Eastern Bldg. & Loan Ass'n v. Bedford

• Decision Date: 31 May 1898
• Docket Number: 487.
• Citation: 88 F. 7
• Parties: EASTERN BUILDING & LOAN ASS'N v. BEDFORD.
• Court: U.S. District Court — Western District of Tennessee

88 F. 7

EASTERN BUILDING & LOAN ASS'N v. BEDFORD.

No. 487.

United States Circuit Court, W.D. Tennessee, Western Division.

May 31, 1898

Buchanon & Minor, for plaintiff.

Froysier & Heath, for defendant.

By an act of the legislature of the state of Tennessee of March 28 1891 (chapter 2), entitled 'An act to regulate the business of building and loan associations. ' It was required that no building and loan association organized under the laws of another state should do business in Tennessee unless said association should deposit, and continually thereafter keep deposited, in trust for all its members and creditors, mortgages amounting to not less than $25,000 or more than $50,000, at the discretion of the treasurer. They were also required, before commencing to do business, to file with the treasurer of the state a duly-authenticated copy of their charter or articles of incorporation, and a certificate of deposit of the valid securities required. By another section the officers directors, or agents of foreign building and loan association were forbidden to solicit subscriptions to their stock in that state, or to sell or knowingly cause to be issued to a resident of the state any stock of the association, unless a deposit had been made in accordance with the terms of the act, and it had otherwise complied with its provisions. Agents were required to be licensed by the treasurer, for which they were to pay a fee of $2, and he was also to receive a fee of $25 for filing the papers mentioned in the act. Any violation of the prohibition against the sale of stock without a compliance with the act was made a misdemeanor, and punished as such by fixed penalties. By another act of March 17, 1891 (chapter 95), chapter 31 of the acts of the legislature of Tennessee for the year 1877, being sections 1992 to 2003 of Milliken & Vertrees' Code, was amended so as to apply that act to corporations, chartered, under the laws of other states, known as 'building and loan associations,' and other specifically enumerated corporations. The act of 1877, carried into Milliken &amp Vertrees' Code was an act for the encouragement of mining and manufacturing corporations, which were required, if desiring to carry on their business in this state, to file in the office of the secretary of state a copy of their charters or articles of incorporation, and such corporations were to be deemed and taken to be corporations of this state, subject to its jurisdiction, to sue and be sued therein in the mode and manner directed by law in the case of corporations created and organized within the state. Then the act conferred the privilege of acquiring and holding real property, which was made liable for its debts. The act gave resident creditors priority. Taxation was regulated. Rights of way were given for the maintenance of roads, bridges canals, tramways, telegraph lines, etc.; but they were required to begin business within a year, it being declared to be the object of that act to secure the opening and development of the mineral resources of the state, to facilitate the introduction of foreign capital, etc.; and such corporations were authorized to establish villages and settlements for the use and residence of its employes and others; and the sale of liquor was prohibited within a radius of five miles of such villages and settlements. Subsequently, by an act of March 26, 1891 (chapter 122), this act (chapter 31, 1877) was extended to all corporations chartered or organized under the laws of other states or countries for any purpose whatsoever, which may desire to do any kind of business within the state of Tennessee. This last act further required that a copy of the charter should be filed with the secretary of state, and an abstract thereof in every county in which a foreign corporation desired to do business. And then, by section 3, it was enacted that 'it shall be unlawful for any foreign corporation to do or attempt to do any business or own or acquire any property in this state without first having complied with the provisions of this act, and a violation of this statute shall subject the offender to a fine of not less than one hundred dollars, nor more than five hundred dollars, at the discretion of the jury trying the case. ' And by section 4, when the corporation had complied with the provisions of the act it should be to all intents and purposes a domestic corporation of the state, and if it had no agent in the state upon whom process could be served, it was liable to attachment, to be levied upon any property owned by the corporation. The last section of the act re-enacted the provisions of chapter 31 of the Acts of 1877, thus extending all the privileges of that original act to all corporations whatever coming into the state to do business. The plaintiff is a building and loan association of the state of New York, having its location at the city of Syracuse, which has never complied or attempted to comply, except as hereinafter stated, with any of the foregoing acts, nor with a subsequent act known in the legislation of the state as the 'Curative Act' of May 10, 1895 (chapter 119), which authorized corporations that had been doing business in the state contrary to the provisions of the former act to file their charters as required, and be relieved of the penalties and forfeitures incurred, but with the important provision that no suit should be instituted upon any contract thus made valid until after two years from the passage of the act.

