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Wm. Hepburn Russell (Wm. Beverly Winslow, Morton Schaeffer, Randolph Barton, and Archibald R. Watson, on briefs), for appellant receivers.

Richard S. Culbreth, for appellant Coltrane.
Fielder C. Slingluff, for appellant Baltimore Building & Loan Ass'n.
William Pinkney Whyte, for appellee Powhatan Improvement Co.

Thos. Foley Hisky and M. N. Packard, for appellee Blake and others.

E. S. Douglass and George H. Lamar (Joseph D. Wright, on briefs), for appellees Cummin and Gulliver.

Edwin J. Farber (David Stewart and E. Stanley Toadvin, on briefs), for appellee Wilkins and others.

Henry C. Kennard (Henry A. Whitaker, on briefs), for appellees Eunice R. Pearce and others.

Before GOFF and SIMONTON, Circuit Judges, and PURNELL, District Judge.

SIMONTON, Circuit Judge. This case comes up on appeal from the circuit court of the United States for the district of Maryland. There are now before us three separate appeals growing out of the settlement of the affairs of the Baltimore Building & Loan Association. The Baltimore Building & Loan Association is a corporation created under the laws of the state of Maryland. It conducted a large business for several years, had members, and had placed loans in North Carolina, Virginia, West Virginia, Pennsylvania, and the District of Columbia, as well as in the state of Maryland. The association having become embarrassed, proceedings were instituted in the circuit court of the United States for the district of Maryland by Daniel B. Coltrane, in behalf of himself and all other stockholders against the association, praying for the appointment of a receiver, and for the administration of the affairs of the corporation in that court. The cause coming on to be heard, Bird M. Robinson was appointed receiver, and subsequently Randolph Barton, Esq., was associated with him as co-receiver. Auxiliary suits were instituted in the circuit courts of the United States for the states above mentioned, and in the supreme court of the District of Columbia, and the assets of the association were put in process of collection. The receivers having made progress in this collection, and a goodly part of the assets having been realized, the court entered an order providing for the intervention in the cause of all stockholders and investors in the association for the purpose of ascertaining and protecting their rights. At the same time John C. Rose, Esq., was appointed special master for the purpose of receiving proois of claims, and he was instructed to report thereon, with his conclusions of law and findings of fact. A large number of interventions have been made. The special master has made his report. The claimants are all holders of stock in the association. Some have paid up their stock subscription entirely, and have been enjoying fixed semiannual dividends at the rates of 8 per cent. per annum with some, and 6 per cent. per annum with others. Some, having paid up their stock in full, have attempted to exercise the privileges of withdrawal given by the by-laws, and have in accordance with them given the required notice. The insolvency of the association defeated the payment of this withdrawal value. All of these two classes claim to occupy the position of creditors. Others are stockholders who have obtained an advance from the funds of the association and have given security therefor. They claim that in settling, ascertaining, and repaying this advance they are entitled to credit for all sums paid in by them by way of dues, premiums, and interest, and that on an adjustment so made they will be discharged from any further obligation as stockholders. Others are stockholders who have paid their dues regularly up to the insolvency of the association, and have never had any advance. They claim that they are entitled to be paid out of the assets of the association, realized and to be realized, the value of their stock, in equal proportion with all the other holders of stock certificates.

The special master, in an exhaustive and able report, discussed the claims of all these classes, and disallowed those of the first three set out above. He held that all holders of certificates of stock were stock holders, entitled to share in equal proportion the remaining assets of the association, the proportion to be measured by the number of shares held by each. And with regard to the third class, the advanced shareholders, he held that they were not entitled as a credit on their advances to the amount of dues on stock subscription paid by them. Exceptions were taken to his report, and the cause was heard by the circuit court. All the exceptions were overruled, except those to his conclusion as to the third class, the advanced stockholders. As to these the court differed with the special master, and held that they were entitled to credit their advance with the dues as well as with all other money paid by them into the association, by way of premium and interest. Appeals and cross appeals were allowed to the decree of the circuit court, and the whole case is here on many assignments of error.

