
    [Philadelphia,
    April 28th, 1836.]
    The Case of The PHILADELPHIA SAVINGS INSTITUTION.
    An act of Assembly incorporating certain persons by name, and all others thereafter becoming members, the object of which incorporation was declared to be to receive from time to •time, deposits of money, and to pay the depositors such interest, as might from time to time be agreed upon by the directors, enacted, that for the security of the depositors a certain capital should be raised, to be'divided into shares, which should be transferable, Sze. The act then proceeded to provide for annual meetings o'f the members, and for the election of directors from among the members; gave to the directors power to provide for the admission of members, and made it their duty to appoint from among the members, five persons as a committee of examination, and also to make a dividend of profits and to pay the same over to the stockholders, dr their legal representatives: Held,
    
    ' 1. That stockholders were not, as such, members of the corporation; consequently that the assignee of a stockholder did not by the assignment become a member.
    2. That persons originally members, continued to be such, although they never possessed stock or had parted with it.
    At the last terra, an application was make by Mr. Norris for a rule to' show cause why an information in the nature of a writ of quo warranto should not be filed, to inquire by what authority Joseph Feinour and others exercised the rights of members of the Philadelphia Savings Institution.
    At the same time a rule was granted upon the President and Directors of the same Institution, to show cause why a mandamus should not issue, requiring them to admit William C. Bridges to participate in the transactions of the said Institution, at its meetings of business.
    Upon the return of these rules, the following appeared to be the material circumstances: ^
    The Philadelphia Savings Institution was incorporated by an act of the Legislature of Pennsylvania, passed on the 5th day of April, 1834.
    The first" section declared that certain persons therein named, (forty-six in number,) “ and all and every other person or persons, hereafter becoming members of the Philadelphia Savings Institution, in the manner hereinafter mentioned,” should be created and made a corporation and body politic, with the usual powers and capacities.
    The 2d, 3d, and 4th sections, were as follows:
    “ Section 2. The object of this corporation shall be to receive from time to time, and at all times, from all persons disposed to entrust them therewith, such funds as may be deposited with them, and for which they shall pay to the depositors such' rates of interest as may be from time to time agreed upon by the Directors of the said Institution. Provided, That the said rates of interest shall not be reduced without giving at least sixty days’ notice of their intention so to do, in two or rhore of the daily papers of the city of Philadelphia.
    Section 3. For the security of the depositors of the said Institution, it shall be the duty of the persons named in the first section, and of their associates, to raise and form a capital for the said Institution, of not less than fifty thousand dollars, nor more than $200,000, in shares of $25 each; which capital shall be at all times liable to the depositors for the amount of their deposites and of the interest accruing thereon. The said shares shall be transferable on the books of the company in such manner as may be designated by the ByLaws of the said Institution.
    Section 4. There shall be a meeting of the members of the said Philadelphia Savings Institution, on such day in the month of May next, and at such place as the five persons first named in this act, or any three of them shall appoint, and give at least ten days’ notice of such meeting Jn two or more newspapers printed in the city of Philadelphia, and on such day in the month of May, and at such place annually thereafter as the By-Laws of said Institution shall provide, for the purpose of choosing from among the members, thirteen Directors to manage the affairs of the said Institution for twelve months thereafter, and until a new election shall take place — and the five persons first named shall be judges of the first election of directors, and the judges of all future elections shall be appointed, and notice of such elections given in such manner as the By-Laws shall provide.”
    The 5th section declared the duties and powers of the directors; among which it wras provided, that they should have power “ to provide for the admission of members, and furnishing proofs of such admission,” and to pass all such By-Laws as should be necessary to the exercise of their powers and of the other powers vested in the corporation by the charter: “ Provided, that all such By-Laws as shall be made by the directors, may be altered or repealed by two-thirds of the members, at any annual meeting, or at any general meeting, called in pursuance of any By-Law made for that purpose; and the majority of members may at any annual or general meeting, pass by-laws which shall be binding upon the directors.”
    The 6th section authorised the corporation to invest its funds in public stocks of the State, or of the United States, or in real securities, or in the discount of notes, and personal securities: provided that the rate of discount should not exceed one half per cent for 30 days.
    The 7th section was as follows:
    “ Section 7. It shall be the duty of the directors, at least once in every six months, to appoint, from the members of the said corporation, five competent persons as a committee of examination, whose duty it shall be to investigate the affairs of the said corporation, and to make and publish a report thereof in one or more newspapers printed in the city of Philadelphia — and it shall also be the duty of the directors, on the first Monday of January and July, in each and every year, to make and declare a dividend of the interest and profits of the said corporation, after paying its expenses, and the same to pay over to the~stockholders, or their legal representatives, within ten days thereafter.”
    The 8th section provided, that nothing in the act contained should be so construed as to give or extend any banking privileges to the institution, or to give or allow any compensation to the directors thereof.
    Shortly after the act of incorporation, the directors adopted certain by-laws, among which were the following:
