63 W. Va. 107 | W. Va. | 1907
Lead Opinion
The assignments of error and the arguments in the-briefs of counsel herein may at once be reduced to the real question presented. Nor does it behoove us to now state the facts involved. These will sufficiently appear as we proceed.
The question is: What sum is legally due from the plaintiff to the defendant company, as the successor of the Metropolitan Building and Loan Association of Richmond, Va., on account of an advance of $1,900.00-made to him by said association, on his nineteen shares of stock therein, on the-11th day of March, 1897, the repayment of which was evidenced by his bond, secured by deed of trust on his real estate in the city of Huntington,' the residue of which indebtedness after payments thereon was, in the year 1901,. renewed by a series of notes, payable monthly, with legal interest, executed by plaintiff and delivered- to defendant-company, secured by a new deed of trust on the same real estate? In other words, was the said building and loan contract invalid as such under our law, and' therefore usurious; and, if so, did the usury follow into, and taint therewith, the said notes given in renewal? The controversy arises by this suit of plaintiff, in the circuit court óf Cabell county, alleging such usury in the notes aforesaid, and enjoining a sale under the deed of trust securing them, and a-full resistance, by the defendant company and its receiver,, of plaintiff’s contention and procedure.
We are therefore called upon to consider the original-building and loan contract, and to see if it was such as-is authorized by our law and by it exempt from usury, because of the bonus or premium taken above the legal rate of interest.
We find it to be a contract calling’ for the repayment of said advance by monthly installments of $23.75 each until such time as the shares of stock should be fully paid up, or until one hundred and forty-four such payments should be made, which monthly payments were recited to be in full of all dues, premium and interest in accordance with the charter and by-laws of the association. But in the said
It is insisted by plaintiff that this failure to definitely state the amount of premium exacted, and to provide for competitive bidding of premium for priority of right to loans, was in conflict with our statute by which a premium charged by a building and loan association is exempted from being usury, and that the by-law's and contract did not come within the defined requirements in said statute so as to entitle the contract to such exemption.
Our legislature has deemed it well to encourage the formation of building and loan associations for the purpose of encouraging industry, frugality and home building, and saving among the members, and has exempted them from the usury laws as to the profit, taken . to the general fund belonging to the members, for the use of money therefrom by a member. It has given them certain
Let ns see. What is our law? It is sections 25 to 29 inclusive, chapter 54, of the Code; section 26 of which is as follows: “ Every such association shall have the power to provide by its by-laws for selling to the stockholders, who shall bid the highest premium therefor, the money in the treasury, or in default of bidders at or above a minimum premium, may award to a member the value of any shares held by him less such minimum premium; the minimum premium, and the mode of making the award to be fixed by the by-laws. Or such association may charge and receive the premium bid by a stockholder for the priority of right to such loans, in periodical installments; but the bylaws of every association shall set forth whether the premium bid for the prior right to a loan shall be deducted therefrom in advance, or be paid in periodical installments. But whether the premium be deducted from the loan, or paid in periodical installments, the transaction shall not be deemed usurious, although any and all the dues, fines, premiums and interest, shall exceed the legal rate of interest on the- amount of money received by the stockholders.” And this, and its
By this law must the said transaction be governed, notwithstanding the domicile of the defendant company was without the state, and notwithstanding it is claimed that the contract was a Virginia contract because the payments were there to'be made. Floyd v. National Loan. & Inv. Co., 49 W. Va. 327.
This Court has held, repeatedly, that this statute requires that the premium be a definite sum, whether payable as a lump sum or in periodical installments, and that the member must know, if the premium is payable in such installments, when such payments are to end, so that he may calculate the aggregate sum of the same; and that, if a definite time is fixed after which no more stated installments of premium are to be made, it is a compliance with the law. Brown v. Rockey, 60 W. Va. 268; Tahmiey v. Washington Nat. B. & L. Assn., 59 W. Va. 296; Thompson v. Nat. Mut. B. & L. Assn., 57 W. Va. 551; Prince v. Holston Wat. B. & L. Assn., 55 W. Va. 19; Gray v. Balt. B. & L. Assn., 48 W. Va. 164; and other cases.
Whether, in the case before us, the premium or profit charged was a sufficiently definite sum, as provided in said by-laws and set forth in said contract and deed of trust, we do not deem important, in view of the conclusion we reach. Another observation merits precedence over this, and precludes the necessity of its consideration.
There was no selling of the money in the treasury to the stockholders, and no provision for the bidding of premium or an amount of profit without that name. There was, if anything of the kind, a fixed premium, or a fixed and limited amount of profit to be paid by members for advances; but our law does not provide for a fixed premium or profit. It has chosen the method of competitive bidding, and provides for none other, except in default of bidders. It fixes this bidding as a method of determining priority of right
In contravention of this method established bj7- our statute, the association with which plaintiff dealt provided for no such priority of right between members, accepted no such plan as being beneficial and proper in the conduct of such an association, but, on the contrary, adopted the plan that “each application shall be numbered in the order of its receipt by the secretary, and when two or more are made at the same time they shall take precedence in order of their receipt, other things being equal; provided, however, that those having the best security shall be given the preference.” Thus one member could be readily favored to the exclusion of another, something against which our statute jealously guar'ds. The whole scheme of this association in the particular of fixing a premium and determining the right of priority to loans is clearly repugnant to the policy of our legislation. It contravenes that which our statute deemed equitable and beneficial; and, by so contravening our law, it is put without the pale of that same statute wherein is the exemption from usury. This association, viewed by our law, in this particular is not a building and loan association, such as practices the beneficent features which that law has prescribed, and for the practicing of which there is given the right to take for the use of monej7 more than the legal rate of interest. Therefore, the contract between plaintiff and the association was usurious, and, to the extent of the usury, is not enforcible in this state, “because it is such a contract as is clearly repugnant to the public policy of the state, plainly written in its legislation, and therefore prohibited as to all building associations.” Floyd v. Nat. Loan & Inv. Co., supra.
