Wilson v. Parvin

Citations

• 119 F. 652
• 56 C.C.A. 268
• 1903 U.S. App. LEXIS 4801

Syllabus

<p>1. Building and Loan Associations—Power to Issue Preferred Stock.</p> <p>A building and loan association, in the absence of charter or other legal inhibition in the law of the state of its origin, may lawfully give one class of shares preference over another, both with respect to dividends and principal.</p> <p>3. Same—Insolvency.</p> <p>Under the law of Tennessee building and loan associations have, in common with other corporations, the power to borrow money and to mortgage the corporate property to secure the same. By an amendment of the law in 1893 (Shannon’s Code, § 2175) such associations were authorized to issue prepaid shares bearing a fixed dividend payable out of the profits. An association, authorized thereto by a by-law, issued such shares, the principal to be payable at a fixed time, or sooner, on notice given either by the holder or the association. Such shares provided that payment of both principal and dividends should be secured by a pledge in trust of notes and mortgages payable to the association, and in accordance with such provision a trust agreement was executed, and each certificate issued bore a certificate of the trustee that the required securities had been deposited. The holders of such shares were not entitled to vote, and the proceeds were placed in the fund to be loaned to borrowing shareholders. \\Eclci, that the issuance of such shares was within the powers of the association, being in effect but a form of borrowing, and that the preference given was lawful, as between the holders and other shareholders, and could be enforced after the insolvency of the association to the extent of the securities pledged; there being no outside creditors.</p> <p>8. Same—Regulabity of Issuance—Ratification.</p> <p>Such shares were not invalidated by the fact that, when some of them were issued, there was no by-law authorizing them, where such action was subsequently, ratified by the voting shareholders, and a by-law adopted authorizing their future