building Association, 117 N. C. 308, is cited for the position that on the debt of a borrowing member of-a building association must be credited all amounts paid by him, whether as fines, penalties, interest or dues; but it will be noticed that this member is to be charged with his debt and six per cent, interest and also his share of the defalcation or loss of the association, and credited with all moneys paid by him, including duos, according to the later case of Williams v. Maxwell, 31 S. E. 821, 5 Am. & Eng. Dec. in Eq. 224, 123 N. C. 586. This late case conforms to the right principle, only adopting another process of reaching the same end. It does credit on the debt dues paid on stock, but it adds to the debt and interest the borrowing member’s share of the loss, estimated or ascertained by the court.
The circuit court decreed upon the principles above indicated, except that it allowed to the credit of borrowing stockholders the estimated present value of their stock as a credit on their debts. The court was not bound to do this until a final realization of the assets; but some courts have held that in view of the hardship and increased expense of settlement which may result from requiring the borrower to pay back all he received, without credit for dues paid, leaving him to final distribution for a return of the excess of his payments over what is really
Appellants say that as there were two series, B and C, of stock issued, the losses under each should be kept separate, and stockholders in the one bear losses only in its time. That would keep two treasuries. That would make the association only a serial one. This association is not so fractioned. It merely issues from time to time stock, that is, offers it to bidders at different times, running from different times; but it is all the same corporation, same treasury; the fate of all interested in it is launched in the same boat. Even in a purely serial corporation there is but one treasury, and the losses are not separated as proposed. Many of the cases above cited, like Leahy v. Build. Assoc. 5 Am. & Eng. Dec. in Eq. 214, were pure serial associations, as this is not. 4 Am. & Eng. Ency. L. (2 Ed.) 1006, says: “The profits and losses are generally reckoned on the whole stock, and then divided equally among the different series, unless the rules provide otherwise.” See Thomp. on Building Assoc. 14, s. 8, (2 Ed.); Tyrrell, L. & B. Assn. v. Haley, 163 Pa. St. 301.
Complaint is made that the commissioner’s report found, or rather remarked, that stockholders in Series A were not members of the assqciation, because their stock had matured and been retired before the date of the assignment. There was not anything in the record at the date of the decree of October 12, 1898, to show that this stock had not been properly retired and the money under it distributed. That is a matter precluded by that decree. The point was made for the first time after the decrees
As to the complaint that payments upon the debts made to the trustees after the assignment, were not credited at the proper time, there is nothing to show that they were not credited at the proper time. There was no exception on that score to the commissioner’s report. In fact, there were no exceptions by the appellants to the commissioner’s report or as to any of the matters above spoken of. They did not appear in the case until after the decrees adjudicated the principles of the cause. If there is anything in this point, it is only an error of calculation which can be corrected, and must be corrected,if at all, by motion in the court below. Why was it not brought to the attention of the court in the petition for rehearing ?
The appellants complain that nine hundred and twenty-five dollars paid as interest on the debt of the Kilbourne Knitting Machine Company before the assignment; was erroneously applied on the principal. How can that prejudice the debtor? It benefitted the debtor by diminishing the interest bearing principal.
As to the complaint that four per centum commission to the trustees was taken out of payments in advance of dues by the appellants before the application of the same. Some stockholders
The assignments of error Nos. 10, 11, 13 and 14 complain that the present or withdrawal value of the stock of the indebted knitting companies was not properly ascertained; that too much money for cost of litigation was allovred by estimate in the process of ascertaining the withdrawal value of stock, and too large an amount allowed for bad debts, and that the value of the stock was not applied at the proper time, as also payments made after the assignment were not credited at the proper time. Now, as to the allowance of too much for estimate of costs of litigation and bad debts there can be no error. Those estimates were made in the process of the ascertainment of the present value of the stock, in order to give the debtor stockholders the relief of applying on their debts the estimated present value of their stock, instead of making them pay in full, without such credit, and compelling them to wait for their share in the assets, which might be finally due on'their stock, until the final account. Now, the debtors had no right to demand the application of their
As to the fifteenth assignment of error for the refusal to give the relief asked in the petition for re-hearing, treated by the court as a bill of review, it is sufficient to say that all the errors pointed out in that bill of review arise on this appeal.
The sixteenth assignment of error involves the same point.
