Case Name: Interstate Savings & Loan Association, Appellant, v. C. H. Knapp et al., Respondents
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1898-11-23
Citations: 20 Wash. 225
Docket Number: No. 2902
Parties: Interstate Savings & Loan Association, Appellant, v. C. H. Knapp et al., Respondents.
Judges: 
Reporter: Washington Reports
Volume: 20
Pages: 225–230

Head Matter:
[No. 2902.
Decided November 23, 1898.]
Interstate Savings & Loan Association, Appellant, v. C. H. Knapp et al., Respondents.
BUILDING AND LOAN ASSOCIATIONS—LOANS TO MEMBERS-CONTRACTS AGAINST PUBLIC POLICY-FORECLOSURE-PLEADING-ESTOPPELAMENDMENT OF PLEADINGS AFTER REVERSAL.
Contracts for loans between a building association and a member cannot be held void as against public policy, when the organization and method of doing business of such corporations is authorized by statutes.
In order to render proof admissible showing that, by the terms of the contract entered into by defendant with the agent of a building and loan association, tbe mortgage given to the association had been fully paid prior to suit, such special contract must he set up iu the answer.
All the essential facts constituting equitable estoppel must be pleaded.
Upon foreclosure of a mortgage given by a member to a building and loan association, the note, mortgage and contract of membership should all he construed together as parts of the same transaction, in order to determine the liability of a borrowing member.
Where a cause is reversed and remanded for further proceedings not inconsistent with the decision on appeal, the matter of allowing amendments to the pleadings remains within the discretion of the trial court.
Appeal from Superior Court, Snohomish. County.— Hon. Keane T. Reid, Judge.
Reversed.
Shank & Smith, for appellant.
F. M. Headlee, Humes & Lysons, and Donworth & Howe, for respondents.

Opinion:
The opinion of the court was delivered hy
Reavis, J.
Suit was commenced by appellant to foreclose a real estate mortgage executed and delivered to it by respondents. The note which the mortgage was executed to secure was as follows:
" Minneapolis, Minn., March 25, 1891. In consideration of the sum of one thousand ($1,000.00) dollars, this day loaned to me as a member of the Interstate Building and Loan Association of Minneapolis, Minn., upon ten shares of stock now held and owned by me in said association, as evidenced by certificate of stock Ho. 3,092: How, therefore, I, the undersigned, hereby promise and agree to repay to said Interstate Building and Loan Association, on or before the maturity of said stock, the sum of $1,000.00, with interest thereOn at the rate of six per cent, per annum and seven per cent, premium per annum, both interest and premium payable monthly on or before the tenth day of each month, commencing April 10, 1891. Principal, interest, and premium payable in current funds at the office of the said Interstate Building and Loan Association, Minneapolis, Minn."
The mortgage contained the stipulation that it was "given to secure an advancement made by the said second party on ten shares of stock now owned by said O. H. Knapp in said Interstate Building and Loan Association, the monthly payments on which amount to $7.50 per month, which payments (together with any fines) said Knapp further covenants and agrees to make as they shall become due until said stock shall attain the par value of $100 per .share." Appellant, as its name indicates, is a building and loan association incorporated under the laws of the state of Minnesota, and authorized to do business in this state. The statutes of Minnesota relating to building and loan associations are similar to the statutes of this state upon the same subject, found in Bal. Code, tit. 23, ch. 6 (1 Hill's Code, tit. 18, ch. 8). The evidence submitted to the superior court on the part of the appellant was respondent Knapp's application for stock and loan, certificate of stock, and assignment thereof ,to appellant, the note and mortgage, appellant's by-laws, session laws of Minnesota, and a transcript of respondent's account taken from appellant's books, which, by agreement, was treated as the original book account, and also deposition of appellant's secretary verifying the account and by-laws, and explaining the method of crediting payments under the heads of loan fund, expense, interest, premium, and fines, the state of the account, the amount of arrearage, and also statement of some payments of premium on insurance. The complaint filed by appellant was an ordinary one for the foreclosure of the mortgage, which was set out, and default in the terms of the contract was alleged. Respondents filed their answer, denying the default in the terms of the contract in suit, and also alleging payment to appellant of the amounts due under the contract. The superior court found as a conclusion of law that the appellant was entitled to no relief, and that appellant had been fully repaid for all sums of money advanced by it to Knapp on said stock, note, and mortgage, and there was nothing due and owing by the defendants, or either of them, thereon. The court further found as a fact that appellant's claim was unjust, unconscionable, and inequitable, and should not be enforced in a court of equity; that the whole scheme of the appellant association was fraudulent, and designed to defraud the borrowing member for the benefit of the non-borrowing. Judgment for costs for respondents was entered.
