Laurel Bun Building Assn. v. Sperring

Mr. Justice Paxson delivered the opinion of the court, The rights of the plaintiff below as a withdrawing stockholder are fixed by the Act of 12 April, 1859, P. L., 544, and the constitution and by-laws of the defendant company. These limit his right of recovery to the amount of dues which he had already paid in, with interest thereon at the rate of six per cent, per annum, less all fines and his proportion of expenses or losses incurred. In point of fact he was allowed to recover not the withdrawal value of his stock, but its par value as reduced. That this was error is too obvious to need an extended discussion. The plaintiff owned seven shares of stock in the first series. Upon five of these shares he had borrowed the full amount, $200 per share, and had given one or more judgments therefor, amounting to $1000, with the seven shares of stock as collateral. Two of his shares were what is called free stock, that is, it had not been borrowed upon, although placed with the others. In 1877 the association, owing it is stated to the general depression of business, passed a resolution reducing the par value of the stock from $200 to $116 per share that the stockholders pay in $20.20 per share, and that all of the stockholders in the first series who should comply with the resolution prior to the ensuing May meeting should “ be entitled to the amount of their stock at $116 per share.” The amount of plaintiff’s assessment on his seven shares under this arrangement was $141.40 which was charged against his two free shares. He then procured satisfaction to be entered ■upon the judgments which the association held against him. ■No money was paid by the plaintiff and the effect of the transaction was the satisfaction of the judgments which were only paid in part, and an advance to him. by the association .of $141.40 on the faith and credit of his remaining two shares of stock. As a result of this somewhat questionable proceeding he held two shares of stock of the fixed value of $116 each = $232, upon which hé owed the company $141.40, leaving an apparent balance due him of $90.60, which he would be entitled to receive upon the final winding up of the first series. That he was not entitled .to sue for it at law was settled in O’Rourke v. West Penn. Loan and Building Association, 12 Norris, 308. To meet this difficulty on July 6, 1881, he gave notice of withdrawal, and subsequently commenced this suit, in which he was permitted to recover the above sum of $90.60 with interest. The result is to let him out as a withdrawal stockholder with a full share of the profits on the seven shares, and to avoid all losses in the winding up, resulting from expenses, depreciation of property, etc. On the five shares he [339] got liis profit for the reason that his judgments were satisfied without payment, and on the two shares he gets the matured value of the stock. This result could not be reached without error somewhere. Upon the trial below, assuming that he was a withdrawal stockholder, he should have been confined to his notice and permitted only to recover what he claimed therein, viz: “to have returned to him the money paid in by him and returnable to him as a withdrawing stockholder, under the provisions of the constitution and by-laws of the Association.” The par value of the stock had nothing to do with the case and should not have been considered. Just what amount of fines, losses and expenses the company were entitled to charge against him we are not called upon to say, for the reason that the plaintiff was not a withdrawing stockholder and could not have been under the Act of 1859, so long as his stock was held in pledge: Watkins v. Building & Loan Association, 1 Out., 514. It appears from the plaintiff's own testimony that the two shares for which this suit was brought were applied by his direction to his indebtedness or arrearages on the other five shares, as well as on the two shares in question. This as before stated was $140, no part of which has been paid. It was only charged. It would bo further liable for all proper arrearages and charges, and for his proportion of losses which may have been incurred prior to his notice of withdrawal, conceding such withdrawal to be valid. For it is idle to say that when stock or a particular series of stock matures a holder is entitled absolutely to its par value. From such value must necessarily be deducted any expenses or losses incurred in winding up the association or the particular series. Such losses may be trifling or they may be serious. What the stockholders are entitled to under such circumstances is an equal division of the assets less expenses and losses. Aside from this, assuming that the resolution of February C, 1877 matured the stock of the first series, I am unable to see how a stockholder of that series can withdraw after such maturity. The plain object of the Act of 1859 was to permit a stockholder to withdraw during the active life of the association or the series. It makes no provision for a withdrawal after the stock has reached par, and the association exists only for the purpose of liquidation. JSlor can any object be perceived for such withdrawal except to gain the right to sue immediately for the value of the stock. This would be giving an unfair advantage which the law does not favor. The plaintiff has no right to recover in this action, and the Court below should have so instructed the jury. [340] Tin’s sustains the fourth and fifth assignments. The others are not in conformity with the rules of Court. Judgment reversed and a venire facias de novo awarded.