Healy v. Eastern Building & Loan Ass'n

17 Pa. Super. 385, 1901 Pa. Super. LEXIS 324

• Court: Superior Court of Pennsylvania
• Decided: July 25, 1901
• Docket: Appeal, No. 9
• Status: Published

Opinion

Opinion by

Rice, P. J.,

It is to be noticed that the plaintiff does not allege that his stock had “ matured,” either by reason of his payment of monthly instalments amounting to $100 per share, or by reason of its being worth $100 per share. He does not claim, and without such allegation could not do so successfully, that the defendant was bound to pay him $100 per share forthwith after he had paid seventy-eight monthly instalments. The clause of the certificate, which standing by itself, seems to hold out that promise, when read in connection with the succeeding clauses of the certificate, the articles of incorporation, the by-laws and the “ terms and conditions ” attached to the certificate, all of which go to make up the contract, creates no such absolute obligation: O’Malley v. People’s Building, etc., Assn., 92 Hun, 572; Daley v. People’s Bldg. Loan & Savings Assn., 172 Mass. . Nor does the plaintiff so claim. What he claims is the withdrawal value of the stock as ascertained by a computation in.accordance with the terms of the fourth condition attached to his certificate. We shall consider the case in that view.

‘ The first point, in logical order, urged by the defendant is, that by the fourteenth clause of the “ terms and conditions ” attached to his certificate, the plaintiff agreed that any action to be brought by him against the defendant should be brought in Onondaga county, New York, and therefore, the court below was without jurisdiction. As was said by Chief Justice Shaw in the leading case upon the subject of the validity of such an agreement, the clause under consideration contains no negative words, and Strictly speaking, no stipulation that the action should not be brought elsewhere, unless it is implied by the words “ and in Onondaga county, New York.” These words were not necessary to give the plaintiff a remedy, because without them it must be conceded that he would have had a remedy at law, as in all cases of breach of contract, for whiph no stipulation is necessary: Nute v. Hamilton Mutual Ins. Co., 6 Gray (Mass.), 174. Granting, however, that the clause is to be construed as a stipulation not to bring suit elsewhere, it is established by the weight of authority that it was not effective to oust the general jurisdiction of the courts. We quote from the opinion of Mr. Justice Clauk in Rea’s Appeal, 13 W. N. C. 546: “ The general jurisdiction of the several courts of the commonwealth is established by law, not only for the security of private rights, but, by'securing these, for the promotion of the good order and peace of' society. It is against public policy, therefore, that parties should, by the terms of a private agreement, in advance oust their jurisdiction. If such' an agreement may be made by one person, it may be made by many, if it may be made as to all courts but one, it may be made as to all, by adding to a personal covenant that the parties are not to be responsible before any tribunal for a breach of it.” Accordingly it was held that an assignor, by nominating in his assignment a particular court for the adjustment of differences concerning assigned property which may arise, cannot oust the jurisdiction of other courts which would otherwise take cognizance of the matter. See also‘Home Ins. Co. v. Morse, 20 Wall, 445, L. ed. Bk. 22, p. 365, where the subject is very fully discussed; Barron v. Burnside, 121 U. S. 186, L. ed. Bk. 30, p. 915; Prince Steamship Co. v. Lehmann, 5 L. R. A. 464; Nute v. Hamilton Mutual Ins. Co., 6 Gray, 174; Hall v. People’s Mutual Fire Ins. Co., 6 Gray, 185; Amesbury v. Bowditch, Mutual Fire Ins. Co., 6. Gray, 596 ; Reichard v. Manhattan Life Ins. Co., 31 Mo. 518; Matt v. Mut. Aid Asso., 81 Iowa, 135 ; Bartlett v. Union Mutual Fire Ins. Co., 46 Me. 500 ; Scott v. Avery, 5 H. of L. C. 811; 2 May on Ins. (4th ed.) sec. 490; Niblack on Ben. Soc. secs. 317, 321. The question of the validity of arbitration clauses in contracts, of clauses limiting the time of bringing suit, of clauses waiving the right of appeal, of agreements submitting pending disputes to a tribunal created by the parties whose decision shall be final, is not before us. The narrow question is whether a stipulation made in advance of any dispute, that any action on the contract or for breach of the contract that may be brought by one of the parties shall be brought in a court of a county named by them — -thus attempting to oust the jurisdiction of all other courts of the land— will be enforced? We are of opinion, and so hold, that such a stipulation is contrary to public policy and cannot be enforced.

