Opinion
13949
November 20, 1934.
Before DENNIS, J., Spartanburg, October, 1933. Affirmed.
Action by Mrs. Fannie Cohen against the Home Building Loan Association of Spartanburg and another. From the judgment, the plaintiff appeals.
Decree of Judge Dennis follows:
This is an action, under the Act of the Legislature of 1933, for the cancellation of a real estate mortgage, which the plaintiff alleges is paid in full and should be canceled and satisfied. She also asks for judgment against the defendant Home Building Loan Association for $442.30 overpayment.
The defendant J.L. Campbell, as receiver, did not answer. The other defendant, Home Building Loan Association, answered, setting up plaintiff's bond and mortgage in the original sum of $8,000.00, dated October 14, 1929, and alleged that there is a balance due of $1,579.79, for which it asks judgment against the plaintiff for foreclosure, etc. The building and loan association also set up a special defense alleging that the plaintiff had no right to bring this action for the reason that she had not procured the permission of the Governor and that such permission was required under an Act of the Legislature of March 9, 1933 (38 St. at Large, p. 1174), known as Act No. 622, authorizing and directing the Governor of our State to assume control of banks and building and loan associations. The question of the right of the plaintiff to bring this action was decided in favor of the plaintiff by Judge Sease, who passed an order on December 22, 1933, which order referred to the master of Spartanburg County the question of accounting between the plaintiff and the defendant building and loan association.
Thereafter, references were held before the master and testimony taken. On April 13, 1934, the master filed his report in which he disqualified himself to act as referee and pass on the questions involved. By consent of counsel, the testimony and exhibits were reported along with the master's report and other papers in the case, and the matter came on for hearing before me on April 17, 1934.
The evidence is undisputed that the plaintiff some time ago subscribed for 100 shares of stock in the defendant building and loan association, and that prior to October 14, 1929, she paid thereon thirty monthly sums of $100.00 each, making a total of $3,000.00. On October 14, 1929, plaintiff executed to the building and loan association a bond in the sum of $8,000.00 and her mortgage securing this bond, and with the bond and mortgage, an assignment of her 100 shares of stock. Upon 80 shares of this stock she borrowed the $8,000.00 in anticipation of its maturity and agreed to pay thereon interest at the rate of 8 per cent. per annum, payable monthly in advance. Thereafter she paid to the association thirty-nine monthly payments of $153.33 each. Making up these monthly payments was $20.00 on 20 shares of stock assigned to the association, but upon which no money had been advanced, $80.00 upon 80 shares upon which $8,000.00 had been advanced, and $33.33 interest at 8 per cent. on the $8,000.00.
Plaintiff contends that under the well-established law in a line of decisions in our state culminating in Huggin v. People's Building Loan Association, 165 S.C. 404, 163 S.E., 883, the loan was really a loan of $5,000.00, since the value of the 100 shares of stock assigned on October 14, 1929, was $3,000.00, and that all payments thereafter should be credited on the obligation. By this method, plaintiff would be entitled to an overpayment of between $300.00 and $400.00. But I cannot approve this method. It seems to me that the 20 shares of stock upon which no advance was made to the plaintiff by the building and loan association stand in a separate relation and must be regarded as investment stock. The 80 shares, however, upon which the loan of $8,000.00 was advanced, having been assigned to the association, must be regarded as a credit on the $8,000.00 obligation as of the date the papers were executed, namely, October 14, 1929, and the plaintiff must be given credit for $2,400.00, thus reducing the obligation to $5,600.00 as of October 14, 1929.
The rule of law is too well established in this State to be questioned that the relation of the plaintiff to the defendant building and loan association is that of debtor and creditor and that all payments on stock and interest must be credited according to the United States partial payment rule. Applying this rule, according to a carefully prepared statement appended to this decree, prepared by plaintiff's attorney, which I assume to be correct, and crediting each month after October 14, 1929, up to and including January, 1933, the sum of $133.33, shows a balance of $1,340.45 due by the plaintiff to the defendant building and loan association on the bond and mortgage in January, 1933, when she stopped payment, without taking into account the sixty-nine payments of $20.00 each which had been also made to the building and loan association by the plaintiff up to and including January, 1933.
