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 the laws of the State of Minnesota, with its home office at Minneapolis. The allegations of the complaint, aside from the allegations as to the insolvency of the association and the appointment of the receiver, are substantially the same as in the case of Loan Co. v. Shain, (decided at this term) 8 N. D. —, 77 N. W. Rep. 1006. The answer also raises the same issues as in that case. Following the decision in that case, we hold that the contract in this case must be governed by the laws of the State of Minnesota, and that said contract is not usurious.
Upon the question of the proper credits to be given to the defendants, this case differs materially from the Shain case, as the association has become insolvent, and is unable to mature the stock, and consequently unable to complete the contract on its part. In this case the loan was $400, and the premium bid was $400. The evidence of indebtedness took the form of a bond. Ella Cairns signed as one of the obligors. The bond was for $800, but only the sum of $400 drew interest, and that at the rate of 6 per cent. Eight shares of stock were assigned to the association as collateral security; the bond to be paid by the absolute surrender of such stock at maturity. The bond’ was payable on or before nine years from date. It is conceded, as we understand the record, that on December 19, 1888, Robert Cairns, deceased, subscribed for, and there were issued to [150]*150him, ten shares of stock in saicl association. Subsequently two of said shares were surrendered, and they figure in no manner in this controversy, and we shall treat the matter as a subscription for eight shares. Upon these shares he contracted to make monthly payments at the rate of 60 cents upon each share until the stock matures. Cairns did not apply for a loan until more than a year thereafter, and the loan was not actually made until March 8, 1890. All payments up to that time had been kept up. Consequently there had been paid upon said eight shares, before the loan was made, the sum of $67.20. From the. time the loan was made until the insolvency of the association the stock payments were regularly made. This included all payments up to and including October, 1895. Hence he paid upon his stock, after the loan, the further sum of $321.60; and of this amount one-half, or $160.80, was paid upon stock held by the association as collateral security for the bonus or premium. The interest upon the loan of $400 was also paid monthly in -advance, and amounted during said term to $134. For what amount of the sums so paid should the respondents receive credit?
This question has received very different answers at the hands of different courts. It has never yet been answered by this Court. It has been held that a proper and equitable adjustment, in cases where the association has become insolvent and unable to mature its stock, is to charge the borrowing member with the amount of money received, with legal interest thereon, and credit him with all that he has paid, “whether paid as fines, penalties, or dues.” Strauss v. Association, 117 N. C. 308, 23 S. E. Rep. 450; Thompson v. Association, 120 N. C. 420, 27 S. E. Rep. 118; Buist v. Bryan (S. C.) 21 S. E. Rep. 537. See, also, Bank v. Whitmore (Sup.) 49 N. Y. Supp. 862. In this case the question was presented in an involved form, and just what the Court decided is not clear. Respondent also cites in this connection Randall v. Protective Union, 42 Neb. 809, 60 N. W. Rep. 1019. But in that case the association involved was, so far as the record discloses, an entirely solvent corporation; and under such circumstances there can be no injustice in crediting a borrowing member, who chooses to surrender the stock pledged, with all that he has paid thereon. This rule has been frequently applied in Pennsylvania. North American Garden Ass’n v. Tradesman’s Bldg. Ass’n, 46 Pa. St. 493; Watkins v. Association, 97 Pa. St. 514. But that a different rule, as to credits to be given, should be applied in solvent and insolvent corporations is, we think, entirely clear. The rule is universal that when a corporation becomes insolvent there must be, or at least there may be, a loss to the stockholder. And, from their very nature, the certainty of loss in case of an insolvent building and loan association is greater than in many other forms of investment. They deal only with their members. Their capital consists exclusively of sums paid by their members. They cannot become insolvent in fact without an impairment of that capital, and, if there be an impairment, then the full amount of capital paid in cannot [151]*151be returned. That being true, every principle of their organization requires that every dollar of capital that has been paid in upon stock subscriptions should bear its proportionate share of the loss. In End. Bldg. Ass’n, § 514, it is said: “The truth is that there is implied, in the very essence of the building association scheme, an agreement between the members of every association, in the light of which all other agreements, and all rules and by-laws, must be read, and to which they must be conformed; and that is the agreement that all burdens shall be equally borne, as well as all profits equally shared, — that the whole enterprise shall be conducted and the rights and obligations of the participants in it shall be adjusted upon a basis of strict mutuality, equality, and fairness.” It is evident that if, in cases of the insolvency of the association, all the borrowing stockholders are to be credited on their indebtedness with all the capital they have paid in, they suffer none of the impairment, and ultimately the entire loss must be borne by the nonborrowing members, and thus the basis of strict mutuality of burdens is entirely disregarded. Equity cannot, therefore, under such circumstances extend to the debtor credit for all he has paid upon his stock. This we think is the rule of the authorities, as well as of reason. Eversmann v. Schmitt, 53 Ohio St. 174, 41 N. E. Rep. 139; Wholford v. Association, 140 Ind. 662, 40 N. E. Rep. 694; Weir v. Association (N. J. Ch.) 38 Atl. Rep. 643; Moran v. Gray, Id. 668; Curtiss v. Association, 69 Conn. 6, 36 Atl. Rep. 1023; Strohen v. Association, 115 Pa. St. 273, 8 Atl. Rep. 843; Post v. Association (Tenn. Sup.) 37 S. W. Rep. 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.
