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proposed amendment being disallowed, the rated in their answer, has undergone a comdefendants next applied for leave to amend plete and radical change since the same was their answer in such a way as to wholly construed by this court and the record sent eliminate therefrom said written memoran- down for a new trial. Their present attidum. This was also denied, and subsequent- tude is that the memorandum is not a conly the defendants sought to amend in manner tract at all, for the reason, as defendants and form as they had offered in their first claim, that they have in no manner assented application to amend. This offer was also to its terms. If the defendants can establish overruled, and the case went to trial on the this claim by competent evidence, the memoriginal pleadings, and resulted in a directed orandum will be stripped of its character verdict in favor of the plaintiff, after exclud- as a contract, and will, in that event, be ing defendants' oral evidence. A new trial only an ex parte version of the terms of a being denied, the defendants appeal from the certain arrangement confessedly made beorder denying the same.

tween the parties concerning the purchase The question presented upon said assign- of the hotel furniture, and, as such, would ments of error is whether such refusals to not, if admissible in evidence, be conclusive allow the amendments to the answer were upon the question of what the arrangement a proper exercise of the discretion vested in really was touching the purchase of the furthe trial court with respect to the allowance niture. But counsel for the respondent or disallowance of amendments to plead- strenuously urge that the defendants are ings. It is elementary that the granting or estopped from making their proposed change refusing to grant amendments to pleadings of attitude with respect to the memorandum, is a matter lying largely within the discre- | because they have incorporated the same in tion of the trial court; but it is equally well their original verified answer, and thereby settled that such discretion means a legal, assumed that the same was not only a conand not an arbitrary, discretion. See Strin- tract, but one of such a character as was ger v. Davis, 30 Cal. 318, and Smith v. Water decisive of the case in their favor. The arCo., 14 Cal. 201. And this court has recently gument of counsel is that a suitor cannot be held that an improper refusal to allow the permitted to assume positions in a lawsuit plaintiff to amend his complaint was, un- which are directly antagonistic to each othder the circumstances of the case cited, an er, and that to allow this to be done would. abuse of discretion. See Anderson v. Bank, in effect, be to countenance bad faith in a 5 N. D. 80, 64 N. W. 114. The general rule suitor. This position is certainly plausible, governing the allowance of amendments to and, abstractly considered, is unassailable; pleadings has been well stated by Chief Jus- but it may, we think, in this case, be antice Sawyer, in Kirstein v. Madden, 38 Cal. swered in part by the fact-as disclosed by 162, in the following language: “From over- the answer--that defendants have not disight of counsel, committed under pressure rectly alleged that the memorandum emof business, pleadings are often defective. braces the arrangement made by the parties In such cases, when an offer to amend is respecting the purchase of the furniture. made, at such a stage in the proceedings The answer sets out the alleged arrangement that the other party will not lose an oppor- as to the furniture, and then proceeds to tunity to fully present his whole case, aver that the plaintiff "signed, executed, and amendments should be allowed with great delivered to these defendants, at the same liberality." In Hayden v. Hayden, 46 Cal. time, an instrument, which instrument is in 334, the court say: "Undoubtedly, courts the words and figures following to wit" should be liberal in allowing amendments, to (setting out the memorandum). But it must the end that cases may be fully and fairly be conceded that the record in the former presented upon their merits, and that equal case does clearly show that the defendants and exact justice may be done between the then assumed that the memorandum had the parties.” In the light of the well-establish- force and effect of a binding contract, and ed principles enunciated by these cases, it is sought to derive an advantage from It as a difficult to understand upon what legal contract. It is likewise true that this court, theory the application to amend the answer on the first appeal, in construing this memwas denied. The refusal to permit an orandum, assumed that it was a contract. amendment of the answer, in its practical ef- This assumption, however, was made by this fect, precluded all inquiry extraneous to the court simply because both parties then claimwritings, and this ruling also led to a di- ed that the instrument was a contract, and rected verdict. It is manifest to this court one which was decisive of