
    William C. Breed and Clifford W. Hartridge, as Receivers of The New York National Building and Loan Association, Plaintiffs, v. Leonard Ruoff, Sr., and Frances Ruoff, Defendants.
    
      Building and loan association—on its involuntary dissolution/ a mortgage given ta it by a member becomes due—what should be credited on it by the receivers.
    
    A mortgage executed by a member of the New York National Building and Loan Association to secure a loan made to him by the association, collateral to-a bond which provides that it shall be harmless if the debtor shall pay “ on or before seven (7) years from date hereof the just sum of five thousand ($5,000) dollars as aforesaid, as provided in the articles of association of said corporation, together with interest, * * * and also all premiums, fines and dues which may be charged,” becomes payable upon the involuntary dissolution of the association, notwithstanding the fact that the time fixed for the repayment of the loan has not then arrived and that the borrowing member has paid all the dues upon the shares of stock pledged by him as additional security for the loan, together with interest.
    In- an action brought by the receivers of the association to foreclose the mortgage, the borrowing member should be credited with the. interest paid by him upon the loan and with dues paid by him upon the pledged stock after the appointment of the receivers, but not with fines paid by him, nor, in the absence of a provision to that effect in the contract, with the dues paid by him upon, the pledged stock before the appointment of the receivers.
    He should not, however, be required to pay the full amount of his loan if it appears that any dividend is due him as a member, and a conservative estimate by the receivers of the probable amount of such dividend, with proper provision for any possible overpayment, is sufficiently definite for the purpose of giving the borrowing member a credit for such amount. .
    Submission of a controversy upon an agreed statement of facts pursuant to section 1279 of the Code of Civil Procedure.
    The- receivers of a building and loan association are plaintiffs, and a borrowing member of such association and his wife are defendants. The controversy concerns a loan made by the association to the defendant- Leonard Ruoff, Sr. The New York National Building and Loan Association was incorporated in 1890, under chapter 122 of the Laws of 1851, entitled “An act for the - incorporation of building, mutual loan and accumulating fund associations,” and the acts amendatory thereof.
    The articles provided for three kinds of - shares: (1) Installment shares of class A and of class B; (2) prepaid assessment stock of the first and second class; (3) full-paid stock shares. The ultimate amount to he paid to the holders of unredeemed shares was $100 per share, to be due and payable on classes A and B and on the prepaid assessment stock as soon as the amount in the loan fund should equal the face values thereof. All profits were to be apportioned semi-annually and credited to all shares in force. The monthly dues on each installment share were sixty cents per share on class A, and thirty-five cents per share on class B until the maturity thereof. Certain fines and penalties were prescribed. The loan fund was to consist of fifty cents of the monthly dues paid in on class A, and thirty cents paid in on class B, and of interest, premiums, fines, transfer fees, profits and, generally, of moneys paid for prepaid assessment and. full-paid stock. Loans were to be made to members only, and Were not to exceed fifty per cent of the full respective value of the shares held by the borrowing member, save in an exception not here material. Interest on the loans at the rate of six per cent p'er annum, and the premiums and dues were all to be paid monthly for a period of seven years or until the maturity of the pledged shares. Loans on security of real estate were to be made to those offering $50 per share premium, and any member must hold two shares for each $100 borrowed. All loans on real estate were to be secured by first mortgage accompanied by a bond or mortgage note; and the borrower was to assign and to deliver to the association the shares of stock upon which the loan was made, and an equal number of shares in addition as further collateral security. The fulfillment of the bond redeemed and canceled the mortgage.
