77 N.W. 1010 | N.D. | 1898
William D. Hale, the appellant, is the duly appointed receiver of the American Savings & Loan Association. As such he seeks to foreclose a mortgage given by Robert Cairns and Ella Cairns to said association. Robert Cairns died before the action was brought, and the defendants Mary and Robert Cairns are his heirs at law. The American Savings & Loan Association was a corporation organized and doing business under the laws of the State of Minnesota, with its home office at Minneapolis. The allegations of the complaint, aside from the allegations as to the insolvency of the association and the appointment of the receiver, are substantially the same as in the case of Loan Co. v. Shain, (decided at this term) 8 N. D. —, 77 N. W. Rep. 1006. The answer also raises the same issues as in that case. Following the decision in that case, we hold that the contract in this case must be governed by the laws of the State of Minnesota, and that said contract is not usurious.
Upon the question of the proper credits to be given to the defendants, this case differs materially from the Shain case, as the association has become insolvent, and is unable to mature the stock, and consequently unable to complete the contract on its part. In this case the loan was $400, and the premium bid was $400. The evidence of indebtedness took the form of a bond. Ella Cairns signed as one of the obligors. The bond was for $800, but only the sum of $400 drew interest, and that at the rate of 6 per cent. Eight shares of stock were assigned to the association as collateral security; the bond to be paid by the absolute surrender of such stock at maturity. The bond’ was payable on or before nine years from date. It is conceded, as we understand the record, that on December 19, 1888, Robert Cairns, deceased, subscribed for, and there were issued to
This question has received very different answers at the hands of different courts. It has never yet been answered by this Court. It has been held that a proper and equitable adjustment, in cases where the association has become insolvent and unable to mature its stock, is to charge the borrowing member with the amount of money received, with legal interest thereon, and credit him with all that he has paid, “whether paid as fines, penalties, or dues.” Strauss v. Association, 117 N. C. 308, 23 S. E. Rep. 450; Thompson v. Association, 120 N. C. 420, 27 S. E. Rep. 118; Buist v. Bryan (S. C.) 21 S. E. Rep. 537. See, also, Bank v. Whitmore (Sup.) 49 N. Y. Supp. 862. In this case the question was presented in an involved form, and just what the Court decided is not clear. Respondent also cites in this connection Randall v. Protective Union, 42 Neb. 809, 60 N. W. Rep. 1019. But in that case the association involved was, so far as the record discloses, an entirely solvent corporation; and under such circumstances there can be no injustice in crediting a borrowing member, who chooses to surrender the stock pledged, with all that he has paid thereon. This rule has been frequently applied in Pennsylvania. North American Garden Ass’n v. Tradesman’s Bldg. Ass’n, 46 Pa. St. 493; Watkins v. Association, 97 Pa. St. 514. But that a different rule, as to credits to be given, should be applied in solvent and insolvent corporations is, we think, entirely clear. The rule is universal that when a corporation becomes insolvent there must be, or at least there may be, a loss to the stockholder. And, from their very nature, the certainty of loss in case of an insolvent building and loan association is greater than in many other forms of investment. They deal only with their members. Their capital consists exclusively of sums paid by their members. They cannot become insolvent in fact without an impairment of that capital, and, if there be an impairment, then the full amount of capital paid in cannot
But, viewing respondents in the light of borrowers only, and turning to the contract, we learn that, for the privilege of ’receiving the loan, respondents agreed to pay a premium of an amount equal to the cash received. That agreement was made by reason of the inducements held out by appellant, to the effect that both loan and premium could ultimately be paid by a surrender and cancellation of the stock when it reached par, and that the stock could be brought to that condition by small payments thereon at stated intervals, together with the profits that would accrue to such stock through the operations of the association. But the association, by reason of its insolvency, is unable to carry out its contract It cannot mature the stock. The inducement which caused the respondent to offer the large premium has failed. Hence, what ever has been paid upon such premium, if anything, should be credited to respondents. This we think is the better rule, and it is amply sustained by the authorities last cited, although some Courts have undertaken to apportion the premium, and treat a portion of it as earned. See Towle v. Society, 61 Fed. Rep. 446; Sullivan v. Stucky, 86 Fed. Rep. 491. But, under what we regard as the better rule, respondents claim that they should be credited with the dues paid upon the shares of stock that were assigned as collateral to the'payment of the premium. (It will be remembered that the premium was included in the bond, but drew no interest.) We
The trial court will set-aside its judgment heretofore .entered in this case, and enter judgment against the respondent Ella Cairns for the amount heretofore indicated, with the usual decree of foreclosure as to all the respondents. It is so ordered.
Reversed.