Klein v. Pennsylvania Savings Fund & Loan Ass'n

Opinion by Mr. Justice Mestrezat, The single question raised by this appeal is whether Klein obtained his loan from the defendant association, by competitive bidding. The learned trial judge has found that at the time Klein’s loan was granted there were fifteen applications for loans, that the application and bids were'handed in one at a time by the person representing the applicant and thereafter [521] were taken up by the board and were passed upon, in order of priority of date, that there was no bidding or competition whatever between the persons representing those members desiring to become borrowers. On these findings of fact, the court’s conclusion of law is as follows: “Was the law complied with in bidding for preference? At the time plaintiff received his loan there were fifteen applications for loans. It does not appear that a single applicant was present in person at the meeting. Each had signed an application prepared by the association and had appointed an officer of the association his representative to bid for him a definitely fixed premium of six per cent per annum. These applications were virtually an agreement upon the part of the borrower to pay a premium of six per cent in addition to legal interest, and the power of attorney attached merely authorized the applicant’s representative to convey that offer to the association. It does not appear to have been the intention of the parties that there should be competition between the borrowers. On the contrary, the conclusion is irresistible that just the opposite was intended. Instead of bidding, i. e., competing at auction for priority, these offers were handed to the directors of the association by the representative of the applicant, and were thereafter acted upon according to priority of date.” These conclusions of fact and law are amply justified by the testimony and the authorities cited in the opinion of the court. The finding that plaintiff was told that he must bid six per cent premium is sustained by the testimony, and we think the testimony also shows that his information came from some person authorized to speak for the company. Kleeb, a bookkeeper of the association during part of the time the plaintiff was a stockholder, testified that during the four years he was in the service of the association — up to 1903 — the borrower was told the amount of premium he had to pay. This is supplemented by the testimony of' the plaintiff that he was told in the office of the association that his loan would cost him six per cent interest and six per cent premium, and by the further fact that the fifteen applicants for loans all bid the same amount of premium, six per cent, at the meeting-at which the loans were granted. [522] As tending to show that, at the time the plaintiff secured his loan, the association had adopted a fixed premium and disregarded the statutory requirement that money should be loaned to the highest competitive bidder, it was competent for him to introduce evidence to show that immediately prior to granting his loan the association had a fixed premium, that it was in effect at the time his loan was granted and was continued thereafter, and that it was the universal custom of the association to have the application for a loan presented by a representative of the borrower who usually was either an officer or employee of the association. Such testimony tended to establish not only the fact that the association had a fixed, definite premium for all loans, but that, as the plaintiff alleges, his loan and the loans of the other stockholders whose applications were considered at the same time were granted for a premium previously fixed by the association. At the meeting at which the plaintiff was granted his loan, there was no bidding at auction, nor crying bids, nor but a single bid for any loan secured. Each applicant for a loan offered a certain premium which he had been informed was necessary to obtain a loan, and without any other bid, greater or lesser, he obtained the loan. Such action on the part of the defendant association clearly shows that it was not conducting a legitimate building and loan association business, but was using its charter as a device or cover for the purpose of evading the usury laws. As said by Burgess, J., in Meroney v. Atlanta B. & L. Assn. (N. C.), 47 Am. St. Rep. 841, in construing a similar statute where a like attempt was made to evade the usury laws, such an association “is merely a money lending, dividend paying corporation to which, for some purpose, some features of a ‘ building and loan association’ have been attached.” Our act of 1874 under which the defendant was incorporated points out explicitly the manner in which the business of such associations shall be conducted, and protection of needy borrowers requires the courts to compel a strict compliance with its, provisions. The language of the act is mandatory as to the manner in which loans shall be made, and provides that the money of the association “ shall be offered for loan in open meeting, and the stockholder who shall bid the highest premium for the preference of priority of [523] loan shall be entitled, to receive a loan.” Failing to observe this positive command of the statute the defendant association cannot invoke the aid of its charter to protect it from the penalty of usury. The privileges and immunities of such corporations are secured by adhering strictly to the law of their creation, and when, as here, they violate that law, they cannot shield themselves from the consequences which the laws of the commonwealth justly inflict upon the usurer. The decree is affirmed. Mitchell, O. J., dissents.