The defense relied on and substantially averred in the affidavit of defense is that under the laws of the state of New York the plaintiff had no cause of action at the time the suit was brought, because, by the provisions of the defendant’s articles of incorporation and by-laws, and its rules and regulations — all of which enter into and form part of the contract between him and the defendant — the latter is not required to pay to with' drawing stockholders more than one half of the amount received by it from dues and stock payments in any month; that the claims of the withdrawing members are to be paid in the order of presentation ; that at the time the plaintiff’s claim was presented and up to the time of the institution of this suit the amount of claims of withdrawing stockholders filed prior thereto ■ by other members of the defendant association greatly exceeded the amount of money in the hands of the defendant applicable to the payment of the same, and since then, and still does greatly exceed such amount; so “ that at the time of the commencement of this action there were no funds in the hands of the defendant association applicable, under its articles of incorporation and by-laws, to the payment of the plaintiff’s alleged claim, and that there have not been since, and are not now, any funds so applicable thereto.” For present purposes these averments of fact in the affidavit of defense are to be taken as true and capable of proof, and their full legal effect is to be given to them. The court below held them to be insufficient to prevent judgment but intimated (following U. S. B. & L. Assn. v. Silverman, 85 Pa. 394) that should it seem equitable it might restrain execution in order that there may be no undue derangement of the defendant’s affairs, and that payment of the judgment may be made in accordance with the terms of its charter and by-laws. Nevertheless, the court entered a general judgment against the defendant, upon which, unless the court in the exercise of its supposed equity powers interferes, an execution may issue forthwith and be levied upon any property of the defendant found within the jurisdiction. The defendant’s position is, that by the terms of the plaintiff’s contract with the association and his fellow members, the claims of withdrawing members are payable in the order of their presentation out of specific funds only, and that lack of such funds, when sufficiently pleaded, is a good defense to an action at law. This it is claimed, is the law of New York and must govern in the present case.

