Occidental Building & Loan Ass'n v. Sullivan
Before: McKinstry
Synopsis
Appeal by defendants from the judgment of the Superior Court of the County of Sacramento, and from an order denying a motion for a new trial. Denson, J.
Action of foreclosure of mortgage. The defendants, S. and wife, were the owners of six shares of stock in the plaintiff corporation, a building and loan association in the city of Sacramento, and on two several dates borrowed money from the plaintiff, for which they executed their promissory notes. To secure the payment of the promissory notes, they mortgaged to the plaintiff certain real estate, and hypothecated to the plaintiff the said stock. The first note was as follows:
“ $800. Sacramento, December 16,1879.
“ Six years after date I promise to pay to the order of the Occidental Building and Loan Association eight hundred dollars in gold coin, with interest thereon at the rate of ten per cent, per annum, in like gold coin, to be paid monthly, on the second Wednesday of each month. Should default be made in any of the payments aforesaid, or in the payment of any installment hereafter to fall due on my stock in said Association, then said Association may, at its option, declare the whole debt to be due, and proceed at pleasure to enforce its collection. “ Emma Sullivan,
“James H. Sullivan.”
The second, in all essential particulars, was the same. Nothing was paid on either of the notes, or as installments on the stock, except such amounts as became due prior to the second Wednesday in May, 1881. In September, 1881, the plaintiff declared the whole of the notes to be due, for default in the payment of the interest thereon and in the payment of the installments on the stock, and commenced this action to recover judgment and to foreclose its lien. Judgment was given for the plaintiff. The other facts are stated in the opinioñ of the Court.
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.
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