66 N.Y.S. 422 | N.Y. App. Div. | 1900
•As a loan to defendant the association advanced one-half of the estimated maturity value of his fifty shares, namely, $2,500, and he-agreed to pay interest monthly thereon at the rate of six per cent per annum, and also to continue his monthly payments of his dues-upon the said fifty shares; The bond, mortgage and assignment of the shares were executed as security. As neither premium in cash-, nor interest of any kind upon the premium bid was required, this case differs from the cases where, incident to the loan, an - actual payment of bonus or of premium is exacted. The premium here* falls within the definition of Woods, J., in Sullivan v. Jackson-Building Association (70 Miss. 94) as it. “ represents the discount agreed' to be made upon the future and uncértain dividends of appellant’s shares of stock in the association. It is the difference, estimated by the association and its borrowing member, between the. par value of the member’s shares of 'stock and their present real value.' It is the bonus which appellant might lawfully agree to pay for a present advancement in cash of a sum certain for the virtual transfer to the association of his shares of stock, which, in the final winding up of its affairs, may realize the sum actually received by the member, together with the premium bid, or which may not.”’ It was not contemplated that the $2,500 should ever be repaid* in cash, for it was, in effect, an advance of the supposed maturity value-of the shares. And so the bond reads that it shall be. harmless if the debtor shall pay “ on or before seven (7) years from date hereof, the just sum of Five Thousand ($5,000) dollars as aforesaid, as provided in the articles of association of said corporation, together with interest, * * ** and also all premiums, fines and dues which may be charged,” according to the said articles of association, and such are the qualifying provisions attached .to repayment when elsewhere mentioned. Thus the advantage promised to the defendant was an immediate loan, to be canceled, when due, by the maturity value of his shares, while his burden was payment meanwhile of his dues upon the fifty shares, and of the said interest upon the cash lent to-him. The record states that the defendant “ has paid as dues upon the said stock so held by him the sum of $30 per month up to-August 1, 1899, being the sum of $1,680, to said association, out of which the sum of $5 per month, being in all the sum of $280, was-
Judgment of dissolution of the corporation, based upon its insolvency, was entered on December 9, 1899, upon the suit of the people. Thus, vis major has stayed the association from further performance of its contract, and the defendant is, of course, held excused on his part. The life of the association as a going concern being ended, there must be a winding up. The plaintiffs contend that the loan is now due, and that they may proceed upon the mortgage security. The defendant insists that the mortgage is not due, inasmuch as it is provided therein that it is to run until January, 1902. Thompson on Building Associations (2d ed. § 171) says: “ The courts have laid down different rules as to the amount the borrower should repay when the association becomes insolvent, and goes into the hands of a receiver. The authorities are agreed that upon such an event the mortgage becomes due.” Endlich on Building Associations (p. 518) says: “ On one point, there seems to be a general consensus, although the distinct enunciation of the principle is only of very recent date : it is this that ‘ upon premature dissolution of the association, the advanced members may be com. polled to pay forthwith the balances due from them on their securities, although the latter be given in terms only for the payment of installments.’ ” (See, too, Towle v. American Building Loan & Inv. Soc., 61 Fed. Rep. 446; Weir v. Granite State Provident Assn., [N. J.] 38 Atl. Rep. 643; Curtis v. Granite State Provident Assn., 69 Conn. 6; Windsor v. Bandel, 40 Md. 172, 177; Leahy v. National Building & Loan Assn., 76 N. W. Rep. 625; Strohen v. Franklin Saving & Loan Assn., 115 Penn. St. 273; People v. Lowe, 117 N. Y. 175.) '
Contending contra, the learned counsel for the defendant' cites Thornton & Blacldedge on Building Associations, 397, and the
If the defendant had not been a member, he could not have been a borrower, and by becoming a borrower he did not cease to be a member. (Endl. Build. Assn. § 45 ; Thomp. Build. Assn. § 34.) He cannot now shake off his membership responsibilities or liabilities to claim that his sole relation to the association is that of a debtor, freed from his obligation in consequence of the association’s compulsory breach of the contract. Rather, he is to be" regarded as a member who had, perforce of membership, obtained a loan from the association on terms now impossible of fulfillment, in that the common venture has been arrested by the People of the State. And equity will regard him as a member, that equality may be established between him and his fellow venturers. To hold that kuch a termination of the life of the association as a going concern discharges the loan absolutely, and thereby-releases the security, would result in confiscation of all assets represented by loans (possibly a great part thereof) for the benefit of the borrowing members respectively, and to the exclusion of the non-borrowing members. So far as Rochester Savings Bank v. Whitmore (25 App. Div. 491) is authority for such conclusion, I think it disregards the principle laid down in People v. Lowe (117 N. Y. 175) where the court, per Earl, J. (speaking of 'the contention of the plaintiff that the society
I take it that the rule indicated, in People v. Lowe (supra) must be applied in the winding up of the association with reference to the rights of the members thereof. (Hannon v. Cobb, 49 App. Div. 480. See, too, Strohen v. Franklin Saving & Loan Assn., supra; Rogers v. Hargo, 92 Tenn. 35; Thornton & Blackledge Build. & Loan Assn. § 355.) The loan, then, of $2,500 must be regarded as due when the life of the association was terminated; that is, upon the appointment and qualification of the receivers.
