Progressive Welfare Ass'n, Inc. v. Morduchay

• Decision Date: 12 July 1938
• Parties: PROGRESSIVE WELFARE ASS'N, Inc., v. MORDUCHAY et al.
• Court: Connecticut Supreme Court

200 A. 813

124 Conn. 485

PROGRESSIVE WELFARE ASS'N, Inc., v. MORDUCHAY et al.

Supreme Court of Errors of Connecticut.

July 12, 1938

Appeal from Superior Court, Fairfield County; John R. Booth, Judge.

Action by the Progressive Welfare Association, Incorporated, against Aron Morduchay and others to recover amount allegedly due on a loan, wherein the defendants' motion for a more specific statement was granted. From a judgment in favor of the defendants when the plaintiff failed to plead further after demurrer to the amended complaint was sustained, the plaintiff appeals.

Error and cause remanded.

Raphael Korff, of Bridgeport, for appellant.

David R. Lessler, of Bridgeport, for appellees.

Argued before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS JJ.

MALTBIE, Chief Justice.

The plaintiff brought an action upon a joint and several note of the defendants, not incorporating a copy of it in the complaint nor annexing it as an exhibit. On the defendants' motion for oyer the plaintiff filed a copy. This made it a part of the pleadings and laid the basis for a demurrer by the defendants that the terms of the note violated the usury statute. Morehouse v Employers' Liability Assur. Corp., 119 Conn. 416 421, 177 A. 568. A demurrer upon that ground was sustained.

The plaintiff filed a substitute complaint, the allegations of which, so far as necessary to present the determinative issue upon this appeal are as follows: The plaintiff is a mutual association, the principal purpose of which is to accumulate the savings of its members and made loans to them; the defendants are members of the association; they applied to it for and received from it a loan to be repaid in two years under the usual terms of the association as provided in its by-laws; under these by-laws money was loaned to the members of the association at a charge of 6 per cent. per annum payable in advance, the loan to be repaid in instalments; as security, defendants gave a mortgage to plaintiff association' made payable to its secretary but upon the agreement that the obligation ‘ should be evidenced by a mortgage note, made payable to’ the secretary and immediately transferred to the plaintiff, an assignment of the mortgage deed to be executed but not recorded, in order that the plaintiff's name should not appear upon the land records. The defendants filed a motion for a more specific statement asking that the complaint be amplified in several respects, particularly by stating whether there was any written agreement for the repayment of the loan and whether the note referred to in paragraph 6 was the same note, a copy of which had been filed in connection with the original complaint, and also by filing a copy of the mortgage referred to in that paragraph. The trial court granted the motion, and the plaintiff filed a statement including the facts that there was no written agreement for the repayment of the loan, and the note referred to was that a copy of which had been filed, and giving a copy of the mortgage. The defendants again demurred, the substance of that demurrer being that the loan as evidenced by the note was usurious. The trial court ultimately sustained the demurrer on the ground stated. That a loan upon the terms stated in the note would be usurious and not recoverable is not questioned.

The plaintiff claims that the action under the substitute complaint is one to recover a loan made and governed by the by-laws of the association and is not one upon the note which with the mortgage is only collateral security for the repayment of the debt. If that claim is sound the plaintiff might prove itself entitled to recover, for the provisions of the by-laws referred to in the complaint only call for the payment of interest at 6 per cent. in advance, and a loan made upon that basis might not prove to be usurious. General Statutes, § 4732. A debtor may give as collateral security for a debt another obligation of his own where that is secured by a lien on property or the like. First National Bank v. National Grain Corp., 103 Conn. 657, 666, 131 A 404; In re Waddell-Entz Co., 67 Conn. 324, 334, 35 A. 257; Hill v. Banks, 61 Conn. 25, 23 A. 712; Continental Life Ins. Co. v. Barber, 50 Conn. 567; Dies v. Wilson County Bank, 129 Tenn. 89, 96, 165 S.W. 248, Ann.Cas.1915A, 1090; Jones v. Third National Bank, 8 Cir., 13 F.2d 86, 89; 49 C.J. 903. In Pothier v. Reid Air Spring Co., 103 Conn. 380, 388, 130 A. 383, 386, while the...