59 W. Va. 209 | W. Va. | 1906
Lead Opinion
On a bill in equity, filed by William M. Burkheimer, Jr., against the National Mutual Building and Loan Association, of New York, for a settlement and adjudication of the amount due on the loan made by said association to him, on the basis of a simple, straight loan, by application to the debt of all sums paid as dues, interest and premiums, under the rule of partial payments, on the theory that the contract between the plaintiff and said association never was a legal building and loan association contract, or, if it ever was such, that, by misconduct on the part of the association, or departure from its plan, the contract has ceased to be a building and loan association contract, and for the cancellation of the deed of trust by which payment of the loan is secured, the circuit court of Cabell county adjudged and decreed, in conformity with the prayer of the bill, that there was due said association the sum of $1.50, which amount, with interest thereon from the date of the decree, was decreed in its favor, and it has appealed, claiming a much larger amount.
In Thompson v. National Mutual Building and Loan Association, 57 W. Va. 551, (50 S. E. 756), the validity of the contracts of the appellee was assailed, because of the provisions .of its by-laws and form of contract, respecting payment of the premium, and an effort was made to defeat the enforcement of its contract, under the principles announced by this
Failure of the appellee to record, in the secretary of state’s office, its articles of association and by-laws, as required by section 30 of chapter 54 of the Code, is alleged as ground for holding .the contract invalid, on the theory that the appellee has not acquired the right to do business in this State as a building and loan association. In Thompson v. National Mutual Building and Loan Association, cited, this precise question was raised and it was expressly held, on principles announced in Toledo Tie & Lumber Co. v. Thomas, 33 W. Va. 566, that such failure did not deprive the corporation of the right to do business in the state as a building and loan association. No reason is perceived why, in respect to this requirement, a building and loan association should be regarded as standing otherwise than as other foreign corporations. It is not the purpose of this statute to discriminate between foreign corporations on the ground of their character or the nature of their business. It has no special application to building and loan asspciations. It is a general statutory regulation, applicable to all foreign corporations; not denying to them the right to do business in the State, but subjecting them to fines and penalties for non-compliance therewith.
Another ground of attack is failure of the association to comply with the laws of the State of New York. Just what is meant by this allegation is not very clear. It is both general and uncertain. It reads as follows: “-The plaintiff now, however, alleges and charges that said Association has not complied with the statutory requirements of the State of New York so as to permit said Association to come within the benefits granted bj^ the statute of the State of New York to Building & Loan Associations, but that it has failed to prop
A serious matter is presented, however, by the charge that the building and loan association has practically abandoned its whole plan and scheme,- by an indefinite suspension of dues, continued for the long period of nearly seven years, to-wit, from the first day of June, 1898, until the 29th day of April, 1905, when its answer was filed in this cause. The loan was made in 1893, from which date the plaintiff paid dues, interest and premiums until May 31,1898, but not regularly and promptly. On the 20th day of April, 1898, the by-laws of the association were amended so as to confer upon the directors authority to suspend payment of dues on all shares, at any time, by a two-thirds vote, for such period of time as to them might seem best.- Under the authority thus conferred, they did suspend payment of dues on all shares, borrowed and unborrowed, from the first day of June, 1898, and, so far as this record shows, have never resumed the collection thereof. But they required the payment of interest and premium on the loan during the period of suspension and gave to the borrowers the right to make such payments, on account of the principal of their debts, as they might wish to pay, and represented that there should be a consequent reduction in the interest and premium to be collected. Under this arrangement, the plaintiff continued to pay interest and premiums until the 17th day of July, 1900, and also to pay money in lieu of dues until the 9th day of June, 1900, amounting to the sum of $180.00. He having ceased to make further payments, the directors, on the 12th day of June, 1900, ascertained the value of his stock to be $456.44, applied said sum as a credit on the loan of $1,200.00, and claimed a balance due the association on that date of $864.49.
As the contract was originally a valid one, it is difficult to see how a breach thereof on the part of the building and loan association, could make it void ab initio, or change its character. Up until the first day of June, 1898, the association, for anything that appears in this record, literally and strictly complied with all the terms of the contract. All payments made prior to that date were confessedly made under the contract, and under a valid contract. The effect of a breach of the contract, or failure of duty, by the association, on that date, would be, not to divest rights which had already attached, nor to undo things which had been done in conformity with the con tract,but only to vest in the injured party a right of action for damages or specific performance, if he wished to soand upon his contract right, .and, if he did not to demand a rescission of the contract, or settlement by way of withdrawal. These are elementary principles of law which the courts cannot disregard, however harsh their operation may be. Relief from a contract cannot be given by the courts merely because it is a hard one or an improvident one, or to punish somebody for wrong-doing. Courts of equity have large powers, it is true, but they are limited to the effectuation of equity and justice, not in disregard of contracts or contractual rights, but upon certain equitable grounds, springing out of the conduct of the parties, or fortuitous circumstances; but in all such instances they are careful not to do injustice, not to ignore vested rights and interests, and never to depart from the letter of a contract, further than is necessary to the effectuation of right and justice, as they spring out of inequitable conduct of some of the parties. Their office is not to execute vengeance or punish the wicked.
