
    The People’s Building, Loan and Saving Association, Respondent, v. Nicholas B. Platz, Appellant, and Magdelena Platz.
    
      Building and loan association—when bound, by the representations of its agents, not to enforce a mortgage given by a borrowing member beyond a certain number of payments.
    
    The agents of a building and loan association informed a prospective borrower that if he held fifty shares of the stock of the association it would advance him the par value thereof to be secured by a mortgage upon his real property; that the mortgage would be taken only as a- security for the payment of the monthly installments of one dollar accruing on each share' of his stock, and that, if he would pay the fifty dollars due monthly upon his fifty shares, the association would, at the end of five years, take up his certificate of stock and cancel his mortgage. At the same time a prospectus of the association was shown to the borrower, in which it was stated that this association was the only one that wrote a definite contract specifying the exact number of payments which would be required on each share of stock and which took a mortgage for a definite period. Purchasers were asked to bear this in mind and to read carefully the certificates issued.
    Such certificates contained an agreement on the part of the association to pay the member the sum of §100 for each of said shares at the end of five years, and that in the event of his death before the expiration of that time, it would pay a sum of money equal to the amount of the monthly installments paid on said shares, together with all dividends which had accrued thereon. Such certificates also made the articles of association and by-laws a part of the contract.
    The mortgage, given by the borrowing member in reliance upon the representations so made, was conditioned upon the payment of the sum of five thousand dollars in the manner following, viz., fifty dollars contribution of principal, and twenty dollars and eighty-five cents interest and twenty dollars and eighty-five cents premium, each and every month from the date thereof for “such term as will secure to the” association “the payment of the full sum of One Hundred Dollars on each and every one of the mortgagor’s shares hereby secured to be paid; * * * and also for the payment of all dries, fines and penalties," pursuant to the articles of association and the by-laws thereof.
    The borrowing member might have discovered from a study of the by-laws and articles of association that his stock would not mature nor his mortgage be canceled at any definite time, but only when the monthly dues paid-upon the stock and the dividends declared thereon amounted to §100 a share.
    
      Held, that as the association had led the borrowing member to believe that five years was the longest period during which he would be required to pay,, it could not take advantage of its own fraud and enforce the mortgage for an amount in excess of the payments which the association had represented that it secured;
    That the borrowing member might properly cease his payments after the expiration of five years.
    Appeal by the defendant, Nicholas B. Platz, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Albany on the 28th day of February, 1900, upon the decision of the court rendered after a trial' at the Albany Trial Term, the jury having been discharged.
    
      Isaiah Fellows, Jr., and E. Countryman, for the appellant.
    
      Chester M. Elliott, for the respondent.
   Parker, P. J.:

After a careful study of the articles of association and by-laws of the plaintiff, and the certificate issued by it, I am satisfied that the defendant had no idea of the contract into which he really entered when he executed the mortgage in question. The situation of the respective parties at that time was substantially as follows:

The plaintiff is a loan and saving association, organized under chapter 122 of the Laws of 1851, and the acts amendatory thereof. As fixed by its articles of association, its capital is five millions of dollars, consisting of fifty thousand shares of the par value of one hundred dollars each. Its scheme is to have éach purchaser pay for stock issued to him the sum of one dollar per month on each share purchased ; also an entrance fee of one dollar on each share; also a quarterly installment of twenty-five cents on each of such shares; also a transfer fee and cancellation fee of one dollar for every transfer or cancellation of his shares. Also certain fines and penalties are provided for, and forfeiture of amounts paid on shares of stock in the event of default by the purchasers. The entrance fees, qnarterly installments, transfer and cancellation fees constituted a current fund, out of which expenses and salaries were paid.' The fines and penalties, the various sums forfeited to the ' company, and the monthly dues paid by such purchasers, constituted a fund from which loans were made and dividends paid, and into this fund also went such interest and premiums as were received upon loans made. The dividends were to be declared whenever, in the judgment of the directors, the fund was sufficient to warrant it.

Whenever the monthly dues paid by a purchaser, and the amount of the dividends declared upon his share of stock equalled the sum of $100, such share was considered matured and was canceled, and the purchaser thereupon became entitled to be paid by the company the full sum of $100 in lieu of it, providing, of course, he had in the meantime made no- default. in his payments and incurred no forfeitures.

