The defendant is a saving and loan association, organized February 25, 1890, under the act, chap. 122 of the Laws of 1851, entitled "An act for the incorporation of building, mutual loan and accumulating fund associations," and acts amending the same. Its general purpose was to encourage small savings, and to accomplish this purpose it was provided in the articles of association that the membership should consist of persons who should subscribe for one or more shares of one hundred dollars each, to be paid for in weekly payments of ten cents on each share, and each member *Page 284 was entitled to a loan to the amount of the share or shares held by him out of any money in the treasury of the association, secured by mortgage, and in case of a loan an additional weekly payment of ten cents a share, called interest, was to be paid by the member securing the loan, to continue until the payments on the shares and of interest should cancel the loan. The association had no paid-up capital, and its only resource for paying the expenses of management and for making loans was the small weekly payments expected to be made by members and premiums on loans. A member not taking a loan, when his share or shares were fully paid up by the aggregate of the weekly payments, was entitled to surrender his stock and receive from the association the amount thereof. But the articles of association accorded to non-borrowing members the further right to withdraw from the association at any time on one week's notice, and in case of withdrawal it was provided as follows: "The dues actually paid in, together with such accrued profits as the directors may deem prudent for the interest of the association, will be refunded to them when the necessary funds are collected. Members who wish to withdraw have preference to those wishing to procure loans." The plaintiff was a member of the association and a subscriber for twenty shares of its stock, and up to the 4th day of October, 1892, had paid weekly payments thereon, amounting in all to $189.00. On that day he filed his application to withdraw the amount paid in by him. Prior to that day seventy-eight members had also filed their applications to withdraw the amounts severally paid in by them. The applications were entered in a book of the association provided for that purpose in the order of presentation. The prior applications aggregated $8,500. The association proceeded to pay them out of collections made, in the order of presentation and up to the time of the commencement of this action had paid the sum of $6,671.74, exhausting by such payments all the money then in its treasury. It had outstanding loans to the amount of $21,857. The amount owing the plaintiff not having been paid, this action was brought to recover the sum *Page 285 of $189.00, it being an ordinary action as upon a debt presently due and payable.
It seems to be very plain that the clause in the articles of association, that the dues paid by withdrawing members "will be refunded to them when the necessary funds. are collected," operated as a qualification of the liability of the association to withdrawing members. It was essential to the practical working of the scheme and purpose of the organization. The association, if the plan was followed, could have no assets of any considerable amount available for immediate re-payment of dues paid in by withdrawing members. It was not a moneyed corporation in any proper sense, and would not in the ordinary course of its business have assets readily convertible into money. Its assets would be represented in the main by loans to members on mortgages payable in small weekly payments. If no restriction existed preventing withdrawing members from immediately maintaining actions to recover their dues and enforcing judgments obtained, it is evident that this and similar associations would have a precarious existence. They would be in peril at almost any moment to have their operations arrested and to be thrown into a receivership by the conjoint action of a few withdrawing members. The beneficial purpose of the statute for the encouragement of small savings would be frustrated and the assets of the association subjected to costs and expenses which would seriously impair the general fund contributed by the members.
The articles of association which showed the scheme of the organization, and defined the obligation of the association and the rights of members, are binding upon each member thereof. They establish the relation between the association and the stockholders and constitute a contract between them. The association only bound itself to return the dues owing to a withdrawing member "when the necessary funds are collected." The plaintiff knew the probable resources of the association when he became a member and by subscribing the articles consented that the payment by members should be *Page 286 invested in mortgages payable in small weekly payments. He does not stand in the position of a general outside creditor. He paid his dues and although by withdrawing he has ceased to be a member of the association, his right to receive them back is measured by the contract between him and the association. There can be no doubt we think that the condition that the association should refund "when the necessary funds are collected," was a material and substantive part of the obligation assumed by the association, and that it constitutes a good answer to the suit of a withdrawing member, that neither at the time that he withdrew, nor subsequently, before the action was brought, were there in the treasury of the association any funds collected, out of which the claim could be paid. We of course eliminate any element of bad faith, for this is not claimed, nor is it the case of an association which has discontinued its business or become insolvent. We need not consider what effect these or other facts might have upon the legal remedies of a withdrawing stockholder.
