The United States Savings and Loan Company v. Shain

• Decision Date: 14 November 1898
• Court: North Dakota Supreme Court

77 N.W. 1006

8 N.D. 136

THE UNITED STATES SAVINGS AND LOAN COMPANY v. SANFORD A. SHAIN, et al

Supreme Court of North Dakota

November 14, 1898

Appeal from District Court, Stutsman County; Fisk, J.

Action by the United States Savings and Loan Company against Sanford A. Shain and others. Judgment for defendants. Plaintiff appeals.

Reversed.

Reversed.

Benton & Bradley, for appellant.

The right of a corporation of another state to make contracts in this state is unquestionable, where not contrary to the known policy of the state or injurious to its interests. Bank v. Earl, 13 Pet. 519-588. Minnesota corporations are permitted to establish offices without the limits of that state for the transaction of building and loan business. Sec 116, Ch. 34, Minn. Stats. 1878. And there is nothing in the laws of this state, indicating a policy refusing to recognize the right of such foreign corporations to make contracts here, excepting the limitation imposed. Sections 3190-3192 Comp. Laws; Ch. 40 and 41 Laws 1889. The prohibition of certain specified contracts by corporations in these laws is by necessary implication an admission that other contracts may be made by foreign corporations and that no legislative permission is necessary to give them validity. Bank v Earl, 13 Pet. 519; Conn. Mut. Life Ins. Co. v Cross, 18 Wis. 109; New York, etc., Co. v. Oil Co., 3 Duer. 648; Munford v. Ins. Co., 4 N.Y. 463; Brill v. Pool, 12 N.Y. 495; Blair v. Ins. Co., 47 Am. Dec. 129. Neither its charter nor the laws of the state creating it, places any restraint upon the association as to making contracts in a foreign state. The right to so contract is presumed. Thomp. on Corp. § 7883; Wood Hydraulic Co. v. King, 45 Ga. 34; Boulware v. Davis, 90 Ala. 207; Chautauqua County Bank v. Risley, 19 N.Y. 381. And the right to so contract here is presumed unless repugnant to the policy of our laws. Thomp. on Corp. § 7884; Aldward v. Holmes, 10 Abb. N.C. 96; Ducat v. Chicago, 95 Am. Dec. 529. The contract of plaintiff is valid and enforcible notwithstanding its failure to comply with the provisions of § 2, Ch. 41, Laws 1889. Washburn Mill Co. v. Bartlett, 3 N.D. 138. A court of equity will not cancel the notes and mortgage given a building and loan association, because the association did not comply with the statute prescribing terms upon which foreign corporations may do business within the state, unless the mortgagor seeking the relief pays back the amount he has actually received. New York National B. & L. Ass'n v. Cannon, 41 S.W. 1054; Story Eq. Jur. § 301; Sporrer v. Eifler, 1 Heisk. 636; Bank v. Windmill Co., 34 S.W. 516, S. C. 96 Tenn. 367. It was competent for the parties to stipulate in their contract, that it was made with reference to and under the laws of the State of Minnesota. Equitable B. & L. Ass'n v. Hoffman, 27 S.E. 692; Turner v. Ass'n, 27 S.E. 947; Caesar v. Cappell, 83 F. 403.

Ormsby McHarg, for respondent.

A foreign building and loan association cannot do business in this state, whereby it contracts to receive usurious interest, and claim protection under the laws of this state. Falls v. U. S. Sav. & L. Co., 13 So. Rep. 25; Link v. Ass'n, 89 Pa. 15; Willard v. Ass'n, 45 Md. 546; Kuppert v. Ass'n, 30 Pa. 465; Maine Guaranty Co. v. Cox, 42 N.E. 915; Meroney v. Atlanta, 21 S.E. 924; Randall v. Ass'n, 60 N.W. 1019; St. Joseph v. Thompson, 19 Kan. 321; Endlich B'l'd'g Ass'ns, §§ 510 and 518. Plaintiff contracted to receive and did receive interest in excess of twelve per cent. This was a criminal offense. Ch. 133 Laws 1889. Thus the contract sought to be enforced here was in effect doing business in this state in violation of an express prohibition. Bradley v. Armstrong, 9 S.D. 267, 68 N.W. 733. Only building associations, incorporated under the laws of this state are exempt from the operation of the usury law. § 3 Ch. 41 Laws 1889; Vermont L. & T. Co. v. Whithed, 2 N.D. 82. The contract is governed by the law of the state wherein the land is situated. United States Sav. & L. Co. v. Scott, 34 S.W. 235; Falls v. Loan Co., 13 So. Rep. 25; Meroney v. Atlanta, 21 S.E. 924; Tilley v. Ass'n, 52 F. 621; Rowland v. Ass'n, 18 S.E. 965; Roberts v. Life Ins. Co., 24 S.E. 780; Building & Loan Ass'n v. Griffin, 39 S.W. 656. If the contract is controlled by the Minnesota statute, as contended by appellant, it is void for usury. The transaction with respondent was a loan and not exempt under the statutes of Minnesota from operation of the usury law there. Fagin v. Peoples Sav. & L. Ass'n, 55 Minn. 437 S.C. 57, N.W. 142; Central B'l'dg Ass'n v. Lampson, 60 Minn. 422, S. C. 62 N.W. 544. And this because appellant is not a mutual building and loan association. Central B'l'd'g Ass'n v. Lampson, 60 Minn. 422; Kent v. Mining Co., 78 N.Y. 159; Simpson v. Ass'n, 41 S.W. 570; King v. Association, 48 N.E. 677; Gibson v. Association, 48 N.E. 570. The association charged a fixed premium of 50 per cent. for an advancement or loan. The effect of this was to destroy competition, and rendered the transaction usurious. McCauley v. Association, 37 S.W. 212; Stiles Appeal, 95 Pa. 123; State v. Greenville, 29 Ohio St. 92; State v. Association, 35 Ohio St. 258; Bates v. Ass'n, 42 Ohio St. 655, Endlich 394, 395, 306 and 307.

