
    Stoddard v. Kline, Appellant
    (No. 1).
    
      Building and loan associations — Rights of borrower — Application of payments — Insolvency.
    Where the stockholder of a building and loan association borrows from the association on a mortgage, assigns his stock to the association by a direct assignment, and agrees to pay monthly installments of dues and interest, the payment of dues on stock in the absence of any application by the stockholder, is not a payment on account of the loan. After the insolvency of the association it is too late to make such an application.
    
      Argued May 13, 1912.
    Appeal, No. 77, April T., 1912, by defendant, from order of C. P. Armstrong Co., Sept. T., 1910, No. 150, making absolute rule to open judgment in part in case of Josiah C. Stoddard, Receiver of the Washington National Building & Loan Association of Washington, D. C., v. Peter H. Kline.
    Before Rice, P. J., Henderson, Morrison, Orlady, Head and Porter, JJ.
    Affirmed.
    Rule to open judgment.
    Patton, P. J., filed the following opinion:
    This is a judgment bond given by Peter H. Kline, to the Washington National Building & Loan Association, of Washington, D. C., on October 1, 1907, in the sum of $1,800, for that amount of money advanced to him “for the redemption of 18 shares of half stock of the 55th series therein, now owned by the said Peter H. Kline, to be paid as follows:
    “1st. As dues, 30 cents per share, monthly, on each share of stock;
    “2d. Interest, 50 cents per share, monthly, on each share of stock;
    “3d. Premium, 50 cents per share, monthly, on each share of stock.
    “Each year the monthly premium to be reduced 10 per cent. That no payment on account of stock or premium should be made for a longer period than 144 months, and if the stock failed, to mature at that time, then the obligor to pay six per cent per annum on the original amount advanced until the said stock shall mature.” This association became insolvent and went into the hands of a receiver on August 14, 1909, before the time of maturity of the stock had arrived, and it is no violent presumption that the stock will ever mature.
    So that if the contract was settled, as contended for by the defendant, by applying the payment of the dues on the debt, the obligor had paid up in full on the debt for 144 months, he would have paid the interest and the premium, and 144 payments of thirty cents dues on each of the eighteen shares of stock, in all $777.60, leaving still due on the principal, $1,022.40, and under the terms of his contract he would still be required to pay six per cent on the original amount advanced ($1,800) — $108 per annum, until the said stock would mature.
    But in this case the uncontradicated fact is that the association became insolvent, and went into the hands of a receiver on August 14, 1909.
    This dissolved the ordinary contract relations of membership, and the liability of Kline as a borrowing stockholder is to be measured by the usual rules enforced between creditor and debtor: Strohen v. Franklin Sav. Fund & Loan Assn., 115 Pa. 273.
    Turning to the bond and mortgage, we find the express agreement of the obligor that the payment of dues, interest and premium was to be made upon the stock. True it is that before the insolvency of the association he could have elected and directed the association to apply the payments on the debt. But it is not'alleged that he did so, or that they were so applied by the association.
    After the insolvency it is too late to make the application, for that would be rank injustice to the nonborrowing stockholders, for it would cast the burden of all the losses upon them.
    Our attention has been called to the fact that the assignment of the stock in this case was unconditional and not as collateral security, and it is earnestly contended that the present controversy does not fall within the line of cases decided by the courts when the stock is assigned as collateral. No authority has been cited to sustain this position, and we have not been able to find any. The express contract is to make the payment on the stock. It is his duty to do so. If these payments are to be considered direct payments the result is that he pays nothing on his stock, notwithstanding his obligation to do so. The association is not bound to satisfy the mortgage until the stock matures, and if the payments were not made on the stock, then the value of the stock would never equal the loan, and if the payments were not applied to the stock, its assignment would add nothing to the security. It is not reasonable to believe that the association would take an assignment of the stock and Kline would agree that the dues would be applied to the stock, if the agreement was only made to be broken and the payment of dues applied to the debt.
    But there is an allegation that there was no competitive bidding. Such being the case, the association would not be entitled to collect any premiums: Klein v. Penna. Sav. Fund & Loan Assn., 216 Pa. 516.
    In the settlement of the affairs of an insolvent building and loan association, a borrowing stockholder should only be charged with the sum actually received, with interest for the same, and credited with all actual payments of interest: Strohen v. Franklin Sav. Fund & Loan Assn., 115 Pa. 273.
    When the association becomes insolvent and is unable to perform its part of the contract, it is entitled to the amount it has in fact loaned, with interest thereon, less the amount paid by the mortgagor on the mortgage, whether it be in the nature of interest or premiums. The installments on stock and fines go with the stock: Twin Cities Nat. Bldg. & Loan Assn. v. Lepore, 17 Pa. C. C. Rep. 426.
    In accordance with the above rule, the amount to be paid by the defendant is assessed as follows: The 141 payments of $5.40 dues each — $761.40—is to be credited upon the stock.
    SETTLEMENT ON BOND
    Loan................................. $1,800.00
    Int. from Oct. 1,1897, to August 14,1909.. 1,281.90
    $3,081.90
    
