Jarrett's v. Cope

The opinion of the court was delivered, by Sharswood, J. I do not propose to review the course of decisions in this court on the subject of building association loans. I am afraid that I do not understand them all, and certainly never would, have united in several of them as to the construction and application of the Acts of Assembly upon the subject. But there is one point which seems to be very clear, that it is entirely too late now to overrule them. These decisions settle two points : First, that an unincorporated society like that now before us could not under the Act of March 2d 1782, 1 Sm. L. 156, lawfully recover more than the amount actually advanced in loans to their members, and the legal rate of interest thereon: Bechtold v. Boehm, 2 Casey 269. In that case the English view that such associations were partnerships and the agreement of members to share the profits was not within the usury laws was urged on the court. “ We think,” said Tindal, C. J., “it was a dealing with the partnership fund, in which the defendant, had an interest in common with the other members of the society, and that it was not a loan. The defendant was interested in the fund when the money was advanced and when it was repaid. The rules of the society are in effect a mere agreement by partners that their joint contributions shall be advanced for the use of one or others as occasion requires:” Silver v. Barnes, 6 Bingh. N. C. 180. This was the ground upon which the judgment of the District Court below in that case had been entered, and that judgment was reversed and judgment was entered for the amount actually advanced and interest. The legislature, however, had interfered. By an Act of Assembly of April 22d 1850, sections 4, 5, 6, 7 and 8, Pamph. L. 150, any number of persons, citizens of Philadelphia, Schuylkill and Berks, associated for the purpose of forming “mutual savings funds, land and building associations, might apply to the Court of Common Pleas and obtain charters of incorporation, and by a subsequent Act of Assembly of May 8th 1855, Pamph. L. 519, it was declared that in investments by building associations in loans to members thereof, the premium given for purchase or priority of loan, shall not be deemed usurious.” In Kupfert v. The Guttenberg Building Association, 6 Casey 465, it was decided that a society formed for the purpose of loaning money to its members, is not a building association, within the meaning of the Acts of 1850 and 1855. “ This company,” said Chief Justice Lowrie, “ is not a building association at all. True, in the second article of its constitution ,it declares its object to be [71] to erect buildings; but this is a mere sham, for all the rest of its constitution and by-laws shows most distinctly that its only purpose is to loan out its money.” “The Mutual Building Association No. 2, of Germantown,” is clearly within the ban of this opinion. By the first article of the constitution its object is stated to be “ the accumulation of a fund by the saving of its members to build or purchase for themselves, respectively, dwelling-houses or real estate or to enter into business, as they shall deem most advisable.” All the other articles, like those of the Guttenberg Building Association, show its purpose to loan out its money, and certain it is that a member having obtained a loan could do what he pleased •with the money — build or buy a house, go into business or spend it. Accordingly, in the Premium Fund Association’s Appeal, 3 Wright 156, where the loan was dated in 1857, it was held that under all contracts of loan by building associations at that time, whenever the rate of interest received exceeded that established by law, the borrower is not liable to pay the excess above the legal rate. The second point, then, which must be considered as at rest, is that an association, like that now in question, whether incorporated or unincorporated, is not a building association within the Act of 1855. Subsequently the legislature passed the Act of April 12th, 1859, Pamph. L. 544, — a well considered and ably drawn law — by which throughout the entire state mutual saving fund, loan or building associations, may be incorporated by the several Courts of Common Pleas, and it was declared to have been “ the true intent and meaning of the Act of 1850 to authorize the incorporation of companies or associations, with power to loan or advance, to the stockholders thereof the moneys accumulated from time to time, * * * * and that the premiums taken by the said associations, for the preference or priority of such loans should not be deemed usurious.” It is very clear that the provisions of this section do not apply to any associations but those incorporated under the Act of 1850. Unincorporated associations are unaffected by it. As to corporations under the Act of 1859, it is provided by the sixth section, “ that no premiums, fines or interest, or such premiums that may accrue to the said corporation, according to the provisions of this act, shall be deemed usurious.” The result then is, that the defendant below was entitled to a deduction for premiums paid. Judgment reversed, and now judgment for the plaintiff below, for $889.12 and interest from November 9th 1869.