Fidelity Savings Association v. Bank of Commerce

• Decision Date: 18 February 1904
• Citation: 75 P. 448,12 Wyo. 315
• Parties: FIDELITY SAVINGS ASSOCIATION v. BANK OF COMMERCE ET AL
• Court: Wyoming Supreme Court

75 P. 448

12 Wyo. 315

FIDELITY SAVINGS ASSOCIATION v. BANK OF COMMERCE ET AL

Supreme Court of Wyoming

February 18, 1904

ERROR to the District Court, Sheridan County, HON. JOSEPH L STOTTS, Judge.

Suit to redeem from a mortgage upon real estate held by a building and loan association, in which the defendant filed a cross-petition to foreclose the mortgage. The facts are stated in the opinion.

Judgment reversed and cause remanded.

Erastus Smith, E. E. Lonabaugh, C. C. Blake and Adelbert Hamilton for plaintiff in error.

I. The court erred fundamentally in holding the contract "solely a contract of loan" and in eliminating from the transaction the contract of stock subscription and the pledge of the stock as collateral security and the contract provisions as to payment of premium and fines and for final settlement between the parties on the building and loan association plan.

a. All parties to the transaction possessed full legal contractual capacity.

b. The parties thus possessing full legal contractual capacity deliberately, solemnly and with all the legal ceremonial of writing and ensealment, made the contracts shown in the record.

c These contracts are all free from deceit, fraud or imposition and are neither unconscionable nor inequitable, nor contrary to public policy.

II. The contracts at bar are Colorado contracts, authorized by Colorado statutes, but enforceable in Wyoming upon principles of interstate law and comity. (Bennett v. Eastern B. & L. Assn., 177 Pa. St., 233; Pioneer Sav. & Loan Assn. v. Cannon, 36 S. W., 386 (Tenn.); Nat. B. & L. Assn. v. Ashworth, 22 S. E., 521 (Va.); Caesar v. Capell, 83 F. 403; Nickels v. People's B. & L. Assn., 25 S. E., 8 (Va.)

Where the contract does not in express terms declare which law shall govern, and a place of payment is stated in the contract, it is to be construed by the law of the place of payment. (Coad v. Home Cattle Co., 32 Neb. 761; Newman v. Kershaw, 10 Wis. 333; U. S. S. & Loan Co. v. Shain, 77 N. W., 1006 (N. D.); Pioneer S. & Loan Co. v. Cannon, 36 S.W. (Tenn.), 386; Bank v. Rutland, 10 How. Pr., 1; Nickels v. People's B. & L. Assn., 25 S. E., 8 (Va.); Association v. Ashworth, 91 Va. 712; Andrews v. Pond, 13 Pet. (U.S.), 65; R. Co. v. Bank, 79 U.S. 226; Sturdevant v. Bank, 60 F. 730; Central Etc. Co. v. Burnham, 83 Ia. 120.)

The fact that the note is secured by mortgage does not change the rule, the real estate being a mere incident. (Jones on Mtgs., Secs. 657, 659a, 660; Story on Confl. of Laws, Sec. 287a; 2 Kent, 460, 461; Edwards on Bills and Notes, 1010; Boone on Mtgs., 86; U. S. S. & L. Co. v. Shain, 77 N. W., 1006 (N. D.); Trust Co. v. Burton, 74 Wis. 329; Bennett v. Assn., 177 Pa. St., 233; Assn. v. Vance, 27 S. E., 274, 692 (S. C.); Assn. v. Hoffman, 27 S. E., 692 (S. C.); Caesar v. Capell, 83 Fed. R., 403; Rector v. Assn., 98 F. 171.)

Comity sanctions the enforcement of contracts of one state by courts of another. (Assn. v. Ashworth, 22 S. E., 521 (Va.); Wright v. Lee, 2 S. D., 596, 605; Charter Oak v. Sawyer, 44 Wis. 387; Cone Exp. & Com. Co. v. Poole, 41 S. C., 70; Sawyer v. Dickson, 48 S. W., 903 (Ark.); Bank v. Rutland, 10 How. Pr., 1; Silver v. Worth, 4 Johns Ch., 371; Ins. Co. v. C. D. Jr., 5 Leigh, 471; Saltmarsh v. Spalding, 147 Mass. 224; British v. Ames, 6 Met., 391; Match Co. v. Roeber, 106 N.Y. 473; Wash. Mill Co. v. Bartlett, 3 N. D., 138; Freie v. Assn., 166 Ill. 128; Columbia B. & L. Assn. v. Junquist, 111 Fed. R., 645.)

III. The contracts in this record, valid either in Colorado or in Wyoming, should be upheld and enforced, not destroyed. (2 Pars. on Cont. (7th Ed.), 628, 632, 630, 636, 637; Bell v. Packard, 69 Me. 105.)

IV. The District Court acted unconstitutionally in destroying the contracts which the parties had a right to make, and in making for them a contract which The Fidelity Association had no lawful authority to make. (Fed. Const., Sec. 1 of Art. 4, Sec. 10 of Art. 1, Amendment XIV; Wyo. Const., Sec. 37 of Art. 1, Sec. 35 of Art. 1; Cooley Const. Lim. (5th Ed.), 493, 434, 436; Bank v. Oakly, 4 Wheat., 244; Gelpoke v. Dubugne, 1 Wall., 275; Bedford v. Assn., 181 U.S. 227.)