    “ Law 4. Any member of the Institution may, by writing ad-, dressed to the treasurer, resign and relinquish his place and right as a member of the institution; and every member who shall cease to-be a stockholder, shall at the same time cease to be a member.
    “ Law 5. No person shall be eligible as a member, unless he shall have been a depositor one year, or a stockholder six months. All elections for membership shall be by ballot at a general meeting of the institution, at which the votes of two-thirds of the whole number of members of the institution shall be requisite for admission.”
    At a general meeting held on the 5th of January, 1836, the old by-laws were repealed by the members, and in lieu of the above-laws, viz. law 4th and 5th, they passed the following by-laws :
    “ Law 3, section 3. The number of members of the institution shall be limited to fifty; and in case of vacancy by death, resignation or otherwise, it shall be the duty of the president immediately to call a general meeting of the institution to supply such vacancy, and a.t any election of members a majority of the whole number of members shall be present; and the person or persons balloted for, shall have received the votes of at least two-thirds of the members present.
    Provided, that no person shall be elected a member who shall not have been nominated at some meeting previous to that, at which he shall be balloted for.
    •Section 4. Any member of the institution may, by writing addressed to the president, resign and relinquish his place and right as a member of the institution, at any general meeting of the members.”
    The law No. 5 above quoted, was repealed.
    The board of directors afterwards, viz. on the 14th of January, 1836, passed the following by-law, being a repeal of and in substitution of by-law 4 above:
    “ Law 4. Any member of the institution may, by writing addressed to the president, resign and relinquish his place and right as a member of the institution at any general meeting of the members.”
    The questions submitted to the Court were,
    1. Whether persons originally members, who had transferred their stock and no longer possessed any interest in the stock, continued to be members, with the right of voting for directors, &c.
    2. Whether a person to whom stock in the institution was assign- , ed — as upon purchase — became a member, ipso facto, without ad-, mission by the directors.
    Mr. James S. Smith and Mr. Sergeant cbntended,
    that none but persons having a pecuniary interest in the corporation by holding stock, were to be considered as members. ' The rule is, that'in monied institutions an interest in the stock is essential to membership. This rule is founded in good sense, which leads men to trust the care of their property to persons having a common interest with themselves. In the case of literary, charitable or religious institutions a general interest is sufficient.' Where the corporation is of a mixed character, the principles as to monied institutions ought to govern; since the control of the stock ought not to be in the hands of persons having no interest in it. Such are the turnpike and • bridge companies and others, in which there is a view to the public good and private advantage. These principles will be found in the text-writers and adjudications. Angel Ames on Corporations, 62, 77, 238, 240. Gray v. Portland Bank, (3 Mass. Rep. 364.) State v. Tudor, (5 Day’s Rep. 333.). Bond v. Appleton, (8 Mass. Rep. 472.) What then is the character of this corporation ? It is obvious, that it is not a charitable institution merely. It differs from the saving banks of England, and the saving fund societies established here, in the essential feature of possessing a joint-stock fund created by the subscriptions of members not depositors, and upon which á dividend is annually made. The object of those societies is to take care of the money of depositors, and to pay them the highest rate of.interest that can be made, after deducting expenses. They are not allowed to discount notes; and their investments being upon11 real estate or public stocks, they require no collateral capital stock as security. The savings institutions, on the contrary, look to the interests of the stockholders, and endeavour to give as much profit as possible to the latter. Whenever a capital is made up by contributions, and is to return a profit, it is a joint stock, no matter what the public object may be. There are many passages of this charter, which seem to imply, that the legislature meant stockholders only when " members” are spoken of, and if there are others, which seem to import a contrary intention, the principles stated with reference to joint-stock companies, ought to have weight in deciding between them.
    Mr. W. M. Meredith and Mr. Broom, contra.
    The rules of law which have been referred to on the other side ■ apply only 'where the charter is silent. Here there is a distinction expressly taken between'stockholders and members. The 1st, 4th, 5th and 7th sections afford evidences of this intention. There were necessarily members, before there were any stockholders. The provision for* future members is, that the directors may admit them ; not that every stockholder might make as many members as he had shares to assign. The power to the directors to admit members is necessarily an exclusive one. The only mention of stockholders is in the 7th section, where a dividend is provided for. If the stockholders alone, were to be considered members, it might follow that the greater part of the profits would be appropriated to them, to the prejudice of the depositors. The legislature probably intended that a check should exist upon this power. This is not a monied corporation, in the sense in which that term is commonly used. The primary object is the security and benefit of the depositors. The creation of the capital stock is stated in the act to he for the security of the depositors. Upon the principle relied upon on the other side, the depositors ought to have the control of the institution. The by-law made by the directors, confining membership to stockholders, was beyond their power; besides it has been repealed by the members in the manner authorised by the act of assembly.
    The following cases were cited: Sergeant v. The Franklin Ins Co. (8 Picker, 90.) Quiner v. Marblehead Ins. Co. (10 Mass. Rep 476.) Lamb v. Durand, (13 Mass. Rep, 57.) 1 .Blackst. Com, 392, 484, (note.) 5 Mad. 259. Angel Sp Ames, 244.
   The opinion of the Court was delivered by

