Case Name: The City Loan and Building Association of Augusta et al., plaintiffs in error, vs. William H. Goodrich et al., defendants in error
Court: Supreme Court of Georgia
Jurisdiction: Georgia
Decision Date: 1873-01
Citations: 48 Ga. 445
Docket Number: 
Parties: The City Loan and Building Association of Augusta et al., plaintiffs in error, vs. William H. Goodrich et al., defendants in error.
Judges: 
Reporter: Georgia Reports
Volume: 48
Pages: 332–337

Head Matter:
The City Loan and Building Association of Augusta et al., plaintiffs in error, vs. William H. Goodrich et al., defendants in error.
(Atlanta,
January Term, 1873.)
Stockholder’s Agreement to Suspend Operations — Effect.—The stockholders of a chartered loan and building association agreed unanimously, at a period long antecedent to the time when, by the rules of the company, it would close, to cease operations and settle their mutual relations on principles of equity. At the same meeting a majority of the stockholders adopted by vote a scheme of settlement, which repudiated, as a basis, the rule of crediting each stockholder with his payments and legal interest thereon, and charging him with *his receipts and legal interest, but was based upon an arbitrary compromise of the assumed rights of the borrowers and non-borrowers, under the charter, in its ordinary working. A large minority of the stockholders protested against this scheme and filed a bill in equity, seeking to enjoin the officers of the corporation from carrying out said scheme, and praying that the rights of the parties should be ascertained and the assets disposed of by the Court on principles of equity which the bill claimed simply required each stockholder to be credited with his payments and legal interest and charged with his receipts and legal interest:
Held, 1. Even though the rules of the company under the charter were not obnoxious to the laws against usury, still as by common consent it was agreed that the company was now to wind up, and as the contracts of the parties must therefore of necessity be set aside, and the rules of the charter be disregarded, it was not competent for the majority to adopt a scheme repudiating the rate of interest prescribed by law between persons having moneyed dealings with each other, and that the injunction was therefore properly granted.
2. Scheme of Settlement — Cardinal Rules. — The cardinal rule for the settlement among the stockholders on principles of equity will be to charge each stockholder with his receipts and interest on them from the time of the receipt, and to credit such stockholder with his payments and interest from the date of the same, according to the rules of law for such calculations, to divide the assets according to the result, subject, of course, to such equitable modification and adjustment as to expenses, losses, etc., as may appear equitable from the proof at the trial.
3. Injunction — Effect on Stockholder’^ Debts. — The injunction prohibiting the officers from carrying out the plan adopted by the majority ought not to hinder the collection of the debts due by the forfeiting stockholders.
4. Speedy Payment — Chancellor’s Duty. — Under the prayer of the bill it is the duty of. the Chancellor to take such order as will ensure the speedy payment of the balances due and the collection of the assets, Including any insurance policies, that the company may own or may hold as collaterals, according to the rights of the parties in each case, as well as balances due by stockholders as debts due by persons who had forfeited their stock before the date of the assessment, as will insure the speedy preparation of the whole matter for a final decree.
Injunction. Building and Loan Association. Equity. Usury. Before William H. Hull, Esq., Judge, pro hac vice. Richmond county. At Chambers. August 10th, 1872.
William H. Goodrich filed his bill against the City.Loan and Building Association of Augusta, making substantially the’ following case: The defendant was organized under its ’"constitution as a building and loan association in June, 1866, an order of incorporation having been obtained at the preceding April term of Richmond Superior Court. The constitution and by-laws being similar to those of other such institutions and being lengthy, are omitted from the bill. (See Parker vs. Fulton Loan and Building Association, 46 Georgia Reports, 166.) Clarence V. Walker took twenty-five shares of stock in said association, and subsequently desiring to effect a loan from the defendant of $1,500 00, he borrowed, what was rated under the rules of defendant at $5,000 00, gave, his note for the last amount, and a mortgage to secure the. payment thereof on the “Wiley Barron place,” at the same time transferring a policy of insurance for $1,000 00 on the house, and hypothecating his said stock. After a few months said Walker was unable to pay his installments on his stock,.and transferred the same to complainant, with all the rights and privileges attaching thereto. Complainant has duly 'paid said installments up to the time it was agreed to wind up said association.