By the charter of the plaintiff company it was authorized to establish a local board anywhere, to be composed of its members in that locality, to assist in carrying on its business, it being a mutual company. It had a firm of agents in Memphis, Shelby county, Tenn., and also a local board composed of members thereabouts. On the 23d day of January, 1891, before the passage of any of the foregoing acts except that of 1877, the defendant signed in Shelby county, Tenn., a written application for shares in the plaintiff association in the form prescribed for the purpose, and customary in doing business. This application was forwarded by mail through the above agents to the plaintiff company at its home office in Syracuse, N.Y. The application was granted by the board of directors at the home office, and on February 2, 1891, a certificate for 46 shares of the stock, amounting to $4,600, was issued to the defendant, being sent to him by mail through the Memphis agents. According to the scheme of the company, this stock was to mature by the payment of its dues and assessments on the 1st of August, 1897. These dues and assessments were payable at its home office in Syracuse, N.Y., but a by-law authorized them to be paid to the local board or agent where the stockholder resided, if the stockholder so desired. On March 20, 1891, the defendant made a written application for a loan, which, according to the custom of the company, was sworn to, and appraisers appointed by the local board indorsed on the application a sworn appraisement of the property which was offered as a security. In this application for a loan of $4,600 for 6 1/2 years it was stated that the loan was to bear interest at the rate of 5 per cent. per annum, and a premium of 5 per cent. per annum, payable annually on or before the last Saturday of each month, 'all payments to be made as the lender may direct,' and to secure the same the defendant agreed to give a mortgage upon the property offered as security. This application and appraisement, like the application for stock, was sent on the 18th of May, 1891, the board of directors at Syracuse, in the state of New York, recommended and approved the loan. Subsequently Bedford made a written application, again sent through the mails for what is called 'an advance of loan,' and referred to the resolution of the board of directors of May 18, 1891, allowing the advance at 'a premium of ten per cent.,' attached to which written application was the affidavit of one of the agents, which was again forwarded to the board of directors by mail. The defendant and his wife then executed a mortgage upon real estate situated in Shelby county, Tenn., dated May 1, 1891, duly and properly acknowledged June 18, 1891, filed for record June 20, 1891, and duly recorded in the register's office of Shelby county. This mortgage acknowledged the receipt of $4,600, and secured the sum of $5,683.08, 'the same being the principal, interest, and premium of the loan, evidenced by 78 notes, dated Memphis, Tenn., May 1, 1891, payable to said association at its office in Syracuse, monthly. ' Having signed these notes at Memphis, and recorded this mortgage, they were again forwarded by these agents, through the mail, to the home office, in the city of Syracuse, N.Y., and thereupon the plaintiff company drew its draft on the Bank of Onondaga at Syracuse, N.Y., in favor of the defendant, for the sum of $4,140, which in due course of business was paid to him, or to his order, at Syracuse, N.Y. The shares of stock were withdrawn, duly receipted for, according to the customary method of doing business. The plaintiff company did file a copy of its charter with the secretary of state on August- 11, 1893, and an abstract thereof in Shelby county of August 15, 1893, more than two years after the completion of this transaction, and before the passage of the curative act. The 78 notes executed were all dated May 1, 1891. Each was for $72.86, except the last three, which were each for the sum of $38.36. They were all payable to the order of the plaintiff company at its office in Syracuse, N.Y., the first on or before the last Saturday of May, 1891, and each successive one on the last Saturday of every month thereafter up to and including the last Saturday of ...