    In December, 1894, the defendant Leonard Ruoff, Sr., subscribed for fifty shares, and thereupon there was issued to him a certificate of membership. It was agreed in the certificate that defendant would pay sixty cents monthly for each share until it matured or was retired; that a sum not more than ten cents a share should be deducted therefrom for expenses ; that the balance should go to the loan fund ; that no part of such fund could be used for any purposes except taxes; that certain stipulated' fines might be charged in case of his arrears; that once in six months the profits arising from interest, premiums, fines and other sources should be apportioned among the shares in good standing, and that whenever the amount standing in ' the loan fund to the credit of any share equalled $100, such share should be deemed to have matured, and no more monthly payments should be required. Upon the same day, defendant wrote an application for a loan of $2,500 upon bond and mortgage, with'this bid :
    “ Amount of money desired, $2,500... I hereby offer a premium of fifty dollars per share.” On the bid was printed: “ This bid should be filled out by the member. ' The rate of interest will be six per cent per annum, payable monthly. Interest will run from the day the loan is awarded. The mortgage and note’will be for the amount of the loan and premium together; but interest will not be charged on the premium, but on the money actually loaned.” Thereafter defendant and his wife delivered their bond, in the sum of $10,000, dated January 11, 1895,- the condition whereof was: “ Whereas said Leonard Ruoff has bid, in accordance with the by-laws of said association, the sum of Twenty-five hundred ($2,500.00) dollars, as and for a premium for the advancement to him by said association of ■ Twenty-five hundred ($2,500.00) dollars by way of the anticipation of the value, at their maturity, of fifty (50) shares of the capital stock of said association now owned by said Leonard Ruoff; and whereas said association has this day advanced to said Leonard Ruoff, Sr. (defendant) the sum of Twenty-five hundred ($2,500.00) dollars, in consideration of said premium and by way of said anticipation, Row, Therefore, if the above-bounden Leonard Ruoff, Sr. * * * shall well and truly pay or cause to be paid unto the above-named association, its certain attorneys, successors or assigns, * *. * on or before seven (7) years from date hereof, the just sum of Five thousand ($5,000) dollars as aforesaid, as provided- in the articles of association of said corporation, together with interest on Twenty-five hundred ($2,500.00) dollars,, at and after the rate of six per cent (6$) per annum, payable monthly, and also all premiums, fines and dues which may be charged against the said Leonard Ruoff, Sr., according to the articles of association of said corporation, which dues per month chargeable against the said Leonard Ruoff, Sr., amount to the • sum of Thirty ($30.00) dollars, and which interest per month amounts to the sum of Twelve and 50/100 ($12.50) dollars, making together the sum of Forty-two and 50/100 ($42.50) dollars,- the first payment of which total sum of Forty-two and 50/100 ($42.50) dollars shall become due and payable on the 26th day of January, A. D. 1895, and on the last Saturday of each month thereafter, during all the time and until the termination of' said corporation, or of that particular series or class of said corporation of which the said Leonard-Ruoff is a member, then the above obligation to be void, otherwise,” etc. • The bond provided, in case of default in payment of the sums of money or any part, “ that * * * the aforesaid principal sum of Twenty-five hundred ($2,500) dollars •and any and all sums for interest, premium, dues or fines thereon, shall, at the option of the said Rew York Rational Building and Loan Association, its successors or assigns, become and be due and payable,” and one IT., or any attorney of a court of record was ■empowered to appear for the obligees,, and, after one or more declarations filed, to confess judgment, with costs.
    With said bond was a mortgage, executed on January 12, 1895, by defendant and his wife upon the premises in question, reciting the indebtedness of Ruoff for $5,000, loan and premium, secured by the bond conditioned for the payment of the said $5,000, as provided for in the articles of said corporation, and stating that said mortgage was for the better security of the- payment of the said sums of money. And at the same time, for the further security of his bond, the said Ruoff executed an assignment of his stock, reciting in consideration of the loan of $2,500 such assignment and transfer to the association, its successors and assigns, and authorizing cancellation of the shares in case of the default of payment of the loan and interest; and reciting further: “It is understood and agreed that if this loan is continued to the maturity of the shares herein mentioned, that then said certificate numbered 7390, together with the shares represented by same, shall become the absolute property of said association, and that the cancellation of the note, given to secure said loan, shall be in full satisfaction of all demands against the said association by reason of the said certificate.”
    