At a meeting of the stockholders of said association, on November 20th, 1871, a committee of ten was appointed, composed equally of borrowers and non-borrowers, for the purpose of “making an equitable and just settlement with eách stockholder, with a view to closing the association.” At a meeting held on the 11th of the succeeding month, said committee, by 'their report, suggested that every stockholder should be credited with the, amount paid in, with interest thereon, and that every borrower should be charged with the amount received by him, with interest thereon, and that each stockholder should be charged .pro rdta with the annual expenses and losses. The report further suggested that any assets collected after the proposed settlement should be divided pro rata between the borrowers and non-borrowers, and that borrowers in arrears at the time should.be allowed six months within which to pay up, with interest added.
This report was, on motion, tabled.
One of the committee then submitted a minority report, in *substance, as follows: That the association should be closed on the basis that each non-borrower should be entitled to $71 00. per share who had paid the sixty-sixth installment, and that in order to effect this end, the borrowers should be assessed $21 00 per share, indulgence being extended to Jan-, uary 1st, 1872, to those unable to meet this demand. This, report further suggested, that assets collected after such settlement-should be divided among the non-borrowers, and that the president and board of directors should constitute an executive, có.mmittee to close up the affairs of said association upon the above basis.
The minority report was adopted, complainant and many other members entering their protest against such action. "
The house'insured by Walker was consumed by fire in April, 1872, and the defendant insists that the amount of the policy .should be paid to its treasurer, to be distributed according to the inequitable plan abov.e set forth. Especially is such a course contrary to equity, as there has been paid to said defendant by said Walker, and by complainant as his successor, not only the principal of said $1,500 00, originally borrowed, with the legal interest thereon, but an additional sum of $1,018 70. Such a course cannot .be pursued by the defendant for the further reason that by its'action in the adoption of the aforesaid minority report, it has abandoned its constitution' and has remitted each member to his respective rights in the joint enterprise or copartnership.
Prayer, that a receiver be appointed to take charge of the assets of said defendant, to be held until relief may be afforded to the parties at interest by a.decree of this Court; that the defendant may be restrained by the writ of injunction from settling with its members upon the basis adopted in said report, and from collecting the money due upon the aforesaid policy of insurance until the further order of thq Court; that the Southern Mutual Insurance Company be' enjoined from paying said fund to the defendant; and that the writ of subpoena may issue.
*The answer is unnecessary to an understanding of the decision.
Judge Gibson refused to preside in the case because of relationship by affinity to the complainant. William H. Hull, Esq., an attorney at law, wag selected by the parties as Judge pro hac vice.
The Chancellor passed the following order: “On hearing the above bill, it is ordered that the writ of injunction do issue restraining the said City Loan and Building Association from paving out any of the funds of the corporation to any stockholder thereof, unless in payment of a debt not growing out of his relation as stockholder; until the further order of this Court, and that said association be restrained by the same writ until the further order of this Court from collecting any note given by any stockholder for advances on his stock, except to the amount of the sum or sums advanced and interest thereon, at the rate of seven per cent, per annum, after crediting the same with all payments made since the giving of the note, according to the laws of the State on that subject.
“And that the said Southern Mutual Insurance Company be restrained until'the further order-of this Court from paying to any party the amount of money due on insurance, as mentioned in the bill. . . .
“And it is further ordered, that before said writ of injunction shall issue, the complainants, or some of them, shall give bond, with good security, in the usual form of injunction bonds, in the sum of $10,000 00.
“And it is further ordered, that complainants may hereafter, if they see fit, renew their application for the appointment of a receiver.”
To which order the defendants excepted.
The record and bill of exceptions do not show by name any other parties to the above case than those stated in the report. But it is to be gathered from the pleadings that all the members, of the association opposed to the plan of settlement adopted by the majority, were made parties complainant, and' that the Southern Mutual Insurance Company was made *a party defendant, though the writ of subpoena was not prayed against it.
Joseph P. Carr, for plaintiffs in error.
Hook & Gardner, for defendants.

