Mechanics & Working Men's Mutual Savings Bank v. Meriden Agency Co.

Waite, C. J. The contract, in the present case, is substantially the same as that in the preceding one, in favor of these plaintiffs against Wilcox and others, and, for the reasons there assigned, was unauthorized by the statute, under which the plaintiffs were organized and acted, and consequently usurious. The decision in that case governs the present, so far as the power of the plaintiffs to contract is concerned. But there are other questions involved in this case, not embraced in the other, which require a brief consideration. The first is, whether the defendants, being a joint stock corporation, organized for a specific purpose, had power to become a stockholder in the association of the plaintiffs. The purpose for which the agency company united, as expressed in their articles of association, was to do a general insurance agency, commission, and brokerage business, and such other things as were incidental to, and necessary in the [164] management of that business. So far as that business was concerned, the proper officers of the company had power to act, and bind the company. But if they departed from that business, and entered into contracts not authorized by the company, such contracts would not be binding. A subscription to the stock of a building association, has no legitimate connection with the business of an insurance agent, commission merchant, or broker, and was not therefore authorized by the defendants’ articles of association. It is said that the defendants had power to borrow money, mortgage their real estate for its security, and, if necessary, to obtain a loan, as in this case, become a stockholder in a building association. We are not disposed to question the right of the defendants to borrow money, and mortgage their real estate for its security. This may be one of the powers incidental to, and necessary in, the prosecution of their business, and the successful management of the same. We are inclined to think the power is implied in their articles of association. But when the directors of the company subscribed for stock in a building association, whatever may have.been their motive, whether to obtain a loan of money, or for purposes of speculation, they transcended the powers conferred upon them, and departed from the legitimate business of the company, as much so, as if they had subscribed for stock in a manufacturing or steamboat company. Such subscription, in our opinion, is not binding upon the defendants, and any payments, made upon it to the plaintiffs, would be money received by them without consideration. In the present case, however, no money has been paid by the defendants upon such subscription. The amount of one month’s installment was, by the plaintiffs, retained out of the loan made to the defendants. That part of the note, which embraced the money so retained, is without consideration. If the subscription for stock was void, as we are of opinion that it was, then the defendants never legally became stock [165] holders of the association, and consequently the plaintiffs had no power to make a loan to them, for any bonus whatever. The statute authorizes the receipt of a bonus, only upon a loan to a member of the association. No more than legal interest can be taken upon a loan to any other person. As the loan in this case was made upon an agreement to pay fifteen per cent, per annum, for the use of it, it is clearly usurious, if made to a party, not a member of the association. Our advice, therefore, to the superior court is, that they deduct from the amount, actually received from the plaintiffs by the defendants, the sum by them paid upon the note, and pass a decree in favor of the plaintiffs, for the balance only, without interest. In this opinion, the other judges, Stores and Hinman, concurred. Decree accordingly.