Middle States Loan, Building & Construction Co. v. Baker

Mr. Justice Morris delivered the opinion of the Court: In pursuance of the express stipulation of the parties that the loans in this ease were made with reference to the laws [8] of the State of Maryland, the auditor purported to state his account in accordance with the rulings of the Court of Appeals of that State; and in this mode of procedure both parties have acquiesced, although it is one of the grounds of grievance of the appellant that the rulings in question have not been fully followed. There is nothing in our own law antagonistic to this course, and the result of the accounting, in our view of the case, would be the same under the law of the District of Columbia as under the law of the State of Maryland. We do not desire it to be understood, however, that we acquiesce without reservation in the theory that all the incidents of mortgage in this District can be made referable at the will of parties to the laws of other States, and that we are always to be governed by such laws in their construction. That the device of premium shares of stock, as they are called, is, in cases like the present, a cloak for usury, we regard as too plain for argument. It was so held by the Court of Appeals of Maryland in the case of White v. Williams, 90 Md. 719, where the precise point was under consideration, and where it was said: “ The premium authorized to be charged by building' associations is a sum of money to be paid for the loan in advance, and the stipulation providing for the monthly sum called premium in addition to the legal rate of interest, during the continuance of the mortgage, is not authorized by the statute, but is usurious.” It is not sought by the appellant to controvert this proposition as applicable to the present case, and we do not think that it can reasonably be questioned. What it is sought to question is the extent of its application as made by the auditor and by the court below. It is attempted to be maintained that, inasmuch as of the premiums of sixty cents paid each month on each of the so-called premium shares in this case the sum of fifty cents was provided to be carried to the loan account of the company and the sum of ten cents was provided to be carried to defray the operating expenses of the [9] company, therefore the appellee was entitled to receive credit only for fifty cents, and not for sixty cents on each share, as the auditor allowed. And in support of this contention the case is cited of The Middle States Loan, Building and Construction Co. v. The Hagerstown Mattress Co., 82 Md. 506, where the appellant was the same party as in the case now before us, and in which there was an accounting over a mortgage of precisely the same character as those involved in this case. There it was said: “ In our opinion the mortgagor must be charged with the loan of $5,000, with interest thereon down to the filing of the bill of complaint, and is to be credited with its payments into the loan fund, to wit, fifty cents a month on each of its shares, with interest on each payment from the time it was made down to the institution of the suit. For the amount thus ascertained to be due the mortgagee is entitled to a decree, with interest thereon until paid.” But a careful reading of that case will show that it has only a partial or limited application to the controversy now before us, and that so far as it is applicable it has been duly followed and applied by the auditor. There no question arose as to premium shares of stock as distinguished from other shares of stock. Throughout the opinion of the court not a single reference occurs to any such distinction; and although the distinction does appear in the argument of counsel in the case, yet the question of the usurious character of the premium shares was not passed upon by the court. This question, however, was raised, and was distinctly adjudicated in the subsequent case already mentioned of White v. Williams, which must be taken as negativing any inference to the contrary that might be deduced from the silence of the court on this point in the previous case. Now, if the device of premium shares of stock was usurious, as held in the case of White v. Williams, it is difficult to see why there should be any abatement of the usury from sixty cents to fifty cents, because the company chooses to apply ten cents of it to operating expenses. It could just [10] as easily have designated the fifty cents as operating expenses, and left only the ten cents liable to be characterized as usury. Or more easily still, it might designate the whole sixty cents as a fund for operating expenses, a very elastic term, and thereby, from its point of view, wholly evade and nullify the decision in the case of White v. Williams. But it cannot be permitted that the law should be evaded merely by designating what is in reality a usurious device by some harmless and euphonious name. We are of opinion that there was no error in the allowance of the whole usurious premium of sixty cents per share a month as a payment on account of the indebtedness. 2. But the principal contention of the appellant is, that the appellee, not being the original mortgagor, but only a grantee or assignee of the mortgagor through divers mesne conveyances, is not entitled to have the advantage of the usury paid by his predecessor in the title. And in support of this contention the cases are cited of Hough v. Horsey, 36 Md. 181; Mahoney v. McCubbin, 54 Md. 268; Log Cabin Building Association v. Gross, 71 Md. 456; Fulford v. Keerl, 71 Md. 397; De Wolf v. Johnson, 10 Wheat. 367; and the Am. & Eng. Encyc. of Law (1st ed.), Vol. 27, p. 952, and cases referred to in note 2 on said page. In reference to the right of a grantee of mortgaged property to take advantage' of usurious payments made by his predecessors in the title on account of the mortgage debt there is a well-established distinction in the law between the case of one who takes the property with the specific agreement to pay the mortgage debt according to the face of the mortgage as part of the consideration for the land purchased, and the case of one who merely purchases the equity of redemption, without any special agreement as to the application of the purchase money, or any reference to the particular amount due on the outstanding mortgage. Hough v. Horsey, 36 Md. 181; Am. & Eng. Encyc. of Law, Vol. 27, pp. 952-954. Under the former head fall the cases above cited by the appellant; under the latter may be enumerated the cases of Trumbo v. Blizzard, 6 Gill & J. 14; Banks v. McClellan, [11] 24 Md. 62, and Andrews v. Poe, 30 Md. 485. There is authority also for the proposition that only the immediate mortgagor himself may take advantage of the usury, and that no assignee or grantee from him may do so. We do not deem it necessary to determine under which class the present case falls; for the parties by their conduct have themselves solved the difficulty. It is shown by the record that the appellee was admitted by the appellant in the place and stead of the original mortgagor or mortgagors, with all their rights, privileges, and liabilities. The stock of the original mortgagors was transferred to the appellee on the books of the company, and he was admitted as a member of the company to all intents and purposes in the place of the original mortgagors. He became the assignee of all the rights of the original mortgagors in the premises. There was here, it must be remembered, not an ordinary mortgage with its ordinary incidents, the condition of which could readily be ascertained by any one dealing with the mortgaged property, but a continuous contract to pay certain specified sums of money until the stock representing the mortgage should become fully paid up. In such cases the grantee or successor of the mortgagor in the property, when recognized and admitted into membership by the company, becomes of necessity his assignee in the contract, in privity with him, and therefore entitled to deal with the contract as if it were originally his own. We are, therefore, of opinion that he was entitled to the benefit of all the payments made by his predecessors in the title, and that there was no error in crediting him therewith. We think that the decree appealed from should be affirmed, with costs. And it is so ordered.