Holmes v. Royal Loan Association

• Citation: 107 S.W. 1005,128 Mo.App. 329
• Parties: RICHARD A. HOLMES, Respondent, v. ROYAL LOAN ASSOCIATION, Appellant
• Decision Date: 27 January 1908
• Court: Kansas Court of Appeals

107 S.W. 1005

128 Mo.App. 329

RICHARD A. HOLMES, Respondent, v. ROYAL LOAN ASSOCIATION, Appellant

Court of Appeals of Missouri, Kansas City

January 27, 1908

Appeal from Gentry Circuit Court.--Hon. William C. Ellison, Judge.

REVERSED AND REMANDED (with directions).

J. W Peery and Rusk & Stringfellow for appellant.

(1) The notice of the meeting of June 22, 1895, was given in strict compliance with the requirements of the statutes of our State and the by-laws of defendant association. R. S. 1889, sec 2484. (2) The requirements as to the holding of this meeting contained in our statutes is merely directory. Reisterer v. Land & Lumber Co., 160 Mo. 141; State ex rel. v Cook, 178 Mo. 189; 1 Thomp. on Corp., sec. 227; 2 Cook on Corp., sec. 590; McClurch v. Sturges, 72 Me. 288; Baintree W. Co. v. Baintree, 146 Mass. 482, 16 N.E 420; Newcomb v. Reed, 12 Allen (Mass.) 362; Walworth v. Brackett, 98 Mass. 98; Water Co. v. Baintree, 16 N.E. 426; State v. Pitts, 58 Mo. 556. (3) One borrowing on certificates is a member and is subject to the liabilities of a member. McNamara v. Assn., 131 Cal. 336, 63 P. 670; Boyd v. Robinson, 104 Ga. 793, 31 S.E. 29; Wilcosen v. Smith, 107 Iowa 555, 78 N.W. 217; Tister v. Assn., 38 Md. 115; Assn. v. Conner, 14 N.J. E. 219; Hagerman v. Assn., 25 Ohio St. 186; Leahy v. Assn., 100 Wis. 555, 76 N.W. 625; Harrison v. Fleischman, 61 A. (N.J. Ch.) 1025. (4) Plaintiff is estopped by reason of his membership and his acquiescence in the by-laws to question their validity. Collins v. Code, 104 Ill.App. 142, 66 N.E. 1079, 202 Ill. 469; Bldg. Assn. v. Leyden, 5 Ohio Dec. (reprint) 344; 7 Ohio Dec. (reprint) 115; Bldg. & Loan Assn. v. Wahoo Tribe, No. 119, 9 Kulp. (Pa.) 487; Loan Assn. v. McIntire, 3 Allen (Mass.) 571; Concordia, etc., Assn. v. Read, 93 N.Y. 474; Parker v. U.S. etc., Assn., 19 W.Va. 744; Bldg. Assn. v. Steele, 11 W. N. (Pa.) 204; Morrison v. Dorsey, 48 Md. 461; Bertche v. Equitable Loan, etc., Assn., 147 Mo. 360; Bldg. & L. Assn. v. Lyttle (Colo.), 66 P. 247; B. & L. Assn., v. Junquest, 111 F. 645; Stilwell v. B. & L. Assn. 57 P. 14; 1 Thompson on Corporations, sec. 218, 495, 7 Id., sec. 8213. (4) Defendant's cross-bill should have been sustained. Bertche v. Loan & Inv. Co., 147 Mo. 343 and cases cited; Gary v. Verity, 101 Mo.App. 589, and cases cited.

J. W. Sullinger for respondent.

(1) Where it is simply understood and agreed, between the borrowing stockholder and the association, that the former is to have the loan applied for at a certain premium--not as the result of any competitive sale but mere consent--the letter and spirit of the statute is violated and the transaction is usurious, and the minutes of the board of the association to the contrary is of little value and on accounting, such premium will be credited as interest on the debt. Clark v. Bldg. Assn., 85 Mo.App. 388; Miller v. Bldg. Assn., 83 Mo.App. 669; Post v. B. & L. Assn. (Tenn.), 37 S.W. 216; R. S. 1899, secs. 3709-3710; Kreivohm v. Yancey, 154 Mo. 67; King v. Vette, 167 Mo. 389. (2) Requirements of the law of 1895 as to the holding of the meeting to reorganize is mandatory. 25 Am. & Eng. Ency. of Law (2 Ed.), p. 633; Rex v. Barlow, 2 Salk. 609; Ex parte Gordon, 94 U.S. 251; Waterworks Co. v. Kansas City, 62 F. 862; Ruggles v. Colliers, 43 Mo. 353; St. Louis v. Russell, 9 Mo. 507; Keating v. Kansas City, 84 Mo. 419; 26 Am. and Eng. Ency. Law (2 Ed.), p. 986; Marlborough Mfg. Co. v. Smith, 2 Conn. 579; Pierce v. Bldg. Co., 9 La. 397; State University v. Williams, 9 Gill and J. (Md.) 365, 31 Am. Dec. 72; Clark v. Omaha, etc., Co., 5 Neb. 314; Duke v. Markham, 105 N.C. 131, 18 Am. 839; Langdof v. Seiberlitch, 2 Pars. Eq. Cas. (Pa.) 64; 8 Am. & Eng. Ency. of Law, 735 and notes, 747, 748; State v. Pitts, 51 Mo. 133; McKinney v. Loan Assn., 18 A. 905; Peterson v. Bldg. & Loan Assn., N.W. 606; R. B. & L. Assn. v. Forter, 75 P. 484.

