Low Street Building Ass'n, No. 6 ex rel. Hennighausen v. Zucker

Alvey, J , delivered the opinion of the Court. This was a proceeding under sections 782-3-4-5, of Art. 4 of the Code of Local Laws, had upon a mortgage made by the appellees to the Low Street Building Association No. 6, of Baltimore City. The Building Association became involved and ceased operations early in the year 1874, and its affairs were placed in the hands of Receivers appointed by an order of Court; and it was upon the application of the Receivers that the ex parte decree for the sale of the mortgaged premises was passed. Charles Zucker, one of the appellees, was a member of the Building Association, and owned seven shares of its stock; and on the 2nd of May, 1871, he and his wife, the other appellee, made the mortgage upon which the decree was passed, upon the advance by the Association, according to the recitals in the mortgage, of the sum of seven hundred dollars, the fixed value of the seven shares of stock.

The mortgage is in the usual form of those given to Building Associations in the City of Baltimore, and contains this covenant: “To pay the mortgagee or its assigns the weekly sum of two dollars and ten cents on every Wednesday, until the time arrives when the said body corporate shall have sufficient funds on hand to pay the holders of every unredeemed share of its stock, the sum of one hundred dollars, clear of all losses and liabilities; to pay all ground-rents and taxes for which the property hereby mortgaged I may become liable, when payable ; also to pay all fines that may be imposed on them by the said mortgagee, in accordance with its Act of incorporation, and to keep the improvements on the said ground fully insured from loss by fire, for the use of the mortgagee ; all of which payments and covenants shall continue in force until the said body corporate shall have sufficient funds on hand to pay the holders of every unre ⁴⁵¹ deemed share, above all losses and liabilities, the sum of one hundred dollars, and the said corporation shall, by the terms of its Act of incorporation, have become extinct.” Then follows the clause giving consent to the passage of a decree for the sale of the mortgaged premises, under the Local Code already referred to ; the sale not to take place until default, in any of the conditions, shall have continued for eight weeks. These are the only provisions in the mortgage that are at all material to the present controversy. After the application for the ex parte decree, and as preliminary to their proceeding to execute the same, that is to say, on the 19th of November, 1874, the Receivers filed a statement of their claim, under the requirement of the statute, wherein they show that the first default in payment of weekly dues occured on the 22nd of April, 1874; and they state their claim thus : Weekly instalments for 7 years and 6 months, being 390 weeks, the probable duration of the Association, on 7 shares, $819.00 Less rebate of interest for 8 years, at 3 per cent...................................... 171.99 $647.01 Arrears of dues from time of default to Oct. 29th, 1874, 28 weeks, at $2.10 per week............................................ $ 58.80 Fines for non-payment of dues, 28 weeks, 19.25 Making a total of................................ $725.06 This statement was excepted to by the mortgagors, and we think there was good ground for the exception. If the Building Association liad been an active, going concern, and there had been proof that seven years and ⁴⁵² six months would be the probable duration of the corporation under its charter, then the statement would he, in principle, correct, according to the rule laid down in the case of Robertson vs. The American Homestead Association, 10 Md., 397 .

But in view of the real condition of the Association in this case, it is manifest from the face of the statement, that it is neither in accordance with the fact, nor the justice of the case. The statement is made upon the theory of a simple default by the mortgagors, and a continued, operative existence of the Association for, at least, the period of seven years and six months thence to come. Whereas, while there has been a default by the mortgagors, the Association is insolvent, and in the hands of Receivers to be wound-up in due course of settlement, according to the rules and practice of a Court of equity. Part of the consideration to the shareholder for the discount or redemption of his shares by the Association, at their then fixed value, was the mode and time of payment.

In such cases as this, the contract, as between the Association and the shareholder receiving the advance, assumes this form : — The Association proposes to sell to the shareholder the right of presently receiving the fixed value of the shares, upon being allowed a certain deduction from the amount, commonly called a bonus, it being, in fact, a, deduction made at the time, and the shares thus discounted or redeemed are to he paid for by the continuance of the subscription and payment of weekly dues, and fines, if any incurred, until the required amount shall he raised to pay each unredeemed shareholder the fixed value of his shares in full; that is to say, one hundred dollars per share. Thus it is that