Opinion
12-27-1904
CITIZENS' MUT. BANKING & BUILDING SOC v. WYATT.
Frederick P. Schenck and W. H. Osborne, for complainant. David Harvey, Jr., for defendant.
Bill by the Citizens' Mutual Banking & Building Society against Henry Wyatt. Decree advised.
Frederick P. Schenck and W. H. Osborne, for complainant.
David Harvey, Jr., for defendant.
BERGEN, V. C. The complainant is seeking to foreclose a mortgage, and the principal controversy is over the amount of credit to which the defendant is entitled on account of his mortgage debt. The material facts necessary for the solution of this problem are as follows: The defendant, being the owner of real estate in Atlantic City subject to a mortgage of $6,000, wishing to procure an additional loan on the same property of $1,500, applied to the complainant for that purpose. He was told that he must subscribe for 37 1/2 shares of the capital stock of the company, and then apply for a loan of $7,500. He followed these directions, and madeand executed his bond in the penal sum of $15,000, and secured the payment of it by a mortgage on the real estate for that amount and by assigning his stock as collateral security. It is not pretended that the company advanced the $7,500. The whole amount paid by them was $1,500, but the mortgage, although the consideration stated therein was $7,500, recited that it was subject to a mortgage for $0,000 not yet recorded, "the payment of which mortgage is hereby assumed by the party of the second part as a part of the consideration above mentioned: provided, further, and it is the true intent and meaning of these presents, that upon default in the performance of any of the terms and conditions of the bond hereinafter mentioned, or in the performance of any of the terms and conditions or covenants in this mortgage contained, then the assumption by the party of the second part hereto of the said prior mortgage or mortgages, and the interest thereon as aforesaid, shall be null and void, and of no effect whatever, as if the same had never been assumed by the said party of the second part as aforesaid." The condition of the bond is that the defendant should pay to the complainant during its continuance as a loan association, or until the shares owned by the defendant and assigned as collateral should mature, the sum of "eighteen and 75/100 dollars per month, with interest on the sum of seventy-five hundred dollars at the rate of six per cent. per annum, payable monthly; and the further sum of eighteen and 75/100 dollars per month premium, being three per cent. such having been the bid of the party of the first part for the amount of said loan, in all amounting to the sum of seventy-five dollars per month." The defendant having defaulted in his payments for the period of six months, the complainant filed its bill, alleging as to the matter of credit that the defendant was entitled to be credited with the sum of $6,000, with interest from the 15th day of January, 1904 (the complainant having rescinded its agreement of assumption on that date), and to the further credit of $525, with interest at the rate of 5 per cent. on that sum for a period constituting the average time from the commencement of the payments to the cessation of the same, and computed from the cessation thereof to the date of the decree, but refusing any allowance for the premium at the rate of 3 per cent. paid on the sum of $7,500.
While the by-laws were not offered in evidence, it is perfectly clear from this bill or complaint that the complainant has exercised some right under such by-laws or under section 43 (page 473) of "An act concerning building and loan associations, P. L. 1903, p. 457," because in crediting the dues and interest the complainant is turning over to the defendant the money paid on account of the principal of his capital stock as the withdrawal value of that stock, for there is no other hypothesis upon which to base such credit. Whether the amount credited is the true withdrawal value of the stock, I am unable from the evidence to determine, but, as the defendant has made no complaint on this ground, I shall assume that it is substantially correct. What the defendant claims is this: that when the complainant rescinds its agreement of assumption, and casts upon the defendant, as it has, the burden of paying the interest on the mortgage of $6,000, which payment the evidence shows the defendant has made out of his own moneys since January 15th last, he ought not to be compelled to pay a premium of 3 per cent。 on the $7,500, and that the premium paid by him in excess of 3 per cent. on $1,500 was paid without consideration, and should be credited on account of his debt to the complainant. In my judgment, this contention is equitable, and ought to prevail, especially in a case like this, where the complainant seeks to dissolve and rescind the relations existing between the defendant and the corporation.
The contract with reference to the payment of the premium as stated in the condition of the bond is that the defendant will pay 3 per cent in monthly payments on $7,500, "such having been the bid of the party of the first part for the amount of said loan"; in other words, he agrees to pay 3 per cent. on his loan. The only loan which the company made was $1,500; the residue of the amount, as stated in the mortgage, being covered by an assumption of another debt which is in no sense a loan. The law which permits corporations of this character to take a premium from its members is restricted to "a premium for priority of loan," which means, according to my understanding, the privilege of obtaining a loan out of the funds of the society in advance of other members seeking a similar benefit. The priority of loan from the funds of the complainant association was limited in this case to $1,500, and, if the principal contended for by the complainant is correct, it could make five loans with $7,500 of $1,500 each, and collect a premium on $37,500. In my judgment, the law does not warrant the taking of premiums on sums not loaned.
I will therefore advise a decree entitling the defendant to a credit for the amount paid on premium account in excess of 3 per cent. on $1,500 in addition to such credits as the bill of complaint admits to be due. If the parties can agree upon the amount due calculated according to the views I have expressed, the complainant may present a decree incorporating that sum: otherwise there will be a reference to a master.