alleges that it was organized for the purpose of loaning money at a usurious rate of interest; denies that plaintiff was ever authorized to do business in the territory of North Dakota. It also puts in issue the application for the loan, but admits the execution of the mortgage, pleads that the contract was usurfous, and pleads payment in full.

The trial resulted in a decree for defendants, directing the cancellation and satisfaction of the note and mortgage in question, and the case comes to this court for retrial.

The appellant contends that the transaction in question must be governed by, and decided under, the laws of Minnesota. Respondent. insist that the laws of Dakota territory and North Dakota must control. The solution of this question, under the authorities, is perfectly clear. This was, in its essence, a money-loaning transaction. By it Sanford A. Shain borrowed $1,500 from appellant. The parties were residents of different states. It was entirely competent for them to contract under the laws of either. They expressly agreed, both in the note and mortgage, that they contracted under the laws of Minnesota, the state of which appellant was a resident. That agreement is binding. Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U. S. 397, 9 Sup. Ct. 469; Security Co. v. McLaughlin, 87 Ga. 1, 13 S. E. 81; Dugan v. Lewis, 79 Tex. 246, 14 S. W. 1024; Lanier v. Trust Co. (Ark.) 40 S. W. 466; Cæsar v. Capell, 83 Fed. 403; Scudder v. Bank, 91 U. S. 406; Bigelow v. Burnham, 83 Iowa, 120, 49 N. W. 104; Smith v. Parsons (Minn.) 57 N. W. 311; Andrews v. Pond, 13 Pet. 77; Watson v. Lane, 52 N. J. Law, 550, 20 Atl. 894. The fact that the loan is made on real estate does not change this rule. Trust Co. v. Burton, 74 Wis. 329, 43 N. W. 141; Bennett v. Association, 177 Pa. St. 233, 35 Atl. 684; Association v. Vance (S. C.) 27 S. E. 274; Association v. Hoffman, Id. 692. The note and mortgage in this case were made payable in Minnesota. Many cases hold that such fact alone would make the contract a Minnesota contract, in the absence of contrary stipulations. As early as Newman v. Kershaw, 10 Wis. 333, it was said, "The general rule that contracts are to be governed by the law of the place of performance is too well settled to require the citation of authorities."

Again, it is conceded that, if appellant be in fact a building and loan association, this contract would not be usurious under the laws of this jurisdiction. Not that our laws as to building associations differed materially from those of Minnesota, but our laws applied only to domestic corporations, and hence appellant could not claim any protection from them, and this contract, if a Dakota contract, would, it is claimed, be usurious. Conceding this to be true, and even were the contract silent as to which forum should govern yet, the parties being residents of different states, the law would presume that they contracted

with reference to the laws of that state where the contract would be valid and enforceable. Whart. Conf. Laws, § 429; Bigelow v. Burnham, 90 Iowa, 300, 57 N. W. 865; Bell v. Packard, 69 Me. 105; Pritchard v. Norton, 106 U. S. 124, 1 Sup. Ct. 102. Under any view that presents itself, this contract must be construed according to the laws of Minnesota.

It is next urged that the note and mortgage are of no force or validity, for the reason that, at the time of making the contracts in suit, appellant was not authorized to do business in the then territory of Dakota. It may be conceded that at that time appellant had not complied with the provisions of sections 3190, 3192, Comp. Laws, specifying what it was necessary to do in order to enable a foreign corporation to do business in the territory of Dakota. But, upon full consideration, we held in Mill Co. v. Bartlett, 3 N. D. 138, 54 N. W. 544, that such facts did not render contracts actually made by and with such foreign corporations unenforceable and void as between the parties. It is true that, while the negotiations that finally terminated in the contract sued upon were pending, chapter 41, Laws 1889, went into effect. That chapter imposes certain further duties upon foreign building and loan associations, but the inhibition upon doing business without compliance with the law is in no manner stronger than, or different from, that contained in the cited sections of the Compiled Laws. Hence the decision in Mill Co. v. Bartlett must control this point. But is this question before us? We have held that the contract was made under the laws of Minnesota. The note was dated in Minnesota, the note and mortgage were finally delivered and accepted in Minnesota, and the draft for the money was payable in Minnesota. Did that constitute "doing business" in the territory of Dakota? We need not answer the question, but the well-considered case of Cæsar v. Capell, 83 Fed. 403, is very instructive on this point.

