Court Opinion

ID: 4937229
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:17:22.967235+00
Date Added: 2024-06-11T08:14:44.247219
License: Public Domain

Emery, C. J.
The case is this : — The Deering Loan and Building Association, the defendant, was incorporated under R. S., ch. 48, secs. 54 to 78 inclusive. As a contribution to its capital each subscriber for shares was bound by statute to pay in each month one dollar on each share held by him until the share reached the ultimate value of $200, or was withdrawn, cancelled or forfeited. (Sec. 60.) After reservation of enough to meet expenses and specified contingencies, the rest of the moneys of the association was to be loaned to the holders of shares at a rate of monthly premiums to be fixed by the- directors not to exceed forty cents a share. The loan to any member or shareholder was limited to $200 for each share held by him, but for such loan he was required to give, in addition to pledging his shares, a real estate mortgage to the satisfaction of the directors. (Sec. 63, sec. 66.) In addition to the monthly dues upon his shares and the monthly premiums upon his loan, the borrowing member was further bound to pay a fixed sum monthly as interest on his loan until his shares reached the ultimate value of $200 each, or the loan was repaid. (Sec. 65.) In default of payment of these monthly dues, premiums and interest, the borrowing member was bound to pay a fine of two cents a month for each dollar so in arrears. (Sec. 68 of statute and art. 10 of bylaws.) Further, for every loan made there was a note to be given secured by a mortgage of real estate. The note and mortgage were to recite the number of shares pledged and the amount of money *409advanced thereon, and were to be conditioned for the payment of the monthly dues upon the shares and the interest and premium upon the. loan, together with all fines on payments in arrears until the shares reached the ultimate value of $200 each, or the loan was otherwise cancelled or discharged. (Sec. G6.)
It is not questioned that the purpose of the organization of the defendant association, like that of similar associations in this State, was to accumulate from small contributions capital to loan to members for building purposes, the money to be advanced as the building progressed.
To enable him to build, or finish building, a house on a lot of land owned by him, the plaintiff applied to the defendant association for a loan of $2000 offering as security a mortgage of the building and land. His application was accepted and on March 1, 1906 he subscribed for ten shares in the association and gave to it the mortgage and his note for $2000 as required by the statute and the association’s by-laws. The note and the condition in the mortgage are printed by the reporter. It will be seen that in these the plaintiff promised to pay the association the sum of $2000 in monthly installments of $10, and interest at six per cent also in monthly installments of $10, and premiums also in monthly installments of $3, and, further, all fines incurred, until the ten shares should amount to $200 each or $2000 in all, or the $2000 loan be otherwise cancelled or discharged.
The whole of the $2000 loan was not advanced to the plaintiff at the date of his note and mortgage but only $610.50. Other sums were advanced at various times afterward as the directors adjudged the progress of the building warranted. Before the full amount of the $2000 had been thus advanced, he applied for an increase of the loan to $3000 which was granted. He thereupon subscribed for five more shares making fifteen in all, and gave July 11, 1906, a new note and mortgage for $3000 of the same tenor'as the first except that the monthly dues on shares were $15, the monthly installments of interest were $15 and the monthly premiums were $4.50. The old note and mortgage were cancelled, the new ones taking their places. The association continued the advancement of money *410to the plaintiff on the loan as before .up to the 24th day of July, when all the advances from the beginning, March 1, amounted to $2858.96, the total amount advanced.
The plaintiff failed to pay the stipulated monthly payments and fines, and the association on July 6, 1907 effected a forfeiture of the fifteen shares of the plaintiff and on July 11 began proceedings for foreclosing the mortgage. In October following, the plaintiff, desiring to redeem his house and land from the mortgage, asked for an account of the amount due thereon. The association by the account rendered claimed $3241.65 to be due. The plaintiff paid the sum and his mortgage was cancelled. He now claims that sundry items of debit to him in the account were unauthorized by the law and the contract, and he has brought this suit to recover back the amount of those items. The case was tried by the Superior Court without a jury and various findings and rulings were made by that court to several of which exceptions were taken by one or the other party. It is not necessary to consider the numerous exceptions seriatim since but few questions of law are involved, and their solution will determine the case and the fate of the exceptions.
1. The principal question is as to the computation of interest and premiums. The plaintiff contends that he should pay interest and premiums only on the sums actually advanced him and reckoned on each only from the date of the advancement. The defendant contends that they are to be computed on the face of the notes and from their date. The plaintiff argues that the notes and mortgages, whatever their tenor, were, as to the loan, only security for the re-payment of such sums as he actually received with interest and premiums on each such sum from the time he received it.
If the relation between the parties were simply that of borrower and lender of money, it might be readily, and perhaps conclusively, inferred that such was the intention, and in such case the lender could only have interest on what he actually advanced and from the time he advanced it. In this case, however, there were between the parties other relations and rights and duties. The plaintiff voluntarily became a borrowing member of the defendant association and thereby bound himself to make to it all the payments *411required of a borrowing member by its by-laws and the statute. In return he became entitled to have similar payments made by all other borrowing members. It was these payments by all the members that created the capital from which loans were made to members, and the income from which the necessary expenses were paid. If, on the one hand the payments required of him were more than the interest on the sums he received from the time he received them, on the other hand he had the benefit of similar payments by the other members. His share of the accruing profits was credited to him.
