Summary
In Building Assoc. v. Webb, supra, the court, at page 548, states the question at issue as follows: "Can a mortgagee maintain assumpsit against the grantee of the mortgagor for the amount of taxes assessed upon the land during the grantee's ownership and paid out of the proceeds of a sheriff's sale under a judgment on the bond accompanying the mortgage when the effect of such distribution of the fund is to reduce the sum which otherwise would be distributable to the mortgagor?
Summary of this case from C'T'z'ns Sav. B'K v. G'R'nty Loan Co.Opinion
No. 41311.
April 10, 1950. Rehearing Denied May 8, 1950.
APPEAL FROM THE CIRCUIT COURT OF COLE COUNTY, SAM C. BLAIR, J.
J. E. Taylor, Attorney General, Arthur M. O'Keefe, Assistant Attorney General, for appellant.
B. H. Dyer, St. Charles, Ragland, Otto, Potter Carson, Jefferson City, Leon P. Embry, California, Mo., for respondent.
Action for a declaratory judgment. After defendant's answer was filed, the relief prayed in plaintiff's petition was granted upon plaintiff's motion for judgment on the pleadings. Defendant has appealed.
Respondent is a corporation organized and existing as a building and loan association under the laws of this state, with its home office in the City of St. Charles. It instituted this action to settle a controversy with the then supervisor of savings and loan associations, who charged that respondent had unlawfully failed to pay sufficient and proper amounts to the holders of certain installment shares of stock retired by the association. He demanded that additional amounts be paid to these retired shareholders and threatened to take over respondent's assets and business unless his demands were complied with.
From time to time, prior to June 30, 1944, and in accordance with its by-laws and the laws of this state, respondent had issued various series of installment shares of stock. Among such shares of stock were the shares in question here numbered from 56 to 73, inclusive, and being known as serial installment shares. These shares had an "ultimate or maturity value of" $200 each. It is admitted that the holder of each such share held the same subject to the by-laws of the association and subject to the laws of the state applicable thereto.
On and prior to August 31, 1944, respondent had on hand considerable money in excess of its reasonable requirements for loans and it decided to retire, as undesirable and unprofitable, all free serial installment shares of the series mentioned (that is, all serial installment shares of said series that had not been borrowed on) and to substitute therefor shares of stock in said association to be known as optional payment shares. On the date mentioned, respondent by letter notified all holders of such free serial installment shares of said series as to the association's condition and requested said holders to exchange such shares for the optional payment shares to be issued. Respondent further advised these shareholders that it would re-purchase all shares in this series held by persons who did not desire to make the suggested exchange.
On October 2, 1944, respondent, by its board of directors, ordered its officers to proceed with the conversion of the said free serial installment shares into optional payment shares. By December 4, 1944, all of the free serial installment shares of said series, except 73 outstanding shares, had been turned in to respondent in exchange for optional payment shares. On that date, the association, by its board of directors, ordered the said 73 outstanding shares repurchased and, prior to December 31, 1944, it paid the withdrawal value of these shares to these shareholders.
Under respondent's by-laws dividends were declared only twice a year, to-wit, on June 30, and December 31; and, by action of its directors, the effective date of the conversion into optional payment shares, or for the re-purchase of the free serial installment shares, was fixed as September 30, 1944.
It is admitted that the amounts paid for the free serial installment shares re-purchased by respondent, and the amounts allowed by respondent to those shareholders who exchanged their free serial installment stock for the optional payment shares, was the withdrawal value of such free serial installment shares; and that such withdrawal value was the amount of dues paid in, plus the dividends accrued and credited up to and including June 30, 1944, less any fines due respondent from the shareholders. No earnings of respondent subsequent to June 30, 1944, had been credited to any such shares exchanged or re-purchased.
In 1946, the then supervisor of savings and loan associations notified respondent that it should have paid for each such share, whether exchanged or re-purchased, "the amount of dues paid in, plus the dividends that had accrued less any fines due," that is, the "full or book value" of such, share as of September 30, 1944. The supervisor demanded that respondent pay to said shareholders additional sums (above the withdrawal value as paid) equal to the proportionate part of respondent's earnings from June 30, 1944 to September 30, 1944 and also an additional proportionate part of respondent's earnings, that is, respondent's undivided profits as of June 30, 1944. Respondent declined to do so and instituted this action.