The testimony further discloses that the defendant building and loan association is being liquidated and that no further payments are being called for on investment stock. All loans are being pressed and collections made as expeditiously as possible, with a view of winding up the affairs of the association as soon as possible. The old board of directors has been replaced by a new board of three, and the former attorneys have been succeeded by others. It thus appears that the defendant building and loan association is being wound up or liquidated and that this method of liquidation has been approved by the board of bank control in Columbia.
Under these circumstances, it is contended by plaintiff that the cash paid-in value of the 20 shares of stock above referred to on which sixty-nine payments of $20.00 each had been made prior to January, 1933, making a total of $1,360.00, should be credited on plaintiff's debt as of January, 1933, when payments ceased. This would pay the mortgage and make an overpayment of $39.55.
I do not think that the 20 shares should be treated in any different way from other shares on which no money was borrowed. As to the 20 shares, the plaintiff is an investor, and as to the 80 shares, a borrower. As I understand the matter, the building and loan association, defendant, is solvent, and they expect to pay all investors in full, but I do not think that the plaintiff should be put in any different position from any other investor as to the 20 shares. In due time it will be determined if the plaintiff's 20 shares are worth all that has been paid by plaintiff on them, and, if it is so determined that these shares are of sufficient value to satisfy the mortgage, then the mortgage should be, of course, satisfied.
This action is in the nature of a penalty, and under the circumstances I do not think that the defendant is in such position that it should have a penalty placed on it, and it is not certain at this time that the mortgage has been paid. It is therefore ordered and adjudged that the action be dismissed.
Mr. Horace L. Bomar, for appellant, cites: When relation of borrower and lender exists: 44 S.C. 121; 62 S.C. 192; 65 S.C. 448; 132 S.C. 276; 165 S.C. 404; 54 S.C. 214; 65 S.C. 408; 56 S.C. 280.
Messrs. H.E. Ravenel, J.W. Mansfield and Evans, Galbraith Holcombe, for respondent, cite: Usury: 62 S.C. 178; 49 S.C. 402.
November 20, 1934. The opinion of the Court was delivered by
The plaintiff sued the defendant in October, 1933, in the Court of Common Pleas for Spartanburg County for the cancellation of a mortgage given by the plaintiff to the Home Building Loan Association of Spartanburg.
The Home Building Loan Association of Spartanburg had Hon. W.H. Townsend, presiding Judge of the Seventh Judicial Circuit, on November 1, 1933, to issue a rule to show cause against the plaintiff why the complaint in the action should not be dismissed on the ground that the plaintiff had failed to comply with the provisions of Act No. 622, March 9, 1933 (38 St. at Large, p. 1174), with reference to securing the authority of the Governor to bring the action.
Thereafter, on the 20th of November, 1933, an amended petition was filed by the Home Building Loan Association reiterating the position taken before Judge Townsend. About the same time an amended answer was filed setting forth in detail the position of the Home Building Loan Association. This portion of the matter was heard ultimately by Judge Sease, who passed his order dated December 22, 1933, in which he refused the prayer of the petition of defendant and allowed plaintiff to proceed with her suit and in the same order referred the matter to Hon. Le Roy Moore, master, to take the testimony and report the same back with all convenient speed.
The testimony was taken by references in the spring of 1934, and the matter came for a final hearing before Hon. E.C., Dennis, presiding Judge, who signed his decree on April 27, 1934, dismissing the complaint for the reasons therein stated. The order of Judge Dennis contains a sufficient statement of the facts and issues involved. The effect of the order of Judge Dennis is that the mortgage should not be canceled, but he in no wise attempted to finally adjudicate the rights of the parties, leaving the question of an accounting between them open for future determination. Judge Dennis holds, in effect, that the complaint should be dismissed for the reason that the action is one in the nature of a penalty and that under the circumstances the defendant should not be penalized.
We are merely stating this in order to make it perfectly clear that the rights of neither of the parties are to be prejudiced in an accounting as to the amount which may be due to the defendant by the plaintiff or to the plaintiff by the defendant. We have carefully examined the order of Judge Dennis, however, and the same, in our opinion is a proper order and with the observation above set forth is adopted by this Court.
The judgment of this Court is that the judgment of the Circuit Court be affirmed.
MESSRS. JUSTICES STABLER, CARTER and BONHAM concur.