There is another question raised, respecting the right of the association to establish a by-law that withdrawing members should be paid in the order in which their applications were filed with the association. Such a by-law was enacted in the fall of 1891, after the plaintiff had purchased his stock, but, so far as appears, before any member had withdrawn or any withdrawals were in contemplation. It is claimed in behalf of the plaintiff that his rights could not be prejudiced by the enactment of such a rule of preference after he had become a member. It appears that when the plaintiff withdrew there was money in the treasury which was subsequently applied to the payment of dues to members whose withdrawals were filed at an earlier date than the withdrawal of the plaintiff.
The power to make reasonable by-laws consistent with its charter inheres in every corporation. Associations formed under the act of 1851 are declared therein to possess certain powers given to corporations by the Revised Statutes in tit. 3, ch. 18, pt. 1, among which is the power to "make by-laws not inconsistent with any existing law for the management of its *Page 287 property and the regulation of its affairs," and by the express terms of the act itself power is conferred on associations formed under it to make "such provisions as shall be necessary for the convenient and effective transaction of the business thereof." The member of an association accepts membership with notice of the powers thus conferred. He is subject not only to regulations existing when he becomes a member, but to such as may be enacted from time to time by the association within the scope of the power given by the statute. It may be admitted that the association could not under this power destroy the contract between it and the member. But the contract made was in law subject to the power of the association to enact at any time reasonable by-laws. It would not be reasonable to extend this power so as to authorize the association by a subsequent by-law to change the essential character of an antecedent agreement between a member and the association, as for example, that a withdrawing member should not be re-paid his dues. But a by-law more or less affecting the remedy of the shareholder may be passed, and existing members will be bound, so far at least as they consented to the exercise of such a power when they became members. The recent English cases of Wilson v. Miles PlattingBuilding Society (L.R. [22 Q.B. Div.] 381, note); Rosenberg v.Northumberland Building Society (id. 373), and Bradbury v.Wild (L.R. [1 Ch. Div. 1893], 377), are quite full upon this point. We think the by-law enacted in the present case, that withdrawing members should be paid in the order of the presentation of their application, was a reasonable regulation and bound the plaintiff, although enacted after he became a member. There is nothing in the articles of association forbidding, directly or by implication, the enactment of such a by-law. It gave no preference to any named stockholder over others. The plaintiff was at liberty at any time to withdraw and make his application for re-payment, but he saw fit to defer doing so until after many others had preceded him. The association, by enacting the rule, did not deny the plaintiff's right to be paid out of collections, but for convenience *Page 288 enacted a rule that those who first applied should be first paid, and this, we think, it was competent for the association to do, and that when enacted the rule was binding upon all members alike. The by-laws originally enacted empowered the board of directors to make "at any time" by-laws which do not interfere with the "articles of association," and further declared that when enacted "they are equally binding upon all stockholders, as by them subscribed." The by-law in question was not an interference with the articles of association.
The authorities upon the question herein considered are not altogether harmonious. The case of the U.S. Building and LoanAssociation v. Silverman (85 Pa. St. 394) may be said to be adverse to the view that the plaintiff could not maintain an action until there were funds collected applicable to the payment of his claim. On the other hand, the cases of Brett v. MonarchInvestment Building Society (L.R. [1 Q.B. Div. 1894] 367);Barnard v. Tomson (L.R. [1 Ch. Div. 1894] 374); Heinbokel v. National Saving, Loan and Building Assn. (58 Minn. 340), andTexas Homestead Building Loan Association v. Kerr, 13 S.W. Rep. 1020), tend to support the opposite conclusion, and rest, we think, upon the better reason.
The judgment of the General Term should be reversed and that of the Municipal Court of Buffalo should be affirmed, with costs.
All concur.
Judgment accordingly. *Page 289