McLaughlin v. National Mutual Bond & Investment Co.

• Decision Date: 13 December 1894
• Docket Number: 16.
• Citation: 64 F. 908
• Parties: McLAUGHLIN et al. v. NATIONAL MUTUAL BOND & INVESTMENT CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

64 F. 908

McLAUGHLIN et al. v. NATIONAL MUTUAL BOND & INVESTMENT CO.

No. 16.

United States Circuit Court, E.D. Pennsylvania.

December 13, 1894

Ernest L. Tustin, for complainants.

John J Ridgway, for defendant.

DALLAS Circuit Judge.

Upon the filing of this bill, and before answer, a motion for injunction and for the appointment of a receiver was made which was refused, because no necessity for making an order involving such serious consequences, in advance of the formal presentation of the defense, was perceived. The cause has however, been since fully heard on bill and answer, and is now for decision; but two incidental matters will be first disposed of. Charles A. Chase has applied for leave to intervene as a party plaintiff. This application is supported by affidavit that he is one of the class on whose behalf the bill was filed. I do not recall that his right to intervene was disputed. At all events, it appears to be unquestionable and he will be allowed to exercise it. The defendant has moved that certain affidavits which were filed on behalf of the plaintiff on November 8, 1894, be stricken from the record. These affidavits were filed without leave of court, and under the impression that they would be for consideration on final hearing. This was a mistake. I have not considered them, and the defendant's motion will be granted.

The defendant is a corporation created under the law of the state of West Virginia 'for the purpose (as stated in its certificate of incorporation) of issuing and selling bonds upon monthly installments, and payable from the redemption and reserve fund, made up of the appropriation of a certain part of the installments paid in, according to tables which insure perfect equity to both large and small investors; the advantage of the association being to encourage and assist persons of moderate means to systematic saving, and by advantageous co-operation to realize larger profits than they could by investing in savings banks or building associations ' In pursuance of this declared purpose of its creation, the defendant issues what are designated as 'Installment Bonds,' and which are in form certificates of its agreement to pay $1,000 to the person named in each of such bonds respectively. No definite time is specified for making this payment, but it is therein provided that the 'bond shall become due and payable at the office of the said company on its surrender, when the monthly installments thereon, together with its proportionate share of the reserve fund, shall equal its face value. ' This undertaking to pay at a time not fixed, but made contingent upon the operations of the company, is subject to 'the following express terms and conditions': There shall be paid to the company 'monthly installments' of four dollars each, and 'quarterly dues' of one dollar each; and any default in either of these shall wholly release the company from obligation to pay at any time,-- 'shall work a forfeiture of the bond.' The instrument further provides that upon forfeiture of the bond 'all previous payments' made by its owner shall likewise be forfeited; that when forfeiture occurs 'a new bond in the regular order of issue at the date of surrender' of the forfeited bond can be obtained; and that if the bond shall have been 'kept in force by its terms and conditions for three years,' 'the monthly installments made thereon, together with interest at the rate of two per centum per annum,' will be refunded upon its surrender. To this point the meaning of the agreement plainly is that the company, in consideration of the payment to it of four dollars per month and one dollar quarterly, will (subject to the terms and conditions which have been mentioned) pay $1,000 to the owner of the bond when the monthly installments paid by him, together with his 'proportionate share of the reserve fund,' shall amount to $1,000; or, in the alternative, will refund him the amount of his monthly installments, with interest at the rate of 2 per cent., at or after the expiration of three years, if all the prescribed monthly and quarterly payments shall have been duly made. If it had been proposed merely to return to the holders of these bonds the sum of their monthly installments when they should respectively amount to $1,000, it is scarcely conceivable that any sane man could have been induced to part with his money. He would have no security for it; it would bear no interest; it would be withheld from him for 250 months, or about 20 years; and, to accomplish this, he would pay an additional sum of $80. Of course, any misguided person who might be led into such a transaction would, on perceiving its character, hasten to withdraw from it, even at the sacrifice of payments already made, or would await only the expiration of the period of three years to claim the refund provided for. But nothing he could do would profit him. Even if the company should be able to, and should in fact, refund him his monthly installments with the interest stipulated, he would not be repaid in full. At the end of...