V. The court erred in holding each stock payment was a partial payment on the loan from time to time as such payments on stock were made, and erred when it found that the association was only entitled to recover $ 750. Stock payments are not payments on loan. (4 Ency. Law (2d Ed.), 1057; State v. Horbacker, 42 N. J. L., 635; So. Assn. v. Anniston L. & T. Co., 101 Ala. 582; Post v. Assn., 37 S. W., 216 (Tenn.); Reeves v. Assn., 19 S.W. (Ark.), 917; Tilley v. Assn., 52 F. 622; Endlich on Building Assn. (2d Ed.), Sec. 477 (1st Ed., Sec. 452); Assn. v. Sutton, 35 Pa. St., 463; Assn. v. Bryan, 54 S. W., 377 (Tex.)

VI. The bank cannot cancel contracts made by the Wrighters to which it is no party. (18 Ency. Pl. & Pr., 795; Yeamans v. James, 27 Kan. 195; Wall v. Cockrell, 10 H. L. Cas., 229; Leach v. Fowler, 22 Ark. 143; Gray v. Ullrich, 8 Kan., 112; Cowan v. Barrett, 18 Mo. 257.)

VII. A borrower having dealt with an association as a building and loan company and having borrowed its money, is estopped to deny the character of the association, its powers to contract, or the liability to it. (Manship v. New South B. & L. Assn., 110 F. 845.)

W. S. Metz, for defendant in error.

The want of equity and the unfairness of the demand of the plaintiff in error is certainly apparent from the statement of facts.

The interest upon this loan of $ 1,500 from September 26th, 1894, to April 19th, 1900, at the time of the tender of $ 750 by the Bank of Commerce, amounts to about $ 500, round numbers. When to this is added the principal of $ 1,500 of the note, would make the note, with its total interest to the last mentioned date, $ 2,000. After deducting from this the total sum paid, viz: $ 1,478, which is admitted in the evidence, will leave a balance of $ 522. To this should be added the insurance paid by the plaintiff in error of $ 14, will bring the sum to $ 536. To cover all possible claims or demands the defendant, Bank of Commerce, tendered the plaintiff in error on April 19th, 1900, $ 750, which tender was refused by the plaintiff in error, and it demanded judgment for twelve hundred ninety-six dollars ($ 1,296).

The court allowed the association to retain the money paid and earned upon the stock, and the money paid upon interest and other charges made by the association, and rendered judgment against the bank and the other defendants in error for $ 750. This is even more than is due the plaintiff in error. But the bank, desirous of avoiding litigation and to save costs and expenses, tendered said sum, though it exceeded the amount due. We insist that this is a contract for the loan and payment of money with interest at six per cent per annum, and not at "12.29 per cent per annum." (Fidelity Sav. Assn. v. Shea, 55 P. 1022.)

In this case Mrs. Wrighter has continued to pay the plaintiff in error for five years, and in that time she has paid fourteen hundred seventy-eight dollars ($ 1,478) on a loan of fifteen hundred dollars ($ 1,500), and, according to the contention of the plaintiff in error, she has reduced her loan two hundred dollars ($ 200), in round numbers. Paying at this rate, she would continue to pay to the plaintiff in error during a term of about thirty-five years before she would complete the payment of her loan, and in that time she would pay to this association many thousands of dollars, yet the plaintiff in error comes into a court of equity and asks the court to enforce, under the principles of equity jurisprudence, such an outrageous contract. The whole contention of the brief of the counsel of the plaintiff in error is that it is a contract--that it is "nominated in the bond," that it matters not what the terms of the agreement are or whether its results are inequitable or not, that it must be kept by the unwary borrower, including premiums and penalties and commissions and all the other subterfuges that the ingenious agents of this association have attached to the real contract of the parties.

The plaintiff in error in its brief seeks to shield itself under the proposition that there was no usury law in the State of Wyoming at the time of the execution of this note and mortgage and other contracts, and it leaves the impression that, because there was no usury law at that time, that any character of contract, the most unjust, is beyond the reach of the court of equity, a principle to which we do not subscribe, and we believe that the courts of equity, when these contracts are brought before them, will do justice between the parties. The contracts of building associations have been construed by many of the courts of this country and relief has been granted upon every ground that could be reached by the courts against these unjust and inequitable character of contracts.

And in all states where usury laws are in force the courts draw these contracts within the provisions and spirit of these laws and have compelled the associations to surrender the "pound of flesh." The courts of Iowa, Kentucky, Maryland, Nebraska, New York, North Carolina, Pennsylvania, South Carolina, Texas, West Virginia and Connecticut have so held this character of contract. (4 Ency. L. (2d Ed.), 1056.)

In other cases the courts have held that the premium paid for the privilege of borrowing is merely a disguise for unlawful interest, etc. (Assn. v. Abbott, 85 Tex. 220; Ewing v. Savings Assn., 43 O. St., 31; Bldg Assn. v. Mayers, 25 S. W., 1132; Stevens v. Assn., 51 P. 779; Assn. v. Graham, 7 Neb., 173; Assn. v. Bierney, 25 S. W., 622; Mills v. Assn. , 75 N. C., 292; Assn. v. Blackburn, 48 Ia. 385; Houser v. Assn., 41 Pa. St.; Citizens' Savings Co. v....