Before entering in detail into a discussion of these assignments of error, a question underlying all of them must first be met. The court below felt itself bound by the decisions of the court of last resort in Maryland in the solution of all questions arising in the administration of the assets of this insolvent Maryland corporation. It held that these decisions led inevitably to the conclusion reached by it. On the other hand, it is earnestly contended that the questions involved in this case, establishing the relations between stockholders and the corporation the Baltimore Building & Loan Association, are questions of general law, determining the nature and obligation of the contracts growing out of these relations, to be solved according to the principles of equity governing the federal courts, and in no wise controlled by decisions of the state courts.

Building and loan associations differ from an ordinary corporation created to deal in money in this: They are allowed to lend out their money, and, under certain restrictions, as such, are exempted from the usury laws of the state. In many other respects they are as other corporations. Their stockholders, in their relations with the corporation as stockholders, enter into the same character of contracts, come under the same character of obligations as do stockholders in other business corporations. And these are regulated by the general law, unless modified by statute. The statute law of Maryland has not modified this relation in these respects. The Maryland statutes, so far as building and loan associations are concerned, have special provisions as to the lending of money by them. In this respect do the Maryland decisions control. A corporation of this character is in one aspect a limited copartnership. Each stockholder ventures a certain sum of money, the amount of stock purchased or subscribed by him. His liability is measured by the stock held by him. Usually, if the enterprise fails, and its assets are exhausted in the payment of debts, the stockholder loses the stock, then valueless, and his liability ds. Sometimes as stockholder he is subject to an additional liability, measured always by the stock held by him. As stockholder he shares in the profits of the association, and, of course, to the extent of his stock and any fixed liability beyond it, he must share the losses. “Qui sentit commodum sentire debet et onus." Each stockholder stands on the same footing with regard to each share of his stock, and each is liable equally and in the same respect with every other for his subscription, according to the form in which he contracts to pay it, whether it be in an entire sum in cash or whether it be in installments at fixed intervals. All these are governed by general law,—the law merchant.

But when a building and loan association begins to exercise the purpose of its creation, becomes a lender of money, and any persona stockholder-gets any of that money, such stockholder assumes a new relation to the association. Whether such a transaction is called an advance from the common fund, or whether it is called a loan, the transaction makes the corporation the creditor, and such person, though a stockholder, the debtor. He incurs a liability which. must be discharged. This feature in the business of a building and loan association is regulated and controlled by the local law. Is such a loan or the incurring of such a liability legal? Does the question of usury arise? Are the general statutes against usury modified with respect to this building and loan association? Are the securities given in this transaction valid? All of these questions must be determined by the local law. Provisions as to such matters vary with the states in which they are made.

In the case at bar, each stockholder—every stockholder in the Baltimore Building & Loan Association-bound himself to pay his stock subscription. This was a contract in which every creditor and every other stockholder of the corporation was interested. He had the option of paying it in cash at once, or he could pay it in certain installments at certain fixed times. All the money so paid under these contracts of subscription went into the common treasury, in which every stockholder had an interest. This transaction is perfectly legal, and not dependent for its legality on any local law. It comes within the general law of contracts. If any one, being a stockholder, because he is a stockholder, concludes to get from the common treasury money in it, and gets it, call it a loan or call it an advance, it has all the characteristics of a debt for which ex æquo et bono he is responsible. He hopes to pay this perhaps by the maturity of his stock at the usual period of similar companies. The insolvency of the company defeats this hope; insolvency brought about by causes which could not be prevented, or perhaps caused by the negligence, fraud, or incapacity of the agents of the stockholders. But this, of itself, cannot release him from his contract, or free him from his responsibility as a stockholder, or cancel his stock. The disappointment which he suffers is common with every stockholder in the association. Every stockholder-each one-has paid his subscription, either in cash or in installments by way of dues, expecting profit at the maturity of the stock in the hoped-for time. The money of each of them has gone into the common fund, and he has used a part of it. The insolvency of the association frees him from the payment of any other dues. But to the extent of the dues paid he is and he remains a stockholder, with all the rights and subject to all the responsibilities of a stockholder. This is according to the law merchant, and no statute of Maryland has altered this law. So the stockholder who has had an “advance” or “loan,” whichever term is used, occupies a twofold relation to the company. He is, first of all, a stockholder, bound by his contract of subscription, and enjoying the advantages and suffering the responsibilities of a stockholder. afterward becomes a debtor, subject to the terms of his contract as borrower,-a contract wholly distinct from that he assumed as stockholder. The one contract comes under the law merchant; the other contract is controlled by the local law.