the case; and that, if the original answer had been amend- not a suggestion was made by either couned by eliminating therefrom the written sel, on the former appeal, to the contrary. memorandum set out in the answer, the is- The memorandum, as so construed by this sues would have been thereby greatly clari- court, when applied to the conceded facts in Bed and broadened; and, as a consequence, the record, operated decisively against the the ends of justice would have been pro- interests of the defendants, and practically moted by such amendment. The record dis- insured their defeat in the action; and we closes that the attitude of the defendants, still adhere to this construction, if the inwith respect to the memorandum incorpo- strument bas the force of a contract. To avoid this result, defendants asked leave, by the memorandum was, without fraud on an amendment, to eliminate the memoran. plaintiff's part, deliberately assented to by dum from their answer, and thereby lay the the defendants, the duty of construing its foundation to prove that the memorandum provisions will, of course, then devolve upon In question never was intelligently and con- the court. But the preliminary and crucial sciously assented to by them, and hence nev- question is whether the terms of the instru. er was a contract at all. This request, as ment were ever assented to by both parties. we have seen, clearly involved a radical It should be kept in view that the action is change of front on the part of the defend- based wholly upon the subscription contract, ants, but we are constrained to hold that which is a separate writing, and that the this change does not necessarily involve bad memorandum pleaded in the answer is only faith on defendants' part. It should be re- important in so far as it bears upon the membered that not only the defendants, but matter of the alleged consideration for the their counsel as well, assumed that the mem- subscription contract. Defendants contend orandum signed by the plaintiff, and deliv- and allege that the sole consideration for ered by him to the defendants, embodied the their subscription was the alleged uncondi. agreement with respect to the purchase of tioned agreement to purchase the hotel fur. the furniture which is pleaded elsewhere in niture of them. Plaintiff's position is that the answer. The trial court was of the same the agreement as to the furniture is conopinion, and, acting upon that theory, at tained in the memorandum, which it is adthe first trial, directed a verdict in favor of mitted plaintiff drew up and signed, and dethe defendants. It was an excusable mis- livered to the defendants. The real controtake, therefore, for the defendants to as- versy, therefore, and the only question left sume, as they did, that the memorandum for solution, is as to the terms of the arembodied what they allege to be the true rangement made by the parties respecting agreement between the parties, and upon this the matter of the furniture. In our opin. assumption to incorporate the same in their ion, the door should be thrown open so as to original answer, as was done. It was only allow the fullest investigation of this pivotal when the parties learned that the memo- question. If the memorandum is a contract, randum, as judicially interpreted, must be made without fraud, that fact, when ascer. construed adversely to the interests of the tained, will practically settle the case in defendants, that it became necessary for the plaintiff's favor. If it is not, the question defendants to show that it was not their will then turn upon parol testimony. See 1 agreement. Until construed by this court, Greenl. Ev. (14th Ed.) § 284. In any event, all parties were content to assume that the the principal question of fact is for a jury. instrument should stand as a contract; but Under all circumstances surrounding the the defendants now insist that the true con- case, we are of the opinion that it was prejutract is not contained in the memorandum, dicial error to refuse to allow an amendment as now construed, but is distinctly alleged in to the answer, by eliminating therefrom the the answer by averments independent of the memorandum. For this error, the verdict memorandum, and that they never assented will be set aside, and a new trial awarded. to the memorandum as a contract, except All the judges concurring. upon the theory and supposition that the same embodied what they claim is the true contract, as alleged in the answer, by averments therein aside from the instrument it

UNITED STATES SAVINGS & LOAN CO. y. self. The defendants, in their new attitude,

SHAIN et al.1 contend that the instrument was incorporated in the answer, and relied upon as a

(Supreme Court of North Dakota. Nov. 14,

18998.) defense, under the mistaken idea that the

CONTRACTS same embodied the true agreement, viz. that


BUILDING ASSOCIATION-ENFORCEMENT OF MORTpleaded in the answer, by allegations there GAGE--MontalY STOCK PAYMENTS-APPLICATION in distinct from the memorandum. The -USURY-ESTOPPEL memorandum is unilateral, and it is not au