      Russel S. Johnson, for the plaintiffs.
    
      Thaddeus Kenneson [Thomas C. T. Crain with him on the brief], for the defendant.
   Jenks, J.:

•As a loan to defendant the association advanced one-half of the estimated maturity value of his fifty shares, namely, $2,500, and he-agreed to pay interest monthly thereon at the rate of six per cent per annum, and also to continue his monthly payments of his dues-upon the said fifty shares; The bond, mortgage and assignment of the shares were executed as security. As neither premium in cash-, nor interest of any kind upon the premium bid was required, this case differs from the cases where, incident to the loan, an - actual payment of bonus or of premium is exacted. The premium here* falls within the definition of Woods, J., in Sullivan v. Jackson-Building Association (70 Miss. 94) as it. “ represents the discount agreed' to be made upon the future and uncértain dividends of appellant’s shares of stock in the association. It is the difference, estimated by the association and its borrowing member, between the. par value of the member’s shares of 'stock and their present real value.' It is the bonus which appellant might lawfully agree to pay for a present advancement in cash of a sum certain for the virtual transfer to the association of his shares of stock, which, in the final winding up of its affairs, may realize the sum actually received by the member, together with the premium bid, or which may not.”’ It was not contemplated that the $2,500 should ever be repaid* in cash, for it was, in effect, an advance of the supposed maturity value-of the shares. And so the bond reads that it shall be. harmless if the debtor shall pay “ on or before seven (7) years from date hereof, the just sum of Five Thousand ($5,000) dollars as aforesaid, as provided in the articles of association of said corporation, together with interest, * * ** and also all premiums, fines and dues which may be charged,” according to the said articles of association, and such are the qualifying provisions attached .to repayment when elsewhere mentioned. Thus the advantage promised to the defendant was an immediate loan, to be canceled, when due, by the maturity value of his shares, while his burden was payment meanwhile of his dues upon the fifty shares, and of the said interest upon the cash lent to-him. The record states that the defendant “ has paid as dues upon the said stock so held by him the sum of $30 per month up to-August 1, 1899, being the sum of $1,680, to said association, out of which the sum of $5 per month, being in all the sum of $280, was-deducted therefrom for expenses of said association, and since the appointment of said receivers, said defendant Leonard Ruoff has paid the sum of $30 in addition thereto thereon ; that the said defendant Leonard Ruoff has also, on January 1, 1898, paid the sum of $5 in fines thereon ; that the said defendant Leonard Ruoff has also paid the sum of $12.50 per month each month up to August 1, 1899, being the sum of $687.50 to said association as interest on said loan, and in addition thereto the sum of $12.50 since, as interest to said receivers.”

Judgment of dissolution of the corporation, based upon its insolvency, was entered on December 9, 1899, upon the suit of the people. Thus, vis major has stayed the association from further performance of its contract, and the defendant is, of course, held excused on his part. The life of the association as a going concern being ended, there must be a winding up. The plaintiffs contend that the loan is now due, and that they may proceed upon the mortgage security. The defendant insists that the mortgage is not due, inasmuch as it is provided therein that it is to run until January, 1902. Thompson on Building Associations (2d ed. § 171) says: “ The courts have laid down different rules as to the amount the borrower should repay when the association becomes insolvent, and goes into the hands of a receiver. The authorities are agreed that upon such an event the mortgage becomes due.” Endlich on Building Associations (p. 518) says: “ On one point, there seems to be a general consensus, although the distinct enunciation of the principle is only of very recent date : it is this that upon premature dissolution of the association, the advanced members may be com. polled to pay forthwith the balances due from them on their securities, although the latter be given in terms only for the payment of installments.’ ” (See, too, Towle v. American Building Loan & Inv. Soc., 61 Fed. Rep. 446; Weir v. Granite State Provident Assn., [N. J.] 38 Atl. Rep. 643; Curtis v. Granite State Provident Assn., 69 Conn. 6; Windsor v. Bandel, 40 Md. 172, 177; Leahy v. National Building & Loan Assn., 76 N. W. Rep. 625; Strohen v. Franklin Saving & Loan Assn., 115 Penn. St. 273; People v. Lowe, 117 N. Y. 175.) '

Contending contra, the learned counsel for the defendant' cites Thornton & Blacldedge on Building Associations, 397, and the first case cited by them, namely, Kemp v. Wright (64 L. J. Ch. [N. S.] 59). But in Kemp v. Wright the lord chancellor makes a distinction that would seem to array the case on this point against the defendant. Kemp v. Wright did not -arise from a compulsory, winding up, but from an instrument of dissolution, that is, from a voluntary act of the association. Speaking of the contention that the loans were immediately due, the lord chancellor said : There is nothing in the deed itself to say that this was to be the effect of the deed of dissolution ; but it is said that this has- been held to be the effect when the court makes a winding up order, and that, therefore, it must also be so when the dissolution is the act of the members. That is a consequence, which I am not able-to follow or to see the force of. A winding up order is the act of the court; it is a vis major however it be procured.” And Smith, L. J., says: “ Mr. Justice Kekewioh arrived at his conclusion on this case by holding -that a deed of" dissolution was equivalent to a winding up order of this Court. There is no authority to support that view.”

