MAGUIRE ET AL. v. HIBERNIA SAVINGS & LOAN SOC. ET AL.
EDWARDS ET AL. v. HIBERNIA SAVINGS & LOAN SOC. ET AL.
CRILLY v. HIBERNIA SAVINGS & LOAN SOC. ET AL.
CROWLEY v. HIBERNIA SAVINGS & LOAN SOC. ET AL.
The above entitled appeals have been submitted on one set of briefs as precisely the same questions are involved in all four cases. Plaintiffs in said actions sought declaratory relief as alleged members of and as alleged depositors in defendant The Hibernia Savings and Loan Society, a corporation. In each case defendants interposed a general and special demurrer to the final complaint therein, a motion to strike portions thereof and a motion to dismiss the action upon the ground that declaratory relief was not “necessary or proper.” Code of Civil Procedure, section 1061. The trial court entered a written order in each case containing several provisions. Defendants' demurrer to the final complaint in each case was sustained without leave to amend upon the grounds specified in the order including the ground that neither the final complaint nor the first or second count thereof stated facts sufficient to constitute a cause of action. The demurrer in each case was sustained upon the further ground that the alleged causes of action were barred by the statute of limitations and by laches. It was further ordered in each case that the motion to dismiss, made under section 1061 of the Code of Civil Procedure, be granted. The order in each case expressly recited that other grounds of demurrer, including those set forth in the special demurrer, were not passed upon and likewise that the motion to strike portions of the final complaint was not passed upon. Judgment was thereupon entered in favor of defendants in each of said actions. An appeal was thereupon taken by the plaintiff or plaintiffs in each of said actions from the judgment so entered.
As the final complaint in each of said four actions contained substantially the same allegations, we will discuss the allegations of the final complaint in Maguire v. Hibernia Savings & Loan Society et al., No. 11584, in the same manner as though that case was the only one before us and we will make only passing reference to the allegations in the final complaints in the other three actions. Before proceeding to such discussion, however, it appears appropriate to refer generally to the historical background of this litigation. This background may be gleaned from the allegations of the final complaint, the early statutes of this state relating to corporations and from facts which are matters of common knowledge and of which we may take judicial notice.
In 1859, The Hibernia Savings and Loan Society was organized as a corporation under the act of 1853 entitled “An Act To Provide for the Formation of Corporations for Certain Purposes.” St.1853, p. 87. By section 25 of that act, chapter five of the act of 1850 entitled “An Act Concerning Corporations” (St.1850, p. 347) was repealed. The act of 1850 had been divided into chapters providing for the formation of corporations for various purposes but there was no provision in said act for the formation of corporations for the purpose of conducting the business of banking. Chapter five of the act of 1850 provided only for the formation of corporations “for the purpose of carrying on any kind of manufacturing, mining, mechanical, or chemical business.” Said chapter five was replaced by the act of 1853 which provided for “Corporations for manufacturing, mining, mechanical, or chemical purposes, or for the purpose of engaging in any species of trade or commerce. * * *” St.1853, p. 87, § 1. Four corporations, including The Hibernia Savings and Loan Society, purported to incorporate between 1853 and 1862 under said act of 1853 for the purpose of conducting the business of savings banks, but the question was soon raised as to whether savings banks could be legally incorporated thereunder. See Archbald, Savings Banks of California, 2 Overland Monthly 363. In 1862, there was enacted “An Act to Provide for the Formation of Corporations for the Accumulation and Investment of Funds and Savings.” St.1862, p. 199. This was the first act relating to corporations which specifically provided for the formation of corporations for the purpose of conducting the business of savings banks. Thereafter and in 1864, section 27 of said act of 1862 was amended to provide that: “All corporations for the accumulation, preservation, and investment of funds and savings, all Savings and Loan Societies, and all associations or societies for the like purpose, claiming in good faith to be incorporated under the laws of this State, may avail themselves of the provisions of and become incorporated under this Act by filing with the County Clerk of the county in which their principal place of business is located, and a certified copy thereof in the Office of the Secretary of State, a certificate stating their intention and election to become so incorporated, which intention and election may be made and declared by the Trustees or Acting Trustees of such corporation, association, or society, or a majority thereof. * * * Such certificate shall in other respects conform to the requirements of this Act.” Stats. 1863–64, p. 531. In 1864, The Hibernia Savings and Loan Society availed itself of the provisions of the act of 1864 by filing the certificate above mentioned.
