94 FEDERAL REPORTER.
nlorethan six years before the commencement of this suit, and their recoveryis barred by laches. But this was within the six years, and thi:! appellee is entitled to a decree for its recovery. The decree below is . accordingly reversed, and the case is remanded to the court below, with instructioJl:s to enter a decree in favor of the appellee and against the appellants for the recovery of $4,000, and interest from December 23,1889. ·i
BOWMAN et al. v. FOSTER & LOGAN HARfDWARE CO. et a1. (Circuit Court, W. D. Arkansas, TeXarkana Division. 1. CORPORATIONS-CONTRACTS ULTRA VIREs-ESTOPPEL.
;\Iay 8, 1899.)
A private corporation, which become's a stockholder in and a borrower from a building and loan association, although its act in becoming a stockholder was ultra vires, is estopped by receiving and retaining the proceeds of the loan from pleading its want of power as a defense to a suit to enforce the secqrity given. 2. ESTOPPEL-AssUMPTION OF DEBT BY GRANTEE-MoRTGAGES. A grantee of the property .of a corporation, who. by the terms of the deed, assumed and agreed to pay the debts of the corporation, is estopped by his contract to set up as a defense to a suit to foreclose a mortgage given to secure suc)l a debt that the aGt of the corporation by whleh the debt was created was ultra vires, and creditors of such grantee stand in no better position. S. BUILDING AND LOAN ASSOCIATIOKS-INSOI.VENCy-ADJUSTMENT OF ACCOUNTS 'l'he plan of business.. of a building and loan association required a borrowing stockholder to carry and pay dues upon stock to twice the amount of his loan, the excess being in fact a premiulll for the loan. Held that, on the insolvency of the association, in adjusting the accounts of a borrowing stockholder, who had kept up his payments until the failure. the dues and. fines paid on account of such premium stock would be credited as payments on his loan, and the stock canceled, while the aggregate dues paid on the remainder or loan stock would constitute the amount of paid-Up stock on which he would be entitled to dividends at the same rate paid on otber paid-up stock; that he would be charged with the amount of the loan actually received, with interest at the contract rate, and credited with interest paid. wrrH BORROWING STOCKHOI,DEHS.
This was a suit by t4e receiver of an insolvent building and loan association to foreclose a mortgage executed by one of its stockholders, in which the receivers of a corporation which had become the owner of the mortgaged property, and was also insolvent, and certain subsequent lienholders and grantees, were made parties or intervened. .. The Southern ;Building & Loan Association, of Knoxville, Tenn., is a corp 0. ration chartered under the laws of that state, and is what Is known as a buildIng and loan association. J. A. Bowman is an ancillary receiver, appointed by .this court; the corporation .being In the hands of a receiver In the state of Tennessee. The Foster & Logan Hardware Company and the Logan Hardware Company are corporations chartered under the laws of. the state of Arkansas. The charter of the Foster & Logan Hardware pompany recites: "The purposes for which said corporation Is organized are to establish, ·own, and carryon and do a general hardware business; to purchase. and sell as its own, and to sell on commissloJ;1s for others, all klnds"of merchandise, goods, machinery, iron, cutlery, stoves; tinware, tools, wagon and carriage material, wagons, buggies, plows, and farming implements, and another merchandise, goods, and articles usually kept for sale at hardware st-ores and agencies for machinery; to
BOWMAN V. FOSTER &: LOGAN HARDWARE CO.
