Strohen v. Franklin Saving Fund & Loan Ass'n

• Decision Date: 21 February 1887
• Docket Number: 69
• Citation: 115 Pa. 273,8 A. 843
• Parties: Strohen v. Franklin Saving Fund & Loan Association to use of McKinley, Receiver
• Court: Pennsylvania Supreme Court

8 A. 843

115 Pa. 273

Strohen v. Franklin Saving Fund & Loan Association to use of McKinley, Receiver

No. 69

Supreme Court of Pennsylvania

February 21, 1887

Argued January 25, 1887

ERROR to the Court of Common Pleas, No. 3, of Philadelphia county Of January Term 1887, No. 69.

This was a scire facias sur mortgage brought by authority of court in the name of The Franklin Saving Fund and Loan Association of Roxborough to the use of John S. McKinley, receiver of said association, against Michael Strohen.

The defendant filed an affidavit of defence. A rule was granted to show cause why judgment should not be entered for want of a sufficient affidavit of defence. This rule was made absolute by the court and the damages were assessed to the full amount of the mortgage with interest, whereupon the defendant took this writ, assigning for error the action of the court in making said rule absolute, and in assessing the damages at the full amount of the mortgage and interest.

The following was the affidavit of defence:

Michael Strohen, the above-named defendant, being duly sworn according to law, doth depose and say, that he has a just and true defence to the whole of the plaintiff's claim of the nature and character following: that is to say, this deponent was a stockholder in and owner of twenty-one shares of the capital stock of the above-named Franklin Saving Fund and Loan Association. Fifteen shares of which said stock this deponent acquired by original subscription, and six shares by purchase from Bernard Schler, who duly assigned the same to this deponent on the eleventh day of April, A.D., 1874. Deponent borrowed from the said association on said twenty-one shares and received a loan thereon from said association of forty-two hundred dollars, less the premium which said premium amounted to the sum of twenty-two hundred and sixty-eight dollars, and the actual amount of cash received by this deponent from said association for said loan was the sum of nineteen hundred and thirty-two dollars, and to secure the repayment of which said loan this deponent gave the said Association the mortgage upon which this suit has been brought.

The amount paid by this deponent to said association (including eighteen dollars which was paid by said Bernard Schler on his said six shares) on account of the principal of said mortgage debt, is the sum of twenty-seven hundred and ninety-three dollars, together with interest at the rate of six per cent per annum.

All moneys paid upon said twenty-one shares of stock, up to the date of said loan, was credited by the said association on account of the principal debt and interest at the rate of six per cent. per annum, charged on the balance. And all moneys paid upon said stock, after the date of said loan, was credited on account of the said principal debt by the said association annually, and the interest on the balance annually reduced until the month of December, 1881, when the entire amount of the said principal sum of said mortgage debt was paid, and after that time no interest was charged by the said association. Notwithstanding the fact that the said principal debt was fully paid in the month of December, A.D. 1881, this deponent still continues to pay twenty-one dollars a month to the said association up to and including the month of January, A.D. 1885.

That the consideration which induced this deponent to make said loan, was that he should be a participant in the profits and advantages which would accrue, and of right ought to accrue and should have accrued to him as a stockholder of said association, from the payment of the premiums, dues, fines and interest of the other stockholders, besides many other profits and advantages incident to membership in a properly conducted building association.

That instead of borrowing, a great number of the stockholders withdrew their stock, and others commenced suits against the said association, and the affairs of the said association had been and were so negligently and improvidently managed, that on or about the month of March, A.D. 1885, the said association became and was, and still is, insolvent, and at that time and ever since has been so disorganized that it has not been able to carry on the business of a building association.

That owing to said insolvency and disorganized condition of the said association, all its estate real, personal and mixed was placed in the hands of John S. McKinley, Esquire, as Receiver, by order and decree of the Court of Common Pleas, No. 1, of Philadelphia County, in the case of Joseph Arbuckle against the said association, as of March Term, 1885, No. 234.

That by reason of the facts hereinbefore stated, the consideration which induced this deponent to make said loan has failed, and under the facts hereinbefore set forth this deponent is advised and respectfully submits to the court that he is not legally bound to pay to the said association or the Receiver thereof any other or greater sum of money than the amount actually received by him from the said association with interest thereon at the rate of six per cent. per annum, which said sum so actually received as aforesaid by this deponent from said association has been fully paid by the deponent to said association, together with six per cent. per annum interest thereon.

The judgment is reversed, and it is ordered that the record be remitted to the court below to enter a judgment for the plaintiff in accordance with the principles indicated in this opinion.

Edward C. Quin for plaintiff in error. -- The effect of the dissolution of a building association upon its members stops at once any liability for further regular stock payments, and this applies equally whether such members be merely investors or also borrowers. The liability to pay monthly dues or fines or interest on the amount advanced cannot extend beyond the existence of the association: Cook v. Kent, 105 Mass. 264; Binker v. Association, 7 Allen (Mass.), 100; Endlich on Building Associations, sec. 496. The reason for this is obvious, as "nothing passes to the Receiver but the possession of the assets, coupled with the duty of converting them into cash and distributing the money among those equitably entitled to it." His appointment does not confer upon him the power or authority of the corporation to carry on the business of a building association. Burrill on Assignment, page 623. His functions are simply to collect the assets and bring the money into court: Kerr on Receivers, page 196; Bennison v. Bill, 62 Ill. 408; Yeager v. Wallace, 44 Penna., St. R., 296; Runyan v. The Bank, 3 Green, C.R., 480; Cooney v. Cooney, 65 Barb., 524. "As a general rule, a Receiver is the mere custodian of the property, and has no power except those conferred upon him by the order of his appointment." Kerr on Receivers, page 196.

The contention here is, that the appropriation of the payments on the monthly dues, being a part of the contract of the purchase of the loan, and the association, in compliance with the terms of the contract, having appropriated the payments on the stock until the loan was fully paid, that neither the association nor the Receiver can undo what has been done against the consent of the plaintiff in error.

There can be no question of law as to the right of the association when entirely solvent to make the appropriation with the consent of the stockholder: Sutton v. The North American Building Association, 35 Penn. St. R., 436; The Spring Garden Building Association v. The Tradesmen's Building Association, 10 Wright, 493; Watkins v. The Building Association, 10 W.N.C., 414; Economy Building Association v. Hungerbueler, 9 W.N.C., 218.

Neither can there be any dispute as to the fact of the appropriation, as this positively appears by the affidavit of defence.

The defendant was liable for only what he had actually received with interest on the same, and should have been credited with all he paid, either upon the stock or interest, and the computation should have been made according to the partial payment rule; Endlich on Building Ass'ns § 496; Cook v. Kent, 105 Mass. 246; Building Ass'n v. Goodrich, 48 Georgia, 445; Windsor et al. v. Baudel, 40 Md. 172; Building Ass'n v. Zucker, 48 Id., 448; Building Ass'n v. Jareksch, 51 Id., 198; Garson v. Seldner, 99 Va. 293.

Alexander Simpson, Jr., (John F. Goodwin with him) for defendant in error. -- When a loan is made, the borrower assigns to the association his stock as collateral thereto, and...