Opinion
07-07-1892
DEEDING v. BISHOP BAYLEY BLDG. & LOAN ASS'N NO. 2.
John W. Wartman, for complainant. Thos. P Curley and Saml. H. Grey, for defendant.
(Syllabus by the Court.)
Bill by Thomas Deering against the Bishop Bayley Building & Loan Association No. 2 to enjoin it from offering its funds for sale to the members of the second series until the members of the first series are paid in full.
John W. Wartman, for complainant.
Thos. P Curley and Saml. H. Grey, for defendant.
BIRD, V. C. The complainant in this case became a member of the Bishop Bayley Building & Loan Association No. 2 in the year 1880. As such he was the owner of five shares of stock. According to the scheme adopted, 10 years were allowed for this stock to mature, and, when so matured, each share was expected to be worth $200. Part of the plan was to issue different and successive series of stock year after year. There was a provision in the constitution for the payment of stock in these words: "When the stock of any series shall have attained the value of two hundred dollars each, one half of the receipts shall be appropriated by the board exclusively to the liquidation of the same. Priority in payment shall be given to those willing to allow the highest premium, and no interest will be allowed on such money due from the time value is ascertained until payment is made." In November, 1891, the second series matured, each share being of the value of $200. The board of directors undertook to apply the one half of the receipts to the liquidation of the stock of both the first and second series by permitting those who held stock in either series to bid, offering such rate per cent. as they were willing to give for the amount of their stock. In December last the rate per cent. for the premium was 6 per cent., and in April last it had so advanced as to command 9 per cent. The complainant says that the money in hand offered in this manner for the liquidation of both the first and second series, rather than of the first series alone, worked a great hardship upon the members of thefirst series, in that it greatly increased competition. It is alleged that this is in contravention of the constitution, and consequently a violation of the contract entered into between the association and its members. It is said that, according to the contract and constitution, the members of the first series are entitled to priority in bidding until the amount due the members of the first series is entirely liquidated. The complainant asks that the corporation may be restrained from offering its funds for sale to the members of the second series until the members of the first series are paid in full. The language of the constitution is plain; its meaning is not doubtful. In discharging its obligations to the owners of the different series, the company expressly contracted to devote one half of its receipts to the liquidation of each series when the stock should become of the value of $200, and in the most distinct manner giving priority of payment to those of such series who should be willing to give the highest premium for the value of their shares. I cannot read this in any other light than that indicated. Each of the series must be treated as a separate and independent association in this particular. Whatever other dependence the one had upon the other by way of benefits, it was not intended that the owner of any series which first matured should be subject for the liquidation of his shares upon the will or wish of the owner of any stock which should mature in any subsequent series. He is only to be brought into competition with the members of his own aeries. He is obliged to forego interest. This surely is sufficient penalty for delay. In addition to this, he should not be subject to the hardship which might ensue if he were obliged to yield to the exactions which subsequent shareholders might impose, who perhaps could afford, since they lose no interest, to supply their necessities by offering high premiums for the money. If the principle contended for by the defendant should prevail, then the owner of the stock in the first series might be postponed until the owner of the stock in the last series was satisfied. In such case, were there to be eight or ten series, the owner of stock in the first would not only be deprived of his principal until the liquidation of the owners of stock in the last series, but also of his interest; so that, in case each series should not commence until the expiration of two years after the last, the loss of interest to the owner of stock in the first series would exceed the amount of his principal. Certainly there is not only nothing mutual in this, but it is in every respect highly inequitable. This view of the case is presented and enforced by Endlich in his work on Building & Loan Associations, § 47. Although the facts are different, yet, I think the same principle was applied in the case of Association v. Haley, (Pa. Sup.) 20 Atl. Rep. 1063. The defendant should be enjoined from accepting bids for the one half of the receipts aforesaid from any holder of stock in any series except the first, until all the shares of stock in such first series be fully liquidated.