Economy Building Ass'n ex rel. Smyth v. Hungerbuehler

Mr. Justice Gordon

delivered the opinion of the court, May 3d 1880.

Mathias Ruoss who, as terre-tenant, was permitted to defend in this case, was the second mortgagee of Hungerbuehler, the building association having the first mortgage. When Hungerbuehler executed this first mortgage, in amount $2200, he held eleven shares of the company’s stock, which he assigned to the association as collateral for the loan embraced by the mortgage. Upon this stock he had paid, in the way of monthly dues, some $803, and subsequently he seems to have met the instalments and interest as they fell due, except about $73, which Smyth paid after the stock fell into his hands. On the 29th of December 1875, Smyth’s attachment was served on the building association, as garnishee of Hungerbuehler, and, on the answers made by it, he obtained judgment subject to its equities as pledgee. On this judgment a fi. fa. was issued, a levy made on the stock, and on sale by the sheriff, October 7th 1874, it was bought in by Smyth. As, previously to this time, no application had been made of the stock payments to the mortgage, either by Hungerbuehler or the association, it is clear that Smyth took it freed from all claims of Hungerbuehler or his creditors, and subject alone to the equities of the company.

On the 31st of October 1876, the association having reached the limit of its chartered existence, by being able to divide $200 to each share of its stock, its board of directors passed a resolution authorizing an assignment of the mortgage to Smyth, on his payment of the remaining unpaid dues and interest. This he accordingly did, and received the assignment on the 8th day of November 1876. In other words, Smyth, the owner of stock worth §2200, assigned it to the company, by which it had been issued, in consideration of the transfer of the mortgage in suit.

Now the defence made by Ruoss is this, that the payments made on the stock were, in law, payments upon the mortgage, and ought so to have been applied. This view was, in effect, adopted by the couvt below, and so Smyth was permitted to recover only what he himself had paid to the company to close out the arrears on the stock and interest due on the mortgage. But this conclusion was based on a false premise, for it is not so that tho stock payments were ipso facto payments on the mortgage. The converse has been expressly ruled in the cases of the North American Building Association v. Sutton, 11 Casey 463; Spring Garden Assoc. v. Tradesmens’ Loan Assoc., 10 Wright 493 ; and Early and Lane’s Appeal, 8 Norris 411. Either of the original parties might have made such application before the levy of Smyth’s attachment, but this was done by neither of those parties, and so Smyth, by virtue of his attachment, took the place of ELungerbuehler, and as the company might, at ELungerbuehlor’s instance, had he retained the stock, have paid to him the value thereof, and retained the mortgage, so might it have done with Smyth. In such case, however, Ruoss could not be heard to complain, for his position as second mortgagee would not be in the least affected thereby. This stock became collateral security not for his benefit, but for that of the association, heneo its surrender would put him in no worse position than he was when his mortgage was executed. Surely, then, Ruoss could not intervene to prevent the disposition of collaterals in which lie had no interest. In effect this very point is ruled in the case of the Spring Garden Association v. Tradesmens’ Loan Association, above cited. It was there held that a purchaser at a sheriff’s sale of the mortgaged premises could not compel such application, but that where the building association, on notice of the assignee of the mortgagor, agreed to retain the stock and issue a scire facias on the mortgage, it had the right to recover thereon. But if the association plaintiff could have paid the value of the stock to Smyth and retained and collected the mortgage, why could it not retain the stock and assign the mortgage ? It certainly would not put Ruoss’s mortgage in a worse position, because Smyth held the first lien rather than the company. Smyth was undoubtedly, by act of law, owner of this stock, which was worth some §2200, and that amount he had the right to demand of the company or its equivalent. The company, on the other hand, had tho right to retain either the stock or the mortgage: it chose to retain the stock, and by assigning the mortgage to Smyth, as in that case it was bound to do, it thereby clothed him with all the rights it would have had had it paid him the value of the collaterals and kept the mortgage. This, however, was a matter for themselves, a matter with which Ruoss had nothing to do. It is true, had the stock payments been applied to the first mortgage, Ruoss would have been the gainer thereby, but so would he had Hungerbuehler assigned the stock in satisfaction of his mortgage. But as he was powerless to compel the latter, so was he powerless to compel the former. It follows, that under the evidence, as it is now presented to us, there should have been a verdict for the plaintiff for the full amount of the mortgage.

Judgment reversed and a new venire awarded.