V.S. Cook Lumber Co. v. Harris
| Decision Date | 29 June 1937 |
| Docket Number | 24485. |
| Citation | 71 P.2d 446,180 Okla. 557,1937 OK 448 |
| Parties | V. S. COOK LUMBER CO. v. HARRIS et al. |
| Court | Oklahoma Supreme Court |
Rehearing Withdrawn Sept. 20, 1937.
Syllabus by the Court.
1. Generally, a solvent and operating domestic building and loan association within this state has no corporate power and authority to sell, assign, and transfer the note and mortgage or the fruits of the contract of a borrowing stockholder of the association, so long as there is no default therein and the mutual original obligations of the stockholder and the association continue.
2. In so far as concerns the corporate power of a solvent and operating domestic building and loan association to sell assign, and transfer the note and mortgage of a borrowing stockholder before default, such note and mortgage are not in default if the periodical payments due thereon have been made by one with legal right so to do, nor until the stock has been legally canceled by the association and the value thereof applied upon the debt.
3. Record examined, and held, that the finding and conclusion of the trial court that the purchaser of the mortgaged real estate did not assume payment of the mortgage debt, and that the payment of certain sums and the taking of the note and mortgage by indorsement and assignment did not constitute payment or operate as a merger, is supported by the weight of the evidence.
Appeal from District Court, Oklahoma County; Sam Hooker, Judge.
Suit by the V. S. Cook Lumber Company against V. V. Harris to foreclose a real estate mortgage, wherein Young Pepper intervened. From a judgment of foreclosure ordering the lien of the plaintiff inferior to certain claims of defendant and intervener, plaintiff appeals.
Reversed with instructions.
Rainey Flynn, Green & Anderson, of Oklahoma City, for plaintiff in error.
Ames Cochran, Ames & Monnet, of Oklahoma City, for defendants in error.
The parties will be referred to herein as they appeared in the trial court, where V. S. Cook Lumber Company was plaintiff, V. V. Harris defendant, and Young Pepper was intervener.
The defendant, Harris, purchased real estate upon which there was then a mortgage in the principal sum of $15,000, in favor of Local Building & Loan Association, and a second mortgage in the principal sum of $4,750 in favor of the plaintiff. Plaintiff brought suit to foreclose its mortgage, alleging default, and sought foreclosure of same subject to the prior mortgage. The Building & Loan Association was not a party to the suit. Plaintiff also sought judgment against the defendant, Harris, upon the theory that Harris assumed payment of the indebtedness when he purchased the property. Personal judgment against Harris was denied, and the denial of same is supported by the evidence and in view of the decision upon former appeal to this court. Harris et al. v. V. S. Cook Lumber Co., 152 Okl. 7, 3 P.2d 694.
Upon retrial, the cause was tried in the nature of an equitable action, and largely upon the testimony taken at the former trial, and our conclusion of the questions here are governed accordingly.
Shortly after the suit was filed, the defendant, Harris, owner of the property, obtained an assignment of the Building & Loan Association's mortgage and the note secured thereby, to one Young Pepper. Harris paid the Building and Loan Association $15,000 therefor out of partnership funds belonging to himself and the said Young Pepper. The note was indorsed to Young Pepper without recourse. There is competent evidence that the transaction was made for the benefit of the Harris-Pepper partnership. The trial court apparently concluded that the payment to the Building & Loan Association by Harris did not result in a merger of the title and the lien, and this conclusion is justified by the evidence.
Pepper intervened, claiming to be the owner of the Building & Loan note and mortgage, alleging same to be in default, and seeking foreclosure thereof as a first lien. Thereafter the plaintiff, by proper pleadings, withdrew its allegations and admissions that the Building & Loan mortgage was a prior lien to its mortgage, and among other defensive matter to the claims of defendants, alleged that the Building & Loan Association could not sell and assign its note and mortgage to Harris or Pepper.
The trial court granted judgment of foreclosure in favor of Young Pepper for the full amount of the Building & Loan Association's mortgage, and declared the same a first lien on the property, subject only to a certain lien for taxes paid by plaintiff, and such action of the court is attacked here.
Although many questions are ably argued, it is our view that the controlling question is whether Pepper was the owner and holder of the mortgage originally made to the Building & Loan Association.
We must consider the corporate power of the Building & Loan Association to sell and assign such a note and mortgage. It is conceded that at the time of the attempted sale thereof the Building & Loan Association was a going concern, which eliminates any question of the right to sell where the association has ceased to operate.
Many authorities given us would appear to uphold the right of a going Building & Loan Association generally to sell and assign its notes and mortgages when the same are in default, but it is doubtful if they would sustain the view that such right exists before default.
We have concluded that at the time of the sale and transfer of the note and mortgage there was no default, and our discussion will be understood to concern the question of the corporate power and authority of a Building & Loan Association, within this state, while a going concern, to sell and assign outright and in the general course of business, the notes and mortgages taken by it from its borrowing members, secured by real estate mortgage and stock of the association purchased at the time of making the loan and as a part of the same transaction, when no default has occurred or proper action taken so as to change the nature of the respective original obligations of the members and the association.
In arriving at our conclusion that the note and mortgage were not in default at the time of the sale and transfer thereof, we note the uncontradicted evidence that on June 27, 1924, the plaintiff here as holder of a junior mortgage paid to the Building & Loan Association cash sufficient to cover all installments due on the note to July 20, 1924. Plaintiff was given this right under section 10953, O.S. 1931 (42 Okl.St.Ann. § 19), as follows:
When the money was loaned in the original Building & Loan transaction, the parties to the transaction entered into a contract containing numerous agreements. Although these agreements were evidenced in writing principally by instruments designated as a note and real estate mortgage, these instruments in reality contain many features not associated with ordinary notes secured by mortgage. They contained agreements to purchase stock in the association and to pay therefor in a certain manner. The agreement, as originally entered into, did not specify a definite sum necessary to be paid to retire the loan. The total amount necessary to be paid was dependent upon contingencies resting in agreements on the part of the Building & Loan Association. The contract entered into does provide a method whereby many of these contingencies and some of the reciprocal rights and duties of the parties might be terminated. In this regard, it contained provisions that in case of failure to make the monthly payments for a period of three months the Building & Loan Association might cancel the stock and apply the value thereof on the principal debt and declare the whole debt due and payable, with 10 per cent. interest thereon. We are not called upon here to determine any results which might follow from the action of the Building & Loan Association in proceeding under these provisions of the contract, further than to say that until such action is taken by the Building & Loan Association it appears to us proper to conclude that the same reciprocal rights and duties remain with the parties to the contract, which originally existed. When such action is taken, it may be, although we do not so decide here, that many of the mutual obligations between the contracting parties which originally existed are thereafter terminated, and that the status of the parties then becomes that purely of debtor and secured creditor. And so we take it that the default mentioned in the cited authorities is such a default as operates to materially change the original status of the contracting parties, and such as defeats the right of the borrowing stockholder to continue periodical payments on his stock. and to continue as the owner of same and to have the earnings of the association accrue to his benefit through enhancement of the value of his stock.
At the time of such payment by plaintiff, the Building & Loan Association had not declared the entire amount of the note due, and canceled the stock and applied the value thereof on the note, which it may have had the right to do under the terms of the agreement. The stock was still outstanding and in full force and effect and the Building & Loan Association had taken no affirmative action which might terminate any of the original reciprocal rights, duties, and obligations undertaken between it and its borrowing stockholder. True Harris and a representative of...
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