Miles v. New South Building & Loan Ass'n

• Citation: 111 F. 946
• Decision Date: 21 March 1900
• Docket Number: 12,810.
• Parties: MILES v. NEW SOUTH BUILDING & LOAN ASS'N.
• Court: U.S. District Court — Eastern District of Louisiana

111 F. 946

MILES v. NEW SOUTH BUILDING & LOAN ASS'N.

No. 12,810.

United States Circuit Court, E.D. Louisiana.

March 21, 1900

A building and loan association issued and sold bonds secured by thehypothecation of securities, consisting of the bonds and mortgages of its borrowing stockholders, with a trustee under an agreement which permitted it to withdraw any such security by depositing in its stead $100 in cash for each $125 in face value of such security. Proceedings were instituted to wind up the association in insolvency, and a receiver was appointed, who was also appointed receiver in ancillary proceedings in other jurisdictions. In one of such ancillary suits the court, having jurisdiction of the trustee, ordered it to turn over the securities held to the receiver for collection, but without prejudice to its rights and the receiver was directed to deposit the proceeds of all such collections with the trustee pending the final adjustment of the rights of the parties in interest. Held that the court of primary jurisdiction, in order to enable the receiver, in making amicable settlements with borrowing stockholders, to allow them a uniform credit on their indebtedness, to be considered as an advance payment on account of dividends to accrue on their stock, would authorize him to exercise the right given the association under the trust agreement, by depositing with the trustee the amount receiver under such settlement from a borrower whose security was pledged, together with such additional amount in cash from the general funds in his hands as would make the deposit equal to $100 for each $125 of such security surrendered; it appearing that the assets of the association were ample to pay all outside creditors.

4. SAME-- ALLOWANCE OF ESTIMATED VALUE OF STOCK.

The existence of unsecured creditors of an insolvent building and loan association does not affect the right of a receiver to make such settlement with borrowing stockholders as may be approved by the court, the court having the same right to authorize such adjustment and settlement of indebtedness due the association as the association itself would have had if a going concern.

5. SAME-- USURY-- LAW GOVERNING CONTRACTS.

Where the charter of a building and loan association and all its contracts with borrowing stockholders provide that such contracts shall be payable at the home office of the association, and shall be governed by the laws of the state in which the association is incorporated, they will not be held usurious, if valid under the laws of such state although the stockholders may reside in other states, and their loans be secured by mortgages on property there situated.

6. SAME-- INSOLVENCY-- STATEMENT OF ACCOUNTS WITH BORROWING STOCKHOLDERS.

In a settlement between the receiver for an insolvent building and loan association and a borrowing stockholder, the latter should be charged, in addition to the amount borrowed, with all installments due upon his stock, all interest and premiums due on his loan, and all insurance, taxes, and other expenses due and equitably chargeable to him up to the time of the appointment of the receiver, against which he is entitled to credit for all payments made and for the amount of his distributive share of the assets of the association, when ascertained, or, when authorized by the court, he may be given credit in the settlement with the estimated value of such share, subject to readjustment on the final settlement of the estate.

The following is the report of Hon. E. B. KRUTTSCHNITT, Special Master in Chancery:

