Case Name: The People of the State of New York, Plaintiff, v. The New York National Building and Loan Association, Defendant. In the Matter of the Claim of Myron N. Clark, Appellant. William C. Breed and Clifford W. Hartridge, Receivers, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1904
Citations: 95 A.D. 243
Docket Number: 
Parties: The People of the State of New York, Plaintiff, v. The New York National Building and Loan Association, Defendant. In the Matter of the Claim of Myron N. Clark, Appellant. William C. Breed and Clifford W. Hartridge, Receivers, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 95
Pages: 243–249

Head Matter:
The People of the State of New York, Plaintiff, v. The New York National Building and Loan Association, Defendant. In the Matter of the Claim of Myron N. Clark, Appellant. William C. Breed and Clifford W. Hartridge, Receivers, Respondents.
Building and loan association —the guaranty in a stock certificate, “ This certifi- ■ cate is guaranteed to mature in seven years," is absolute—at the end of seven years the certificate holder is entitled to $100 for each certificate — the insolvency of the association and the charging of losses against the certificates do not affect the guaranty.
A certificate for ten shares of stock in a building and loan association of the par value of $100 each containedun agreement on the part of the shareholder to. ' pay to the association sixty cents monthly for each share until such shares matured or were retired. It also provided as follows: “Once in six months the profits arising from interest, premiums, fines and other sources shall be apportioned among the shares in good standing. Whenever the amount standing in the loan fund to the credit of any'share equals one hundred dollars, such share shall be deemed to have matured, and no more monthly payments shall be required. * * . * This certificate is guaranteed to mature in seven, years from date, unless sooner retired.”
The certificate holder paid the monthly dues regularly during the seven years, the last payment being made March 1, 1899. Shortly thereafter the association was dissolved and permanent receivers thereof were appointed.
Meld, that the provision in the certificate, that it was guaranteed to mature in seven years unless sooner retired, constituted an absolute contract that the . shareholder should, at the end of seven years, be entitled to withdraw the full sum of $100 per share, and was not to be construed as a mere estimate of the time within which the association would earn sufficient money to mature the stock;
That evidence that the association was insolvent prior to the expiration of the seven years, and that prior to the expiration of that time the board of directors of the association passed resolutions charging against the stock certain percentages of the amounts paid thereon to meet certain losses of .the association, was .immaterial;
That the shareholder’s claim should be allowed at the full sum of $1,000, and that he was entitled, upon the winding up of the affairs of the association, to receive his pro rata share of its assets.
Appeal by the claimant, Myron N. Clark, from a judgment of the Supreme Court in favor of the receivers of The New York National Building and Loan Association,'entered in the office of the clerk of the county of Kings on the 1st day of February, 1904, upon the report of a referee dismissing the appellant’s claim, and also from an order entered in said clerk’s office on the 14th day of January, 1904, confirming the said referee’s report.
Thomas R. Hart and Job E. Hedges, for the appellant.
G. M. Fannin, for the respondents.

Opinion:
Hooker, J.:
On the 1st day of April, 1892, there was issued to the appellant Myron N. Clark a certificate that he had subscribed for and was the owner of ten shares of stock in the New York National Building and Loan Association. The certificate was issued and was accepted by the appellant upon certain express terms and conditions. In these terms and conditions'no reference whatever was made to any by-laws, rules or regulations of the association, except those contained therein. Among the terms and conditions was one to the effect that the shareholder agreed to pay to the association sixty cents monthly for each share until such share matured or is retired, and that such payments must be made each month, in default of which certain fines and penalties attached. It was also provided that any non-borrowing member might withdraw one or more shares after six months by giving thirty days' notice in writing, and thereupon he would be entitled to receive the amount of the monthly dues paid into the loan fund on such shares, together with all profits that had been apportioned thereto, provided that at no time should more than one-half of the monthly dues received in any one month for the loan fund be applicable to the demand of the drawing members without the consent of the board of directors. The loan fund was provided to be at least eighty-four per cent of the monthly payments. The 9th condition was as follows: " Once in six months the profits arising from interest, premiums, fines and other sources shall be apportioned among the shares in good standing. Whenever the amount standing in the loan fund to the credit of any share equals one hundred dollars, such share shall be deemed to have matured, and no more monthly payments shall be required." And, finally, printed in display type was this language: " This certificate is guaranteed to mature in seven years from date, unless sooner retired."
The appellant paid his first monthly dues on the 1st of April, 1892, and continued regularly without default to discharge his monthly obligation. On the 1st day of March, 1899, he paid the last installment of monthly dues, and on that day had regularly for a period of seven years from the issuance of the stock to him paid what was required of him by his contract. On the 16th day of May, 1899, he duly demanded from (the association the payment of the sum of $1,000, which he claimed was then due to him as representing the face or the withdrawal value of the ten shares of stock he held, On the 28th day of July, 1899, an action was pending against the association, brought by the People of the State of New York, to obtain a judgment dissolving it, and on that day temporary receivers of the association were appointed who then took possession of its property. This action resulted, on the 12th day of Decern her, 1899, in a final judgment dissolving the corporation, and appointing permanent receivers thereof. On the 21st day of March, 1900, the appellant filed his claim for the amount of $1,000 with the receivers, which was rejected. The claim was referred and the referee has filed his report, upon which judgment has been entered declaring that the claim of Myron N. Clark for $1,000, matured value of his certificate, be dismissed, except as to the extent of $448.67, the book value thereof. From the order confirming the report, and from the judgment, Clark appeals to this court.
