Cloone v. Minot Bldg. & Loan Ass'n
| Decision Date | 06 December 1938 |
| Docket Number | 6516 |
| Citation | 282 N.W. 441,68 N.D. 543 |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1. A member of a building and loan association who enters into a contract with it, by which he receives a benefit, cannot under the principles governing all corporations, deny its existence.
2. Where a usury statute imposes a penalty for violation thereof of twice the amount of interest collected, such penalty does not accrue until usurious interest is actually paid and received.
3. Chapter 94, Session Laws of 1931 of the State of North Dakota, permits building and loan associations to charge interest not to exceed 12%, and provides that such rate of interest is not usurious unless in excess of 12%.
4. Where plaintiffs continued to be members of defendant Association and to make payments after the effective date of Chapter 94, Session Laws of North Dakota for 1931, and it being conceded by plaintiffs that no usurious interest was paid until after the effective date of said Chapter 94, for reasons stated in the opinion it is held that such payments are governed by the provisions thereof, and such interest payments not being in excess of 12% are not usurious.
Appeal from District Court, Ward County; A. J. Gronna, Judge.
Action by Elaine Cloone and W. F. Cloone against the Minot Building & Loan Association, and the Minot Federal Savings & Loan Association to recover penalties under the usury statutes. From a judgment in favor of the plaintiff, the defendants appeal.
Judgment reversed and action dismissed.
L J. Palda, Jr., for appellants.
A borrower, before his stock is paid up, receives from the association the par value of his shares, in the nature of an advance loan. Evanmann v. Schmidt, 53 Ohio St. 174 41 N.E. 139, 29 L.R.A. 184, 53 Am. St. Rep. 632; Butson v. Home Sav. & L. Co. 129 Iowa 370, 105 N.W. 645, 4 L.R.A.(N.S.) 98, 113 Am. St. Rep. 463; White v. Mechanics Bldg. Fund Asso. 22 Gratt. (Va.) 233.
The legislature has the right to leave such associations untrammelled in the matter of premiums paid for loans, and it has an equal right to leave them untrammelled in the matter of interest proper. Vermont Loan & T. Co. v Whithed, 2 N.D. 82, 49 N.W. 318.
Where the court said the reasonableness of the classification must be looked at from the point of view of the legislature, all reasonable doubts are to be resolved in favor of upholding the statute establishing the classification. Rosedale School Dist. v. Towner County, 56 N.D. 41, 216 N.W. 212; Klingensmith v. Siegel, 57 N.D. 768, 224 N.W. 680.
The dealings of building and loan associations with their own stockholders differ from ordinary loan transactions to such an extent as to warrant the legislature in excepting such associations, as to such dealings, from the operation of the provisions of the general usury laws. Baker v. Fargo Bldg. & L. Asso. 64 N.D. 317, 252 N.W. 42; State ex rel. Ohlquest v. Swan, 1 N.D. 11, 44 N.W. 492; State ex rel. Coghlan v. Poindexter, 49 N.D. 203, 190 N.W. 818; Eddy v. Krekow, 54 N.D. 232, 209 N.W. 225; Reeves v. Bruening, 16 N.D. 398, 114 N.W. 319; Sargent County v. Sweetman, 29 N.D. 260, 150 N.W. 876; United States v. Hemmer, 241 U.S. 379, 60 L. ed. 1055, 36 S.Ct. 659.
Classification is not necessarily made by specific words stating that the legislature has made a classification, but is generally made by the different objects of legislation, and the provisions of the statutes showing that the legislature has treated the different statutes as belonging to different classes. Rosedale School Dist. v. Towner County, 56 N.D. 41, 216 N.W. 212; Hagen v. Anderson, 22 N.D. 65, 132 N.W. 433; Atkins v. Lawler, 53 N.D. 278, 205 N.W. 880; Linde v. Taylor, 33 N.D. 76, 156 N.W. 561; Investors Syndicate v. Pugh, 25 N.D. 490, 142 N.W. 919; Re Connolly, 17 N.D. 546, 117 N.W. 946.
Where they have been recognized for a long period of time, such by-laws will be recognized by the courts as the by-laws of the association. Cummings v. State, 47 Okla. 627, 149 P. 864; People ex rel. Wallace v. Sterling, 82 Ill. 457; Manufacturers' Exhibition Bldg. Co. v. Landay, 219 Ill. 168, 76 N.E. 146.
By-laws are made legal by long usage as against the stockholders themselves. Marsh v. Mathias, 56 P. 1075; Graeber v. Post, 96 N.W. 783; Smith v. Sherman, 85 N.W. 747; Wilson v. Union Mut. F. Ins. Co. 58 A. 799.
Where a stockholder participated in benefits under by-laws, he is estopped from objecting to the mode of their adoption. People v. Sterling Burial, 82 Ill. 457-461.
A member of a mutual insurance company (and this is a mutual building and loan association) cannot attack the validity of the by-laws under which he acquired membership, on the grounds that they were not legally adopted. Phister v. Gerwig, 23 N.E. 1041; Home Circle Soc. v. Shelton, 81 S.W. 84; Montgomery v. Whitbeck, 12 N.D. 286, 96 N.W. 327.