Neither plaintiffs nor defendants question the validity of the original incorporation of 1859 under the act of 1853 or the reincorporation of 1864 under the act of 1862 as amended in 1864. Plaintiffs' claim of membership in the defendant corporation, as reincorporated in 1864, is based upon the original deposit of plaintiffs' predecessor, Michael Maguire, which original deposit was made in 1862 with the corporation organized in 1859. It is alleged that at the time of the original deposit in 1862, a pass–book was issued to Michael Maguire containing a copy of the by–laws then existing. It is upon the alleged contract which came into existence at that time that plaintiffs predicate their present claim of membership as successors in interest of Michael Maguire. It therefore becomes necessary first to discuss briefly the act of 1853, the incorporation thereunder in 1859 and the by–laws adopted in 1859 and, thereafter, to discuss briefly the act of 1862 as amended, the incorporation thereunder in 1864 and the by–laws adopted in 1864 and later.
The Act of 1853, the Incorporation Under Said Act in 1859, and the By–Laws Adopted in 1859.
The act of 1853, St. 1853, p. 87, appears to contain many of the provisions ordinarily found in statutes providing for the formation of corporations of specified classes. It will suffice to call attention to a few provisions thereof. It provided only for the formation of corporations having a capital stock and made no provision for the formation of corporations without capital stock. In other words, there were no provisions for corporations to be composed of members rather than stockholders. It was required that the certificate of incorporation should state the amount of the capital stock and the number of shares of which the stock should consist. § 2. The corporate powers were to be exercised by a board of not less than three trustees who were to be elected by the stockholders. § 5. A stockholders' liability was imposed (§ 16) in conformity with the provisions of section 36 of article IV of the Constitution of 1849. The act also contained the provision that “the total amount of the debts of the corporation shall not at any time exceed the amount of the capital stock actually paid in.” § 14.
The certificate of incorporation of 1859 provided for a capital stock of $600,000 consisting of 6,000 shares. It also set forth the other matters required by the act. Eleven trustees were named therein and it was signed by twenty incorporators. Plaintiffs' predecessor was not among the incorporators. Our attention is called to the statement therein by the incorporators “that we have associated ourselves together for the purpose of forming a Society, and that we desire to incorporate the same under” the act of 1853; and the further statement “that the object for which it is formed is, that by means of it the members thereof may be enabled to find a secure and profitable investment for small savings, and may have an opportunity of obtaining from it the use of a moderate capital, on giving good and sufficient security for the repayment of the same.” We note the further statement in said certificate “that the Society shall go into operation as soon as thirty shares shall have been subscribed for, and an installment of five dollars per share paid thereon.”
At the time of the incorporation in 1859, by–laws and rules of order were adopted. Our attention is called to the preamble which recited: “We, the undersigned, being desirous of forming a Society, by means of which its members may be enabled to find a secure and profitable investment for small savings, do, each for himself, covenant, promise and agree to and with all the other subscribers hereto, that the following By–Laws shall govern us, and determine our mutual duties, rights and privileges, as members of such Society.” The by–laws stated the amount of capital stock as $600,000 and the number of shares as 6,000. It was provided that “Those who shall sign these By–Laws in the book to be kept for that purpose by the Secretary, and pay the entrance fee of two dollars, shall be styled and considered members of this corporation. Those, who, in addition to the above, shall hold one or more shares of its Stock, shall further be styled and considered Stockholders. * * * The entrance fee will in no case be repaid or credited back, but shall be considered part of the sinking fund hereinafter provided for.” It was provided that the trustees should be elected by the stockholders and further provided that one of the trustees should be “elected by the Society” as President and another as Vice President. The members were “at liberty to make deposits” in sums of not less than $2.50. Each depositor was to be furnished with a pass–book having a printed copy of the by–laws appended to it, in which pass–book his deposits were to be entered. It was provided that “As soon as the amount to his credit shall form a full share, he shall be entitled to a Certificate of Stock, up to the number of twenty shares, the corresponding debt being entered on his pass–book, and such share may be transferred on the books of the Society to any member of the same, by the owner paying a fee of Fifty Cents, for the transfer of each share, and surrendering the Certificate which shall be marked ‘cancelled’ on its face; but whenever a member would thereby become the owner of more than twenty shares, then the excess over this number shall become a simple deposit, as contemplated in the preceding article, and shall be credited to the owner thereof on his pass–book.” Provision was made for monthly meetings and annual meetings “of the Society” as well as monthly meetings of the board of trustees. Special meetings “of the Society” were to be called upon written request of ten stockholders and notice thereof was to be given to the “members and stockholders.” The funds of the society were to be employed (1) “in refunding to members the whole or part of their shares, or deposits, which shall be done in order of their applications”; (2) in loans on shares in the society; and (3) in loans to members at one per cent per month, the funds being put up at auction by the presiding officer at the meetings of the society and being awarded to the member bidding the greatest premium. The by–laws could be amended only by three–fourths of the shares represented at a meeting of the society. It was also provided that “No money shall at any time be borrowed, nor shall any debt be contracted, for account, or in the name of this society.”
