Birmingham v. Maryland Land & Permanent Homestead Ass'n

Miller, J., delivered the opinion of the Court. The question arising in this case is, whether the amount due on the mortgage from the appellants to the appellee, is correctly ascertained by the order appealed from, or whether the usury in the shape of a bonus of $250, and other excessive interest, stipulated for by the contract between the parties, should he eliminated therefrom ? The appellee insists, that the exaction of this bonus is legalized and made valid by the provisions of its charter, the Act of 1868, ch. 427. By this Act certain named individuals and their successors are incorporated under the name of “ The Maryland Land and Permanent Homestead Association of Baltimore County,” and the purpose of the association is declared to he, “the purchase, improvement, sale and leasing of land, the borrowing of money, and the loaning of money to its members and others upon collateral securities, or upon mortgage of real or leasehold property, and to insure the lives of its members and. debtors for the benefit of the association, whereby the security advanced upon may be in case of death secured to the family of the deceased.” And by the eighth section it is provided “that it shall and may he lawful for the said association to loan money upon spch interest as may he prescribed by law, for any period of time, and upon such premiums or bonus as may be agreed upon by the association and the borroiuer, and in all cases to deduct the interest and bonus, or either of them, in advance.” It is a very grave question whether, under the provisions of the Constitution of this State, and especially the fifty-seventh section of the third Article, it is competent for the Legislature, by a special law, to confer upon a corporation like this the peculiar privilege of exacting usury upon loans of money. But we do not find it necessary now to decide that important. question, because assuming the eighth section of this Act to be constitutional and valid, we are of opinion, the contract in this case is [544] not within its terms, and consequently not protected by it. The privilege thus granted is a very unusual and extraordinary one, and no contract should be .brought within its operation unless-made and executed in strict conformity with the very terms of the law. Clearly no latitude or liberality of construction should be indulged in, in order to extend the operation and effect of such a provision, but on the contrary, its extraordinary character, granting as it does to a strictly private corporation, an exclusive privilege of great value, not conferred upon other corporations or the citizens of the State generally, justly subjects it to a rigid and strict construction. In view of these considerations, it would seem to be not unreasonable to construe it as protecting a contract of loan upon a bonus agreed upon, only where the bonus is actually deducted in advance, or, in other words, as making such a contract lawful, provided the bonus is thus deducted and as having no further operation whatever. But, however this may be, we certainly find nothing in this section, that, upon any reasonable construction of it, authorizes or makes lawful a contract like that entered into in the present case. This leads us to consider the terms and conditions of that contract. It appears the appellants borrowed from the appellee $1000, and the bonus agreed on was $250. Instead of deducting this bonus in advance, and giving the borrowers $750, it was added to the $1000, and a note and mortgage given for $1250, by the terms of which the appellants stipulated to pay to the appellee this sum of $1250, “in monthly instalments of ten dollars forty-one and two-thirds cents each, with an additional monthly instalment of six dollars and twenty-five cents as interest and bonus, both said instalments to be due and payable on the first Thursday of each and every month, commencing on the first Thursday in June, 1873, and each to- continue for one hundred and . twenty consecutive months.” A simple calculation shows that these terms required the borrowers to pay in principal [545] and interest the sum of $2000, making $400 in excess of the $1000 which they actually received from the lender, and legal interest thereon for the ten years, and this excess of $400 includes one hundred and fifty dollars of excessive interest, over and above the $250 bonus. The mortgage provides, moreover, that in case of default in payment of these monthly instalments, or either of them, the mortgagors shall pay “a fine of three dollars twelve and a half cents for the first month’s default, and the sum of six dollars and twenty-five cents for each subsequent monthly default, until the same shall be paid.” Such being the character and effect of this contract, we repeat, it appears to us very plain that there is nothing in the section referred to, or in any other part of the appellee’s charter, which sanctions it, or makes it lawful. It is a contract altogether outside of the provisions of- that Act, and must therefore be treated as a contract between individuals, liable to have usury deducted from it, when that objection is made, as it has been in this case, at the proper time and by the proper parties. Ball. Permanent Building & Land Society vs. Taylor, 41 Md., 409. It is proper to remark, in conclusion, that the appellee is not a Building Association, nor is this mortgage executed in conformity with the law regulating such associations, so as, for that reason, to be free from the objection of usury; nor does it appear, (even if that would make any difference,) that the mortgagors were members of the association created by this charter, or subscribers to its stock. (Decided 9th February, 1877.) The order appealed from must therefore be reversed, and the cause remanded, in order that an account may be stated ascertaining the true amount due on the mortgage, excluding all excessive interest exacted or paid in the shape of bonus or otherwise. Order reversed, and cause remanded.