Sullivan v. Jackson Building & Loan Ass'n

"Woods, J., delivered the opinion of the court. The questions involved have been so often and so exhaustively considered by courts of last resort that it appears like beating threshed straw to do more than announce the views of this court. 1. The premium of'$400 represents the discount agreed to be made upon the future and uncertain dividends of appellant’s shares of stock in the association. It is the difference, — 100 — estimated by the association and its borrowing member, between the par value of the member’s shares of stock an,d their present real value. It is the bonus which appellant might lawfully agree to pay for a present advancement in cash of a sum certain for the virtual transfer to the association of his shares of stock, which, in the final winding up of its affairs, may realize the sum actually received by the member, together with the premium bid, or which may not. ■ It is not a deduction of money belonging to him, for, at the time of the transaction, appellant had only a future interest in the association’s earnings and accumulations. It is not a prepayment of that amount by appellant, for the premium of $400 will be paid, if at all, when the $600 advanced is repaid. We are of opinion, therefore, that the premium does not render the contract usurious. 2. It logically and legally follows that interest cannot be charged on the premium. “ If it were a deduction, it would be analogous to the bonus reserved in advance by usurers upon loans made by them, ostensibly at legal interest, the debtor being, nevertheless, required to pay that interest upon the whole nominal sum, as if he had received it entire, thus virtually paying interest upon the bonus. If it were intended to be a prepayment, the borrower, since he in fact does not hand it over immediately, ought to pay interest upon it to the society, as for the forbearance of a debt presently due.” Endlich’s Law of Building Associations, 396. Erom the nature of the premium — being neither a deduction nor a prepayment, but only, in effect, a relinquishment of a prospective, contingent interest in appellant’s shares of stock — it is impossible to conceive of interest predicable thereon, unless wild legislation shall be found to authorize it. It is startling to the judicial mind to be forced to consider a proposition which involves the assertion of a right to take interest upon' a purely imaginary sum. Interest, to the legal and common mind alike, means compensation for the loan or use of money, — 101 — and to talk of interest upon the appellant’s premium of $400, a sum which is mythical, which he never saw, which was not in existence, and which, if it ever came into being, was to be the property of the association, is paradoxical indeed. The contract, to this extent, is oppressive, illegal and essentially usurious. And to this effect is the almost unbroken current of authority. In the one or two exceptional cases, unwise legislation constrained the action of the court. And this brings us, in an orderly way, to the contention of appellee’s counsel that such legislation is found in the acts of our legislature, 1886, p. 35. We cannot agree with the leanied counsel. The utmost that this remarkable act can be said to do is to authorize building and loan associations to stipulate for and demand a greater rate of interest than ten per cent, per annum “ for any money advanced or loaned ” by it. Legislative tenderness for such corporations has not yet gone, as counsel suppose, to the violent extreme of permitting even these favored associations to stipulate for and demand any extortionate rate of interest which its greed and its borrowing member’s necessity might fasten upon the unhappy and necessitous creature, on any imaginary sum of mythical money which they agreed to name, even though such sum was never seen by the member, and even though such sum had no existence, in fact, at the time of the transaction. For the present, the borrowing member can only be constrained to pay extortionate and usurious interest upon “ money advanced or loaned ”■ — -money which he actually received and had, and not upon forty per cent, of all his shares of stock in the association, which he has virtually transferred to the association, under the name and in the form of a premium. 3. The averments of the bill, substantially stated, as to the illegal'abrogation of the charter provisions in force when appellant became a member, and when he had the transaction out of which this litigation arose, as to the uSfe and disposition of all funds arising out of the business of the first series, — 102 — and the consequent injury to appellant, are as follows : that the association, by a vote of the stockholders, from which all borrowing members were excluded, broke down all distinctions between the first and all other and junior series, and mingled the business of all in one common mass, whereby all stockholders in any series were made sharers equally of all profits arising in all the various series; that the premiums at first were high, and gradually decreased from forty per cent, to nothing; that the $400 premium bid by appellant represents that much accumulated profits, in which appellant has an interest, and this, by the action of the association, had through persons who were not members of the first series (the share-holders in the many subsequent series largely outnumbering those in the oldest, the first, of which appellant was a member), has been divided out among all the stockholders in all the various series, thus taking from appellant profits, which, if properly applied, and as should have been done, to his stock, would bring it up to par, and would put the association into liquidation, and would cancel his debt. These averments áre of material matters entitling the appellant to relief, if true, and the demurrer admits their truth. The defendant corporation, against which these serious charges are made under oath, should have been required to answer. Reversed and remanded. Nugent & Mc Willie, for appellee, filed a lengthy suggestion of error, reviewing in argument the entire subject-matter of controversy, and, in support of the contention that the premium, and taking of interest thereon, do not make the contract usurious, citing the following authorities, in addition to those cited in the brief: Montgomery v. Robinson, 69 Ala., 419; Ib., 456; 20 S. W. Rep. (Texas), 116; Ib., 118. Under