Opinion
February Term, 1900.
James C. Murray, for the appellant.
Halstead H. Frost, Jr., for the respondent.
This is a suit to foreclose a mortgage for $500, in which the appellant agreed to pay the respondent the sum of $5.26 for dues, interest and premium on the first Tuesday of each month. The mortgage provided that if any of the dues or interest should remain unpaid and in arrears for the space of one month, the principal sum of $500 and all arrearages of interest should become due and payable forthwith.
The action was begun on May 14, 1898. The complaint alleged that the appellant had made default by omitting to pay the sum of two and seventeen one-hundredths dollars contribution for dues which became due under the mortgage on April 6, 1897; that more than one month had elapsed since the same became due; and that the same and all installments of dues which had become due since that time still remained unpaid, although payment had been duly demanded; in consequence of which the plaintiff had elected that the entire amount secured by the mortgage should become presently due and payable.
There had been another mortgage transaction between the parties, in which the appellant, as a member of the plaintiff association, had been charged with a penalty or fine to which the association claimed to be entitled; but which he insisted that he could not rightfully be called upon to pay. The correct determination of this litigation depends upon the question whether he was liable to this fine or penalty under the by-laws of the plaintiff association, or whether he should be credited with the sum which was charged against him on this account. If so credited, nothing would have been due from him to the plaintiff at the time of the commencement of the present action by way of interest or dues on the mortgage in suit.
The appellant had made another mortgage to the plaintiff association for $2,000, the payment of which was secured by a pledge of eight shares of the association stock. Article 19 of the by-laws of the association provides that any member may at his option repay any loan made to him in full at any time and receive back his shares pledged as security, but that such shares shall not be returned until such fine or fines as are imposed under article 18 of the by-laws shall have been paid in full. Referring back to article 18 we find this provision: "A fine of an amount equal to not more than the premiums agreed to be paid on the shares redeemed for one year, may be imposed on the shares of a member repaying a loan and redeeming his (or her) shares under article 19, which fine may be imposed, reduced or remitted by the Board of Management."
Under these provisions, in calculating the amount which the appellant would have to pay in order to discharge his $2,000 mortgage, the officers of the association charged him with a fine of $41.76 for redeeming his eight shares of stock. He contends that this was wrong, because at the same time he "withdrew" said shares, or, in other words, returned them to the association, and became entitled to receive from the association the value thereof, to be determined in the manner prescribed in article 19 of the by-laws. The transaction thus provided for is virtually a surrender of the stock to the association and a release of the member's interest in the corporate property to that extent. The appellant insists that upon notifying the corporation of his desire to make such a surrender, he could not also be fined for the redemption of the same upon electing to pay off the loan upon which his stock was pledged as collateral security. The county judge answered this contention by pointing out that these eight shares were pledged, and the member could not obtain them to surrender and receive their withdrawal value till he should redeem them from the pledgee. To redeem them he was obliged to pay the fine provided for in the by-laws. Until he had done this they remained subject to the pledgee's lien, and the member did not possess that complete and absolute interest in the shares necessary to enable him to make an effectual surrender and obtain their withdrawal value.
In taking this view we think that the learned county judge properly construed the rights and obligations of the respective parties under the by-laws of the plaintiff association. It follows that the sum of $41.76 was a proper charge against the appellant in making up the account of the amount due from him on the $2,000 mortgage. If so, the appellant, at the time of the commencement of the action, was more than a month in default for some installments of dues which had become payable since April 6, 1897, and this fact was sufficient to authorize the maintenance of the action, although the proof did not sustain the specific allegation that the defendant had failed to pay the contribution of two dollars and seventeen cents which became due on that date.
The judgment must be affirmed, with costs.
All concurred, except HIRSCHBERG, J., taking no part.
Judgment of the County Court of Queens county affirmed, with costs.