At the time respondent exchanged or repurchased the said free serial installment shares in question, Section 23 of its by-laws provided: "Monthly installment shares shall be entitled to dividends at such rates as may be determined by the board of directors and such dividends shall be irrevocably credited to such monthly installment shares semi-annually on the thirtieth day of June and on the thirty-first day of December in each year until such shares shall reach their maturity value." Section 32, with reference to withdrawals, provided: "* * * and when so withdrawn the shareholders shall be entitled to receive the dues paid in on such shares plus the dividends which may have been irrevocably credited on such shares prior to the date of such withdrawal * * * Monthly installment shares may, by order of the board of directors, be called in for cancellation at any time after the expiration of three years from the date of issuance thereof, regardless of whether or not the member owning such shares has filed an application for their withdrawal and, when so called in for cancellation, shall be redeemed at the amount of dues paid on account of such shares plus the dividends accrued thereon to the designated date of cancellation. Fines due by withdrawing members shall in all cases be deducted * * *."
At that time Section 8223, R.S. 1939, as amended, Laws 1943, p. 341, Mo.R.S.A., governing savings and loan associations, provided with reference to installment shares, the following: "Whenever an unpledged share shall reach its maturity, all payments thereon shall cease and the holder of such stock may withdraw the same as provided in this law. If not so withdrawn, such matured stock shall be and become fully paid stock of the association in a sum equal to the matured value of said shares: Provided, however, that at no time shall more than one-half of the funds in the treasury be applicable to the payment of such matured shares without the consent of the directors; and provided further, that the directors of said corporation may, at their discretion, under rules made by them, retire the unpledged full paid shares, or prepaid shares, at any time, and may in like manner retire installment shares at any time after the expiration of three years from the date of the issue thereof by enforcing the withdrawal of the same; and provided further, that the matured shareholders shall be entitled to receive and shall be paid the full value of their shares at the time, less all fines and their proportionate part of any loss." (Italics ours). This section was subsequently repealed and new sections re-enacted. Laws 1945, p. 1578.
The trial court found that the holders of the shares so exchanged or re-purchased "were not entitled either to proportionate parts of plaintiff's earnings from June 30, 1944 to September 30, 1944, or to proportionate parts of plaintiff's earnings to June 30, 1944, which had not been declared as dividends, so that they were not entitled to proportionate parts of plaintiff's undivided profits as of June 30, 1944; that * * * whether the amounts paid by plaintiff therefor were the full or book value of said shares or not, the above mentioned by-laws * * * of the plaintiff authorized the retirement of such shares without the payment of any greater sum or sums than was paid by plaintiff therefor; that the transactions aforesaid were such as plaintiff had a lawful right to have, and to make, with said shareholders; that said section 8223 R.S.Mo. 1939, as amended by Laws of Mo. 1943, p. 341, did not require the payment of book value or full value for said shares * * *; and that * * * said shares * * * did not become matured shares and the holders thereof were not and did not become matured shareholders * * *." The court further held that defendant (supervisor) had no right or authority to require plaintiff (respondent) to pay any additional sums on account of the retired shares, or to take over the association's assets or to manage its business on account of its retirement, exchange or repurchase of said installment shares.
Appellant's points relied on and specifications of alleged error are as follows: (1) "The respondent corporation should have paid book or full value to the shareholders rather than withdrawal value"; and (2) "the action of the supervisor in threatening to take over the assets and management of the respondent was proper."
Appellant contends that respondent acted illegally in refusing to pay "the book value" of the installment shares exchanged or re-purchased; and that, proper notice having been given and demand made, the supervisor of savings and loan associations had the right to take over and manage respondent's affairs. Appellant cites Sec. 8223, R.S. 1939, as amended, Laws 1943, pp. 335, 341, as applicable to the exchange or re-purchase of the installment shares and the value to be paid therefor, and Sec. 97, Laws 1945, pp. 1578, 1611, Sec. 8257.96, Mo. R.S.A., as applicable to the supervisor's right to take over respondent on the date this action was instituted. Appellant cites State ex rel. Wagner v. Farm Home Savings and Loan Association, 338 Mo. 313, 318, 90 S.W.2d 93, 100, in support of the proposition that "all members of said associations must participate equally in the profits and bear the losses, if any, in the same proportion." Appellant's theory is that Sec. 8223, R.S. 1939, as amended, Laws 1943, pp. 334, 341, provides that the matured shareholders shall be entitled to receive and shall be paid the full value of their shares at the time the stock reaches its maturity; and that "the statute is plain in its requirement that all shares that have been matured either by all installments being paid, or which are retired under the association's authority to enforce retirement, are included within the provision that full value must be paid." In other words, appellant contends that, when the association at the expiration of three years forces the withdrawal of installment shares which have not yet reached maturity, such forced withdrawal matures the stock "so that the full or book value must be paid to the shareholder." Not only does appellant contend that the statute recognizes that installment shares may be matured by forced retirement, but appellant further argues that it would be inequitable and unjust for installment shareholders to be forced out against their will without the payment of the full or book value of their shares. In this connection, defendant's answer alleged "that, as a result of the plaintiff paying to the shareholders the withdrawal value as of June 30, 1944, instead of the book value as of September 30, 1944, the plaintiff corporation profited and gained approximately $18,600.00." The motion for judgment on the pleadings, for the purpose of the motion, conceded this fact.