purchase and sell for others and as Its own lime, cement, plaster, lumber, lath. shingles, doors, sash, glass, and blinds; to establlsh, own, and manage and control a general agency for the sale of all kinds of machinery, farming implements, and other articles;" and designates its place of business at Prescott, Nevada county, Ark. This corporation was organized, and its articles of Incorporation filed, on the 23d of April, 1883. The charter of the Logan Hardware Company recites that its place of business Is at Prescott, Nevada county, Ark., and that "the general nature of the business proposed to be transacted by this corporation is to manufacture, deal in, buy, and sell, at wholesale and retail, hardware, furniture, agricultural Implements, wagons, buggies, and tinware, and to do and perform all things necessary for carrying on a wholesale and retail hardware and furniture bnsiness." Its articles were filed Jannary 1, 1891. On December 12, 1889, the Foster & Logan Hardware Company, being the holder of 40 shares of stock in the plaintiff association, borrowed of said association the sum of $2,000, and agreed to pay therefor 6 per cent. interest, and, in addition thereto, to mature the said 40 shares of stock, and out of the proceeds thereof to repay said loan; the said 40 shares of stock being for $100 each, and the same being payable In monthly calls or assessments of 60 cents per share; and to secure the payment of said calls and the payment of said interest the said Foster & Logan Hardware Company executed and delivered to the said building and loan association an obligation in writing, and also a mortgage, which was duly recorded in Nevada county, Ark., on the following described real estate: "That certain lot or parcel of land situate in the county of Nevada, in the state of Arkansas, and thus described: Part of lot four In block twenty in the Railway survey of Prescott, Arkansas, described as follows: Beginning at the western corner of said lot, and running northwardly parallel with West Second street one hundred and forty-two feet; thence In a southeast direction, at right angles with said Second street, forty-six feet; thence in a southwest direction, parallel with said Second street, forty-two feet; thence In a northwest direction, at right angles with said street, twenty-one feet; thence In a southwest direction, parallel with said street, to Main street; thence with Main street to place of beginning." The mortgage recites that this conveyance is in trust, and for the following uses and purposes; that is to say: "That the Foster & Logan Hardware Company, of the first part, is a member of the said Southern Building & Loan Association, and owns forty shares of the seventh series of stock therein, and has obtained a loan of four thousand dollars thereon, for which it has executed its note or obligation of even date herewith, payable to said association at its home office on or before nine years from date, with interest at the rate of six per cent. on the sum of two thousand dollars, monthly, and in which note are the following stipulations and conditions: 'Now, if we pay promptly the monthly interest on the said sum of two thousand dollars, and the monthly payments on said shares of stock, and any flnes assessed under the rules of said association, and the taxes accruing on the lot of land described in the mortgage securing this obligation, and the premiums necessary to keep the house on said lot insured in such sum as such association may require (not exceeding two thousand dollars). until the said stock becomes fully paid in, and of the value of one hundred dollars per share, then it is understood that upon the surrender of said stock to said association this note shall be deemed fully paid and canceled; but, If we fail to pay promptly, when due and payable, the said taxes and insurance premiums, or default in the payment of said monthly interest, fines, and monthly payments on said stock for a period of six months after the same are, or any installment thereof Is, due, then, at the option of said association, the whole indebtedness evidenced by this obligation (including any taxes or insurance premiums due or paid by sald association) shall at once become and be due and collectible, and a foreclosure of said mortgage In the manner therein provided may be made. Now, if the said Foster & Logan Hardware Company shall comply with Its undertakings in said obllgatlon until the same be paid or canceled, as therein provided, then this conveyance shall become and be void; but, if default be made in all or In one of the particulars mentioned In said note, which shall make the same due, then foreclosure thereof may be had upon the following terms.''' Afterwards, on the 30th day of December, 1891, the FosM>r & Logan Hardware Company, by deed, which is made an exhibit to the bill, conveyed "all of its goods, chattels, 14 F.-38
