Stumph v. Wheat Belt Building & Loan Ass'n of Pratt

• Citation: 148 Kan. 25,79 P.2d 896
• Decision Date: 11 June 1938
• Docket Number: 33721.
• Parties: STUMPH v. WHEAT BELT BUILDING & LOAN ASS'N OF PRATT.
• Court: United States State Supreme Court of Kansas

79 P.2d 896

148 Kan. 25

STUMPH v. WHEAT BELT BUILDING & LOAN ASS'N OF PRATT.

No. 33721.

Supreme Court of Kansas

June 11, 1938

Syllabus by the Court.

Where a building and loan association is without permanent stock, all profits from operations are ultimately to be declared as dividends to all shareholders entitled to participate, and the association is without power to treat one class of shareholders differently from another except as specifically authorized by statute. Gen.St.1915, § 2214.

Where a building and loan association has permanent stock, directors need not do more than declare sufficient dividends of profits to mature shares in specified periods, notwithstanding that the earnings may justify declaration of dividends sufficient to mature stock ahead of the specified time. Gen. St.1915,§ 2214.

A building and loan association having permanent stock can issue loan stock payable in a stipulated number of months and can enter into a loan contract under which the stock is assigned and pledged as security. Gen.St.1915, § 2214.

Where Kansas building and loan association by-laws provided for issuance of permanent stock and definite monthly payment installment stock to members desiring real estate loans, and association thereafter loaned money on real estate security to a person becoming a member by purchase of loan stock assigned as collateral security for payment of loan, and the member made the required number of payments under the by-laws as incorporated in the loan stock certificate and referred to in the note and real estate mortgage, the contract was fully performed and member was entitled to have the mortgage released. Gen.St.1915, § 2214.

A mortgagor suing to compel mortgagee to release a real estate mortgage was not entitled as a matter of right or statute to a judgment for statutory penalty or for attorney's fees notwithstanding that debt secured was paid and the mortgage was subject to be released, where there was a bona fide controversy between the parties as to whether the debt had in fact been paid. Gen. St.1935, 67-309.

1. Where a building and loan association, organized under the laws of Kansas, adopts by-laws providing for the issuance of permanent stock, and also for the issuance to members desiring loans upon real estate upon the association's definite contract plan of installment stock on which the member is required to pay definite monthly payments according to the schedules in the by-laws, and thereafter the association loans money on real estate security to one becoming a member by purchase of loan stock, assigned as collateral security for the payment of the loan, and the member makes the required number of payments under the by-laws, as incorporated in the loan stock certificate and referred to in the note and real estate mortgage securing it the contract is fully performed by the member and he is entitled to have the mortgage released.

2. Where upon the trial of an action by a mortgagor against a mortgagee to compel release of a real estate mortgage, it was found that the debt secured was paid and the mortgage subject to be released, but it appeared that there was a bona fide controversy between the parties as to whether the debt had in fact been paid, the mortgagor is not entitled as a matter of right or statute to a judgment for the statutory penalty or for attorney's fees under G.S.1935, 67-309.

Appeal from District Court, Pratt County; George L. Hay, Judge.

Action by Joe Stumph against the Wheat Belt Building & Loan Association of Pratt, Kan., to compel the release of a mortgage and to recover statutory damages and attorney's fees because of the mortgagee's refusal to release the mortgage. From the judgment, the defendant appeals, and the plaintiff cross-appeals.subject to be released, where there was a bona fide controversy between the parties as to whether the debt had in fact been paid. Gen.St.1935, 67-309.

John L Hunt, Margaret McGurnaghan, John H. Hunt, and George M Brewster, all of Topeka, for appellant.

Wm. Barrett, George Barrett, and Robert G. Miller, all of Pratt, for appellee.

THIELE Justice.

This was an action to compel release of a mortgage and to recover statutory damages and attorney's fees because of the mortgagee's refusal to release.

