Building & Loan Ass'n of Dakota v. Chamberlain

• Decision Date: 24 November 1893
• Citation: 56 N.W. 897,4 S.D. 271
• Parties: BUILDING & LOAN ASS'N OF DAKOTA v. CHAMBERLAIN.
• Court: South Dakota Supreme Court

56 N.W. 897

4 S.D. 271

BUILDING & LOAN ASS'N OF DAKOTA v. CHAMBERLAIN.

Supreme Court of South Dakota

November 24, 1893

Syllabus by the Court.

1. A party who has contracted with a corporation de facto, as such, cannot be permitted after receiving the benefits of his contract, to allege any defects in the organization of such corporation affecting its capacity to enforce such contract but all such objections, if valid, are available only on behalf of the sovereign power of the state.

2. Stockholders who subscribe for stock, or assist in organizing a corporation under a charter, and reap the benefits of the law, and thereby induce persons to credit the corporation and do business with it on the faith of its being legally organized, will be estopped from alleging that the law under which the corporation is organized is unconstitutional, as a means of avoiding any personal liability by reason of these transactions or contracts with such corporation.

Appeal from circuit court, Potter county; H. G. Fuller, Judge.

Action by the Building & Loan Association of Dakota against Albert E. Chamberlain, Kate V. Chamberlain, and J. R. Hughes. From a judgment overruling his demurrer to the complaint, defendant Albert E. Chamberlain appeals. Affirmed.

A. E Chamberlain, (Walter C. Fawcett, of counsel,) for appellant. C. E. Reed and Taubman & Potter, for respondent.

BENNETT P. J.

This was an action brought by the respondent in the court below upon a contract for the payment of money, executed by the defendant, Albert E. Chamberlain, and to foreclose a mortgage upon real estate, which was given by him to secure the payment of said money.

The Building & Loan Association of Dakota is a corporation organized under the provisions of "An act to provide for the incorporation and regulation of building and loan associations," passed by the territorial legislature of Dakota, and approved March 13, 1885, and an act amendatory thereof, approved March 11, 1887. Said act, after prescribing the mode in which corporations may be organized as therein specified, provided, among other things, not material here "Sec. 4. The money in the treasury, if equal to the amount of one share of stock in such association, shall be offered for loan in open meeting, and the stock holder who shall bid the highest premium for the preference or priority of loan shall be entitled to receive a loan for the full amount of each share of stock held by such stock holder; provided that good and ample security shall be given by the borrower to secure the re-payment of the loan. Sec. 5. A borrower may re-pay a loan at any time by the payment to the corporation of the principal sum borrowed together with interest, *** not to exceed twelve per cent. per annum; together with such per cent. of premium per annum as may have been bid for the preference or priority of such loan. Or in case the amount of premium bid for the priority of such loan shall be deducted in advance and the re-payment thereof is made before the expiration of the eight years after the organization of the corporation, there shall be refunded to such borrower one eighth of the premium paid for every year of said eight years unexpired; provided, that when the stock is issued in separate series, the *** time shall be computed from the date of the issuing of its shares of stock on which the loan is made. Sec. 6. No premium, fine or interest on such premiums that may accrue to the said corporation according to the provisions of this act shall be deemed usurious; and the same may be collected in this territory."

On the 1st day of March, 1889, the defendant Albert E. Chamberlain was a member of said association, and the owner and holder of 16 shares of stock of said association; said stock being issued in separate series; 10 shares being dated March 1, 1889. On that day the plaintiff made a loan of $1,600 to said defendant Albert E. Chamberlain, the whole amount of premium bid therefor being deducted in advance, and for which defendant Albert E. Chamberlain, on March 1, 1889, made, executed, and delivered to the said plaintiff his promissory note, in writing, and said note so executed and delivered is in words and figures following, to wit: "$1,600.00. Aberdeen, Dakota, March 1st, 1889. For value received, after three years from date, and before nine years from date, I promise to pay to the order of the Building and Loan Association of Dakota, at its home office, in Aberdeen, Dakota, the sum of sixteen hundred dollars, with interest at the rate of six per cent. per annum on the sum of seven hundred eighty-four dollars, payable monthly in advance. It is understood that this note is given for a loan obtained on sixteen shares of stock of said Building and Loan Association of Dakota, and if the maker hereof fails to make any monthly payment on said stock, or to pay any installment of interest for a period of six months after the same is due, then the whole amount of this note shall become due and payable at once. But if the maker hereof shall pay all installments of interest which become due hereon, and all fines and monthly payments which become due on said stock, until said stock becomes fully paid in, and of the value of $100 per share, and before any of said installments of interest or monthly payments shall have been past due for a period of six months, then, upon the surrender of said stock to said association, this note shall be deemed to be fully paid, and canceled. This note is understood to be made with reference to, and under the laws of, the territory of Dakota. All payments hereon payable at the office of the association in Aberdeen, Dakota. Albert E. Chamberlain. [ Margin:] If this note is paid before eight years from date, there shall be allowed such rebate from the amount of the premium as the board of directors of said association shall deem equitable. Premium, $816.00; loan, $1,600.00."

To secure the payment of said note, interest thereon, and loan, and also to secure the payment of the monthly dues upon said stock, the fines for failure to pay said monthly dues, and the fines for failure to pay the interest payments when due, the said defendant Albert E. Chamberlain did, on the 1st day of March, 1889, execute and deliver to the plaintiff a mortgage deed, and thereby convey to the plaintiff certain real property, which was described therein, which mortgage deed "provided, further, in case of default in the payment of the principal, when due, or of interest, or of any part thereof, or if the taxes or premiums on insurance on the property hereby mortgaged be due and unpaid for the space of six months, or should said sixteen shares of stock, as above recited and mentioned, or any part thereof, be sold or forfeited for the nonpayment of dues, fines, or penalties, as provided in the by-laws of said second party, then, and in either of said cases, the whole principal debt aforesaid shall immediately become due, payable, and recoverable, and the said party of the first part, in such case, does hereby authorize and empower the said party of the second part, its successors or assigns, to sell the hereby granted premises at public auction or otherwise, and convey the same to the purchaser in fee simple, agreeable to the statute in such case made and provided, or which may hereafter be in force, and, out of the moneys arising from such sale, to retain the principal and interest, as well as any fines or penalties which shall then be due on said obligation, and as provided by the by-laws of said association, together with all the costs and charges of foreclosure. ***"

The by-laws of said association in force at the time of the contract provide that "any member who shall neglect or refuse to pay his or her monthly dues of sixty cents per share on the day the same shall become due, shall pay a fine of ten cents per share upon each share of stock, payable monthly, for every month a monthly payment shall be allowed to run past due." "For each day an interest payment shall be allowed to run unpaid after it becomes due, there shall be the sum of five cents per day paid the association upon each one hundred dollars of loan for which such interest payment...