Cobe v. Guyer

• Decision Date: 03 February 1909
• Citation: 86 N.E. 1088,237 Ill. 568
• Court: Illinois Supreme Court
• Parties: COBE v. GUYER et al.

237 Ill. 568

86 N.E. 1088

COBE

v.GUYER et al.

Supreme Court of Illinois.

Dec. 15, 1908.

Rehearing Denied Feb. 3, 1909.

Error to Appellate Court, Second District, on Appeal from Circuit Court, Rock Island County; Emery C. Graves, Judge.

Bill by Ira M. Cobe against E. H. Guyer and others. From a judgment of the Appellate Court (139 Ill. App. 580), affirming a decree for complainant, defendants bring error. Reversed and remanded, with directions to dismiss.

J. T. Kenworthy and S. R. Kenworthy, for plaintiffs in error.

S. W. Swabey (W. R. Moore, of counsel), for defendant in error.

DUNN, J.

This writ of error is prosecuted to reverse a judgment of the Appellate Court affirming a decree of foreclosure. The mortgagee was the Masonic Mutual Savings & Loan Association, a corporation organized under the homestead and loan association act, and the defendant in error the assignee of the receiver of said association, appointed by the superior court of Cook county under section 25 of that act. Several reasons for reversal are urged; but in the view we take of the defense of usury, which was insisted upon in the circuit court, it will be unnecessary to consider any other question.

The mortgage sought to be foreclosed was dated July 1, 1899, and was made to secure promissory notes of that date for the sum of $12,000; but the indebtedness originated in August, 1896, when the loan association made a loan of $10,000 to the plaintiffs in error and one George W. Walker upon 100 shares of its stock. This loan was secured by a mortgage, and the bond given therefor required the payment of $50 dues, $50 interest, and $50 premium, monthly, until the maturity of the stock, when the loan would be paid in accordance with the plan of the association. Subsequently, the makers of said bond being in default, a new loan of $2,600 was made to them on August 30, 1898, on 26 shares of the stock of the association, which was also secured by a mortgage; the payments required being $13 dues, $13 interest, and $13 premium monthly. No money was advanced on this loan, but credit was given for its amount on the delinquent installments on the former mortgage. A few months later the obligors were again in default on both loans; the loan association claiming the total amount due to be $13,379.60. Thereupon the 26 shares of stock were canceled. Notes for $12,000, bearing 7 per cent. interest, dated July 1, 1899, and secured by mortgage, were given by plaintiffs in error, and the two former mortgages were released. According to the claim of the association, the value of the stock canceled, $1,328, and the $12,000 mortgage notes being credited on the amount due on the former mortgage, left a balance of $51.60, for which the plaintiffs in error gave their note due in 60 days.

The exemption of homestead and loan associations from the operation of the interest law applies only to interest, fines, and premiums accruing according to the provisions of the act providing for their organization. Jamieson v. Jurgens, 195 Ill. 86, 62 N. E. 917;Borrowers' Building Ass'n v Eklund, 190 Ill. 257, 60 N. E. 521,52 L. R. A. 637. By the terms of the bonds given for the payment of the $10,000 loan and the $2,600 loan, the obligors were required to pay $50 and $13 a month, respectively, as dues on the stock, and interest and premiums at the rate of 12 per cent. per annum. Since the total amount to be paid for the use of the money exceeded the legal rate of interest, these transactions must be held to have been usurious under the general laws of the state, unless the premium required to be paid was determined in the manner provided by the homestead and loan association act (Hurd's Rev. St. 1908, c. 32, §§ 78-91t). The modes of determining such premium were set forth in section 8 of the act, and were either by bids for the preference or priority of loan in open meeting, or, if the association had by its by-laws dispensed with the offering of its money for bids in open meeting, by the priority of the applications for loans of its stockholders. The $10,000 loan and the $2,600 loan were not made upon bids made for the preference or priority of loan in open meeting. The association did not offer its money to be loaned for the highest premium which might be bid for it. The money was loaned at a fixed rate of interest and premium, and it is therefore necessary to inquire whether the association had by its by-laws dispensed with the offering of its money for bids in open meeting, for, if it had not, the premium did not accrue according to the provisions of the act.

In order to show the adoption of such a by-law, the defendant in error introduced in evidence the record of a special meeting of the...