594
94 FEDER4J. REPORTER.
credits, and effects, also the real estate and property ,9f ,every, kind, to the. Logan Hardwllre Company, which deed was, on the Hth day of .1a:1iuary, 1892, duly filed for record and recorded In the proper office in NevadacOlinty, Ark., and the Foster & Logan Hardware Company thereby became, to all Intents and purpOses, extinct. By the terms of sald, deed it is recited, among other things: "Whereas, :the Logan Hardware COD;lpa'ny has, on the 30th WiY of December, 1891, become,incorporated, and all stockholders in the Foster & Logan Hardware Company have taken stock in. the same to the same amount that they held in the origina) corporation; and whereas, the Logan Hardware Company 'has assumed, .and does hereby assume, all the debts and)iabilities of the Foster& Logan Hardware Company; and whereas, at a meeting of all of the stockhOlders of the Foster & Logan Hardware Company" held on the 30th day of December, 1891, it was'unanhnously agreed to merge the Foster & Logan Hardware Company into the Logan Hardwll.re COD;lpany, and all the stockholders in both companies assented thereto." Then follows a granting clause in the deed, after which follows this recital: , ','To have and to hold the same unto the said Logan Hardware Company, its successors and assigns, forever; and ttlat the Logan Hardware Company hereby assumes and agrees to pay all the debts and liabilities of the Foster & Logan Hardware Company in full." On April 9,. 1895, the Logan Hardware Company conveyed by deed to defendants Samuel W. White and Watson W. White the following portion of said land heretofore described, and the buildings thereon, to wit: "An undivided half interest in the southeastern wall of the Logan Hardware Company Building on the west half of 'said lot, and also a parcel of land bounded by a, line beginning twenty-five feet southeast from the northwest corner of said lot No.4, on the alley, and ruuning theJ;lce in a southeasterly direction parallel, with Second street forty-two feet; thence easterly, at right: a,ngles, 21 feet; ,thence northerly, at right angles, 42 feet, to the alley; thence along the alley 21 feet, to the point of beginning." On August 8,' 1896, the LoglUl, Hardware Company conveyed the land heretofore described to M. W. GreesOn,in trust to llecure the payment of a debt to the Nevada County Bank. The land is described in the deed as follows: "PlV'tot.Iot four, block of the Rallroad s1;irvey.to Prescott, Arkansas, It being that half of said lot lying along West Second street, facing and sixty-five feet off the southeast ends twenty-five feet on West of lots Sev,en lUld eight, blOCk thirteen, of ,the Railroad survey, to Prescott, Arfeet on West MaiJ;lstreet and one hUJ;ldred feet on West kansas, fac,ing Second street; and, the said Logan Har9wareCompany, party Of tb.e first part, and agree wlth the said.M. ,W, Greeson, of the sec()nd part, do hereby that the said both, real and personal" is wholly, and E!ntirely its own, and free from, all except a wortgage to a B. & ,L. associatiQn, any previous liens whatever." On the 1st Ilay of October. 1896, the Logan Hardware (Jompanybecame and in a suit brought in the chancery court of Nevada countY,Ark., by (J.p. }lcSwain ag;!;lIlst !laid hard\yare company",towind up affairs thereor, thedefendaut O. R. McDaniel W/;lS appointep. receiYer,and as such was Pl!tin possessioll;.of ;aU of Us assets. ,on intervention, filed by said banj{in said suit, Qf C. :0. McSwain Ilgajpst the LOg3,1l Hardware,: Company, a decree of foreclosure was rendered 1la,ld mortgage to ,Greeson in trust for said Nevllda County Bank. One ls tQ say, 2O,llhares-of the said building and loan association and agreed. tp be a preml/illl for said loan ,of $2,000. Monthstock was ly payments; \YC!lIe,)nade on ·Sflid stock for 82, months, comt;neucing at the date of sl,tid mortgage,to the said building and loan, associatiop, and interest at the rate of $10 per ;month on said sum, of $2,000 was pl!-id montply for 77 months. No ,other payments have been made on said lQan or Sllid .srock, The Foster ,& Logan Hardware Company ,were owners shares ,of stock in flIlJd building and loan on Wllich Said five sbares uumthly, payments of 60 cents .per shllre for a period of 82 months, ending on the 3Otl;1day of May, ,and said building and loan association, by agreement, has a 1896, were lien on aU of for the payment of said loan of That about the :\.st of February, 1897, the buildi.ng and loan asso.ciation became insolvent, and upon a suit., brought in the United States circuit court for the Eastern district of Arkansas,at,Llttle Rock, of LidaJohnsQu,plaintiff, agajnstsaid building
real; personal, and mixed," includlug . the real estate
BOW::IfA:-i V. FOSTER & LOGAN HAIWWARE CO.