Other provisions of said by-laws and rules of order will be noted as the occasion may require. We may merely state here that as we understand the contentions of the parties, plaintiffs contend that the words “members” and “stockholders” were used synonymously in said by–laws and rules of order while defendants contend that the word “members,” as used therein, was synonymous with “depositors.” A reading of said by–laws and rules of order convinces us that the provisions thereof were somewhat anomalous, but it seems entirely clear that while all “stockholders” were necessarily “members,” it may not be said that all “members” were “stockholders.”
The Act of 1862 as Amended, the Incorporation Under Said Act in 1864, and the By–Laws Adopted in 1864 and Later.
The act of 1862, St.1862, p. 199, as already noted, was an act providing specifically for the incorporation of savings banks. That act permitted the formation of such corporations with or without a capital stock. § 2 and § 17. The corporate powers of such corporation were to be exercised by a board of not less than five directors who were required to be stockholders in the event that a capital stock was provided in the certificate of incorporation, or “members, each having deposits with the corporation to the amount of at least one hundred dollars,” in the event that the corporation had no capital stock. § 6. In the case of corporations having no capital stock, the directors were required to retain, on each dividend day, at least five per cent of the net profits, to constitute a reserve fund. The disposal of any reserve fund in excess of $100,000 could be provided for in the by–laws. § 11. One section of said act purported to exempt the stockholders or members of such corporations from any liability in the nature of a stockholders' or members' liability § 27, but said section was later declared unconstitutional. McGowan v. McDonald, 111 Cal. 57, 43 P. 418, 52 Am.St.Rep. 149.
The amendment of 1864, St.1863–64, p. 531, which has been mentioned above, permitted savings banks “claiming in good faith to be incorporated under the laws of this State” to become incorporated under the act of 1862. Such a corporation could become so incorporated whenever the trustees of such corporation declared the “intention and election” of the corporation to become so incorporated and filed the required certificate. § 27. There was no specific method provided, however, for reincorporating a corporation, previously existing as a capital stock corporation, into a corporation without a capital stock under said act of 1862 as amended.
Following the adoption of said amendment of 1864, a certificate of incorporation, dated August 29, 1864, was signed by the president and secretary and was filed. It contained the required statements and was accompanied by a copy of the resolution of the trustees declaring the intention and election to become incorporated under the act of 1862. Said resolution and said certificate recited that “said corporation shall have no capital stock.”
On September 29, 1864, a new code of by–laws was adopted which expressly repealed all former by–laws. Being a membership corporation rather than a capital stock corporation, no mention was made of stockholders. With respect to membership, this code provided in section I, article 4 as follows: “All persons who were members of The Hibernia Savings and Loan Society on the twenty–ninth day of August, 1864, shall be deemed and considered members of this corporation, and the signatures of such persons to an agreement on their part to become members of this corporation, and ratifying and confirming the incorporation of said The Hibernia Savings and Loan Society, as directed by a resolution of its Board of Trustees, adopted August 8th, 1864, shall be procured as speedily as may be. Other persons may be allowed to become members of this corporation by a vote of the Board of Directors, and not otherwise. Membership shall not pass with the ownership of moneys deposited with or under control of the corporation.”