Most similar to our statute was the one involved in Bates v. People’s Savings & Loan Assn., 42 Oh. St. 655, where the court makes the following comment, directly applicable here: “ The premium named in the note is unlike the pre-
Upon this subject, Thompson on Building Associations, section 188, says: “The manner of charging the premium by'auction of money is the one usually contemplated by the statute, and is more in harmony with the general scheme. The power of determining its cost is thus placed with the borrowers themselves, and the managers can not impose upon them an arbitrary rate. If the statute shows that this method was the one intended by the legislature, the courts require compliance with it.”
And in Floyd v. Nat. Loan & Inv. Co., supra, this Court recognized the principle that strict compliance with the statute by these associations is essential to the exemption from usury. At page 343, the opinion says: “The care which the legislature has taken to state explicitly the plamupon
It is contended, however, on behalf of the defendant company, that, conceding the original contract to be usurious, as we now hold, the renewal of the debt thereunder by the notes aforesaid made an entirely new contract which was free from the usury. We can not so hold. As stated by Judge Snyder in Hess v. Dille, 23 W. Va. 90: “The doctrine is well settled, both in Virginia and this state, that the giving of a new note for a previous one, which has become due, will not be regarded as an absolute payment or extin-guishment of the precedent note or preexisting debt, unless it bo expressly so agreed, whether the new note was that of one previously bound or of a stranger.” The ivhole of the same debt, the exact amount claimed, a part of which was usurious, ivas simpty put into another form, and evidenced and secured by new papers, changing, between the same parties, only the amount and character of the monthly payments. The correspondence between plaintiff, his attorney, and those representing the defendant company, calls it a “change” and so,it was. They gave it the proper construction. It was a renewal of the usurious contract between the same parties — nothing more. “A renewal of the usurious contract between the same parties partakes of the infirmity of the original agreement.” Webb on Usury, section 312. “The original taint attaches to all consecutive obligations or securities growing out of the original vicious transaction, and none of the descendant obligations, however remote, can be free from it, if the descent can be traced.” Dunning
The plaintiff counter assigns as error the refusal of the court to declare the said notes absolutely void, upon the ground that they were executed and payable in the state of New York, and were contracts governed by the law of that state, by which law, pleaded and proved in-this cause, notes and other cantracts whereby there shall be reserved or taken, or secured or agreed to be reserved or taken, any greater sum, or greater value, for the loan or forbearance of any money, than six per cent, shall be void. But it must be remembered that this usurious debt did not originate in the state of New York, in which state new evidences in the form of said notes were given for it. The usury not being conceived there, the law of this forum, where the original usurious contract is in question as being in violation of our law, is proper to apply. The contract containing such usury was not made there; it was simply “ changed”. there. These notes are only usurious because of the usury in the'original contract for which they are a renewal. The usury was in the inception of the transaction, not in the execution of the notes in the state of New York, or the contract for their payment there. The notes there executed covered the identical usurious amount that the company claimed from plaintiff, as contracted elsewhere than in. that state, and were not a novation, but were simply the residue of the original debt put in another shape and secured by the same real estate. This suit calls in question said original contract by which the usury was conceived, not the renewal contract, as being-violative of our law, and by such law it is proper to meas
The circuit court properly excluded this usury from the claimed indebtedness, finding “ that the defendant company is entitled only to the amount of the balance on said original loan treated as a straight loan at six per cent per annum interest, after giving the plaintiff credit for all payments made by him as of the times they were severally made, computed upon the rule of partial payments,” and correctly decreed accordingly. Miller v. Monumental S. & L. Assn., 57 W. Va. 437, Syl. 1.
There is no error, and the decrees are affirmed.
Affirmed.
Concurrence Opinion
{concurring:)
Out of deference to the great weight of judicial opinion and authority, I concur in this decision, for the sole reason that the by-laws of the association do not conform to the statutory regulation which, the courts generally say, was intended to give members the privilege of competing for the right of preference in respect to loans; but I do not wish to be understood as saying competitive bidding is compulsory, and that the loans of an association whose members all see fit to bid the minimum premium and no more, and await their turns to obtain loans at such bids, are usurious and void as building association'loans. The equity and fairness of the uniform premium is so apparent that I am not prepared to say that the legislature intended to forbid it. ' At the same time, the statute seems to express intention to give every member of an association the right to put in a competitive bid for any loan it may be able to make, and to require this right to be secured by provision therefor in the by-laws. In failing to adopt such a by-law, this association has ignored the requirement and put itself technically without the pale of building and loan association law.