We come now to a closer inspection of the contract. Sanford A. Shain had already subscribed for 30 shares of stock of the appellant corporation. The matured value of this stock would be $3.000. Its value at that time was but small. But, in consideration of receiving an advance of $1,500, Shain agreed to continue the payment of the monthly installment of 60 cents upon each share of said 30 shares of stock until the same should mature, or, in other words, reach par value. One-half of said stock (15 shares) was to be assigned absolutely to appellant as a bonus or premium for such advance. The remaining 15 shares were to be assigned as collateral to said loan or advance. When the stock matured the advance would be repaid by the absolute surrender to appellant of the shares so assigned as collateral. But as Shain might cease his installment payments on stock at any time, and thus leave appellant without

any adequate security, if it depended upon the stock alone, it required Shain, in addition to the assignment of the stock, to execute the note,-or the contract which we denominate the note,-and the mortgage securing the same; Shain agreeing to pay interest upon the sum advanced at the rate of 6 per cent. per annum, payable monthly in advance, until such loan was repaid. Now, we need enter into no mathematical calculations to demonstrate what rate of interest Shain in fact paid or agreed to pay. Section 109, c. 34 Gen. St. Minn. 1878, and which was in force when this contract was made, declares that: "Such association or corporation is authorized to loan money and funds, and secure such loan by mortgage, or other security; and any premium taken by such association for the preference or priority of such loans, or for the preference or priority on any sale, or disposition of its lands," etc., "or any premium for preference or priority taken by any mutual building association, shall not be deemed interest within the meaning of any law of this state, nor shall any excess of such premium over any rate of interest permitted by the laws of this state be deemed or held, in any court of law or equity, to be usury." That statute eliminates the premium from our further consideration as an element of usury. We may remark, in passing, that the statutes of Dakota territory contained a similar provision, fully as strong, but limited to domestic corporations. See Comp. Laws, § 3171. It is urged by counsel, and has sometimes been held, that every payment on account of stock must be treated as a payment, pro tanto, of the money loaned, and the principal must be reduced by the amount of such payment, and the principal would thus grow less from month to month, until towards the end it would be reduced to a very small sum, and finally to one month's payment; and, as the monthly interest payments remain the same (i. e. at the rate of 6 per cent. per annum upon the full sum of $1,500), it is claimed that the rate of interest becomes enormously usurious, amounting towards the close of the term to several hundred per cent., and it is claimed that this makes the contract not only usurious, but so harsh, exacting, and unjust that a court of equity should relieve from it. In our judgment, this view entirely excludes the fact that all money that is paid into the treasury of the corporation upon stock installments is, in theory, at least, and generally in practice, immediately advanced to other borrowing stock subscribers, at the same rate of interest, and at a large premium, thus tending at once to increase the value of the stock of the member who pays the money into the treasury, and hasten the date of its maturity, or, in other words, hasten the day when payments on account of stock subscriptions can cease. In this manner every member receives a profit upon the money he pays upon stock installments. Now, a man cannot use his money to pay his debts, and yet use 77 N.W.-64

it to bring a profit to himself. The two things embody a contradiction. The stock

holder in a building and loan association who insists upon having his stock installment payments applied at once in reduction of the amount advanced to him must, in fairness, renounce all claims to share in the profits of the association. But that is contrary to the whole theory and spirit of building and loan associations, and directly opposed to the intentions of all parties who become members. And these remarks suggest another thought, that answers respondents' contention that the payment of the large premium renders the contract harsh and oppressive. If any subscriber suffers unduly in consequence of the premium he pays, it is because his necessities are such that he is willing to pay a larger premium than other subscribers pay. If all subscribers pay the same premium, and all the money paid in be kept continually loaned, then there can be no hardship, however great the premium may be; and herein we find the causes that operated upon the legislative mind, and induced it to declare that no amount of premium paid should render the contract usurious. End. Bldg. Ass'ns, § 17, declares: "The principal aim is to provide for its members, desirous of owning homesteads, the opportunity of obtaining advancements, with facilities for gradual liquidation, not elsewhere to be obtained, which, together with the mutuality of the whole plan, amply compensates for the apparent exorbitancy of the premiums and interest; keeping in constant view the interests of the investor as well as the borrower."