If the defendant had not been a member, he could not have been a borrower, and by becoming a borrower he did not cease to be a member. (Endl. Build. Assn. § 45 ; Thomp. Build. Assn. § 34.) He cannot now shake off his membership responsibilities or liabilities to claim that his sole relation to the association is that of a debtor, freed from his obligation in consequence of the association’s compulsory breach of the contract. Rather, he is to be" regarded as a member who had, perforce of membership, obtained a loan from the association on terms now impossible of fulfillment, in that the common venture has been arrested by the People of the State. And equity will regard him as a member, that equality may be established between him and his fellow venturers. To hold that kuch a termination of the life of the association as a going concern discharges the loan absolutely, and thereby-releases the security, would result in confiscation of all assets represented by loans (possibly a great part thereof) for the benefit of the borrowing members respectively, and to the exclusion of the non-borrowing members. So far as Rochester Savings Bank v. Whitmore (25 App. Div. 491) is authority for such conclusion, I think it disregards the principle laid down in People v. Lowe (117 N. Y. 175) where the court, per Earl, J. (speaking of 'the contention of the plaintiff that the society was dissolved by voluntary action), says: “ But the rule of equity must, nevertheless, prevail among the members. Each.member for each share held by him was entitled to precisely the same amount in the assets of the society, and such assets should be distributed accordingly. Those who were debtors, if they owed more than their distributive shares of the assets, should pay the balance to the society, and upon such payments should have their mortgages canceled. If they owed less- than their distributive shares, they should have their mortgages canceled and receive the balances so as to make them equal- with the creditor members. The claim made on behalf of the People, and the five members represented by them in this case, that the three debtor members were entitled to-have their mortgages canceled without payment, and that the creditor members were entitled each to have $1,000, is utterly without any foundation; and the counsel for the defendants has a proper conception of the rights of his clients when he claims that, in winding up the affairs of the society, the trustees are bound to distribute its assets among its. members equally, according to their respective shares.” In that case (no interest on the Iban being required), Eabl, J., further says: If he pays, or is charged with the principal due upon his mortgage, he has discharged his whole duty to the society as a debtor. In other respects, he stands upon a footing of precise equality with the creditor members. * * * And yet their (i. e., the debtor members’) claim is, that because the society has come to an end, although prematurely, they are absolutely entitled to have their mortgages canceled without payment. USTo claim could be more preposterous, and there is no justification for it in the law or in the articles of association of the •society.”

I take it that the rule indicated, in People v. Lowe (supra) must be applied in the winding up of the association with reference to the rights of the members thereof. (Hannon v. Cobb, 49 App. Div. 480. See, too, Strohen v. Franklin Saving & Loan Assn., supra; Rogers v. Hargo, 92 Tenn. 35; Thornton & Blackledge Build. & Loan Assn. § 355.) The loan, then, of $2,500 must be regarded as due when the life of the association was terminated; that is, upon the appointment and qualification of the receivers.

There is this further question : “ What, if any, credits against the loan should be allowed to the defendant ? ” He has received $2,500 in cash as a loan, and under his contract has paid legal interest thereon. He is indebted, then, to the association at the time of the appointment and qualification of the receivers in the said sum of $2,500. He should, however, be credited with the $12.50 paid as interest to the receivers. He is not entitled to any credit against the loan of the dues paid by him. For, as stated, he is to be regarded as a member of the association none the less that' he is a borrowing member, and he agreed to pay dues as a member) not as a borrower, and must have paid them whether he ever became a borrower or not. Under the terms of the association or of the loan, the dues were not paid on account of the loan, nor were they to he credited ' against the loan pro tanto. (City Building & Loan Co. v. Fatty, 1 Abb. Ct. App. Dec. 347.) They were paid on the stock towards the establishment, maintenance and growth of the loan fund, that was, so to speak, a sinking fund, ultimately to extinguish the stock, and thereby to cancel the loan. Their sole relation to the loan was that the “ security is conditioned upon their continuous payment.” Payments, therefore,” on account of dues upon the stock are not reductions of the loan; certainly not in the absence of any provision therefor. (Hannon v. Cobb, supra; Endl. Build. Assn. § 478; Thomp. Build. Assn. § 171; Barker v. Bigelow, 15 Gray, 130; People's Building & Loan Assn. v. Furey, 47 N. J. Eq. 410; North America Building Assn. v. Sutton, 35 Penn. St. 463; Post v. Building & Loan Assn., 97 Tenn. 408; State v. Hornbacker, 42 N. J. Law, 635; Thornton & Blackledge Build. & Loan Assn. § 168.)

