Johnson v. National Bldg. & Loan Ass'n

• Decision Date: 10 April 1900
• Citation: 125 Ala. 465,28 So. 2
• Court: Alabama Supreme Court
• Parties: JOHNSON v. NATIONAL BUILDING & LOAN ASS'N.

28 So. 2

125 Ala. 465

JOHNSON v. NATIONAL BUILDING & LOAN ASS'N.

Supreme Court of Alabama

April 10, 1900

Appeal from city court of Gadsden; John h. Disque, Judge.

Bill by Thomas L. Johnson against National Building & Loan Association. From a decree in favor of defendant sustaining a demurrer, complainant appeals. Affirmed. From a decree in favor of complainant overruling a motion to dismiss the bill and dissolve an injunction, defendant prosecutes a cross appeal. Reversed.

The bill in this case was filed by the appellant against the appellee, and as amended it was averred in the bill that the National Building & Loan Association was a corporation organized under the laws of the state of Alabama; "that the object of respondent corporation is to enable its members to accumulate in an easy manner, by monthly contributions or assessments, the necessary capital for acquiring a homestead to establish themselves in business, or to deposit their savings securely, and at a fair rate of interest." After averring certain provisions of the by-laws which are made exhibits to the bill, the bill then contained the following averments: "That paid-up stock may be issued and sold at the price of twenty-five dollars per share. A dividend of seventy-five cents per share may be paid semiannually on such stock, which dividend shall be deducted from the profits apportioned to such share. There may be used for expenses on such stock one and 75/100 dollars per share the first year and seventy-five cents per year per share thereafter. Paid-up stock cannot be withdrawn until after six months from date of issue, and, if withdrawn before maturity, shall entitle the holder to receive twenty-five dollars per share. Paid-up stock which shall have been in force one year or more may be withdrawn, and a profit at the rate of two per cent. per annum will be allowed. Holders of paid-up stock can never be assessed or called upon for any payments other than the twenty-five dollars per share for which such stock is sold. That the receipts are divided into a loan and expense fund. The expense fund consists of all admission, transfer insurance, abstract, and attorney's fees; amounts paid for insurance or taxes on property on which loans have been made; fees, costs, and disbursements of foreclosure; together with five cents per share per month from the monthly payments on stock. The loan fund consists of all receipts which do not go to the expense fund as above set out, and no part of the loan fun can be used for expenses, except taxes. That in case the funds subject to loan are not called for by any member entitled thereto within ninety days after the same has been offered for bids, and in case they are not otherwise disposed of, if the board of directors deem for the best interest of said association they may invest the same in real-estate security for the mutual benefit of the members, and that on the first days of the months of January and July in each year all undivided profits shall be apportioned and credited to the shares in force. That a member desiring a loan shall file written application therefor with the secretary, accompanied by a bid stating the amount of the premium per share, in addition to six per cent. interest, which the applicant is willing to pay for such loan. But no loan shall be granted to a member until three months from the date of his certificate of stock, unless the board of directors shall for good reasons determine the contrary." It was further averred that on April 18, 1892, the complainant subscribed for 200 shares of the capital stock of the defendant corporation, and made application for a loan on the same day of the subscription; that on May 7, 1892, the loan was made, and the defendant entered into a contract evidencing the same, and executed to the defendant a mortgage for $10,000 on certain real estate of which he was seised and possessed, and which was situated in Gadsden, Etowah county, Ala.; that, upon the execution of the contract and mortgage, the complainant received $9,615.90, the balance having been deducted as payment of dues, interest, and premiums for the month of June, 1892, and the expenses of making the loan, the complainant having paid $100 as an admission fee upon subscribing for the stock; that the true consideration of said mortgage was that the "complainant was to pay the corporation monthly the sum of $190 per month for 65 months and at the outside limit he was to pay only 72 months; *** that the corporation falsely and fraudulently made such representations to induce your orator to borrow money from said corporation; and that, by reason of said false and fraudulent representations, your orator was induced to and did borrow money and execute said mortgage." It was then averred that the complainant had paid to the defendant $190 per month for 72 months, making in the aggregate $13,780 which the complainant avers fully paid off said mortgage. Continuing, the bill then avers: "That said respondent corporation has issued more than six thousand shares of paid-up stock of the face value of fifty dollars per share, and sold the same at twenty-five dollars per share, and pays the holder semiannually six per cent. guarantied, and it is not liable for assessments in case of loss. And that by reason of the issuance of said paid-up stock said corporation was put to large expense, and had a large surplus on hand, upon which it was paying interest, and that in order to reduce its large surplus it loaned its money in other states, and thereby subjecting the profits, earnings, and its principal to the usury laws of other states, and thereby making the borrowers of this state pay the losses," the paid-up stock not being liable for same, but is a preferred claim against all corporation. And that said respondent corporation has paid out to paid-up stockholders a large amount as dividends, being the six per cent. they are required to pay on the paid-up stock; but orator does not know how large the amount that has been paid on said paid-up stock, but the report of the president of said corporation on September 30, 1896, then showed that the large sum of $28,983.61 had then been paid by the said corporation as dividends on its paid-up stock, and orator charges that said corporation has since that time paid large sums to paid-up stockholders; thereby withdrawing from the funds of said corporation, and reducing the capacity and ability of said corporation to make the earnings larger, and preventing all stockholders sharing alike in the mutual undertaking. That, although orator has paid said respondent corporation the large sum of thirteen thousand seven hundred and eighty dollars for and on account of said loan and mortgage, the said National Building & Loan Association at the time of the filing of the original bill in this case was advertising said above-described property under the power in said mortgage to sell on the 15th day of June, 1899, and claims that orator owes the said corporation the further sum of ten thousand dollars, and orator avers and charges that the same has been fully paid. That said real estate is worth twenty thousand dollars, largely more than the amount claimed by said National Building & Loan Association, and that the books of said corporation are in the possession of said corporation or its agents, and orator does not and cannot know the amount of accrued dividends during the many years that he has held stock in said corporation, and that upon said above-described lands are situated four storehouses and a hotel, and that orator occupies one of said storehouses in carrying on the business of a wholesale and retail family grocery, and that all the other houses, situated on said lands are rented out under contracts and leases, and that a sale would interfere with orator in carrying on his business, and would terminate all leases on the balance of said houses." The prayer of the amended bill was as follows: "The premises considered, your orator prays that the National Building & Loan Association be made a party respondent to this amended bill of complaint, and that process issue as required by law and the regulations of your honor's court, and that the indebtedness of orator to said National Building & Loan Association be ascertained, and that orator submits himself to the jurisdiction of this honorable court, and avers that he is able, willing, and ready to pay whatever amount that may be ascertained to be due to said National Building & Loan Association by your orator, and pending this suit that the injunction heretofore granted be retained and reinstated during the litigation of this amended bill. And that upon final hearing may it please your honor to grant orator general relief, and upon the payment of any amount that your honor may find to be due to said National Building & Loan Association by your orator, or, if nothing is found due by our orator, then, in either event, that said injunction be made perpetual, and said mortgage canceled, and such other and further relief as equity, justice, and good conscience may require. And as in duty bound orator will ever pray," etc. The mortgage and the contract of loan were made exhibits to the bill, and were such as are usually given to building and loan associations to secure the payment of money borrowed from them.

Upon the filing of the original bill, and the giving of the bond as required, an injunction was issued. The defendant moved to dismiss the bill as amended for the want of equity, and also moved to dissolve the injunction upon the ground that said bill as amended does not contain equity. The defendant also demurred to the bill, assigning many grounds of demurrer which may be summarized as follows: (1) The bill does not show that the debt secured by such...