Case Name: Englehardt v. Fifth Ward Permanent Dime Savings and Loan Association
Court: Buffalo Superior Court
Jurisdiction: New York
Decision Date: 1893-11
Citations: 5 Misc. 518
Docket Number: 
Parties: Englehardt v. Fifth Ward Permanent Dime Savings and Loan Association.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 5
Pages: 518–528

Head Matter:
Englehardt v. Fifth Ward Permanent Dime Savings and Loan Association.
(Superior Court of Buffalo—General Term,
November, 1893.)
The articles of the defendant loan association provided that members who had received no loan might withdraw at any time upon giving one week’s notice, and that all dues actually paid would be refunded to them when the necessary funds were collected. Held, that a member who had received no loan, having complied with the requirements of the articles of association, was entitled as a creditor to prosecute to judgment his claim for a return of the dues actually paid.
The fact that the court upon application might stay the issuing of an execution, or restrain the prosecution of suits in order to protect the rights of all the members of the association, does not militate against the right of such member to have his claim established by judgment.
After plaintiff became a member the association adopted a rule or by-law that members withdrawing from the association should be paid in the order in which their applications for withdrawal were filed.
Also, held, that the adoption of the resolution was beyond the power ot the association.
At the time plaintiff filed his application for a withdrawal a number of applications for withdrawal were already on file, and there were funds- on hand sufficient to pay his claim, but not enough to pay his and those of the other applicants. Held, that plaintiff had a right to be paid equally with the others whose application had preceded his.
Appeal from a judgment of the Municipal Court of Buffalo.
Benjamin F. Folsom, for plaintiff (appellant).
Henry W. Brendel, for defendant (respondent).

Opinion:
Hatch, J.
I think this judgment should be reversed for the following reasons: The articles of association provide that a member may withdraw when he chooses, upon complying with certain conditions. These requirements have-been complied with by the plaintiff, and he became, when that event happened, a creditor of the association and no longer a member. The association then presently owed him this money which, by the articles of association, he was entitled to receive from it. The fact that he was to be paid from the funds when collected does not change his status and cannot affect his legal rights; he is still a creditor, his debt is due, and he has the legal right to have that debt established. If the association should fail to collect money and fail to have funds on hand, is the creditor to be prejudiced thereby, and is the failure to collect to be an answer to his claim, and a defense when he seeks to assert his rights % If this is his status, then he can never maintain an action at law so long as the association is without funds in the treasury, and then we have the anomaly of a creditor with a debt due denied his legal right.
This precise question was the subject of decision by the courts of Pennsylvania (U. S. Bldg. Assn. v. Silverman, 85 Penn. St. 394), and it was there held, for satisfactory reasons, that the action could be maintained. Endlich Bldg. Assn. §136, 137, 141, 143, 266.
Doubtless the creditor has an equitable right which may be enforced by appropriate remedies, but his right is not so lim. ited, nor is his legal right prejudiced thereby. I see no dis tinction between a case where the statute provides for with drawal, and where the statute relegates to the association the right of making such provision in its articles. Here the provision in the articles is as broad as the provision of the statute in the Pennsylvania case, and certainly can have no greater force or'effect. It is quite likely that upon proper application a court would stay the i&suing of an execution or the prosecution of actions in order to protect the rights of all the members,if such protection seemed necessary, but such fact does not militate against the right of plaintiff to have his claim established by judgment.
When plaintiff's withdrawal was perfected, funds sufficient were on hand to pay his claim, but there were not sufficient funds on hand to pay his claim and those of other members who preceded him in point of time in perfecting their withdrawal. I doubt much the power of the trustees to provide by resolution, after plaintiff became a member, a preference of payment in favor of members who should first file their claims. To the extent of the amount paid in each withdrawing member stands upon an equal footing to participate in the fund collected. When the member perfects his right of withdrawal, he is then the equal of any other member who has perfected such right, and is entitled to be paid. It is here that the resolution becomes operative, for it creates a preference in favor of those who have first perfected their withdrawal. It has been held that such a rule was inoperative when the association had ceased to be a going concern (In re Blackburn & District Benefit Building Society, L. R. [24 Ch. Div.] 421; In re Sunderland Building Society, L. R. [24 Q. B. Div.] 394), and by implication that the rule found force when the society was solvent. But in both of these cases the rule was in existence as part of the by-laws when the association was formed. It is well settled that it is, not within the power of the trustees to destroy the equality of shares in a stock company, or to take away a right which originally existed, and this even though the power exists.to amend, alter or repeal by-laws. Kent v. Quicksilver Mining Co., 18 N. Y. 159.
In the present case plaintiff's original right was to be paid equally with all others when his withdrawal became perfected; by the operation of the resolution his right is postponed and others preferred. This is something more than a mere regulation ; it is the creation of preference in payment where all are equal. This right to be paid equally with the others is a substantial right, and when the withdrawal is perfected all persons therein must be treated alike, and a resolution which gives the whole fund then to one, in exclusion of the others, is the destruction of such right, which I believe to be beyond the power of the trustees to accomplish. Holyoke Assn. v. Lewis, 1 Col. App. 127.
In either view, the judgment appealed from must be reversed.