Case Name: Dollar Building & Loan Association v. Shields
Court: Colorado Supreme Court
Jurisdiction: Colorado
Decision Date: 1933-10-09
Citations: 93 Colo. 480
Docket Number: No. 13,280
Parties: Dollar Building & Loan Association v. Shields.
Judges: 
Reporter: Colorado Reports
Volume: 93
Pages: 480–496

Head Matter:
No. 13,280.
Dollar Building & Loan Association v. Shields.
(27 P. [2d] 485)
Decided October 9, 1933.
Rehearing denied November 27, 1933.
Messrs. Strachan & Horn, Mr. Charles H. Smith, for plaintiff in error.
Mr. J. E. Little, for defendant in error.
En Banc.

Opinion:
Mr. Justice Holland
delivered the opinion of the court.
The plaintiff in error was defendant in the trial court and for convenience here, the parties will be referred to as Shields and the association.
In February, 1932, Shields filed his complaint alleging the existence of the association as a corporation under the Colorado laws doing business in El Paso county; that on the 1st day of December, 1924, Shields loaned the association the sum of $3,000, and that the association delivered to him at that time an instrument in writing as follows:
"The Dollar Building and Loan Association
"Seven Per Cent. Certificate
"Colorado Springs, Colorado, December 1st, 1924.
" J. A. Shields has deposited with The Dollar Building and Loan Association Three Thousand and No/100 Dollars payable to the order of J. A. Shields or E. A. Shields, on return of this certificate, properly endorsed, any time on demand from the date of this certificate, providing-thirty days notice of such withdrawal is given, interest payable semi-annually, at the rate of seven per cent per annum.
"The Dollar Building and Loan Association "(Seal) By E. C. Sharer, Secretary-Treasurer."
"Nov. 10 1931 Pd. on this certificate $500.00." That on the 10th of November, 1931, $500 was paid on said in debtedness and that on the 5th of December, 1931, he served notice on the association in writing giving the association thirty days' notice of his intention to withdraw the balance of $2,500 with interest from July, 1931, and that the association refused payment.
The association demurred to this complaint and after same was overruled, answered admitting issuing a 7 per cent certificate, and the payment of $500 as alleged; admitted the giving* of notice by Shields of his intention to withdraw the balance and that the same had not been paid to Shields, but alleged that the said certificate when issued was subject to the provisions of section 2792 of the Compiled Laws of the state of Colorado and the amendments contained in chapter 72, section 1 of the Session Laws of 1927, and was subject to the by-laws of the said association and particularly article 3, section 4 and article 3, section 12, which are as follows:
"Article III, Section 4. "Withdrawals. Payments upon installment stock which has not been pledged as security for a loan, may be withdrawn upon giving thirty days notice in writing to the Board of Directors and upon withdrawal, the holder shall receive all of his monthly installment payments made thereon, together with all dividends credited to same, less the cancellation fee, fines and other lawful charges. The Association shall not be required to pay out upon withdrawals during any one month, more than one-half of its receipts from installment stock for that month. Advance payments and prepaid stock may also be filed for withdrawal upon like notice, and will be liquidated in accordance with its terms and these By-Laws. The Association shall not be required to pay out during any one month, upon withdrawals of such shares, more than one-third of the receipts from installment stock for that month. Stock filed for withdrawal will be liquidated according to priority of filing, and without regard to class or series of stock shares filed for withdrawal or retirement. All shares forfeited will revert to the association and new shares may be issued in lieu thereof, but at no time shall the shares outstanding exceed the aggregate number of shares into which the capital stock of the Association is divided. ' '
"Article III. Section 12. Advance Payment Stock. The Association may issue advance payment stock upon advance payments of fifty dollars ($50.00) per share to which shall be credited the regular dividends declared by the Association. When sums paid in and dividends accruing upon such stock shall aggregate one hundred dollars ($100.00) per shar'e, such stock shall be deemed matured, and the holder of such stock shall have the right to withdraw same at any time upon thirty days' notice in writing' to the Board of Directors upon the same terms and conditions as installment stock, and the Association may also accept payment for the full par value of stock and issue to such subscriber a Certificate of Fully Paid Stock, together with Pass Book, or may issue a Certificate of Deposit, bearing such rate of interest, payable semi-annually, as the Board of Directors mav from time to time direct."
The association further alleged that said certificate issued to Shields represented a full paid stock subscription aiid could only be withdrawn in accordance with the laws of the state and the by-laws of the association and that at no time since the withdrawal notice was given the association, had the association been in position to pay the balance to Shields, if it did so according to the statutes and by-laws concerning withdrawals from the association. It further alleged that on the 8th of April, 1932, the building and loan commissioner of the state of Colorado declared the defendant association insolvent and impounded its assets and ordered that no payments be made upon accounts on which notice of withdrawal had been given. Thereafter Shields filed his reply.
