Lindsay v. Chickasha Building & Loan Ass'n
| Decision Date | 18 February 1913 |
| Citation | 130 P. 570,39 Okla. 12,1913 OK 144 |
| Parties | LINDSAY ET UX. v. CHICKASHA BUILDING & LOAN ASS'N. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
Under the laws in force in the Indian Territory prior to statehood "in a loan made by a building association to a shareholder in the usual form, there can be no usury, because the rate of interest paid by him is contingent upon the length of time required to pay out his shares."
Where a building and loan association, organized under the laws in force in the Indian Territory prior to statehood, and where prior to statehood, a mortgage is given to such association to secure a loan of $400, and where the by-laws of such association provide that, in case of default in any payment when it becomes due, the entire debt shall at once become due, and that the stock assigned as collateral, together with all payments made thereon, shall become forfeited to the association, and that the association shall have the election to foreclose, not only for the amount of the loan and interest, but also for a premium note of $540 bid by the borrower for the loan, equity will not decree for the premium in addition to the loan and interest, as to do so would be tantamount to enforcing a penalty for a breach of contract.
Forfeitures are not favored by law, but building and loan associations are permitted to forfeit shareholder's stock for nonpayment of dues, where the by-laws specifically provide for such forfeiture, and where such provision is not in conflict with statutes. In case of forfeiture for default in payments due and foreclosure proceedings by the association where the borrower is not seeking to redeem the stock and to continue his relations as a member, but seeks merely to liquidate the debt, he may elect to have the stock payments applied on the loan, and will be allowed credit for same.
Commissioners' Opinion, Division No. 2. Error from District Court, Grady County; Frank M. Bailey, Judge.
Action by the Chickasha Building & Loan Association against J. D Lindsay and wife to foreclose a mortgage and lien on stock. Judgment for plaintiff, and defendants bring error. Modified and affirmed.
John H. Venable, of Chickasha, for plaintiffs in error.
Wm. Stacey, of Chickasha, for defendant in error.
In November, 1905, J. D. Lindsay, then a stockholder and member of the board of directors of the Chickasha Building & Loan Association, obtained a loan of $400 from said association and executed a note therefor, bearing 6 per cent. per annum, and as a bid for said loan executed a premium note for $540, bearing 8 per cent. per annum, and to secure the payment of said notes, and as part of the same transaction, executed a mortgage on certain lots in the city of Chickasha, and as additional security assigned a certain certificate of stock in said association for $1,000; the same being 40 shares. The mortgage and both notes were also signed by Mary E. Lindsay, his wife. The loan was made under the rules and regulations and by-laws of said association, and the payments of both principal and interest were regulated by such rules and by-laws.
Under the terms of said notes and mortgage, and under the rules and by-laws of said association, the interest accruing on said notes was to be paid monthly on or before the Monday preceding the first Tuesday of each month. The notes became payable in five years after November 24, 1905. Some payments had already been made on the stock assigned before the date of the loan. After the loan was obtained, Lindsay continued to make the monthly payments for a few months and then defaulted in further payments. The by-laws of the association and the notes and mortgage provided that, upon default of payment of the interest on the loan and premium note when same became due, the stock assigned, together with all payments which had been made thereon, should become forfeited to the association. In March, 1909, neither the interest nor stock payments having been made for several months, and defendant refusing to make further payments, the association brought suit to foreclose the lien on the stock and the mortgage on the real estate and prayed judgment for $940, the sum of the two notes and the interest due thereon. Defendant answered that the contract, being made in the Indian Territory prior to statehood, was in violation of the Arkansas statute on usury, and void.
At the trial of the cause the court rendered judgment for the amount of the loan, $400, with interest from date at the rate of 6 per cent., less the sum of $22.66 found by the court to have been paid on same, and judgment foreclosing the mortgage on the real estate, and decreeing the stock forfeited to the association, together with the sum of $80 paid on the stock before the loan, and $113.34 found to have been paid on same after the loan had been made, and decreed the cancellation of the premium note for $540.
Defendants, Lindsay and his wife, appealed from this judgment, claiming that the entire contract was usurious and void, and that the court erred in not rendering judgment in favor of defendants, and further claiming as an alternative that if judgment be rendered against defendants for the amount of the loan, $400, and also judgment forfeiting the stock which defendants had assigned as collateral, that in such event defendants should have been allowed a credit on the loan note for the amount, $113.34, which had been paid on the stock after the loan had been obtained, and $80 paid on same previous to the loan.
As to whether defendants are entitled to judgment annulling the entire contract because of the usurious...
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