York Trust, Real Estate & Deposit Co. v. Gallatin

Opinion by Mr. Chiee Justice Stebbett, This appeal from judgment of the court below, on the case stated in an amicable scire facias sur judgment on bond to the Anchor Building and Loan Association, involves the construction of a clause in said bond providing for the appropriation of [157] payments in liquidation of the debt evidenced by the bond. The facts appear in the case stated and need not be recited here. When the question as to the effect of such payments on building and loan association stock first arose in this state it was held that all payments were to be credited to the debt created by the loan: Kupfert v. Guttenberg Building Association, 30 Pa. 465; Hughes’s Appeal, 30 Pa. 471. In Building Association v. Sutton, 35 Pa. 463, Mr. Justice Stbong- said: “The doctrine of those eases was perhaps in advance of the general understanding. . . . What was then said is not to be regarded as laying down the rule that payment of dues on the stock, ipso facto, works an extinguishment of so much of the mortgage. The debtor may so apply it, but the payment itself is not an application of the money to the reduction of the mortgage.” In Philadelphia Mercantile Loan Association v. Moore, 47 Pa. 233, it was said: “ The assignment of the stock as collateral was not a discharge of the loan to the extent of the instalments paid. The declaration that it was given as collateral negatives this.” The last cited case shows how the debtor may put it out of his power to appropriate the payments on the stock to the ex-tinguishment of the debt. In that case the debtor made two successive loans from the association, with assignments of some stock as collateral. The Court said “ he might have appropriated the sum of the instalments paid to the discharge of the debt, but he did not. On the contrary, on the 8th of October, 1859, when he borrowed from the plaintiffs an additional sum of $400 and made another assignment of the same stock as collateral security for the repayment of the second loan, he elected not to treat the first assignment as a partial payment of the first bond, and pledged the stock as a living security for the payment of the second. It is true that without the consent of the company he could not pledge it for the payment of a second debt until that for which it was first pledged had been paid; but when the company assented, as they did, by receiving it as a collateral for the security of the second loan, ho had no longer any right to insist that it should be applied to the discharge of the first.” In Wadlinger v. Washington German B. & L. Association, 153 Pa. 622, the principle of that case was recognized and applied to the case of a second assignment to a stranger. [158] These and. other cases that might be cited distinctly recognize the right of the debtor to direct appropriation of the payments on the stock to the extinguishment of the debt. His power to so direct before the intervention of the rights of creditors cannot be doubted. It is only where the rights of creditors attach, by assignment, as in the cases last cited, or by legal process or insolvency as in Strohen v. Franklin Saving and Loan Association, 115 Pa. 273, that the debtor’s right of appropriation is forfeited. Until thus forfeited, his right remains. He may appropriate or refuse to appropriate payments on stock in liquidation of the loan, even after default and suit on the bond: Watkins v. Workingmen’s B. & L. Association, 97 Pa. 514; or after sale of his realty by the sheriff: Early & Lane’s Appeal, 89 Pa. 411. Bearing in mind these principles, in which all the eases substantially agree, it clearly follows that where the appropriation is made at the inception of the contract of loan, it cannot thereafter be successfully questioned. The question under consideration was virtually decided in Hemperley v. Tyson et al., 170 Pa. 385. One of the by-laws in that case, as quoted in the charge of the trial judge, provided “ that when the stock gets to be worth #200, in the case of a person who has borrowed money on his stock from the saving fund, the stock shall be applied to the payment of the money borrowed, and it shall revert to the corporation.” The trial judge charged: “ Our judgment in relation to that article in the by-laws is that it made this stock the primary fund for the payment of the mortgage, and the one to which the saving fund should first resort to pay itself back the money it had loaned to Anna Tyson.” This construction was held to be free from error. In that case there was also the following stipulation in the nature of an assignment: “The amount realized from said stock to be appropriated towards the payment of any amount in which I may be indebted to said association either on account of the principal of said debt, interest, premiums or fines for which I am now or may hereafter become responsible to said association.” It is apparent from the language employed that this is not a collateral, but a direct, assignment. Speaking of the election by the assignor to appropriate the amount realized from the stock in payment of the association’s loan to her, our Brother McCollum said: “This election shows that it [159] was her purpose to make the stock fund primarily liable for the loan, and the acceptance by the association of the assignment subject to the election involved an agreement on its part to so regard it. The subsequent action of the association was therefore in strict accordance with the mutual purpose and understanding of the parties to the transaction and with the nineteenth section of the by-laws of the association. . . . The borrower, after her election, could not compel the lender to sell her real estate before resorting to the stock fund for payment of the loan, nor could her creditor do so.” In the case now before us, article 4, section 5 of the bylaws provides, inter alia, as follows: “ The security shall be real estate, or by the borrowing member assigning his share or shares of stock to the association in pledge, or by giving the association such bonds or notes in pledge as security for said loan as the directory may deem sufficient.” The bond which the association demanded and received from the defendant under this by-law contains this clause: “ And further, I, the above named John D. Gallatin, do hereby expressly agree that all money heretofore paid or hereafter to be paid by me into the association on the stock I now hold in the same shall be taken and considered as payment on and in liquidation of this bond.” This language is so clear and explicit that it leaves nothing for either inference or construction. It is an agreement that is mutually binding alike upon the defendant and the association, and was manifestly intended to operate as an express appropriation, and not a direction to appropriate : Chase v. Bank, 66 Pa. 169. Indeed it is difficult, if not impossible, to conceive of language more positively expressive of an appropriation; and our judgment would safely and securely rest alone upon the agreement of the parties as clearly and unequivocally expressed by them in the clause above quoted. The application of the payments having been thus explicitly agreed upon at the inception of the contract, the learned court below erred in not entering judgment accordingly. Both assignments of error are sustained. Judgment reversed, and judgment is now entered in favor of the plaintiff for five hundred and eighteen seventy-five one hundredths dollars ($518.75), with interest from January 17,1896, in accordance with the first proposition in the case stated.