There is this further question : “ What, if any, credits against the
I am sustained in my conclusions in the main by the decisions heretofore cited. The authorities that the borrower is to be cred-.' ited with the dues seem to rest upon the theory .that the transaction is to be regarded after the failure as one of an ordinary loan. But this would, as'I have stated, ignore the existing relation of the debtor as a.member of the.association. And such credits would he, in effect, paying dividends to the defendant, after the association was in the hands of a receiver through its insolvency, of 100 per cent of the amounts so credited to him5 and hence there would be a preference, pro tanto, as against his fellow-members of the same class. It will be found that very nearly all the cases that authorize such a
The doctrine applied in Rochester Savings Bank v. Whitmore (supra) is not only open to the foregoing objections, but would seem to be at variance with that laid down in People v. Lowe (supra), that every member was to stand on equal footing, whether debtor or -creditor member, and that each debtor member, to that end, should pay what he owed, this being, in the case of a mortgagor, the principal due upon his mortgage, so that each member for each share held by him might be entitled to precisely the same amount in the assets of the society. If the dues were, within the contemplation of the court in People v. Lowe (supra), to be applied upon the debt, as a dividend of 100 per cent, the debtor’s right would not there be stated as that of a sharer in the assets, or as only a sharer therein. Further, in this case, not only did the articles of association provide in express terms that the dues should be paid as upon the stock, but the agreement of facts reads that the defendant “ has paid, as dues upon the said stock so held by him, the sum of $30 per month,” etc. But the defendant is entitled to a credit of the thirty dollars paid as dues after the appointment and qualification of the receivers. The fines were the penalties of his personal delinquencies, and went into the funds of the association. (Towle v. American Building Loan & Inv. Soc., supra.)
The final question is as to the practical relief. The plaintiffs ask judgment of foreclosure and sale to recover $5,000 with interest and expenses with a deficiency provision. The defendant seeks a judgment denying the right of foreclosure, or, if foreclosure be granted, then a judgment that the defendant be credited on account of the principal of his mortgage with all payments together with certain interest thereon and that the receivers reassign the stock now held as collateral security to defendant that he may share in any final distribution, so that any dividend may be added to his payments to the increase of his credits upon the principal of the mortgage, and that the judgment of foreclosure and sale be post
• While we decide that the principal of the loan, namely, $2,-600, is-now owing to the receivers from the defendant, if there is any dividend presently his due as a member, no good reason appears why the defendant should be required to pay the full amount of the loan in the first instance. On,the other hand, here may well be a-hardship worked by a, disregard of the equity that should strike a-balance between his debt and his dividend. If the receivers, by ..marshalling assets and liabilities and by allowing for expenses, cannot determine, .they can at least approximate the prospective value, of-each share of stock, and hence the probable. dividend due each-shareholder sufficient for the purpose at hand. Naturally,, such estimate would be conservative, and, therefore, provisión should .be-, made for any possible overpayment, 'These- views are in accord with the valuable discussion of Mr. Endlich in his work cited. Equity demands that 'this course should be taken. The parties,. . then, may, within, twenty days after this opinion is handed down, file an additional statement such as we "áre authorized to require by section 1281 of the Code of Civil Procedure,, to the end that wé may render a judgment in 'accord with the views- expressed in, this, opinion. In case they fail to submit such statement, then the. suN - mission will be dismissed without, costs to either party.
All concurred.
Submission dismissed,-without costs, under section 1281 of the Code, of -Civil Procedure .unless, the parties within- twenty days1 file an additional statement in accordance with the opinion- of Mr. Justice Jenks.