Shannon v. Howard Mutual Building Ass'n

Stewart, J.,

delivered the opinion of the Court.

An ex parte decree had been passed by thé Circuit Court of Baltimore City, at the instance of the appellee, The Howard Mutual Building Association, for the foreclosure of the mort *391 gage of the appellant, a member of the society, by reason of his alleged default.

The appellant filed a petition, representing that the account exhibited with the application for the decree was erroneous, and that he had offered 1o pay the true amount due, and praying to have the matter referred to the auditor to state an account of his indebtedness, and to be allowed to bring the amount he owed into Court, and that the decree be stayed.

The Court ordered a day for the hearing, with leave to the parties to take testimony. Upon the return of the-commission, with the testimony taken, the cause was referred to the auditor to state an account of the indebtedness of the appellant. The account was accordingly made out, and excepted to by the appellant; his exceptions were overruled, and the account ratified, and he has appealed from that decision.

He complains that he is overcharged, and the main question in dispute is, as to the correctness of the auditor’s account. He also alleges that he has made a sufficient offer to pay what was due, either upon his application to be released from the mortgage; or from the payment of the amount of the Weekly dues, interest and fines remaining unpaid, and claims the benefit of having tendered himself ready to pay each on different occasions. A point is also made in the argument of the case, that a Court of Equity ought not to afford relief to the appellee in the collection of any fines that may have been imposed.

By the 16th Article, 1st and 2d sections, of the association, it is provided that any member may obtain a release of his mortgage by paying back the difference between the dues paid and the amount borrowed, together with a bonus, graduated by the number of years it has run, and before the unredeemed shares are worth $250; and upon the release being effected, he ceases to be any longer a member.

The mode of settling the indebtedness under such circumstances is explained in the law of the Oak Cottage Building Association vs. Eastman & Rogers, 31 Md., 556 .

*392 It is alleged by the appellant that he made application to be released, and tendered himself ready to' comply with the required terms, and was refused by the appellee.

This is denied by the company. The proof is so conflicting, that the tender cannot be considered as made out; whilst, in actions at law, to constitute a legal tender, considerable formality is required, and the money must be actually produced, unless the claimant dispense with its production, by express declaration or other eqivalent act, as if a party declare beforehand, that if tender is made, it will not be accepted, that will dispense with a formal tender; Buel vs. Pumphrey, 2 Md., 268 ; yet such strictness is not necessary, in cases of this sort, to be determined by the principles of equity and good conscience.

The application to be released, and an offer to comply in good faith, with the ability to pay whatever might be due, where the party did not know the precise amount, and sought to ascertain in a reasonable way from the company, and the officer of the company, in charge of the books and entries, shewing the state of the account, could furnish the proper information, and refuses or omits to do so, without justifiable excuse, would have constituted a sufficient tender, if such a state of things had been clearly proved. See Smoot, et at. vs. Rea & Andrews, 19 Md., 398 .

The inexcusable refusal or omission of the officer, in cases where he could furnish the desired information sought by an applicant in good faith, would excuse the formal tender, and subject the company to the consequences of a rejection of the proposition to settle. It seems, however, that the appellant waived his offer to be released from the mortgage entirely, according to the 1.6th Article, and afterwards proposed merely to settle the balance due on account of the weekly instalments, the interest, and all legitimate fines incurred by his default, but in regard to this offer there is the same contrariety of testimony as in the former application, and the same construction as to the matter of tender is applicable, and it is not satisfactorily proved.

*393 In regard to the question that a Court of Equity does not enforce the payment of penalties and forfeitures, according to the principle regulating its jurisdiction, this is true in cases where the doctrine is applicable. Where, in strictness, nothing but forfeitures and penalties are sought to be claimed and enforced in a Court of Equity, it will not lend its aid for their collection, but the parties must resort to the Courts of Law for the purpose.

The sum stipulated to be paid by a member of a building association, under by-laws or regulations authorized by its charter, for a default in settling his weekly dues, is not such a forfeiture, but is simply an amount conventionally due upon the accruing of the weekly instalment, and the failure to pay it accordingly. It is in the nature of liquidated damages, agreed to be paid for the non-performamce of a promise or covenant; and where they are not unconscionable or disproportioned to the exigency of the case, a Court of Equity will award their payment, more especially when incidentally involved in a matter confided to its peculiar jurisdiction and control.

From the character of these building associations, the imposition of adequate fines, as agreed upon by the by-laws, is justified in order to prevent default in the punctual payment of the weekly dues, upon which the success of the company depends; or in case of default, that some reasonable equivalent for the consequent damage sustained, may be provided.

The law authorizing the formation of the company, expressly provides for the imposition of such fines, and the mortgage given by the appellant recognizes their obligation, and stipulates for their payment; and the Court of Equity is required, where a case occurs justifying its interposition, to foreclose the mortgage ex parte or otherwise, to allow in the ascertainment of the indebtedness of the party, such reasonable and legal fines incurred by the party, by his own consent, where he has been in default. See 2 Story’s Eq. Juris., sec. 1318.

*394 ■We see no difficulty in a Court of Equity compelling a party, under such circumstances, to meet all his engagements, where it is authorized to exercise its jurisdiction over the subject matter of the mortgage. Without the power to collect such fines through a Court of Equity, where the mortgage- is enforcible, the anomaly would be presented o'f compelling the company also to resort to a Court of Law for the recovery of the fines.

