In Hall v. Stowell (75 App. Div. 21) it is said: "In such cases the better rule seems to be that the borrower be charged with the money received from the corporation and the legal rate of interest thereon and be credited with such payments as are referable to the loan itself and not to the stock.Summary of this case from People v. N.Y. Building-Loan Banking Co.
July Term, 1902.
Joseph N. Tuttle, for the plaintiff.
Basil B. Aylesworth, for the defendant.
Judgment should be ordered for plaintiff for $392.25, with interest from July 1, 1901, with costs.
August 24, 1899, the defendant desired to borrow $2,250 from the corporation of which the plaintiff is now the receiver, and to give her bond therefor secured by a mortgage upon real estate owned by her, situated in the county of Onondaga, State of New York. She made her application therefor, and offered a premium of ten per cent thereof for the loan. The loan, $2,250, and the ten per cent thereof, $225, amounted to $2,475. The defendant took twenty-four and three-quarter shares of stock in the corporation of the par value of $2,475, known as class C stock.
She paid $1 per share premium therefor, $24.75, and agreed to pay on the first day of each month $.80 per share of stock, $19.80, until the loan was fully paid as provided by the rules and regulations of the corporation. This $.80 was made up of $.50 per share, $12.38 interest at six per cent on the $2,475 and $.30 per share, $7.24, to apply in payment for the stock. August 25, 1899, the bond and mortgage were made and delivered and the stock assigned as additional collateral to the loan. The defendant received in cash only $450, and the corporation assumed and agreed to pay a prior mortgage of $1,800 on the property, drawing interest at five per cent.
The defendant then paid monthly the $19.80 from September 1, 1899, to June 30, 1901, both inclusive, amounting to $435.60. The corporation paid the interest on the $1,800 mortgage from September 1, 1899, to July 1, 1901, amounting to $165.
A temporary receiver of the corporation was appointed July 15, 1901, and soon thereafter the corporation was dissolved and a permanent receiver appointed and directed to close up the affairs of the corporation. The defendant never made default in any respect up to the time the temporary receiver was appointed. The withdrawal value of the stock when the receiver was appointed was $163.24, and the estimated value of the stock when the affairs of the corporation were closed up, $32.64. Leaving out unnecessary details, the foregoing fairly represents the facts appearing from the submission.
We are not inclined to hold the loan usurious. It was an exorbitant compensation agreed to be paid for the use of the money, considering all the payments to be made by the defendant, but the Legislature has legalized such agreements, and if parties will enter into them they must take the consequences.
It seems to be well settled, however, that when the corporation making the loan goes into the hands of a receiver, and it is no longer able to carry out the agreement, the borrower is relieved also from compliance with the terms thereof, and an equitable adjustment between the parties must be made. In such cases the better rule seems to be that the borrower be charged with the money received from the corporation and the legal rate of interest thereon and be credited with such payments as are referable to the loan itself and not to the stock. This rule is based upon the theory that the relations of a member as a shareholder and a borrower are separate and distinct; that as shareholder he should bear his proportionate share of the loss, but as borrower he should have the benefit of the rescission of the contract, and should repay what he has received, less what he has paid on account thereof. ( Strohen v. Franklin Saving Loan Association, 115 Penn. St. 273; Post v. Building Loan Association, 97 Tenn. 408; Endl. Build. Assn. [2d ed.] §§ 514, 515, 531; Rochester Savings Bank v. Whitmore, 25 App. Div. 491; Hannon v. Cobb, 49 id. 480; Breed v. Ruoff, 54 id. 142, and many cases in other States.)
Here the defendant received only ..................... $450 00 She paid interest thereon to July 1, 1901. She paid 6 per cent while the corporation paid only 5 per cent on $1,800 mortage for ten months, the excess amounting to ............. $33 00 And she paid interest for ten months on the premium of $225 ............................. 24 75 ______ 57 75 _______ Leaving balance due plaintiff ...................... $392 25 =======
to which should be added interest from July 1, 1901, at six per cent. By this method of adjustment the defendant loses the $24.75 paid originally upon her stock, and also the $7.42 paid by her each month for ten months upon the stock. She is allowed, however, all her counsel asks for her in his brief submitted upon the argument, and substantial justice and equity are apparently done in the premises.
Judgment should be ordered for the plaintiff against the defendant for $392.25, with interest from July 1, 1901, with costs.
ADAMS, P.J., McLENNAN, SPRING and HISCOCK, JJ., concurred.
Judgment ordered for the plaintiff for $392.25, with interest from July 1, 1901, with costs.