The seventeenth assignment of error complains that the court refused any relief upon the answer of the knitting companies. The court expressed the opinion that the matter of the answer could not be considered, because precluded by the decrees which had been entered in the case before that answer was filed, and therefore declined to pass upon the matters set up in the answer. The decrees which had been entered adjudicated all the principles involved in the case, leaving nothing to be done in the case,’ save only to carry out the decrees. Any decree which adjudicates all the’principles of the ease and determines the principles and rules by which relief is to be administered to the parties, so that it is only necessary to apply such rules to the facts in order to decree the relative rights of the parties, is an appealable decree, in fact, a final decree. After such a decree it is too late for an answer introducing a defense to the bill, introducing new matter. The day for defense has gone by. If wrong has been done, it cannot be amended, unless there be such error as can be corrected on appeal. The circuit court could not review itself on that answer. The appellants had been served with process; they had
While on the subject of that answer, having referred to it I will refer to its allegation that as a reason why the respondents had not appeared to the case sooner, that when process was served upon their agent, he called upon one of the plaintiffs, and was informed by him that he need not pay any attention to the proceeding as his rights would not be in any way affected or jeopardized. Shall I be called upon to decide whether such an expression of opinion as that by one of the trustees, his opinion of the law, as to what would be adjudged by the court upon.the many matters arising on the assignment, the nature of which must have been well known to the appellants, as no person was more largely interested as stockholders than they, — the appellants— I ask shall I say whether such an opinion of a trustee would affect the rights of the many interested as beneficiaries under the assignment? Shall I decide whether that mere expression of opinion could be held to be either a fraud or surprise upon the appellants affecting and impairing the decrees which were final in the case, when after that expression of opinion by the trustee, the appellants were served with notice by the commissioner by publication in a newspaper in their own town that he was proceeding to ascertain and report the assets, the debts of the association, the stockholders and their shares and what they had paid, and they still failed to appear. Shall I be called on to decide whether the failure of the appellants to attend to their interests in long pending proceedings constitutes laches on their part precluding them from setting aside decrees merely from an expression of a legal opinion by the trustee as to what would be done in the suit, when any body would know that he could not possibly know what would be done in the suits, and that at most gave no pledge or specification of what would or would not be done in the suit so as to warrant any suitor in relying upon it ? I am excused from squarely deciding those matters, and for the following reasons. That expression of opinin by trustee Young is alleged to be a fraud lulling the appellants to sleep. If so, it
The appellants would at a late day upturn and revolutionize the entire adjustment of the affairs of this association, decrees and all, by an assault upon the validity of the deed of assignment. Though served with process, the appellants did not appear, but allowed the case to go on through many steps upon the bill taken for confessed as to them, without ever hinting that they had any objection to the validity of the assignment on the ground that the board of directors caused it to be executed by the president, without the authority of the stockholders. This point was first raised after the decrees adjudicated the principles of the case made in May and October, 1898, which fixed the rights of all the parties and settled the principles on which the large transactions and affairs were to be wound up. The bill of review presented this objection for the first time, the answer repeated it; but both bill of review and answer were after those appealable decrees, and therefore the point could not be then raised. Had the court gone back of the decrees into an investigation of this question, it would have been error, because those decrees stand essentially upon the basis stated in the bill, that that deed of assignment was valid; for if there was no deed of assignment, there could not possibly be any decree settling the affairs of the association entirely upon the existence, basis and validity of that deed of assignment, and those decrees are res judicata upon the existence and validity of that assignment. That assignment is initial point A of the whole proceeding and decrees in this case. The bill of review and answer could not re-open that question. Crim v. Davisson, 6 W. Va. 465; McCoy v. McCoy, 29 Id. 794. Moreover, the bill set up this deed of assignment as the basis of relief, and alleged that the building
Suppose, however, that the appellants were not precluded by the bill taken for confessed against them and the decrees thereon . fixing the rights of the parties. Still, they would be debarred from upheaving things as they propose because of their laches in assaulting the deed on this merely technical point, merely technical when everybody admits that the association was wholly insolvent, unable to go on, and that the assignment was only what the' stockholders surely would have done, or a court of equity would have done through a receiver. Hot only would they be debarred by laches, but the appellants would be also thus debarred by their acts of recognition and ratification of that assignment. The deed of assignment was 24th September, 1897. Active steps were taken by the trustees by the institution of the suit to wind up in November, 1897. In February, 1898, on the bill taken for confessed the case was referred to a commissioner to report the assets, debts and stockholders, and the amount paid by the stockholders. The commissioner reported these things, and on 28th May, 1898, a decree ivas made confirming the report, and another reference was made to the commissioner to settle the accounts of each stockholder with the association and with other stockholders, and to report a scheme by which stockholders could be made equal in the distribution of the assets. Upon the second report, a decree of confirmation was entered settling the rights of all the parties in October, 1898. In February, 1899, for the first time the knitting companies sought to raise this question of the validity of the assignment. Before that they had paid on their debts and stock, after that assignment, large 'amounts of money to the trustees under the assignment, thus recognizing and ratifying that assignment in solemn manner. Besides, they knew that the court had ordered the disbursement under that assignment of large amounts of money, thousands of.
Thus we find no error in the decrees under the assignments made by the appellants.
The trustees cross-assign two errors. One is, that the court overruled the commissioner, as asked in the bill of review filed by. the knitting companies, by decreasing the interest from six per centum, as calculated by the commissioner, to five per centum on the- ten thousand dollars at which the Middlesex Knitting Company purchased from the association real estate in Martinsburg. The trustees say that the by-laws and statute require that all loans by the building association should bear six per centum interest, and that the said real estate was nothing but a loan as if money, and that the provision in the contract between the association and said company charging only five per
The other cross-assignment of error contends that the contracts between the association and the knitting companies, so far as they fix a definite amount and number for weekly dues on stock until the payments would amount to eighty-eight dollars are violative of the plan of the association, which, as well as the statute and by-laws, requires payments to go on until the stock reaches par, whereas this contract lets off these borrowers with the payment of only eighty-eight dollars per share. I do not doubt the proposition of the appellees. The contracts would be construed to conform to the by-laws and statutes, and enforced as if so drawn; but the question is immaterial, because that contract, as regards further payments, on stock, has been rescinded by the insolvency of the association.
Decrees affirmed.
Affirmed.