His note and mortgage were security, not merely for the repayment of money advanced with interest from the time of each advancement, but for the contract expressed in them, a contract permitted if not required, by the by-laws and the statute. In consideration of being received as a borrowing member entitled to the benefits of such membership, as well as in consideration of the association’s duty to advance to him' money as needed and as the security warranted up to the amount specified, he contracted, not simply to repay what money he received with interest, but to pay certain fixed, specified sums each month, until the payments plus his share of the earnings of the association should amount to $200 for each of his shares in the association, or the loan applied for and voted to him should be otherwise cancelled or discharged. It is true the association did not set apart in its vaults, nor specially deposit in some bank, the whole amount of money voted as a loan to the plaintiff, but kept all its unemployed money in one deposit in a bank on interest. The association was bound, however, to have the money instantly available to advance to the plaintiff as fast as he became entitled to it. He shared in the profits from the deposit in the bank. In this respect the transaction was much like that where a bank stockholder discounts his note at the bank and leaves a part of the proceeds there on deposit. He pays the full discount on the face of his note for the time it is to run though he takes away a much less amount. As a stockholder he gets his share of the bank’s profits on his deposit.
But the plaintiff further contends that if the contract were as *412claimed by the defendant, it was illegal, and he cites sec. 64 and sec. 65 of the statute. Sec. 64 enacts that "Premiums for loans shall consist of a percentage charged on the amount lent in addition to the interest.” Sec. 65 enacts that the monthly interest on the "loan” shall not be at an annual rate of more than six per cent.” The argument is that the words "loan” and "lent,” in the sections cited, mean the sum or sums actually drawn out; but, reading the words in connection with the rest of the statute and in the light of its undisputed purpose, they rather appear to mean the whole sum contracted for between the parties. It was one "loan” and one sum "lent,” though the money be advanced only in installments. The defendant’s contention must be sustained.
2. The plaintiff also contends that, upon the defendant’s theory, his second mortgage and note were only security for further payments of dues, premiums, interest and fines, and, though he might still owe the unpaid installments secured by the first mortgage, it is an unsecured indebtedness and cannot be included in the amount to be paid to redeem from the second mortgage. It was, however, very clearly the understanding of the parties that the new' note and mortgage were to be a continuing security for the original contract. A change in the security does not cancel the contract. The second note and mortgage were intended, and operated, to be security for all previous overdue installments of dues, interest and premiums, and these were properly charged in the account.
3. The plaintiff again complains that there was an incorrect computation of the amount of fines to be paid to redeem. Sec. 68 of the statute enacts that "no fines shall be charged after six months from the first lapse.” The first note was given March 1, and the plaintiff failed to pay the March and subsequent installments down to the time of the forfeiture of his shares, July 6, 1907. He claims that under the statute no fines could be charged after September, 1906, six months from his first lapse. But on July 11, 1906 he made a new promise with a new mortgage to pay installments and his first lapse under this new note and mortgage was in August, 1906. The defendant in making up the account under the mortgage did not charge any fines from March to August but did charge fines *413for the six months from August, the time of the first lapse under the new mortgage and not afterward. The charge made was authorized.
4. The plaintiff continued in arrears for dues, interest, premiums and fines for more than six months from the date of his second, or $3000 note, and upon due proceedings his shares became forfeited to the association July 6, 1907, nearly a year afterward. By section 69 of the statute an account was then to be stated. The plaintiff was to be debited with arrears of premiums, interest and fines to that date, July 6, 1907, and of course with the sums advanced to him. On the other hand he was to be credited with the withdrawal value of his shares at that date. The balance of the account thus stated was to be enforced against the mortgaged property.
It is in controversy whether this balance becomes a new principal to bear interest from its date until paid or whether the interest from that date is to be computed only on the amount of the sums advanced. By the forfeiture of his shares the plaintiff ceased to be a member of the association and became simply its mortgage debtor for the balance found due at the date of the forfeiture upon the account stated according to the statute. The various items on either side of the account were merged in that balance and the plaintiff became indebted for the whole balance and should pay interest on the whole. There is no provision in the statute or contract for dividing it.
The foregoing practically disposes of all the questions finally in controversy, the parties having mutually conceded some other claims made at first. The result is that the exceptions by the plaintiff must be overruled, but the court below having ruled that interest after the forfeiture was not to be computed on the whole balance but only upon the sum advanced, the defendant’s exception to that ruling must be sustained. Upon the whole record, the judgment below should be for the defendant.

Plaintiff's exceptions overruled•

Defendant's exceptions sustained.

Judgment for defendant ordered•