Hale v. Kline, 113 Iowa 523

113 Iowa 523 | Iowa | 1901

Si-ierwin, J.

The only question presented for our determination in this case is fhether the defendants are entitled to credit for any part of the dues paid on the 12 shares of stock issued to A. D. Kline, and assigned by him as collateral security for the loan and premium Tn question. At the outset of the discussion of this question, we should say that the association was purely a mutual one; that every stockholder was a member thereof; and that every member thereof was a stockholder. Except as to the liability incurred by borrowing mone'y of the association, every member assumed the same liabilities, and was entitled to a proportionate share of its earnings, from whatever source derived. With this mutuality of interest and liability in view, what are the rights of the defendants, and the rights of the other members and creditors as represented by the plaintiff ? There were two classes of members, which we may designate as “borrowers” and “nonborrowers.” To become a borrower, it was necessary to offer a premium of so much per share on the shares held by the applicant. The premium which these defendants contracted to pay Avas$600, represented by one-half of the amount for AA’hich they gaA*e their note. If the association had continued as a going-concern until the monthly dues paid on the 12 shares of stock had matured the. stock, then, by the terms of the note itself, a surrender of the stock could have been made in full payment of the money actually received and of the premium represented in the note, and in such case the defendants AA^ould, of course, receive indirectly the amount paid in dues. But the association became insolvent before the maturity of the stock, and it is obvious that the rights-' and equities of the members are thereby placed upon a dif-^ ferent footing. This changed condition has been held1 by some courts to operate as a rescission of the entire contract and to leave the members to an equitable adjustment of" their rights and liabilities. It is conceded by all or by most. of the courts, however, that the insolvency of such a mutual, association releases the stockholders from further payment-of dues on stock. It is the almost universal holding* that,, in the settlement of the affairs of an insolvent mutual association, a borrowing member, whose stock has not matured, shall be held for the amount of money actually received by him, with interest thereon, less-, the premium act- . ually paid by him for the loan, and less the- interest on the-monthly payments of interest made by him. This rule applies to cases where the affairs of the association are not so-far settled as to ascertain the value of the stock. When the-value of the stock can be determined, the borrower would then be entitled to credit for its value in addition to the-items heretofore mentioned. Wilcoxen v. Smith, 107 Iowa, 555; Hale v. Cairns, 8 N. D., 145, (77 N. W. Rep., 1010) ; Phelps v. Loan Ass’n, 121 Mich., 343, (80 N. W. Rep., 120); Leahy v. Loan Ass’n, 100 Wis., 555, (76 N. W. Rep., 625); Knutson v. Building Ass’n, 67 Minn., 201, (69 N. W. Rep., 889) ; Rogers v. Hargo, 92 Tenn., 35, (20 S. W. Rep. 430) ; Weir v. Loan Ass’n, 56 N. J. Ch., 234 (38 Atl. Rep., 643) ; Curtis v. Provident Ass’n, 69 Conn., 6, (36 Atl. Rep., 1023, 61 Am. St. Rep., 17), and, see note to this case, page 24, 61 Am. St. Rep.; People v. Lowe, 117 N. Y., 175, (22 N. E. Rep., 1016); See, also, Endlich, Building Assn’s (2d Ed.) 477 ; Am. & Eng. Enc. Law (2d ed.) 1080; Post v. Loan Ass’n, 97 Tenn. Sup., 408, (37 S. W. Rep., 216, 34 L. R. A., 201) ; Strohen v. Loan Ass’n, 115 Pa. Sup., 273 (8 Atl. Rep., 843)., Many other states hold the same doctrine. In- most of the-cases where credit for the premium paid was- allowed, it had been paid in cash in monthly installments ;• but in the-cases of Phelps v. Loan Ass’n and Hale v. Cairns, supra, the same conditions existed as in this case, as they both concerned this association.

Appellees urge, however, that payment of the monthly-dues, so far as applied to six shares of this stock, was in reality the payment of the premiums contracted for. But this view will not stand the test of reason nor of equity. When the defendant A. D. Kline became a member of this association, he voluntarily placed himself on the plane of exact equality with the other members thereof. When he secured the loan, and executed his obligations therefor, he entered into a new, separate and distinct contract, whereby he agreed to pay a certain sum in cash, unless, by reason of the maturity of his stock, he should choose to surrender it in payment of his obligations. This was optional, not compulsory with him. His stock never matured. In common with every other member of the association, he was placed in an entirely different position. If permitted to offset the dues paid by him on any portion of his stock against his debt to the association, he would be deriving therefrom an unjust advantage over the nonborrowing members, who are, of necessity, compelled to take in final settlement for their stock whatever the receiver may be able to pay. To leave the borrowing member in this same class and situation is but just and equitable. By so holding, we leave him in this situation: He should be charged with the $600 actually received by him, with interest thereon from the date it was received at the rate of 7 per cent, per annum. On this amount he should be credited with the interest paid by him on the $600, and with the interest on this interest, computed thereon as partial payments, at the rate of 7 per cent, per annum. This leaves him with his 12 shares of stock, upon which he may receive whatever sum may be finally found’ payable upon settlement of the affairs of the association.’ As thus modified', the judgment is affirmed. — Modieied and aeeirmed.