Case Name: Michael Sinteff, Respondent, v. The People's Building, Loan and Saving Association, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1899-02
Citations: 37 A.D. 340
Docket Number: 
Parties: Michael Sinteff, Respondent, v. The People’s Building, Loan and Saving Association, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 37
Pages: 340–345

Head Matter:
Michael Sinteff, Respondent, v. The People’s Building, Loan and Saving Association, Appellant.
Contract — agreement to pay -a certain sum contained in a certificate of stock of an association — subsequent by-laws limiting the amount a/re a violation of such contract— losses of the association cannot be charged against the a/mount due—rule as to matured stock.
Where a certificate of stock, issued by a building and loan association, contains an absolute and unconditional promise that, at the option of the holder, the amount paid on the certificate may be withdrawn at any time after three years from its date, with six per cent interest, and this option is also conferred by the by-laws in effect at the time of the issue of the certificate, subsequent by-laws which provide that ‘ ‘ only one-half the receipts of the association in any one month shall be applicable to the payment of all claims,” and that “the association shall not be required to pay out on withdrawing and matured stock more than one-half the amount received from dues and stock payments in any month,” constitute a violation of the contract to pay upon withdrawal, at the option of the holder, after three years.
Losses which the association has sustained cannot be charged against the amount due to the holder of such a certificate, upon his election to withdraw after three years.
Where such a certificate contains a provision by which the association agrees to pay a shareholder the sum of $1,200 at maturity, the holder takes his shares subject to the rules and regulations affecting all members alike, and his stock matures only when the net earnings of the association authorize its payment.
Appeal by the defendant, The People’s Building, Loan and Saving Association, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Ontario on the 8th day of June, 1898, upon the decision of the court rendered after a trial before the court without a jury at the Ontario Trial Term.
Chester M. Elliott, for the appellant.
H. J. Tuttle and Frank M. Hardenbrook, for the respondent.

Opinion:
Judgment affirmed, with costs, on the opinion of Nash. J, delivered at Trial Term.
All concurred.
The following is the opinion of Hash, J., delivered at Trial Term:
Hash, J.:
By the terms of the certificate issued by the defendant to the plaintiff, the defendant, in consideration of the sum of §720, or §60 per share for 12 shares of its stock paid by the plaintiff to the defendant at the date of the certificate, promised and agreed to pay to the plaintiff in accordance with its articles of association and by-laws, which were, by the terms of the certificate, made part of the contract, the sum of §1,200 at the end of five years from the date of the certificate, or at maturity of the stock; or at the option of the holder of the certificate, the amount paid on the same might be withdrawn at any time after three years from its date, together with six per cent interest, payable in the manner set forth in the articles of association and by-laws, and terms and conditions printed on the back of the certificate.
The promise that, at the option of the holder, the amount paid on the certificate might be withdrawn at any time after three years from its date with six per cent interest, by the terms of the certificate, is absolute and unconditional.
The articles of association of the defendant at that time authorized the issuing of the certificate in that form, and the by-laws provided that the holder might withdraw the amount paid on the certificate at any time after three years from the date of issue, and before maturity, together with annual interest of six per cent, to be computed for even months, interest to cease after the date of the application for withdrawal.
The contention of the defendant is, that the 7th condition printed upon the back of the certificate, which provides that " the articles of association, by-laws, terms and conditions, together with the application, are to be construed together as the contract between the shareholder and the association," includes and makes applicable all subsequent amendments of the articles and by-laws made prior to actual payment to the shareholder giving notice of withdrawal, under the three-year or withdrawal clause of the contract.
The amended articles and by-laws adopted since the certificate was issued to the plaintiff provide that payment shall be made upon withdrawals before maturity in the order of the applications for withdrawal, and that the association shall not be required to pay out on withdrawing or matured stock more than one-half the amount received from dues and stock payments in any month.
The contention of the defendant is that by the provisions of the amended by-laws the action is prematurely brought for the reason, as stated in the defendant's brief, that on the 10th day of August, 1895, the association had no funds on hand applicable, according to its rules, to pay-the plaintiff's claim; and that this condition existed until long after January 11,1896, at which time the association scaled its assets and charged against the plaintiff's stock a loss of twenty-three per cent, and the plaintiff being a member of the association at that time, and at all times since, is bound to pay his proportionate share of that loss.
It does not appear but that, if all the dues and stock payments had been applied, the prior withdrawals would not all have been paid long before the commencement of this action.-
The authority for the defendant's contention is the case of Engelhardt v. Fifth Ward Loan Assn. (148 N. Y. 281).
That case holds that a member of a mutual loan association organ- • ized under the. act of 1851 is subject not only to regulations existing when he became a member, but to such as may be enacted from time to time by the association, within the scope of the power given it by statute, including the power to enact at any time reasonable by-laws; and that a subsequent by-law to the effect that withdrawing members should be paid in the order of the presentation of their applications, is a reasonable regulation and binding upon all members alike, including those who became members before its adoption. But in laying down this rule the court held that, in the exercise of the power to make reasonable by-laws, a mutual association organized under the act of 1851 cannot destroy a contract created between it and its members by the articles of association to refund his dues to-a withdrawing member; it may enact a by-law more or less affecting the remedy of the member; and existing members will be bound thereby, so far, at least, as they consented to the exercise of such a power when they became members.
