Cloone v. Minot Bldg. & Loan Ass'n

• Decision Date: 06 December 1938
• Docket Number: No. 6516.,6516.
• Court: North Dakota Supreme Court
• Parties: CLOONE et al. v. MINOT BUILDING & LOAN ASS'N et al.

68 N.D. 543

282 N.W. 441

CLOONE et al.

v.MINOT BUILDING & LOAN ASS'N et al.

No. 6516.

Supreme Court of North Dakota.

Dec. 6, 1938.

Syllabus by the Court.

1. A member of a building and loan association who enters into a contract with it, by which he receives a benefit, cannot, under the principles governing all corporations, deny its existence.

2. Where a usury statute imposes a penalty for violation thereof of twice the amount of interest collected, such penalty does not accrue until usurious interest is actually paid and received.

3. Chapter 94, Session Laws of 1931 of the State of North Dakota, permits building and loan associations to charge interest not to exceed 12%, and provides that such rate of interest is not usurious unless in excess of 12%.

4. Where plaintiffs continued to be members of defendant Association and to make payments after the effective date of Chapter 94, Session Laws of North Dakota for 1931, and it being conceded by plaintiffs that no usurious interest was paid until after the effective date of said Chapter 94, for reasons stated in the opinion it is held that such payments are governed by the provisions thereof, and such interest payments not being in excess of 12% are not usurious.

Appeal from District Court, Ward County; A. J. Gronna, Judge.

Action by Elaine Cloone and W. F. Cloone against the Minot Building & Loan Association, and the Minot Federal Savings & Loan Association to recover penalties under the usury statutes. From a judgment in favor of the plaintiff, the defendants appeal.

Judgment reversed and action dismissed.

L. J. Palda, Jr., of Minot, for appellants.

B. H. Bradford, of Minot, for respondents.

W. H. Shure, Nilles, Oehlert & Nilles, and Burnett, Bergesen and Haakenstad, all of Fargo, and Fred J. Fredrickson, of Valley City, amici curiæ.

SATHRE, Judge.

This is an appeal from the District Court, Ward County, from a judgment in favor of the plaintiff.

In May, 1936, the plaintiffs brought an action against the defendant Building and Loan Association to recover penalties under the usury statutes of this state.

The case was tried to a jury, but at the close of the testimony both parties moved for directed verdicts and agreed that the court might take the case from the jury and the issues be tried by the court. The court thereupon dismissed the jury and made its findings, and upon these findings entered judgment for the plaintiff.

Defendants thereupon made a motion for judgment notwithstanding the verdict, or in the alternative for a new trial, which motion was denied by the court. The defendant appealed and demanded a trial de novo.

Under the proceedings had in the court below, and upon the state of the record in this case, the defendants are not entitled to a trial de novo. This question was before this court in the case of Wasson v. Brotherhood of Railroad Trainmen, 65 N.D. 246, 257 N.W. 635. We quote from the syllabus in that case: “Where a law action is tried to a court and jury and at the close of the evidence both plaintiff and defendant move for a directed verdict, respectively, and thereupon the jury is dismissed and the issues are determined by the court, upon appeal from such determination to this court, the same does not constitute a case tried to the court without a jury, as contemplated by section 7846. 1925 Supplement to the Compiled Laws of 1913, as amended by chapter 208, Laws of 1933.”

The defendants assign numerous specifications of error, but only the first and the fourth need to be considered here, namely:

I. That the court erred in denying defendant's motion for a directed verdict and for judgment of dismissal on their motion at the close of the taking of testimony.

IV. The court erred in denying defendant's motion for judgment notwithstanding findings and verdict or for a new trial.

Other assignments are directed against rulings of the trial court relative to admission or exclusion of testimony, but in view of the law applicable to this case, they need not be considered.

The question before us, therefore, is whether or not the conclusions and judgment of the trial court are sustained by the record as a matter of law.

The findings so far as material here are in substance as follows:

(1) In December, 1922, the Mutual Building and Loan Association of Minot was duly organized and received its charter under the laws of the State of North Dakota, and in the year 1926 the name of said corporation was changed to the Minot Building and Loan Association, and in October, 1935, the said corporation was reorganized and converted into the Minot Federal Savings and Loan Association, and the business theretofore conducted under the name of the Minot Building and Loan Association was taken over by the Minot Federal Savings and Loan Association, and that the said corporation duly qualified under the federal law.

