Pawlick v. Homestead Loan Ass'n

Davy, J. The plaintiff, who was a stockholder and member of the Homestead Loan Association, the defendant herein, filed on. the 20th day of June, 1893, notice of withdrawal. When this notice was filed there was credited to him upon the — 428 — books of the ■ association for weekly payments upon his ¡stock the sum of $742, and this action is- brought .to. recover that amount. The defendant contends that by the terms of the articles of association the plaintiff’s claim‘was not due at the. time of the commencement of this action, which is the principal. point in controversy. It ■ appears that the defendant was organized under chapter 122, Laws of 1851, and the several acts amendatory thereof and supplementary thereto. By" the provisions of said act any number "of persons, not less than nine, call associate and form an incorporated company for the purpose of accumulating a fund from the subsciiptiohs of its members for the purchase- of real estate and the erection of buildings, or the making' of other improvements upon "lands or to pay off incumbrances thereon; by loaning to its members the requisite amount of money from the funds of the society upon1 good security, and also for. the purpose of accumulating a fund to be returned to its members who do not obtain advances, when the funds of 'such an association, shall amount to a certain sum per share, to be specified in the articles- of association. Membership- is acquired by becoming the owner of stock and subscribing to the articles of - association. • i Section 2- of article 14 of the association provides that members may withdraw the whole or part of their deposits by giving not less than one week’s notice in writing to-the: association, and the liability to .pay further dues and the right to dividends shall cease with the filing of said notice ; provided, however, that should the applications for loans-'and withdrawals at any time exceed the weekly receipts, such applications shall be numbered in the order in which they are received and paid in the same order ,as fast as the receipts of, the association will permit. The plaintiff, who subscribed to the articles of association, thereby.agreed to-'its terms and conditions. . One of those conditions was, that if he withdrew from the' association that his notice or application of .withdrawal should be numbered' in the order in which it was received and paid in the same order as fast as the receipts of — 429 — the association would permit. The reasonable construction to be placed upon this section is, that if the available receipts of the association are not sufficient at any given time to pay all the depositors who have given notice of withdrawal, they are to be paid in accordance with the order of their notice, so that the society should not be at liberty to prefer one depositor to another in an arbitrary way, as they might do without some such restriction. It appears from the evidence that at the time the plaintiff filed his notice of withdrawal the aggregate amount of prior unpaid ivithdrawals was $106,279.47, and that the total amount of receipts from the time the plaintiff filed his withdrawal down to the time this action wis commenced was $61,324.53, leaving $44,954.94 to be collected in before the defendant could pay the plaintiff’s claim according to the agreement expressed in the articles of association. The plaintiff also contends that he had a right to bring this action and take judgment against the association even if there were no money in the treasury legally applicable to the payment of -his claim, and in support of his contention he cites the case of United States Building & Loan, Association v. Silverman, 85 Penn. St. 394, as an authority. It is true that the court there held that a member who had served notice of withdrawal could maintain an action to recover the amount of his deposit before the funds provided for by the by-laws of the association had been collected. It appears, however, from an examination of that case that there was no provision in the by-laws for priority of notice, as there is under the rules of the association under consideration. It is also claimed by the plaintiff that the case of Englehardt v. Fifth Ward Permanent Dime Savings & Loan Association, 5 Misc. Rep. 518; 25 N. Y. Supp. 835, is controlling in this case. The views expressed in the prevailing opinion of the court are not in accord with my views, and it is contrary to the reasoning of Mr. Justice Dwight in the case of Wolfe v. Conkey Avenue Association, 75 Hun, 201. The learned judge says that “ the articles of association of every organiza — 430 — tion for mutual benefit, like the defendant, constitute the contract between the association and the individual member, and no provision of such contract is subject to be abrogated or its obligation impaired by any act of the board of directors which is not expressly authorized.” ' Endlich" on Building Associations, section 110, lays -down the rule that as soon as a member has perfected his right as a withdrawing, stockholder against the association by giving the proper notice of withdrawal, and conforming to all the legal requirements in the premises, he becomes a creditor of it to the amount coming to him under the rules and statutes-, payable out of the available funds in.the order in which his.withdrawal' was ■ perfected. It is also claimed that under the rule laid down in O'Rourke v. West Penn. Loan, etc., Association, 93 Penn. St. 308, that no injury can result to the other members of the association, even if a- judgment is obtained:. That the court has the power to stay the execution of the judgment until the association. has ■collected the necessary funds, It seems to me that there is an inconsistency in permitting the plaintiff to maintain his action ■ to recover a judgment, and then denying him the right of immediate execution. This course would certainly be: com trary to- the well-settled rules of practice in this state. There is no claim that the association has discont-inued'its business, or that it is insolvent, or that there is any bad faith- on the part - -of the directors in the management- of the affairs of the association, so that those questions, áre not before me for consideration. I know of no way, therefore, in which a. member of this association can enforce the collection of his claim sooner than the statute or rules of the organization will permit. It - would completely wreck any association of this kind if all of its members who chose to withdraw from the. organization -could sue and recover judgments before there were any funds in the treasury for paying the claims-as