In becoming a stockholder in the association and borrower from it, the plaintiff entered'into contractual relations, not only with the association as a distinct corporate entity,but with all its other members, and these may have been numerous. There were expenses to be borne, losses to be sustained and
Whether the plaintiff may sever the relations existing between him and the association, otherwise than in the man
As a case of dissolution or inability to carry out the contract is not here fully disclosed, what has just been quoted may not be applicable in its full extent to this case; but it asserts a principle within which the case falls. There has been such a departure from the plan, and such an abandonment of some of its essential features for so long a time, as to deprive the borrower of a substantial part of the original consideration, in consequence of which he is entitled, upon
In the application of general principles, some variation must always be made to accommodate them to the nature of the case and its peculiar circumstances. This is not a co-partnership nor is it an ordinary corporation. The borrow ing stockholder sustains a dual relation to the corporation, and, through it, to his corporate associates. In one aspect he is a debtor, the amount due from him constituting part of the assets of the corporation to which its creditors may look for satisfaction of their demands and to which, after the satisfaction of the claims of creditors, payment of expenses and deduction for losses, all the' stockholders, he included, may look for their distributive portions on dissolution, or consummation of the enterprise. In another aspect, he is a stockholder, contributing to the capital stock of the corporation,
Upon these considerations, it might be just and fair to give the association the benefit of the premiums paid, or which ought to have been paid up to the date of the suspension, and allow the borrower to take, as a credit on his debt, the full actual value of his stock at that date. But he agreed to pay that premium as a consideration for the opportunity given him to satisfy the loan by maturing the stock within the time contemplated. Pie did not agree to pay, as premium, fifty cents per share for such length of time as the association might be solvent or properly conduct' its business, but for the whole pieriod of eight years, as consideration for the satisfaction by the association of his debt at or near the end of that period by maturing the stock. The premium is not, in a legal sense, additional interest, though it practically amounts to that. Legally, it is the purchase monejr of the right to take from the association as a loan the ultimate value of the borrower’s stock to be paid and satisfied by the maturing of that stock. When the association becomes insolvent, or, by its misconduct, makes it necessary or proper for the borrower to dissolve his relations with it, the consideration for the
Endlich on Building Associations, after reviewing the decisions in the different states, says-, at section 531: “Upon the basis of all the decisions examined, it may be safely laid down that the clear weight of authority rejects the enforcement of any part of the premium. And in reason and fairness this must be so. The premium is not a payment in advance. The contract concerning it is that it shall be made up by the borrower in the association’s hands, and that, upon his final settlement with the association, when the work of both shall be accomplished and their reciprocal duties fulfilled, it shall be relinquished to and appropriated by the association. The contract, therefore, is an entire one. It does not contemplate a stoppage at any intermediate point and an apportionment of the premium accordingly. No part of it is earned until the whole scheme has been carried out. Hence, if at any stage, the society, breaking down, fails to perform its part of the bargain, the promise to pay it the premium loses the consideration upon which it was- based, and ought to be regarded as wholly abrogated. To attempt to apportion the premium is simply to treat it as additional interest. To regard it as something with which the borrower has parted, as something which the society has earned, as assets in its hands before it has done that which entitles it to retain the premium, is to misconceive its true character and office. It must be true, therefore, that the basis of the borrower’s in-
This law seems to be justly and fairly applicable to the present case, but at what time ought the application of it to be made? Since June 1, 1898, nothing appears to have been done but receiving interest and premium on the loans and collecting assets. The plaintiff has not paid nor been permitted to pay, any dues, and it seems to be admitted that none had been paid by any person. - He has made payments corresponding in amount to the dues, but with the understanding that -these payments were to be credited upon his debt. Hence, it appears that there has been a cessation since June 1, 1898, of some of the most important functions of the association. What disposition has been made of the collections does not appear. Whether they have been re-loaned
Bor the reasons above given,.the decree complained of will be reversed and the cause remanded for further proceedings, in accordance with the views herein expressed, and the principles and rules governing courts of equity.
Reversed.
Dissenting Opinion
(dissentm.g:)
The decree of the circuit court is based upon the theory that at the time the defendant became a member of the association and at the time the loan was made to him, certain by-laws of the association were in force, providing that monthly dues should be collected from all members and stockholders of the association, and that some time thereafter the by-laws were changed so as to permit the directors to indefinitely suspend the payment of such dues, which they did, in pursuance thereto, thereby changing the contract entered into between the plaintiff and the association, and defeating the entire purpose and object thereof, and destroying its features as a building and loan association, and that this being done, the loan made should be treated as a simple loan, bearing the legal rate of interest. This conclusion of the circuit court, I think, is eminently correct, and I would affirm the decree.
The conclusion reached by the Court, in its majority opinion, and that reached by the circuit court, differs only in respect to the basis of settlement, it being held here that the indefinite suspension of dues amounted practically to a dissolution of the association, and that the settlement should be governed by the principles announced in the case of Young v. Building Association, 48 W. Va. 512. It does not appear from the record that the association, at the time of the suspension of the payment of dues, was insolvent, or that it is now insolvent, or has been disssolved, nor is there any such claim, but, so far as the record shows it is perfectly solvent and continuing. Therefore, it is improper to hold that the settlement made with the plaintiff should be upon the theory that the association is not a going concern. So far as we know, this plaintiff is the only member complaining of such suspension, and the only one who seeks a settlement