Bank of Loudon v. Armor

Mates, L, delivered the opinion of the court. This case is on appeal for the second time. Unless the stock dues are to be credited as payments on the indebtedness, the record shows that this contract is not usurious. In the former case the court held that the stock dues were to be credited, and that therefore the contract was usurious. On an analysis of the opinion of the court in that case the court did not hold, and did not intend to hold, that stock dues, as a general proposition, were to be credited on the indebtedness of a borrower, where the borrower sustained the dual relation to the building and loan association of stockholder and borrower. To have so held would have been to overrule the McPhilamy case, 81 Miss., 61, 32 South., 1001, decided long prior to the case of Armour v. Bank of London, 86 Miss., 658, 39 South., 17. The court merely held, in the opinion in the case of Armor v. Bank of London, 86 Miss., 658, 39 South., 17, that upon the pleadings as framed in this particular case the stock dues should be [716] credited as payments upon the principal debt. The opinion of the court is made to hinge upon this, quoting from the opinion of the court as follows: “It is averred in the bill that the subscription for stock, the contemporaneous application for the loan, the execution of the contract and deed of trust, and the depositing of certificates of stock as collateral, were all parts of the same scheme to negotiate and secure the loan. This averment is not denied, and must therefore be treated as confessed. Section 4, art. 9, by-laws of the Atlas Savings & Loan Association, with reference to which the loan was made and the securities taken, provided that: ‘Every member who procures a loan shall secure the payment by an acceptable deed of trust, mortgage, or deed on real estate, the conservative value of which must be at least twice the amount wanted, and this deed of trust, mortgage, or deed shall remain in force till the monthly dues, applied to the general fund, dividends, and reserve apportioned, make up the Sum of' one hundred dollars on each share drawn. The deed of trust, mortgage, or deed shall then be canceled, and such member shall cease, with regard to his incumbered shares, .to be a member.’ The confessed averments of the bill, taken in consideration with the section from the bylaws above quoted, make it clear that in the instant case the taking of stock was merely a condition to the getting of the loan, that appellant was in reality never to acquire any stock, but that the payment in full for the stock was ipso facto to pay the loan and cancel the stock. This is nothing but a scheme to evade the law against usury, and we are therefore constrained to differ with the opinion of the learned chancellor that the contract was not usurious.” This case comes back to us in quite a different aspect. The basis upon which the former, opinion was grounded was that the bill averred that the subscription for stock, the contemporaneous application for loan, the execution of the contract and deed of trust, and the depositing of certificates of stock as collateral, were all parts of the same scheme to negotiate and [717] secure tlie loan. This averment was not denied, and, this being the case, the court held that the whole transaction was but one thing, and constituted a scheme to avoid the law against usury, and therefore that the interest, the premium, and the stock dues, all being paid upon one contract according to the pleadings, made the contract usurious, and therefore both the premium, interest, and stock payments should be credited upon the principal debt, and when this was done the contract was shown to be usurious. In this case the averments of the bill are now expressly denied, and by the terms of the contract the amounts paid as premium and interest are less than ten per cent unless the stock dues are to be credited, and the contract is therefore not usurious. We think, as the record now comes to us, with these averments denied, that the borrower sustained both the relation of the stockholder and borrower to this association, and that his stock dues should be credited as payments upon the principal. Under sec. 4 of art. 9 of the by-laws above quoted it is shown that while he puts up his stock as collateral security, yet he is to participate in the general funds, dividends and reserve. In other words, he is to participate in whatever advantage accrues to any other stockholder by virtue of being such up to the time the value of his stock equals the amount of his debt. In the case of Sokoloski v. Building & Loan Association (Miss.), 43 South., 674, the court has reannounced the doctrine laid down in the McPhilamy case, and nothing that is said in the opinion in the case of Armor v. Bank of London. 86 Miss., 658, 39 South., 17, in any way conflicts with the decisions in the two cases above referred to. The whole predicate of the case of Armor v. Banlc of Loudon, supra, is upon the fact that under the pleadings there was in reality no genuine building and loan contract, but a mere subterfuge, and, that being the ease, all the money paid should be credited to the debt of the borrower. Reversed and remanded.