Once a person applies for membership in a mutual venture such as a building and loan association, under the laws of North Dakota, and if admitted to such membership, he is presumed to consent to the by-laws and all amendments of the by-laws. Hayes v. German Benefit, 35 Pa. S.Ct. 142.
By-laws become a part of the contract in all mutuals. 1 Fletcher, Corp. p. 1028.
By-laws in existence at the time of the subscription for stock become a part of the contract in all mutuals or similar associations such as a building and loan. 1 Fletcher, Corp. p. 1031; Montgomery v. Whitbeck, 12 N.D. 385, 96 N.W. 327; J.P. Lab & Co. v. Merchants Nat. Mut. F. Ins. Co. 18 N.D. 253, 119 N.W. 1048; Fee v. Nat. Masonic Asso. 110 Iowa 271, 81 N.W. 482; Deitz v. Staub, 115 F. 309; Cummings v. State ex rel. Wallowers, 47 Okla. 627, 149 P. 864.
The cause of action for the recovery of usury and penalty therefor commences to run at the time of payment of usurious interest. Young v. First Nat. Bank, 22 Ga.App. 58, 95 S.E. 381; Baker v. Lynchburg Nat. Bank, 120 Va. 208, 91 S.E. 157; McCarthy v. First Nat. Bank, 223 U.S. 493, 56 L. ed. 523, 32 S.Ct. 240, affirming 23 S.D. 269, 121 N.W. 853, 23 L.R.A.(N.S.) 335, 21 Ann. Cas. 437; Laster v. First Nat. Bank, 72 S.W. 1054; Thormley v. Hyatt, 208 N.C. 478, 181 S.E. 242; Talbot v. Sioux Nat. Bank, 111 Iowa 583, 82 N.W. 963; Norfolk Nat. Bank v. Schwenk, 46 Neb. 381, 64 N.W. 1073.
No cause of action to recover back usurious interest accrues until such interest has actually been paid. 66 C.J. 288, § 267.
A person who has contracted with a corporation de facto as such cannot be permitted, after receiving the benefits of the contract, to allege any defects in the organization of such corporation affecting its capacity to enforce such contract. Building & L. Asso. v. Chamberlain, 4 S.D. 271, 56 N.W. 897; Kalamazoo v. Kalamazoo Heat, Light & P. Co. 124 Mich. 74, 82 N.W. 811; Washington College v. Duke, 14 Iowa 14; St. Paul Land Co. v. Dayton, 39 Minn. 315, 40 N.W. 66; Livingston B. & L. Asso. v. Drummond, 49 Neb. 200, 68 N.W. 375.
The legality of the existence of a corporation and its rights to exercise corporate powers, cannot be questioned collaterally. Farmers State Bank v. Brown, 52 N.D. 806, 204 N.W. 673.
Section 4495, Comp. Laws 1913, is controlling and we maintain that no such authority can be found to the effect that it is not a valid and constitutional provision, and any corporation continuing to do business as such, following any amendment, change or alteration of the statute, does so under the new law, and must be held to have elected to operate under such new law, and to be governed by the same. First State Bank v. Cox, 61 N.D. 175, 237 N.W. 708; First State Bank v. Bond, 61 N.D. 179, 237 N.W. 709; 13 Am. Jur. p. 222, § 78, p. 378; Pearsall v. Great Northern R. Co. 161 U.S. 646, 40 L. ed. 838, 16 S.Ct. 705; Baltimore & O.R. Co. v. Watts, 105 Md. 396, 66 A. 685, 12 L.R.A.(N.S.) 326.
A member of the association borrowing money is estopped from raising the question of irregularity in its organization or by-laws. Dietz v. Staub, 115 F. 309.
By contracting with an association, or corporation, for a loan of money, a member thereof is estopped to deny the existence of a corporation in a suit by its corporate name. McLaughlin v. City Bldg. L. & Sav. Asso. 62 Ind. 264; East Norway Lake N.E. Lutheran Church v. Froislie, 37 Minn. 447, 35 N.W. 260; Mokelumne Hill Canal & Min. Co. v. Woodbury, 14 Cal. 424, 73 Am. Dec. 658; Heald v. Oen, 79 Iowa 23, 44 N.W. 210.
B. H. Bradford, for respondents.
If premium installment payments are allowed, the number of installments must be definite; otherwise, the premium is regarded as interest, and if adding it to other charges the legal rule is exceeded, the loan is tainted with usury. Note in 74 A.L.R. 986.
Loans made in conformity with such statutes are entitled to exemptions provided, but such exemptions are strictly construed and the benefit of them can be rightfully claimed only when the loan is made in strict conformitya to the statutory provisions, . . . and the matters claimed to be exempted are within the letter of the statute. 9 C.J. 974.
Premium is distinguishable from interest in that interest is a certain percentage charged for the reduction or use of money, while a premium is a fixed sum paid for obtaining the money. Accordingly it has been said that the premium is not interest . . . premiums originated in the necessity of determining the order in which members should be entitled to loans. 9 C.J. 966.
Being organized under a mutual plan, it is part of the fundamental law governing these associations that all of its members participate equally in the profits and bear the losses. 4 R.C.L. p. 346, § 6, note 11.
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