Case Name: Fannie Ottensoser and L. Ottensoser, Appellants, v. G. S. Scott as Receiver of the Ocala Building and Loan Association, Appellee
Court: Supreme Court of Florida
Jurisdiction: Florida
Decision Date: 1904-01
Citations: 47 Fla. 276
Docket Number: 
Parties: Fannie Ottensoser and L. Ottensoser, Appellants, v. G. S. Scott as Receiver of the Ocala Building and Loan Association, Appellee.
Judges: 
Reporter: Florida Reports
Volume: 47
Pages: 276–288

Head Matter:
Fannie Ottensoser and L. Ottensoser, Appellants, v. G. S. Scott as Receiver of the Ocala Building and Loan Association, Appellee.
1. On foreclosure by the receiver of an insolvent building and loan association against a borrowing member who has paid his dues and assessments promptly until the association was dissolved by the appointment of a receiver, through no fault of such member, the receiver is not entitled to charge such member with the so-called “earned premium” where such premium is in the form of a deduction from the sum loaned. (Carter, P. J., dissenting.)
2. On a settlement with an insolvent building and loan association borrowing members are not entitled to be credited with the full face or book value of their stock, but only for such pro rata amount thereof as the actual conditions may warrant, based upon the net assets in the hands of the receiver.
3. On foreclosure by the receiver of an insolvent building and loan association, attorney’s fees are properly allowed, the mortgage providing that the borrowing member “promises and agrees to a pay a reasonable sum of money for solicitor’s fees that may be incurred by the association in the event that foreclosure of this mortgage becomes necessary.”
4. Borrowing members of an insolvent building and loan association are not enstopped from contesting a scheme of settlement agreed upon by a majority of the stockholders and adopted by the court on bill filed by certain other members, borrowers and non-borrowers, “on behalf of themselves and all others who may be similarly situated and having like interests who may join them as complainants” against the association, a corporation, as sole defendant, none of the complainants being in exactly the same class as such borrowing members. Nor do the facts that such borrowing members filed their “protests” against the proposed scheme and were represented by counsel who made argument in support of the protest, constitute "res judicata,” it not appearing that they “intervened” or were in position to control the cause or to appeal therefrom, nor that any action was had by the court upon the “protest.” (Carter, P. J., dissenting.)
This case was decided by Division A.
Appeal from the Circuit Court for Marion county.
■ The facts in the case are stated in the opinion of the court.
Richard McConathy and W. K. Zewadski for appellants.
R. A. Burford for appellee.

Opinion:
Cockrell, J.-
— The principal contention in this case is the right of an insolvent building and loan association to charge a borrowing stockholder with a proportionate part of the discount bid for the priority of loan, the so-called "earned premium." In this case the Ottensosers had bid for this priority of loan a discohnt of 29 4-5 per cent., and had paid promptly when due, each month for eighty-five months, and until the association was dissolved by the appointment of a receiver, the monthly installments of interest on the amount borrowed and of assessments on the stock bought; and upon a bill filed by the receiver of the association to enforce the mortgage lien given as security for the transaction, they were charged with the amount actually received, with eight per cent, interest, the legal rate of interest in this State, from the time the said amount was received, and were further charged with eighty-five per cent, of the discount so bid, on the theory that the scheme upon which the bid was made having partially failed, the bidder was equitably entitled to a reduction only of the bid, in proportion to the degree of the failure, and as the scheme was estimated to work out in one hundred months, the bidder had the advantage of the scheme for eighty-five of these months, and should, therefore, be charged in that ratio. Such method of charging borrowing stockholders of insolvent building and loan associations is not without respectable authority, nor is it unsupported by weighty reasons. It was announced by Judge Grosscup in Towle v. American Bldg. Loan & Inv. Soc., 61 Fed. Rep. 446, and has been frequently applied in the federal courts. We are of the opinion, however, that the weight of authority, as well as the sounder reason, is to the contrary. The premium bid, in the instant case, is in the form of a deduction from the sum to be loaned, and is founded upon the sole consideration that the scheme will work out without interruption; and if the existence of the association is prematurely interrupted through no fault of the borrowing member, the consideration for the bid entirely fails and there is no equity for its apportionment. According to the agreed facts before us, the failure of the association was caused by circumstances over which neither the association nor its members had control, viz: the depreciation of its assets by the freeze of 1895, and the collapse of two Ocala banks. The decree is to be modified, therefore, by striking off from the accounting the charges against the defendants for "earned premiums." The cases sustaining this view are numerous and we shall cite only a few. Hale v. Phillips, 68 Ark. 382, — S. W. Rep. —; Curtis v. Granite State Provident Ass'n-, 69 Conn. 6, 36 Atl. Rep. 1023; Marion Trust Co. v. Trustees of Edwards Lodge, 153 Ind. 96, 34 N. E. Rep. 444; Spinney v. Miller, 114 Iowa 210, — N. W. Rep. —; Knutson v. Northwestern Loan & Building Ass'n, 67 Minn. 201, 69 N. W. Rep. 889; Ansolme v. American Savings & Loan Association, 63 Neb. 525, — N. W. Rep. —; Weir v. Granite State Provident Ass'n, 56 N. J. Eq. 234, 38 Atl. Rep. 643; Strohen v. Franklin Sav. Fund & Loan Ass'n, 115 Pa. St. 273, 8 Atl. Rep. 843; Rogers v. Hargo, 92 Tenn. 35, 20 S. W. Rep. 430; Young v. Improvement Loan and Building Association, 48 West Va. 512, — S. E. Rep. —. See, also, Endlich Build. Ass'n (2nd ed.) sec. 531.
