Southern Building & Loan Ass'n v. Casa Grande Stable Co.

• Decision Date: 22 January 1901
• Citation: 128 Ala. 624,29 So. 654
• Court: Alabama Supreme Court
• Parties: SOUTHERN BUILDING & LOAN ASS'N v. CASA GRANDE STABLE CO.

29 So. 654

128 Ala. 624

SOUTHERN BUILDING & LOAN ASS'N v. CASA GRANDE STABLE CO.

Supreme Court of Alabama

January 22, 1901

Appeal from chancery court, Morgan county; W. H. Simpson, Judge.

Bill by the Casa Grande Stable Company against the Southern Building & Loan Association. Judgment for complainant, and defendant appeals. Affirmed.

The bill in this case was filed by the appellee against the appellant.

It was averred in the bill that the complainant had negotiated a loan with the defendant, and, for the purpose of securing the loan of the money, had subscribed for capital stock of the defendant association, and had given its bond and executed a mortgage to secure the payment of the same, upon certain property owned by the complainant; that this loan was negotiated and consummated on the regular building and loan plan. It was further averred in the bill that the act of the complainant in borrowing the money was ultra vires; that the complainant was organized under the general incorporation laws of the state and had no authority to subscribe for the capital stock of another corporation; that the loan was made without the consent of the stockholders of the complainant corporation and without a meeting being held therefor as required by statute. It was also averred in the bill that by reason of alleged default in the payment of the installments due the defendant as required by the contract, the defendant was proceeding to foreclose said mortgage. In its bill, the complainant offered to do equity by paying to the defendant such amount as might be ascertained to be legally due it.

The prayer of the bill was that the borrowing of the money and the transactions with the defendant on the part of the complainant be declared ultra vires and void; that the stock and bond be canceled and that the cancellation of the mortgage from the complainant to the defendant be decreed that an account be taken and the amount complainant should equitably restore to the defendant be adjudged, and that the defendant, its agent and attorneys, be restrained and enjoined from proceeding with and making the threatened foreclosure and sale. The other facts of the case necessary to an understanding of the decision on the present appeal are sufficiently stated in the opinion.

Upon the final submission of the cause upon the pleadings and proof, the chancellor decreed that the complainant was entitled to the relief prayed for, and ordered that upon the payment by the complainant to the defendant of the amount ascertained to be due it, the stock and bond and the mortgage executed by the complainant to the defendant be delivered up and canceled. From this decree the defendant appeals, and assigns the rendition thereof as error.

Harris & Eyster, R. W. Walker, and Lawrence Cooper, for appellant.

E. W Godbey, for appellee.

HARALSON J.

The bill attacks the validity of the bond and mortgage of the complainant company on several grounds, viz.: That they were given to secure a loan to said company at a greater rate of interest than 8 per cent. per annum, and, under the statute under which said company was organized (Code 1886, § 1664 subd. 7), said bond and mortgage were ultra vires and void; that said stable company is a corporation organized under the general laws of the state, having only the powers and authority conferred by statute, and that no power is given to it by statute to subscribe for the stock of another corporation, and that, said stable company was without power to execute the mortgage, without the consent of the holders of the larger part in value of the capital stock of said company, expressed by a vote at a meeting of the stockholders, called for that purpose, according to the requirements of said section 1664 of the Code of 1886.

To the bill as originally filed, a demurrer was interposed by the defendant corporation, and the same was overruled. On appeal to this court, the decree was affirmed, and the equities of the bill, on the averments as made, were sustained. Southern Building & Loan Ass'n v. Casa Grande Stable Co., 119 Ala. 175, 24 So. 886.

The question of usury as presented in the evidence introduced on the trial of the cause, is quite different from that presented on the face of the bill. We deem it unnecessary to pass on the question of usury, as it is now presented on the facts, since it is not necessary for the determination of the cause in the view we take of it in another of its aspects. We refer, as touching the question, to Southern Building & Loan Ass'n v. Anniston Loan & Trust Co., 101 Ala. 582, 15 So. 123, 29 L. R. A. 120; Sheldon v. Association, 121 Ala. 278, 25 So. 820; Johnson v. Association, 121 Ala. 524, 26 So. 201; Association v. Ballard (Ala.) 27 So. 971.

It is conceded that one corporation cannot, in the absence of express statutory authority, become an incorporator by subscribing for the capital stock of a new corporation, or invest its capital stock in the capital stock of another corporation. Lumber Co. v. Rees, 103 Ala. 622, 16 So. 637; Commercial Fire Ins. Co. v. Board of Revenue, 99 Ala. 1, 14 So. 490. But, it is contended with plausibility, that this principle has no application to a transaction with a building and loan association already organized and operating, where a borrower is required by its rules and regulations to subscribe for certain shares of its stock,-a device, peculiar to such institutions, upon which loans are alone effected. As bearing on the question we refer to End. Bldg. Assn's, 282, § 321; Thomp. Bldg. Ass'ns (2d Ed.) 215, § 114. As the point is unnecessary to the decision of the cause we express no opinion on it.

The section of the Code of 1886 above referred to, under which the complainant corporation was organized, and which is the law of its existence, provides that the corporation may borrow money at...