1. Where, in a money-loaning transaction, the thenticated by the signatures of the defend

lender and the borrower reside in different

states, it is competent for them to agree that ants. If it is their contract, it became such

the transaction shall be governed by the lawg only by virtue of their assent to its terms, of either state. either in words or by their conduct. Wheth

2. Where, under such conditions, the transac

tion would be valid and binding under the laws er defendants ever assented to its terms,

of one state, and invalid under the laws of the either orally or by their conduct, is a fact other, the law will presume, in the absence of which can only be established by the intro- stipulations, that the parties contracted with duction of evidence of the circumstances and

reference to the laws of that state where their

contract will be upheld. concomitant facts connected with the entire

3. Where a foreign building and loan assotransaction, including the making and de- ciation advanced money to a member of said livery of the memorandum. This question,

association resident in this state, who received

the same, and executed a note for the amount, we think, is a question to be determined by

and a mortgage upon real estate to secure the a jury, under proper instructions from the court; and, if the fact is established that 1 Rehearing denied January 12, 1899.

same, such note and mortgage can be enforced , in the plaintiff company, and continue the in the courts of this state, notwithstanding the monthly payments thereon until said stock fact that said association had not complied with the statutes prescribing the terms upon which

should mature or the loan be paid, and pay foreign corporations might do business in this all fines and assessments against said stock, jurisdiction. Mill Co. v. Bartlett, 54 N. W. 544, and to pay plaintiff a premium of 50 per 3 N. D. 138, followed.

cent. of said 30 shares, and to assign 16 4. Where a party subscribes for shares of stock in a building and loan association, and

shares to plaintiff as collateral to said loan; agrees to pay therefor by paying certain monthly that this offer was accepted, and said Shain installments upon each share of stock until the executed and delivered to plaintiff the folsame reaches maturity or par, and where such lowing written instrument: “St. Paul, Minne party subsequently borrow's money from such association, with the understanding that the

sota, April 8th, 1889. For value received, same may be paid by a surrender and cancella- after three years from date, and before nine tion of his stock when it reaches maturity, while

years from date, I promise to pay to the order the stock of such party shares in the profits of the association he cannot claim to have his

of the United States Savings, Loan and Buildmonthly payments upon stock applied, as made, ing Company, at the office of its treasurer, St. in reduction of the amount so borrowed.

Paul, or its trustee, in Minneapolis, Minn., 5. Courts cannot presume that a building and

the sum of fifteen hundred dollars, with inloan association violated its charter provisions, as well as the provisions of the statute under

terest at the rate of six per cent per anwhich it was created, by refusing to allow its num on the sum of fifteen hundred dollars, members to secure its funds by competitive bid. payable monthly. It is understood that this ding for the same, without some competent evidence of such a course.

note is given for a loan obtained on thirty 6. While a by-law of a building and loan asso- shares of the stock, of the said United States ciation, which fixes a minimum premium below Savings, Loan and Building Company; and, which bids will not be considered, may render if the maker hereof fails to make any monthly a transaction usurious as to one who was forced, by reason of the by-law, to bid a larger pre

payment on said stock or to pay any installmium than he otherwise would have been re- ment of interest for period of six months after quired to pay, yet, where one voluntarily bids the same is due, then the whole amount of a premium greatly in excess of that required by

these notes shall at once become due and the by-law, he cannot be heard to complain of the obnoxious by-law.

pa yable, but if the maker hereof shall pay all (Syllabus by the Court.)

installments of interest which become due

hereon, and all monthly payments and fines Appeal from district court, Stutsman coun

which become due on said stock, until said ty; C. J. Fisk, Judge.

monthly payments shall have been past due Action by the United States Savings &

for a period of six months, then, upon the Loan Company against Sanford A. Shain and

surrender of said stock to said company, this others. Judgment for defendants. Plaintiff

note shall be deemed to be fully paid and appeals. Reversed.

canceled. This note is understood to be Benton & Bradley, for appellant. Ormsby made with reference to and under the laws of Vcllarg, for respondents.

the state of Minnesota. If this note is paid before seven years from date, there shall be

allowed such rebate from the premium as BARTHOLOMEW, C. J. This is an action

the board of directors of said company sball by the original mortgagee to foreclose a mort

deem equitable. Premium, $1,500. Loan, gage on certain real estate situate in Stutsman county. The defendants Sanford A.