The articles of the defendant association in that case accorded to its non-borrowing members the right to withdraw from the association at any time on one week's notice, and in case of withdrawal it was provided as follows : " The dues actually paid in, together with such accrued profits as the directors may deem prudent for the interest of the association, will be refunded to them when the necessary funds are collected. Members who wish to withdraw have preference to those wishing to procure loans."
" It seems," the court say, per Andrews, Ch. J., " to be very plain that the clause in the articles of association, that the dues- paid by withdrawing members ' will be refunded to them when the necessary funds are collected,' operated as a qualification of the liability of the association to withdrawing members." And further on the opinion says: " There can be no doubt, we think, that the condition that the association should refund ' when the necessary funds are collected,' was a material and substantive part of the obligation assumed by the association, and that it constitutes a good answer to the suit of a withdrawing member, that neither at the time that he withdrew nor subsequently, before the action was brought, were there in the treasury of the association any funds collected, out of which the claim could be paid."
This ruling disposed of the question then before the court for its decision, without the application of the further rule laid down, that a subsequent by-law, to the effect that withdrawing members should be paid in the order of their applications, was a reasonable regulation, binding upon all its members alike, including those who had become members before its adoption. In regard to the power to enact subsequent by-laws affecting such members, the court say : " It may be admitted that the association could not under this power destroy the contract between it and the member. But the contract made was in law subject to the power of the association to enact at any time reasonable by-laws. It would not be reasonable to extend this power so as to authorize the association by a subsequent by-law to change the essential character of an antecedent agreement between a member and the association, as, for example, that a withdrawing member should not be repaid his dues. But a by-law more or less affecting the remedy of the shareholder may be passed, and existing members will be bound, so far, at least, as they consented to the exercise of such a power when they became members."
Here there are no such conditions annexed to the contract as m the Engelha/rdt case. The option given to the shareholder to with draw the amount paid, with interest, at any time after three years from the date of the certificate, is absolute and unconditional.
Whatever may be said of the provision of the by-law subsequently adopted, to the effect that claims should be paid in the order of the applications for withdrawal, as a reasonable exercise of the power of the association to enact by-laws which should affect the remedy of the plaintiff as a shareholder demanding payment of his stock at maturity, it cannot be said that the subsequent by-laws, which provide that " only one-half the receipts of the association in any one month shall be applicable to the payment of all claims," or that " the association shall not be required to pay out on withdrawing and matured stock more than one-half the amount received from dues and stock payments in any month," are provisions which merely affect the remedy of the plaintiff in the exercise of his right of withdrawal of the amount paid on his stock at the end of the three years. It is the withholding by the association of part of the means which the original articles and by-laws provided for meeting the absolute agreement of the defendant to pay upon withdrawal, at the option of the shareholder, after three years, and, if allowed, would destroy the contract to that extent.
If the withholding one-lialf the dues and stock payments has, as it appears to have had, the effect of postponing payment beyond the time implied by law, which is, presently, upon giving the required notice, it is a violation by the defendant of its contract. For aught that appears, it has already had the effect of postponing the time of payment since August 10,1895, and will, if the defendant's contention is allowed, postpone payment for a future indefinite period of time.
Besides postponing payment for an indefinite time, there is also the actual pecuniary loss of the interest, which by the terms of the by-laws ceased after the application for withdrawal.
The association has sustained losses to the amount of twenty-three per cent of its stock, on account of which the defendant seeks to charge against the plaintiff's shares as of the 11th of January, 1896, $161.50, and reduce the plaintiff's claim upon his withdrawal by that amount.
This, too, would be a violation of the defendant's agreement to pay to the plaintiff at his option after three years the amount paid by him on his certificate.
As to the provision of the certificate by which the association agreed to pay the plaintiff as shareholder the sum. of §1,200 at maturity, he took his shares subject to the rules and regulations affecting all members alike ; his stock matured when the net earnings would authorize its payment. It would bear its share of the losses and the time of payment would be regulated by such reasonable by-laws as the association might enact, but as to the option of with-, drawal provided by the agreement the time of payment and the amount cannot be changed by any subsequent act of the association; the exact amount is stipulated and the time of payment is fixed in law by the terms of the contract.
The plaintiff did not, by giving his notice of withdrawal in the form in which it appears, upon a blank provided by the company, limit the time of payment or in any manner affect his rights under the contract. He is entitled to recover the amount paid on his stock less the amount of expenses chargeable to his shares, conceded to be $100, and interest from the date of the certificate to the time of filing the notice of withdrawal. And the payment having been wrongfully withheld at least from the time of the commencement of the action, interest should also be charged against the defendant from the time the action was commenced.