To the Honorable the Judges of said Court: By order signed in this cause on the 31st day of October, 1899, the court appointed the undersigned special master in chancery in this cause, and referred to him the petition of the receiver filed on the 25th day of October, 1899, with directions and authority, after due notice to all parties to this cause, to take testimony and report fully to the court as to the subject-matter of said petition, and specially to ascertain and report what would be a proper basis for the adjustment, settlement, and collection at this stage of the cause of the obligations of the borrowing members of the defendant, the New South Building & Loan Association; said master being required to include in his report both his findings of fact and his conclusions of law in the premises, and to accompany his report with the evidence, oral and documentary, upon which the same is based. The order further provided that, as it is desirable that the collection of debts due the association shall proceed without avoidable delay, the master is directed to make his investigation and report with all convenient speed. After notice duly extended to all parties to the record, the reference came on to be heard at the master's office, room No. 818, Hennen Building, in the city of New Orleans, on the 18th day of November, 1899, when and where the receiver and complainant appeared through their solicitor, Joseph P. Blair, Esq. The defendant was absent and unrepresented, notwithstanding due notice served upon it, through its president, Jules A. Blanc, Esq., as per affidavit of service filed as part of this report, marked 'Exhibit A.' In addition to the parties of record, the special master also notified Solomon Wolff, Esq., attorney at law, of said hearing. Said notice was given to said Wolff, pursuant to his request, and in his capacity as solicitor for Mrs. Nonie M. Chase. The solicitor for the complainant and receiver thereupon proceeded to take testimony, and offered exhibits in evidence, and, pursuant to the order of court appointing the undersigned master, the master herewith files the stenographic report of said hearing, giving the evidence adduced, and noting the various documents and memoranda offered in evidence by the said solicitor for the complainant and receiver; the documentary evidence being also filed with this report, and being marked, consecutively, 'Receiver 1' to 'Receiver 44,' inclusive. The reference came on further to be heard, after notice duly extended to all parties to the record, at the master's office, as aforesaid, on the 9th day of December, 1899, when and where the receiver appeared in person,-- the complainant, through her solicitor, Joseph P. Blair, having notified the master personally that she was willing that the hearing should go on in its absence; the defendant absent and unrepresented, notwithstanding due notice served upon it, through its president, Jules A. Blanc, as per affidavit of service filed with this report, and marked 'Exhibit B.' The said Solomon Wolff, solicitor for Mrs. Nonie M. Chase, was also present. The master, in the presence of the parties aforesaid, called upon the receiver for certain information and documentary evidence, as will appear from the stenographic report of the hearing, annexed to and made part of this report, and from the documents marked 'Receiver 45' to 'Receiver 53,' inclusive, annexed to and made part of this report. The receiver also subsequently filed with the master the document hereto annexed, and herewith filed, marked 'Receiver 54,' being document referred to in the testimony of the receiver, near the close, giving statement as to manner in which he reaches his estimate of the probable loss which will result on the sale of the real estate belonging to the defendant association. The foregoing, with the testimony and exhibits annexed to this report, constitutes all of the evidence adduced before me, and all of the proceedings had; and upon same I submit the following report to the court:

The petition of the receiver recites the existence of the bonded and scrip indebtedness of the corporation substantially as hereinafter found by me, and the existence of stock of various classes and series, all also substantially as hereinafter found by me. It sets forth at length the present status of the association, with a description of its assets and liabilities, all of which will, in my finding of facts hereinafter made, be given in detail, and which I therefore consider it unnecessary at this point to state at length. After reciting the facts in reference to all the matters aforesaid in great detail, the petition of the receiver shows that it is necessary that he should proceed, without avoidable delay, to collect in the obligations of borrowing members, but that in order to produce and maintain equality among all members of the association, and secure a homogeneous administration of the affairs of the association, it is, as the receiver is advised, proper and necessary that the court should instruct him in limine as to the terms and conditions upon which the borrowing members may repay their loans, and the claims in respect thereto which the receiver should assert, in cases where it is necessary for him to sue to compel the payment thereof, to the end that sufficient funds may be realized from the assets of the association not only to pay and discharge the bonded and scrip indebtedness of the corporation, and the expenses of the receivership, but also sufficient to adjust the equities between borrowing and nonborrowing members of the association, and between those paid for their stock. The receiver further represents that he is advised that by reason of the fact that the defendant association has ceased to be a going concern, and that the court has undertaken the administration of its affairs, for the purpose of making an equitable distribution of its assets among its creditors and stockholders, all debts due by members for loans made, as in his petition detailed, have become due and payable, and that the borrowing members can be required to repay in full what each has received, with interest, and are entitled, after payment of the debts of the...