DISSENTING OPINION. I feel that the questions involved in this case are new in the state of Indiana, and that they are of sufficient importance that I should set forth the reasons for my dissent from the opinion of the other members of the court. I differ with them in two particulars. First, as to the priority rights of a withdrawing stockholder of a building and loan association over continuing stockholders. Second, as to the existence in the record of any evidence showing the solvency of the building and loan association at the time that the appellant gave notice of his intention to withdraw or at the time of the maturity of such notice. Nor do I believe that a presumption or inference of the solvency of the building and loan association, at a particular time, can be properly drawn from the fact that several years have elapsed from the time of withdrawal to the time of judicial determination of insolvency, or from the fact that a building and loan association was permitted by state departments to continue its operations.
The majority of the court thinks that a withdrawing stockholder is entitled to priority in payment over continuing stockholders if the building and loan association was solvent at the time notice of withdrawal was given and matured, despite the fact that the association became insolvent before it was required to pay the withdrawing stockholder and before any payments had been made to him. They reached this conclusion by determining that his status changed from a shareholder to a creditor as of the date of the maturity of his notice. Then, if insolvency occurs thereafter, as a creditor they hold that he is entitled to priority over continuing stockholders. I do not agree with this view. I think the statute, which is quoted in the majority opinion and which declares the rights of the stockholder upon *Page 614 withdrawal, is applicable under conditions where a relative proportion of the assets of the building and loan association will remain for the benefit of continuing stockholders; and that it was not the intention of the Legislature that the manner and order of payment provided for therein should be the basis for distribution where the association becomes insolvent prior to actual payment. If the statute and the provisions thereof concerning order of payment remain applicable after insolvency has been declared, the practical result is to permit those who are a part of the management, or who have information from the management and who know about the condition of the building and loan association, to give their notices and thus obtain a preferment over the others who are not advised. I do not think that this was the intention of the Legislature.
Under the provisions of our statute (§ 5085, Burns' 1926), which are quoted by the court, the withdrawing stockholder is entitled to the proportionate part of the assets of the association represented by his shares. He is entitled to receive "the full amount of dues paid in upon the stock to be withdrawn, together with all declared dividends thereon, less all fines and other charges provided by the by-laws and a pro rata share of the losses sustained during such stockholder's term of payment." It will be noted that the shareholder is not entitled to receive the full amount of his contribution to the building and loan association, for his pro rata share of all losses during his term of payment are to be deducted. This, within itself, indicates that it was legislative intent that equality exist as between the members of the association; and there is no reason to believe that if distribution among shareholders was required because of insolvency, that it was contemplated that a particular shareholder, who had given *Page 615 a prior notice, should be paid before another shareholder.
This matter of priority as between withdrawing and continuing stockholders is discussed in a number of cases in other jurisdictions. They are annotated in 49 L.R.A. (N.S.) 1143 and 98 A.L.R. 116. In 9 Am. Jur., Building and Loan Associations, § 94, p. 181, the text summarizes and discusses the decisions in other jurisdictions:
"Generally speaking, holders of withdrawn or matured stock have no priority over continuing stockholders if the association is insolvent at the time of withdrawal or maturity. They are entitled only to a pro rata share in the distribution of its assets. According to the weight of authority, this rule is not changed by the fact that the notice of withdrawal preceded the entry of a winding-up order or a judgment declaring the insolvency; . . . Although this rule applies most clearly where the association becomes insolvent before the withdrawal or maturity of the stock is complete, the majority of cases hold that notwithstanding the fact that the withdrawal or maturity of the stock is complete before insolvency, except for payment, no preference will be allowed where the association becomes insolvent before payment of such stock is made."
I agree with the majority that the burden of proof was upon appellant to establish his status as a preferred claimant. It must be remembered that the trial court determined that the appellant had not established his right of priority; and, upon appeal, we have no right to overthrow the determination of the trial court, unless the evidence was without conflict and but one reasonable inference could be drawn therefrom. Haughton v.Aetna Life Ins. Co. (1905), 165 Ind. 32, 73 N.E. 592. From my examination of the record, I am wholly unable to find any evidence from which an inference *Page 616 could be drawn that the building and loan association was solvent at the time appellant gave notice or at the time such notice matured. There is evidence in the record from which the inference could be drawn that it was not solvent at that time. The record shows that appellant filed his notice of withdrawal in October of 1931; that at that time there were twenty-nine or thirty prior notices filed; that the association paid on these notices in order until it went into liquidation, but that it never had sufficient money on hand to make any payment upon the notice of withdrawal of appellant prior to such time. It further shows that appellant tried to get a clerk of the building and loan association to repay him the amount that he had paid for his stock and that he told her that he wanted to withdraw his stock and get paid off before it was too late. There is no evidence in the record concerning the amount of stock, the contributions made by different stockholders, the amount of losses, dues, fines, or any other facts from which it could be determined whether or not the association could pay back its members the amount of their contributions, dollar for dollar.
The insolvency of a building and loan association is suigeneris. It is such a condition as reduces the available and collectable assets below the level of the stock already paid in, and makes it impossible for the association to pay back to its stockholders the amount of their contributions. It does not consist in the inability of the association to pay its available debts, but merely in its inability to satisfy the demands of its own members. Such inability must result from losses in the capital paid in by its members. 9 Am. Jur., Building and Loan Associations, § 86, p. 174; 12 C.J.S., Building and Loan Associations, § 110, p. 528. There is not a single item of evidence in the record from which *Page 617 it can be determined when the condition of the building and loan association became such that it could not pay to its members the amount of their contributions, dollar for dollar. In the absence of such evidence, this court presumes that the association was solvent and that it could pay its members the amount of their contributions, dollar for dollar, upon the date that appellant gave notice of withdrawal or upon date of maturity of such notice, because of the period of time that had elapsed between the giving of such notice and a judicial determination of insolvency. The notice was given on October 24, 1931, and there was a judicial determination of insolvency on June 7, 1937. I do not believe that such presumption can take the place of evidence nor do I believe that it is a proper presumption to draw.
The mere fact that the Department of Financial Institutions of the State of Indiana permitted the building and loan association to operate for four years after the department was established does not, to me, indicate any condition of solvency in 1931. It is a matter of common knowledge that in 1931, and 1932, all building and loan associations and other financial institutions were adversely affected by economic conditions. The value of the assets of such institutions was so depreciated that in a great number of cases, if liquidation had been forced, the amount obtained would not have been sufficient to pay the liabilities. Yet despite this fact, thousands of these institutions were permitted to operate; financial assistance was given through legislation by the federal government so that they would not be required to close their operations; and then because of an increase in the value of their assets they became solvent where they had prior to such time been insolvent. To my mind, the fact that a building and *Page 618 loan association, which had been operated a great number of years, was judicially declared insolvent in 1937, is a strong indication that it was insolvent in 1931, and 1932, for during the period from '32 to '37, the value of real estate was increasing and this was true generally of the other assets of financial institutions.
It seems clear to me that the appellant wholly failed to establish his rights to preference in payment and that the decision of the court below should be affirmed.
NOTE. — Reported in 37 N.E.2d 24.