Prior to the enactment of the Building and Loan Code of 1933 (15 Pa.C.S.A. § 1074), even a defaulting borrower could not be required to repay to the association, while it was solvent, anything more than the difference between the amount of the loan and the amount paid on the installment shares, and in the case of a share loan the association would certainly not loan a stockholder a greater sum than was represented by the withdrawal value of the stock pledged as collateral. In short, the borrower could apply the withdrawal value of the stock in discharge of any obligation to the association on account of the advance, and the association could not have demanded more than the difference — here nothing: Chase v. Vigilant-Champion B. L. Assn., 133 Pa. Super. 262, 265, 2 A.2d 584; B. Podol B. L. Assn. v. Polak, 102 Pa. Super. 36, 38, 156 A. 556. Under the facts and the peculiar contract of hypothecation found here, the association could not have maintained an action against Black for any part of these loans: York Trust, etc., Co. v. Gallatin, 186 Pa. 150, 40 A. 317; Kurtz v. Campbell, 218 Pa. 524, 527, 67 A. 843; Consolidated B. L. Assn. v. Shipley, 95 Pa. Super. 232. In the Shipley case the pledge was in the identical words found here.
There is a marked legal distinction between set-off and withdrawal. A set-off does not amount to a withdrawal nor does it constitute a preference. Leimons v. Lithuanian S. L. Ass'n, 44 Ohio App. 454, 186 N.E. 107. Nowhere in the by-laws is there any inhibition or restriction which would affect the right of set-off; and complainant is entitled to set-off the stock against his mortgage debt. 9 C.J. 981; Caruso v. Members B. L. Asso., 115 Pa. Super. 212, 175 A. 304; Benjamin Podol Building Loan Asso. v. Polak, 102 Pa. Super. 36, 156 A. 556; Graham v. Mt. Airy B. L. Asso., 102 Pa. Super. 116, 156 A. 592; Gen.Acts 1931, p. 230; Mutual B. L. Asso. v. Guice (Ala.App.) 165 So. 864; Id., 231 Ala. 572, 165 So. 868; Code 1923, §§ 7000, 7108, 7097, 7099; Ala. Code 1928 (1936 Sup.) § 7111 (2). 27 Ala. App. 7.
Appellant was a borrowing member and such members are expressly excluded from the withdrawal feature conferred by section 37 of Act of 1874, supra. She could, however, if the association were solvent, appropriate the value of her stock to the indebtedness, receiving the excess, if any; in this way she could accomplish the same result without paying her note and then withdrawing: Act of April 10, 1879, P. L. 16, section 4, as amended by the Act of April 30, 1929, P. L. 901; Orient B. L. Assn. v. Freud, 298 Pa. 431, 436; Early Lane's App., 89 Pa. 411; Podol B. L. Assn. v. Polak, 102 Pa. Super. 36; Morris Resnick B. L. Assn. v. Barnes, supra. This, the appellant contends, was the true effect of her withdrawal notice (see Savitz B. L. Assn. v. Lissman, 101 Pa. Super. 501) . Appellant gave no express direction to so apply her stock, but relies on her notice of withdrawal as implying a request to pay off her note and credit her with the difference in the value of her shares. But if her withdrawal by implication included an appropriation, then the provision in the merger agreement prohibiting withdrawals equally, by implication, prohibited appropriations; and if the withdrawal did not include an appropriation, she has never requested that the shares be applied to the payment of her debt.
It is argued rather vaguely on behalf of defendant association that it was insolvent as of the effective date of plaintiff's notice of withdrawal of his shares of stock. But there was ample evidence of solvency notwithstanding that the burden of proving actual insolvency of defendant association in November, 1931, was upon the defendants. U.S. Bldg. Loan Ass'n v.Silverman, 85 Pa. 394, 396; Benjamin Podol Bldg. Loan Ass'n etal. v. Polak, 102 Pa. Super. 36, 41, 156 A. 556; YonahBldg. Loan Ass'n Case, 133 Pa. Super. 376, 384, 3 A.2d 49. Of course, insolvency, actual or potential, is incompatible with the right to withdraw.
He was entitled to have the withdrawal value appropriated to the payment of his loans to the extent necessary for that purpose. See Benjamin Podol Building Loan Ass'n et al. v. Polak, 102 Pa. Super. 36, 156 A. 556. The underlying legal question involved in this appeal is whether plaintiff's notice of withdrawal was an act of appropriation. Under the pleadings it is necessary that plaintiff rely on his notice of withdrawal as implying a request to pay off his notes and credit him with the difference in the value of his shares, as it does not appear that plaintiff gave express direction to appropriate the value of his stock to his indebtedness.
The appellants' contention in the court below was confined to the proposition that the appellees were shareholders because they neither assented nor dissented to the merger, and there was no evidence that any payment that may have been made was for the purpose of cancelling the prior withdrawal notices of the appellees. Moreover, payments, after filing of withdrawal notices, do not necessarily indicate a cancellation of the notices: Benjamin Podol B. L. Assn. et al. v. Polak, 102 Pa. Super. 36, 156 A. 556. The appellants further assert that the appellees failed to prove that their respective turns for payment were reached prior to the merger.
The question before the court for determination was upon considering the testimony and the documentary evidence, whether or not the defendant has shown that it was insolvent on December 16, 1932. Solvency or insolvency is a question of fact. The defendant having alleged insolvency, it was its duty to prove it. B. L. Assoc. v. Polak, 102 Pa. Super. 36, 156 A. 556; Savitz B. L. Assoc. v. Lissman, 101 Pa. Super. 501. Of course, if the association was solvent the right to appropriate the shares to the payment of the loan followed. Crawford v. New Spartan B. L. Assoc., 112 Pa. Super. 113 and cases therein cited: 170 A. 695.
" Our court has often held that the right of appropriation of payments on account of stock can be exercised providing the association is solvent, and the loan paid, or, if paid in part, the remaining security is satisfactory to the lender: Zusin v. Wharton B. Men's B. L. Assn., 107 Pa. Super. 181, 189, 163 A. 377; Benjamin Podol B. L. Assn. v. Polak, 102 Pa. Super. 36, 156 A. 556; Savitz Assn. v. Lissman, 101 Pa. Super. 501; Consolidated Assn. v. Shipley, 95 Pa. Super. 232, and cases therein cited on page 237. We may add that in the present case, there is no question about the maturity of the stock or the continuation of membership in the association.
If the contention urged is sound, a borrower would be compelled to repay his loan and then withdraw, which would defeat the purpose and express provision of the Act of 1879 that he had the right to repay his loan at any time and receive the withdrawal value of the shares. In fact, this matter is ruled by the case of B. Podol B. L. Assn. v. Polak, 102 Pa. Super. 36, where it was held that a borrower could elect to treat the installments paid on stock collateral to such loan as credits. If, as in the case at hand, there is a balance due the stockholder, the association may be protected and full force given to the acts of assembly by providing that execution shall not issue on the judgment until funds are available in accordance with the provisions of the act. We also note that the notice served upon the association in this case referred particularly to the building and loan book which, we may fairly assume, recorded not only the payment of dues, but interest, and that the stockholder was asking to have the loan discharged by the application of the withdrawal value and then to receive the balance due her.