Arbuthnot v. Brookfield Loan & Building Ass'n

• Decision Date: 16 February 1903
• Citation: 98 Mo. App. 382,72 S.W. 132
• Court: Missouri Court of Appeals
• Parties: ARBUTHNOT v. BROOKFIELD LOAN & BUILDING ASS'N.<SMALL><SUP>*</SUP></SMALL>

72 S.W. 132

98 Mo. App. 382

ARBUTHNOT v. BROOKFIELD LOAN & BUILDING ASS'N.^*

Court of Appeals at Kansas City, Missouri.

February 16, 1903.

BUILDING AND LOAN ASSOCIATION — LOAN — USURY—BY-LAW FIXING MINIMUM PREMIUM — EFFECT — ATTORNEY FOR ASSOCIATION — ADMISSIBILITY OF TESTIMONY—FINES FOR DELINQUENT PAYMENTS—WAIVER—RATE OF INTEREST ALLOWED.

1. Rev. St. 1889, § 2812, requires that loans made by building associations shall be at competitive bidding for premium for preference of loan in open meeting. Held, that a by-law fixing a minimum premium of 16 per cent.—the secretary announcing that no bid would be received for a less amount—vitiated a loan, and made it subject to the defense of usury, though the premium actually received as a consequence of competitive bidding over the minimum fixed was 25 per cent.

2. In a suit against a building association, by its attorney, to cancel a note and deed of trust executed by him to the association to secure a loan, the attorney is a competent witness as to matters relating to the loan.

3. Where fines for delinquent payments due to a building and loan association by its attorney on a loan made to him had never been charged against him, nor ever collected, on account of his relation to the association, they are properly disallowed in an action by the attorney against the association to cancel his note and deed of trust.

4. Rev. St. 1899, § 3709, provides that on proof of usury the same, in excess of "the legal rate of interest," shall be credited on the principal debt, and that costs shall be taxed against the guilty party, who shall in no case recover more than the amount due on the principal debt, "with legal interest," after deducting usurious payments, etc. Held, that the legal rate of interest contemplated was the statutory rate of 6 per cent. allowed in the absence of a contractual stipulation, and not the limit of 8 per cent., for which a valid stipulation might be made by the parties.

Appeal from circuit court, Linn county; Jno. P. Butler, Judge.

Suit by James A. Arbuthnot against the Brookfield Loan & Building Association.

From a judgment finding an insufficient amount due it, defendant appeals. Affirmed.

Chas. K. Hart, for appellant. Johnson & Bresnehen and Harry K. West, for respondent.

ELLISON, J.

1. This is an action in equity, whereby it is sought to cancel a note, and deed of trust to secure it, given by plaintiff to defendant for borrowed money. The plaintiff asked an accounting, and offered to pay to defendant whatever sum was found to be legally due. The trial court found that there was yet due defendant the sum of $777.28, and entered a decree that upon the payment of that sum to defendant the note and deed of trust should be canceled. The defendant, claiming more than that sum, has appealed.

It appears that defendant is a building and loan association, and that in October, 1891, plaintiff executed his note to it for $2,200; that, of this sum, defendant retained $583 as a bonus or premium bid for the loan; that he agreed to pay 8 per cent. per annum in monthly installments, and also monthly dues of $11 each month on his certificate of stock as a member of the defendant association. The loan in this case was made prior to 1895, when the building and loan statute was amended, and is therefore governed by the original statute of 1889. If the loan was made in accordance with the provisions of the latter statute, the defendant has been injured by the decree of the trial court. If, as charged by plaintiff, that statute was disregarded, then the exactions by defendant in the way of premium, interest, etc., were not authorized by law, and being, in the aggregate, much more than lawful interest, became usurious, and the decree of the trial court allowing credits for usurious payments should be affirmed. For we have ruled in a series of cases, beginning with Brown v. Archer, 62 Mo. App. 277, that, if a loan was made in the manner provided by statute, it was a valid loan, though the premium, interest, etc., aggregated more than a lawful rate of interest. But that if the statute was disregarded, it would not protect the loan from the charge of usury. The defendant had an established, fixed, minimum premium of 16 per cent. for preference of loans. The statute referred to (section 2812) required that the loan should be made at competitive bidding of premium for preference of loan in open meeting, and we have held that, where the association had a fixed minimum premium at which they made loans, that was an act in disregard of the statute, and avoided its protection. Brown v. Archer, supra; Moore v. Building & L. Ass'n, 74 Mo. App. 468; Barnes v. Building & L. Ass'n, 83 Mo. App. 466; Clark v. Mo. Guar. Ass'n, 85 Mo. App. 388; Fry v. Savings Ass'n, 88 Mo. App. 289; Cover v. Building & L. Ass'n, 93 Mo. App. 302.

2. That statement of the law is not questioned by defendant. But it seeks to distinguish this case from those just cited by the fact that, while there was a minimum premium of 16 per cent....