the act of 1886, the sum received is no more a loan than is the premium. The words, “ money advanced or loaned,” should not be held to have the restricted’meaning — 103 — applied to them in the opinion. The manifest intention of the act was to except building and loan associations from the usury law's. Woods, J., delivered the following response to the suggestion of error: The very respectful, yet very determined, earnestness with which the learned counsel for appellant press their suggestion of error seems to call for a word by way of response. The argument of counsel is the strenuous effort of acute intellect and dialectical skill to make that which appellant, in effect, parted with and surrendered up to the company — to wit, the premium of $400 in his shares of stock — appear to be not a loan perhaps, but a something which he is due the association, and for forbearance to collect which he should be required to pay, not interest at eight per cent, per annum perhaps, but something which will perform the beneficent purpose of securing eight per cent, to the association from the appellant. Careful examination of the argument demonstrates its unsoundness. It is the argument once considered by us presented under new and alluring aspects, but it is, after all, but the winning and seductive effort to gain the beguiled assent of the judgment to the taking of interest on a sum never advanced or loaned, a purely imaginary but precious fancy of the usury-taker — a sum called a premium, which the borrower has virtually surrendered, and the association accepted; a sum which the borrower is never to see again, but which the association really has. the only beneficial interest in, and which, if there be no miscarriage, the association will finally'put-bodily in its coffers. The premium is now, in truth as well as in effect, the property of the association, and has been parted with forever by the borrower, and we are slow to listen to any voice, though “ charming never so wisely,” which seeks to fasten any thing in the shape or nature of interest thereon upon the borrowing member. — 104 — "We have thoroughly considered the authorities submitted by counsel, and find they ‘give their theory no support. The very recent case from the supreme court of Illinois, Mutual Building and Loan Association v. James B. Tascott, does not touch the question. True, it is allowed that interest upon the premium was permissible and proper, but an examination of Starrs & Curtis’ Annotated Statutes of Illinois discloses the fact that the charge of interest upon the premium is expressly warranted by legislative enactment. See page 78 of said work. The case of Montgomery, etc., Association v. Robinson, 69 Ala., 419, asserts the doctrine contended for by counsel, but an examination of the acts of the Alabama legislature, 1866-67, p. 414, discloses legislative authority given the association to collect interest upon the premium. The case of the International Building and Loan Association v. Abbott et al., supreme court of Texas, not yet reported officially, but which counsel furnish us from advance sheets, is authority for the doctrine that when the whole amount of interest charged the borrower, on every account, sum actually advanced and premium, does not exceed the maximum rate of interest in that state, the contract will not be usurious. "We express no opinion as to the soundness of this view; but, sound or unsound, that is not the question involved in the case^bef'ore us. Besides, in Jackson v. Cassidy, 68 Texas, 282, the supreme court of that state, when the question of allowing interest upon a premium was squarely presented, emphatically repudiates such interest charge as usurious. Says Willie, C. J.: “ The weight of authority holds it unlawful to charge interest upon the premium; for this is a charge, not upon what the member receives, but upon what he relinquishes to the society.” The two Arkansas cases, Reeve v. Ladies’ Building Association and Taylor v. Van Buren Building and Loan Association, do not determine the point in controversy; they do not even allude to it. They have no sort of relevancy to the — 105 — controversy in Land. In one, it was held that there can be no usury in a building association mortgage which expressly stipulates that the borrower shall not pay more than the legal rate of interest; and in the other, there is a repetition of the early learning touching the nature and character of the loans and .contracts of building and loan associations, beginning with Delano v. Wild, 6 Allen, and Bowker v. Association, 7 Allen, and coming down to Endlich’s work on the subject. But there is no syllable of support for the contention of the counsel for appellant. The case of the Vermont Loan and Trust Company v. Whithead, supreme court of North Dakota, not yet reported, is a voluminous gathering up and rehearsal of law learning on building and loan associations, beginning with the English case of Selver v. Barnes, 6 Bing. N. C., 180, the earliest authority with which we have met. But,' interesting as the learning might prove to one unread in it, the novice would fail to find in the Dakota case any support for the counsel’s position, for the reason that, by statute of that state, interest on premiums is allowed to be charged. The case of Citizens’ Mutual Loan Association v. Webster, 25 Barb., 263, justifies the taking of interest upon a premium, but upon a judicial interpretation of a statute of New York, which the court said must be held to allow the collection of interest upon the full amount of the share — that is, upon the sum actually loaned or advanced, and upon the premium. These are the cases cited and relied upon by the learned counsel. The supposed support derivable from them for counsel’s contention vanishes at the touch of investigation. ¥e thought it unnecessary to quote authorities in delivering the former opinion of this court. The field of inquiry had been so thoroughly explored, and the general subject so often and so exhaustively considered, that we declined to beat again the threshed straw. See Endlich on Law of Building Associations; Am. & Eng. Enc. of Law, same subject; Thompson on Building Associa — 106 — tions. See, too, the many adjudications of courts of the last resort, cited in the three text-books named, holding interest upon premiums is inadmissible. We have no doubt as to the absolute correctness of the former opinion of the court, and we adhere to it.-