
    Eversmann, Receiver v. Schmitt.
    
      Building association — Mutual interest of members — When borrowing member ~is entitled to cancellation of mortgage.
    
    1. The members of a building association, whether borrowers or non-borrowers, have a mutual interest in its affairs; and, sharing alike in its earnings, must assist alike in bearing its losses.
    2. A borrowing member is one who receives in advance the par value of his shares, and agrees in consideration of such advance, to pay the weekly dues on the shares and the interest on the loan, until the dues paid and the dividend declared ■ and not paid, are equal to the par value of his shares. He then ceases to be a member and is entitled to a ’cancellation of the mortgage given to secure the obligations arising from the loan.
    
      3. The mortgage executed by a borrowing member of a building association, contained among other conditions, a stipulation for the payment of such “assessments” as might be levied on him as a member. Losses occurred and the association became insolvent, whereupon a receiver was appointed to wind up its affairs, who ascertained the “ shortage ” in the assets, and made a pro rata assessment on the members to meet the same. Held: That an assessment for such purpose is within the above stipulation of the mortgage, and that the member is not entitled to its cancellation until paid. Held, further, that, in such case, the receiver is the proper person to ascertain the amount of the losses 'and make an assessment on the members to meet the same.
    (Decided June 11, 1895.)
    Error to the Circuit Court of Hamilton county.
    George H. Eversmann, receiver of the New Ohio Building Association, an insolvent corporation, on March 10, 1890, brought suit in the Hamilton common pleas to foreclose a mortgage that had been given it by the defendant below, Maria T. Schmitt. The defendant being a member of the association, and the owner of twelve shares of the aggregate value of $3,000, when paid up, on May 1, 1880, had received an advanced loan of that amount, bidding therefor $240.00. To secure the obligation to the association arising from the loan, she executed and delivered a mortgage to it, on definitely described property. The defeasance clause of the mortgage is contained in the finding of facts, hereinafter inserted. Among other conditions, it stipulates for the payment of the dues on the stock and interest on the loan “until such time as the weekly dues paid and dividends declared and unpaid, shall amount to the said sum of three thousand dollars,” and the payment of such, assessments as may be levied upon her as a member of the association.
    