On June 1, 1932, a jury was impaneled and at the close of the trial both parties moved for a directed verdict and the jury was discharged. The court sustained Shields ' motion for a directed verdict and entered judgment in his favor against the association for $2,660.38 and costs, to which judgment the association brings error, which error is assigned under five assignments in substance as follows: Error in overruling association's demurrer' to Shields ' complaint; error in overruling the association's motion for a nonsuit and in denying association's motion for directed verdict', and in granting Shields' motion for directed verdict and the entering of the judgment.
Under the pleadings in this case, there is but one question to be determined, namely: Was this a loan by Shields to the association or was it a subscription for fully paid stock in the association?
The evidence in the case on behalf of both parties is undisputed. Shields testified in his own behalf and Ruth Smith, as secretary, testified for the association. Briefly, Shields said he had some money that he wanted to put out at interest; that he talked with Mr. Sharer of the association, told him that he would like to loan $3,000 and be in position to get it at any time he needed it; that Sharer told him they could use it and Shields could get his money any time he wanted it; that the usual requirement was the giving of 30 and 60 days' notice, but that the association did not go by that, and that he would give Shields 7 per cent and make the loan on demand; that thereupon the certificate (herein set out) was issued and delivered to him and that there was never anything said by Shields or Sharer about any stock in the association; that he had never' heard of any such thing as stock in the association and did not know there was stock to sell by the association; that he received the interest regularly until December, 1931; that he never received a pass book from the association and that nothing was said to him about a pass book; that he was receiving no loan from the association. Shields identified the original instrument issued to him at the time he claimed to have loaned the money, it being Exhibit A which has been herein set out.
Ruth Smith, as secretary for the association, testified that she had been connected with the association since 1927, and was familiar with the account of Shields; that the account was carried on the books of the association as a fully paid account and that dividends were paid thereon; she identified association's Exhibits 1 to 15, being- checks marked "dividends," payable to Shields, and the original ledger sheet showing Shields' account. She further testified that no pass book or stock was issued to Shields; that the association kept a register of stock issued, and that the certificate issued to Shields at the time he deposited the money was the only written instrument issued by the association to evidence the deposit.
Sharer, who had the original transaction with Shields and signed the instrument as secretary-treasurer of the association contends that if his remarks in the original conversation with Shields established dealings contrary to those provided for in the statutes or the articles of incorporation and the by-laws, that such a change would not be binding on the association. The association contends that the transaction was not a loan but a fully paid stock subscription.
The instrument showing the transaction between Shields and the association, on its face, rejects any reasonable conclusion that it represents a fully paid stock subscription. In our opinion, it is a certificate of deposit, payable to the order of Shields on return of the endorsed certificate at any time on demand, providing thirty days' notice is given, and provides for interest payment. It is in substance and effect a promissory note and when issued to Shields, he became the creditor of the association and the association his debtor.
The by-laws as herein set out prescribe the dealing to be had with a subscriber'. Article 3, section 12, provides that the association may issue a certificate of deposit bearing' such rate of interest, payable semiannually, as the board of directors may from time to time direct, but that is in connection with the right of the association to accept payment' for the full par value of stock to be issued to the subscriber. A subscriber puts his name to something evidencing the transaction or' assents to some course of dealing made known to him.
There is nothing- in the evidence or in the record in this case or on the face of this certificate that indicates in the slightest degree that Shields subscribed for any shares of stock in the association or that any such matters were made known to him or that he assented in any way to the benefits or liabilities of a shareholder in this association. It was within Shields' powei at all times, as the owner and holder of this certificate, to make it due and payable by his own act of giving- a thirty-day notice. He was justified in believing that the officer with whom he was dealing was acting within his authority in borrowing his money and issuing- the certificate. It is an executed contract, and after the association has received the benefits, if any, or was in a position to receive the benefits over a long period of time, it is ©stopped to deny the authority of its officer to enter' into such a contract. It sought the benefits from the transaction and cannot now assail same as ultra vires.
The acts of the officer in this case, if allowed to stand, were the acts of the association and it is liable to Shields therefor because of its remaining inactive. We are of the opinion that Shields is in the position of a general creditor of the association.
Association's Exhibit 15 discloses that Shields' account was carried on the general ledger' of the association as a "demand account." The copy of association's Exhibit 15 contained in the abstract of record filed by t'he association shows the matter to have been carried on the loan ledger of the association and is silent on the matter of demand.
Shields testified that he received interest on the interest paying dates for about seven years. The association's Exhibits 1 to 14, inclusive, are cancelled checks showing payment to Shields of an amount substantially the same as would be due him under the terms of the certificate. These checks are marked "dividend," which is of no particular consequence, since Shields had no notice of the plan of bookkeeping followed by the association in such matters and was therefore not bound thereby. The, laws of this state (section 2794, C. L. '21) governing building and loan associations permit the association to negotiate long or short term loans, and on the face of the transaction in this case, Shields had a right to assume that the association had borrowed his money, and when he received interest payments thereon, no duty devolved upon him to inquire into or ascertain the manner or means used by the association in payment.
The finding of the trial court was right and its judgment is affirmed.
Me. Justice Bouck dissents.