Broadwell v. Inter-Ocean Homestead & Loan Ass'n

Mr. Justice Wilkin delivered the opinion of the court: Neither the complainant in the orignal bill nor any other shareholder or officer of the association has made complaint of the action of the court below or its final decree, therefore the only assignment of error material to be considered on this appeal is, “the court erred in refusing to forfeit the charter of the defendant corporation.” The petition by the Attorney General is based on section 17 of the act of 1893, (Laws of 1893, p. 85,) which provides: “And whenever it shall appear to said Auditor that the assets of any such association incorporated or doing business in this State are insufficient to justify the continuance of business of such association, or that it is conducting its business, in whole or in part, contrary to-law or in an unsafe manner, he shall communicate the fact by mail, addressed to the president and secretary of such association. The mailing of such notice shall be deemed sufficient evidence and notice. Such association shall be allowed sixty days within which to make the assets sufficient or correct such illegal practices, and in case such assets are not made sufficient or such illegal practices corrected within the time herein provided, then the Auditor shall report the same to the Attorney General, whose duty it shall then become to apply to the circuit court of the county in which the principal office of such association may be located, or to any of the judges of said court, in the name of the People of this State, on the relation of said Auditor, for an order requiring such association to show cause why the business of such association shall not be closed or for an injunction restraining such association from doing further business, which application may be made either in term time or in vacation, in the manner now provided for obtaining injunction, except no bond should be required from said Auditor in obtaining such injunction. The court shall thereupon proceed to hear the allegations and proofs of the respective parties, either in open court or by reference to a master in chancery; and in case it shall appear to the satisfaction of said court that the assets and funds of said association are not sufficient, as aforesaid, or that such association has been conducting its business, in whole or in part, contrary to law, the court may decree a dissolution of said association and the distribution of the assets, and may appoint a receiver of such association, with full power to do all acts necessary to close the affairs of such association and for the proper distribution of its assets.” It is insisted by counsel for appellee that the petition on the relation of the Auditor was improperly filed, because no notice was given by him of any irregularity in the affairs of the association after his examination of November, 1894. We think, in view of the allegations of the petition that the report made in answer to the notice which he did give was false and made to deceive him, and that the liabilities Of the association were largely in excess of its assets, (neither of which allegations is denied by the answer,) the Auditor was justified in treating the report of the compliance with his requirements, and his answer thereto, as if not made. The petition alleges that at the time it was filed this corporation was insolvent, and, as we have said, the answer does not deny it. The action of the shareholders, as well as that of the board of .directors, concedes the fact. If, therefore, the case should be decided on the facts as they existed when the petition was filed, there would be no question but that it would be the duty of the court to sustain the petition, and order the dissolution and the winding up of the affairs of the association. It seems, however, that section 17, as well as the two preceding sections of the act of 1893, supra, clearly manifests an intention upon the part of the legislature to give the Auditor of Public Accounts supervisory power over homestead loan associations in this State. Any action brought under section 17 to dissolve such an association must be on his relation. He is the public officer designated by the law to determine when the assets are insufficient to justify the continuance of business or when it is conducting its business contrary to law or in an unsafe manner, and he alone is authorized to decide whether or not the assets have been made sufficient or any illegal practices corrected within the sixty days allowed for that purpose after notice. The theory upon which the court below proceeded manifestly was that the Auditor was clothed with the power of determining these questions, and the association through its shareholders, and subsequently by the action of its board of directors, having made its assets equal to its liabilities, to his satisfaction, the decree refusing to dissolve it and re-investing its officers with its assets with authority to proceed with its business was authorized. We do not understand the Attorney General to question this right provided the assets were increased in a legal manner, but his contention is, that the proceedings by the stockholders and the board of directors were illegal and irregular, first, because stockholders could not be legally represented by proxy at the meeting at which it was resolved to increase the assets, and second, that neither the stockholders nor the board of directors could legally increase the assets so as to make them equal to the liabilities by spreading assessments against the shareholders. We are not prepared to agree with, either of these contentions, especially the latter, which,, in our opinion, goes to the merits of the case. Section 17, supra, by providing that the association “shall be-allowed sixty days within which to make the assets-sufficient,” clearly contemplates the right of the board of directors to increase it assets, and we are unable to-perceive how that could be done in any other way than by making assessments against its shareholders. Nor can we see how the shareholder would be injured by making that assessment available by charging upon the books of the association the per cent necessary to make-the association solvent, against the amount each shareholder paid in upon his stock, as was done in this case, as shown by the Auditor’s report of May 17, 1895. But even if the contention of the Attorney General that the action of the shareholders and board of directory was not in strict conformance with the law be correct, still the question remains, who can complain of that: action? As we have before said, no one interested in the association is complaining or making any objection. The-Auditor, charged with the official duty of supervising the-association, has by his affirmative act and report aproved the action by which its solvency has been brought about. He reports to the court every fact necessary, under the provisions of the statute, to entitle it to resume business under its organization, and we are unable to see how the public are in anyway interested in preventing it from so doing. Again, the court had jurisdiction of this corporation under the original' bill, and was, by its receiver-appointed in that case, in possession and control of its-business and assets. That jurisdiction was neither taken away nor interfered with by the intervening petition. If, through the subsequent action of the shareholders or-board of directors, the court became satisfied that the errors and irregularities in the management of its business had. been corrected and its assets so increased as-to render it solvent, there is no reason why it might not, in the exercise of a sound legal discretion, order its receiver to re-transfer the business and assets back to its board of directors and permit it to resume business in conformity with its charter and the statute. The object of the amendatory act of 1893 is undoubtedly a wholesome one, intended to prevent the abuse of the privileges of such associations under the law, and to prevent their doing business after their assets have become insufficient to justify them in doing so. When irregularities of this kind are discovered and proceedings begun to dissolve the corporation, if the court becomes satisfied that they have in good faith been corrected, it would seem that the interest both of the shareholder and the public requires that they should be permitted to continue their business. Certainly it can not be urged that the shareholders of this organization would have been benefited by a dissolution and winding up of its affairs rather than to permit it, by the method adopted, to put itself in a condition to continue business. The decree of the circuit court will be affirmed. Decree affirmed.