Court Opinion

ID: 8268189
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:14:48.061798+00
Date Added: 2024-06-11T16:43:26.177435
License: Public Domain

The opinion of the court was delivered by
Dixon, J.
The first objection made by the appellant to the decree below is that interest was allowed to the complainant on the sum of $8,000, the appellant insisting that, as only $7,000 were advanced in cash, interest should be reckoned only on that principal.
The answer to this contention is that, in effect, the sum of $8,000 was paid to the obligors, and their contract calls for interest on that sum. Their agreement with the association was to borrow $8,000 and to pay therefor a premium of $1,000. By force of the statute the agreement to pay a premium was made *279legal. Franklin Building Association v. Marsh, 5 Dutch. 225 ; Freehold Mutual Loan Association v. Brown, 2 Stew. Eq. 121. If, in exact performance' of its agreement, the' association had paid $8,000 to the obligors and had received therefor the present bond, no question could have been raised as to the propriety of the stipulation for interest on the $8,000; but the obligors would, besides, have owed the association the premium of $1,000, and this debt they must at once have discharged by paying that .sum to the association. Such a payment would not have affected the obligations of their bond, and would; have left only $7,000 in their hands. . The payment by the association of $7,000 cash, and its release of the borrowers from the duty of paying the premium,, were an equivalent for the exact performance of their mutual obligations, and the validity of the stipulation in the bond for payment of interest on the $8,000,is not impaired by such a change in the mere form of the transaction. Mechanics’ Building and Loan Association v. Conover, 1 McCart. 219; S. C. on appeal, 2 C. E. Gr. 497, 504.
Counsel for the appellant refers us to cases in other jurisdictions, where it has been held that what is described as interest upon the premium cannot be collected. But we think it clear that when the statute gives the parties a right to agree upon a premium for a loan without- restriction, they have -a right to agree that the premium shall consist of a sum payable presently -out of the amount loaned, or of a sum payable in the-future, with interest meanwhile, or without interest, and that it is for the courts simply to give effect to their agreement. In the case now before us the cotemporaneous acts of the parties prove that the premium agreed upon was. the difference between $7,000, advanced at once by the association, and the sums due from the obligors under their bond. That premium can be secured to the association only by enforcing the bond according to its terms. ..
This objection cannot prevail.
The next objection is to the allowance of fines as. a part of the mortgage debt. . .
It is not .necessary for us to consider whether ihe association can lawfully impose fines upon its members for non-payment of *280dues or interest. Assuming that it may, we are to decide whether such fines constitute part of the debt secured by the mortgage, and that must be determined by the agreement of the parties.
On recurring to the bond it will be seen that it provides for the payment of only dues and interest, or, in default thereof, of principal and interest. Similarly the assignment of stock was made “ as collateral security for the payment of the debt mentioned in the bond,” aud required the proceeds of sale to be applied to the “payment of said loan.” And, although this assignment made the non-payment of fines one of the grounds for selling the stock, it pledged the stock only for the purpose above stated. It is plain that neither of these instruments provides for the payment of fines in express terms.
But it is claimed that such a provision is implied in that clause of the bond which refers to the constitution and by-laws of the association as being assented to by the obligors and made part of the bond. A like clause appears in the mortgage.
If the constitution and by-laws declared that fines should be collected out of the proceeds of sale of property pledged to secure a loan made to the member in default, then, perhaps, this clause would justify the decree now before us. But they do not. The first section under the title “ Fines ” merely provides that shareholders shall pay fines for defaults. The second section under the title “ Transfer ” declares that no share shall be transferred until the transferee shall have assumed all the obligations of the original shareholder. If this includes fines previously imposed it shows that they are not to.be paid out of the proceeds of sale of stock but are to remain as merely personal debts of the shareholder. There can be found in the constitution and by-laws nothing evincing an intention to make fines a lien either on stock or on property mortgaged for loans. This reference in the bond and mortgage to the constitution and by-laws, when read with its context, can be fairly interpreted only as applying to the mode in which the principal of the bond is to be satisfied by the payment of dues. Such is its apparent meaning, and it Cannot be extended further by construction without holding that *281it embraces every possible duty of the obligors as members of the association. So broad a construction is unwarranted.
We think there is nothing in the contract under which the payment of fines can be enforced in the present suit. In this respect the case resembles Clarksville Building and Loan Association v. Stephens, 11 C. E. Gr. 351, 354
The decree below should be modified by eliminating from it the amount allowed for fines.
For reversal — Abbett, Depue, Dixon, Garrison, Lippin■cott, Magie, Eeed, Van Syckel, Bogert, Brown, Clem_ent, Phelps, Smith — 13.
For affirmance — None.