But it is strenuously insisted that appellant is not a building and loan association, within the provisions of the Minnesota statutes, and hence not entitled to the privileges and immunities extended to such corporations. Two cases from Minnesota are cited in this connection. The first is Fagan V. Association (Minn.) 57 N. W. 142. The opinion in that case contains an intimation that the articles of association and by-laws of the association there involved rendered it simply a saving and loan association, rather than a building and loan association. What those articles and by-laws were, is not disclosed; hence we cannot say that what is there said would have any application whatever to this appellant. The point decided by that case in no manner involves the point we are now discussing. The second case is that of Association v. Lampson (Minn.) 62 N. W. 544. In that case it is said: "The respondent, then, upon this appeal, is to be regarded as a mutual building and loan association, doing a local business; and as such it is not subject to the usury laws of this state by reason of excess of premiums contracted to be paid by its members to it, on a loan to them, over the rate of interest permitted by law." It is claimed that under that decision it is only such building and loan associations organized under the laws

of Minnesota as are engaged in "doing a local business" that are entitled to exemption from the usury laws. The court was then dealing with an association that did only a local business, and it made its decision no broader than the case before it. No question of discrimination between building and loan associations doing business within the state only, or doing business within and without the state, was before the court. The association there involved, and the appellant here, were organized under the same statute (section 109, c. 34, Gen. St. 1878), and section 116 of said statute.clearly contemplates that such associations need not limit their business to the state of Minnesota; and we do not think the supreme court of that state intended to deprive an association so organized of the benefit of the usury exemption because it had advanced money to a member who resided out of the state, or to declare that such fact deprived such association of its character of a building and loan association. It appears that, some three or four years subsequent to the making of this advancement or loan, some changes were made in the articles of incorporation and in the by-laws of appellant, and something is said in argument as to the effect of these changes upon the character of appellant. But these changes in the by-laws do not appear in the abstract, and perhaps it is unnecessary. We have carefully scrutinized the articles of incorporation and by-laws as they existed when this contract was made, and also the articles of incorporation as amended. In these we find nothing to warrant the assertion that appellant is not in fact a building and loan association. It is stated that the changes in the by-laws (which do not appear in the abstract) make certain classifications in the stock which impair the feature of mutuality. Be this as it may, it is conceded that such changes in the by-laws could not change the fundamental rights of the parties under a pre-existing contract, and in this case we are simply dealing with the enforcement of such a contract.

Lastly, it is urged that when Shain made his loan the money was not put up, subject to competitive bids. The evidence does not support this assertion. We have only the fact that the offer, as made by Shain, was for a premium of 50 per cent. How many other bids there may have been for the same money does not appear. True, it is shown that appellant made two other loans in this state, and received the same bonus or premium. But that does not prove that there was no competitive bidding. Both the statute and the by-laws of the appellant required the funds to be put up, subject to competitive bids. We cannot assume that this was not done, in the absence of all evidence on the point. It is true that one of appellant's by-laws in force when the loan was made fixed the minimum premium at 35

per cent. But it is evident that Shain was not injuriously affected by such by-law, as his bid was for above the minimum thus fixed. There was nothing but his desire to secure the money that required him to make the bid he did make. He was bound to know that upon a much lower bid he could obtain the money, if no one bid higher than he did. He cannot be heard to complain of the obnoxious by-law. End. Bldg. Ass'ns, § 411, and cases cited.

It follows from what we have said that no valid defense to this action has been shown, and that appellant is entitled to a foreclosure of its said mortgage. It is the judgment of this court that the district court of Stutsman county set aside and vacate its judgment heretofore entered in this case, and enter judgment and decree of foreclosure in favor of appellant, as prayed in the complaint, save and except the item of $216 claimed for stock installments in arrears. Such item is not included in the note, or se cured by the mortgage. Fagan v. Association (Minn.) 57 N. W. 142. Reversed. All concur.

HALE v. CAIRNS et al.1 (Supreme Court of North Dakota. Nov. 19, 1898.)

BUILDING ASSOCIATION - LOAN TO MEMBER APPLICATION OF PAYMENTS.

A member of a building and loan association, who borrows money from the association, and bids a premium for the privilege of obtaining the loan, and executes his bond for the amount of the loan and premium, and gives a mortgage to secure the payment of such bond, and also assigns to such association his shares of stock as collateral security for such payment, is not entitled, in an action brought to foreclose such mortgage by the receiver of such association (said association being insolvent), to apply the amounts he has paid as dues upon his stock in reduction of his indebtedness.

(Syllabus by the Court.)

Appeal from district court, Cavalier county; O. E. Sauter, Judge.

Action by William D. Hale, as receiver of the American Savings & Loan Association, against Mrs. Ella Cairns and others. Judg. ment for defendants, and plaintiff appeals. Reversed.

Cochrane & Corliss, for appellant. M. H. Brennan, for respondents.

