Court Opinion

ID: 5199135
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:48:47.387612+00
Date Added: 2024-06-11T08:27:09.989605
License: Public Domain

O’Brien, P. J. (dissenting):
Were it not for the two cases of Preston v. Reinhart (109 App. Div. 781) and Preston v. Lamano (46 Misc. Rep. 304), the" latter of which was approved in -the former^ and which- are- .relied upon by the appellant, and which lie _ contends are directly in point, we should not feel called upon to add anything to the reasons assigned by the learned referee for his conclusion in holding in .the case at bar that Montague was entitled to be paid as a creditor the amount "of interest paid by him in excess of the interest paid by the company on the $25,000 mortgage-. The fact,, however, that both cases referred to are decisions of the Appellate Division in the- second department, and which were they directly in point we should follow, makes it necessary briefly to refer to what we’’regard as features distinguishing them from.the case at bar.
*147The Lamano action was one brought by the receiver of a building loan company to foreclose a mortgage given as collateral security for a loan, and it was there held that the premiums and all other payments must be left out of consideration entirely in fixing the amount due to the receiver by the defendant member. Th eLem-hart case is in no way distinguishable in its facts from the Lamano case and the rule in the former case was, therefore, very properly applied in determining the rights of the parties. The principal fact which distinguishes those cases from the case at bar is that here no loan was made, nor was there- any consideration moving from the company to Montague, It is true he was a member, having subscribed for stock in tile building loan company; but this relation ' was one which he was obliged to assume as a condition for the agreement which the company made with him that in the event of the mortgage on the property becoming due before the amounts which he agreed to pay were sufficient to meet the principal, they would loan whatever was necessary to protect him until the time fixed when they agreed to pay the mortgage in full.
In noting the distinction, therefore, we must not lose sight of the important fact that in the cases relied upon the company made a loan, whereas in the case at bar they did nothing but take Montague’s money upon an agreement to protect him against' the foreclosure of a mortgage, which agreement on their part is- ended because of the insolvency of the company. . This necessarily results in the .failure of the consideration upon which alone the company could claim the right to receive from Montague any more money, or, in our judgment, to retain what they had already received.
It will not do in construing the contract entered into by Montague to make that the principal feature which is really incidental and subsidiary, namely, his becoming a member of the loan company, and then as a result of so regarding him, to hold that he should not only lose the amount which he paid on his stock, but that in addv tion the company should be allowed to retain money which it received without paying or parting with any consideration therefor.
In applying to the loan company, what Montague sought to obtain was protection against the foreclosure of a mortgage then on his property; and in order to procure the agreement from the loan company, it imposed as a condition, not alone that he should take *148the stock/bnt that.'during, the'period intervening between his application and the timé when they would be called upon to advance the money, he should make payments in excess of the interest due on the existing mortgage,, such-payments being.made in consideration of their promise ■ to protect him against its foreclosure. The company never having been called upon to advance money and having become'insolvent has been guilty of a breach because of inability to perform its contract, and it would be in- the highest degree inequitable to permit the company to- retain money which it has received without having parted with any consideration therefor.
Hor do 'I think that the position of the .appellant is sustained by the line of argument Upon which he proceeds in contending that the contract, is to be construed as though the principal feature was • membership in the company, which membership imposed upon the member not only the forfeiture of what he had paid upon the stock-but deprived him of any rights, to money which he had voluntarily paid, and which the company received and insisted on retaining without having parted with - any ■ consideration therefor. This, process of reasoning also assumed that it is impossible legally to separate the two relations which one could occupy .under the contract, viz., as a stockholder and as a borrowing member ,; and yet as I read 'all the'text books and decisions the two relations are perfectly sevérable and distinct. . .
It would serve no useful purpose to collate and discuss what has been said by text writers and in the numerous decisions on the question, all sustaining this statement, thinking it sufficient to refer .. to but one, the case of Roberts v. Cronk (94 App. Div. 171; affd., 182 N. Y. 546), which was similar to the Lamano and Reinhart cases, in that it was an action by the receiver of an insolvent loan association to foreclose a mortgage executed by a shareholder. In that case it was held that “ the shareholder is not entitled to be credited upon the, mortgage in the foreclosure action with the . amount .of dues paid by him to the association, or with the amount *• of the monthly premium which lie paid as a bonus for the loan.”. In the opinion in that -case, however, it was said: “We cannot express our view of the law defining the rights of the parties in the circumstances in which they are now. placed better than to reiterate the words of Mr. Justice Williams in the case of Hall v. Stowell *149(supra*), When the corporation making the loan goes into the hands of a receiver, and it is no longer able to carry out the agreement, the borrower is relieved also from compliance with the terms thereof, and an equitable adjustment between the parties must be made. In such cases the better rule seems to be that the borrower be charged with the money received from the corporation and the legal rate of interest thereon and be credited with such payments as are referable to the loan itself and not to the stock. This rule is based upon the theory that the relations of a member as a shareholder and a borrower are separate and distinct; that as shareholder he should bear his proportionate share of the loss, but as borrower he' should have the benefit of the rescission of the contract, and should repay what he has received, less what he has paid on account thereof.’ Citing Strohen v. Franklin Saving & Loan Assn. (115 Penn. St. 273); Post v. Building & Loan Assn. (97 Tenn. 408); Endl. Build. Assn. (2d ed. §§ 514, 515, 531); Rochester Savings Bank v. Whitmore (25 App. Div. 491); Breed v. Ruoff (54 id. 142), and Hannon v. Cobb (49 id. 480).”
If, therefore, we can, as the cases seem to hold, legally separate the relations which Montague occupied as shareholder and under his contract tó obtain security against the foreclosure of the mortgage, then it seems to follow that upon the failure of the company and its consequent inability to carry out its contract to protect him against the enforcement of the lien of the mortgage, the consideration for his payments failed, and he is entitled to such settlement as will return to him all moneys paid by him because of such contract, less the moneys paid out for him. The conclusion of the learned referee that the company did no beneficial thing to or for this claimant is not only supported but, as we understand it, is not in dispute; and the agreement of the company to do something - which its insolvency will now prevent its ever doing presents an instance where the consideration for the contract has entirely failed. . The rule is settled that when money has been paid on contract and the consideration fails, an action for money had and received will lie.
In the Lamano and Reinhart cases there was a piartial performance. The member got the advance and was furnished with *150money; whereas in this case, as we have endeavored to point out, Montague got nothing for .the money which he seeks to have allowed to, him as a creditor.
Thinking as we do, therefore, that, upon the facts and upon the law applicable to them there, is a clear distinction ‘to be noticed, between the cases relied upon by the appellant and the one at bar, we are of opinión that the order appealed from should be. affirmed, with costs.
Laughlin, J., concurred.
Order reversed, with ten dollars costs and dishursbments, and motion denied, with ten dollars costs. Order, filed.

 75 App. Div. 22.— [Rep.