Washington Nat. Building, Loan & Investment Ass'n v. Stanley

• Citation: 63 P. 489,38 Or. 319
• Parties: WASHINGTON NAT. BUILDING, LOAN & INVESTMENT ASS'N v. STANLEY et al.
• Decision Date: 07 January 1901
• Court: Supreme Court of Oregon

63 P. 489

38 Or. 319

WASHINGTON NAT. BUILDING, LOAN & INVESTMENT ASS'N v. STANLEY et al.

Supreme Court of Oregon

January 7, 1901

Appeal from circuit court, Polk county; H.H. Hewitt, Judge.

Action by Washington National Building, Loan & Investment Association against Hartwell B. Stanley and others. From a decree dismissing its complaint, complainant appeals. Reversed.

This is a suit to foreclose a mortgage upon real estate. The complaint avers: That plaintiff is a corporation organized under the laws of the state of Washington, and that, by compliance with the requirements of the laws of this state it is entitled to do business herein and to maintain this suit. That on September 2, 1895, Hartwell B. Stanley and wife, of Seattle, Wash., made their certain promissory note to plaintiff, of which the following is a copy: "On or before eighty-four (84) months after date, for value received, I promise to pay the Washington National Building Loan and Investment Association, a corporation duly organized under the laws of Washington, the sum of five hundred ($500.00) dollars, with six per cent, interest per annum, and six per cent. premium per annum, thereon from date until paid, principal, interest, and premium payable in United States gold coin of the present weight and fineness, payable monthly on or before the last Saturday of each month principal, interest, and premium payable to the treasurer of the Washington National Building, Loan and Investment Association, at Seattle, Washington. Any failure to pay interest or premium when due shall, at the election of the payee, make the principal, interest, and premium at once due and any waiver of such right shall not prevent the payee from enforcing the right, at its election. The shares of stock of the Washington National Building, Loan and Investment Association held by the undersigned, as shown by the certificate of stock No. 4,895, are hereby transferred and pledged to the payee as collateral security for the performance of the conditions of this obligation and of the mortgage securing the same. And it is hereby especially agreed that if this note is placed in the hands of an attorney for collection, or if collected by suit, I agree to pay such additional sum as attorney's fees as the court may adjudge reasonable." That at the same time the said Stanley and wife, for the purpose of securing the payment thereof, duly made, executed, and delivered to plaintiff their certain mortgage upon real property (describing it) in Polk county, Or., which was duly recorded in the office of the clerk of said county. That said note and mortgage were made with reference to, and in accordance with, the laws of the state of Washington, and that, under and by virtue of said laws, they are each valid and binding obligations. That no part of said note, either principal, interest, or premium, has been paid. That the shares of stock referred to in said mortgage are of no value whatever. That there is now due and owing from the defendants Stanley to plaintiff the sum of $500, with interest thereon at the rate of 6 per cent. per annum, and premium at the rate of 6 per cent. per annum, from September 2, 1895, and that $75 is a reasonable sum to be allowed as attorney's fees for the foreclosure of said mortgage. The prayer is for such foreclosure, and a cancellation of the defendant's stock in the association. The defendants Stanley and wife join issue therewith, and, among other things, deny that the plaintiff had complied with the requirements of the act of February 25, 1895, entitling building and loan associations of other states to transact business within this state (Sess.Laws 1895, p. 103), or that said contract was made or executed in the state of Washington, or that they otherwise executed and delivered said mortgage, except as stated in their further and separate answer, or that there is anything due or owing from them to the plaintiff. As a separate defense, they allege that no rate of premium is fixed by plaintiff's by-laws, as provided by section 6 of said act, and that the agreement to pay a premium of 6 per cent. per annum, in the manner specified in said note, is illegal and void; that said note and mortgage were executed and delivered in Polk county, Or.; that the note was made and delivered upon a usurious agreement between the plaintiff and the defendants, and that said corporation has not complied with the provisions of said act, so as to entitle it to transact business in this state. The reply denies the material allegations of the answer, and further alleges, among other things, that plaintiff fully complied with the statute authorizing it to do business in this state, and received the certificate of the secretary of state to that effect. The trial resulted in a decree dismissing the suit, and the plaintiff appeals.