OPINION

BARTHOLOMEW, C. J.

This is an action by the original mortgagee to foreclose a mortgage on certain real estate situate in Stutsman county. The defendants Sanford A. Shain and Julia Shain, his wife, were the original mortgagors; The defendant William Stone is the subsequent grantee of Sanford A. Shain, and took subject to the mortgage; Augusta Stone is the wife of William Stone; and S. L. Glaspell was joined as defendant as a junior lienholder. Sanford A. Shain and William Stone answer jointly, the other defendants not appearing.

The complaint alleges the incorporation of the plaintiff under the laws of the State of Minnesota, for the purpose of doing business as a building and loan association, under the name of the United States Savings, Loan & Building Company, and the subsequent change of name to the United States Savings & Loan Company. It alleges that plaintiff has fully complied with all the requirements of the laws of the Territory of Dakota and the State of North Dakota for the purpose of enabling it to do business in this jurisdiction; that on February 4, 1889, the defendant Sanford A. Shain applied to plaintiff for a loan of $ 1,500, agreeing to take 30 shares of stock in the plaintiff company, and continue the monthly payments thereon until said stock should mature or the loan be paid, and pay all fines and assessments against said stock, and to pay plaintiff a premium of 50 per cent. of said 30 shares, and to assign 15 shares to plaintiff as collateral to said loan; that this offer was accepted, and said Shain executed and delivered to plaintiff the following written instrument: "St. Paul, Minnesota, April 8th, 1889. For value received, after three years from date, and before nine years from date, I promise to pay to the order of the United States Savings, Loan and Building Company, at the office of its treasurer, St. Paul, or its trustee, in Minneapolis, Minn., the sum of fifteen hundred dollars, with interest at the rate of six per cent. per annum on the sum of fifteen hundred dollars, payable monthly. It is understood that this note is given for a loan obtained on thirty shares of the stock, of the said United States Savings, Loan and Building Company; and, if the maker hereof fails to make any monthly payment on said stock or to pay any installment of interest for period of six months after the same is due, then the whole amount of these notes shall at once become due and payable, but if the maker hereof shall pay all installments of interest which become due hereon, and all monthly payments and fines which become due on said stock, until said monthly payments shall have been past due for a period of six months, then, upon the surrender of said stock to said company, this note shall be deemed to be fully paid and canceled. This note is understood to be made with reference to and under the laws of the State of Minnesota. If this note is paid before seven years from date, there shall be allowed such rebate from the premium as the board of directors of said company shall deem equitable. Premium, $ 1,500. Loan, $ 1,500." It is further alleged that, to secure compliance with said instrument in all particulars, Sanford A. Shain and wife executed and delivered to plaintiff the mortgage in question. There is a provision in the mortgage that, in case of failure to pay the monthly interest payment or the monthly payment on stock, and such default shall continue for three months, then the whole amount to become at once due and payable. These defaults are set forth, and the defendants are charged with the following amounts:

Principal of loan

$ 1,500 00

Monthly interest in arrears

97 50

Monthly stock installments in arrears

216 00

Fines

48 00

Making a total of

$ 1,861 50

Defendants are then credited with what is called the "withdrawal value" of his shares of stock, amounting to $ 1,018.35 leaving a balance of $ 843.15, for which plaintiff asks judgment and decree of foreclosure.

The answer admits plaintiff's corporate organization, but denies that it was ever organized as a building and loan association, and alleges that it was organized for the purpose of loaning money at a usurious rate of interest; denies that plaintiff was ever authorized to do business in the Territory of Dakota. It also puts in issue the application for loan, but admits the execution of the mortgage, pleads that the contract was usurious, and pleads payment in full.

The trial resulted in a decree for defendants, directing the cancellation and...