      The petition avers that by reason of the payment of dividends that had not been earned and the misappropriation of funds by its treasurer, the capital of the association had become impaired to the extent of thirty-one and a fraction per cent.; that the defendant had participated in the receipt of these unearned dividends, that the plaintiff had been appointed as a receiver to wind up the affairs of the association; and, as such receiver, had made an assessment on the stock of the members to meet the losses, that against the defendant amounting to the sum of $934.17, which she refused to pay. The defendant claimed to have paid in dues the full amount of her loan, $3,000, and all the interest thereon, and had performed all the requirements of the mortgage according to the constitution and by-laws and was entitled to its cancellation and prayed accordingly.
    Issues having’ been made up, the case was tried in the common pleas, and both parties appealed from the judgment to the circuit court.
    The circuit court made a finding of facts which is as follows:
    “The New Ohio Building’ Association is an insol- • vent corporation. Its insolvency is due partly to the over-payment of dividends by its secretary, George R. Topp, and partly to a misapplication of its moneys by its treasurer, William Peters.
    “The amount of the shortage, as determined by the receiver, is about thirty-one per cent.
    “Georg’e H. Eversmann is the receiver of the company, and is engaged in winding up its affairs. The receiver was appointed December 5, 1889.
    “ Maria Theresa Schmitt became a member of the corporation May 5, 1880, and subscribed for twelve shares of its stock ($250.00 each), and bid for a loan of money for the amount of her shares, three thousand ($3,000.00) dollars.”
    This sum was advanced to her, and she gave to the company her mortgage on certain real estate in Cincinnati, described in the petition in this case. This mortgage was duly recorded May 6, 1880. The clause of defeasance provided: “That if said Maria Theresa Schmitt,, who has become a member of said building association, and subscribed to twelve shares therein, and received in advance from said association said sum of three thousand ($3,000.00) dollars, the par value of said shares, shall pay or cause to be paid to the building association, without demand therefor, according to its constitution and by laws, until such time as the weekly dues paid and dividends declared and unpaid, shall amount to said sum of three thousand ($3,000.00) dollars, or, in case of the dissolution of said association, until within the meaning of the constitution and by-laws of said association, she shall be released therefrom:
    “1st. The sum of six dollars per week from the date hereof, the same being the dues on said twelve shares;
    “2d.' The sum of six per cent, interest upon said three thousand ($3,000.00) dollars, payable pro rata in weekly payments, subject to rebatement every corporate year;
    “3d. The sum of six ($6.00) dollars per week from the date hereof, for a period of forty (40) weeks, the same being' in payment of the premium of two hundred and forty dollars bid on said twelve shares;
    ‘ ‘ 4th. All fines, assessments'and penalties which the said Maria Theresa Schmitt shall incur, and which may be levied upon her as a member of said association, and in accordance with its constitution and by-laws;
    “5th. All rents, taxes, assessments, and premiums of insurance upon the said mortgaged premises, in accordance with the constitution and bjMaws of said association; then this instrument to be null and void.”
    The constitution of said association contains the following sections:
    “ARTICLE XI.
    “1. All members shall pay for every share fifty (50) cents initiation fee, and an installment of fifty (50) cents per week.
    “ARTICLE XII.
    “1. Every shareholder shall be entitled to a sum equal to the amount of $250.00 for each share.'
    ‘ ‘ 3. Every share for which the money has been drawn shall be considered >as a ‘paid out’ share, and shall bear six per cent, interest (6 per cent.) annually, and the premium must be paid in weekly rates. The interests and premiums shall be payable 'pro rata, ’ as soon as any part of the money is ready to be paid out. Interest will only be charged on the amount remaining due at the beginning of each year.
    “4. Every member, who wishes to draw the amount of his or her shares, shall secure the payment by the executing’ of an acceptable mortgage on real estate, and this mortgage shall remain in force until the weekly dues and undrawn dividends make up the sum of $250.00 on each share, the mortgage shall then be canceled, and such a member shall then cease, on the ground of such shares, to be a member.
    “Those members who have not yet drawn money can have their dividend paid to them; they may also draw their money before six months without the dividends.
    “Maria Theresa Schmitt was a stockholder, and shared equally with the others in the profits of the company, and withdrew the same from time to time. She withdrew dividends from time to time as they were declared, amounting to nine hundred and ninety-five and 92-100 ($995.92) dollars, with the consent of the association.
    ‘ ‘Maria Theresa Schmitt made the last payments in her book on November 27, 1889, which was the last regular meeting night but one before the receiver was appointed, and demanded cancellation of her mortgage, which was refused.
    “ The last payment of dues with the other payments of dues made the entire amount paid in by her, as dues, the sum of $3,000.00. In addition to the dues, defendant paid interest and premium in fuli. The losses occurred during her membership. The assets of the company are mortgages. The liabilities are to members only.
    “ The entire premium of $240.00 due under said mortgage was paid by Maria Theresa Schmitt, at the time she became a member of the association, to-wit, May 5, 1880. The dues and interest called for by the mortgage were paid regularly and according to the terms of the mortg-age.
    “The court finds that the proceedings in the Superior Court of Cincinnati, in which plaintiff was appointed receiver, were for the dissolution of the association; and that the assessment set up in the petition herein was made by the said receiver; that there are a g'reat number of members of said association, both borrowing and nonborrowing, and that none of said members, including- the defendant, were parties to said case in which the receiver was appointed, nor were they, or this defendant, given an opportunity to be heard in reference to said assesment; that there were a large number of members of said association, both borrowing and nonborrowing-, who were members thereof during-‘the time said losses set up in the petition occurred, and who withdrew from said association prior to the time said association went into the hands of the receiver, and that none of said parties have been brought into said suit in the Superior Court of Cincinnati, nor have the liabilities of said parties been considered in making- said assessment. ’ ’
    The court found and adjudged that the defendant was liable as a member for her proportion of the losses, but held that the condition of the mortgage had been performed and that she was entitled to have it cancelled, and decreed accordingly.
    The plaintiff in error claims that the judgment, ordering a cancellation of the mortgage is not sustained by the findings, and asks to have it reversed.
    