The findings of fact do not sustain such conclusions of law. Respondents, in their answer, admitted the execution of the mortgage and note, stock subscription, and membership in the association. The appellant association, from the evidence it has submitted, seems to conform to the statutes of this state in its organization and its by-laws. The organization of such corporations, the terms of their membership, and the relations of the members to each other and to the corporation, and the terms upon which such corporations shall transact business within the state, are solely within the province of the legislature, and are controlled by its views of public policy; and in the enforcement of contracts between a building and loan association and its members the court will be controlled by the law of the state as given by the legislature, and the judiciary can neither revise nor suspend the operation of such laws duly enacted. The findings of fact in the record here show that certain representations were made by an agent of appellant to respondents, and upon which respondents relied, that varied the effect of the written contract; that under the representations made by the agent of appellant the amount due upon the note and mortgage was paid before the commencement of the suit; and also that the agent exhibited to respondents a prospectus of appellant, which authorized such representations; and it is doubtless upon this finding that the conclusion was reached that the amount due was paid. But we are at a loss to perceive how such finding of fact is responsive to any issues raised by the pleadings in the case. Testimony of a nature to support such finding was, at the trial, tendered by the respondents, and, over the objection of appellant, received by the court. Such testimony could only tend to prove either a special contract made by the agent of appellant with respondents, or else to show facts which would constitute an estoppel in pais. If intended to establish a special contract, it is elementary that such contract must be set up in the answer. It has been frequently determined by this court that all the essential facts constituting equitable estoppel must be pleaded. Walker v. Baxter, 6 Wash. 244 (33 Pac. 426); Huggins v. Milwaukee Brewing Co., 10 Wash. 579 (39 Pac. 152); Jacobs v. First National Bank, 15 Wash. 358 (46 Pac. 396). The admission of the evidence referred to, tendered by respondents, was clearly error, for which the judgment must be reversed.
The note, mortgage, and contract under which respondent Knapp became a member of the appellant corporation are all to be construed together as parts of the same transaction. Knapp was a debtor to the corporation for the money borrowed by respondents. He was, as a member of the corporation, a creditor to the extent of the value of his stock. js, a mortgagor, he was a borrower; as a stockholder, he was an investor. Counsel for respondents seem to support the conclusion of the superior court bv the case of Interstate Sav. & Loan Association v. Cairns, 16 Wash. 215 (47 Pac. 509), and their contention is that the case cited is decisive of the one at bar. But there is a material difference in the facts presented to this court by the two cases. In the case cited the note for which the mortgage was security was payable sixty-six months after date. In the case at bar the principal of the note is, by its terms, payable on or before the maturity of the stock. Also, in the case cited, the defendants affirmativelv set up in their answer the representations made by the agent of the loan company inducing them to take the loan, which representations were held by the superior court to constitute an equitable estoppel. It was said by this court in that case:
" The defendants, according to the undisputed testimony, borrowed this money on the representations of an agent of the plaintiff; the obligation which they signed was properly construed by the court; and the method of computation that was adopted was the method which carried out the intention of the parties to the contract."
In view of the different theories presented by counsel for appellant and respondents here, and the failure of specific findings upon the evidence properly introduced in the superior court, the case is remanded for further proceedings not inconsistent with this opinion.
Scott, O. J., and Andebs, Dunbab and G-obdon, JJ., concur.
OPINION ON BEHEABING, JANUABY 23, 1899.
Reavis, J.
Appellants have requested that the opinion heretofore filed in this cause reversing and remanding it to the superior court be made more specific relative to the right of that court to allow amendments to the pleadings. The opinion filed directed such further proceedings in the superior court as were not inconsistent with the decision here. The cause was thus remanded with the question of the amendments of pleading submitted to the original discretion of the superior court, and it would perhaps be improper for the court in this case by intimation to attempt to control such discretion of the superior court. With this further statement in addition to the opinion, the petition for rehearing is denied.
Gobdon, O. J., and Dunbab and Andebs, JJ\, concur.