Guy G. Willis, for appellant.

J.L. Collins and Raleigh Stott, for respondents.

WOLVERTON J. (after stating the facts).

One of the grounds upon which the dismissal was based is that the complaint does not state facts sufficient to constitute a cause of suit. Such insufficiency was not suggested by the defense, but was so found by the court upon its own motion, and is urged here as a correct holding in the premises. The specific objection to the complaint is that it has neither set up the mortgage by copy or exhibit, nor stated the substance or purport of its provisions, and that, therefore, the court cannot determine what are its conditions, or whether or not they, or any of them, have been broken so as to entitle the plaintiff to a foreclosure. The question not having been raised until after joining issue, all intendments must be taken in favor of the complaint. If it shows a good cause of suit, though defectively stated, it will support a decree, and ought to be allowed to stand, at this stage of the proceedings. But, if it has omitted an allegation material and necessary to a maintenance of the suit, then it must be held insufficient. Booth v. Moody, 30 Or. 222, 46 P. 884. It must be admitted that the pleading contains but a meager statement of the plaintiff's cause, which, if tested by demurrer, could not be sustained; but, under the circumstances, we are inclined to think that it will support a decree. It was evidently patterned after one of the forms contained in 2 Estee, Pl. & Prac. (2d Ed.) 265, Form 450. This court has held a complaint in like form good against a collateral attack. Berry v. King, 15 Or. 165, 13 P. 772. It is there said, by Mr. Chief Justice Lord, that "it may be well doubted whether the allegation complained of is insufficient in the particular noted." While that case is perhaps not authority here, as the question has arisen in a direct proceeding, yet, giving the plaintiff advantage of all intendments, the complaint must be held to state a cause of suit.

The articles of incorporation appear to have been executed and acknowledged by only six persons, instead of ten, as required by the statute of Washington in the organization of such an association, and the defendants challenge the plaintiff's corporate capacity to enforce its obligations, because the law has not been complied with in the particular suggested. But the association having apparently and in good faith attempted to comply with the law governing the organization, and the defendants being borrowers of the concern, and having received and accepted its stock and dealt with it in its corporate capacity, they cannot now be heard to question its entity. The association is, at least, a de facto corporation, and may maintain suits and actions against those who have dealt with it to enforce their obligations, and the state only can complain of its defective organization. "When a body of men are acting as a corporation under color of apparent organization, in pursuance of some charter or enabling act, their legal authority to act as a corporation cannot be questioned collaterally." Tayl.Priv.Corp. (4th Ed.) § 145. So that, if there has been an apparent attempt to perfect an organization under the law, and there has been user in pursuance of such an attempt, the organization has acquired a de facto existence, which will enable it to maintain its individuality against all attacks that may arise collaterally. Finnegan v. Noerenberg, 52 Minn. 239, 53 N.W. 1150. And this rule is applicable to building and loan associations, as well as private corporations generally. Payette v. Association, 27 Ill.App. 307; Hagerman v. Association, 25 Ohio St. 186.

It is further insisted that the plaintiff has not complied with the requirements of our statute so as to entitle it to do business within this state. The act (see Sess.Laws 1895, p 103) provides that no building and loan association organized under the laws of any other state shall do business herein, unless such association shall have securities of the value of $100,000; and that, before commencing to do business here, such association shall file with the secretary of state an authenticated copy of its charter or articles of incorporation and by-laws, a duly-authenticated copy of a resolution adopted by the board of directors, appointing an attorney therefor, resident within this state, upon whom legal process may be served, and whose name and residence shall be stated therein, and an agreement that said association will pay any judgment that may be taken against it within 60 days after the final entry thereof, and a certificate of the authorized officer of such other state, showing that securities of the value of $100,000 are on deposit with the proper officer or trust company, in trust for all the members and creditors of such association. It is further provided that every such association doing business in this state shall, on or before the 1st...