In 1867, the first portion of said article of the by–laws of 1864 was amended to apply only to those persons who were members on August 29, 1864. “and whose accounts have not since been closed.” In 1868, said article was again amended to apply only to those persons who, on August 29, 1864, “had respectively not less than one hundred dollars to their credit.” There was further added to the end of said article, a provision that “No one shall be deemed a member whose account is once closed.” In 1870, said article was amended by changing the entire first portion of said article to read: “All persons, who, on November 1, 1870, had signed the agreement to become members of, and who then had accounts open with this Corporation, are deemed and considered members thereof.” In 1871, the entire first portion of said article was again amended to read: “Those persons who, on January 17th, 1871, had signed the agreement to become members of The Hibernia Savings and Loan Society as a Corporation, incorporated and existing under an Act of the Legislature of the State of California, entitled ‘An Act to provide for the Formation of Corporations for the Accumulation and Investment of Funds and Savings,’ approved April 11th, 1862, and who at the date aforesaid, had accounts open with said Corporation, shall be deemed and considered the only members thereof at that date.”
In 1874, said article was further amended by changing the first portion thereof to read “The only members of this Corporation are the persons who have signed the agreement hereinafter described, and who have kept accounts open with the Corporation since they respectively signed said agreement.” In 1886, an amendment was added reading “Any person shall cease to be a member of this Corporation, The Hibernia Savings and Loan Society, who shall not have continuously and at all times, at least One Hundred Dollars to his or her credit upon an open deposit account on the books of this Corporation. Membership therein shall continue only so long as such credit shall exist, and shall cease whenever such credit shall cease to exist. Any provision of any By–Law in conflict with this By–Law is hereby repealed.”
The record does not disclose any later amendment making any substantial change relating to membership. Other provisions of the by–laws adopted in 1864 or later will be mentioned as the occasion may require. We will now proceed to a discussion of the first and second counts of the final complaint.
The first count of the final complaint is based upon plaintiffs' claim of the rights of a member of the defendant corporation. The incorporation of 1859 and the reincorporation of 1864 are alleged. The certificates are attached as exhibits as well as the various by–laws. As to the individual defendants, it is alleged that said defendants claim to be the only members of the defendant corporation and that “plaintiffs deny that said defendants, or any of them, are members of defendant The Hibernia Savings and Loan Society.”
The theory of the first count appears to be that the incorporation of 1859, under the act of 1853, resulted in effect in the formation of a membership corporation rather than of a capital stock corporation because of the alleged “plan and intention” of the incorporators and their actions pursuant to such plan and intentions; that Michael Maguire, plaintiffs' predecessor, became a member of said corporation in 1862 and that plaintiffs as the successors in interest of Michael Maguire now have the rights of a member in the membership corporation formed in 1864; and that plaintiffs have the right as such member, and the individual defendants have not the right, to share in the alleged reserve fund of approximately $8,000,000 in the event that the present membership corporation may be reincorporated at any time as a capital stock corporation and the reserve fund converted into capital stock. It will be recalled that the act of 1853 provided only for the formation of corporations having a capital stock and made no provision for membership corporations.
The main allegations in support of plaintiffs' theory are found in paragraph four of the final complaint. Said paragraph reads as follows:
“That it was the plan and intention of the incorporators of said defendant The Hibernia Savings and Loan Society that said corporation should be conducted as a membership corporation, wherein the members were to be the owners, proprietors, and constituents of the corporation; that the members, stockholders and trustees carried out said plan, and no member, stockholder or trustee raised any objection thereto at any time; that the members of said corporation alone exercised the right to vote and to elect the trustees of said corporation and to amend the by–laws of said corporation, and to hold monthly, semiannual, annual and special meetings of the corporation; and the trustees of said corporation at all times were elected from the members, not the stockholders of said corporation; that no dividends were ever declared or paid upon the outstanding stock of said corporation, but that all dividends were paid to the members upon their deposits.
“That no shares of stock of said corporation were issued prior to June 14, 1859; that during the period from June 14, 1859, to November 29, 1861, said corporation issued to certain members shares of stock in said corporation, but that no shares were issued subsequent to November 29, 1861; that after November 29, 1861, the outstanding shares were voluntarily surrendered, retired and cancelled; and that on or about June 27, 1863, all but four certificates had been retired and cancelled and the whereabouts of said four certificates were unknown, and after said last mentioned date the said corporation was composed of members only, none of whom held or owned any share or shares of stock; and that said members were the only owners, proprietors and constituents of the said corporation, recognized and considered as such by all persons interested in said corporation.”
