Northern Bldg. & Loan Ass'n v. Witherow

• Decision Date: 09 June 1939
• Docket Number: 32025.
• Citation: 286 N.W. 397,205 Minn. 413
• Parties: NORTHERN BUILDING & LOAN ASS'N et al. v. WITHEROW et al.
• Court: Minnesota Supreme Court

286 N.W. 397

205 Minn. 413

NORTHERN BUILDING & LOAN ASS'N et al. v. WITHEROW et al.

No. 32025.

Supreme Court of Minnesota.

June 9, 1939

Reargument Denied June 30, 1939.

Appeal from District Court, Clay County; D. M. Cameron, Judge.

Action by the Northern Building & Loan Ass'n and others against James M. Witherow and another, to foreclose a mortgage on realty. From an order denying defendants' motion for a new trial, the defendants appeal.

Affirmed.

Syllabus by the Court .

1. Held that evidence sustains finding that mortgagee was a bona fide building and loan association.

2. One who has given a mortgage to a building and loan association as security for money loaned to him cannot, when action is brought to foreclose, deny that the mortgagee is a bona fide building and loan association.

3. Building and loan associations are exempt from operation of usury statutes.

4. Held that evidence sustains finding that defendants were in default.

James M. Witherow, of Moorhead, pro se.

Kerr O'Neill & Dudley, of St. Paul, and Edgar E. Sharp, of Moorhead, for respondents.

GALLAGHER, Chief Justice.

Appeal from an order denying defendants' motion for a new trial.

The action was instituted to foreclose a real estate mortgage given by James M. Witherow and wife no the Northern Building and Loan Association to secure the repayment of a loan of $3900. Two transactions are involved. In 1930, defendants borrowed $4000 from the Association. As required by the articles and by-laws of the latter, they subscribed for 40 shares of its stock when application for the loan was made. A mortgage was given to secure the loan and the stock was pledged as additional security. There was deducted from the loan $80 as a non-withdrawable membership fee, $40 representing a commission of one per cent on the face amount of the loan, and other miscellaneous expenses representing mortgage registration tax, cost of abstract expense of recording mortgage, and a small attorney's fee for examination of title.

Defendants made all required payments on the bond given in exchange for the loan until about October, 1932. At that time, they had a credit of $581.84 in their favor. Thereafter they defaulted in their payments. After negotiations for refinancing payment of back taxes by the Association and application of the credits, a new arrangement was contrived whereby the Association cancelled one share of the stock for which defendants had subscribed; a new certificate for 39 shares was issued to defendants and assigned by them as security for a bond in the amount of $3900; the bond was also secured by the mortgage here in question. The following provisions are contained in the bond:

‘ We-I agree to pay on the first day of each and every month, commencing on the first day of December, 1933, and continuing until the whole of said principal sum and interest shall be paid, the sum of not less than Forty-two and 90/100 ($42.90) Dollars. This amount shall be applied by the association as follows:

‘ 1. To the payment of said agreed interest.

‘ 2. To the payment of taxes, insurance premiums or other advancements made by the Association.

‘ 3. The balance to be credited as dues on the stock aforesaid, with the right, but not the obligation, to the Association to thereafter apply any and all of said balance theretofore credited as dues to the first and (or) second allocations upon default by the undersigned under this bond or the mortgage-contract for deed securing it. When said dues are thus paid in full, so that One hundred ($100.00) Dollars has been paid and ultimately applied upon each share of said loan stock, the stock shall be cancelled and retired and this note and the other security shall be satisfied.

‘ Whenever the amount of dues paid and ultimately applied on said unpaid stock, as aforesaid, shall equal the sum of One hundred ($100.00) Dollars, the said amount shall be applied in reduction of the principal sum of this Bond, whereupon said agreed interest shall thereafter be computed and paid upon the unpaid balance of said principal sum as reduced by such payments.'

In 1937 a federal charter was obtained by the Association and thereafter it assumed the name ‘ Northern Federal Savings and Loan Association.’ During the same year, defendants' bond and mortgage were assigned to certain trustees who, together with the Association, are plaintiffs in this action.

Claiming that defendants were again in default, plaintiffs instituted this action to foreclose the mortgage in March, 1938. The complaint alleged that the default consisted of their failure to pay a balance of $14.82 due on December 1, 1936, sums of $42.90, each of which became due on the first day of every month thereafter, amounting in the aggregate to $658.32; and taxes for the year 1933 amounting to $180.95. The total amount of principal and interest claimed was $3,548.53.

The defense rests upon three propositions: (1) That the Northern Building and Loan Association was not a bona fide building and loan association and, therefore, not entitled to the benefits of the statutes enacted for the protection of such associations; (2) that usury vitiated the entire transaction; and (3) that defendants are in default only because plaintiffs overcharged them and failed to give proper credit for payments made.

1. The trial court found as a fact that the Northern Building and Loan Association, at the time the note (or bond) and mortgage here involved were given and thereafter until January 11 1937 (the date it federalized), was ‘ a corporation duly created as and constituting a bona fide ‘ building and loan association’ so-called, and organized under the laws of the state of Minnesota relating to and affecting building and loan associations.'While the complaint fails to allege in so many words that it is such an association and although its articles of incorporation were not offered in evidence, there was, nevertheless, sufficient evidence upon which the finding referred to might rest. The Association was under the supervision of the banking department of the state at all times. It described itself as a building and loan association in its relations with defendants. Shares were allocated to persons who sought and obtained loans. Defendants treated it as such an Association. They executed the bond and mortgage...