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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 the laws of the State of Minnesota, with its home office at Minneapolis. The allegations of the complaint, aside from the allegations as to the insolvency of the association and the appointment of the receiver, are substantially the same as in the case of Loan Co. v. Shain, (decided at this term) 8 N. D. —, 77 N. W. Rep. 1006. The answer also raises the same issues as in that case. Following the decision in that case, we hold that the contract in this case must be governed by the laws of the State of Minnesota, and that said contract is not usurious.
Upon the question of the proper credits to be given to the defendants, this case differs materially from the Shain case, as the association has become insolvent, and is unable to mature the stock, and consequently unable to complete the contract on its part. In this case the loan was $400, and the premium bid was $400. The evidence of indebtedness took the form of a bond. Ella Cairns signed as one of the obligors. The bond was for $800, but only the sum of $400 drew interest, and that at the rate of 6 per cent. Eight shares of stock were assigned to the association as collateral security; the bond to be paid by the absolute surrender of such stock at maturity. The bond’ was payable on or before nine years from date. It is conceded, as we understand the record, that on December 19, 1888, Robert Cairns, deceased, subscribed for, and there were issued to [150]*150him, ten shares of stock in saicl association. Subsequently two of said shares were surrendered, and they figure in no manner in this controversy, and we shall treat the matter as a subscription for eight shares. Upon these shares he contracted to make monthly payments at the rate of 60 cents upon each share until the stock matures. Cairns did not apply for a loan until more than a year thereafter, and the loan was not actually made until March 8, 1890. All payments up to that time had been kept up. Consequently there had been paid upon said eight shares, before the loan was made, the sum of $67.20. From the. time the loan was made until the insolvency of the association the stock payments were regularly made. This included all payments up to and including October, 1895. Hence he paid upon his stock, after the loan, the further sum of $321.60; and of this amount one-half, or $160.80, was paid upon stock held by the association as collateral security for the bonus or premium. The interest upon the loan of $400 was also paid monthly in -advance, and amounted during said term to $134. For what amount of the sums so paid should the respondents receive credit?
This question has received very different answers at the hands of different courts. It has never yet been answered by this Court. It has been held that a proper and equitable adjustment, in cases where the association has become insolvent and unable to mature its stock, is to charge the borrowing member with the amount of money received, with legal interest thereon, and credit him with all that he has paid, “whether paid as fines, penalties, or dues.” Strauss v. Association, 117 N. C. 308, 23 S. E. Rep. 450; Thompson v. Association, 120 N. C. 420, 27 S. E. Rep. 118; Buist v. Bryan (S. C.) 21 S. E. Rep. 537. See, also, Bank v. Whitmore (Sup.) 49 N. Y. Supp. 862. In this case the question was presented in an involved form, and just what the Court decided is not clear. Respondent also cites in this connection Randall v. Protective Union, 42 Neb. 809, 60 N. W. Rep. 1019. But in that case the association involved was, so far as the record discloses, an entirely solvent corporation; and under such circumstances there can be no injustice in crediting a borrowing member, who chooses to surrender the stock pledged, with all that he has paid thereon. This rule has been frequently applied in Pennsylvania. North American Garden Ass’n v. Tradesman’s Bldg. Ass’n, 46 Pa. St. 493; Watkins v. Association, 97 Pa. St. 514. But that a different rule, as to credits to be given, should be applied in solvent and insolvent corporations is, we think, entirely clear. The rule is universal that when a corporation becomes insolvent there must be, or at least there may be, a loss to the stockholder. And, from their very nature, the certainty of loss in case of an insolvent building and loan association is greater than in many other forms of investment. They deal only with their members. Their capital consists exclusively of sums paid by their members. They cannot become insolvent in fact without an impairment of that capital, and, if there be an impairment, then the full amount of capital paid in cannot [151]*151be returned. That being true, every principle of their organization requires that every dollar of capital that has been paid in upon stock subscriptions should bear its proportionate share of the loss. In End. Bldg. Ass’n, § 514, it is said: “The truth is that there is implied, in the very essence of the building association scheme, an agreement between the members of every association, in the light of which all other agreements, and all rules and by-laws, must be read, and to which they must be conformed; and that is the agreement that all burdens shall be equally borne, as well as all profits equally shared, — that the whole enterprise shall be conducted and the rights and obligations of the participants in it shall be adjusted upon a basis of strict mutuality, equality, and fairness.” It is evident that if, in cases of the insolvency of the association, all the borrowing stockholders are to be credited on their indebtedness with all the capital they have paid in, they suffer none of the impairment, and ultimately the entire loss must be borne by the nonborrowing members, and thus the basis of strict mutuality of burdens is entirely disregarded. Equity cannot, therefore, under such circumstances extend to the debtor credit for all he has paid upon his stock. This we think is the rule of the authorities, as well as of reason. Eversmann v. Schmitt, 53 Ohio St. 174, 41 N. E. Rep. 139; Wholford v. Association, 140 Ind. 662, 40 N. E. Rep. 694; Weir v. Association (N. J. Ch.) 38 Atl. Rep. 643; Moran v. Gray, Id. 668; Curtiss v. Association, 69 Conn. 6, 36 Atl. Rep. 1023; Strohen v. Association, 115 Pa. St. 273, 8 Atl. Rep. 843; Post v. Association (Tenn. Sup.) 37 S. W. Rep. 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, what ever 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. Rep. 446; Sullivan v. Stucky, 86 Fed. Rep. 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 [152]*152held 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 unpledged. 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, “until 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 payment on stock are not payments upon the premium. Hence in this case nothing has been paid upon the premium bid, arid 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 thereon, 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 legál 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 w'ere 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.
(77 N. W. Rep. 1010.)
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.