Hough v. Maupin

• Decision Date: 14 January 1905
• Parties: HOUGH v. MAUPIN
• Court: Arkansas Supreme Court

84 S.W. 717

73 Ark. 518

HOUGH v. MAUPIN

Supreme Court of Arkansas

January 14, 1905

Appeal from Fulton Circuit Court in Chancery, JOHN B. MCCALEB Judge.

Reversed.

Decree reversed and cause remanded.

Phillips & Kay, for appellant.

The wife could not testify in the husband's defense. 37 Ark 298. The mortgage was only an incident to the debt. 67 Ark 260. The written contract must govern. 68 Ark. 30. The defendant must abide the consequences of his own inattention and carelessness. 11 Ark. 1058; 27 Ark. 244; 8 Am. & Eng Enc. Law, 643; 31 Ark. 170. A fraudulent misrepresentation must be relied upon. 8 Am. & Eng. Enc. Law, 636. Every one is presumed to know the effect of a contract which he signs. 9 Ind. 488; 44 Ind. 243; 15 N.W. 242; 119 Ill. 567. Representations as to the legal effect of certain acts of a policyholder in forfeiting the policy to obtain a compromise by an agent are not actionable. 71 S.W. 252; 53 S.W. 231; 51 S.W. 530; 74 S.W. 161; 51 S.W. 406. A building association has no power to contract that shares of its stock pledged shall reach their par value within a fixed time. 73 S.W. 732; 48 S.W. 954. The fraud must be of an existing fact. 2 Add. Torts, 422; 68 Ark. 30. The defendant stands on the same footing as non-borrowing members. 37 S.W. 216; 36 S.W. 810; 68 Ark. 382.

Sam H. Davidson, for appellees.

The misrepresentations were actionable fraud. 22 S.W. 719; 116 Mo. 313; 62 Ark. 278. When a fraudulent combination is established, the acts and declarations of the parties while engaged in the common design may be proved against the others. 50 Ark. 287; 59 Ark. 265. Appellees were entitled to have their contracts rescinded ab initio. 62 Ark. 274. The defense of ultra vires must be pleaded. 70 S.W. 285; 73 S.W. 732.

OPINION

HILL, C. J.

The appellees became stockholders, for the purpose of borrowing, in the Farmers' & Mechanics' Savings Company of Springfield, Mo., a building and loan corporation organized as such under the laws of the State of Missouri. Two loans were obtained, but for brevity herein they will be discussed as one.

An obligation or bond was executed secured by mortgage on real estate in Mammoth Spring, Arkansas. The bond is in the usual form of building and loan obligations, with this exception: It seems to limit the payment to 60 monthly payments of the amount therein set forth. The by-laws and prospectus are expressly made part of this obligation, and they make it clear that such is the purport of the obligation. It may be taken as established that this contract was for the payment of the sums therein stipulated as dues, premiums and interest for 60 months as full satisfaction of the advancement, instead of payment until the stock matured, thereby satisfying the advancement. Various representations of officers and agents were introduced into the evidence, but they only proved that the contract would be as above stated. The association failed, and executed an assignment. This is a suit by the assignee to foreclose the mortgage. The appellees answered, alleging fraud in that they were induced to enter into the contract upon the strength of the by-laws, prospectus and representations to the effect that 60 monthly payments of the dues, interest and premium would discharge the loan. The chancellor found in their favor, and the assignee appealed.

The contract is dated and to be performed in Missouri. Under frequent decisions of this court, this is a Missouri contract, to be governed, construed and controlled by the laws of Missouri. Clarke v. Taylor, 69 Ark. 612, 65 S.W. 110; Crebbin v. Delony, 70 Ark. 493, 69 S.W. 312; Farmers' Saving & Building & Loan Association v. Ferguson, 69 Ark. 352, 63 S.W. 797; Bank of Harrison v. Gibson, 60 Ark. 269, 30 S.W. 39; Sawyer v. Dickson, 66 Ark. 77, 48 S.W. 903.

This court must turn from any original determination of the rights flowing out of the contract, and ascertain, if possible, their construction by the courts of that State.

Building and loan corporations are organized under statutes in Missouri especially providing for their existence and giving them certain rights and privileges and imposing certain limitations.

In case of Bertche v. Equitable, etc., Assn., 147 Mo. 343, 48 S.W. 954, the Supreme Court held that a building and loan association could not fix an arbitrary period within which the shares of its stock will mature, and that such fixing of a definite period is subversive of the letter and spirit of the legislative scheme governing building and loan associations, and beyond the power of the board of directors. This case was decided in 1898, long after the contract in this case was made, and it seems to be the first case so construing the building and loan law of that State. From the decisions in other cases it appears that other associations in the State had fixed periods as well as the one now before this court.

This decision is followed by the two Courts of Appeals of that State in cases wherein other associations had fixed periods for payment. In Caston v. Stafford, 92 Mo.App. 182, the Kansas City Court of Appeals, after reviewing the Bertche case, said: "The statute requiring the borrowing stockholder to continue the payment of monthly dues until the stock reaches par is as much a part of the contract as if it had been written in the face of such contract. It results from this that, with the elimination of the ultra vires agreement [in that case the payment for 84 months to cancel the loan] from the contract and the substitution of the statute in its stead, we have a contract which provides that at the end of any period of payment of the monthly dues the stock shall reach par, whether that period turns out to be 84 months, or a longer or a shorter one, it shall be redeemed and the deed of trust released. Any time arbitrarily fixed in a contract with the borrowing stockholder for the maturity of the stock and release of the security is but an assumed time at most; and if the stock does not mature at such assumed time, the borrowing stockholder, notwithstanding this, continues the payment of his monthly dues on his stock until it does reach maturity, at which time he will be entitled to the release of his security, and this, we think, results from the operation of the statute." In Williams v. Verity, 98 Mo.App. 654, 73 S.W. 732, the same court reiterated this principle. In Gary v. Verity, 101 Mo.App. 586, 74 S.W. 161, the contract provided that payment for 100 months of the stipulated amount would entitle the stock to redemption, and its surrender would cancel the loan. The court said, after citing the numerous decisions on this point: "Respondents, regardless of that clause of the contract,...