Occidental Building & Loan Ass'n v. Sullivan

McKinstry, J.: Plaintiff’s by-law ix. provides: “Every stockholder for every share of stock shall pay to the Secretary, on the second Wednesday in every month, the sum of one dollar in gold.” And by-law xi.: “Any stockholder failing to pay his or her monthly installments or interest shall pay a fine of ten per cent, per month upon the amount of the indebtedness. This fine shall be charged by the Secretary, and collected with the delinquent’s monthly dues; and in case any stockholder shall neglect or refuse to pay the monthly dues or fines for the space of six months, the Secretary shall tender to the delinquent the amount actually paid in, deducting all fines and [398] forfeitures that may be charged against him or her, and from that time he or she shall cease to be a member of the association.” It was held by the Court below that the fine imposed for the non-payment of any monthly installment or installments (as required by the ninth by-law), “or interest,” is ten per cent, upon the installment due and ten per cent, upon all interest due, upon any loan which may have been made by plaintiff to the stockholder. Even if this were assumed to be true, it would by no means follow that the failure to pay the fine could be made to constitute a term of the contract of loan, so that if, as in the case before us, the loan is represented by promissory note secured by mortgage, the note or mortgage can be made to read, not only that the borrower shall pay the fines and the same be secured by the mortgage, but that a failure to pay a “ fine” shall make the whole principal sum due, although the loan has not otherwise matured. The only consequence provided in by-law xi., in case a stockholder shall fail to pay (for six months) his monthly dues (installments) or fines, or interest, is that if the Secretary shall tender to the delinquent the amount actually paid in— deducting all fines and forfeitures that may be charged against him or her—-from that time he or she “ shall cease to be a member of the association.” By-law xi. in no way affects or changes the terms of any contract of loan between the association and a stockholder. We are convinced, however, that the word “interest” as used in the by-law does not refer to interest due upon any loan from the corporation to a stockholder. Penalties and forfeitures are not to be favored; they must be created by unambiguous language. Judgment and order reversed, and cause remanded for a new trial. Boss and McKee, JJ., concurred.