Court Opinion

ID: 9302461
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:13:32.530149+00
Date Added: 2024-06-11T17:13:29.564981
License: Public Domain

On Rehearing.
(April 17, 1902.)
I have recently granted to counsel for the Class C stock referred to in the foregoing opinion a rehearing on the question as to the right of that stock to a preference over Class A stock. Counsel have earnestly urged that this court should be controlled by the decisions of the supreme court of the state, which it may be conceded are not in harmony with the decision rendered by this court. Cook v. Association, 104 Ga. 814, 30 S. E. 911, and the recently decided case of Cashen v. Association, 41 S. E. 51. It seems that the supreme court of Georgia in the case last cited itself realized the conflicting views of different courts on this question, for in closing the opinion it is said :
“This court was, when it undertook to deal with the Cook Oase, under the necessity of taking position one way or the other upon the question at issue. We then held that the holder of a certificate like that of Cashen was a creditor of the association. To this view we have adhered in later cases, and are content with its correctness. Applying to the case in hand the doctrine to which we stand committed, it necessarily results that the judge erred in setting aside the auditor’s ruling on the point in controversy.”
In the case of Alexander v. Association, decided in this court by Judge Pardee, 110 Fed. 267, the. exact question was made. I have carefully examined the report of the master in that case. He goes at length into the question, cites the case of Cook v. Association, supra, and, notwithstanding that decision, concludes that stock substantially like that now in question has no preference; in other words, that the holders of the stock are not creditors of the association, as distinguished from its ordinary installment shareholders. Judge Pardee, in reviewing the report of the master, says:
“The special master has submitted an elaborate report, finding substantially that the holders of full-paid stock and the holders of stock in the different classes who have duly given notice of withdrawal stand upon the same footing of priority as other stockholders. * * * To this report certain holders of full-paid stock, and certain holders of stock upon which notice of withdrawal had been given prior to the appointment of the receiver, filed exceptions; the former claiming that they are not stockholders at all, but creditors, and entitled to be paid by preference over any and all stockholders, and the latter claiming that, as they had given notice of withdrawal prior to the appointment of the receiver, they are creditors with a lien upon the funds of the association, and entitled to be paid by preference over all stockholders. After an elaborate examination and full consideration, I am satisfied that the master’s finding in regard to these two classes of stockholders is correct, and the authorities cited by him fully sustain his position. As the association is in the hands of a receiver, to be wound up and *680liquidated because of tbe impossibility to carry out tbe original scheme and purpose, it would be rank injustice to allow one class of investors to be paid in full at the expense of the other investors equally innocent of all fault in the matter.”
In view of this decision by Judge Pardee in which he declined to follow the decisions of the 'supreme court of the state, although brought to his attention, I shall, of course, not do so, especially as I entertain the views heretofore expressed. The supreme court of the state in its decisions was not construing any statute of the state, but simply expressing its opinion upon an interesting question of general law, and while, of course, highly persuasive, it is not controlling.
It is urged, however, that in the case of Bottom v. National Railway Building & Loan Association, in this court, a different rule was adopted by Judge Pardee by reason of his approval of the master’s report. So far as I can find that any exceptions were made to the master’s report or any question was brought to the attention of the judges of this court similar to the question here involved, the exceptions were disposed of by a consent order. It is not at all clear that the debenture stock there referred to by the master was similar to the Class C stock in question here, but, even if such were the case, the clear decision in the Alexander Case will necessarily be controlling.
In a recent decision by Judge Morris in the United States circuit court for Maryland, in Coltrane v. Association, 110 Fed. 281, the following language is used on the question at issue here:
“Nearly all building associations draw up their by-laws and make their agreements upon the assumption that they will succeed. They promise to each class of persons with whom they seek to do business those things which are likely to prove most attractive to people so situated. When disaster overtakes the association each class of its stockholders insists that the association shall be required to carry out its contract with them, no matter what happens to its agreements with the other classes of stockholders. In any such case, to enable any class of stockholders successfully to assert a right to be paid in full in preference to other stockholders, they must rest their claim upon a positive, unambiguous contract, specifically giving them that priority.”
Judge Morris’ opinion is interesting for the reason that it discusses the decision by this court in the Alexander Case, and of the supreme court of Georgia in the Cook Case.
The conclusion reached-in the former opinion, filed March 6, 1902, that Class C stock and Class A stock stand on a parity, and that the former is not entitled to any preference, is adhered to.