It is also alleged that in 1862, Michael Maguire entered into a “contract of membership” by signing the by–laws and by paying the entrance fee of two dollars; that a pass–book was issued to him showing the payment of said entrance fee and the deposit of the sum of $2,498; that since said time, Michael Maguire and his successors have continuously maintained a deposit evidenced by said pass–book, which deposit at the time of the commencement of this action in 1934 amounted to approximately $135; and that plaintiffs have succeeded to all the rights of said Michael Maguire as a member.
In further support of their theory, plaintiffs allege that no by–laws had ever been adopted by the members of the defendant corporation, other than the by–laws of 1859; that all by–laws adopted in 1864 and later, including those purporting to restrict membership, were invalid for the reason that all such by–laws were adopted by the directors and not by the members and such by–laws were adopted without any authority in law. It is alleged “That plaintiffs and each of them, and all their predecessors in interest have performed all conditions and requirements of all by–laws of the corporation, but have not performed the conditions and requirements of alleged by–laws referred to in paragraph IX hereof, except as to matters specifically alleged in this amended complaint.” The “by–laws referred to in paragraph IX” are the by–laws adopted in 1864 and later.
Plaintiffs then allege in said final complaint the existence of an actual controversy between plaintiffs and defendants relating to the legal rights of the parties in the defendant corporation. The alleged claims of the parties are set forth at length and in some detail. Suffice it to state that it is alleged that plaintiffs claim the rights of a member in the present membership corporation as the successors in interest of Michael Maguire and further claim the defendants are not members and it is further alleged that these claims of plaintiffs are denied by defendants. The prayer of the complaint is that the court enter its judgment “declaring the rights and duties of plaintiffs and defendants in said defendant corporation.”
Plaintiffs contend that the trial court erred in sustaining defendants' demurrer to said first count of the final complaint but in our opinion said contention cannot be sustained. Plaintiffs' claim of membership in the membership corporation incorporated in 1864 is based upon the several facts alleged in said first count of the final complaint. We believe the facts alleged therein are insufficient to sustain such claim. It may first be noted that there is no allegation that plaintiffs or their predecessors ever complied or offered to comply with any of the requirements of the by–laws of said membership corporation adopted in 1864 and later relating to membership. In fact, plaintiffs allege that plaintiffs and their predecessors “have not performed the conditions and requirements of alleged by–laws referred to in paragraph IX hereof. * * *” In other words, plaintiffs are not claiming membership under any by–law relating to membership adopted by the membership corporation incorporated in 1864 but are claiming membership therein solely because of the claimed status of Michael Maguire, their predecessor, as an alleged “member” of the corporation incorporated in 1859. As we view the contentions of the plaintiffs, it is conceded that the corporation incorporated in 1859 was formed under the act of 1853 which provided only for the formation of corporations having a capital stock and that the certificate of incorporation of 1859 and by–laws of said corporation provided for a capital stock. It is nevertheless contended that because of the claimed “plan and intention” and acts of the incorporators of 1859 and those associated with them from 1859 to 1864, a de facto membership corporation existed in 1864 immediately prior to and at the time of the reincorporation in that year; that Michael Maguire, plaintiffs' predecessor was a “member” and as such “member” was one of the “owners, proprietors and constituents” of said de facto membership corporation at that time; and that therefore Michael Maguire became ipso facto a “member” of the de jure membership corporation incorporated in 1864 without complying with any of the by–laws of said last mentioned corporation with respect to membership therein.
While much is said in the briefs regarding the meaning of the word “member,” as used in the by–laws and rules of order adopted in 1859, it appears unnecessary to discuss the contentions of the parties concerning the meaning of that word as so used or the contentions of the parties with respect to the legal effect of the alleged plan, intention and acts of the incorporators of 1859 and of those associated with them from 1859 to 1864. These questions and many others are not free from difficulty as appears from the exhaustive discussion of said questions by able counsel in presenting their conflicting views. As we see the situation, the striking feature of plaintiffs' contention is that it is entirely apparent therefrom that an investigation of the alleged facts upon which plaintiffs' theory is based would involve an investigation, in this action commenced in 1934, of the plan, intention and acts of persons in the year 1864 and prior thereto; and that there is nothing alleged in said complaint to show the reason for the failure of plaintiffs and their predecessors to institute such investigation at an earlier date through some appropriate proceeding. There is nothing in the complaint to show that plaintiffs or their predecessors ever claimed the right of membership in the corporation as reincorporated in 1864 or that they were ever willing to accept membership therein, with the obligations as well as rights incident thereto, at any time before said corporation had accumulated an alleged reserve fund of approximately $8,000,000. If they had claimed such right of membership after the reincorporation of 1864 and if that right had been denied them, the alleged facts now presented for investigation could have been investigated at that time and the issues of fact and law could have been determined many years ago when evidence relating to any material issues of fact would have been readily available. To ask a court for the first time in this action commenced in 1934 to investigate such claims, constitutes an attempt on the part of plaintiffs to secure an investigation by a court of equity of stale claims.