On March 28, 1922, Jessie J. Steward and her husband borrowed $3,000 of the defendant, hereafter referred to as the association, securing the same by a mortgage on real property in Pratt County, Kansas. When the loan was made, and in accordance with the statutes applicable to building and loan associations, the borrowers purchased from the association thirty shares of Class G installment stock evidenced by a certificate which will be referred to later in more detail. This stock was pledged for payment of the debt. At the same time, the borrowers executed and delivered to the association a note reciting that on maturity of the stock pledged they would pay the association the $3,000 advanced, with interest at the rate of ten percent per annum payable monthly on the 25th day of each month until the principal sum had been fully paid, and that they pledged and assigned to the association as collateral security the capital stock evidenced by the above mentioned certificate and that they agreed to pay the monthly dues on the stock amounting to $10.80 and the monthly installments of interest amounting to $25.20, together with all fines chargeable upon arrears "until such time as said stock shall reach the ultimate value thereof and fully mature and be fully paid in and of the value of $100.00 per share, according to the terms and provisions thereof, and of the said Constitution and By-Laws; when, if all the terms and conditions of this note and the mortgage securing the same, have been fully complied with, such stock shall be accepted by said Association at its face value, in settlement of this note and the said loan and indebtedness; unless said loan shall be otherwise sooner paid, cancelled and discharged."

To secure payment of this note the borrowers executed and delivered to the association a mortgage describing the above note and reciting:

"The first parties expressly agree--that they will pay to second party, or its successors or assigns, on or before the Fifteenth day of each month the sum of $10.80 as dues on thirty (30) shares of Class 'G' Installment Stock Certificate No. 90 of said Association assigned and pledged as collateral security to said Association, and the sum of $25.20 as interest on said sum of $3,000.00 and also fines that may be assessed against said stock until said stock shall become fully paid up and of par value of One Hundred Dollars per share under the provisions of the Constitution and By-Laws of said second party, and to secure the performance of all the terms and conditions expressed in said promissory note."

The stock certificate above mentioned in general complied with the requirements of Laws 1911, ch. 131, § 2, then in force and showed that Jessie J. Steward was the owner of Class G shares of the capital stock of the association and that it was issued in accordance with the following provisions of the by-laws, which, in part, were as follows:

"Class G. Installment Stock.

"Article VI.

"Sec. 8. Class G Installment Stock shall be issued only to members desiring loans upon real estate, upon the Association's definite contract plan and shall be dated the day of the month in which issued. The Stockholder shall be required to make monthly payments as stated in the following table, and at the expiration of the number of months specified therein his stock shall be due, and the proceeds thereof shall be applicable for the payment of the loan for which they were given as security. Excess payments permitted on Class G shares, the same to participate in dividends in the same proportion as regular payments. (Italics ours.)

"Table of Monthly Rate for Each Share of $100.00.

Terms of Payments Payment Monthly Terms of Payments Payment Monthly

**** **** 144 months .38

"The power is given the Board of Directors to change the above payments when deemed for the best interest of the Association; such change, however, shall not affect outstanding Certificates in this class,"

The following paragraph also appeared on the certificate:

"In consideration of a guarantee by the holders of the Permanent Stock to declare dividends at a rate sufficient to mature this Certificate within the term prescribed, and the guaranteed withdrawal privileges, the holder hereof hereby agrees to waive his right to any earnings in excess of the amount necessary to realize such guarantee."

On the back of the certificate was endorsed:

"Number

"90

"Class G

"Number of Shares 30

"$3000.00

"Year 12

"Series --

******

"Issued to

"Jessie J. Steward

"Date

"3-28-22

"Address

"Read Your Certificate. It is Your Contract with the Association."

Sometime thereafter, Mrs. Steward and her husband sold the real estate to one Walter E. Baker, and at that time assigned their interest in the building and loan stock to him. Baker continued to own the property until about January, 1933, when he sold it to the present plaintiff, to whom the building and loan stock was transferred. The plaintiff made payment of the monthly installments of $36, and on May 3, 1934 he made payment of the 144th installment due and demanded release of the mortgage. Without reciting the details here, the association refused to release the mortgage claiming that the pledged stock was not matured to its face value, and that there was a balance due and owing on it to make it worth its par value of $100 per share. On October 31, 1934, the plaintiff brought his action to compel release. The association answered that the note secured by the mortgage...