Appellant further argues that (since Section 32 of the by-laws of respondent provides that the monthly installment shares may be cancelled at any time after three years of the date of issuance and, when so called in for cancellation, "shall be redeemed at the amount of dues paid on account of such shares plus dividends accrued thereon to the date of cancellation"), the respondent should have paid full or book value up to the date of cancellation, September 30, 1944.
If the amounts paid by respondent to its retired shareholders conformed to the by-laws of the association and to the laws of the state, appellant's claim that the amounts paid were inequitable and unjust cannot be sustained, because it is conceded that "the holder of each such share held the same subject to the by-laws of the plaintiff and subject to the laws of the State of Missouri applicable thereto."
Nor do we believe that respondent violated either its own by-laws or the statutes of this state in fixing the amounts to be paid the retired shareholders. As stated, the by-laws (Sec. 23) provided that "* * * installment shares shall be entitled to dividends at such rate as may be determined by the board of directors and such dividends shall be irrevocably credited * * * semi-annually on the thirtieth day of June and the thirty-first day of December in each year * * *." Section 32 provided that installment shares when called for cancellation "* * * shall be redeemed at the amount of dues paid on account of such shares plus the dividends accrued thereon to the designated date of cancellation." No dividends accrued between June 30, 1944 and September 30, 1944, the rates for no dividends appear to have been determined by the board of directors and no dividends were "credited on such shares prior to the date of such withdrawal," exchange or re-purchase. Nor could any such dividends accrue prior to a determination of the amount thereof and the time fixed by the by-laws for such dividends to be credited. Further, the earnings and profits of a corporation remain the property of the corporation until severed and ordered distributed as dividends. Hayes v. St. Louis Union Trust Co., 317 Mo. 1028, 298 S.W. 91, 98, 56 A.L.R. 1276; Brown v. Luce Mfg. Co., 231 Mo.App. 259, 96 S.W.2d 1098, 1100. We find no provision of respondent's by-laws that would require the payment of any sums in excess of those paid by respondent on the retirement of these shares.
Did the statute, Sec. 8223, R.S. 1939, as amended, Laws 1943, p. 341, require additional payments? Prior to 1931, Sec. 5603, R.S. 1929, governed the retirement of installment shares, as follows, to-wit, "the directors of said corporation may, at their discretion, under rules made by them, retire the unpledged full paid shares, or prepaid shares, at any time, and may in like manner retire installment shares at any time after the expiration of three years from the date of the issue thereof by enforcing the withdrawal of the same; and provided further, that the retired shareholders shall be entitled to receive and shall be paid the full value of their shares at the time, less all fines and their proportionate part of any loss. The particular shares to be so involuntarily retired shall be determined under such regulations as the directors may prescribe." (Italics ours). This section was amended, Laws 1931, p. 154, and the words "matured shareholders" were substituted for the words "retired shareholders" as italicized above. The words "matured shareholders" have been carried forward in subsequent amendments. Laws 1937, pp. 191, 192; Laws 1943, pp. 341, 342.
We cannot accept appellant's construction of the statute, Laws 1943, pp. 341, 342, that the forcible retirement of the installment shares prior to full payment and prior to such shares having reached the ultimate or maturity value of $200 each, matured such shares under the statute, or entitled the owners of such shares to what appellant refers to as "full or book value." Retirement under the by-laws and statute did not make the installment shares, which had not been paid to "maturity," matured shares as the word "matured" is used in the statute. Further, the substitution of the word "matured" for the word "retired" see Section 5603, R.S. 1929, as amended by Laws 1931, p. 154, shows a legislative intent to require payment of full value only on the involuntary withdrawal or retirement of "matured" shares and not on the retirement of installment shares, which had not been paid on to maturity. Also see Laws 1937, p. 191, Laws 1943, p. 341. In construing the statute, we must proceed upon the theory that the Legislature intended something by the amendment. Holt v. Rea, 330 Mo. 1237, 52 S.W.2d 877, 878; State ex. rel. Klein v. Hughes, 351 Mo. 651, 173 S.W.2d 877, 880. We think the amendment clearly excluded the holders of installment stock which was retired prior to maturity.
It is conceded that respondent did pay the withdrawal value of the retired shares to the owners thereof and, since we hold that such withdrawal value was the full amount payable on such shares at said time under respondent's by-laws and the laws of this state, respondent did not act unlawfully with respect thereto and its business and assets were not subject to being taken over by the supervisor of savings and loan associations on account thereof.
The judgment is affirmed.
All concur.