The successful management of such building associations, chartered by the laws of the State, and intended for useful purposes, would in a great measure be defeated or seriously jeopardized, if a Court of Equity should refuse to entertain jurisdiction and give relief in such cases. Such fines do not come within the principle forbiding a Court of Equity to lend its assistance for the simple purpose of the reeovery of fines, penalties and forfeitures.

Mortgages of the character of the one in question are peculiar, in,not being for the re-payment of the sum advanced with interest, but for the payment of weekly instalments, including weekly interest and fines, for the omission to make such payment; and a rule was laid down in Robertson vs. The American Homestead Association, 10 Md., 398 , for the ascertainment of the sum due upon such a mortgage, in the event of a sale of the property, for the purpose of foreclosing the mortgage, and terminating the engagement of the member to the association. Upon its accomplishment, all relations between the association and the member are as effectually dissolved, as if he had made application to be released under the 16th Article, 1st and 2d sections — and compliance therewith. The 35th and 36th sections of the 26th Article of the Code recognize the power thus to terminate the relations of the parties, and a contract accordingly between the member and the association is fully authorized.

The immediate question in that case, as well as in this, was not to ascertain the amount due upon the mortgage, regarding its final and complete foreclosure by a sale of the mortgaged *395 property and the dissolution of the relation between the member and the association; but upon the basis of their further continuance, notwithstanding his existing default, by his paying up his indebtedness for the weekly instalments, interest and fines, in which he had been delinquent, and to ascertain the true amount thereof, before any sale, so that he might have the opportunity to pay the same and save the necessity of a sale of the property — the decree merely standing, in the meantime, as a security for future instalments and liabilities.

This indebtedness is made up partly by the weekly dues, and the interest and the fines, if any, imposed by the society, in accordance with its by-law's and Act of incorporation.

The only dispute, in this case, so far as the indebtedness of the appellant is concerned, is in regard to the amount of the fines imposed, and claimed by the company, the mortgagee, and whether they are authorized by its by-laws and Act of incorporation.

Its solution depends upon the legal force and effect of the by-law's of the company and their conformity with the law authorizing the incorporation, together with the provisions and stipulations of the mortgage in question.

By the 35th sec. of Art. 26 of the Code, under which the company was chartered, it is authorized to advance to any member the sum which he would be entitled to receive upon the dissolution of the company, or it may purchase the shares of the stock of any member, and on payment of the sum agreed upon, receive from the member, security for the payment of the future instalments on the shares sold or redeemed, together with interest on the sum, at such times and subject to such fines and penalties for the non-payment thereof, as may be prescribed in the articles of association.

The 36th sec. provides that the payment of the instalments, with interest, and all fines and penalties incurred in .respect thereof, shall be secured by mortgage, &c.

It is under the authority of these sections, the mortgage in this case was taken, and the money thereupon advanced to *396 the appellant, and the mortgage can only be operative to the extent of its conformity therewith.

We discover no departure from the requirements of the law in the mortgage, but there is nothing in the sections of the law aforesaid to wari’ant the corporation in the enactment of the 5th sec. of Art. 2, and the imposition of a distinct fine for the non-payment of the weekly interest.

The weekly instalments and weekly interest constitute but one debt, and the weekly interest, according to our construction of the terms of the law, ought to be included in the weekly dues, in sec. 3 of same Art. if a fine is to be imposed or paid, for its non-payment, as well' as the weekly instalment of the principal debt — that is, the portion of the principal, properly so called, payable weekly, and the proportional interest, weekly payable, constitute the weekly instalment, and make up the weekly indebtedness, which, if not paid punctually, subjects the party to a fine, if the company think proper so to determine by its by-laws.

There is no reason nor authority, under the law, for the sub-division of the principal and interest, and separate and independent by-laws, imposing distinct fines for the non-payment of each. ' '

The fines, therefore, undertaken to be imposed upon the appellant under the 5th by-law, in regard to default in the payment of the weekly interest, and charged to the appellant in the account of the auditor, and confirmed by the order of the Court, are unauthorized and erroneous, and ought not to have been charged and allowed.

Upon a fair construction of by-law, sec. 3 of Art. 2, we think but one fine is authorized for the non-payment of each instalment of the weekly dues — that is, upon the nine shares, upon his default in the weekly payment, the appellant owed ninety cents, equivalent to ten cents on each share as a fine. Because that weekly instalment remained unpaid for sundry weeks, the by-law does not authorize an additional fine of ninety cents for every week it may remain unpaid.

*397 (Decided 20th June, 1872.)

The appellant was answerable for so many fines of ninety cents or ten cents on each share, as there were weeks, each weekly instalment accrued, and was not paid up to the time of the decree.

The order below must be reversed and the cause remanded in order that the account against the appellant may be corrected conformably with this view.

Upon the payment, of whatever amount may be so ascertained, by the appellant, and the costs of the decree, as he was in default (all other costs to be paid by the appellee,) the sale of his j>roperty mortgaged, will be prevented, and the decree rendered will stand as a security for his future liabilities.

Failing to do this, and the property has to be sold in pursuance of the decree, the rule prescribed by this Court in the case of Robertson vs. The American Homestead Asso., 10 Hd., 397, must govern; the indebtedness of the appellant under the default in the payment of the weekly instalment, to be computed according to the views we have expressed in regard thereto.

Order reversed and cause remanded.