Opinion:
McCay, Judge.
We see no reason to change the opinion we expressed at the last term in the case of Parker vs. The Fulton County Loan and Building Association, and only now add that it is'pushing the usury laws very far to attempt by them to limit the right of parties going into a partnership or corporation to contract on what terms the partners shall use the common funds.
But however clear it may be that these contracts as made, are not usurious, it does not at all follow that this injunction was not properly granted. As charged by the bill and admitted by the answer, it was and is the agreement of all these parties that the corporation shall cease operations and its affairs be settled on principles of equity and right. Obviously, by this agreement, the contracts of the several parties are by common consent to be abandoned, since by the agreement it is impossible they shall be performed. Each of these contracts, not only those of the borrowers, but also of the non-borrowers, has as one of its fundamental essential elements, that it shall only be performed by monthly payments, which are to extend over the entire period of the existence of the corporation, and until, under its regular working, it will wind up. If it is to close now, at an arbitrary period, by agreement, these contracts are necessarily to be abandoned, and the parties are to stand without any agreed rule to adjust their relations to each other. Each has paid money into the common stock, and some have drawn out, and there have been expenses and losses. The end they all sought, has by agreement been abandoned by unanimous consent. It remains that their several relations to each other and to the fund is one not fixed by any agreement and must be regulated by the law *of ex equo bono. What that is in questions of money is regulated by law. The parties who have paid in money and drawn none out, who have got nothing but burdens, ought, it seems to us, to get back their money with legal interest, and the parties who have used the money ought to account for it and legal interest. In such matters equity follows the law, which fixes a standard by which to .determine what money is worth. Nor is there anything in the charter or in the new agreement which authorizes the majority to decide how the assets are to be divided. The agreement in terms abandons the charter, and with it the right of a majority to make rules also falls, and the parties are left to the relations which equity estab-t lishes.
We can easily see how the rule we have indicated for ascertaining the present status of each stockholder, by crediting him with his payments and charging him with his receipts, with legal interest, may need some qualification when the assets come to be divided. It is hardly equity that the non-borrowers, who have done nothing but pay, should bear also the burden of the past expenses. They ought, it seems to us, to get their money back, with legal 'interest, in full. But there ought to be some profits, and we leave all such adjustments for discussion and settlement according to the facts as they may be made apparent at the trial, after the assets have come' in.
If the injunction was intended to restrain the collection of the debts due by those of the original stockholders, who, by forfeiture, had, at the date of the agreement, ceased to be members of the company, we think this was error, though we doubt if the Judge so intended. Such stockholders were not parties in any sense to the agreement or to the bill, and have no part or lot in the matter. What they owe is entirely independent of the agreement.
Whether the company or Mr. Goodrich is entitled to the insurance money, we are unable to say from the facts, as it does not appear from the record how he stands to the company under the rule we' have suggested. The insurance money, as it seems to us, the company has a right to retain as security *for whatever Mr. Goodrich may have to pay in making up the fund to be divided.
It is in the power of the Chancellor, and we take it for granted he will wisely exercise it, to' take such order by interlocutory decree as will prepare the fund and marshal the assets for final division by the decree. He may do this by the appointment of an auditor, or master, or by the appointment of a receiver, or, if he sees fit, we see no objection to directing from time to time the proper officers of the company as agents of the Court to collect up the assets.
This agreement to suspend operations and close up the affairs of the company, is not, Jn any fair sense, either a present forfeiting or laying down the franchises of the corporation. Indeed, it would seem to be of great importance to the success of the agreement that the existence of the company do not terminate. By unanimous agreement, the'members of any corporation may alter any stipulation which only affects their relations to each other — which does not take up or lay down any new privilege, or affect the rights of fhird persons, and we do not see that the agreement in this case does not fairly come within this principle. The parties do not desire a forfeiture, and it would be strange if the law w'ill not permit them to divide their assets as they please. We are, therefore, of opinion that the relief sought for can be had by bill, and that jurisdiction is not exclusive by scire facias, in the Court of law, to forfeit the charter.'
Judgment affirmed.
Principal case also reported in 54 Ga. 99.