Rogers, J.

The rules obtained in this case, involve two questions, which depend upon the construction of the act of the 5th of April, 1834, incorporating the Philadelphia Savings Institution.

1. Is a stockholder, a member of the corporation, and as such entitled to participate in its business 1 ■ 1

2. Does he cease to be a member when he ceases to be a stockholder 1

In relation to the power of admitting members of a corporation, as is said in Angel and Ames on Corporations, 62, reference must often be had to the provisions and spirit of the'charter; and when the charter is silent, we must look to the provisions of the common law, and to the particular nature and purpose of the corporation. In certain corporations, (such for example as religious, charitable, and literary,) the number of members is often limited by charter; and whenever there is a vacancy, it is usually filled by a vote of the company. As regards trading and joint stock operations, no vote of admission is requisite; for any person who owns stock therein, either by original subscription or by conveyance, is in general entitled to, and cannot be refused the rights and privileges of a member. Gray v. Portland, (3 Mass. R. 364.) King v. Bank of England, (Doug. 524.) In monied institutions, such as banks, insurance, canal, and turnpike companies, &c. the mere owning of shares in the stock of the corporation, gives a right of voting; and a stockholder ceases to be a member by a transfer of stock. There is then this marked distinction arising from the nature of the corporation. In the one case, a pecuniary interest is the evidence of membership; whilst the affairs of religious, charitable or literary institutions, are committed to those who have no pecuniary interest whatever in their management. If this were a corporation of the former description, it would greatly strengthen the argument of the respondent’s counsel, but I cannot view it in that light, but look upon this and all institutions of a like kind, as partaking of the nature of a charity, where the professed object is to advance the interests of the poor and helpless. The object of this institution is declared to be, to receive from time to time, from all persons disposed to entrust them therewith, such funds as may be deposited with them, and for which they are to pay to the depositors such rates of interest, as may be from time to time agreed upon by the directors. These deposits, as is well known, are made in small sums by the poor; and the institution is professed to be more especially for their benefit. In aid of this object, and as subsidiary to it, the Legislature in the third section directs, that for the security of the depositors, &c., it shall be the duty of the persons before named, and of their associates, to raise a capital, &c. of not less than $200,000, in shares of #25 each; which capital is to be at all times liable to the depositors for the amount of their deposits and the interest.