There was also a further provision in such articles by which a shareholder could, at the discretion of the directors, be ad/vcmced the full amount of his share of stock, provided he secured the same by a bond and mortgage upon real estate. The terms of payment of such bond and mortgage are not stated in the articles of association, except that they are to be as “ prescribed by these Articles of Association and the By-Laws thereof; which mortgage, when paid out of the dues and accruing dividends,- shall be a full and complete redemption and satisfaction of the shares of capital stock held by the shareholder so mortgaging said property.”

In the by-laws it was provided that upon such a mortgage should be paid interest at the rate of five per cent, and also a premium of five per cent per annum, to be paid monthly.

Thus, if this defendant had carefully and intelligently studied these articles he could probably have discovered that, in purchasing his fifty shares of stock, he had acquired the privilege of paying $50 per month for an indefinite time, and until, in the discretion of the directors, dividends enough had been earned to bring such payments up to $100 per share. And, also, by including the by-laws within his studies, he would probably have discovered that he was to pay five per cent interest annually on the amount advanced him, and a bonus or premium of five per cent additional annually, for the privilege of borrowing from the association, until perchance the dividends in the course of years, and in the discretion of the directors, would bring the amount of his monthly installments paid up to $100 per share. • .

But the situation as the defendant understood it was' ■ quite different.

In November, 1889, he purchased five shares of such stock and took a certificate from the association for the same. Such certificate constitutes him a shareholder of the association, states that he holds five shares thereof, and, in express terms, agrees on the part of the association to pay him the sum of $100 for each of said shares at the end of five years from the date thereof. It further provides that in case of his death before the expiration of such term it will pay a sum of money equal to the amount of monthly installments paid on said shares; together with all dividends accrued thereon. ISTowhere is it intimated that Only the monthly installments paid and accrued dividends are to be paid on the five shares, if he lives and pays his montl^y installments for five years; büt a plain distinction to that effect is made in case he dies and thus stops paying before the expiration of five years. It is, however, provided in such certificate that the articles of association and by-laws are thereby made a part of the contract. Save what is concealed, rather than expressed, in that phrase, this certificate is a direct contract that the association will pay the par value, of each share after sixty monthly payments by the shareholder shall have been made.

[[. Subsequently forty-five other shares were purchased by the defendant— ten at one time and thirtydive at another—by certificates in all respects expressed as the one just referred to. These subsequent shares were taken out on the suggestion of the general agents of the association, that if he held fifty shares he could have advanced to him their par value if he would secure them by a mortgage on his property. These agents also informed him that the annual interest which he would have to pay upon such amount would be two and one-half per cent only; that the mortgage was taken only as security that he keep up the .monthly installments accruing on his stock, and that if he would regularly pay the fifty dollars due monthly upon his fifty share’s the association would, at the end of sixty such payments, take up his certificates of stock and .cancel his mortgage. At the same time a prospectus of the association was shown to the defendant by these- agents, in which, among other things, it was stated that this association is the only one that writes a definite contract, specifying the exact number of payments that will be required from the members on each share of stock, and also takes a mortgage for a definite period; and purchasers are asked to bear that in mind and read carefully the certificate issued. In connection with this, a statement issued by the association, illustrating the result to a borrower of $1,000 for five years, was shown the defendant, in which $1,000 is credited to such borrower on his ten shares at the end of five years.

The trial judge made no finding upon the question whether or not such statements were made by the plaintiff and relied upon by the defendant, but from the evidence before us it cannot be doubted but that they were. From these representations, made by the agents and so distinctly corroborated by the certificates and prospectus of the association, the defendant undoubtedly did, in fact, believe that he assumed no greater obligation than to pay the specified monthly sums for a period of sixty months. There is no expression in the mortgage that distinctly or intelligibly contradicts this belief. The term therein stated is a period that “ will secure * * * the payment of the full sum of One Hundred Dollars on each and every one of the mortgagor’s shares hereby secured to be paid” In view of the fact that not only the statements of the agents, but also the certificate under which he held such shares, declared that they would be satisfied by the payment of sixty monthly installments, such a provision in the mortgage was not calculated to give him any different impression.

Relying upon these statements, the defendant, being then about to build and needing the money, on August 30, 1890, executed a bond and mortgage to the association, conditioned substantially as follows: That if the said defehdant should pay to the said association the sum of $5,000 in the manner following, viz., fifty dollars contribution of principal, and twenty dollars and eighty-five cents interest and twenty dollars and eighty-five cents premium, each and every month from the date thereof for such term as will secure to the ” association the payment of the full sum of One Hundred Dollars on each and every one of the mortgagor’s shares hereby secured to be paid; * * * and also for the payment of all dues, fines and penalties,” etc., pursuant to the articles of association and. the by-laws thereof, then this obligation to be void, etc.