      Huntington <& Hol?nes, for plaintiff in error.
    Maria Theresa Schmitt made the last payment 'in her book ($6.00) on November 27, 1889, which ’was the night before the receiver was appointed. This sum, with the other payments made, would have made her stock amount to the sum of $3,000.00, the exact amount of the loan had there been no losses. But the losses had already occurred during the time of her membership. The assets of the com-
    
      pany are mortgages. The liabilities are to haem' bers only.
    We hold that the payments are payments on, stock and not on the mortgage and that the whole amount of the mortgage is due until a settlement is made by using the amount paid in on the stock to cancel the mortgage. The weekly payments made by the stockholders are payments on “stock or shares subscribed.” They are not payments on the mortgage. Where they share equally in the profits they must share equally in the losses. Seibel v. Building Association, 43 Ohio St., 373.
    Being equally entitled with all the others in the direct ratio of his interest in the society to share in the common gains of the enterprise every member is liable to contribute, in the same proportion in which he expects to profit, to the losses and expenses incident to its management.. Endlich Law of Building Associations, section 104; McGrath v. Building Association, 44 Pa. St., 383. He can not evade such liability by a transfer of his stock without the consent of the corporation, nor can he be allowed to withdraw from the association for the purpose of escaping his proportion of the common burden. Everhart v. Building Association., 29 Pa. St., 339.
    The association has the right to deduct a members proportionate share of the expenses, losses and debts of the association from the amount otherwise coming to him. The society may assess the loss on each share pro rata. U. S. Building and Loan Association v. Silberman, 85 Pa. St., 394; 4 W. N. C., 546; 35 Leg. Int., 51; Wittman v. Building Association, 7 W. N. C. (Pa.) 80; Knoblauch v. Robert Blum, Building Association, No. 2, 8 Pittsburg, Leg. Four, N. S., 39.
    
      Nor is. this liability in any way affected by the fact that the member has become a borrower, so long as, being such, he still continues in membership.
    Maria T. Schmitt was a borrower and made payments on her stock or shares subscribed and received full dividends on the stock. Her payments are, therefore, subject first, to the payment of expenses and losses, and only the balance remaining can be applied to the payment of the loan.
    The contract of membership and the mortgage contract are, in equity, one contract. The contract of her mortgage is so coupled with her membership that the two cannot be separated. The one is an equitable incident of the other. Maria Schmitt asks equitable relief — the cancellation of the mortgage. This should be denied until she is first placed on an equality with her fellow members, for equity is equality.
    The clause of defeasance of the mortgage contains the word “assessments” twice — once in connection with the word taxes, once in connection with the words “fines and penalties.” Assessments in the latter clause means “costs” or losses. Compare the clause of defeasance with Article XV of the constitution.
    