$1,500." It is further alleged that, to secure Shain and Julia Shain, his wife, were the

compliance with said instrument in all par

ticulars, Sanford A. Shain and wife executed original mortgagors; the defendant William

and delivered to plaintiff the mortgage in Stone is the subsequent grantee of Sanford

question. A. Shain, and took subject to the mortgage;

Toere is a provision in the mortAugusta Stone is the wife of William Stone;

gage that, in case of failure to pay the month.

ly interest payment or the monthly payment and S. L. Glaspell was joined as defendant

on stock, and such default shall continue as a junior lienholder. Sanford A. Shain and

for three months, then the whole amount to William Stone answer jointly, the other de

become at once due and payable. fendants not appearing.

These de

faults are set forth, and the defendants are The complaint alleges the incorporation of

charged with the following amounts: the plaintiff under the laws of the state of Minnesota, for the purpose of doing business

Principal of loan.....

$1,500 00 Monthly interest in arrears.

97 50 as a building and loan association, under

Monthly stock installments in arrears 216 00 the name of the United States Savings, Loan


18 00 & Building Company, and the subsequent change of name to the United States Savings

Making a total of ....... $1,861 50 & Loan Company. It alleges that plaintiff Defendants are then credited with what is bas fully complied with all the requirements called the "withdrawal value" of his shares of of the laws of the territory of Dakota and the stock, amounting to $1,018.35, leaving a balstate of North Dakota for the purpose of en- ance of $813.15, for which plaintiff asks judgabling it to do business in this jurisdiction; ment and decree of foreclosure. that on February 4, 1889, the defendant San- The answer admits plaintiff's corporate orford A. Shain applied to plaintiff for a loan ganization, but denies that it was ever organof $1,500, agreeing to take 30 shares of stock ized as a building and loan association, and alleges that it was organized for the purpose with reference to the laws of that state of loaning money at a usurious rate of inter- where the contract would be valid and enest; denies that plaintiff was ever authorized forceable. Whart. Conf. Laws, $ 429; Bigeto do business in the territory of North Da- low v. Burnham, 90 Iowa, 300, 57 N. W. 807; kota. It also puts in issue the application Bell v. Packard, 69 Me. 105; Pritchard v. for the loan, but admits the execution of the Norton, 106 U. S. 124, 1 Sup. Ct. 102. Under mortgage, pleads that the contract was usur- any view that presents itself, this contract fous, and pleads payment in full.

must be construed according to the laws of The trial resulted in a decree for defendants, Minnesota. directing the cancellation and satisfaction of It is next urged that the note and mortthe note and mortgage in question, and the gage are of no force or validity, for the case comes to this court for retrial.

