Court Opinion

ID: 6148070
Source: CourtListenerOpinion
Date Created: 2022-02-05 15:31:29.587335+00
Date Added: 2024-06-11T08:54:42.500360
License: Public Domain

Titus, Ch. J. (dissenting).
This is an appeal from the Municipal Court of Buffalo, from a judgment rendered in favor of the defendant against the plaintiff.
The action was brought to recover $187 which the plaintiff had deposited with the defendant during the period of two years prior to October, 1892.
The defendant corporation was organized under chapter 122 of the Laws of 1851, entitled “An act for the incorporation of building, mutual loan and accumulating fund associations,” on the 27th day of February, 1890. It adopted articles of association and by-laws to regulate the business of the corpora*522tion, and the same were duly filed as provided by statute. On the fourth day of Hay the plaintiff subscribed for ten shares of the stock of the corporation and became a member thereof, and up to October 6, 1892, he had paid in as dues $187. He received no loan from the association, but allowed his dues to accumulate. In October, 1890, a rule or -by-law was adopted by the defendant that persons withdrawing fz-om the association should be paid izi the order in which their appdications for-withdrawal were filed. At tlze tizne the plaintiff filed his application there were then seventy-eight applications for witlzdz-awals by zneznbers on file. These applications for withdrawals aznozzzzted to $8,500, azzd at the time of the trial of this actiozi the associatiozz had paid frozn the dues of its members, $6,671.74, leaving something less thazi $2,000 zznpaid.
The association is solvent and will evezztually pay all of its shaz’eholdez’s the full value of their slzaz-es.
The act of 1851 azzthorizes corporations oz’ganized under it to make az-ticles of associatiozz, amozzg other thizzgs, Z’egulating “ the transfer or withdrawal of shares.” Section 10 of article 4 of the articles of association provides that “ members who have received zio loazz znay withdraw at azzy tizne by giving at least one week’s zzotice to that effect. The dzzes actually paid, together with such accrued profits as the directors may deem pnzdent for the izzterest of the association, will be z'efunded to them when the necessary funds a/re collected.”
It appears that the zzecessary funds have been collected, oz* at least a szzfficiezit szzzn to pay the azzzozzzzt due the plaintiff since his zzotice of withdrawal was served, but they have been zzsed in paying the claizns of znembez's who served notices of witlzdz'awal before the plaizztiff, and in the oz-der of the service of such zzotices. The questiozz is whether tlze plaintiff is entitled to recover his znozzey while there are yet outstanding claims of other zzzembez-s wlzo gave the zzotice of withdrawal before he did.
It is claimed by tlze plaizztiff that whezz lie served his notice of withdrawal, as he had a right to do, he ceased to be a member of the associatiozz, zzot subject to pay dues, nor to *523any of the advantages or liabilities of a member, and sustained to the association the relation of creditor only. This is undoubtedly so, but in the proceedings to enforce his claim he is still subject to the articles and by-laws of the association. When he became a member, the by-laws and articles of association became a part of his contract of membership with the defendant, and to that extent he is still subject to the agreement which he entered into, and his claim must be enforced, if enforced at all, as a member of the association, with the agreement still binding upon him. Livingston v. Lynch, 4 Johns. Ch. 573: Clearwater v. Meredith. 1 Wall. 25.
The articles of association provide that the sum which he has paid for dues shall only be paid him when the necessary funds are collected, and that he shall be paid in the order of the filing of his notice of withdrawal. It would, therefore, seem that in good conscience he should abide by the laws of the association of which he is a member and which form a part of his contract.
It is not questioned that the by-laws were not regularly enacted at a regular meeting of the association in conformity with all legal requirements. It is claimed, however, by the plaintiff, that this particular hy-law Was not in force when he became a member, but was enacted after that time, and it is-said that as he did not subscribe it, he is not bound by it.
By-law 1 provides that “the board of directors may at any time make such by-laws as are deemed advisable for the management of the business of the association.” Section 3 of the act of 1851 provides that “ corporations organized under this act shall possess the powers and privileges and be subject to the provisions of the third title of chapter eighteen of part one of the Revised Statutes,” and by section 1 of that title it is provided “ that such corporations may make iy-laws, not inconsistent with any existing law, for the management of its property and regulation of its affairsV
This power to make reasonable and proper by-laws is probably not disputed, hut it is claimed somehow that the plaintiff *524is exempt from the operation of the by-laws, and that they cannot, or should not, be enforced against his claim.
It seems to me that there can be no doubt that the members of the corporation are bound by such reasonable by-laws as it is authorized to make.
Paine, in his work on Building and Loan Associations, at page 12, says: “ By assuming the relation of member, he contracts to fulful all the provisions contained in the articles of' association and amendments thereto, and he is bound by them, whether he has actual knowledge of their contents or not,” and on page 22, the same author says : “ When a member has given notice to the association of his intention to withdraw, and after service of the notice the association amends its by-laws, which materially prejudices the claim of the withdrawing member, such amendments are not applicable to the withdrawing member, and in no manner affect his claim. Membership, Avith all its rights and liabilities, ceases on the service of the notice of intention to withdraw.”
It has been held that it is not essential that a person should subscribe the original articles of association. He may become a member after the articles are subscribed and filed, yet he is bound by them as fully as if he had subscribed the original articles of association. ° Concordia Loan, & Aid Association v. Read, 93 N. Y. 414.