The defense of the staleness of plaintiffs' claims is a defense which exists independently of any statute of limitations and it does not rest alone upon the doctrine of laches. United States v. Beebee, C.C., 17 F. 36, affirmed 127 U.S. 338, 8 S.Ct. 1083, 32 L.Ed. 121. In 30 C.J.S. 521, Equity, § 112, it is said: “A stale demand or claim in its proper sense is one that has for a long time remained unasserted; one that is first asserted after an unexplained delay of such great length as to render it difficult or impossible for the court to ascertain the truth of the matters in controversy and do justice between the parties, or as to create a presumption against the existence or validity of the claim, or a presumption that it has been abandoned or satisfied. Strictly speaking, laches and staleness of demand are distinct conceptions; staleness of claim necessarily implies great lapse of time, while to constitute laches, the delay need not necessarily be long continued. Another point of distinction lies in the fact that, to constitute laches a change in conditions must have occurred that would render it inequitable to enforce the claim, while no such change need have occurred in order to render the demand stale.”
This defense has long been recognized in this state. Garrity v. Miller, 204 Cal. 454, 268 P. 622; Emerson v. Kennedy, M. & M. Co., 169 Cal. 718, 147 P. 939; Bell v. Hudson, 73 Cal. 285, 14 P. 791, 2 Am.St.Rep. 791; Elliott v. Bunce, 10 Cal.App. 741, 103 P. 897. The language used by the court in United States v. Beebee, C.C., 17 F. 36, is quoted with approval in Emerson v. Kennedy, supra, 169 Cal. at page 722, 147 P. at page 941, as follows: “The authorities support the proposition that lapse of time may be a good defense in equity, independently of any statute of limitations, and they show that the doctrine rests not alone upon laches; it is often put upon one or all of the following grounds, namely: First, that courts of equity must, for the peace of society and upon grounds of public policy, discourage stale demands by refusing to entertain them; second, that lapse of time will, if long enough, be regarded as evidence against the stale claim equal to that of credible witnesses, and which, being disregarded, would, in a majority of cases, lead to unjust judgments; third, that, after the witnesses who had personal knowledge of the facts have all passed away, it is impossible to ascertain the facts, and courts of equity will, on this ground, refuse to undertake such a task.” Said language is again quoted with approval in Garrity v. Miller, supra, 204 Cal. at page 459, 268 P. at page 624.
It has been held further that the defense of the staleness of a claim is available upon demurrer whenever the staleness of the claim appears upon the face of the complaint. In Bell v. Hudson, 73 Cal. 285, at page 289, 14 P. 791, at page 793, 2 Am.St.Rep. 791, it is said, “It is contended, however, that this question cannot be raised on demurrer. But the preponderance of authority (and we think the better reason) is to the effect that it can. Lansdale v. Smith, 106 U.S. , 392, 1 S.Ct. 350, [27 L.Ed. 219]; Bliss v. Prichard, 67 Mo.  189, 190; Shorter v. Smith, 56 Ala.  210. The defense is, in substance, that the bill does not show equity; or, in the language of our statute, that the complaint does not state facts sufficient to constitute a cause of action. This was one of the grounds of the demurrer; and if it had not been it would not have been waived, but could be taken at any time.” See, also, Garrity v. Miller, 204 Cal. 454, 268 P. 622; Elliott v. Bunce, 10 Cal.App. 741, 103 P. 897.
We believe there can be no dispute here that the staleness of plaintiffs' claims appears upon the face of the first count of their final complaint and we conclude that the demurrer to the first count of plaintiffs' final complaint was properly sustained upon that ground. It therefore appears unnecessary to discuss the other grounds urged by defendants in support of the judgment of the trial court insofar as said judgment relates to said first count.
