Wineman v. First Mortgage Loan Co.

Mr. Justice Baker delivered the opinion of the court. ' Section 85, chapter 32, R. S., provides that at any stated meeting of the board of directors of a building and loan association “ the money in the treasury shall be offered for loan in open meeting * * * provided that any such association may by its by-laws dispense with the offering of money for bids in open meeting and in lieu thereof loan its money at a rate of interest fixed by its by-laws and either with or without premiums, deciding the preference or priority of loans by the priority of the applications for loans of its shareholders. The by-laws of appellee provide that upon loans made by it the borrower shall pay <l sixty cents per month as interest upon each $100 borrowed.” Section 88 of the statute above referred to provides that no interest, etc., which may accrue to the association under the provisions of that act shall be deemed usurious. That a building and loan association may loan its money to its shareholders in the manner prescribed in the statute at a rate of interest exceeding seven per cent per annum without making the transaction usurious, is. as was said in Freeman v. Ottawa B., H. & S. Ass’n, 114 Ill. 182, no longer open to discussion. If the transaction disclosed by this record was a loan by appellee of its money to Wine-man at sixty cents per month per hundred dollars interest, it was not usurious. Whether it was such a loan is the principal question involved in this case. Looking into the facts of the case we find that in May, 1899, when Wineman applied for a loan and appellee accepted his application, appellee had no money in its treasury to loan to any one and that no money came into its treasury which could properly be loaned to Wineman until October 24, 1900. When a loan of money is agreed to be made, the borrower, 'when the security agreed upon has been given by him to the lender, is entitled to demand and receive from the lender the amount of the loan in money. Here the lender issued to the borrower “ borrower’s loan certificates ” for the amount of the loan, and the trust deed recites that the borrower “ had received such certificates in full consideration for the bond of indebtedness ” which he had given the company for the amount of the loan. The bond, the certificates, the assignment and guaranty of the certificates and the trust deed bear the same date and were executed as parts of the same transaction. Wineman, by accepting the certificates in full consideration for the bond he had given appellee, gave up his right to demand or receive from it the amount of the loan in money, and in lieu thereof took only the right to demand and receive the amount of the certificates when they by their terms became due and payable. The statute gives to building and loan associations the power to lend their money at a rate of interest exceeding seven per cent, without making such transaction usurious. The provisions of a statute are to be construed in the light of the general purpose of its enactment. The object of this statute as expressed in its title is “ to enable persons to become incorporated to raise funds to be loaned only among the members of such association.” TTo authority is given by the statute to issue such “ borrower’s loan certificates ” as were issued in this case. An association organized to “ raise funds to loan only to its members ” has,no occasion to issue such certificates, for the statute contemplates that the funds shall be raised before they are loaned. Eo doubt loans may be accepted in advance, to be made as funds come in the treasury in the order in which the applications are made, but the loan cannot be made until the money is in the treasury, and when the loan is made the borrower is entitled to receive the amount of his loan in money, not in certificates payable at no definite or fixed time. In our opinion the transaction in question was not a loan of money by appellee to Wine-man, within the provisions of the Building and Loan Association statute, but was a transaction neither within the letter nor spirit of that act, nor protected by it from the statute against usury. It is not shown that appellee received any part of the §160 discount on the bond that was paid to Waldo, its president, by Wineman. Appellee is entitled to recover the principal of the bond but is not entitled to recover interest thereon. The amount paid as interest and as fines for the non-payment of interest must be credited on the principal of the bond. The amount paid for insurance and for fines for failure to keep the mortgaged premises insured as provided in the trust deed must be added to the principal of the bond. The allowance in the decree of an attorney’s fee of $100 was proper under the evidence. The decree of the Superior Court will be reversed and the cause remanded for further proceedings not inconsistent with the views above expressed. Reversed and remanded.