Burton v. Schildbach
| Decision Date | 13 April 1881 |
| Citation | 45 Mich. 504,8 N.W. 497 |
| Court | Michigan Supreme Court |
| Parties | BURTON v. SCHILDBACH and others. |
Where parties in good faith, and contemplating a lawful business organize what they intend as a corporation, which organization is ineffectual, the person having the money jointly contributed will not be allowed to retain what he has received, but may be obliged to account to those who are equitably entitled to the same. Defendant was a member of a building and loan society, and borrowed money upon the shares held by him, and in compliance with the rules and by-laws gave the society therefor an obligation, agreeing, among other things, to pay certain weekly sums as dues on his stock and interest on said loan, until the dissolution of the corporation, with a mortgage to secure the performance of such obligation. Subsequently it was determined, in a proceeding to which defendant was not a party, that the attempted incorporation of the society was ineffectual, and a receiver was appointed, to whom the defendant afterwards made payments. A bill was filed by the receiver asking a foreclosure of defendant's mortgage. Held, that the securities were invalid, and a foreclosure could not be had but, as the members of the society had put money into a common fund, and some of them had received portions of such fund upon an agreement, that, by reason of the non-existence of the society, could not be carried out, equity would require an adjustment of the accounts between all parties upon the basis of the money paid in and drawn out, and that the bill might be amended so as to authorize such relief, and that defendant, having recognized the receiver by making payments to him, could not be heard to question his appointment in a collateral proceeding.
Mok v. Detroit Building & Sav. Ass'n, 30 Mich 511, explained.
Appeal from superior court.
Romeyn & Romeyn, for defendants.
The legislature of 1869 passed an act to authorize the incorporation of building and savings associations, which is published as chapter 93 of the Compiled Laws of 1871. Several associations were formed under and in supposed conformity with its provisions, and among them the "Detroit Building & Savings Association No. 4," of which the defendant William Schildbach became a member. The articles of association provided for a capital stock of $250,000, divided into 2,000 shares, of which no member could hold more than 20. The shares were to be had on paying an initiation fee of 10 cents, and 25 cents a week thereafter. The purpose of the association was declared to be to make loans to members and enable them to procure houses and places of business. Each share was to entitle the holder to a loan of $125, for which he was to give real estate security. Loans were obtained as follows: At each regular weekly meeting, whenever there were more than $125 on hand, the money was to be sold in loans of $125, and the shareholder who bid the highest premium was to receive it. Each shareholder receiving such a loan was to pay a weekly interest of 15 cents, and also the weekly dues of 25 cents until the dissolution of the corporation. This dissolution was to take place as soon as every shareholder should have received on each share the sum of $125, including the premiums bid as aforesaid, and all mortgages given were then to be discharged or returned to their respective makers. These articles, together with the constitution and by-laws of the association, are given in full in 30 Mich. 514 et seq.
William Schildbach became the owner of 20 shares in the association, and in May, 1873, was awarded a loan thereon of $125 on each share. The premium bid for this appears to have been $178.50 and a bond and mortgage were given as security, which bear date June 10, 1873. The conditions of the bond are as follows:
The mortgage was conditioned for the performance of the condition of this bond. Schildbach made the weekly payments on the bond and mortgage until December 7, 1874, and after that date made payments as follows: $50 May 6, 1875, $25 July 15, 1875, and $25 September 30, 1875. He made no payments after the date last named. The last three payments were made to Michael Martz, receiver as hereinafter mentioned. Sometime in the year 1874 one Andrew Mok, who was also a member of the association and had given to it a similar bond and mortgage, filed his bill in the superior court of Detroit to have the weekly payments which he had made upon the mortgage, except so far as should be necessary to satisfy the accruing interest at the lawful rate, declared to be payments on the principal sum named in the bond and mortgage, and to have those securities decreed to be satisfied and discharged when the principal sum should be thus paid up. The superior court made a decree in accordance with the prayer of the bill, and the defendant appealed to this court. In this court the discussions of counsel were directed mainly to the question whether the act under which the association was organized was constitutionally sufficient for the purpose, and this court was of opinion that it was not. The reasons for the opinion are given in the reported case. Mok v. Detroit Building & Savings Association, 30 Mich. 511. The defect in the act was found to be, that it was not complete and sufficient in itself to permit of incorporations under it, and that it undertook to accomplish the purpose by reference to an indirect and blind amendment of a previous statute, whereas the constitution requires that all amendments of statutes shall present the provisions in full as amended.
The result of this decision was that the association of persons who previously supposed they had...
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