The second count of the final complaint is based upon plaintiffs' claim to certain alleged rights as a depositor in the defendant corporation, in addition to their admitted right to receive the amount of the deposits in their account together with accrued “interest” thereon. The claim to greater rights is based upon certain by–laws adopted in 1864 and later, relating to depositors who were not members, which by–laws are treated as valid by plaintiffs for the purposes of the claims made by them in their second count.
Plaintiffs in the Maguire case allege the original deposit of $2,498 by Michael Maguire in 1862; the continued existence of a deposit to the time of the commencement of the action and the existence of a balance on deposit at that time of $135. Similar allegations are found in the final complaints in the other three actions alleging original deposits in varying amounts by predecessors of the plaintiffs therein between 1859 and 1864 and the existence of various small balances. In all other respects, the material allegations in the second counts of the four final complaints are the same and we will therefore discuss only the allegations appearing in the second count of the final complaint in the Maguire case.
In addition to the above–mentioned allegations, plaintiffs incorporate by reference several paragraphs of the first count. They then allege the adoption of certain by–laws relating to “profits” and “dividends” adopted in 1864 and later. It is plaintiffs' claim that by reason of these laws, plaintiffs as depositors, have the “same rights in the reserve fund ․ as any member of said corporation.” It is alleged that an actual controversy exists for the reason that defendants deny that plaintiffs have such rights in the reserve fund or in any distribution thereof upon dissolution.
It is appropriate, before proceeding to a consideration of the alleged by–laws, to refer to some of the provisions of the act of 1862 as amended, under the authority of which act defendant corporation was reincorporated in 1864 and under the authority of which act said by–laws of 1864 and later were adopted. Said act made numerous references to “dividends,” “earnings,” “interest” and “profits.” It first made provision for the formation of corporations “for the purpose of aggregating the funds and savings of the members thereof and others. * * *. § 1. It gave a corporation so formed the power to receive deposits, invest its funds “and to repay such deposits without interest, or with so much of the earnings and interest as the by–laws of the corporation may provide” and to make by–laws prescribing “the conditions on which deposits shall be received, the time and manner of dividing the profits.” § 4, as amended by St. 1863–64, p. 159. It also provided “It shall not be lawful for the corporation, or the directors, to make any dividend, except from the surplus profits arising from the business of the corporation; and the directors shall, at such times and in such manner as the by–laws shall prescribe, declare and pay dividends of so much of the profits of the company, and of the interest arising from the capital stock and deposits, as may be appropriated for that purpose by the provisions of the by–laws.” § 10. It further provided that corporations could prescribe by by–laws “the time and conditions on which repayment is to be made to depositors. * * * And the directors of any corporation formed under this act, and having no capital stock, shall retain, on each dividend day, at least five per cent of the net profits of the corporation, to constitute a reserve fund, which shall be invested in the same manner as other funds of the corporation, * * * and the corporation may provide, by its by–laws, for the disposal of any excess in the reserve fund, over one hundred thousand dollars, and the final disposal, upon the dissolution of the corporation, of the reserve fund, or of the remainder thereof, after payment of losses.” § 11. It required publication annually of a statement of “all depositors who shall have deposits, dividends, or interest, to their credit” and of whom the officers of the corporation had no knowledge for two years. § 16. It also made the directors, upon dissolution, the “trustees for the members and others interested in the corporation dissolved” and gave them “full power and authority to * * * divide among the members and stockholders, in such proportion as the by–laws shall direct, the money and other property that shall remain after the payment of all expenses. * * *” § 25.
Plaintiffs set forth in the second count of their final complaint the adoption of three by–laws following the reincorporation in 1864. The first is alleged to have been adopted in 1864 and to have read as follows: “The board of directors shall have the right to determine the terms and conditions upon which deposits will be received from persons not members of the corporation, and to make contracts in the name of the corporation with such persons for that purpose. Until otherwise provided by such contracts, depositors shall be entitled to the same share of profits as members.” It is then alleged that said provision was amended in 1868 to read as follows: “The board of directors shall have the right to determine the terms and conditions upon which deposits will be received from persons not members of the corporation. Until otherwise provided, depositors shall be entitled to the same share of the profits as members.” It is then alleged that said provision was repealed in 1888 and that a by–law was adopted in that year “providing that ‘The board of directors shall have the right to determine the terms and conditions upon which deposits will be received’ but that ‘until otherwise provided by the board of directors, depositors who are not members shall get a dividend equal to that given to members.’ That there has been no alteration of said last–mentioned provisions of said by–laws since October 19, 1888.”
