Georgia State Building & Loan Ass'n v. Grant

Whitfield, C. J., delivered tbe opinion of tbe court. Tbe only proposition seriously pressed upon us by appellant is that the provision in tbe bond in tbe Terry case and tbe provision in tbe by-law in tbe Grant case, properly construed, each means that whenever a stockholder, in tbe exercise of bis legal right under tbe contract to withdraw, attempts to withdraw, be is entitled then, however long prior to tbe maturity of tbe stock on final settlement, to have tbe account so taken as that be shall only pay, by way of interest, the highest legal rate allowed by tbe law of tbe state where it is sought to be enforced. The section in tbe bond is as follows: “It is further stipulated and agreed that, upon tbe maturity of the stock so advanced upon, total payments of installments, interest and premium, shall not exceed tbe amount of tbe advance with interest thereon at tbe highest contractual rate per annum allowed by the statute of tbe state aforesaid.” It is too plain for argument that this means that the stockholders shall have tbe benefit of such provision only upon tbe maturity • of tbe stock advanced upon. There is no room for construction; tbe meaning is plain. The‘by-law referred to is as follows — being section 12 of articlé 6 of the by-laws, incorporated Hay 24, 1891: “The board of directors, in their discretion, shall have power and authority to make such contracts with stockholders, both with regard to stock subscriptions and withdrawal privileges and advances and loans, as shall seem to them to tbe best interest of tbe association, provided that wherever tbe loan contracts of this association are governed by laws that limit tbe aggregate amount of premium and interest that can be taken on them, only so much of tbe premium collected shall be taken as profits by tbe association, as will, with tbe interest collected, equal and conform to the highest contractual rate of interest in such state, [433] the balance of the premium being used, at settlement, in reduction of the debt.” The words “at settlement,” in this by-law, mean the same thing as the words, “upon the maturity of the stock advanced upon,” in the bond given by Terry. We think there is no room for construction' as to them, and that they plainly mean that the only case in which the stockholders would be entitled to the benefit of the stipulation in the bond in the one case, or the provision of the by-law in the other, would be upon final settlement, when the stock had been carried to maturity. This would be in accordance with the usual building and loan scheme, which does not contemplate, usually, anything other than carrying the stock to maturity, and thus completing the contract. But, apart from this, it is perfectly plain from the testimony of E. W. Bell, secretary of the association, that the construction which we put upon the by-law and stipulation in the bond is just the construction intended by the association. ITe says: “Just here I will explain that in the books there will appear in red ink, at the end of each fiscal year, the amount of dividend apportioned to the stock. This will be shown on the transcript, but it must be understood that this is only a tentative credit, and goes to the stock only in case it is carried to maturity. If. stock is withdrawn before maturity, it does not receive this dividend as a credit, but its withdrawal value is ascertained by loan fund payments with interest for the average time at six per cent.” Again, he says: “To illustrate: If Mrs. Grant was in good standing with her stock, and had paid all arrearages of interest and premium, and wanted to buy out, without using the stock, she would have to pay $400, the amount of the advance ; or, if she wanted to use the stock at its withdrawal value, ■ as part payment, she could do so; but she would not be entitled to receive any part of her interest and premium payments in reduction of the debt, as the interest allowed upon the .loan fund payments of the stock would be in lieu of her rights to partici [434] pate in the earnings of the association. This right she surrenders when she elects to withdraw This shows that the association meant precisely what it has said, and what they have said is too plain for dispute. But, further than this, these two contracts have been dealt with from the first by the association- upon the basis of only allowing the benefit -of the by-laws and the stipulation in the bond on final settlement, when the stock has been carried to maturity. The association was proceeding all along upon the construction of Mr. Bell, which is correct. We have, therefore, not only the plain provision of the by-laws and the stipulation in the bond, but also the construction placed upon it by the secretary of the association, who, presumably, is daily making hundreds of settlements on this construction. But we have added to this the fact that this construction has been put into practical operation in both contracts under review. The counsel for appellants, it is true, argued at the bar that Mr. Bell’s construction might be wrong. And so it might, and we are not founding our opinion upon Mr. Bell’s construction, but simply refer to the fact that he has so construed these provisions of the bond and by-law as very persuasive of the intention of the association in the matter. Counsel further argued that these provisions were in exact harmony with a provision, which the supreme court of North Carolina, in the Meroney Case, 116 N. C., 912, 21 S. C., 934, 47 Am. St. Rep., 841, said would save the contract from the taint of usury. That opinion on this subject is as follows: “It may not be improper for us to say, in this connection, that the insertion in such a contract as we now have under consideration of a stipulation that in no event should the aggregate of all the sums to be paid by the borrower (interest being allowed to his credit) exceed the sum loaned him and interest thereon at eight per centum per annum would perhaps entirely relieve all such transactions from the imputation of being usurious. The remedy seems easy. It is insisted with great confidence that [435] the rate of interest which he would be required to pay if he and his fellow borrowers would carry out their engagements will be much less than six per centum. If that be true, no loss can come to the lender by reason of the incorporation of such a stipulation in the contract. It would be merely to make that a part of the contract which is in fact an inducement to it, but an inducement put in such shape as to be of no legal effect to protect the borrower from usurious exactions. The proposition is a simple one. Let the money-lending corporations that, under the guise of building and loan associations, are professing to loan money, in a complicated and somewhat confusing method, at six per centum or less, insert in their contract a binding stipulation to the effect that in no event will they exact more than eight per cent, and all trouble and difficulty will vanish.” It must be obvious, upon the mere reading of this utterance, that it is vitally different from the stipulation in this bond and by-law. What the supreme court of North Carolina said was that, if the benefit of this sort of provision, in any event, was allowed the borrower, then it would save the contract from the taint of usury; that is, on withdrawal as well as at maturity of the stock. On the whole, we think the learned chancellor was entirely correct in the conclusion reached, both on appeal and cross-appeal in both cases. There is nothing in the cross-appeal. The chancellor correctly disallowed the credits claimed therein. This results from the dual nature of the building and loan contract in a true building and loan association, as this is. People’s B. & L. Ass'n v. Hawks, 81 Miss., 61; s. c., 32 South., 1001. We only add that the by-law in the Grant case would not become a part of the contract here, for the reason that Mrs. Grant had the legal right, before it was adopted, to sue for and recover the usury. This right was a right vested, by law, not by the contract; and it was not competent for the association, [436] or the association with Grant jointly, to change or alter the usury law of the state by any by-law of its own, or to impair rights vested in Mrs. Grant by virtue of that usury law of the state and our decisions construing it, and holding Mrs. Grant entitled to recover the interest in an action at law, or have it allowed in equity. The provision that she would be bound by all by-laws then in force or thereafter to be adopted would bind her as far as a contract could. But she could malee no contract to waive the usury laws of the state, nor could any by-laws adopted after her contract was made have any such effect. Public policy forbade both. Appellant must see the clear distinction. Appellant says the effect Avas to bring the contract within the law, not to evade it. Granted; but before the bylaw was ádopted Mrs. Grant’s legal 'right, law-conferred, to recover all the interest, the usury having already tainted the contract, had attached, was a valid right, and could not be contracted away, such a contract being forbidden to be made by law. Affirmed on appeal and cross-appeal.