American Thrift Building & Loan Ass'n v. Gimbel

Urner, J., delivered the opinion of the Court. The plaintiffs are free shareholders in the defendant building and loan association, and, in this equity suit for discovery, and relief, complain of the retention of certain dividends on their stock declared by the association in the course of its voluntary liquidation. The right to retain the dividends on the shares of the plaintiffs is asserted by the association in reliance upon an agreement under which it claims to have that authority, and because of the partial application of the plaintiffs’ share account to the payment of their mortgage indebtedness to the association in an amount exceeding the dividends sought to be recovered in this suit. A defense of former adjudication is also interposed.

The decree appealed from overruled those ³ defenses and directed the payment to the plaintiffs of the retained dividends on their stock. The association began to liquidate in July, 1931, in pursuance of a resolution by its stockholders to that end, which provided that, after all its debts had been paid, distributions should be made to the shareholders, from time to time, whenever a sum of money equal to five per cent, or more of the par value of the outstanding shares was found to be available for that purpose. It was proposed by the resolution that the shareholders be requested to sign an agreement consenting to the liquidation, and promising that during its progress they would forbear to bring any receivership or other suit against the association. Instead of assenting to the liquidation, the plaintiffs asked that they be permitted to withdraw the amount of their shareholder’s account, which was then $6,000.

This request was made on August 18th, 1931, in a letter to the association from Mr. Sayler, the plaintiffs’ attorney. A liquidating dividend of five per cent, had already been declared, and a check for $300 had been sent to the plaintiffs in payment of the distribution to their account. The check was returned by their attorney in the letter by which the proposal to withdraw their account was communicated. About two weeks later, Mr. Sayler, in a letter to Mr. Waxman, the association’s attorney, requested on behalf of the plaintiffs that their account be applied so far as necessary to the satisfaction of their mortgage debt to the association, and stated that they would accept another check for $300 in place of the one previously sent, provided it omitted a reference to the liquidation, which the first check had contained.

In response to that letter a new check for $300, drawn by the association to the order of the plaintiffs, was delivered and accepted, and their attorney was advised that the mortgage debt would be canceled in the manner proposed. The amount of that debt was $2,064.47. Its payment out of the share account of the plaintiffs left it with a credit balance of $3,635.53, after it had also been charged with the $300 liquidation dividend. ⁴ In December, 1931, the plaintiffs, made a further and futile demand for payment of the balance credited to their account, and then brought suit against the association in the Superior Court of Baltimore City to recover the sum of $3,635.53 thus claimed. At the trial of that súit, a verdict for the defendant was directed on the ground that the plaintiffs were not entitled to withdraw their account while the association was in process of liquidation and after they had accepted a dividend which had been thus produced.

The court declined to recognize a defense based upon an agreement signed by the plaintiffs and the association in April, 1929, which provided that the free shares then in their name should remain liable for a due proportion of the income taxes which the association might be required to pay, and of any losses on its pre-existing mortgage loans. The stated reason for the exclusion of that defense was the i'ndefiniteness of the agreement as to the time of its operation. Shortly after the termination of the action to recover the balance of their free shares account, the plaintiffs brought this suit in equity to compel the association to disclose and pay the dividends which have been allocated to the account but payment of which has been refused. There have been seven such dividends, and they aggregate $1,090.68.

The grounds of defense to the present suit have already been indicated. The agreement of April, 1929, upon which the defendant relies primarily, was exacted from the plaintiffs when they were making the last of a series of withdrawals which reduced their free shares