Bedford v. Eastern Building Loan Association of Syracuse

• Decision Date: 22 April 1901
• Docket Number: No. 153,153
• Citation: 45 L.Ed. 834,181 U.S. 227,21 S.Ct. 597
• Parties: H. L. BEDFORD and Lou M. Bedford, His Wife, Petitioners , v. EASTERN BUILDING & LOAN ASSOCIATION OF SYRACUSE, New York
• Court: U.S. Supreme Court

181 U.S. 227

21 S.Ct. 597

45 L.Ed. 834

H. L. BEDFORD and Lou M. Bedford, His Wife, Petitioners,

v EASTERN BUILDING & LOAN ASSOCIATION OF SYRACUSE, New York.

No. 153.

Argued January 30, 31, 1901.

Decided April 22, 1901.

This suit was brought in the circuit court of the United States for the western district of Tennessee by respondent to foreclose a mortgage executed by petitioners. A decree was entered in favor of the respondent. 88 Fed. Rep. 7. There was an appeal taken to the United States circuit court of appeals for the sixth circuit. From that court the case came here on certificate. Subsequently a writ of certiorari was issued.

The following are some of the material facts contained in the statement of the circuit court of appeals. Other facts will be stated in the opinion:

'The Eastern Building & Loan Association of Syracuse, New York, is a corporation organized under the laws of the state of New York for the purpose and with the power of conducting a general building association business in New York and other states. Its plan of organization is similar to that generally adopted by such associations. Subscribers to its stock pay $1 initiation fee for each share of $100, and 75 cents per month as dues on each share, and certain fines on default; and when the whole amount of dues and dividends paid in amounts to $100 the holder is entitled to withdraw the same. Borrowing members receive par value of their shares in advance, and secure their compliance with requirements as to dues, fines, and interest by mortgage or otherwise. Prior to March 26, 1891, the association had a soliciting agent in Memphis, Tennessee, whose duty it was to solicit persons to become members of the association and to subscribe to its stock. The agent had no authority to accept applications for membership or subscriptions for stock, but only the authority to transmit them by mail to the office of the company in Syracuse, New York, where they were accepted or rejected by the board of directors of the association. Three months after a person had subscribed for stock, and the stock had been issued to him, he was, by the by-laws of the association, permitted to apply for an advance of the nominal par value of his shares, or, in effect, a loan. This application was forwarded through the soliciting agent to the company at Syracuse, together with the certificate of stock, already issued, as a pledge and a statement of the value of the property which it was proposed to mortgage to secure the loan. The application was accompanied by a recommendation of what was called 'the local board' in regard to the wisdom of the loan. The local board consisted of certain stockholders of the association living at the applicant's place of residence, who had been elected by all the resident stockholders, and whose duty it was to advise the association at Syracuse concerning the value of the property offered and the character of the applicant. The local board had officers, one of whom was a treasurer, through whom members might, if they desired, forward payments due to the association at Syracuse; but the by-laws stated that in so doing the local treasurer was acting as agent for the stockholders, and not for the association. Another by-law provided that all payments should be made to the secretary of the association at the home office, in registered letter, express or money order, or drafts.'

On the 2d day of January, 1891, H. L. Bedford, one of the petitioners, then being a resident of Shelby county, Tennessee, made application in due form, and under seal, to become a member of the association, and subscribed for forty-six shares of instalment stock. He delivered the application to the soliciting agent of the association at Memphis, to be forwarded to Syracuse. He agreed in the application 'to abide by all the terms, conditions, and by-laws contained or referred to in the certificate of shares,' and to comply with the rules and regulations of the association; and he appointed the secretary of the association as proxy to appear and vote on his shares.

On the 2d of February, 1891, the certificate of stock was issued by the association and sent to its soliciting agent at Memphis, who, a few days later, handed it to Bedford. The certificate was numbered 4,773, and stated the number of shares to be forty-six, and the amount $4,600; date of maturity, August 1, 1897. It certified that Bedford was thereby constituted a member of the association and holder of forty-six shares therein of $100 each. 'The terms, conditions, and by-laws printed on the front and back' of the certificate were made part of the contract, and it was stated 'that this certificate of shares is issued to and accepted by the holder thereof upon the following express terms and conditions.'

