Bowlley v. Kline

• Citation: 63 N.E. 723,28 Ind.App. 659
• Parties: BOWLLEY v. KLINE et al.
• Decision Date: 11 April 1902
• Court: Indiana Appellate Court

28 Ind.App. 659

63 N.E. 723

BOWLLEY

v.KLINE et al.

Appellate Court of Indiana.

April 11, 1902.

Appeal from circuit court, Shelby county; F. E. Gavin, Special Judge.

Action by Andrew C. Bowlley against Mary E. Kline and others. From a judgment for defendants, plaintiff appeals. Affirmed.

Adams & Carter, A. E. Lisher, and Joseph Chez, for appellant. Lee F. Wilson and Wray & Campbell, for appellees.

ROBY, J.

The legislature, by an act which became effective July 1, 1897, provided, among other things, that “the bonds, notes or mortgages belonging to any association shall not be negotiable except upon an order of the circuit court or the judge thereof, in vacation, of the county in which the principal office of said association is situated.” Section 4463e, Burns' Rev. St. 1901. The first paragraph of complaint is founded upon a note and mortgage executed October 16, 1894, by John Kline, to the Mutual Loan & Savings Company of Shelbyville, Ind., in the form usual to building and loan contracts. An assignment thereof was made by the payee to appellant on December 8, 1898. The appellant held second mortgages covering the same land described in the first paragraph, and set them up in subsequent paragraphs of the complaint. Kline paid all amounts due under the contract up to March 6, 1897, and departed life April 22, 1897, leaving an estate of less than $500, which was set over to his widow under the statute. No payments were made after March 6th, aforesaid. The payee of the note was a building and loan association, organized under the laws of the state of Indiana. The assignment was made without any order by any court or judge, as provided by the act of the legislature above set out.

The first conclusion of law was to the effect that the transfer by the payee was in violation of law, and that appellant was not entitled to recover on his first paragraph of complaint. The correctness of the conclusion depends (1) upon whether the act of 1897 applies to instruments executed prior to its enactment; (2) whether, if so applied, it impairs the obligation of such contracts; (3) whether a building and loan association, prior to its enactment, had or had not power to negotiate its securities. The powers of building and loan associations, conferred by the act of 1885, included those of suing and being sued; of holding and conveying real estate and personal property; of loaning money, and securing its repayment by note and mortgage and otherwise; of purchasing at sheriff's or public sale real estate upon which it had an incumbrance, or in which it had an interest; of conveying, leasing, or mortgaging such real estate; of purchasing real estate and conveying it in fee simple, not in excess of 50 acres at one time. Sections 2, 3, 10, 11, Acts 1885, p. 81 (sections 4445, 4446, 4453, 4454, Burns' Rev. St. 1901). The right of a stockholder to withdraw and receive the amount paid in by him was also fixed by statute. Acts 1885, p. 81 (section 4447, Burns' Rev. St. 1901). There was no legislation forbidding or restricting the transfer of bonds, notes, or mortgages held by such an association, prior to the act of 1897. The general rule applicable to the assignment of securities by corporations is accurately stated in a recent text-book as follows: “A corporation which has received bills, notes, bonds, or other choses in action in the course of its business has the same power as a natural person to negotiate or assign the same, provided it does so for a legitimate corporate purpose, and violates no express restriction in its charter.” 1 Clark & M. Corp. § 158. The rule applies to building and loan associations. Davis v. Union No. 3, 32 Md. 285;Grommes v. Sullivan, 26 C. C. A. 320, 81 Fed. 45, 43 L. R. A. 419, and note; North Hudson Mut. Building & Loan Ass'n v. First Nat. Bank of Hudson, 79 Wis. 31, 47 N. W. 300, 11 L. R. A. 845, and note; Quien v. Smith, 108 Pa. 325;Wright v. Hughes, 119 Ind. 324, 21 N. E. 907, 12 Am. St. Rep. 412. All written promises to pay money are negotiable by indorsement so as to vest the property thereof in the assignee, who may recover on such instrument in his own name. Sections 7515, 7516, Burns' Rev. St. 1901. And the right to take a note ordinarily implies a power to assign it. Hardy v. Merriweather, 14 Ind. 203. That in the legitimate conduct of its business it may become desirable and necessary for a building and loan association to negotiate and assign paper held by it is illustrated by the facts of this case. Holding a first mortgage upon real estate, the owner of which dies insolvent, the holder of a junior lien proposes to buy its claim, thereby reaching the same result that would follow from a foreclosure sale, purchase, and redemption. No reason can be suggested why it should not have power to save itself from the annoyance and risk of litigation, and collect its money by selling and assigning its note and mortgage to him. The legislature, by the negative and restrictive language used in the act of 1897, recognized the prior existence of the right. Bank v. Sharp, 6 How. 301, 12 L. Ed. 447. It follows that, when the note and mortgage were executed by Kline, they carried with them the promise of the maker to pay to the assignee, if they should thereafter be properly assigned by the payee. The law is a part of every contract. Pennsylvania Co. v. Clark, 2 Ind. App. 152, 27 N. E. 586. The law as it existed at the time of the execution, and not the law as it was when the assignment was made, determines the right to make it. Bank v. Sharp, supra. Had the legislature thereafter attempted to destroy the negotiability of the contract, its act would have been void. Article 1, § 10, Fed. Const.; article 1, § 24. Const. Ind.; Bank v. Sharp, supra. Nor in order to produce such result was it necessary that the act be prohibitive. “One of the tests that a contract has been impaired is that its value has by legislation been diminished. It is not by the constitution to be impaired at all. This is not a question of degree or manner or cause, but of encroachment in any respect upon its obligation, dispensing with any part of its force.” Bank v. Sharp, supra; Johnson v. Board, 140 Ind. 152, 39 N. E. 311;McClelland v. State, 138 Ind. 321, 37 N. E. 1089;Edwards v. Kearzey, 96 U. S. 611, 24 L. Ed. 793;Walker v. Whitehead, 83 U. S. 314, 21 L. Ed. 357;State v. Helms, 136 Ind. 122, 35 N. E. 893;Association v. Elbert, 153 Ind. 198, 54 N. E. 755. The effect of the act is to render an assignment made without the order therein required noneffective and void. Dudley v. Congregation, 138 N. Y. 451, 34 N. E. 281; The Vigilancia, 19 C. C. A. 528, 73 Fed. 452-457; Clark & M. Corp. § 159. To make the right of assignment to depend upon the consent of a third person, which may or may not be given, is to induce a new and burdensome provision into the contract. The Vigilancia, 19 C. C. A. 528, 73 Fed. 452; The Vigilancia (D. C.) 68 Fed. 781. In the case cited the consent required was that of the holders of two-thirds of the stock of the corporation. It was held that a contract made prior to the act, and calling for the execution of a mortgage subsequent thereto, would be impaired thereby, and the act was construed to have only a prospective operation. The consent of the stockholders required by the New York act considered in Re The Vigilancia, might or...