      CR.
    Payments of interest and premium as shown by loan card attached to plaintiff’s affidavit of default, 141 payments........... $1,860.30
    Bal. due at date of Insolvency, on bond... $1,221.60 Int. from August 14, 1909,
    Attorney Com. $61.05.
    Upon the former argument of the case there was no evidence to show that there was not competitive bidding. Since that evidence has been taken to show there was not. To this the plaintiff replies that it is not a Pennsylvania corporation, that the contract is not a Pennsylvania contract, and hence it can charge usurious interest. Plaintiff cites People’s Bldg. Loan & Sav. Assn. v. Berlin, 201 Pa. 1; Swing v. Munson, 191 Pa. 582; Bennett v. Bldg. & Loan Assn., 177 Pa. 233, and other authorities to sustain this position, but we are of the opinion that they do not apply. These cases are either where the attempt was to collect back the usurious interest due on promissory notes, or where the mortgage had been stricken off because the association had no authority to do business in Pennsylvania.
    We think the present case is ruled by Land, Title & Trust Company v. Fulmer, 24 Pa. Superior Ct. 256, and Beso v. Eastern B. & L. Assn., 16 Pa. Superior Ct. 222. In the former case it is said: “Powers and immunities granted to building and loan associations under the Act of April 29, 1874, P. L. 73, sec. 37, and the supplements thereto, do not extend to corporations not chartered under that legislation, and managed and controlled in accordance with its provisions.” A foreign corporation not so incorporated can only secure the amount actually loaned, with legal interest. The latter case draws a distinction between when the usurious debt is secured by a promissory note, and when secured by a lien on land in Pennsylvania, The former is the contract of the foreign state, the later must be governed by the laws of Pennsylvania.
    We might further say in this case the by-laws authorized the formation of local boards in Pennsylvania, and the payment of money to them in Pennsylvania, and it was paid to their agent in Pennsylvania.
    And now, August 18, 1911, the writ is stayed and the judgment is opened as to all amounts in excess of $1,282.65.
    Rule discharged as to the amount under $1,282.65, with interest from August 14, 1909, and costs of suit.
    
      Error assigned was the order of the court.
    
      W. L. Peart, with him A. L. Ivory, for appellant.
    — The obligor is bound for the payment of $1,800, and as long as he pays that $1,800 to the parties and for the purposes which the bond specifically sets forth, he is entitled to a credit upon that bond to the amount of the last dollar that he so pays, and by the very terms of the bond he cannot be charged interest upon the $1,800 or any part of it: Beso v. Eastern Bldg. & Loan Assn., 16 Pa. Superior Ct. 222; Land, Title & Trust Co. v. Fulmer, 24 Pa. Superior Ct. 256.
    The assignment is an absolute and unconditional sale of the stock to the association. The association has redeemed the stock and no one excepting the association has any right, title, claim or interest whatever in the stock: Moeser v. Schneider, 159 Pa. 412; Hanna v. Holton, 78 Pa. 334; Beale v. Bank, 5 Watts, 529; York Trust Real Estate & Deposit Co. v. Gallatin, 186 Pa. 150; Hemperley v. Tyson, 170 Pa. 385.
    The right claimed by. the defendant in the case at bar is not one of credit by appropriation, but is one of credit, because he paid the money, and paid it upon a contract to pay it: Erthal v. Glueck, 10 Pa. Superior Ct. 402; Kurtz v. Campbell, 31 Pa. Superior Ct. 516; Strohen v. Sav. Fund & Loan Assn., 115 Pa. 273.
    
      
      C. E. Harrington, with him Jefferson R. Reason, for appellee.
    — The appellant, after the insolvency, attempts to appropriate the value of the shares of his stock to the mortgage debt. He seeks to apply payments upon his stock, assigned as collateral security, as credits on the mortgage and bond, in the payment of the principal and interest. This the appellate courts have decided cannot be done, and the case relied upon by the learned court below is pertinent: Strohen v. Sav. Fund & Loan Assn., 115 Pa. 273; Haskel v. Moffitt, 32 Pa. Superior Ct. 344.
    July 18, 1912:
   Opinion by

Morrison, J.,

This was a confession of judgment on a bond and the defendant made application to have the judgment opened and he to be let into a defense on the theory that he had paid all he was legally liable for on said bond; The learned judge below heard the parties and filed an opinion in which he deducted from the amount of the judgment confessed the sum of $1,860.30 and opened the judgment as to that amount and discharged the rule and refused to open the balance of the judgment, to wit, $1,221.60, with interest from August 14, 1909, and attorney’s commission of $61.05. From this adjustment both plaintiff and defendant appealed.

We have reached the conclusion that the learned judge did not err and that his opinion and the authorities therein cited furnish sufficient reasons for his decision as to the amount of the judgment which he left standing against the defendant, and we do not deem it profitable or necessary to discuss the questions raised or to add anything on that ground to what has been said by the learned judge in his opinion filed. But in addition to the authorities cited we add the recent case of Leechburg Building and Loan Association v. Kinter, 233 Pa. 354.

The assignments of error are overruled and the decree is affirmed.  