Eastern Building & Loan Ass'n of Syracuse, N.Y. v. Welling

• Decision Date: 21 May 1902
• Citation: 116 F. 100
• Parties: EASTERN BUILDING & LOAN ASS'N OF SYRACUSE, N.Y., v. WELLING et al.
• Court: U.S. Court of Appeals — Fourth Circuit

116 F. 100

EASTERN BUILDING & LOAN ASS'N OF SYRACUSE, N.Y., v. WELLING et al.

United States Circuit Court, D. South Carolina.

May 21, 1902

Russell & Winslow and Mordecai & Gadsden, for complainant.

Mitchell & Smith, for defendants.

SIMONTON Circuit Judge.

The facts of this case are fully set out in the opinion of this court filed 25th July, 1900. 103 F. 352. When that opinion was filed a writ of error was pending to a judgment of the supreme court of South Carolina in a cause of Welling and Bonnoitt against the Eastern Building & Loan Association of Syracuse, N.Y. This judgment had been pleaded in bar of the relief asked in the bill as res judicata. The court was of the opinion that the judgment could not be pleaded as res judicata so long as the decision of the supreme court had not been had on the writ of error. It now appears that the writ of error has been dismissed by the supreme court upon the ground that no federal question was involved in the case. So the judgment of the supreme court of South Carolina is final. The defendants have now filed a plea in her supplemental to the former, setting forth the action of the supreme court so sustaining their plea of res judicata. This is the question in this case.

Rev St. S.C. 1893, Sec. 1895, provides that any mortgagor who has paid in full his mortgage may tender to the mortgagee the fees for entering satisfaction thereon, and thereupon demand that satisfaction be so entered; that any mortgagee, after such payment and tender, who shall not repair to the office of record within three months thereafter and enter satisfaction as demanded, shall forfeit and pay to the party aggrieved a sum of money not exceeding one-half of the amount of the debt secured by such mortgage, to be recovered in any court of competent jurisdiction. Welling and Bonnoitt had made application to the Eastern Building & Loan Association of Syracuse, N.Y., for 50 shares of its capital stock. Their application had been granted and the certificates issued to them, making them stockholders, expressly subject to all the rules and by-laws of the corporation. Subsequently they made application for a loan of $5,000 under the rules and by-laws of the association. This application was granted and the loan made, they receiving in cash $4,500. Before completing the loan Welling and Bonnoitt executed 78 notes, payable from month to month, and extending over a period of 78 months from the date of the mortgage; 75 of them being for $79.20 each, and the last 3 in the order of payment being for $41.70 each, they being in the aggregate $6,177.60. Contemporaneously with these notes they also executed a mortgage of a tract of land in Darlington county, S.C. This mortgage, after the granting part, states as follows:

'This grant is intended as a security for the payment of the sum of sixty-one hundred seventy-seven and 60/100 dollars, the same being the principal, interest, and premium of a loan from said association, which said loan was made pursuant to and accepted under the provisions of the by-laws of said association, and which said by-laws have been read by the mortgagors, and are hereby made a part of this contract which said loan is evidenced and secured to be paid by seventy-eight (78) certain promissory notes of even date herewith, executed by the said Lawrence S. Welling and Marion Bonnoitt, payable to the said association, at its office in Syracuse, as follows: One of each of said notes is to be paid on or before the last Saturday of each and every month until all of the seventy-eight notes are fully paid, together with interest on each of said notes after maturity at the rate of six (6) per cent. per annum, payable semiannually until said notes are fully paid.'

Then follow the covenants:

'And the said mortgagors, for themselves, and their heirs, executors, administrators, and assigns, hereby covenant and agree with the party of the second part, its successors and assigns, to pay said principal, interest, and premiums at maturity, and the interest accruing on said notes after maturity, and all fines and penalties that may be imposed pursuant to the provisions of the constitution and by-laws of said association, and also keep and perform all promises and engagements made and entered into with said association according to the true intent and meaning of its by-laws and articles of association.'

