Court Opinion

ID: 6995341
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:32:11.93119+00
Date Added: 2024-06-11T16:09:45.366995
License: Public Domain

Mr. Presiding Justice Boggs delivered the opinion of the Court. The right of the appellee to recover rests upon two propositions of facts which he undertook to establish in the trial court. 1. That the association granted the loan upon condition that it should be paid in partial payments, as needed from time to time in the construction of the building. 2. That to effectuate this purpose he was required to indorse and deliver to the secretary of the association the warrant upon the treasurer thereof in order that the secretary might procure the money from the treasurer and hold it as secretary and pay it out from time to time upon bills for material furnished or work done upon the building. There is no proof in the record that the association, acting as an organized corporation, attached any condition to the payment of the money to be loaned or required or requested the appellee to indorse or deliver the warrant to its secretary. It is contended, however, that certain of its officials required that the money should be paid only in installments and in payments of bills for work done upon or material furnished for the building, and that the appellee did indorse and deliver the warrant to the secretary upon the requirement of that official and in pursuance of the direction of the president, and that such was the customary and usual course pursued by the association in such cases. A conversation had by the appellee with the secretary of the association before he became a member of the association, and a conversation with the secretary when the order upon the treasurer was indorsed by the appellee, and other later conversations with the secretary are relied upon to establish the appellee’s contention. It appeared from the evidence that when it became apparent to the appellee that he would need to negotiate a loan in order to complete the building, he called upon the president and secretary to inquire whether the association had funds to loan and to learn whether he could borrow $1,000 on his property. These gentlemen assured him that the association could furnish the money and thought, and so told him, that the lot he owned, with the partially constructed house thereon, would be acceptable as security therefor, but explained that the loan might be granted only on condition that the money should be paid in installments as required in the further construction and completion of the building. The appellee was simply seeking information as to the probability of getting the money from the association and the officials were merely answering his inquiries. He knew that a contract was not then and could not then be consummated. He was not a member of the association and could not for that reason apply for, or be granted a loan, and the officials with whom he was talking had not legal power to contract for the association or to make a loan, even to a member. Corporate contracts are to be made by theboard of directors. Cook on Stockholders Yol. 2, Sec. 709. The appellee afterward became a stockholder and when the association offered money to borrowers at a public letting, as the law required it to do, became the successful bidder for a loan of $1,000. The security committee of the association examined the property and reported it satisfactory security for the amount he desired to borrow. The association by its board of directors approved the action of the security committee and granted the loan without restrictions or conditions as to the manner, mode or time of payment of the money to the appellee. The appellee executed his note or obligation for the amount borrowed and a mortgage on his property to secure it, and delivered the instruments properly executed to the secretary, and the president and secretary, pursuant to the action of the board of directors, executed a warrant or order directing the treasurer to pay the sum of $1,000 to the appellee or to his order. With the delivery of this warrant or order to the appellee, the official duties of the secretary in connection with the transaction ceased. It only remained for the appellee to present the order to the treasurer and receive the full sum he had borrowed. Instead of doing this he indorsed the order at the bank and left it with the banker. The cashier of the bank to ivhom the order, by the act of the appellee, became lawfully payable, presented it to the treasurer and collected it in full out of the funds of the association. It is contended that the secretary led the appellee to believe that the association required him to indorse the order and leave it with the secretary, so that the secretary could draw the money from the treasurer, and hold it in his capacity as secretary, and in that capacity pay it to the appellee from time to time as needed about the building. The law, by force of which the association existed and by which the appellee became a member of, and interested in its capital stock, required that the funds of the association should be committed to the custody of, and kept by the treasurer, who was required to execute a bond for the safe keeping of the moneys so intrusted to him. The association was without power to lawfully withdraw its funds from the custody of its treasurer and place them in the hands of another through its secretary, and the president or secretary was wholly without power, real' or even apparent, to make such a contract for the association. The appellee was a member of the association, and as such, charged with notice of its charter and of the powers of the various officers, and with knowledge that the directors alone could contract for the association. As the secretary was without power to bind the association by any arrangement he might make with the appellee as to the custody of the money, it follows that proof of his statements and admissions tending to establish such a contract ought not to have been admitted in evidence. It was proven that in some instances loans were paid in installments as work upon the building progressed, but in such cases, separate warrants were drawn upon the treasurer for the amount of each installment as it was to be paid, and there was no proof that the money in any instance had been drawn out of the treasury and committed to the custody of the secretary with directions to make partial payments from time to time, etc. We think that the payment of the order or warrant to the cashier of the bank upon the order of the appellee constituted full payment upon the part of the association, and that the verdict, upon the evidence upon the part of the appellee alone, excluding that which was not competent, should have been for the appellant. The judgment is therefore reversed and the cause remanded.