      Tugmcon c& Baker, for defendant in error.
    Said mortgage should be cancelled and defendant’s title to said premises quieted because, as shown by the finding of facts, she has fully complied with all the conditions of said mortgage.
    On November 27, 1889, therefore, when defendant made her last payment upon her mortgage, she had fully complied with all the conditions of said mortgage, and, as provided in section 4, article XII above set forth, she was entitled to have the same cancelled.
    But it is said that defendant is liable under said mortgage to an assessment for losses. To this we answer that she is not so liable unless the mortgage, or those parts of the constitution which are made part of the mortgage by reference, so provide. There is nothing upon the face of the mortgage making her liable. Is there anything creating such liability in those parts of the constitution referred to in, and made part of the mortgage? In the defeasance clause of the mortgage we first find “assessments” referred to under the “4th” head thereof.
    The assessments here referred to mean the weekly assessments the members are liable to pay while the corporation is a going concern, and is synonymous evidently with the words dues and contributions used in the same paragraph. . It will also be observed that the word “assessment” as used in this article, applies solely to nonborrowing members.
    But counsel seem to think that article XV of the constitution is intended to apply to an assessment for losses such as is attempted to be collected in this action. That they are entirely mistaken in their view will be apparent, we think, after a comparison of this article of the constitution with the requirements of the law then in force concerning the matters contained in said article.
    There being, therefore, no provision in the constitution for the payment of an assessment for losses, and none in the mortgage proper, and defendant'having fully complied with, all the conditions of said mortg-age and the constitution, she is entitled to a cancellation of the mortgage and to have her title to said premises quieted against the claims of the plaintiff and the New Ohio Building* Association.
    If the defendant is not liable to any assessment for losses, it follows that she is entitled to have plaintiff and said association and its officers enjoined from levying, or attemption to levy, any assessment upon her.
   Minshall, C. J.

Mutuality is the essential principle of a building association. Its business is confined, to its own members; its object being* to raise a fund to be loaned among themselves, or such as may desire to avail themselves of the privilege. This is done by the payment, at stated times, of small sums, in the way of dues, interest on loans and premiums for loans. Each - shareholder, whether a borrower or nonborrower, participates alike in the earnings of the association, and alike assists in bearing the burthen of losses sustained. It has what is called a capital stock. But this is only true in a modified sense. Unlike other corporations for profit, a share in a building association has, at the inception, only a nominal value. Its value is expected to increase by the lapse of time and the success of the association. It is contrary to the purpose and genius of a building association that a share in it should be paid up at the time of the subscription. The is done by the payment of small dues, and the crediting, at stated times, of the earnings in the way of dividends. When the aggregate dues with the credited earnings equal in amount the par value of a share of stock, it is paid up, and the owner, for that share, ceases to be a stockholder. He is entitied to the par value of his stock, but can no longer participate in the earning’s of the association. His relation, then, becomes simply that of a creditor, until he is paid. Of course what is here said, is subject to the qrtalification, that no losses have been sustained. Losses are incident to the most careful management of men; they cannot be wholly avoided; though it is worthy of note, that the smallness of the losses in the .management of building associations, compared with that of other. monied institutions, is remarkable. Still, agents may prove unfaithful, and bad loans be made. When this happens, the mutual character of the association prescribes that the burthen must be sustained by the stockholders according to the amount of their stock; for he who participates in the benefit of a business must assist in bearing the burthen.

As before observed, borrowers and nonborrowers participate alike in the earnings of a building-association. The difference between them is simply in the time at which each class is paid the par value of his shares. A borrower before his .stock is paid up, receives from the association the par value of his shares, in the nature of an advance loan. For this, he agrees to pay the premium, if any, for the privilege, the interest on the money advanced, subject to abatements to be made at stated times, and the dues on his stock until it matures. In other words, he agrees to keep up and pay out his stock, as if he were a nonborrower, in consideration of the amount being advanced to him before that time. Hence, the borrower remains a stockholder, and participates in all the privileges and benefits of a stockholder; has a voice in the management of the association and participates in its earnings. The latter go toward discharging his obligations arising on the loan, and to shorten the time in which he will be fully discharged therefrom. For, taking all losses into account, whenever the shares of the borrower have reached their par value by the payment of dues and the apportionment of earnings, the loan is liquidated and he ceases to be a member, as he would, if he had not borrowed at all. In other words, with his shares paid up, he discharges his obligations as a borrower. And the exact test of his right to call for a cancellation of the mortgage given to secure his obligations as a borrower, is the inquiry, whether he would have been entitled to receive from the association the par value of the shares on which the loan was made, had he not become a borrower.

