U.S. Sav. & Loan Co. v. Shain

• Decision Date: 14 November 1898
• Citation: 77 N.W. 1006,8 N.D. 136
• Parties: UNITED STATES SAVINGS & LOAN CO. v. SHAIN et al.
• Court: North Dakota Supreme Court

8 N.D. 136

77 N.W. 1006

UNITED STATES SAVINGS & LOAN CO.

v.SHAIN et al.¹

Supreme Court of North Dakota.

Nov. 14, 1898.

Syllabus by the Court.

1. Where, in a money-loaning transaction, the lender and the borrower reside in different states, it is competent for them to agree that the transaction shall be governed by the laws of either state.

2. Where, under such conditions, the transaction would be valid and binding under the laws of one state, and invalid under the laws of the other, the law will presume, in the absence of stipulations, that the parties contracted with reference to the laws of that state where their contract will be upheld.

3. Where a foreign building and loan association advanced money to a member of said association resident in this state, who received the same, and executed a note for the amount, and a mortgage upon real estate to secure the same, such note and mortgage can be enforced in the courts of this state, notwithstanding the fact that said association had not complied with the statutes prescribing the terms upon which foreign corporations might do business in this jurisdiction. Mill Co. v. Bartlett, 54 N. W. 544, 3 N. D. 138, followed.

4. Where a party subscribes for shares of stock in a building and loan association, and agrees to pay therefor by paying certain monthly installments upon each share of stock until the same reaches maturity or par, and where such party subsequently borrows money from such association, with the understanding that the same may be paid by a surrender and cancellation of his stock when it reaches maturity, while the stock of such party shares in the profits of the association he cannot claim to have his monthly payments upon stock applied, as made, in reduction of the amount so borrowed.

5. Courts cannot presume that a building and loan association violated its charter provisions, as well as the provisions of the statute under which it was created, by refusing to allow its members to secure its funds by competitive bidding for the same, without some competent evidence of such a course.

6. While a by-law of a building and loan association, which fixes a minimum premium below which bids will not be considered, may render a transaction usurious as to one who was forced, by reason of the by-law, to bid a larger premium than he otherwise would have been required to pay, yet, where one voluntarily bids a premium greatly in excess of that required by the by-law, he cannot be heard to complain of the obnoxious by-law.

Appeal from district court, Stutsman county; C. J. Fisk, Judge.

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

Benton & Bradley, for appellant. Ormsby McHarg, for respondents.

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 North Dakota. It also puts in issue the application for the 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 satisfaction of the note and mortgage in question, and the case comes to this court for retrial.

The appellant contends that the transaction in question must be governed by, and decided under, the laws of Minnesota. Respondents insist that the laws of Dakota territory and North Dakota must control. The solution of this question, under the authorities, is perfectly clear. This was, in its essence, a money-loaning transaction. By it Sanford A. Shain borrowed $1,500 from appellant. The parties were residents of different states. It was entirely competent for them to contract under the laws of either. They expressly agreed, both in the note and mortgage, that they contracted under the laws of Minnesota, the state of which appellant was a resident. That agreement is binding. Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U. S. 397, 9 Sup. Ct. 469;Security Co. v. McLaughlin, 87 Ga. 1, 13 S. E. 81;Dugan v. Lewis, 79 Tex. 246, 14 S. W. 1024;Lanier v. Trust Co. (Ark.) 40 S. W. 466; Cæsar v. Capell, 83 Fed. 403;Scudder v. Bank, 91 U. S. 406;Bigelow v. Burnham, 83 Iowa, 120, 49 N. W. 104;Smith v. Parsons (Minn.) 57 N. W. 311;Andrews v. Pond, 13 Pet. 77;Watson v. Lane, 52 N. J. Law, 550, 20 Atl. 894. The fact that the loan is made on real estate does not change this rule. Trust Co. v. Burton, 74 Wis. 329, 43 N. W. 141;Bennett v. Association, 177 Pa. St. 233, 35 Atl. 684;Association v. Vance (S. C.) 27 S. E. 274; Association v. Hoffman, Id. 692. The note and mortgage in this case were made payable in Minnesota. Many cases hold that such fact alone would make the contract a Minnesota contract, in the absence of contrary stipulations. As early as Newman v. Kershaw, 10 Wis. 333, it was said, “The general rule that contracts are to be governed by the law of the place of performance is too well settled to require the citation of authorities.”

Again, it is conceded that, if appellant be in fact a building and loan association, this contract would not be usurious under the laws of this jurisdiction. Not that our laws as to building associations differed materially from those of Minnesota, but our laws applied only to domestic corporations, and hence appellant could not claim any protection from them, and this contract, if a Dakota contract, would, it is claimed,...