Evidence Was taken before the referee tending to show that the association was in fact insolvent prior to the 1st day of March, 1899, when the appellant made his last monthly payment. A resolution of the board of directors of the association, passed December 2, 1898, received in evidence over the appellant's objection and exception, recited that it was resolved, in order to protect the shareholders and the interests of the association, that it was necessary to charge against the various shares of stock twenty-five per cent of the value of the loan fund of the association to meet certain losses and depreciations, and it was ordered that said charge of twenty-five per cent be made against all shares of stock to meet such losses and depreciations. On the 22d day of March, 1899, a few days before the expiration of the seven years from the issuance of the appellant's stock, the board of directors passed another resolution, received in evidence over the same objection and exception, to the effect that, in order to protect the shareholders and in. the interest of the association, the board of directors amended the resolution of December 2, 1898, and declared it to be necessary to charge against the book value of the various shares of the stock issued by the association, issued previous to the 2d of December, 1898, pro rata, an amount equal to twenty-three per cent of . the amount of the loan fund, and on that day said amount was directed to be used to meet those losses and depreciations. The resolution directed accordingly that the said charge of twenty-three per cent be at once made. against the said shares of stock issued and outstanding on that day.
No pretense is made that the appellant knew of or ever consented to be bound by those resolutions. The respondents make the claim that the language in the terms and conditions attached to the appellant's certificate of stock,' that the certificate was guaranteed to mature in seven years unless sooner retired, is to be construed as the estimated length of time in which the association would earn money enough to mature the stock or to apportion enough to this stock so that its share of the profits, added' to the amount of monthly dues paid in, would amount to $1,000, and that because the association had met reverses and sustained losses, and had found it necessary to require all the stock to contribute twenty-three per cent of what had been paid in upon it, or at least of the sum that stood to its credit, in order to meet reverses, by reason whereof the plaintiffs stock, as appeared in the evidence, had at the time of his demand the value of about $448.67, that sum limits the amount of his lawful claim against the receivers. It is difficult to understand by what reasoning the plain language of the guaranty may be contorted into sustaining the contention of the respondents. It is true that one of the conditions upon which the association issued the stock and the appellant received it was that once every six months profits arising in the business of the association should be apportioned among the shares in good standing, and that whenever the amount standing in the loan fund to the credit of any one share equalled $100, such share should be deemed to have matured, and it seems to be quite clear that had the language of the guaranty been omitted , from the terms and conditions of the agreement between the association and the appellant, as evidenced by his certificate of stock, no share would have matured until such apportionments, together with the sums paid in monthly, had equaled the full sum of $100 per share. It seems equally clear that the officers of the association, at the time this certificate was issued, believed that the association could earn enough money during the period of seven years so that the apportionment to these shares would be. sufficient to entitle them to be retired; and with that supposition in view, and acting upon what they believed the business could and would do, guaranteed tó the appellant that his certificate would mature in seven years in any event. If this language is not to be held to express a contract between the parties that the shareholder should at the end of seven years in any event be entitled to withdraw the full sum of $100 per share, it is difficult to imagine what language would have been sufficient to express such an intention. The circumstances also point to the intention to make a con tract of that character. In Vought v. Eastern Building & Loan Association (172 N. Y. 508) a similar question was presented. There a stockholder sued the association for the full matured value of his stock ajlter having paid his monthly dues regularly for the, full term required. From the opinion of Judge Martin, in that case, it appears that there the defendant agreed', upon certain considerations, to pay the shareholder the sum of $100 for each of his shares absolutely at the end of seventy-eight months from the date thereof. Upon the question we are now discussing, however, the following language is germane (p. 515): "It is also pertinent to inquire what object the plaintiff or her assignor could possibly have had in purchasing stock if she or he was to pay the full amount in cash, and then at the end of eleven years receive without interest. only the, principal which had been thus paid. Obviously, the inducement to make such' purchase was that the plaintiff and her assignor were to obtain a profit by thus investing their money, as one of the avowed objects of the association was to afford its members a safe and profitable investment of their savings." Unless the language under consideration was to be taken as an. explicit guaranty that the appellant's stock should mature in seven. years, a guaranty of just what its language purports to be, no inducement existed to the appellant to put his money into the concern except what it might earn in its regular business. If the language expressed in truth an agreement to pay the full amount at the end of seven years, the value of the contract must be seen to be enhanced. We believe the intent of the parties was-what the language of their undertaking expressed.
In this view of the contract between the parties, the evidence of. insolvency prior to the maturity of the appellant's shares, and of the resolutions of the board of directors, seems to us immaterial. Our attention has been invited to no cases holding that the obligation of the association to Clark by virtue of this contract, after he had on his part complied with all the conditions, differs from the obligation of an ordinary promise to pay money, and no such difference exists. It is said that insolvency is always a defense. That seems to be true in this case to the extent that the appellant will-be entitled to receive from.the receivers, as they wind up the affairs of the association, only his pro rata share of the $1,000 ; but the insol veney of the association, even prior to the time the appellant made his last monthly payments, it seems to us can avail it by way of defense no more than its insolvency would be available as a plea to an action by the holder of a promissory note for $1,000 given as evidence of that amount of borrowed money. There is no apparent escape to the .association from the. adjudging of its liability to the full extent of $1,000 under this contract with the appellant. That the association's failure to earn money with which to mature the stock is no defense to such an action is the settled law of this State, and under the authority of the Vought Case (supra) that adjudicar tion must be held to determine that particular question adversely to the respondents.
The judgment and order appealed from must, therefore, be reversed.
All concurred.
Judgment reversed and new trial granted before a referee to be appointed by the Special Term, costs to abide the event.