reason that, at the time of making the conThe appellant contends that the transaction tracts in suit, appellant was not authorized in question must be governed by, and decid- to do business in the then territory of Daed under, the laws of Minnesota. Respond- kota. It may be conceded that at that time ent; insist that the laws of Dakota territory appellant had not complied with the proviand North Dakota must control. The solu- sions of sections 3190, 3192, Comp. Laws. tion of this question, under the authorities, specifying what it was necessary to do in is perfectly clear. This was, in its essence, a order to enable a foreign corporation to do money-loaning transaction. By it Sanford A. business in the territory of Dakota. But, Shain borrowed $1,500 from appellant. The upon full consideration, we held in Mill Co. parties were residents of different states. It v. Bartlett, 3 N. D. 138, 54 N. W. 544, that was entirely competent for them to contract such facts did not render contracts actually under the laws of either. They expressly made by and with such foreign corporations agreed, both in the note and mortgage, that unenforceable and void as between the parthey contracted under the laws of Minnesota, ties. It is true that, while the negotiations the state of which appellant was a resident. that finally terminated in the contract sued That agreement is binding. Liverpool & G. upon were pending, chapter 41, Laws 1889, W. Steam Co. v. Phenix Ins. Co., 129 U. S. went into effect. That chapter imposes cer397, 9 Sup. Ct. 469; Security Co. v. Me- tain further duties upon foreign building and Laughlin, 87 Ga. 1, 13 S. E. 81; Dugan v. loan associations, but the inhibition upon doLewis, 79 Tex. 246, 14 S. W. 1024; Lanier ing business without compliance with the law v. Trust Co. (Ark.) 40 S. W. 466; Cæsar v. is in no manner stronger than, or different Capell, 83 Fed. 103; Scudder v. Bank, 91 U. from, that contained in the cited sections of the S. 406; Bigelow v. Burnham, 83 lowa, 120, Compiled Laws. Hence the decision in Mill 49 N. W. 104; Smith v. Parsons (Winn.) 57 Co. v. Bartlett must control this point. But N. W. 311; Andrews v. Pond, 13 let. 77; is this question before us? We have held Watson V. Lane, 52 N. J. Law, 550, 20 that the contract was made under the laws Atl. 891. The fact that the loan is made on of Minnesota. The note was dated in Minreal estate does not change this rule. Trust nesota, the note and mortgage were inalCo. v. Burton, 74 Wis. 329, 43 N. W. 141; ly delivered and accepted in Minnesota, and Bennett V. Association, 177 Pa. St. 233, 35 the draft for the money was payable in Atl. 684; Association v. Vance (S. C.) 27 S. Minnesota. Did that constitute “doing busiE. 274; Association v. Hoffman, Id. 692. The ness" in the territory of Dakota? We need note and mortgage in this case were made not answer the question, but the well-considpayable in Minnesota. Many cases hold that ered case of Cæsar v. Capell, 83 Fed. 403, such fact alone would make the contract is very instructive on this point. & Minnesota contract, in the absence of con- We come now to a closer inspection of the trary stipulations. As early as Newman v. contract. Sanford A. Shain had already sub Kershaw, 10 Wis. 333, it was said, "The scribed for 30 shares of stock of the appelgeneral rule that contracts are to be gov- lant corporation. The matured value of this erned by the law of the place of performance stock would be $3,000. Its value at that time is too well settled to require the citation of was but small. But, in consideration of reauthorities."

ceiving an advance of $1,500, Shain agreed Again, it is conceded that, if appellant be in to continue the payment of the monthly infact a building and loan association, this con- stallment of 60 cents upon each share of tract would not be usurious under the laws said 30 shares of stock until the same should of this jurisdiction. Not that our laws as mature, or, in other words, reach par value, to building associations differed materially One-half of said stock (15 shares) was to be from those of Minnesota, but our laws ap- assigned absolutely to appellant as a bonus plied only to domestic corporations, and hence or premium for such advance. The remainappellant could not claim any protection from ing 15 shares were to be assigned as collat. them, and this contract, if a Dakota contract, eral to said loan or advance. When the stock would, it is claimed, be usurious. Conceding matured the advance would be repaid by the this to be true, and even were the contract absolute surrender to appellant of the shares silent as to which forum should govern yet, so assigned as collateral. But as Shain might the parties being residents of different states, cease his installment payments on stock at the law would presume that they contracted any time, and thus leave appellant without any adequate security, if it depended upon it to bring a profit to himself. The two the stock alone, it required Shain, in addi- things embody a contradiction. The stocktion to the assignment of the stock, to exe- holder in a building and loan association who cute the note,-or the contract which we de insists upon having his stock installment paynominate the note,-and the mortgage secur- ments applied at once in reduction of the ing the same; Shain agreeing to pay interest amount advanced to him must, in fairness, upon the sum advanced at the rate of 6 per renounce all claims to share in the profits of cent, per annum, payable monthly in advance, the association. But that is contrary to the until such loan was repaid. Now, we need whole theory and spirit of building and loan eater into no mathematical calculations to associations, and directly opposed to the indemonstrate what rate of interest Shain in tentions of all parties who become members. fact paid or agreed to pay. Section 109, e. 34 And these remarks suggest another tlought, Gen. St. Minn. 1878, and which was in force that answers respondents' contention that when this contract was made, declares that: the payment of the large premium renders the "Such association or corporation is author- contract harsh and oppressive.