595
ahd loan association, the said J. A. Bowman was appointed recei'l"er of said building and loan association by said court, and was shortly afterwards appointed ancillary receiver by this court, and as such receiver has· in his hands and custody for collection, among other assets of said building and loan association, the note and mortgage executed by the said Foster & Logan Hardware Company. Special leave was obtained from the Nevada chancery court to join the receiver of the Logan Hardware Company as a jefendant in this suit. The $2,000 borrowed by the Foster & Logan Hardware Company was used in constructing a. building on the property hereinbefore described, in which it subsequently carried on its busiij.ess. '.rh.e Nevada County Bank, in its answer. admits the facts above stated, but insists that the monthly payments of interest. according to the contract have been more than paid by the 82 payments of 62 cents each on the 45 shares of stock. It also urges that the Foster & Logan Hard:ware Company acted without legal authority in subscribing for the said 45 shares of building and loan stock of the said building and loan association, and that its attempt to make the Foster & Logan Hardware Company a member of said building and loan association was ultra vires and void, and that the only legal relation created by the issue of said stock and the execution of said mortgage between the said Southern Building & Loan Association and the Foster &. Logan Hardware Company, or its successors, the Logan Hardware Company, was that of debtor and creditor; and insists that the Southern Building & Loan Association, at the time of the appointment of the receiver, was justly indebted to the Logan Hardware Company in the sum of $214,-that being. the excess of the amount paid by the Logan Hardware Company over the amount borrowed from said building and loan association, exclusive of interest. It insists, further, that the Nevada County Bank is now the owner of the property described in the plaintiff's complaint, having become the purchaser under foreclosure of said deed of trust to the Nevada County Bank, and exhibits as evidence its deed, which is made a part of its answer. It insists that the mortgage is a cloud upon its title, and should be satisfied and canceled. The said O. R. McDaniel, as receiver of the Logan Hardware· Company, files a separate answer, substantially the same as that of the Nevada County Bank. Samuel T. White and Watson VV. White, a firm known as White Bros., also file a joint answer, in which they say that by deed dated the 9th of April, 1895, the Logan Hardware Company to them, by warranty deed, with special covenants to warrant and defend the title in said lands against all claims whatever. The land is described in that deed as follows: "Beginning twenty-five feet southeast from the northwest corner of lot four, block twenty, of the Hailroad survey to Prescott, Arkansas, on the alley, and running thence in a southerly direction, parallel with 'West Secohd street, forty-two feet; thence at right angles, in an easterly direction, twenty-oue feet; thence in a northerly direction forty-two feet, to the alley; thence along the alley, in a westerly direction, twenty-one feet, to the beginning,-being that part of the southeast half of said lot four now owned by said Logan Hardware Company; and also an undivided half interest in the southeastern wall of the Logan Hardware Company's building on said lot." It further appears that after the White Brothers had purchased the interest in the eastern wall on that part of the said eastern half of said lot that was owned by the said hardware they also procured title to the remainder of the eastern half of said lot 4 in block 20, and erected an adjoining one-story brick building, using the said brick wall as one of the side walls for their building" which they now occupy as a storehouse, It is alleged in their answer that the value of the west half of said lot and the building thereon is greatly in excess of the sum due the plaintiff, and that to secure payment of the amount due on the mortgage it is not necessary to sell the part of the said lot sold to them, and that their rights and interest in the wall should be protected by proper order. They insist that, if any judgment of foreclosure is rendered, or order of sale made herein, the court direct in its decree that the western half of said lot 4, block 20, and the two-story brick bUilding thereon, and the association stock held by plaintiff, be first sold, and the proceeds arising from the same applied to whatever balance !pay be ascertained and found to be due plaintiff; and that, if it is sufficient to pay the same, that the part of the eastern half of said lot, being 21 by 42 feet, now owned by them, be not sold, but, if it becomes necessary to sell it, that it be sold separately. This case was
596
submitted on the pleadings, exhlblts,and the statement of factslls herein Bet forth, including the commissioner's deed to the Nevada County. Bank for the lands sold under the decree· of foreclosure of the Nevada chancery court, which deed is filed and made a part of the record.