(2) That thereafter the incorporators of the defendant corporation adopted certain by-laws, but that such by-laws were never certified by a majority of the Board of Directors and were never recorded in any book known as the “Book of By-Laws” open to public inspection, that such by-laws did not provide for or fix rates of premium and interest at which loans would be made to any stockholder, nor did the charter of said corporation contain any provision with reference to premiums to be charged in connection with loans to stockholders.

(3) That on the 9th day of April, 1929, the plaintiffs applied to the Minot Building and Loan Association for a loan of $3,000, that thereafter the application was amended increasing the sum applied for to $3,300, and the plaintiffs were then required to subscribe for 33 shares of stock in the corporation as a condition precedent to receiving the loan, and the plaintiff did so subscribe and that thereupon the plaintiff executed and delivered to the Minot Building and Loan Association their note for the said loan, which note is as follows:

“For value received we promise to pay the Minot Building and Loan Association or order the sum of Thirty Three Hundred 00/100 Dollars, * * *, at the Office of said Association, in the City of Minot, North Dakota, (said sum being money advanced to Elaine Cloone and W. F. Cloone, her husband by said Association upon 33 shares of Class ‘A’ series of the stock of said Association) in monthly payments as follows, viz: The sum of $44.55 in advance, the receipt of which is hereby acknowledged, the sum of $44.55 on the first day of June A. D. 1929, and the further sum of $44.55 on the first day of each and every month thereafter, for a period of 118 months and for the principal and interest upon said sum, and also to pay the further sum of $16.50 on the first day of each and every month, as and for the monthly dues on said 33 shares of the Class ‘A’ series of the stock of such Association, * * *.”

That for the purpose of securing payment of said note, the plaintiffs executed and delivered to Minot Building and Loan Association a mortgage on certain real property owned by the plaintiffs.

(4) That all of the payments provided for in said note were duly made by the plaintiffs to the defendant Minot Building and Loan Association up to and including October 1st, 1935, and that the plaintiffs did not know, nor were they in any manner advised, concerning the application of such payments on the principal and interest, until just prior to the commencement of this action and long after October 25, 1935.

(5) That from April 9, 1929 to October 1st, 1935, the plaintiffs paid to the Minot Building and Loan Association upon their shares of stock the sum of $1,287, making the total amount paid by the plaintiffs to the defendant Minot Building and Loan Association on account of the said loan and stock to October 1st, 1935, the sum of $4,761.90. That during the month of October, 1935, the defendants required the plaintiffs to surrender their stock for cancellation and to have the avails thereof applied upon said loan for the purpose of permitting the Minot Building and Loan Association to qualify under the Federal law, and the plaintiffs consented to such cancellation. That from April, 1929 to October, 1935, the Minot Building and Loan Association, defendant, had allotted to the plaintiffs as dividends upon their stock the sum of $111.70, that upon the cancellation of the stock the defendants charged the plaintiffs' account with the sum of $82.50 membership fee of $2.50 per share of stock, and accredited to plaintiffs upon their note the sum of $1,316.20, instead of $1,398.70. That thereafter the plaintiffs paid to the defendant Minot Federal Savings and Loan Association the sum of $296.11 on account of principal and interest, and that the total amount paid for principal by the plaintiffs upon this loan is the sum of $3,300, and that the total amount of interest paid thereon is $1,869.71, and that such amount paid as interest accruing to the dates and amounts paid constitutes interest upon said debt at approximately 12%, and in accordance with the stipulation of the parties to this action to at least 10 3/4% per annum.

(6) That such interest was collected and received by the defendant Minot Building and Loan Association with full knowledge that said rate of interest was at least 10 3/4% and that the defendant corporation intended to collect and receive interest at that rate.

(7) That under the practice of the defendant Minot Building and Loan Association borrowers were required to subscribe for certain stock designated as Class “A”, which stock was subject to a membership fee of $2.50 per share.

(8) That when plaintiffs applied for and received their loan, they understood they were to pay interest at the rate of 6.2% on the whole loan of $3,300 for the full period of the loan and that they further understood that the principal was divided into 120 payments of $27.50 each and the interest was payable in monthly installments of $17.05 for 120 months or until such time as the loan was paid; that had the...