Miller v. Eastern Building & Loan Ass'n

• Decision Date: 05 October 1899
• Parties: MILLER v. EASTERN BUILDING & LOAN ASS'N et al.
• Court: Tennessee Supreme Court

53 S.W. 231

MILLER v. EASTERN BUILDING & LOAN ASS'N et al.

Court of Chancery Appeals of Tennessee.

October 5, 1899.

Appeal from chancery court, Rhea county; T. M. McConnell, Chancellor.

Bill by W. B. Miller against the Eastern Building & Loan Association and others. From a decree in favor of complainant, defendants appeal. Reversed.

Geo. W. Easley, for appellants. Burkett, Miller & Mansfield, for appellee.

WILSON, J.

This bill was filed April 28, 1898, to recover from the defendant building and loan association $500, with interest thereon from January 1, 1898. The association is a corporation of the state of New York, with its home office in the city of Syracuse, in that state, but it did business in other states. It carried on business in Rhea county, in this state, through a local board of citizens organized in Dayton, in that county. It made loans to borrowing members resident in that county, and, through foreclosures and otherwise of mortgages taken to secure loans, became the beneficial owner of certain real estate in the county, which is described in the bill. The title to this real estate was put in defendant Pierce, an officer of the corporation, as trustee. In June, 1891, complainant applied for and received a certificate for five shares of the stock of the association, of the par value of $100 each. His contention is that the association, on the face of the stock certificate issued to him, as well as by the purport of its literature and the direct representations and assurances of its agent, guarantied the maturity of his stock at the end of 78 months, provided he paid the stipulated membership fee and monthly dues. He avers that he had regularly, in accordance with his contract with the association, paid his dues for 78 months, and had demanded the payment of the $500 in compliance with its guaranty, and that it had refused payment, alleging as a reason that the earnings of the association, after payment of expenses and considering losses, had not matured the stock. An attachment writ issued, and was levied upon the property described in the bill, and the defendants were brought before the court by publication. Pierce answered, admitting that the title to the real estate mentioned in the bill was in him as trustee for the association, that he had no beneficial interest in it, and that the association was its real and beneficial owner. In its answer the association admits the same as to the property, and also admits that the complainant had regularly paid the monthly dues on the certificate of stock issued to him for 78 months. It denies, however, that, under the language quoted in the bill from the certificate issued to complainant, and under its articles of association, rules, and by-laws, it guarantied the maturity of the stock in 78 months. It further insists that if the language of the certificate is susceptible of the construction contended for, to wit, that it constitutes a contract of guaranty of the maturity of the stock in the period stated, such contract of guaranty was ultra vires the power of the association or its officers, and contrary to and in direct violation of the law of the state of New York, and its articles of incorporation thereunder. Its further insistence is that the language of the certificate, read in the light of its articles of association, and its rules and by-laws, and the law of the state of its creation, means, when properly construed, that 78 months was the estimated time required in which to mature the stock of an investing member. It incorporates in its answer its charter of incorporation, its by-laws, the application of complainant for shares, and the law of New York under which such associations are organized. Evidence was adduced by the parties, and there was also an agreement of counsel as to certain facts. The chancellor heard the cause August 10, 1899. He held that the complainant was entitled to recover, and gave him a decree against the association for $500, with interest thereon from January 1, 1898, making together the sum of $548.35. He declared the recovery a lien on the real estate attached, devested the legal title thereto out of Pierce, and ordered the master to sell it unless the recovery was paid in 60 days. From this decree the association was permitted to appeal to the supreme court. It has assigned errors as follows: First, the court erred in holding anything on the certificate of stock issued to Miller to be a guaranty of the maturity of the stock at the end of 78 months, and that after the payment of 78 monthly dues such guaranty created a debt against the association to the extent of the par value of the stock; second, the court erred in giving a decree against the association in favor of said Miller, inasmuch as he never returned the certificate of stock to it; third, the court erred in not finding for the association and in not dismissing the bill.

The controlling questions in the case are: (1) Did the association, in its contract with the complainant in issuing stock to him, obligate itself to pay him the par value of the stock at the end of 78 months, provided he complied with the terms and stipulations of the contract embodied in the certificate? (2) If so, was such a contract one that, under the law of its being, it had the power to make?

If the certificate issued to complainant is alone to be considered, there is no doubt, it seems to the writer, that the association intended the complainant to understand and believe that, in becoming an investing member, the stock received by him was to mature in 78 months, and that at the end of this period, having complied on his part with the conditions of membership and his contract, he was to be paid by it the $500, the par of his stock. This purport of the language of the certificate was directly enforced and emphasized by the representations and promises of the agent and representative of the association on the ground at the time that complainant became an applicant for its stock and received it. The certificate contains the following on its face: "In consideration of the membership fee, together with the agreements and statements contained in the application for membership in the association, and full compliance with the terms, conditions, and by-laws printed on the front and back of this certificate, which are hereby referred to and made a part of this contract, the said Eastern Building & Loan Association of Syracuse, New York, agrees to pay said shareholder, his heirs, administrators, or assigns, the sum of $100 for each of said shares at the end of 78 months from the date hereof." Complainant fully complied with the terms, conditions, and by-laws printed on the front and back of his certificate. He paid his membership fee and regularly paid his monthly dues for 78 months. There is no dispute as to these facts. It is said, and properly so, that in construing this certificate, or the contract evidenced by it, the charter or articles of the association and all its by-laws should be considered. Gibbs v. Bank, 83 Hun, 92, 31 N. Y. Supp. 406; In re Washington Park Com'rs, 52 N. Y. 131. And, say these authorities, the article of association should be treated as a part of the contract embraced in or on the certificate. O'Malley v. Association, 92 Hun, 572, 36 N. Y. Supp. 1016. And this on the principle that a party becoming a member of an association of this kind is chargeable with knowledge of the provisions of its charter and by-laws. Beach, Priv. Corp. § 321; End. Bldg. Ass'ns (2d Ed.) 271. And we held in a case at Nashville against a building and loan association that, unless the literature and language of the contracts clearly expressed otherwise, statements as to the maturity of its stock would be treated and construed to be estimates. Taylor v. Association, 51 S. W. 1008. In some cases it...