Cockrill & Cockrill and McCain & Son, for receiver. Thomas C. McRae, for defendants. ROGERS, District Judge. It is contended that, in subscribing for stock in the plaintiff building and loan association the Foster & Logan Hardware Company exceeded its charter powers, and the act was therefore ultra vires and void. Cases are found to that effect. Franklin Co. v. Lewiston lnst. for Savings, 28 Am. Rep. 9, and cases cited in note On page 15; End. Bldg. Ass'ns, § 323. Whether it be true that an ordinary corporation, authorized by its charter to do a general merchandise business, can become a shareholder in a building and loan association, in order to borrow money to carryon its business, in the opinion of the court is not decisive of this case; indeed, the question is not necessarv to its decision. If it be admitted that it cannot,still, underlying this question, is another, about which there cannot be much doubt in the light and trend of modern decisions. The Foster & Logan Hardware Company complied with the rules and regulations required by the plaintiff building and loan association in order to become a borrower, and executed the note and mortgage sued on, and accepted the stock. It used the money so borrowed in constructing its business house. So far as the plaintiff building and loan association was concerned, the"contract was an executed contract. All the plaintiff building and loan association could do was done. Can the Foster & Logan Hardware Company, after having received and used the plaintiff's money under this executed contract, be heard to say that it had no power to become a member of the association, and that its act Waf! therefore ultra vires? I think l1vt. This subject is fully discussed in 5 Thomp. Corp. §§ 6015-6042, inclusive. The author says' (section 6016): "The great mass of judicial authority seems to be to the effect that where" a private corporation has entered into a contract in excess of its granted powers, and has received the fruits or benefits of the contract, and an action is brought against It to enforce the obligation on its part, it is estopped from setting up the defense that it had no power to make it."
See note 3, where a great number of cases are cited supporting the text. See, also, Railroad Co. v. Johnson (Kan. Sup.) 48 Pac. 847. In that case the court say: "While an executory contract made by' a corporation without authority cannot be enforced, yet where the contract has been executed, and the corporation has received the benefit of it, the law interposes an estoppel, and will not permit the validity of the contract to be questioned." Blue Rapids Opera-House Co. v. Mercantile Building & Loan Ass'n
(Kan. Sup.) 53 Pac.. 761, is a case precisely in point. In that case the opera-house company had taken stock in the building and loan association, and made a loan to finish the construction of the opera house. It got the money, and gave its bond and mortgage. When sued on the bond and mortgage, the opera-house company set up want of power to become a shareholder and to make the loan. The court say:
BOWMAN V. FOSTER &: LOGAN HARD\\' ARE CO.
597
"Whatever may have been the powers of the officers of the opera-house company in this respect, the defense of ultra vires is not available to the company. The contract has been, in good faith, fully performed by the other party, the money has been paid, and the opera-house company has had the full benefit of the payment and the performance of the contract. The law now interposes an estoppel, and will not permit the validitj' of the loan contract to be questioned."