It would seem to need no argument to prove so plain a proposition, because if it were otherwise, only the few who are the incorporators could become members bound by the articles of association and by-laws. If the by-laws had been amended after the plaintiff’s notice of withdrawal had been given, no question could be raised that the by-law providing for the payment of claims in the order of the service of the notice of Avithdrawal would not affect the right of the withdrawing member, for by the act of Avithdrawal he ceased to be a member, and his rights and liabilities must be measured by the law of the association as it was at the time of his withdrawal.
It may be claimed that the statute does not confer the' *525necessary power upon the association to make the hy-law. It is certainly a necessary rule to establish that members should be paid according to the priority of notice of withdrawal. The provision of the act authorizing the withdrawal of members provides that “ members who have received no loan may "withdraw at any time by giving at least one week’s notice to that effect. The dues actually paid, 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.”
If no such provision existed, an action at law could be maintained by the last member who served the notice, and the accumulated funds could be taken by him, instead of the diligent one who had perhaps long before served his notice. The design of the statute is that these associations shall continue for the benefit of then- members, and to say that a by-law equitable to all members, designed to promote the continuance of the association and prevent the accomplishment of the very object of the statute, is not a reasonable and proper exercise of the power conferred upon the association, is to hold that the law defeats itself; that such associations are at the mercy of nonborrowing stockholders. I cannot assent to this view of the law, and have no doubt that ample power exists under the statute to enact the by-law. If this view is correct, the plaintiff cannot recover, for the obvious reason that there is no fund out of which his claim can be paid, and this fact is the material factor in his right to maintain the action. It is a condition precedent to his right to recover. The association does not agree to refund the money until the necessary funds are collected, and that event has not happened; consequently his debt is not due, and no action can be maintained upon a claim until the party has the right to enforce it by judgment and execution.
It cannot be said to be a hardship to him. He went into the association presumably with a full knowledge of the articles of association and by-laws. His position is not different from the other members. They were only required to pay ten cents a *526week on each share. All of the members probably understood that their money could not be paid them until it was collected . in the manner provided by the statute and articles of association. There is no way in which collections can be enforced by the association against its members more quickly than the law points out. If all may sue and recover judgment, without there being a fund, as contemplated by the articles of association, to pay claims, then all may enforce their judgment by execution or by the appointment of a receiver of the corporation, and thus utterly defeat what was designed by the statute to be a beneficent law, enacted to aid the poor people in acquiring homes, or accumulating out of their savings enough to support them after they can no longer labor to support themselves.
This view of the law, that the plaintiff cannot maintain this action, has been held in a number of cases. In one case the plaintiff, a stockholder of an association, sued to recover the amount which had been paid in on his stock, under a law permitting stockholders to withdraw after due notice filed, and to receive the amount paid in, with a proviso that no more than one-third of the funds in the treasury should be appropriated to demands of withdrawing stockholders without the consent of the directors. The court held that the plaintiff could not maintain his action without proving that the necessary funds were in the treasury, and- that the directors consented to the application of the fund to the payment of his claim. Texas Homestead Loan & Building Association v. Kerr, 13 S. W. Rep. 1020. I have not been able to see this case reported .in full. It is briefly reported in the American Digest for 1890, from which the above statement is taken.
In another case where a building association adopted a rule that “ on and after the expiration of the first twelve months .any member may withdraw the subscription money which he may have contributed, with such an amount of interest as may be determined by the committee. * * * And should more than one member give notice to withdraw at one time the members so giving notice shall be paid in rotation, accord*527ing to the priority of notice ; provided, always, that the said society shall not be obliged to make such payments as aforesaid until they have sufficient funds in hand for that purpose, and also to meet the then existing liabilities of the society,” it was held by the court that where the society was insolvent, and known to be in that condition at the time of giving the notice of withdrawal, such a rule had no application to the case, but that it did apply to cases maturing before the society was known to be insolvent. In re Sunderland Building Society, L. R. (24 Q. B. Div.) 394.
These cases go upon the theory that the conditions contained in the articles of association and by-laws when the society will pay have not arisen, and that such conditions were precedent to the right of withdrawing members to maintain an action.
I have examined the case referred to in the plaintiff’s brief. U. S. Building & Loan Association v. Silverman, 85 Penn. St. 394.
The statute of that state is similar to our own, but there was no provision in the by-law for priority of notice, as in the, case under consideration. The court there held a member might maintain his action, and it was intimated in O'Rourke v. West Penn. Association, 93 Penn. St. 308, that the judgment might be stayed by the court until funds had accumulated so as to authorize the payment according to the by-laws.
I do not think these cases present the law as it is in this state, as they are not in harmony with the spirit of the statute governing these associations. I much prefer to follow the rule adopted in the other cases. It would be a most remarkable condition of things if the seventy-eight members who served notices in this case could maintain actions, and then be stayed by order of the court until such time as the funds provided for by the by-laws of the association had been collected. Nothing would be gained but the accumulation of unnecessary costs and expenses to be borne by the association. I think, therefore, in the absence of any authoritative construction of the statute by the courts of this state, that the interests of all *528parties concerned will be best conserved and the object of the statute best attained by following the law as laid down in the Texas case.
The judgment should, therefore, be affirmed, with costs. Judgment reversed.