Workingman's Loan & Building Ass'n v. Heaton

Opinion by Mr. Justice Moschzisker, The appellant states two questions involved: (1) “A, defendant, purchased from B, a loan and building association, a number of shares of stock, and became a borrower, giving as security a judgment bond and mortgage. After several years A defaulted in his payments and became in arrearages for more than six months. A appeared before board of directors, and offered to pay a certain amount per month covering his regular payment of dues, interest and premium and a certain amount of the arrearages, provided they would not tax any more fines. This proposition was accepted and agreed to by the board. A continued the payment of the amount agreed upon for four years, and B, notwithstanding the agreement made, continued to tax fines, against objection by A. Upon trial of suit, court refused to submit question as to whether agreement made was such a contract as would bind B. Was this not error?” The trial judge refused the issue thus outlined upon the ground that there was no sufficient evidence to justify its submission. After a careful scrutiny of the testimony and [178] documentary evidence upon the record, we are not convinced that there was any error in this ruling. At the most the defendant Heaton showed that he was desirous of making such an agreement and that certain individual members of the board had informed him that his proposition had been acceded to. But there was no testimony showing that the agreement was expressly entered into, or which would justify the conclusion that as a matter of fact the contract was actually made. The alleged oral agreement not to charge further fines after November 22, 1900, was contrary to the by-laws of the plaintiff corporation and the written contract of the parties, and it finds no sufficient support in the minutes of the association. There is nothing in the constitution or by-laws which authorizes individual officers to enter into such contracts, and the directors could not bind the association in that respect by their individual declarations; nor could such loose declarations bind it upon the theory of ratification: Smith v. Crum Lynne Iron & Steel Co., 208 Pa. 462; Gaynor v. Railroad Co., 189 Pa. 5; Allegheny County Work House v. Moore, 95 Pa. 408; Stoystown & Greensburg Turnpike Road Co. v. Craver, 45 Pa. 386; Curry v. Cemetery Assn., 5 Pa. Superior Ct. 289; Endlich on Building Assn. (2d ed.), sec. 179, 10 Cyc. 774. While, owing to the lack of adequate evidence, the trial judge refused to submit the issue as to the existence of the contract alleged by the defendants, yet he did permit the evidence to go to the jury upon the question of whether or not Heaton had directed a special appropriation of the monthly payments, and the verdict shows that issue found in favor of the defendants. The evidence bearing upon the dealings between the officers of the plaintiff association and Heaton, was given the full effect to which it was entitled, and we feel that no injustice was done by the rulings in relation thereto. The other question which the appellants state as involved, is, (2) “Court reserved point to determine as a matter of law whether fines could be charged after six [179] months’ arrearages. Defendants’ motion for judgment on reserved point overruled. Was this not error?” It will be noticed that under the by-laws of the plaintiff association, as well as under the terms of the bond and mortgage, the stock of a borrowing member does not become forfeited at the end of six months’ default unless so declared, at the option of the board of directors. If associations were compelled to declare a forfeiture and proceed on the mortgage of a borrowing member at the expiration of six months’ arrearages, the result would be lamentable; many worthy persons would lose their homes, who, if given a little indulgence, could save them. On the other hand, if the associations were to be deprived of the privilege of imposing fines on borrowing members after the expiration of six months, a failure to foreclose against defaulting stockholders would be inequitable to non-borrowing stockholders and also to debtor stockholders who pay promptly; for the defaulting borrowing members would be apportioned their respective shares of the profits of the association, which would arise from a strict compliance with all the obligations of membership by such other stockholders. Hence, for the protection of all, associations would be obliged to foreclose promptly upon the expiration of the six months period. The thought back of the whole building association idea is the common good of all stockholders, and the system of fines which has always been fully recognized in the law as an essential part of the plan, tends to maintain the general scheme of mutuality. The one who pays the fine derives the benefits therefrom as a member of the association in common with the other stockholders; no injustice is suffered, for he can always stop the running of the fine by paying the arrearages, or, he can pay off his loan and cease to be a member of the association, or, if he is unable to pursue either of these courses, he can notify the association of his inability to pay and that he desires it forthwith to foreclose upon his property in order to stop the running of further fines. If the present defendants had [180] taken this last course and the association had neglected or refused to foreclose within a reasonable time, they might have been in a position to complain of the fines imposed thereafter, on the theory that such fines constituted an unreasonable penalty which the law would not permit. See Lynn v. Bldg. & Loan Assn., 117 Pa. 1. But the defendants did none of these things; on the contrary, they asked that they should be given time, and that they should not'be proceeded against; the delay was upon their own application, and they were bound under the by-laws of the association and the law of the state to pay the fines as imposed. There is nothing in any of the acts of assembly governing the subject before us which compels a forfeiture at the expiration of six months or which limits the time for imposing fines. The Act of April 10, 1879, P. L. 16, provides, “Section 5. In case of non-payment of instalments of stock, premiums, dues or interest, by borrowing stockholders, for the space of six months, payment of the same, together with the full principal of the loan, may be enforced by proceeding on their securities according to law; .... Section 6. Fines or penalties for the nonpayment of interest, instalments of dues, and bonus or premium, shall not exceed two per cent per month on all arrearages.” The practice pursued by the plaintiff association was in accord with this act. We have not been referred to an authority from either of our courts of appeal which rules these points, but we are convinced that the verb “may” in sec. 5 of the above act should be construed as a word of permission (26 Cyc. 1590), and that the fines imposed in this case did not in any way exceed those allowed in sec. 6. After considering all of the specifications, we are not convinced of any reversible error upon the record. The assignments comprehended in the statement of the questions involved are overruled, the others are dismissed, and the judgment is affirmed.