See, also, Illinois Trust & Savings Bank v. Pacific Ry. Co. (Cal.) 49 1'ac. 197. Franklin Co. v. Lewiston Inst. for Savings, supra, cited by defendants' counsel, is not in conflict with the cases cited. In that case the contract sued on was executory, and that fact is distinctly recognized by the court in the last paragraph of the opinion. & ·Working Men's Mut. Sav. Bank & Bldg. Ass'n of New Haven v. Agency Co. (decided in 1855) 24 Conn. 159, seems to support defendants' construction, and there are doubtless other cases to the same effect; but they must yield to the weight of modern judicial authority. I am aware that quasi public for instance, railroad corporations-which owe important duties to the public are governed by a different rule. They will not be allowed to do any ultra vires act which, in effect, disqualifies them from diseharging their duties to the public; and, if they do, they are not estopped to invoke the d()ctrine of ultra vires. Central Transp. Co. v. Pullman's Palace-Oar Co., 139 U. S. 24, 11 Sup. Ct. 478; Id., 171 U. S. 150, 18 Sup. Ct. 808. The supreme court do not extend this rule, h()wever, so as to do injustice. Hitchcock v. Galveston, 96 U. S. a41: Railwa)' Co. v. McCarthy, Id. 258; Arms Co. v. Barlow, G3 N. Y. fi2; RaHway Co. v. Sidell, 35 U. S. App. 160, 14 C. C. A. 477, and 67 Fed. 464. The cases cited, 139 U. S. 24, 11 Sup. Ct. 478. and 171 U. S. 150. 18 Sup. Ct. 808, supra, are distinguishable from cases like that under consideration, and the different United States circuit comts of appeals have recognized that distinetion, and, I think, have settled the law in accordance with right and justice and the trend and weight of modern judicial authority. In Gorrell v. Insurance Co., 24 U. S. App. 198, 11 C. C. A. 240, and 63 Fed. :371, the court said: "In New York, however, as elsewhere, the rule is established that the contracts of corporations, made in excess of their rightful powers, but free from any other vice, are not illegal in the sense of the maxim, 'Ex turpi causa,' etc.,"-in support of which is eited a large number of authorities, ineluding several eases by the supreme eourt of the United States. See, als{), Bensiek v. ThOInas, 27 U. 8. App. 765, 13 C. C. A. 457, and 66 Fed. 104; Coffin v. Kearney Co.. 12 U. S. App. 5G2, 6 C. C. A. 288, and 57 Fed. 137; Railway Co. v. Sidell, 35 U. S. Ap'll. 152, 14 C. C. A. 477, and 67 Fed. 4(;4. The court is of opinion that the Foster & Logan Hardware Company, if in existence, and a defendant. could not avail itself of the plea of ultra vires, and, if it cou ld not, neither can its vendees, assignees, or mortgagees. They cannot acquire any stronger position than the Foster & Logan Hardware Company, under which they claim, held. But it is not necessary to rest the opinion upon the point decided supra. By the terms of the deed from the Foster & Logan Hardware Company to the Logan Hardware C{)mpany, the latter expressly assumed and agreed to pay all the debts and liabilities of the Foster & Logan Hard-