In other .institutions of the like kind, the latter provisions are' omitted: they were manifestly introduced into this charter, not for the benefit of the stockholders, but as an additional security or pledge to the depositors. As an inducement to make this investment, in the sixth section, the corporation is authorized to invest its funds “in public stocks of this State, or the United States, or real securities, or in the discount of notes and personal securities and in the seventh section, the directors are authorized to declare a dividend of the interest and profits of the corporation, after paying its expenses, and to pay it over to the stockholders, or their legal representatives. It seems to me, most clear, that the Legislature had no intention of establishing a joint stock company, but that there was a mere modification or change in the provisions usually inserted in the charters of savings fund institutions.

But at any rate, these rules of construction only apply when the charter is silent. So that in this, as in every other case, we must look to the act itself, having regard to the particular nature and purpose of the corporation. In the charter there are antagonist interests; the interest of the stockholders is in some measure in opposition to the interest of the depositors. It is for the benefit of the one to decrease, and of the other to increase the rate of interest on deposits; and hence, there may be a peculiar propriety in the Legislature to entrust the control of the funds to persons who have no pecuniary interest in the corporation. At least, I perceive nothing in this, of which the stockholders have any right to complain. If the stockholders have the exclusive management of the institution, for which the respondents contend, a temptation .is held out to 'divert the institution from its original and primary object, and convert it into a bank, differing only in the fact, that it is a bank of discount and deposit, and not of circulation. Besides, if a pecuniary interest is the only criterion of membership, it may with equal plausibility be said, that the depositors are members also, and as such entitled to participate in its management. In the first section it is enacted “ that the persons therein named, and all and every other person or persons, hereafter becoming members of the Philadelphia Savings Institution, in the, manner hereafter mentioned, shall be, and are hereby created and made a corporation by the name and style of the Philadelphia Savings Institution.” The manner in which they can become members, is pointed out in the fifth section. Among other matters, the directors have power to provide for the admission of members and furnishing proofs of such admission. This, we conceive, to be inconsistent with the idea, that a stockholder is ipso facto a member of the corporation ; for if so why confer the power to provide for the admission of members ? The Legislature do not confine the power to furnishing proofs of the admission of members, but they in express words, grant the power to admit members of the corporation. This we conceive, to be an authority to elect such persons as members, as they may deem- best fitted to carry into effect the objects of the charter. The respondent’s case alsoderives additional strength from the seventh section. A distinction is there taken between a member of the corporation, and a stockholder. It is made the duty of the directors, to appoint from the members of the corporation, five competent persons as a committee of examination to investigate the affairs of the corporation; and in the same section, to declare a dividend, &c. and to pay the same over to the stockholders, or their legal representatives. Why, it has been asked, this change of phraseology, if a stockholder, as such, is a member of the corporation 1 -It is also worthy of remark, that the Legislature wholly omit to regulate the right of voting; a regulation always introduced in all joint-stock incorporations. It is the uniform policy to limit the number of votes to which stockholders may be entitled, in all such companies; a limitation which would riot have been omitted, had the Legislature conceived this to be an institution of that description.

Reliance has been placed on the word “ associates,” in the third section, which the counsel for the commonwealth says, must refer to stockholders. This is an argument not without plausibility. This section makes it the duty of the persons named in the act, and of their associates, to raise a capital of not less than $200,000; but iri what manner this is to be effected, is left to their discretion. It would seem to be the intention of the Legislature to give power to admit members before, as well as after the capital was raised; and indeed they might have required the aid of others than those named, to effect this result. I see nothing in the act which forbids this; but I think a fair construction of this part of the charter, shows that this power was intended to be given. If so, this is an argument to show that a monied interest., is not an indispensable condition of membership.

It is said, that the directors have passed a by-law, that every member, who shall cease to be a stockholder, shall cease to be a member. Whether this be so or not, is of little importance; for although the charter give authority to the directors to admit members, there is none given to disfranchise them. A by-law may modify and change the constitution of a corporation, but cannot alter it. It may regulate in a reasonable manner, the exercise of a right in the internal affairs of a corporation, in the conduct ofits members, or the mode by which a person is admitted to the exercise of a right to which he has an inchoate title; but it cannot take away a right, or impose any unreasonable restraint in the exercise of it. 2 Kyd on Corporations, 107, 122.

Rules discharged.  