People's Building & Loan Ass'n v. Billing

Montgomery, J. This is a proceeding to foreclose a mortgage given by defendants to complainant to secure a loan of money made to defendant John W. Billing, who was at the time of making the loan a member of the complainant association.2 The property mortgaged was real estate owned by defendants as tenants in the entirety. The application for the loan was made in the usual way. — 189 — The face of the loan was $1,500. The premium paid was 37 per cent., so that defendant John W. Billing received but $1,049.07. The loan was secured by a joint bond executed by the two defendants, by the mortgage upon the property in question, and by a deposit of stock held by John W. Billing, of the face value of $1,500, but upon which there had been paid but $165.75. Tlje court decreed foreclosure, and both parties appeal, — the complainant on the ground that the decree was too small, and the defendants on various grounds, which will be considered in order. 1. It is contended that the loan was made to defendant John W. Billing and another, not a member of the association, and that for this reason it is ultra vires. Section 8 of Act No. 50, Laws of 1887, under which the complainant was organized, provides that— "No loan shall be made by said corporation except to its own members, nor in any sum in excess of the amount of stock held by such members borrowing." The bill alleges that defendant John W. Billing bid for the loan, and that the loan was made in accordance with said bid. It is true the bill further sets out the giving of the joint bond and mortgage, and avers that thereby the defendants, John W. Billing and Mary A. Billing, became jointly indebted to the complainant. But, taken as a whole, these averments show a loan- to John W. Billing, and the giving of an undertaking, joint in form, by John W. Billing and Mary A. Billing, as security for the loan. Whether this undertaking created a personal liability on her part or not, the averment is not inconsistent with the proofs, which showed a loan made to John W. Billing; and, when the loan is so made, the fact that the joint obligation of the member and another is taken, or that the loan is secured by a mortgage executed by a third person, does not open the defense of ultra vires. End. Bldg. — 190 — Ass’ns, § 382; Massey v. Association, 22 Kan. 624; Association v. Mixell, 84 Penn. St. 313; Kadish v. Association, 47 Ill. App. 608. 2. It is next urged that the transaction was a discount, and not a loan, and that, as the corporation is given no banking powers, discounting paper is beyond the scope of its business and authority, and that the contract is for this reason ultra vires. To sustain this contention, counsel cites the case of Anderson v. Association (Tex. App.), 16 S. W. Rep. 298. But the same court, in Sweeney v. Association (Tex. Civ. App.), 26 S. W. Rep. 290, holds that, under a statute similar to ours, the receipt or retention of a premium out of the loan is not in excess of the powers of the corporation.- Section 8 of the statute provides: “ The board of directors shall hold such stated meetings as may be provided by the by-laws, at which the money in the treasury * * * shall be offered for loan in open meeting, and the stockholder who shall bid the highest premium for the preference or priority of loan shall be entitled to receive a loan of not more than the amount fixed by the by-laws as the full value of a share of stock {less the premium bid) for each share of stock held by said stockholder.” The transaction was plainly within the powers conferred by this section. 3. It is contended that the interest of Mary A. Billing was not bound by the mortgage; and, to sustain this contention, counsel cites Naylor v. Minock, 96 Mich. 182, and argues that under the authority of this case, if she had executed the mortgage herself, merely as a surety for her husband, it would have been void. This is true, for the reason that she could not pass the title to lands of which she was a tenant in the entirety, by her separate deed. But there is no such difficulty here. The husband and wife join. This is the only method by which such an — 191 — -estate can be alienated, and the mortgage in this case was valid. 4. It is contended that, if the transaction is not ultra vires, it is not a loan, as far as Mary A. Billing is eon■cerned, and the complainant can have only the money loaned, with interest, as any other lender would be entitled to under like circumstances. This contention of defendants is sufficiently answered by the discussion- under the first head of this opinion. If it is competent for the borrower to secure the payment of a loan made to him by furnishing a mortgage given by a third person, it follows that the association can enforce such security. See the authorities cited. 5. It is contended that the mortgage is given for too large a sum, for the reason that the premium should have been reckoned on the amount of money received, and not -on the face of the loan. We are not able to see the force ■of- this contention. It would be immaterial by which method the computation was made, if the one intended were understood in advance; and it is evident that defendant did understand it in this case, for he accepted the money and executed the papers after the computation of the premium had been made, and the amount deducted from the face of the loan. 6. It is contended that the statute authorizing the formation of building and loan associations is class legislation, and unconstitutional. This contention is not supported by the authorities. On the contrary, such legislation has been upheld in a number of the states, while we have found but a single authority sustaining the contention of defendants counsel, — the case of Association v. Johnson, 88 Ky. 191. We think the reasoning of the authorities which sustain the constitutionality of such statutes is in accord with sound principle and the previous holdings of this Court. As was said in Holmes