Preston v. Woodland

Schmucker, J., delivered the opinion of the Court. There is but one question raised by this appeal. It is whether, when a building association has become insolvent and is in process of liquidation, one of its members who owes it a mortgage debt may set off against the debt not only the premium and interest but also the dues theretofore paid by him under the mortgage. No controversy exists as to the facts of the case, of which an agreed statement appears in the record.

The facts material to the question brought up by the appeal are as follows : The Colonial Savings and Investment Association of Baltimore City was incorporated on April 19th, 1897, under the provisions of Art. 23, sec. 18, clause 5 of the Code relating to Building or Homestead Associations. It continued in operation until December 28th, 1905 when it was judicially declared insolvent and placed in the hands of the appellants as receivers for liquidation by a decree of the Circuit Court of Baltimore City. It had an authorized capital stock of two hundred and fifty thousand shares of the par value of one hundred dollars each. ⁶⁴⁴ According to the general scheme of the association as disclosed by the record, subscribers to its stock had the option of paying for it in cash at its face value, or by the payment of specified monthly installments, called "dues” until its maturity i. e. until the assets of the association made the stock worth one hundred dollars per share. The holders of full paid shares were subject to no further assessments and received dividends at the fixed rate of eight per cent per annum.

The holders of installment shares received no dividends but their stock was to be credited with a proper share of the earnings of the association. Each stockholder was entitled to borrow upon mortgage or other satisfactory security from the association, when it had funds on hand, one hundred dollars on bach share of his stock. On such loans the borrowing stock holder was required to pay, in monthly installments, interest at the rate of six per cent per annum and a premium at the same rate. If the borrowers stock was installment stock he was required in addition to pay the monthly dues on it.

Every member was entitled to one vote at meetings of the association for each share of stock held by him, except that no member who was indebted to the. ássociation could vote upon any question affecting its claim against him. On April 30th, 1898, Harry E. Forwood, being the owner of eighteen installment shares in the association, received á loan thereon from it of $1800, which he secured by a mortgage on a house and lot on Druid Hill avenue. He continued to pay the interest, premium and dues called for by the mortgage until July, 1900,, when the appellee John W. Woodland acquired title to the house and lot subject to the mortgage, the payment of which he agreed to assume. Woodland thereafter paid the sums called for by the mortgage until November, 1904, after which he refused to make further payments.

It does not appear from the record that the eighteen shares of stock in the association were ever assigned.to Woodland, and the account of the mortgage debt on its books seem to have' always been kept in the name of Forwood. ⁶⁴⁵ After the receivers for the association had been appointed and the Forwood mortgage had come to their hands, Woodland filed a petition in the receivership case in the Circuit Court averring that the whole of the mortgage debt had been fully paid and satisfied and he was entitled to have the mortgage released and praying for an order requiring the receivers to release it. The receivers answered the petition denying that the mortgage debt had been paid and asserting that a balance was still due thereon which should be paid in order to entitle the petitioner to the release of mortgage for which he prayed. The issue upon this petition and answer and the testimony taken thereunder having been heard the Circuit Court passed the order appealed from directing the receivers to execute and deliver to Woodland a release of the mortgage. It is admitted that the total payments made as interest, premium and dues amount to more than the mortgage debt with interest at six per cent and, if credit be allowed for all of them, the mortgage debt has been fully paid; but if a proportionate share of the losses sustained by the association be charged against the dues paid there will be a balance due upon the mortgage.

The counsel for the appellant receivers contended before us with skill and plausibility that inasmuch as the association was a mutual one each shareholder should be obliged to bear his share of its losses and the fact that a shareholder was also a borrower did not release him from this obligation ; and that therefore to allow credit for all