In their opening brief, plaintiffs make reference to the by–laws of 1859 but it appears from their closing brief that they rely solely upon the by–laws adopted in 1864 and later to sustain the claim made in the second count. They seek to have the words “profits” and “dividend” as used in the above–quoted by–laws construed so that said provisions would mean that the depositors, who were not members, would be entitled to be paid not only the same periodical “dividend” or “interest” on deposits as that paid to members but would also be entitled to share in the reserve fund at some indefinite future time to the same extent as members. We do not believe that this construction is warranted.
The wording used in the quoted provisions of the by–laws of 1864, 1868 and 1888 differed to some extent but, in each instance, the phrase upon which plaintiffs rely commenced with the words “Until otherwise provided. * * *” The use of this phrase necessarily negatives the idea that it was intended to grant any right which would endure indefinitely and would continue until such time as there might be a dissolution of the corporation and a disposal of the reserve fund. It clearly implies that it was intended to grant a mere temporary right subject to termination. It therefore appears that the right granted must be construed as a right to share equally with members in the periodically declared “dividends” on deposits or in other words, a right to receive on the dividend days a rate of return on deposits equal to that received by members.
We believe this construction is borne out by a reading together of all of the provisions of the act of 1862 and of the by–laws adopted in 1864 and later. For example, article 15 of said by–laws of 1864, incorporated by reference into the second count, required the board of directors to ascertain the “net profits” at the meetings in January and July of each year and to set apart and credit to the reserve fund a part thereof not to exceed one–tenth and also to set apart an amount sufficient to pay a “dividend” to members and a “dividend to depositors”; and provided that “moneys withdrawn before the dividend for the current half year is due, shall be entitled to interest at the rate of one–half of one per cent per month. * * * Dividends not called for within fifteen days from the date of their being declared will be carried to the credit of whom it may concern and * * * treated in all respects as other deposits of members.” A reading of said by–laws shows that the word “dividend” was used practically synonymously with “interest” as those words are commonly employed in connection with deposits in savings banks; and a reading together of all of said by–laws shows that it was equality of treatment with respect to “dividends” which was intended in the by–laws upon which plaintiffs rely.
We further believe that the above mentioned construction is borne out by a consideration of the practical difficulties which would be encountered if the portions of the by–laws upon which plaintiffs rely were given the construction for which plaintiffs contend. We have not been informed by plaintiffs of the proportions in which they believe that the reserve fund should be shared upon dissolution by the thousands of the then depositors and the thousands of former depositors in the defendant corporation. We know of no formula which could be used to determine such proportions and conclude that plaintiffs' construction would render the alleged contract between the defendant bank and its depositors incapable of being carried into effect. Such construction may not be adopted. Civ.Code, § 1643.
We further are of the opinion that any possible uncertainty which may have arisen from the use of the word “profits” in the quoted by–laws adopted in 1864 and 1868 was clarified by the adoption of the above mentioned by–law in 1888 which dropped the word “profits” and provided that depositors should get a “dividend equal to that given to members.” This is the by–law which, according to plaintiffs' allegations, had been in effect for almost fifty years before this action was commenced. It is not alleged that the defendant corporation has ever given to members any “dividend” greater than that given to depositors other than members or that said corporation is threatening or intends to do so or claims the right to do so “until otherwise provided.” On the contrary, plaintiffs allege that “no distribution of any dividend or share of profits has been made to any depositor or to any member” other than “interest.” This allegation shows that depositors and members have been accorded the same treatment with respect to “profits” and “dividends,” in the sense in which those terms were employed in the by–laws upon which plaintiffs rely. As we construe said by–laws it appears from the allegations of the final complaint that plaintiffs have been accorded their full rights, which rights will continue only while plaintiffs remain depositors and only “until otherwise provided.”
We are therefore of the opinion that the second count of plaintiffs' final complaint fails to allege facts sufficient to show that plaintiffs have the rights claimed therein and we therefore conclude that the trial court properly sustained defendants' demurrer thereto. This conclusion makes it unnecessary to discuss the other grounds urged by defendants in support of the judgment of the trial court insofar as said judgment relates to said second count.
The judgments in the above entitled actions are, and each of them is, affirmed.
NOURSE, P. J., and STURTEVANT, J., concurred.