Case Name: The People of the State of New York, Plaintiff, v. The New York Building Loan Banking Co., Defendant (In re Montague)
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1904-07
Citations: 44 Misc. 296
Docket Number: 
Parties: The People of the State of New York, Plaintiff, v. The New York Building Loan Banking Co., Defendant (In re Montague) .
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 44
Pages: 296–299

Head Matter:
The People of the State of New York, Plaintiff, v. The New York Building Loan Banking Co., Defendant (In re Montague) .
(Supreme Court, New York Special Term,
July, 1904.)
Building loan bank — Loan to a member — His property rights upon its insolvency — Interest — Dues — Premium.
Where a person, desirous of getting a five per cent, mortgage on his premises paid off, enters in 1897- into an agreement with a building loan bank company by the terms of which it agrees to carry the mortgage, pay interest on it in the meantime and the principal upon maturity, of the stock, and he agrees to pay it a premium^ monthly dues on the stock in the meantime, give it. a six per cent, mortgage for the amount of his mortgage and the premium, pay interest on that until the maturity of the stock and assign his stock to it, and these stipulations are mutually performed by the parties until a permanent receiver of the property of the company is appointed in 1903 upon its insolvency, and thereafter the subscriber to the stock petitions the court that the receiver pay him the difference between what he has paid in and the company has paid out, the court, in view of the fact that he is not only a borrower from the company but also a member of it, will give him no interest on any sum allowed him, will credit him with the dues-he has paid as constituting a basis to fix his share of the net assets as. a stockholder but will allow the receiver to retain the dues, and allow the company such proportionate part of the premium — which must be deemed to have been earned to some extent by it — as the period before insolvency and during which it kept its contract bears to the entire term of the contract.
Application by petitioner, a stockholder of the New York Building Loan Banking Co., asking that the receiver of the above-named company be required to pay him the difference between the amount paid in by him and the amount paid out by the company with interest, and in the event of the rejection of the method above refered to, he asks the court to direct the receiver to pay .him $3,974.27 with interest thereon from the date of the appointment of said receiver, reserving amount of dues paid by petitioner and interest thereon as a basis for a claim to share pro rata with other stockholders at the final distribution.
Charles R. Hall, for petitioner.
Charles W. Dayton, for receiver.

Opinion:
Davis, J.
The defendant, the'New York Building-Loan Banking Company, .is insolvent and in the hands of a permanent receiver. On or about December 1, 1897, the petitioner, Peter J. Montague, became the owner of 300 share of class "A" stock, issued by the defendant. His primary purpose in subscribing for 300 shares was to bring about the payment and cancellation of an existing mortgage of $25,000 on his premises, No. 60 Court street, Brooklyn. The company undertook to carry this mortgage of $25,000, agreeing to pay off the principal on or before the maturity of the stock, and in the meantime to pay the interest (five per cent.) on the mortgage. In consideration of the company's agreement to issue to him the 300 shares of stock, and to carry and finally to pay off the mortgage, Montague agreed to pay the company a premium of $5,000; to make a monthly payment of $75 dues on the 300 shares; to execute in favor of the company a mortgage of $30,000 on said premises, and pay interest thereon at the rate of six per cent., the interest to be paid monthly at the time of the payment of the dues. This made a total monthly payment of $226, and these payments were to continue until the stock matured, December 1, 1909. The premium of $5,000 is included in the $30,000 mortgage. He also assigned his stock to the company. The assignment as well as the $30,000 mortgage was made to secure the monthly payments of $226. It was expected that at the end of the maturing period, December 1, 1909, the 300 shares of stock would be paid up in full, and that Montague would have his premises free and clear of both mortgages. Both parties lived up to the agreement for sixty-nine months and fourteen days. The company then became insolvent and a temporary receiver was appointed September 14, 1903. Hnder an order of this court the $30,000 mortgage has been satisfied. No part of the $25,000 mortgage on the petitioner's premises has been paid. At the date of the appointment of the temporary receiver, Montague had made the following payments to the company: $10,350 interest on the $30,000 mortgage, and $5,175 as dues on 300 shares of stock, making in all $15,525. In the meantime his stock has been maturing and the company has paid on account of interest on the $25,000 mortgage, at the rate of five per cent., the sum of $6,770.83. The petitioner asks that the receiver be required to pay him the difference between the amount paid in by him and the amount paid out by the company, that is $8,754.17, with interest for the average time to September 14, 1903, making a total of $10,286.12; and in the event of a rejection of the method just referred to, he asks the court to direct the receiver to pay him $3,974.27, with interest thereon from the date of the appointment of the receiver, reserving the amount of the dues' paid by the petitioner and interest thereon as a basis for a claim to share pro rata with other stockholders at the final distribution. Neither of these methods of settlement appears to the court to be equitable, because they both substantially ignore the just claim of the company to a portion of the premium agreed to be paid by the petitioner. The relation between the petitioner and the, company is not merely that of borrower and lender. He is also a member of the company. " The question emancipates itself, therefore, from legal or contract technicalities, and reduces itself to one of simple equity and fair play." Towle v. American B. L. & L. Soc., 61 Fed. Repr. 448. It follows, therefore, that whatever amount shall be allowed the petitioner, he is not entitled to any interest on that amount. He should be credited with the amount paid as dues, this amount serving as a basis for the fixing of his pro rata share of the net assets as a stockholder. Hnder authorities in this State and in the Federal courts, some part of the premium agreed to be paid should be regarded as earned by the company. Hannon v. Cobb, 49 App. Div. 480; Riggs v. Carter, 77 id. 580; Breed v. Ruoff, 54 id. 142; MacMurray v. Gosney, 106 Fed. Repr. 11; Choisser v. Young, 69 Ill. App. 256. The company kept its agreement for sixty-nine and seven fifteenths months. One hundred and forty-four months being the full term of the agreement, it should be allowed, therefore, to retain a proportionate part of $5,000 as earned premium, i. e., $2,412.04. Following the rules laid down in the cases referred to, I think it would be just to all parties to allow the company to retain $2,412.04 as earned premium and $5,175 as dues on the 300 shares of stock. And it should be credited with $6,770.73 interest paid by it on the $25,000 mortgage. If the total of these amounts be deducted from the whole amount paid by Montague, i. e.} $15,525, it will leave $1,167.13, which should be returned to the petitioner. This amount, however, should not be paid until final accounting, when it can be determined whether or not there is money sufficient to satisfy the claims of all others similarly situated. The diligence of the petitioner in making this application should not give him a preference over others having the same kind of claim against the company.
Ordered accordinglv.