Atlanta Loan & Saving Co. v. Norton

Beck, P. J. 1. Section 2878 of the Code of 1910 reads as follows: “All building and loan associations, and other like associations doing business in this State, are authorized to lend money to persons not members thereof, nor -shareholders therein, at eight -per cent, or less, and to aggregate the principal and interest at the date of the loan for the entire period of the loan, and to divide the sum of the principal and the interest for the entire period of 809 the loan into monthly or other installments, and to take security by mortgage with waiver of exemption, or title, or both, upon and to real estate situated in the county in which said building and loan' association may be located.” If we were called upon, in answer to the question propounded by the Court of Appeals, to decide whether or not Atlanta Loan and Saving Company was, under the provision of section 2878 as it stands in the Code of 1910, a “building and loan association” or “a like association,” we should reply that under the decisions in the cases of Cook v. Equitable B. & L. Asso., 104 Ga. 814 (30 S. E. 911), and McIntosh v. Thomasville Real Estate &c. Co., 138 Ga. 128 (74 S. E. 1088, Ann. Cas. 1914C, 1302), it is not a building and loan association or a like association. In the Goolc ease it was held: “A building and loan association, as such organizations usually -exist to-day, is a private corporation designed for the purpose of accumulating into its treasury, by means of the gradual payment by its members of their stock subscriptions in periodical installments, a fund to be invested from time to time in advances made to such shareholders on their stock as may apply for this privilege on approved security; the borrowing members paying interest and a premium for this preference in securing an advancement over other members, and continuing to pay the regular installments on their stock in addition; all of which funds, together with payments made by the non-borrowing members, including fines, forfeitures, and other like revenues, go into the common fund until it, with' the profits thereon, aggregates the face value of all the shares in the association, the legal affect of which is to extinguish the liability incurred for the loans and advancements, and to distribute to each non-borrowing’ member the par value of his stock.” In the McIntosh case it was held: “In order for an incorporated company to come within the classification of like character to a building and loan-association, so that it may conduct business on the plan of a building and loan association and escape the penalty of taking an excess of legal interest, its charter must indicate that its method of business with relation to mutual participation in’profits and losses in loans made by it has some distinctive feature of the plan of a building and loan association. ” And in the course of the opinion delivered in that case it was said: “It is the mutual participation in profits and losses by borrowers and non-borrowers which is the 810 basic principle on which contracts between this class of associations and its members have been saved from the consequences attached to other usurious loans. Rooney v. Southern Building & Loan Association, 119 Ga. 941 (47 S. E. 345). The original conception of building and loan associations confined the loans to its members, but in the course of evolution such associations have been allowed to make loans to non-members. At the same time, however, the departure from the original scheme of a community of interest among its members has never been so radical that a corporation which gathers its capital from its members by installment payments on stock subscriptions of fixed amounts may loan the money accumulated in its treasury indiscriminately to any person at greater than the maximum legal rate of interest and escape the consequences of usury. The scheme of a trae building and loan association holds fast to the basic plan that members are to be given a preference in obtaining loans, and that the excess of interest is to be adjusted to the stock in the way of premiums and fines, and not to the loan; and there must be some nexus between at least some of the loans and the stockholder’s interest in the association.” We do not find in the excerpts quoted in the questions propounded by the Court of Appeals the essential features, as pointed out in the two decisions from which the above quotations are taken, of a building and loan association, or a like association, but that feature of a building and loan association, called by the writer of the opinion in the McIntosh case the “basic principle” of such an association, is wanting from the charter and by-laws of the Atlanta Loan and Saving Company, unless it.appears in other portions of the charter and by-laws not quoted in connection with the questions propounded. Eor we find nothing in'the charter and by-laws, as exhibited here, making provision for the mutual participation in profits and losses by borrowers and non-borrowers, which constitutes the basic principle on which contracts between this class of associations and its members have been saved from the consequences attached to other usurious loans. After these decisions were rendered, the legislature passed an act approved August 16, 1913 (Acts 1913, p. 54), entitled, “An act to amend section 2878 of the Code of 1910, to define the term ‘other like associations’ therein referred to,” etc. It had previously passed the amending act of 1910, relating to the 811 location of such associations. See Act. 1910, p. 35. As thus amended section 2878 reads as follows: “All building and loan associations, and other like associations doing business in this State, [and the term other like associations shall include a corporation organized to do a general savings and loan business, and among other things lending its funds to members of the industrial and working classes, or others, and secured in whole or in part by personal endorsements and its own fully paid or installment stock, or its own fully paid or installment certificates of indebtedness, or other personal property] are authorized to lend mbney to persons not members thereof, nor shareholders therein, at eight per cent, or less, and to aggregate the principal and interest at the date of the loan for the entire period of the loan, and to divide the sum of the principal and the interest for the entire period of' •the loan into monthly or other installments, and to take security by mortgage with waiver of exemption, or title, or both, upon and to real estate situated in the county in which said building and loan association may be located; [and such building and loan association shall be construed to be located in any county wherein it has an office, agent, or resident correspondent:] [Provided, however, and nevertheless, the associations referred to and as defined herein shall not be compelled to lend their funds exclusively in the manner hereinbefore specified, but in addition thereto also have authority to make loans to members of the industrial and working classes and to all other persons, due at fixed intervals not exceeding twelve months, and secured in whole or in part by personal endorsements and by its own fully paid stock, or stock payable on the installment plan, certificates of indebtedness, fully paid or payable on the installment plan, or both endorsements and such securities, or other personal security and choses in action, and on such loans so made and secured as aforesaid it shall be lawful to deduct interest in advance, but not to exceed eight per cent, discount, and the installment payments, if any, made on such hypothecated stock or certificates of indebtedness during the time the loan is of force may or may not bear interest, at the option of the association; and the taking of said installment payments on said hypothecated stock, certificates of indebtedness, choses in action, or other evidences of indebtedness shall not be deemed usurious].” The parts in brackets are the additions and 812 interpolations made by the acts of 1910 and 1913. The plain language of the amendment of 1913- makes a radical departure from what was formerly an -essential feature of a building and loan association and from what has been termed the “basic principle” of such an association. That is apparent without discussion and without an analytical construction of the language employed in the act of 1913. For under the plain, unambiguous declaration of this amending statute, a corporation organized for the purposes set forth in the charter and constitution of the Atlanta Loan arid Saving Company falls within the terms there used to define a like association. "Whether this departure from the underlying principles of building and loan associations, by which companies may charge a rate of interest which was formerly usurious and which would have been usurious until the amendment contained in the act of 1913 was made, was a wise departure, is a legislative question; and we are not called upon to discuss the wisdom of such legislation. But we may point out the fact that it will enable many corporations to charge usurious rates of interest which could not have been charged under the law defining building and loan associations and prescribing and limiting their powers, as it existed before the act of 1913. 2. This is a general law to the advantage of and conferring additional privileges and rights upon corporations like the plaintiff in error, and, moreover, makes provision for doing business as the Atlanta Loan and Saving Company prayed it might be permitted to do. And we are of the opinion that this amendment became a part of the charter, in view of these facts, without formal adoption; and we deem it unnecessary to enter upon an extended discussion as to when amendments become a part of the charters of existing corporations without formal adoption. See 2 Fletcher’s Cyclopedia of Corporations, § 784, and cases there cited. All the Justices concur.