-- With the usual insurance clause. Then the default clause in these words:

'And it is hereby expressly agreed, by and between the parties to these presents, that if default be made in the payment of any one of said notes, or any part thereof, as herein provided, or in case of waste, or nonpayment of taxes, assessments, or impositions on said premises, or in case of neglect or refusal to keep the premises insured, as herein provided, or in case the improvements thereon shall not be kept in good order or repair, or in case of a breach of any of the covenants or agreements contained herein, or in case of a failure to duly observe and keep the by-laws of the said association, and in either or any of such cases, the whole of the said principal sum, interest, premiums, fines, dues, and costs, shall at once become due and payable, at the option of said association, its successors or assigns; and it shall be lawful for said association, or its successors or assigns, at any time thereafter, to sell the premises hereby granted, or any part thereof, in the manner prescribed by law, and out of all moneys arising from such sale to retain the amount due and unpaid for principal, interest, premiums, fines, dues, and costs thereof, taxes, assessments, impositions, insurance, and other advances, together with the costs and charges of making such sale, and the overplus, if any there be, shall be paid by the party making such sale, on demand, to the said Lawrence S. Welling and Marion Bonnoitt, or their heirs or assigns. And this conveyance shall be void if full payment of the aforesaid moneys, both principal and interest, be made as hereinbefore specified, and if the aforesaid covenants, and each of them, be well and truly kept and performed, as herein specified and provided.'

The mortgagors paid all of the notes but the last. When that became due they tendered the full sum of it, and the costs of entry of satisfaction, and demanded thereupon that satisfaction be entered. These tenders were refused. Thereupon Welling and Bonnoitt, three months thereafter, brought their action in the court of common pleas for Darlington county, S.C., against their mortgagee for the penalty provided in the act. The building and loan association, having been served with summons, entered its appearance and filed its answer to the suit. Its defense was that this advance or loan was effected to the plaintiffs as stockholders in a mutual association; that it was governed wholly by the by-laws of the association and the terms of its charter, all of which entered into and were a part of the contract; that the mortgage did not secure merely the notes therein specified, but that it was an indemnity and security to the association for the performance by the borrowing stockholder of all his obligations to the association, and that among these was an obligation to pay his dues, as provided by the by-laws, until the stock of the association had reached par; that although the notes of the plaintiffs had been paid in full, yet the stock of the association had not reached par, and so the obligation of the borrowing stockholder, secured by this mortgage, had not been released and satisfied. So the issue was drawn. Was this mortgage satisfied? If it was, defendants must pay the penalty. If not, the complaint must be dismissed. The cause was tried before a judge with a jury. The defendant put in evidence its charter, by-laws, application for the stock, certificates of stock, application for the loan, grant of the loan, and all papers connected therewith, to sustain its contention that the mortgage was not satisfied. The case went to the jury under the charge of the judge, and a verdict was found for plaintiffs, and judgment entered accordingly. On appeal by the association this judgment was affirmed by the court of last resort. This judgment was that upon the pleadings and the evidence the mortgage was satisfied, and as its result such satisfaction should be entered on the record.

Meanwhile the Eastern Building & Loan Association of New York, pending the writ of error from the supreme court of the United States, filed its bill of complaint in this court against Welling and Bonnoitt, the same parties who were plaintiffs in the action at law in the state court. This bill sought the foreclosure of the mortgage, the subject-matter of the suit in the state court. It set forth in elaborate detail the facts connected with the application for subscription by the defendants to the capital stock of the complainant association, the granting of this application, the issue of the certificates of stock, upon each of which was printed the by-laws of the association as part of the contract of subscription, the application by defendants of the loan in advance, all made subject to the by-laws of the association the granting of the loan, the execution of the 78 notes, and the execution and delivery of the mortgage. The bill avers that this mortgage, construed in connection with the charter and by-laws of the association, the declarations of the defendants in applying for the stock, and subsequently for the loan thereon,...