BROADDUS, P. J. Johnson, J., not sitting; Ellison, J., concurs.

OPINION

BROADDUS, P. J.

--This is a suit by plaintiff for an accounting and to have a certain deed of trust executed by him canceled. The defendant is a building and loan association under the laws of Missouri, located at the city of St. Joseph. On the 21st day of September, 1896, the plaintiff made sworn written application to the defendant association for a loan of $ 600 on the real property described in the said deed of trust. On the 21st day of December next following plaintiff with his wife Mattie executed, what was denominated a mortgage bond, wherein they acknowledged themselves indebted to the defendant in the sum of $ 600 borrowed money "on six shares of the fifty-seventh series of the capital stock of said society now (then) owned by Richard Holmes." In said bond plaintiff bound himself to pay to the defendant the sum of $ 3.60 each month as monthly dues upon said stock, and also the sum of $ 3 each month as monthly interest at the rate of six per cent per annum upon said $ 600, and $ 3 as monthly premium upon said shares of stock. By the terms of the mortgage bond the six shares of stock were pledged for the payment of the sum borrowed.

On the 22nd day of December plaintiff and his wife executed the deed of trust mentioned to secure the payment of said principal sum of $ 600 loaned on said six shares of capital stock, and the payment monthly of $ 3.60 as dues, on said stock, $ 3 as interest on the money loaned, and $ 3 as premium.

The plaintiff alleges that he was compelled to execute said mortgage bond and said deed of trust to defendant; that he has been compelled to pay on said bond the sum of $ 3.60 as dues, $ 3 as interest, $ 3 as premium monthly as provided therein; and that he has made ninety monthly payments, which aggregate the sum of $ 864.00, a sum more than sufficient to discharge said sum of $ 600.00 borrowed and the accumulation of the legal rate of interest thereon. The record does not furnish any evidence that plaintiff was under duress when he executed the said bond and deed of trust and there is no evidence of fraud therefore their validity stands admitted unless they are invalid for some other reason.

The plaintiff introduced evidence tending to prove, that it was represented to him by defendant's local agent and its secretary, that the monthly payments made by him was only six per cent per annum on the principal sum, and the loan would be discharged in ninety months. He testified that he had no knowledge that any stock had been issued to him by the association at any time until this controversy arose. It appears among other things that the six shares of stock were issued to plaintiff but retained by defendant as required by statute, and that the secretary handed him the old by-laws of the association on which was written across the face in red ink "amended June 22, 1895." The plaintiff says that he was unable to compute the interest and the payment himself but he does not state or make any further explanation in that respect. He does not claim that the defendant's agents practised any fraud to deceive him but merely makes a statement of the transaction as he understood it.

Under this state of facts the plaintiff claims that the transaction was an ordinary loan. To support which much reliance is placed upon the case of the defendant Association v. Forter, by the Supreme Court of Kansas, 76 P. 484; where the court in passing upon a similar loan in which the circumstances were much like the ones in this case, held that, the loan was an ordinary one without reference to the question whether the association was acting under the amended act of June 21, 1895, or the previous statute regulating building and loan associations. The court in commenting on the facts treats the provisions in the mortgage bond and the deed of trust as of no significance and leaves them out of consideration in deciding the case. But it will be observed that the court gave its ruling principally on the ground that the by-laws of the association were quite unlike the provisions of the Kansas Law with respect to building and loan associations and hold that under the latter the transaction would be nothing more than a loan and the usury laws would apply. The bond and mortgage had been executed in that State. To this part of the opinion we have nothing to say against its soundness but we do not feel inclined to concur in the holding, that the transaction under the facts was a mere loan independent of the question, whether the association was acting under the amendatory law or the law as it previously existed in this State.

In passing upon the question we cannot ignore the recitations in the bond and the deed of trust to the effect that plaintiff was a shareholder in the association and that the bond itself pledged plaintiff's shares of stock for the payment of the loan. These instruments were executed in the most formal manner and the recitations therein were clear and unequivocal and to hold that they were no part of the contract without any evidence of fraud, mistake, or duress would be against every principle of construction and if such construction is to be followed it would effectively do away with the necessity of reducing contracts to writing and the Statute of Frauds and Perjury would be a dead letter.

The question in the case is: Was the defendant association at the time it made the loan doing business under the amendatory act of June 21, 1895, or under the act that previously existed? If under the latter for want of competitive bidding as the statute there required the loan was an ordinary one and the monthly payments in excess of six per cent per annum were usurious and the plaintiff is entitled to relief as the payments he has made has discharged the debt with the legal rate of interest. [Clark v. Mo. Guar. Sav. and ...