The defendant regularly and monthly paid the installments and sums due upon his said fifty shares until sixty monthly payments, had been made thereon, and during that period also paid the. interest and premiums required by the mortgage. The whole amount, so paid amounted to $5,573.30, in which there is not included any dividend. He then stopped payments and offered in surrender to the association his fifty shares of stock, and demanded that his-mortgage be discharged. The plaintiff, however, claiming that the. mortgage was to secure not merely the payment of the monthly' installments for five years, but for so long a time as would, with the. dividends accrued, bring each of his shares up to $100, and that by ceasing to pay before that was accomplished he had become liable to certain fines and penalties, insisted that there was still' due and. secured by such mortgage the sum of $4,999.38, and it is for such sum that it is now seeking to foreclose the mortgage.

Thus it appears that the real question between the parties is whether or not the defendant must continue to pay the sums specified for a longer period than sixty months; whether or not that being the actual contract made between the defendant and the association, the mortgage should not be so construed; and whether or not, under the circumstances of this case, the plaintiff can lawfully insist that the defendant is in default and, therefore, liable for the'large amount of fines and penalties as above claimed.

It has been frequently held that, in contracting with, associations similar to this, the articles of association and the by-laws are to be deemed a part of the contract made. And in O'Malley v. Peoples Building Assn. (92 Hun, 572) a shareholder of a certificate issued) by this very association, and. in precisely the same terms, was not allowed to recover at the expiration of sixty monthly payments the full par value of the shares which he held. Substantially, it was there held that he must be deemed to have contracted with knowledge of the general plan specified in the articles and by-laws, and that the fixed term in the certificate, in view of such plan, should be construed as an estimated time merely for the maturing of the-certificate. But in the case before us I am inclined to think that, there-are other features and equities that should not be overlooked. Concede that the articles and by-laws are written into both the certificate and mortgage in question, and that being therein, they make it plain to one who reads them that the period of five years is not the absolute extent to which the shareholder is required to pay. Yet if a mortgagor is induced by the fraudulent statements of the mortgagee to omit reading the full text of the written contract, and provisions are incorporated in the mortgage by the mortgagee which are in conflict with the agreement that is in fact made between the parties, the mortgagee will not be permitted to derive a benefit from the terms so fraudulently interpolated. (Albany City Savings Institution v. Burdick, 87 N. Y. 40, 47; Kirchner v. New Home Sewing Machine Co., 135 id. 189.)

Thus in this case the defendant did not study the provisions of the articles and by-laws. The distinct statement in the certificate and in the prospectus of the association that it was the only association that fixed a definite term during which the shareholder was required to pay, and the only association that takes a mortgage for a definite period, and the request that purchasers would observe it,, was equivalent to a statement that its articles and by-laws were in harmony with that plan. It was equivalent to telling the defendant that, under its articles and by-laws, it was authorized to contract for a fixed time, and that it had, therefore, and thereunder, fixed upon the term of five years as the limit. And the defendant, trusting to that statement, and being thereby diverted from reading that part of the contract, assumed that there was nothing in the mortgage which he signed conflicting with the parol agreement made between himself and the association’s agents as to what the mortgage and its terms should be. Defendant did not know of the plan and scheme outlined by the articles of association and the by-laws, because he had never studied them. He did not study them because the plaintiff (so far as the point in question is concerned) substantially assumed to state them. By a false statement, evidently made for the purpose of inducing the defendant to purchase stock and give a mortgage- for advances thereon, the plaintiff has acquired the mortgage in question, and now seeks to enforce it as a contract much more burdensome upon the defendant than he ever knowingly assumed. I am of the opinion that the plaintiff should not have the benefit of the advantages which it thus secured. By its false statements, evidently made for that purpose, it deceived the defendant into supposing, he could discharge his mortgage by paying for ■sixty continuous months the sums mentioned in his certificate. Having procured the - mortgage by such deceit, it should not be allowed to enforce it for anything more than it represented it to be.

For this reason the judgment must be reversed and a new trial .granted.

All concurred; Smith, J., in result; Chase, J., not sitting.

Judgment reversed and new trial granted, with costs to appellant to abide event.  