The record-union., 1898-07-26
THE SHAREHOL DER'S RIGHTS.
GROUNDS FOR INTERVENING
IN CERTAIN CASES.
Full Text of Judge Buckles Deci-
sion in the Union b. and J..
Suit Against a Bank.

AS there are large number of per-
sons interested in the settlement of the
complicated affairs of the Union Build
ing and Loan Association, the recent
decision of Judge Buckles of Solano in
the case of the association against the
Farmers and Mechanics Bank, by Re-
ceiver L. w. O'Neil, is given below in
full.
The decision is on the point as to the
right of a shareholder to intervene.
which right the defendant denied. Judge
Buckles says:
The right of Intervention is determined
by our code, and is as follows:
Section 5s., Z; g +. Any person may
before the trial intervene in an action or
proceeding, who has an interest in the
matter in litigation, in the success OF
either of the parties, or an interest
against both. An intervention takes place
when third person is permitted to be-
come party TO an action or proceeding
between other persons, either by joining
the plaintiff in claiming what is sought
by the complaint, or by uniting with the
defendant in resisting the claims of the
plaintiff, or by demanding anything ad-
yersely to both the plaintiff and de-
Many authorities have been cited upon
the right to intervene in general and OF
stockholder in particular, but l have not
had access to a number OF them, and eS-
pecially of those from the State of Louis
lana. In Isaacs vs.. Jacobs, decided by our
Supreme Court June "a, 1883, it is said:
| There have been many decisions upon
the right of Intervention which is given
by this section (3SO, but in none of them
has there been any attempt to define the
right in any clearer terms than those
of the section itself. Whether any par
ticular case is within the terms of the
premises is best determined by con-
sideration of the facts of that case"
In the same case it is also held that:
ITO avail himself of the right given by
| this section, the applicant must have
either an interest in the matter in liti-
cation, or in the success of one of the
parties to the action, or an interest against
both of them. The interest here reIerred
TO must be direct and not consequential,
and it must be an interest which is proper
to determine in the action in which the
intervention is sought"
Devine, the intervenor, is d stock holder
or share holder in the Union Building and
Loan Association, and the plaintiff
ONeil, is the receiver of that associa-
ton with power to take possession OF It's
property, books of accounts and records
and to liquidate and settle up the business
OF said association and to do all acts nee
essary thereto.
AS share holder, Devne is primarily
entitled to receive $500 for every share
he has, but now entitled to receive what
the assets of the said association will pay
pro rata, as it is the business Of the re-
ceiVer to wind up its affairs. OF course
what he may be entitled to receive Must
be paid after the debts of the aSSocia-
the securities sued for, the assets of the
said association, are something like these
or member of a firm, who upon the
dissolution of the co-partnership is enti-
tled TO receive his share of the surplus
assets of the firm after the debts and
legal obligations of the firm have been
settled.
The complaint herein alleges that for il
legal purposes the directors of the Union
Building and Loan Association borrowed
of the defendant $4,000, and as security
for the payment thereof illegally pledged
to said defendant the securities of the
said association amounting TO $41, 703.35.
But as L understand it, and as was con-
ceCed on the argument the receiver is
limited TO the question of the illegality of
the pledge irrespective of the question
whether or not the loan for which the
securities We're placed with the bank,
was legal and one the directors had
| power to negotiate.
The intervenor's petition sets forth
/ that his purpose in intervening is to liti-
gate the question OF the return Of the Sc.
| curities, and also to ltigate the right of
! the directors to borrow the $4,000 and
| it seems to me this latter is legitimatcly
part and a necessary part of the iiti-
| cation to determine the right to recover
the securities, or the right of the bank to
/ them.
| 1t may be true that the directors had no
| power to pledge these securities in the
| manner and form in which they We're
gwen to the bank. If so then under this
i suit the receiver might have the right
| to recover them. and the full purpose of
the suit accomplished But on the other
| hand, suppose that on the trial it is
| required of them in making pledge and
| proceeded in manner and form as re-
quired by law. then it might become nee
essary to inquire into the consideration
| for such pledge. Yet. / apprehend. under
| the restrictions of the receivers powers
all that could be given in evidence upon
| that point would be the simple isolated
fact the bank loaned these directors
10000 That would show good con-
sheraton and the securities would not be
returned.
| AS has been seen, it is alleged that the
| borrowing of the $4,000 an illegal
transaction, being without the scope of
the powers of the directors The question
then becomes important as bearing upon
the right to recover the securities. If the
rowing this money, as security for the
repayment of which these securities were
pledged, the conditions may be shown TO
be such as might preclude the bank from
| holding the securities Should interven-
| ton be allowed and all that is charged in
the complaint and petition be proven at
| that any judgment could be recovered
against the bank until it had received
back the $4,000 That is not the question
under considerat ton
| 1t may be said that the question of the
validity of the loan may be tested by an
answer in suit which the bank may
| bring to recover judgment for the 500 900:
/ but the bank may never have occasion
| to bring such suit, for while it retains
4 these securities, IL may collect them as
! they BECOME due and apply the proceeds
| TO the payment of this $4,000 indebtedness
| until the same is extinguished and in this
connection ii must be remembered that
! these securities amount to Sal. 703 3d. over
| double the amount of money loaned
| /. may be there are no corporate debts
| to pay outside of the disputed 5000 loan
But however this may be. the stakeholder,
Devine, has direct interest in the recov-
4 cry of these securities. because as has
| been seen, the affairs of the Union Build
/ ing and Loan Association are to be wound
up, and that means direct payment to
/ the shareholders of all the surplus asset s.
There is no law or reason to preclude a
| stakeholder from intervening in o proper
lease simply because he is stakeholder
| / apprehend that where the officers of q
COZ poration, in suit involving the assets
of the corporation fail and refuse to set
| up all proper matters for the protection of
| such assets. it will not be denied that
upon proper showing a stakeholder will
| be permitted to intervene Waymire VS.
| San Francisco Railway Company Ql2
Cal, on page 65D.
| In my judgment it becomes absolutely
necessary. for the reasons heretofore
stated, that in order that there may be a
nation of the issues in this controversy
the validity of the $4,000 loan be in
quired into. The receiver cannot do so
| because he is prevented by a prior order
| of this court now in force 1t therefore
appears to me proper that the stock
| holder should be permitted to intervene,
| and it is so ordered.
Hard to Tell.
Many tea dealers regret exceedingly
that when the Government exacted
10-centa-fb duty on tea, they did not
| likewise pass law to force all old teas
4