Herberich Realty Co. v. Rogers

George W. Rogers, Receiver of the Portage Construction and Finance Company and others, 'as lien holders on certain real estate belonging to the Herberich Realty Company brought this action originally against the Realty Co. to foreclose their liens in Summit Common Pleas. Judgment for foreclosure awarded in the Common Pleas was affirmed by the Court of Appeals.

It appears that the Portage Construction and Finance Co. purchased the land upon which the Realty Co. is seeking to establish the prior lien in this case from Charles Herberich, Trustee for The Herberich Realty Co., and gave to the Realty Co. its purchase money mortgage for $54,900 to secure the balance of the unpaid purchase price. The Finance Co. then proceeded to borrow from the Cleveland Discount Co. on 3 mortgages on parcels 1, 2 and 3 in the amounts of $335,000, $200,000 and $335,000 respectively, The Discount Co. retaining the sums of $50,250, $30,000 and $50,250 out of the loans in advance, said sums being entered under the heading of “discount” on its books in the regular course of business when it took a mortgage. The same procedure was followed where an additional $80,000 was advanced on parcel 1, except that, 25% or $20,-000 was retained in advance as discount, so that the Cleveland Discount Co. withheld a total “discount” of $150,500 on total loans of $950,000.

On motion to certify in the Supreme Court the Realty Co. contends:

1. The Delaware statute prohibiting a corporation from discounting notes does not prohibit the buying of notes at less than face, but merely prohibited loaning money and deducting from the loan the interest in advance.

2. The Cleveland Discount Co. cannot recover on the notes so attempted to be discounted ultra vires.

3. That since the amount borrowed was so much larger than the borrowing limit prescribed by statute, the corporation exceeded the limit upon its power in that behalf and hence that its attempted engagements thus in excess were void.