Murphy v. Preston

Schmucker, J., delivered the opinion of the Court. The question presented by this appeal is in a certain sense a corollary to the one determined by us in the case of the present appellees against John W. Woodland reported in ioqMd. 642. In that case we determined that when the Colonial Savings and Investment Association of Baltimore City, whose assets are involved in the present suit, had become insolvent and was in process of liquidation one of its members who owed it a mortgage debt might set off against the debt not only the premiums and interest but also the dues theretofore paid to association by him under the mortgage. Our decision in Woodland’s case was put upon the ground, which had been taken by us in earlier cases upon the same subject, that the insolvency of the association having rendered impossible the performance on its part of the contract between it and the mortgagor that contract as originally contemplated between the parties was destroyed and the liability of the mortgagor on his mortgage must be ascertained in the ordinary way and he was therefore allowed credit on his mortgage debt for all payments of interest premiums and dues which had been made under it.

And in Waverly Mut. Bldg. Assn. v. Buck, 64 Md. 344—46, the existing relations between the mortgagor and the association, under such circumstances, are described as those of debtor and creditor. ⁴⁴⁶ We are asked in the present appeal to go a step further and say that if the payments of interest, premiums and dues, made to the same association by one of its shareholders under a mortgage given by him to it, exceed the amount of the mortgage debt and interest and the association become insolvent he is entitled, in the .liquidation of its assets, to be repaid such excess in full before the other shareholders receive anything on account of their shares; or, in other words, that, as to such excess,' his relation to the association is tobe regarded as having been changed from that of shareholder to that of creditor. The issue now before us arose as follows.

After the decision in Woodland’s case the appellees as receivers in the further liquidation of the assets of the association, allowed to each shareholder indebted to it' upon mortgage credit on his mortgage debt for all payments of interest premiums and dues made by him to the association up to the date of the receivership.. It happened that the total payments thus made to the association by a number of these1 borrowing shareholders, including the present appellants who received a loan of $2,500, exceeding the amounts due on their respective mortgages, and as to such excess they were treated by the auditor as shareholders and allowed the same dividend (15 per cent) thereon as was allowed to the other shareholders upon the amounts which had been paid into the association by them. The appellants excepted to the auditor’s account allowing this dividend insisting that they were entitled to be treated quoad the excess amounting to $891.01, of their payments-over their mortgage debts and interest as creditors of the association and to receive payment thereof in full. Their exceptions having been overruled and the account finally ratified they appealed from the order of ratification.

There is no dispute as to the facts of the case and the record contains an agreement that reference may be made to Woodland’s case for the contents of the certificate of incorporation and by-laws of the association. As in that case we stated the history and character of the association and the general scheme of its operations we deem it unnecessary to ⁴⁴⁷ repeat them here. It is sufficient for the purposes of this case to say that the association was a mutual building association having both full paid shareholders who received dividends at eight per cent on their stock and installment shareholders who received no dividends, and that the question before us concerns only the rights of installment shareholders. The consideration of that question will be simplified by treating the installment shareholders as composed of two divisions, borrowers and non borrowers, whose rights and relation to the association were, in all respects the same except in so far as those of the borrowing shareholders were modified by the new relations assumed by them as