Holders of paid-up stock; are they creditors of the association ? In his very able report the special master discusses and exhausts this question. He holds that they remain stockholders, and are not entitled to stand as creditors. “There is nothing in any of the by-laws of the corporation which as much as suggests that the holders of paid-up stock are anything other than stockholders. They were allowed a vote at stockholders' meetings, and many of them, including the petitioners intervening in this cause, did vote at least by proxy. They were eligible to office, and were so elected. It is true that they received a definite dividend on their stock, and would not have been entitled to any more, no matter how great the profits of the corporation might have turned out to be. But such a contract is not uncommon between corporations and holders of certain classes of stock.” And then he quotes i Cook, Stock, Stockh. & Corp. Law, § 269; Hamlin v. Railroad Co., 24 C. C. A. 271, 78 Fed. 664, 36 L. R. A. 826; Mercantile Trust Co. v. Baltimore & O. R. Co. (C. C.) 82 Fed. 365. These cases sustain him. The case last quoted was decided by the circuit court of the United States for the district of Maryland. In that case the circuit court (a full bench) says: “There is a legal inference that the claim of a stockholder, with a voice in the management of the corporation, is subordinate to debts due to creditors. That this inference is a well-recognized rule of law, and that to rebut it the expression of a contrary intent, in clear and unambiguous language, is required, is shown by the following citations." Then follows a long list of authorities. If this be the status of this paid-up stock, the holder of it comes within the rule of law which governs other stockholders. They cannot share the assets until all debts are paid. Plimpton v. Bigelow, 93 N. Y. 592; Fisher v. President, etc., 5 Gray, 373; Gibbons v. Mahon, 136 U. S. 557, 10 Sup. Ct. 1057, 34 L. Ed. 525. And so they are neither more nor less than stockholders. The Maryland courts adopt this view also. Tax Cases, 50 Md. 321. We concur with the court below in overruling the exception to the report on this point, and in adopting the conclusion of the special master.

Are stockholders who have given notice of withdrawal creditors? The special master finds as a fact that, under the by-laws of the association as amended, it is expressly declared that a withdrawal notice does not constitute a withdrawal or terminate the membership, or give to the person filing such notice the status of a creditor, or create any rights of action, legal or equitable, against the association, or in any manner alter or disturb the rights or duties as a member. This ends the case so far as those are concerned who acquired their stock after May, 1899, the date of the amendnient.

The master also finds as a fact that, under the by-laws of 1891, 30 days' notice was required before the stock could be withdrawn or reduced. In fact no notice of a desire to withdraw was given 30 days before the appointment of a receiver in any claim proved in this case. The master discusses the question at some length, and reviews the authorities. He shows that there is a conflict of authorities upon the question whether a stockholder who has exercised his right to withdraw, and has given the notice required, and such notice has matured, can rank as a creditor. But all authorities agree that he cannot be recognized as a creditor if such notice has not matured. And this is based on reason. The condition precedent to a right to withdraw is notice for 30 days. This condition has not been fulfilled. The insolvency of the association forbids and prevents its fulfillment. This insolvency puts an end to all business of the association, and destroys its vitality as a going concern.

What are the rights of stockholders who have had advances ? It is contended by this class of stockholders, and the contention is sustained by the circuit court, that in the administration of the assets of this insolvent corporation they are to be charged with the sum actually advanced to them, with lawful interest at 6 per cent. per annum, and they are to be credited with all payments made by them by way of dues, premium, and interest, with interest at the same rate, upon the principle of partial payments. Is this the law?

It will be noted that they are stockholders, and that by subscription to the stock they have become bound, as all other stockholders are, to pay this subscription; that by the by-laws it is expressly declared that the losses, if they exceed the undivided profits, shall be charged pro rata against the several shares; that there are other stockholders who have faithfully fulfilled their contracts of subscription; that by the insolvency of the corporation each of them has been disappointed in the expectation upon which their payments were made; yet, by the conclusion reached by the court below,

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