598
94 FEDERAL'REPORTER.
ware (Jempany in fun. The and note.sued on was aliabHitt of the Foster & Logan HatidwareOompany, and the defense of U1V3,;Vires now interposed, if availa.ble at 'all, could be invoked by & Logan Hardware Company, or by some stockholder or creditor thereof. 27 Am. & Eng. Ene. Law, p. 396 et seq., and notes; Railroad Co. v. Eller.man, 105 V. S.,166. were either creditors or stockholders ot the Foster 8{, Hardware Comthe Fo.ster &:r.oganlIa.rdware Oompany Itself passed out of pany, e;istencewhen it sold entire. assets to the Logan Hardware ComThe Logan Har4ware Oompanycould not, therefore, interpose the defense of ultra' vires, and, having assumed. to pay the debt, is estopped;now'to deny either its validity or question its liability to pay it. MilJjngton v. Hill, 47 Ark. 311, 1 S. W. 547; Freeman v. Auld, 44 N.y.50; Oramer v. Lepper, 26 Ohio 8t. 59; Hough v. Horsey, 36 Md. 181; fickett v. Bank, 32 Ark. 346. The instrument sued on was. a very peculiar The FOlSter & Logan Hardware Oompany only borrowed $2,000 from the plaintiff To get it, it had,to /lnd did become a shareholder of 40 shares of $100 each, lLmountblg, in the aggregate, to $4,000. To secure said loan and the premiums tobepaid.on the stock, it executed.a mortgage, by Which it obligated itself to mature the $4,000 in stoc)i. by paying the monthly dues thereon. It also obligated iton the loan of $2,000. Evidently, self to pay .6 per cent. $2,000 of this stock covered the $2,000 borrowed, and maybe, for convenience, called "loan stock." The other $2,000 in stock, for convenience, may. be called ,"premium stock." The full dues required on the $4,000 stock and 6 per cent. interest was paid up to the time the plaintiff building and loan association. became insolvent, which was in January, 1897;..andon the 1st of February, 1897, the receiver was appointed by this court. It will be seen on the fifth page of the pamphlet which is ;made an exhibit to the answer of O. R. McDaniel, receiver, that all dues were payable on the last Saturday in each month, so that,at the time the receiver was appointed, the dues and interest for the month of January, 1897, had not been paid. The plaintiff. corporation had,' by becoming insolvent, become incapable of carrying out its part of the contract, and the settlement of its business remitted to a court of equity. In view of the facts, by what rule should a court of equity adjust the rights of the parties under this contract? The question has been decided differently by different courts, and it is not certain that exact justice hal' been reached by any of them. Indeed, I am not sure that any arbitrary rule which can be stated would accomplish that end in eveJlY case. After· th.e most careful consideration in a former case, presenting the same question, I concluded to follow the Pennsylvania and Tennet;see decisions (Rogers v. Hargo [Tenn. Sup.] 20 8. W. 430, and Strohen v. Association [Pa. Sup.] 8 At!. 843), and in that case laid down the following rule as the' correct rule of settlement in this district: (1) All loans in arrears prior to January 1, 1897, shall be charged with dues toiliat date on the actual amount receivedpy. th.e borrower from the association. (2) Oharge the borrower with the cash loan obtained, and 6 per cent. per annum inter-
BOWMAN V. FOSTER &: I.OGAN HARDWARE CO.
599
est thereon. (3) Credit the loan with all interest paid and one-half of all fines and one-half of the stock dues paid, with interest on the same at 6 per cent. per annum; also credit the borrower with full amount of stock dues paid since January 1, 1897, if such payments have been made, with interest at 6 per cent. per annum. :Make all calculations according to the partial payment plan. After deducting the aggregate of credits, supra, the remainder will constitute the sum due on the mortgage. (4) The aggregate of stock dues paid in on the stock, which represents the actual cash loan, will constitute the amount of paid-up stock upon which the borrower will draw dividends from the association, and the balance of the stock will be canceled. (5) In foreclosures, if the borrower and receiver can agree upon the present cash value of such paid-up stock, such value will be allowed as a credit on the mortgage debt, and all the stock of the borrower be canceled. It will be seen by this rule that all dues paid on the premium stock and all interest are treated as credits on the note, and the stock representing the loan is treated as loan stock. and remains as stock paid up, to the aggregate amount of the dUes, upon which the holder might draw dividends like any other creditor upon the winding up of the estate of the plaintiff association by the receiver thereof. 