The defendants are not entitled to credit upon their indebtedness the full face or book value of the stock held by them in the several series issued, but only for such pro rata amount as the actual conditions may warrant based upon the net assets in the hands of the receiver. As stockholders in the association they are not to be preferred as such over their fellow stockholders by reason of the fact that they are also borrowers from the association. See authorities cited above. No question of usury is here involved.
It is further contended that there was error in allowing counsel fees, and in support thereof Park v. Kribs, Receiver, 24 Tex. Civ. App. 650, — S. W. Rep. —, and Union Trust Co. v. Shilling, 30 Ind. App. 543, 66 N. E. Rep. 699, are cited. We think those cases may be distinguished from the present case. In both of them the courts refused to allow attorneys' fees, conditioned upon the failure of the borrowers to fulfil the conditions of their "bonds," on the theory that it was the act of the law precipitating the maturity of the debt on the insolvency of the association that caused the suit, and not the failure of the debtor to comply with his bond. In the instant case'the mortgage, not the bond, provides for the fee, and in it we find the following: "And the said Fannie and L. Ottensoser promise and agree to pay a reasonable sum of money for solicitor's fees that may be incurred by the Ocala Building and Loan Association, in the event that foreclosure of this mortgage become necessary." The foreclosure became necessary by reason of the failure of the defendants to pay the sum due upon the equitable accounting indicated above, and a reasonable fee should be awarded, the amount thereof to be hereafter determined.
The appellee insists that the Ottensosers should not be heard to contest the scheme of settlement decreed in the Clyatt case and under which the receiver therein appointed is proceeding in this case to enforce the mortgage lien. The Clyatt suit appears to have been a friendly one, brought by Clyatt, Clarkson and Delouest "on behalf of themselves and all others who may be similarly situated and having like interests, who may join them as complainants in said cause," against the corporation as sole defendant, for the appointment of a receiver and the carrying out of a scheme of settlement agreed upon theretofore by a majority of the stockholders; the court's action being rendered necessary by reason of the fact that unanimous written consent of the stockholders, — the Ottensosers being of those who refused to concur, — could not be had for the purpose of a voluntary settlement in pais. None of the parties complainant can be said to be in the class with the Ottensosers; Clyatt held free and unencumbered shares in series C of the capital stock, Clarkson shares in series D that had been borrowed on, Delouest held shares in series B that were fully matured, while the Ottensosers' shares that were borrowed on and are now being subjected, are in series C. The only borrower represented, therefore, is Clarkson, who belongs to a later class than the Ottensosers, and who, therefore, would not, under the scheme, be subjected to so large a percentage of the premium bid. These complainants were all pecuniarily interested therefore in making the Ottensosers pay the premium as it redounded to their benefit. The relation between the association and the Ottensosers as borrowing members was also hostile. Whatever right the majority of a corporation may have to bind the minority to acts inimical to the latter, as stockholders that right will not be extended so as to allow the creditor to alter or change by his own ipse dixit the contractual or other obligation of the debtor.
Had we before us an intervention properly filed in the Clyatt case that raised questions of law or fact and passed upon by the court, a different question might be presented. The pleadings set up, as constituting the estoppel or res judicata, the matters hereinbefore pointed out, but in the agreed statement of facts we find that the Ottensosers filed "their 'protest' in the suit of W. W. Clyatt and others, against the Ocala Building and Loan Association prior to the judge's rendering the decree therein, the protest being directly and principally to the manner or plan of settlement as provided in said decree, the said defendants protesting against any part of the premium being charged to the borrower and were represented by counsel who made argument before the court in support of his protest against any part of the premiums being charged to the borrower in the general plan of settlement decreed by the court. That at the time of the appointment of a receiver the defendants owed the largest amount to the association of any individual member," etc. We do not see that this act on the part of the defendants constituted them parties to the cause in such sort as to bind them. They did not control the case nor were they in position to appeal from the decree rendered, nor does it appear that any action by the court was had upon this "protest." The court, on the consideration of the directions to be given its receiver in the settlement of an insolvent concern, might seek light from any proper source and listen to suggestions from members of the bar who had studied the subject, but until it is called upon to pass its judgment upon some issue raised by proper pleadings before it, can it be said there is an adjudication? Nothing done in the Clyatt case gave those who "protested" the right to control the proceedings, to make defense, to adduce and cross-examine witnesses, nor to appeal from the decision, within the rule as to "parties in the larger sense," laid down in the leading case of Cecil v. Cecil, 19 Md. 72, S. C. 81 Am. Dec. 626. See, also, Central Baptist Church & Society v. Manchester, 17 R. I. 492, 23 Atl. Rep. 30, S. C. 33 Am. St. Rep. 893. We think the case before us clearly distinguishable in its facts from the facts as found by this court in the case of Elizabethport Cordage Co. v. Whitlock, 37 Fla. 190, 20 South. Rep. 255, and that what we have said here is not in conflict with the decision therein rendered.
The decree is reversed, with directions to restate the account upon the principles above announced, and for such further proceedings as may accord with equity practice and with this opinion.
Taylor, C. J., and Hocker, J:, concurring.
Shackleford and Whitfield, JJ., concur in the opinion.
Carter, P. J., dissenting.