contemplated .by the articles of association. Such a condition-of things- would necessarily result in the appointment of a receiver- to wind up the business of the association, which would defeat the very - — 431 — •object of the statute, which was enacted to aid the laboring classes in acquiring homes from their accumulated earnings. The plaintiff was a creditor in a qualified sense only. Not like a general creditor who could enforce his claim at any time, regardless of the consequences to the association. The amount deposited to his credit was not his earnings alone, but it was tire profits made upon the money contributed to the association by all its members.. His relation, therefore, to the defendant and its members was in the nature of a partnership. When the plaintiff subscribed to the articles he thereby agreed to their terms and conditions. One of those conditions was that if he withdrew from the association that his notice or application of withdrawal should be numbered in the order in which it was received, and paid in the same order as fast as the receipts of the association would permit. His right, therefore, to bring an action to recover the amount credited to him as a depositor is not absolute until there is money in the treasury available for that purpose. The rules of equity will not permit him to depart from his contract obligations and take advantage of the other members of the association, in the collection of his claim. It was held in Texas Homestead Building & Loan Association v. Kerr, 13 S. W. Rep. 1020, that a judgment could not be recovered against the association by a withdrawing member, in the absence of an allegation in the complaint and proof by him that there were sufficient funds in the treasury to meet his claim in accordance with the by-laws. In Heinbokel v. National Savings & Loan, Association, 58 Minn. 340, it was held that the right to withdraw from a loan association and to receive back what had been paid into the treasury by a member of the association existed solely by virtue of the by-laws or statute. Brett v. Monarch Investment Building Society, L. R. (1 Q. B.) 367. While the rule which these courts have adopted is in- conflict with the authorities cited by the learned counsel for the plaintiff, yet I think it rests upon much sounder reason. The learned counsel for the plaintiff contends that inasmuch — 432 — as the secretary and treasurer of the association paid to the plaintiff $128, and agreed to pay him. the balance of his deposit when called for, this constituted a waiver of the contract, and, therefore, the whole amount of his claim became due. As I have already indicated, the plaintiff subscribed to the articles of association and became bound by their provisions. He was thereby charged with notice of the limitations and powers of the defendant and its officers, and that the secretary and treasurer had no authority to disregard its articles in the payment of withdrawal loans. First National Bank of Lyons v. Ocean National Bank, 60 N. Y. 278. It was held in Alexander v. Cauldwell, 83 N. Y. 480, that one who deals with a corporation is chargeable with notice of the purpose for which it was formed, and one who deals with its officers and agents is bound to know their powers and the extent of their-authority. There is an entire absence of evidence that it was the custom and practice of the defendant to pay withdrawals contrary to its rules. The plaintiff knew, or at least he was bound to know, that the articles which he signed constituted the contract between him and the association and its individual members, and that none of its provisions could be disregarded by any of its officers. The ¡ilaintiff also contends that after he became a member of the association section 2 of article 14 was amended by adding thereto that “ all withdrawals, except in full, should be paid from deposits on stock made prior to the beginning of the quarter in which notice of withdrawal is filed,” and that this amendment was made without his knowledge or consent, and, therefore, he is not bound _ by it. The plaintiff when he joined the association assented to all lawful amendments to the articles which might thereafter be legally enacted. Section 2 of the 'Laws of 1851 provides that the articles of building associations organized under said act shall provide the manner of altering or amending the articles of associatiQn, and such other provisions as shall be necessary for the convenient and effectual transaction of the business — 433 — thereof, providing that the same shall not in any respect conflict with the Constitution or laws of this state. Section 1 of article 18 provides that the defendant’s articles of association may be amended by giving proper notice to the members, providing also that the proposed amendments shall be approved by a majority of the board of directors and ratified by the votes of two-thirds of its members £tt a regular meeting thereof. It appears, therefore, that the members of the association had the right to amend its articles, subject, however, to certain limitations mentioned in the act under which the defendant was incorporated. It has been held that a private corporation has no right to repeal a by-law so as to impair rights that have become vested by virtue of the by-laws, although the same is reserved by charter to alter, amend or repeal its by-laws. Kent v. Quicksilver Mining Co., 78 N. Y. 159 ; Endlich Law of Building Associations, § 278. It seems to me that this amendment does not violate any rule of law, or infringe upon the plaintiff’s vested rights secured by contract with the defendant. There was no evidence introduced upon the trial showing, or even tending to show, that this amendment was in the least prejudicial to the plaintiff, and there is no contention but what it was regularly and legally adopted. Assumed that the plaintiff was not bound by the amendment, I do not see how he can maintain this action, even under the articles that were in force at the time he became a member of the association, for the reason that theré was no money in the treasury at the time this action was commenced applicable to the payment of his claim. The evidence fails to show that the plaintiff was prejudiced in any respect by this amendment. It is a rule that one who enjoys and reaps a pecuniary benefit of membership in a corporation under its constitution and by-laws is estopped from disputing their validity when they are sought to be enforced against him. I. am of the opinion that this action was prematurely brought, and the complaint, therefore, must be dismissed, but without costs. Complaint dismissed, without costs.