Sawyer v. Menominee Loan & Building Ass'n
| Decision Date | 22 December 1894 |
| Citation | 61 N.W. 521,103 Mich. 228 |
| Parties | SAWYER v. MENOMINEE LOAN & BLDG. ASS'N. |
| Court | Michigan Supreme Court |
Appeal from circuit court, Menominee county, in chancery; John W Stone, Judge.
Action by Alvah L. Sawyer against the Menominee Loan & Building Association to compel defendant to accept a certain sum as payment of plaintiff's indebtedness, and cancel a certain mortgage and bonds. From a decree dismissing his bill complainant appeals. Decree overruled.
Sawyer, Waite & Waite, for appellant.
W. H Phillips, for appellee.
In September, 1888, complainant applied to the defendant association for a loan, and in order to procure it was obliged to subscribe for stock in the association. The taking of the stock and procuring the loan were all one transaction. James H. Walton was secretary of the association, and acted in the transaction in behalf of the defendant. Complainant claims that, before he subscribed for the stock, Walton, in setting forth the advantages to be gained by a borrower, among other things, represented that such borrower could pay a loan at any time at the end of any quarter, and could settle on the basis of the loan's being canceled in eight years, and at one-eighth thereof each year, taking the actual money loaned as a basis, and, so far as settlement was concerned, disregard the premium bid for the loan. The secretary explained that the association could do this because of the advantage it had in compounding interest monthly and receiving interest on premiums and installments on premiums, and that the right to settle on this basis was plainly guarantied by the by-laws. Complainant claims that, relying upon these representations, he did not examine the by-laws, but agreed to take a loan of $4,500, and subscribed for 45 shares of the capital stock of the association, having bid for such stock 22 1/2 per cent. premium. After subscribing for such stock and securing the loan, complainant claims that, relying upon the representations made by the secretary, he continued for 17 quarters to pay the installments on the stock and interest, when he decided to settle and pay up the loan and cancel the stock pursuant to the representations made by the secretary, and was then for the first time informed that there was no such by-law, whereupon he tendered the sum of $1,700, and demanded the cancellation of the stock, bonds, and mortgage given to secure the loan, which was refused. This bill was filed for the purpose of having the bonds and mortgage canceled upon the payment of the $1,700, which complainant claims is sufficient to discharge his indebtedness to the company under the by-laws as represented to him by the secretary. The testimony was taken in open court, and at its close the court filed a written opinion, which sets out substantially: That the complainant's object in joining the association was to secure the loan. That the certificate in the form used by the association was issued to him for the 45 shares, and on the same day of its issue was duly assigned to the defendant to secure in part the loan. That in the written application signed by complainant he agreed "to comply with the charter and the by-laws of your association." That he secured the loan for the advance on 45 shares of the stock at a premium of 22 1/2 per cent. That he filled out, signed, and executed the form of bond and mortgage in use by the defendant, which bond recited that he had become a stockholder of the association, and had subscribed to its charter and by-laws. That the mortgage contained the following condition: "That if the parties of the first part shall and do well and truly pay or cause to be paid to the said party of the second part, at its office in Menominee, the full sum of four thousand and five hundred dollars, payable in installments of twenty-two and 50-100 dollars on the first Tuesday of each and every month beginning on the first Tuesday of September, 1888, together with interest on the principal sum at the rate of eight per cent. per annum, payable in monthly installments of thirty dollars each, at the same place and time respectively, until the said shares of stock shall have attained the full value of one hundred dollars each, and shall pay all fines on said stock, or shall sooner pay said indebtedness under the provisions of the by-laws of said second party, according to a certain bond bearing even date herewith, executed by said Alvah L. Sawyer to the said party of the second part, then these presents and said bond shall cease and shall be null and void." The court recited that the amount actually received by complainant on the loan was $3,487.50; that he made payments for 17 quarters, or 51 monthly installments, of $52.50 each, denominated by said association as $22.50 installment and $30 interest; that December, 1892, when he sought to withdraw from the association, he had paid $2,677.50. The court stated the claims of complainant made in his bill: (1) That he was induced to join the association and make said loan by reason of certain false and fraudulent representations of its secretary and business manager; that it was contemplated from the first that he would want to settle at the end of about four years, and that the secretary represented to him that for the purpose of settlement after the first year a borrower could disregard the premium bid, and could for each year his loan continued deduct one-eighth from the amount of money actually received, and could cancel the loan by paying the balance thereof, disregarding the premium, and on the same basis and at the same rate at the end of any quarter year, so that at the end of four years the loan would be half paid up; that the secretary figured over the loan desired on the basis above specified, and showed that for the first four years the average cost of the use of the money would not exceed about 8 per cent.; and that the secretary said at the end of four years complainant could cancel the mortgage by paying one-half the amount of money actually received, and that the right was plainly guarantied to borrowers in the by-laws of the association. (2) That the by-laws are capable of the construction given them by the secretary, and complainant asks for such a construction. The court below says that upon a review of the testimony he found the representations were made substantially as claimed by complainant, but that he did not think any fraud was practiced by defendant or its agent, but that there was an honest belief on the part of the secretary that at the end of the four years one-half of the loan would, by the working scheme, be paid off; that both parties were bound to take notice of the law of this state under which the defendant association was formed, which constituted the charter of the defendant; that in his opinion the secretary believed in the truth of what he asserted, but that both he and the complainant were bound to know that the company could not be operated on such a basis without a violation of the charter, and that if the complainant did not read the charter and by-laws it was his fault. The court further said: A decree was entered in the court below, dismissing complainant's bill, and from which he appeals.
It is evident from all the testimony that complainant took the loan in good faith, and in full reliance upon the interpretation given by the secretary that the defendant company would and did construe the by-law as the secretary then construed it and he made his contract in reliance upon such interpretation. If that interpretation had been adhered to by the company, he could have settled at any time. We think he is now entitled to have the contract construed in the light of the by-laws as they were represented to be, or that at least the defendant should receive its money, with interest at 7 per cent. from the time the loan was made. Whether such misrepresentations were intended or were mere matter of mistake, the complainant has been misled to his injury; and the law is well settled...
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