v. Smythe, 100 Ill. 413: — 192 — “ The statute under which the association was organized is a general law, applicable to all the citizens of the state who choose to bring themselves within the relations and circumstances provided for by it.” See, also, Association v. Read, 93 N. Y. 474; McLaughlin v. Association, 62 Ind. 264; Trust Co. v. Whithed, 2 N. D. 82; People v. Bellet, 99 Mich. 151. It is said by defendants* counsel that, under the practical operation of the law, those who take stock and are not borrowers earn large profits at the expense'of those who are borrowers, and especially the weaker members, who make default and suffer fines. On the other hand, it may be said that the organizations open a way for people of limited means, and wage earners, to acquire-homes, by making small payments at stated intervals, and that, if the system adopted places a premium on thrift and promptness, it is in harmony with all laws of economy. But these arguments relate rather to the wisdom of such, provisions than to their constitutionality. 7. In the decree the court below directed that the bond be reformed by striking the name of Mary A. Billing therefrom. This order was unnecessary. While the bond was in the form of a bond of both defendants, yet as the-p roofs showed that Mary A. Billing was a married woman, the wife of the defendant, and was not personally liable-upon it, and no personal decree was sought against her, it was competent for the court to enter a personal decree-against her codefendant, who was the only one personally bound by the instrument, and this could be done without-any reformation of the pleadings. 8. The only remaining questions which we think require-discussion are those relating to the method of stating the-account. The defendants insist that there should be a. foreclosure of the stock before resort is had to the mortgage, or that, at least, the bill should ask for a foreclosure193 of the stock in connection with the mortgage foreclosure. A copy of the bond is attached to the bill, and contains the provision that, if default be made in the payment of the installments of the principal money or interest, etc., for the space of six months,— “ The said 15 shares of stock of the first series, on which the said loan is obtained, and all other stock issued by the said obligee, and this day transferred as collateral hereto, may at any time thereafter be declared forfeited to the obligee as for non-payment of dues, and thereupon revert to said obligee, its successors or assigns, as forfeited stock, and the withdrawal value thereof, at the option of the obligee, its successors or assigns, be applied to the satisfaction of the above indebtedness; and, in such ' case or cases of default in payment, the whole principal debt aforesaid, and interest, shall, at the option of the obligee, its successors or assigns, immediately thereupon become due and recoverable, and payment of said principal sum. and all interest thereon, as well as any payment on said' shares of stock subscribed for and pledged, and all fines and taxes as aforesaid then due, may be enforced and recovered at' once,” etc. It -is evident that no formal foreclosure is contemplated as necessary for the purpose of applying the value of the stock to the extinguishment of the debt. It is contemplated that the payments on the stock, together with its earnings, shall remain in the hands of the company, and, be applied, without foreclosure, to the reduction of the claim, — at least, at the option of the company. In the present case the complainant stands ready to credit the earned value of the stock on the mortgage, and has made. such application. Section 10 of the act provides that— “A borrower may repay a loan at any time, and in the event of the repayment thereof before the expiration of the eighth year after organization of the association, or. the date of issue of the series of stock in such association on which the loan may have been made, there shall be re — 194 — funded to such borrower one-eighth of the premium paid for every year of the said eight years then unexpired: Provided, that, at the time of such repayment, the stock upon which such loan is based shall be withdrawn in the manner provided in section 6 of this act relative to withdrawing stockholders.” Section 9 provides that— In case of non-payment of installments or interest and fines by borrowing stockholders for the space of six months, payments of principal and interest and fines, without deducting the premium paid or the interest thereon, may be enforced by proceedings against their securities, according to law, upon the order of the board of directors.” Section 11 provides that— “ Corporations organized under this act being of the nature of co-operative associations, therefore no premium, fines, nor interest on such premiums that may accrue to the said corporation, -according to the provisions of this act, shall be deemed usurious.” We think the language of this statute is very plain, and susceptible of but one interpretation, and that is one which excludes any right in the borrower to a deduction on account of premium paid, except in case of a voluntary payment of his debt before maturity. It must be admitted that this is a seemingly harsh provision, but we do not think it was beyond the power of the Legislature to enact such a provision, and it does not rest with us to overturn the plain provisions of the statute. We think the complainant was entitled to a decree amounting on the 7th of January, 1895, the date of the ■computation, to $1,4,11.22. The decree will be for this sum, with interest, less the credit for certain insurance money now in the hands of the American Commercial and Savings Bank of Saginaw, deposited to await the determination of the suit, the avails of which will be applied on the decree. Complainant will recover costs of both courts. McGrath, C. J., Grant and Hooker, JJ., concurred. Long, J., did not sit. Footnotes [2] The mortgage was given December 5, 1888.