Court Opinion

ID: 3553842
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:05:34.267285+00
Date Added: 2024-06-11T13:43:01.580393
License: Public Domain

If a withdrawing shareholder is entitled to any part of the profits it is by virtue of the statute or some by-law governing such withdrawals. "At any time after four years from the date of issue, the directors may, pursuant to the provisions of the by-laws, if any, on the subject, retire unpledged shares of any series and compel their withdrawal by paying to the shareholders the amount of dues paid upon the shares, and the proportion of profits belonging to them according to the last preceding adjustment and valuation of shares, less the amounts due from such shareholders for fines and other charges and for their proportionate shares of unadjusted losses, if any. If all unpledged shares are not so retired, the directors shall determine by lot which shall be retired." P. S., c. 166, s. 14. The by-laws of the association provide that "After four years from the date of issue of any series, if the board of directors deem it expedient to reduce the number of unpledged shares in said series, they shall cause a notice to be sent to the holders of said shares, stating *Page 368 
the number required for reducing the series, and offering the total profits on them, if voluntarily withdrawn." The by-laws must be interpreted in conformity with the statute; and the provision that withdrawing shareholders shall have "the proportion of profits belonging to them according to the last preceding adjustment and valuation of shares," has reference to an adjustment and valuation properly and legally made. The statute provides for such an adjustment and valuation. "The interest, premiums, fines, and profits received by the corporation, less losses and the amount paid for the necessary expenses of the business, shall be equitably distributed among the shares and added to the dues paid by the shareholders at least once a year, until the value of each share in the series reaches two hundred dollars, when it shall be paid to the shareholder and the share shall be retired." P. S., c. 166, s. 11. The proportion of profits belonging to the shares according to the last preceding adjustment and valuation must be determined by an equitable distribution of the interest, premium, fines, and profits among the shares. An inequitable and unfair distribution is not in conformity with the statute, and is therefore void.
The only question is whether the premium bid for a loan should be treated as a profit when the loan is made, or apportioned equally over the entire duration of the loan. Should a computation of the profits to be distributed among withdrawing shareholders include the entire premiums which borrowers have agreed to pay, or such premiums as were earned at the date of withdrawal? Is a withdrawing member entitled to share in premiums actually paid, or in premiums agreed to be paid in monthly installments until the maturity of the shares? Obviously, he is entitled to share in premiums actually paid. A shareholder who withdraws is not liable for future losses, and is not entitled to future profits. If he shares in premiums agreed to be paid, he receives an anticipated profit; and if there should be a deficiency, instead of a profit, by reason of default in the payments agreed to be made, he has received more than his just proportion of premiums earned. Such a distribution is inequitable and contrary to the provisions of the statute.
The adjustment and valuation of shares made by the directors at the annual meeting in September, 1894, was incorrect, in that it included the premiums agreed to be paid to the maturity of the series to which the shares loaned upon belonged, whereas it should have included only the premiums actually paid at that time. The premiums should have been apportioned as claimed by the plaintiff, and the withdrawal value of each share fixed at $56.53.
Case discharged.
All concurred. *Page 369