101 F. 8 | U.S. Circuit Court for the District of Southern Alabama | 1900
The petitioner avers that nothing is due on the mortgage mentioned in the petition, and that there is nothing owing on or secured by said mortgage, except the last note mentioned therein, payment of which is offered, and tender thereof made. Petitioner prays that the receiver he restrained from selling the property described in the mortgage, and that he he directed to accept the amount of money tendered, and to surrender said note, and to cancel and surrender said mortgage. The receiver, answering, admits that all the notes mentioned in the mortgage, except the last one, have been paid, and admits the tender alleged, hut denies that the mortgage was executed to secure only the notes described therein, and insists that a large sum of money in addition to the last-mentioned note is due on said mortgage, to wit, the sum of $1,200. There is nothing in the answer that shows how said sum is due, and nothing in the mortgage which specifically shows that the money loaned to petitioner was an advance on her stock in the company. There is nothing in the mortgage as to the probable time
It matters not whether the money received hv the petitioner and secured by the mortgage be called a loan, or simply an advance to her on her shares. The mortgage was given to secure the repayment of the money in the manner and upon the terms therein men
The agreed statement of facts shows that the sum of money evidenced by the notes, the payment of which is secured by the mortgage, was made up of monthly instalments on stock, and interest and premiums on loan, and the pass book in evidence shows that the money, when paid on the notes, was so applied; thus showing the construction put on the contract by the parties themselves. So, then, the monthly payments on stock were designated in the mort-" gage as principal. There is no other provision in the mortgage that can be considered as securing such monthly payments. The mortgage, by its terms, was executed to secure a specific sum of money, being principal, interest, and premium, and in addition thereto such sums as the company would have had to pay out for insurance and taxes. If “principal” therein mentioned was not meant to be the monthly payments provided for by the by-laws, then such monthly payments have not been made. But it is evident that “principal,” as that term is used in the mortgage, and monthly payments on stock are the same thing, while it is not clear what is meant by “dues” spoken of.
Let us suppose that the affairs of the company had not by this time gotten into the court and the hands of a receiver; can it be questioned that, on payment of all the notes provided for (there being no default shown in any of the other covenants contained in the mort: gage), the petitioner would be entitled, not only to the surrender of the notes, but also to the cancellation and surrender of the mortgage? If her shares of stock had not been matured at that time, she would still be obligated to continue the monthly payments on them, for her promise and engagement as a shareholder bound her to make such payments until the maturity of her stock. But she has given no security that she would make such payments after the maturity and payment of the notes. The only effect of her failure to keep this promise and undertaking would be a forfeiture of her stock. She would then be, as to forfeiture and penalties, on the same footing with nonborrowing shareholders, who give no security for monthly payments on their stock. To hold that the mortgage was given- to secure the payment of the principal of the loan, to wit, $1,800, interest and premium, and also to secure the payments on stoqk, as contradistinguished from such principal, would, it seems to me, place the borrowing shareholder in a worse condition than the
The position of the petitioner seems to be this: She had advanced or loaned to her the estimated par value of her stock at its maturity. She was requii*ed to repay in monthly installments the amount advanced, with certain charges, as interest and premium, added thereto, in a given or definite period of time, and she was required to give security (both real estate and a transfer of her stock) that she wrould make the payments as specified. It was an advancement or a loan to her of a sum of money, with an agreement to repay it in monthly installments, with interest, and a “bonus” for the loan, for the repayment of which she gave the security required. There is no default shown in the payment of the notes or in the keeping and performing of any of the" provisions of the contract. Without such default, there is no forfeiture of the mortgage, and no power in the company to sell the property conveyed by it.5
If I am correct in my construction of the contract, there was nothing owing on the mortgage debt at the time the affairs of the company went into the hands of the receiver, except the last: note of $30.60, which became payable a short time thereafter, payment of which was tendered to the receiver and by him refused. It appears that the receiver then sold the property, and at the sale himself became the purchaser. But the so-called “insolvency” of the company, and the proceedings to wind it up, put an end to its operations, and to the contract between it and its members, at least so far as future performance is concerned. Curtis v. Association (Conn.) 61 Am. St. Rep. 17 (s. c. 36 Atl. 1023); Knutson v. Association (Minn.) 64 Am. St. Rep. 410 (s. c. 69 N. W. 889), and authorities therein cited; Sullivan v. Stucky (C. C.) 86 Fed. 491.
All authorities agree that, on the premature abandonment of the enterprise by its so-called insolvency and by the winding it up by judicial proceedings, the original contract between the company and the borrowing shareholder cannot be carried out, and that neither party is bound to its literal fulfillment, but they differ as to the relative rights and obligations of the company and its borrowing shareholders, and as to the rule by which such rights and obligations should he settled. See authorities supra; McIlwaine v. Iseley (C. C.) 96 Fed. 62; Douglass v. Kavanaugh, 33 C. C. A. 107, 90 Fed. 373.
Now, nothing remains but to wind up the affairs of the company in such a manner as to do equity to creditors and between the members of the company themselves. The question is, how shall it be done? Many of the courts, so far as possible, treat the changed condition of affairs as equivalent to a rescission of the contract, and hold that, in adjusting matters between the company and its members, the principle of rescission should be applied as far as it is just and equitable; that each borrowing member indebted to the company should he charged with the amount received by him, .with legal interest from the dale of the loan, and should be credited, on
The statute of Alabama provides that, upon foreclosure of any mortgage of land by a member of a building and loan association, to such association it shall credit, as of the date made, upon the entire debt claimed by the association, all payments made upon such debt, whether of principal, premiums, or interest, and the stock pledged for such loan shall be credited on the said loan at its actual value. Code Ala. § 1135. It seems to me that this is a just rule, upon which the account between the borrowing member and the association should be settled in the case of the insolvency of the association and the winding up of its affairs by the court, with the qualification, however, that the borrowing member should contribute his pro rata share to the losses of the association. This rule, as far as practicable,, I adopt in this cause.