'l'he five shares of stock, not covered by the mortgage, held by the Foster & Logan Hardware Company, and conveyed by deed 'with its other assets to the Logan Hardware Company, it is conceded by the pleadings are subject to a lien in favor of the plaintiff corporation for the payment of the loan of $2,000; but it should not be subjected to sale for the payment of said debt until the $2,000 of stock representing the loan has been sold, and, in the event the receiver of the Logan Hardware Company should payoff the debt due the plaintiff corporation, that stock would remain the property of said company in the hands of the receiver as paid-up stock to the aggregate amount of the dues paid thereon, upon which that company would be entitled to draw dividends like other creditors of the plaintiff corporation upon settlement of its affairs by the receivers thereof. In this case, however, the rights of third persons have intervened, and render it necessary, in foreclosing the mortgage or obligation sued on, to have regard for their rights. No pOl" tion of the real estate covered by the mortgage should be sold until the stock, including the five shares of premium stock held by the Logan Hardware Company, has been sold, and that portion of the real estate held by White Bros. should not be sold until the property covered by the Nevada County Bank has been sold. The stocks must also be sold at public auction, unless a price therefor should be agreed upon by all the parties to the suit, in which event such price should be credited on the debt before any portion of the real estate is sold. Applying the rule above stated, I find that there is due the plaintiff building and loan association, after allowing all just credits, principal and interest, the sum of $---, and that the same is a first lien on all the real property covered by the mortgage, and upon the $2,000 stock of the Logan Hardware Company representing the loan of $2,000, and also on the five shares still held by it. The Nevada County Bank, under the trust deed and the decree rendered
600
thereon, under which it purchased, took subject to the plaintiff's and therefore acquired no title as against the plaintiff corporation. In the event the .debt found due is not paid, and a sale is made, the "loan stock" shall first be sold and to the payment of the debt, and, if not sufficient to pay the debt, the property not purchased by White Bros. will be sold, and, in the event it is insufficient to pay the debt, then the property purchased by White Bros. shall be sold, and sufficient thereof appropriated to satisfy this decree, and the residue thereof brought into court for further disposition. The decree of the court therefore will be for the foreclosure of the mortgage on all the property, and an order for the sale, the property to be sold in the order stated, and in conformity with this opinion. LEDOUX v. FORESTER et at.' (Circuit Court, D. Washington, E. D. 1.
May 22, lSH9.)
MINJNG CI.AIMS- V ALJDJTY OF LOCATION-PRIOR OJSCOVEItY OF VEIN OR LODE.
The provisions of Rev. St. § 2320, that no location of a mining claim shall be made until the discovery of tbe vein or lode within the limits of the claim located, is mandatory; and, to sustain an adverse claim filed against an application for a patent on, a mining elaim on the ground of a prior conflicting location, there must be evidence reasonably tending to show sucb before the prior location was made.
2. SAME-MARKING BOUNDARIES OF LOCATION.
Under Rev. St. § 2324, requiring a mining location to be distinctly marked on the ground so that its boundaries can be readily traced, in marking a claim regard must be bad to the topography of the ground, and the markIngs be so placed that they can be readily followed from one to another, and :that a person accustomed to tracing the lines of mining claims can, after reading the description of the claim in the posted notice of location, , a reasonable and bona fide effort, find all the stakes.
This is a suit in equity brought by the complainant, under section 2326, Rev. St. U. 8., in support of the adverse elaim filed by him in the United States land office at Spokane against the application oUhe defendants for a patent to the Ben Tillman lode mining claim, situated in Eureka mining district, Ferry county, state of Washington; the complainant claiming title to the same ground under a mining location. called the "Minnie Lode Mining Claim." Heyburn, Price, Heybnrn & Doherty, for complainants. Albert Allen, for defendants. BANFORD, District Judge. The complainant asserts that he has a superior title to the mining ground in controversy, as the purchaser from one George W. Elliott of the Minnie lode mining claim, which was located by said Elliott, through an agent named on the 22d day of April, 1896, and that he is in possession of said ground, and has made large expenditures in prospeeting and developing the claim; the date of said location being about three weeks prior to the location of the Ben Tillman elaim by the defendants, covering part of the same ground. The validity of the complainant's title is disputed on two grounds.. viz.: (1) The loca-