As already suggested the defendant is a New York corporation ; the plaintiff applied for, and was admitted to membership there and his certificate was issued and delivered in that state. Moreover, the certificate contains the express stipulation that' all payments under the same are payable at the home office o£ the association at Syracuse, New York. It is hardly necessary to say, that, as the contract was made in New York and is performable there, it is a New York contract: Bennettv. Eastern Building & Loan Assn., 177 Pa. 233 ; Beso v. Eastern Bldg. & Loan Assn., 16 Pa. Superior Ct. 222. Hence, the law of that state must govern in determining its validity, nature, obligation and interpretation: Brooke v. N. Y., Lake Erie & Western R. R. Co., 108 Pa. 529; Tenant v. Tenant, 110 Pa. 478; Forepaugh v. Delaware, etc., R. R. Co., 128 Pa. 217 ; Sea Grove Assn. v. Stockton, 148 Pa. 146; Baum v. Birchall, 150 Pa. 164; Perlman v. Sartorius, 162 Pa. 320; Cbamplin v. Smith, 164 Pa. 481; Burnett v. Penna. R. R. Co., 176 Pa. 45; Musser v. Stauffer, 192 Pa. 398; Bedford v. Eastern Bldg. & Loan Assn., 181 U. S. 227; Whiting Mfg. Co. v. Bank, 15 Pa. Superior Ct. 419. The law of a state, though it rests only on the decisions of the courts, is none the less absolutely and indisputably the law than if it had been made so by statute. “ The decisions of a state court, upon its common law and on its statutes, must stand unquestioned, because it is the only authority competent to decide, or they must be alike questionable by any tribunal which may choose to differ with its reasons or with its conclusions: ” Mitchell, J., in Forepaiugh v. R. R. Co., supra. “ Generally as to its formalities and its interpretation, obligation and effect, a contract is governed by the laws of the place where it is made, and if it is valid there it is valid everywhere; but when it is made in one state or country to be performed in another state or country, its validity and effect are to be determined by the laws of the place of performance. It is to be presumed that parties enter into a contract with reference to the laws of the place of performance, and unless it appears that the intention was otherwise, these laws determine the mode of fulfillment and obligation and the measure of liability for its breach: ” Fell, J., in Burnett v. R. R. Co. supra; The fact that the plaintiff is a resident of Pennsylvania can make no difference in the construction of a contract made and to be performed in another state. The defendant is a corporation created by another state and subject to the laws- of that state. Its organization, corporate functions, who shall become members, what are their rights as members, are all questions for New York courts, because questions of local law. By the very act of membership the plaintiff intrusted his money to the control of an organization owing its existence to and governed by the laws of another state, and has no right to call upon the courts of his own state to protect him from the consequences of voluntary membership therein: Madden v. Penn Electric Light Co., 181 Pa. 617; Bank v. Adams, 1 Pars. Sel. Eq. Cas. 584; Morris v. Stevens, 6 Phila. 488; Bennett v. Building & Loan Assn., supra. It is clear, therefore, that if the facts alleged in the affidavit of defense would constitute a good defense by the law of the state under which the defendant corporation was organized, and where the contract sued upon was made and is to be performed, such defense is equally good in every other place where the question may be litigated. That the law of New York is as alleged in the affidavifc of defense seems to be well established by the decisions of its appellate courts. In the case of Engelhart' v. Fifth Ward ■ Permanent Dime Savings & Loan Assn., the superior court of • Buffalo held, reversing the lower court, that a member of a loan ' association on complying with the conditions for withdrawal becomes a creditor of the association and his right to have his ■ debt then due established by judgment is not affected by a - provision in the articles that the dues paid by withdrawing mem- ■ bers “ will be refunded to them when the necessary funds are collected.” 5 Misc. Rep. 518. This judgment was reversed by the court of appeals and the conclusions of the latter court, so far as it is necessary to quote them here, were thus stated by Chief Judge Andrews : “It seems to be very plain that the clause in the articles of association, that the dues paid by withdrawing members ‘will be refunded to them when the necessary funds are collected,’ operated as a qualification of the liability of the association to withdrawing members.” Further on in the opinion. speaking of the rights of a withdrawing member, he said: “ He does not stand in the position of a general outside creditor. ■ He paid his dues, and although by withdrawing he has ceased ‘ to be a member of the association, his right to receive them back is measured by the contract between him and the association.” We remark in passing that the last quoted ruling is in. harmony with' the decision of our own Supreme Court' in ■ Christian’s Appeal, 102 Pa. 184, where the late Chief Justice’ Sterrett said: “While, in a qualified sense, withdrawing, stockholders may be considered creditors of' the association,'' their rights, as against those with whom they have been asso-' ciated, are very different from those of general creditors whose claims are based wholly on outside transactions.” But to return to the Engelhart case, Chief Judge Andrews concluded ■ his discussion of the precise question now under consideration with the following clear and unambiguous statement of the law . of New York applicable to the case of a “going” corporation where bad faith is not alleged. “ There can be no doubt, we think, that the condition that the association shall refund -‘ when . the necessary funds are collected ’ was a material and substantive part of the obligation assumed by the association, and that it constitutes a good answer to the suit of a withdrawing member that neither at the time that he withdrew, nor subsequently before the action was brought, were there in the treasury of the association any funds collected, out of which the claim could be paid: ” Engelhart v. Fifth Ward Permanent Dime Saving & Loan Assn., 148 N. Y. 281 (1896). This ruling has been followed in New York in at least one case in which the present defendant’s charter and by-laws were under consideration (House v. Eastern Bldg. & Loan Assn., 52 App. Div. (N. Y.) 163), and is in harmony with the other New York cases Cited by the appellant’s counsel. See also Eastern Building & Loan Assn. v. Snyder, 98 Va. 710, and cases cited in the notes to the Engelhart case in 35 L. R. A. 289, at p. 301. If by the law of New York the-by-law under consideration is a “material and substantive part of the obligation assumed by the association ” which operates “ as a qualification of the liability of the association to withdrawing members ” it must be so regarded in any forum where action is brought on the contract. It is not unjust to hold that the plaintiff by bringing suit here, could not acquire rights that he would not have had if he had brought his suit in the state where his contract was made and was to be performed: Forepaugh v. R. R. Co., supra.

It follows that the plaintiff was not entitled to judgment for want of sufficient affidavit of defense.

The judgment is reversed and a procedendo awarded.