I am sustained in my conclusions in the main by the decisions heretofore cited. The authorities that the borrower is to be cred-.' ited with the dues seem to rest upon the theory .that the transaction is to be regarded after the failure as one of an ordinary loan. But this would, as'I have stated, ignore the existing relation of the debtor as a.member of the.association. And such credits would he, in effect, paying dividends to the defendant, after the association was in the hands of a receiver through its insolvency, of 100 per cent of the amounts so credited to him5 and hence there would be a preference, pro tanto, as against his fellow-members of the same class. It will be found that very nearly all the cases that authorize such a credit show either that the-dues were, under the articles of association, to be applied in so many words to the loan, e. g., Cook v. Kent (105 Mass. 246); Brownlie v. Russell (8 App. Cas. 235), or that the contract was held usurious, contrary to the decisions in this State. (Concordia Savings & Aid Assn. v. Read, 93 N. Y. 474; Eagle Savings & Loan Co. v. Samuels, 43 App. Div. 386.)

The doctrine applied in Rochester Savings Bank v. Whitmore (supra) is not only open to the foregoing objections, but would seem to be at variance with that laid down in People v. Lowe (supra), that every member was to stand on equal footing, whether debtor or -creditor member, and that each debtor member, to that end, should pay what he owed, this being, in the case of a mortgagor, the principal due upon his mortgage, so that each member for each share held by him might be entitled to precisely the same amount in the assets of the society. If the dues were, within the contemplation of the court in People v. Lowe (supra), to be applied upon the debt, as a dividend of 100 per cent, the debtor’s right would not there be stated as that of a sharer in the assets, or as only a sharer therein. Further, in this case, not only did the articles of association provide in express terms that the dues should be paid as upon the stock, but the agreement of facts reads that the defendant has paid, as dues upon the said stock so held by him, the sum of $30 per month,” etc. But the defendant is entitled to a credit of the thirty dollars paid as dues after the appointment and qualification of the receivers. The fines were the penalties of his personal delinquencies, and went into the funds of the association. (Towle v. American Building Loan & Inv. Soc., supra.)

The final question is as to the practical relief. The plaintiffs ask judgment of foreclosure and sale to recover $5,000 with interest and expenses with a deficiency provision. The defendant seeks a judgment denying the right of foreclosure, or, if foreclosure be granted, then a judgment that the defendant be credited on account of the principal of his mortgage with all payments together with certain interest thereon and that the receivers reassign the stock now held as collateral security to defendant that he may share in any final distribution, so that any dividend may be added to his payments to the increase of his credits upon the principal of the mortgage, and that the judgment of foreclosure and sale be postponed until the sum of his credits he finally cast up- upon the' accounting of - the- receivers. 1 . '

• While we decide that the principal of the loan, namely, $2,-600, is-now owing to the receivers from the defendant, if there is any dividend presently his due as a member, no good reason appears why the defendant should be required to pay the full amount of the loan in the first instance. On,the other hand, here may well be a-hardship worked by a, disregard of the equity that should strike a-balance between his debt and his dividend. If the receivers, by ..marshalling assets and liabilities and by allowing for expenses, cannot determine, .they can at least approximate the prospective value, of-each share of stock, and hence the probable. dividend due each-shareholder sufficient for the purpose at hand. Naturally,, such estimate would be conservative, and, therefore, provisión should .be-, made for any possible overpayment, 'These- views are in accord with the valuable discussion of Mr. Endlich in his work cited. Equity demands that 'this course should be taken. The parties,. . then, may, within, twenty days after this opinion is handed down, file an additional statement such as we "áre authorized to require by section 1281 of the Code of Civil Procedure,, to the end that wé may render a judgment in 'accord with the views- expressed in, this, opinion. In case they fail to submit such statement, then the. suN - mission will be dismissed without, costs to either party.

All concurred.

Submission dismissed,-without costs, under section 1281 of the Code, of -Civil Procedure .unless, the parties within- twenty days1 file an additional statement in accordance with the opinion- of Mr. Justice Jenks.  