These conditions were substantially as follows:

The payments of a monthly instalment of 75 cents on each share until it matures or is withdrawn; a fine of 10 cents per share per month for each month if the payment of the instalment shall be in arrears; declaring the stock nonforfeitable; providing for its sale at auction if the monthly instalments due thereon be in arrears for six months or more, and providing for the application of the proceeds of the sale to the payment of such instalments and accrued fines; the balance remaining, if any, to be paid to the member in whose name the stock stands at the time of sale. 'If the stock brings no more than enough to pay the accrued fines and monthly payments, it shall be bid in by the association and canceled, and the amount standing to the credit thereof in the loan fund shall be divided among the other shares as profits.'

Further conditions of the stock were '(4) that members could withdraw their monthly instalments at any time by giving thirty days' notice, and to receive six per cent annual interest on all shares of six months' standing and up to two years; the third year, 7 per cent; any time after the third year and before maturity, 8 per cent; (5) if a shareholder died, his personal representative could continue or withdraw his share; (6) at stated periods the profits arising from interest, premiums, fines, and other sources shall be apportioned among the shares in good standing; (7) all payments were required to be paid to an authorized agent, or sent to the secretary at the home office (8) reservation of a right in the association to make investigation prior to approval of claims; '(9) the by-laws of this association, which are attached to and indorsed hereon, are a part of this contract, and such by-laws and this certificate are to be construed together as part of the contract between the association and the shareholder;' (12) no shareholder to have an interest in the affairs, assets, or funds of the association, except as above stated, or to assume liability, except as hereafter described; (13) upon the cessation or determination of the contract, all payments made thereon shall become forfeited to the association; (14) actions to be brought within six months after filing proofs in the county of Onondaga, in the state of New York; (15) 'no agent has authority to change this contract, and the association assumes no liability for any statements not contained in its printed literature."

The certificate concluded as follows:

Given under the seal of said association at Syracuse, New York, the second day of Feby., A. D. 1891.

H. H. Loomis, President.

[L. S.] Jno. W. Reynolds,

Secretary and Gen'l Manager.

On the 20th of March, 1891, Bedford made an application for a preference for an advance, which was forwarded through the same soliciting agent to Syracuse. Bedford described in detail the real estate upon which he proposed to give the association a mortgage. This application was approved May 18, 1891, by the board of directors at Syracuse. Bedford then applied on June 20 for the loan in the letter following:

Application for an Advance.

To the Board of Directors of the Eastern Building & Loan Association of Syracuse, N. Y.

Gentlemen:——

At a regular meeting of your board, held May 18, 1891, having obtained the preference for an advance on forty-six shares of No. 4,773 of your association, at a premium of 10 per cent, I now respectfully request the advance be granted. I hereby agree to comply with the charter and by-laws of your association and all requirements defined by your committee of the board of directors.

H. L. Bedford, Applicant.

Witness: J. H. T. Martin.

This letter was accompanied by a mortgage to the association, duly executed and acknowledged by Bedford and wife before a notary in Shelby county, Tennessee, of the land in that county previously tendered as security. The mortgage had been duly recorded in Shelby county.

The defeasance clause of the mortgage recited among other things that the—'grant is intended as security for the payment of the sum of fifty-six hundred eighty-three and 8/100 dollars, the same being the principal, interest, and premium of a loan from said association, which said loan was made pursuant to and accepted under the provisions of the by-laws of said association, and which said by-laws have been read by the mortgagor, H. L. Bedford, and are made a part of this contract, which said loan is evidenced and secured to be paid by seventy-eight (78) certain promissory notes of even date herewith, executed by the said H. L. Bedford, payable to the said association at its office in Syracuse as follows: One of each of said notes to be paid on or before the last Saturday of each and every month until all of said seventy-eight notes are fully paid, together with the interest, and each of said notes after maturity at the rate of six (6) per cent per annum, payable semiannually, until said notes are fully paid. And the said mortgagor, H. L. Bedford, for himself and his heirs, executors, administrators, and assigns, hereby covenants and agrees with the party of the second part, its successors and assigns, to pay...