If any subized to loan money and funds, and secure scriber suffers unduly in consequence of the such loan by mortgage, or other security; premium he pays, it is because his necessities and any premium taken by such association are such that he is willing to pay a larger for the preference or priority of such loans, premium than other subscribers pay. If all or for the preference or priority on any sale, subscribers pay the same premium, and all or disposition of its lands," etc., “or any the money paid in be kept continually loaned. premium for preference or priority taken by then there can be no hardship, however great any mutual building association, shall not be the premium may be; and herein we find the deemed interest within the meaning of any causes that operated upon the legislative law of this state, nor shall any excess of such mind, and induced it to declare that no premium over any rate of interest permitted amount of premium paid should render the by the laws of this state be deemed or held, contract usurious. End. Bldg. Asa'ns, $ 17, in any court of law or equity, to be usury.” declares: "The principal aim is to provide That statute eliminates the premium from for its members, desirous of owning homeour further consideration as an element of steads, the opportunity of obtaining advanceusury. We may remark, in passing, that ments, with facilities for gradual liquidation, the statutes of Dakota territory contained a not elsewhere to be obtained, which, together similar provision, fully as strong, but limited with the mutuality of the whole plan, amply to domestic corporations. See Comp. Laws, compensates for the apparent exorbitancy of $ 3171. It is urged by counsel, and has some- the premiums and interest; keeping in contimes been held, that every payment on ac- stant view the interests of the investor as count of stock must be treated as a payment, well as the borrower." pro tanto, of the money loaned, and the prin- But it is strenuously insisted that appelcipal must be reduced by the amount of such lant is not a building and loan association, payment, and the principal would thus grow within the provisions of the Minnesota statiess from month to month, until towards the utes, and hence not entitled to the priviend it would be reduced to a very small sum, leges and immunities extended to such corand finally to one month's payment; and, as porations. Two cases from Minnesota are the monthly interest payments remain the cited in this connection. The first is Fagan same (i. e. at the rate of 6 per cent. per annum v. Association (Minn.) 57 N. W. 142. The upon the full sum of $1,500), it is claimed opinion in that case contains an intimation that the rate of interest becomes enormously that the articles of association and by-laws usurious, amounting towards the close of the of the association there involved rendered it term to several hundred per cent., and it is simply a saving and loan association, rather claimed that this makes the contract not only than a building and loan association. What usurious, but so harsh, exacting, and unjust those articles and by-laws were, is not disthat a court of equity should relieve from it. closed; hence we cannot say that what is In our judgment, this view entirely excludes there said would have any application whatthe fact that all money that is paid into the ever to this appellant. The point decided by treasury of the corporation upon stock in- that case in no manner involves the point stallments is, in theory, at least, and general- we are now discussing. The second case is ly in practice, immediately advanced to other that of Association v. Lampson (linn.) 62 borrowing stock subscribers, at the same rate N. W. 544. In that case it is said: “The of interest, and at a large premium, thus respondent, then, upon this appeal, is to be tending at once to increase the value of the regarded as a mutual building and loan asstock of the member who pays the money sociation, doing a local business; and as into the treasury, and hasten the date of its such it is not subject to the usury laws of maturity, or, in other words, hasten the day this state by reason of excess of premiums when payments on account of stock subscrip- contracted to be paid by its members to it, tions can cease. In this manner every mem- on a loan to them, over the rate of interest ber receives a profit upon the money he pays permitted by law.” It is claimed that under upon stock installments. Now, a man cannot that decision it is only such building and use his money to pay his debts, and yet use loan associations organized under the laws

77 N.W.-64

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