In this case, Mrs. Schmitt subscribed for twelve shares, and received from the association their par value, $3,000, as an advanced loan, at a premium of $240. She paid the premium, and agreed to pay the dues thereon, $6.00 per week, and interest at the rate of six per cent., subject to an annual abatement, “until such time as the weekly' dues paid and dividends declared and unpaid shall amount to the sum of three thousand dollars,” and all “assessments” that might be levied upon her as a member of the association. She paid the premium, the dues $3,000, and the interest on the loan to the appointment of the receiver. These facts standing alone would satisfy the mortgage. But it is further found that the association is insolvent; that its capital is impaired to the extent of about thirty-one per cent., for which the receiver has made an assessment on the members including the defendant; ' that the losses occurred during her membership, were caused by the payment of dividends that had not been earned, and the misapplication of moneys by the treasurer; and that she had withdrawn $995.92 of these unearned dividends, although the right to draw earned dividends was limited by the constitution to those members who had not “drawn money.” Can then a borrower under these circumstances claim the cancellation of his mortgage? We think not. To do so would, as we have shown, undermine the principles upon which these associations are organized. By the terms of the constitution of the association, on the cancellation of the mortgage, the borrower ceases to be a member, and all liability to it is at an end. We see no reason why the remaining- members should be left to bear all the burthen, resulting from losses, for which they are no more to blame than she is. It is wholly unlike a savings society where the borrower is not a member or otherwise interested in its business. Having1 no voice in the management, nor interest in the earnings of the society, the borrower and it sustains the simple relation of debtor and creditor. Here, as shown, the borrower is also interested as a creditor. The loan is for no definite period of time. It depends upon the management of the association, in which he continues as a member and has- a voice. It is in view of the relation of the borrower to the association and the possibility of losses, that the mortgage stipulates that, in addition to the specific conditions mentioned, the borrower shall pay all ‘ ‘ assessments ’ ’ that may be levied on him. The fourth section of the twelfth article of the constitution, on which much stress is laid, simply expresses what would "be true in a safely conducted association. It does not include nor apply to the case where there are no earnings, and losses have to be met and borne. This was wisely provided for in the mortgage. It was a matter about which the parties could and have contracted. There is no suggestion of fraud or mistake in its execution, and their rights must be determined by its stipulations, conforming’ as they do to the equity and justice of the case. She has received from the association in the way of unearned dividends, a sum greater than the assessment that has been made on her.

But it is insisted that Mrs. Schmitt, and the other members were not parties to the suit in which the receiver was appointed, and that he had no power to make the assessment, and it is not binding upon them. This objection is without weight. It is not necessary that the members should, as individuals have been made parties to that suit. They are parties in. their corporate name and capacity, and, for the appointment of a receiver, that was sufficient. We will presume that the receiver was duly appointed, as-there is nothing to the contrary. As receiver, it was his duty to collect the assets and wind up the affairs of the association. This could only be done by ascertaining the loss and making- an assessment on the members to meet it. It was simply a matter of calculation; involved no matters of personal confidence, and could, therefore, be made by the receiver as well as by the members themselves or their chosen agents. Moreover these had been displaced by the appointment of the receiver, and could not a'ct in the premises.

It is, however, found that a large number of members, borrowing and nonborrowing, who were such during the time the losses occurred, had withdrawn prior to the time the association went into the hands of a receiver. This does not affect the question here. In the absence of bad faith, such persons as had, according to the constitution and by-laws of the association, withdrawn and ceased to be members, cannot again be brought into the association for the settlement of losses. Wangerien v. Aspell, 47 Ohio St., 250, 261. The withdrawal being an executed transaction, can only be recalled by the association, and a remedy had, in conformity to the rules of equity jurisdiction.

It follows, as we think, that the judgment of the circuit court, dismissing the petition of the receiver should be reversed, and judgment entered upon the findings as prayed for in the petition.

Judgment accordingly.  