
    The People of the State of New York, Plaintiff, v. New York Building-Loan Banking Company, Defendant. In the Matter of the Application of Charles M. Preston, Respondent, for a Settlement of His Accounts as Temporary and Permanent Receiver of the New York Building-Loan Banking Company, from September 14th, 1903, to September 13th, 1904; Louis Baer and Others, Claimants, Appellants.
    First,Department,
    December 30, 1905.
    Building, añd loan association — distribution of assets on Insolvency— í members not creditors for dues paid in advance.
    Members of an insolvent building and loan association, who, under a provision ' . of the by-laws, have paid dues in advance to secure the benefits of a discount, .are not, in the absence of proof of an agreement that the money was to be held by the association as a deposit, creditors or depositors of the association so as to be entitled to recover the dues paid beyond the daté of insolvency before . r * • the distribution of assets among members.
    FiuTes for marshalling.assets of such association stated.
    Ingraham, J., concurs in result only. The -question of priorities, should he determined only on the final accounting.
    Appeal by Louis Baer an<;l others, claimants, from an order of the Supreme Court, made at' the New York Special Term and entered in the office of the clerk of the. county of New York on'the 8th day of November, 1905, confirming the first interlocutory report of a referee theretofore appointed herein with respect to the disallowance of the claims of the claimants.
    
      Charles R. Hall, for the appellants.
    
      Charles W. Dayton, for the respondent.
   Houghton, J.:

. The claimants were members of the New York Buildin'g-Loan Banking Company,, and were known as class .“A.” shareholders. The particular rights and duties of members of this class were provided for by section _1 of article 27 of the company’s articles of association, which reads as follows.: The. monthly installments or dues on shares in Class A’shall be twenty-five cents, and must be paid on or before the third day of each month in advance, until the money accumulating from monthly dues or installments, together with the profits. from interest, premiums, fines, withdrawals, an equitable portion of' any reserve or surplus fund or undivided profits, and all other profits accruing to each share, shall equal one hundred dollars. Members desiring to pay dues six months or more in advance in Class ‘ A ’ will be allowed a discount at tlie rate of six per cent per annum for the average time of such advance.”

Prior to the insolvency of the company, the claimant§ had taken advantage of the provision permitting advance payments with a discount, and had paid the monthly installments or dues on their shares of stock, some several months and others several years beyond the date when the company became insolvent. Their claim now is that as to these payments beyond the period of insolvency, they are depositors with or creditors of the insolvent company, and should be repaid such amounts before any general distribution of assets amongst the various members and - shareholders.

No facts were shown upon the hearing before the referee, from which it can be said that the claimants were depositors of these several amounts with the company. The advance payments were made strictly in accordance with the permission given by section 1 of article 27. Having the money on hand they desired to take advantage of the discount. The payment by appellant Combs illustrates the manner in which all payments were made. On January 12, 1899, there was due upon his forty shares of class “A” stock $1,440. On that day he paid the dues for twelve years in advance on this stock, and received approximately a discount of $500, leaving substantially $900, which he paid in cash. There was no agreement that this money should be held by the company on deposit for him or that the company should hold the money and pay from it his monthly dues from month to month. In the absence of any such, agreement, we cannot assume that the transaction with the company was any different from that' which it purports to have been — a simple present advance payment upon shares of stock with a discount. i

In Munhall v. Boedecker (44 Ill. App. 131), upon which appellants rely, the advance .payment by the shareholder was secured for him by the association with collateral security, and it remained intact upon the winding up'of the association, the shareholder having paid meanwhile from interest received upon the deposit. together with moneys supplied by him the installments upon his shares as they fell due. It is quite plain that the appellants here do not bring . themselves within the facts of that base.

Rór do we think, with respect to sucli advance payments, that the claimants occupy the position of creditors to the insolvent company. ' - '

• Upon a building and loan association becoming, insolvent, all classes of shareholders are treated alike. Insolvency, in a way, ends the contract between such an association-and- its members. It puts an end to its operations. The assets of the association áre to be marshalled and debts and expenses paid. Then it is'to be ascer^ tained how much each member has in the concern with á view to final distribution amongst all its members. yOne member may have fully paid for his stock and another only partially paid for it, but one has no advantage over the other. Even a shareholder who has fully paid for his stock and become entitled to withdraw it,' and has given notice of withdrawal, does not thereby become a creditor of the association upon its insolvency. (People v. Metropolitan Mutual S. & L. Assn., 103. App. Div. 153 ; Criswell’s Appeal, 100 Penn. St. 488 ; Hohenshall v. Sav. & Loan Assn., 140 Mo. 566 ; 41 S. W. Rep. 948.)

The rule with respect to distributing the assets of an insolvent ' building and loan association is (in the absence of a binding, express agreement, which is not claimed to, exist in the present case) that the debts and expenses are to be first paid, and then each shareholder, is entitled to a dividend.jpro rata upon the amount which he has paid upon his stock. (People v. Metropolitan Mutual S. & L. Assn., supra ; Strohen v. Franklin Saving & Loan Assn., 115 Penn. St. 273 ; Christian’s Appeal, 102 id. 184 ; Brown v. Archer, 62 Mo. App. 277.) The amount which the shareholder has paid, of course, is to be ascertained in accordance with the rules and articles of the association and the statutes governing, it.

, These logical and equitable rules with respect to the rights of different classes of shareholders, and as to thn manner of distributing the assets of an insolvent building and loan association, would seem to quite effectually dispose of appellants’ contention that they are ' creditors of the association, and that their advance payments should be handed over to them before a general distribution of ass'ets.

The earnestness, however, with which the claim is made, and the importance of the question to a large number of shareholders in the rapidly failing building and loan associations throughout the country, have led us to an extensive investigation of the holdings of our own sister States. The only decision which' we have been able to find involving the precise question presented is that of Post v. Building & Loan Assn. (97 Tenn. 408 ; 34 L. R. A. 201), where the conclusion was reached, with some features more favorable to the member than are here presented, that advance payments of dues did not make the member a creditor of the association to the amount of such advances. .

It is unfortunate that these claimants made advance payments. It is also unfortunate that any member has fully paid for his stock, as well as that any member has ever paid anything thereon. By the rule which must be adopted, however, in the distribution of assets, all will obtain a dividend upon all payments made, and thus all will be compensated ratably and as fully as the financial condition of the association will permit. That which claimants considered a good bargain, with a,large discount for advance payment, has turned out tó be a bad one. They took that risk, however, when they entered into it, and we see no way, even if there be a reason, for relieving them therefrom.

The order should be affirmed, with ten- dollars costs and disbursements.

O’Beien, P, J., McLaughlin and Clakke, JJ., concurred.

Ingraham, J. (concurring):

I concur in the affirmance of this order, as I think the question presented should be properly determined upon the final accounting of the receiver. The claimants are members of the corporation. The question as to.the method which should control in distributing the assets of the corporation after the payment of its debts should be determined upon the final accounting. Whether making these advance payments will give the shareholders a priority over those who have not made such advance payments is a question involving considerable doubt, and I am not at all satisfied with the proposition that a shareholder who- lias paid in advance of the. time when payments on the shares were due should not. be entitled to a'return , of the payments that he had made in excess of the other shareholders, but I think that question should be determined on the final . accounting. ^

Order affirmed^ with ten' dollars costs and disbursements.  