BARTHOLOMEW, C. J. William D. Hale, the appellant, is the duly-appointed receiver of the American Savings & Loan Association. As such he seeks to foreclose a mortgage given by Robert Cairns and Ella Cairns to said association. Robert Cairns died before the action was brought, and the defendants Mary and Robert Cairns are his heirs at law. The American Savings & Loan Association was a corporation organized and doing business under

1 Rehearing denied January 12, 1899.

aas well as of reason. Eversmann V. Schmitt, 53 Ohio St. 174, 41 N. E. 139; Wohlford v. Association, 140 Ind. 662, 40 N. E. 694; Weir v. Association (N. J. Ch.) 38 Atl. 643; Moran v. Gray, Id. 668; Curtis v. Association, 69 Conn. 6, 36 Atl. 1023; Strohen v. Association, 115 Pa. St. 273, 8 Atl. 843; Post v. Association (Tenn. Sup.) 37 S. W. 216.

But, viewing respondents in the light of borrowers only, and turning to the contract, we learn that, for the privilege of receiving the loan, respondents agreed to pay a premium of an amount equal to the cash received. That agreement was made by reason of the inducements held out by appellant, to the effect that both loan and premium could ultimately be paid by a surrender and cancellation of the stock when it reached par, and that the stock could be brought to that condition by small payments thereon at stated intervals, together with the profits that would accrue to such stock through the operations of the association. But the association, by reason of its insolvency, is unable to carry out its contract. It cannot mature the stock. The inducement which caused the respondent to offer the large premium has failed. Hence, whatever has been paid upon such premium, if anything, should be credited to respondents. This we think is the better rule, and it is amply sustained by the authorities last cited, although some courts have undertaken to apportion the premium, and treat a portion of it as earned. See Towle v. Society, 61 Fed. 446; Sullivan v. Stucky, 86 Fed. 491. But, under what we regard as the better rule, respondents claim that they should be credited with the dues paid upon the shares of stock that were assigned as collateral to the payment of the premium. (It will be remembered that the premium was included in the bond, but drew no interest.) We held in the Shain Case-and the authorities fully sustain the proposition-that payments made upon stock that was pledged as collateral security for the payment of the loan did not constitute payments upon the loan. This was held upon the theory that the purchase of the stock and the borrowing of the money were distinct and separate transactions. The stock was purchased as an investment, and for the profits which it promised, and these profits inure to the benefit of the purchaser alike whether the stock be pledged or ampledged. Goodrich v. Association, 54 Ga. 98. True, in the ultimate adjustment it was the intention to exchange the stock for the bond. But, in the language of the New Jersey court of errors and appeals in Association v. Hornbacker, 42 N. J. Law, 635, “unif so exchanged, they are distinct in legal contemplation, as well as in form. The stock is a collateral security for, and not a credit on, the bond." No reason, in law or Logic, presents itself to us, why the same rule must not apply to payments made upon

stock that is pledged to secure the payment of the premium. Such payments on stock are not payments upon the premium. Hence in this case nothing has been paid upon the premium bid, and there is therefore nothing in that behalf with which to credit respondents. It will be noticed that in this case appellant is not seeking to recover any of the premium. He asks only the payment of the cash advanced, with certain interest there on, and taxes paid. The association having become insolvent, and having been in the hands of a receiver, it becomes the duty of that officer to proceed to collect the assets of the association. It is his duty to close the business out. The expectations of both parties have been disappointed. The contract is at an end. The interest upon this loan was paid, under the terms of the contract, to November 8, 1895. The appellant is entitled to recover the original loan, with the legal rate of interest in Minnesota, which is 7 per cent., from said November 8, 1895. Should respondents pay this amount, or should it be realized upon a sale of the mortgaged property, respondents will, of course, become the absolute owners of the shares of stock which were assigned as collateral security, and will be entitled to a reassignment thereof. There is a claim made for taxes for the sum of $18.80, which the court found were paid by plaintiff, and which should also be included in the judgment.

The trial court will set aside its judgment heretofore entered in this case, and enter judgment against the respondent Ella Cairns for the amount heretofore indicated, with the usual decree of foreclosure as to all the respondents. It is so ordered. Reversed. All concur.

EQUITY-INVOLUNTARY TRUSTEE.

1. Where the records of a case show that a case exclusively of equity jurisdiction has been tried as an action at law, and to a jury, this court will sustain the order of the trial court setting aside the verdict and granting a new trial therein, regardless of the fact that no specific objection was made by either party to such method of trial.

2. Where a complaint states that the holder of a sheriff's certificate of sale of real estate by fraud and false promises prevented the owner from redeeming within the statutory period, and, in violation of his oral agreement to extend the period of redemption, took a sheriff's deed, such facts entitle the aggrieved party to relief in equity.

3. Such facts, when established, constitute the wrongdoer an involuntary trustee, under section 4263, Rev. Codes.

(Syllabus by the Court.)

Appeal from district court, Walsh county; O. E. Sauter, Judge.

Action by Michael Prondzinski against James Garbutt. Verdict for plaintiff. From