Ch. Tyrrell L. & B. Ass'n v. Haley

OPINION,

Me. Chief Justice Paxson :

The plaintiff below is a building association ; the defendant is a stockholder in the same. He procured a loan of money from the association, and gave his bond and mortgage therefor. After his stock had matured, as he alleges, the association entered judgment upon the bond, by virtue of the warrant of attorney attached. This judgment was opened by the court below upon his application, and a trial had to ascertain how much was due upon the mortgage. The result was a verdict for the full amount. The defence was that the stock of the series to which the defendant belonged, had fully matured, and was worth par, viz., two hundred dollars per share.

If the defendant is right in his contention, he certainly ought to have an opportunity of showing it, under his equitable plea of payment. As the case stands, he has a judgment at law against him for the full amount of the mortgage, which carries with it the costs of suit, while I see no relief from the effect of this judgment, except by a proceeding in equity, which involves additional expense and trouble. It would be unjust to subject him to all this, if, in point of fact, his series has matured. It is a well-settled rule that when such stock has matured, the debt is paid, and the borrower is entitled to a return of his securities. There may be circumstances which prevent or delay the maturity of the stock in a given instance. This may result from fraud or mismanagement on the part of the officers of the association, or from loss on investments. But, when the stock has fairly matured, I am unable to see what right the association has to recover a judgment against one of its stockholders for the amount of his loan.

While the case was not very fully or clearly presented, there appears to have been a dispute between the association and the defendant as to the maturity of the stock. The series to which the defendant belonged was started in 1877. He had nothing to do with the other series ; as to them he was not a member of the association. With the profits or losses, of other series he had no concern. He claimed, and, upon the trial below, offered to prove by Joseph Sheehan, a witness called by him, that “ the stock, in the series in which defendant was a stockholder and had borrowed the loan in controversy, had reached a value of two hundred dollars; and, further, that the stock upon which he had borrowed the loan in controversy was worth, in November, 1887, two hundred and eighteen dollars and twenty-four cents a share.” This offer was objected to by the plaintiff, because “ the constitution and by-laws provide a method for division of profits, and witness could testify onljr as a matter of judgment.” The objection was sustained by the court below.

The witness was not a member of the association, and may not have had any knowledge upon the subject; yet, as the offer was rejected, we must assume he would have sustained the offer. His means of knowledge could have been tested upon his cross-examination. The objection was -to the competency of the evidence, not to that of the witness. If we concede that the constitution and by-laws provide a method of the division of profife, it does not follow that the evidence, if received, would not have showed that they have been divided precisely as the constitution and by-laws direct. On the other hand, the profits of defendant’s series may have been applied to some other series, to aid in part to make up its losses. All this the defendant had a right to show, yet the inquiry was throttled at its'very commencement. It may be the defendant would have been entitled to a mandamus to compel the corporation to divide and apply the profits to their proper series, and to declare the series matured; or, if necessary, to file a bill in equity for a like purpose. But he was not bound to assume the position of an actor, and involve himself in the expense which either of these proceedings would have entailed upon him. If his series had matured, he was entitled to stop paying, and to rely upon the association surrendering his securities when the proper time arrived. If, instead of doing this, the association brings suit upon his mortgage, he can surely set up an equitable defence, and show that his stock has matured. Such defence is a substitute for a bill in equity for that purpose. To meet such defence the association can show, if the fact be so, that the stock has not matured; that it has met with losses ; or, any circumstances which tend to prove that the stock is not worth par. This is no hardship, as it has in its possession, and under its control, all the books, papers, and other evidence which bear upon the actual value of the stock. It can show how the profits have been divided, and, if they have been divided contrary to law, the error can be corrected by the court. Such associations, while useful in many instances, are not above the law, and cannot arbitrarily dispose of the property of their members.

If the defendant can sustain his offer, he has a full defence to the mortgage, and we are of opinion the evidence should have been admitted.

The judgment is reversed, and a venire facias de novo awarded.