Manship v. New South Building & Loan Ass'n

• Decision Date: 27 July 1901
• Citation: 110 F. 845
• Parties: MANSHIP et al. v. NEW SOUTH BUILDING & LOAN ASS'N et al.
• Court: U.S. District Court — Southern District of Mississippi

110 F. 845

MANSHIP et al. v. NEW SOUTH BUILDING & LOAN ASS'N et al.

United States Circuit Court, S.D. Mississippi.

July 27, 1901

Sterling & Harris and Frank Johnston, for complainants.

Denegre Blair & Denegre and J. S. Sexton, for defendants.

NILES District Judge.

Complainants herein filed a bill against the New South Building & Loan Association, Johnston Armstrong, receiver therefor, and Jules A. Blanc, trustee in a certain deed of trust hereinafter referred to, and alleged, among other things, that Luther Manship and his wife, Belmont P. Manship, borrowed from said association the sum of $1,000 on the 7th day of December 1894, and that in order to secure the same they executed a deed of trust of that date to said Jules A. Blanc as trustee to secure said association in the sum of money so borrowed upon real estate situated in the city of Jackson, Miss. They further alleged that said loan was 'evidenced by the joint promissory note of Luther Manship and Belmont P Manship, payable on the . . . day of October, 1906, to the order of said association, at its office in the city of New Orleans, La. '; that said association is a nonresident of this state, and that on the . . . day of . . ., 1899, it was placed in the hands of Johnston Armstrong as receiver of the United States circuit court for the Eastern district of Louisiana, and that later said receiver was appointed in ancillary proceedings had in the United States circuit court for the Southern district of Mississippi; that said Armstrong was about to make an attempt to collect the sum of money so borrowed, with a lot of usurious interest and extortionate charges claimed to be due by him, and that he insisted upon the payment of 'interest,' 'dues,' and 'premium,' all of which are synonymous and aggregated 12 per cent. interest to start with and a correspondingly increasing ratio as each payment was made by complainants; that the contract entered into between the parties was usurious, because 'it reserves 6 per cent. per annum interest and 6 per cent. per annum fixed premium,' and that the term 'premium' is used merely as a disguise for the word 'interest,' and that the whole is in excess of the 10 per cent. maximum allowed by the law of the state of Mississippi; that the contract 'was made at Jackson, Miss., between complainants and the agent of the defendant association, and the amount of the loan so paid to complainants at Jackson, Miss., and it was the express agreement and understanding of all the parties to the transaction, at the time of making it, that said contract was to be performed by complainants making certain monthly payments to the local agent of said defendant association at Jackson, Miss., and that, as a matter of fact, it was never intended that said note should be paid at New Orleans, or at any other place than at Jackson, Miss.'; that said association 'was engaged in the ostensible business of a building and loan association, which served as a cloak for its nefarious operations and practice of usury in the state of Mississippi,' and that, as a matter of fact, it was not a building and loan association at all, but 'was simply a money-lending concern, using the guise of a building and loan association, with complicated and intricate form of contract, merely to hide its illegal and shady transactions, and that none except holders of the guaranty stock were allowed to have any voice at all in the management of the affairs of said corporation, and that, as borrowers, complainants were not members of a building and loan association, but debtors to a lot of money sharks, and that none of the benefits of a bona fide building and loan association could possibly inure to them from their membership in this concern'; that the by-laws of the association were made a part of the contract of loan, and that the premiums charged were fixed therein without legislative authority therefor, and that said premiums were therefore illegal, and were in fact interest. Complainants further alleged their willingness to do equity in the premises, and offered to pay into court 'whatever amount that may seem right to the court that they should pay,' and that said receiver threatened to foreclose said mortgage and thereby collect a lot of illegal charges, and that said mortgage constituted a cloud upon the title of complainants. Wherefore complainants ask that said receiver be restrained 'from attempting to foreclose the mortgage on said property of complainants until the matter has been fully inquired into and adjudicated by this court.'

The defendants answered said bill, denying the allegations that the contract was usurious, and that the words 'interest' and 'premium' were synonymous, and in fact denied that there was any premium provided for in the contract between the parties. They further denied that said contract was made at Jackson, Miss., and alleged that, while the note and mortgage were executed in Jackson, Miss., it was done for the convenience of the said Luther Manship and his wife, and denied that there was any understanding that said contract was to be performed by complainants making certain monthly payments to the local agent of said association at Jackson, Miss., and that as a matter of fact it was never intended that said note should be paid in New Orleans, or at any other place than at Jackson, Miss., and stated that, 'in reference to the allegations as to payments made at Jackson, Miss., defendants say, as a matter of convenience to local borrowers at Jackson, Miss., they were allowed to make their payments to one George Green, and such payments as were made by Luther and B. P. Manship on said loan were made to him, but that it was expressly agreed by the parties that such payments were made to such party as the agent of the said Luther and Belmont P. Manship, and not as the agent of the defendant association. ' Section 5 of article 3 of the by-laws of the defendant association is expressly made a part of the contract between the said Luther and B. P. Manship and the said defendant association, and expressly provides that 'all money due from members to the association or from it to the members shall be payable at the home office in New Orleans, La.' The defendants denied all allegations to the effect that the New South Building & Loan Association was anything more or less than a regular building and loan association, and that it was 'using the guise of a building and loan association to hide its illegal and shady transactions' by which usury was extorted from the people of Mississippi, and denied 'that a fixed premium, which, added to the rate of interest charged in a building and loan contract, exceeds the legal rate of interest charged or permitted to be charged in Mississippi, necessarily makes such contract with a Mississippian usurious.'

The defendant Johnston Armstrong, receiver, made his answer a cross bill against the complainants, alleging that he was a citizen of Louisiana, and that said association was likewise a citizen of that state; that it was organized as a building and loan association under and by virtue of the general and special laws of that state, and that subsequent to its organization it adopted certain by-laws; that during the active operation of said association said Belmont P. Manship made a written application for membership therein and subscribed for ten shares of stock of said association, and that she was admitted into membership in said association 'subject to all the conditions and limitations contained in the charter and by-laws of said association'; that subsequent thereto she made application in writing for a loan, which application was accepted; that she and her husband, Luther Manship, executed the note and deed of trust referred to in complainants' bill. The complainant in said cross bill further alleged that said New South Building & Loan Association became insolvent in June, 1899, and that it became impossible and impracticable for it to further carry on its business; that one of the stockholders filed a bill in the circuit court of the United States for the Fifth circuit and Eastern district of Louisiana praying that a receiver be appointed to take charge of said association and wind up its affairs; that service on said bill was accepted by said association, and upon presentation of the same to the Honorable Don A. Pardee, circuit Judge in and for said Fifth circuit, he (the said Johnston Armstrong) was duly appointed receiver of the association; that he had qualified as such under the original order appointing him, and by proper ancillary proceedings he was likewise appointed receiver by the United States circuit court for all of the districts of Louisiana, Mississippi, Georgia, and Florida, and that he was proceeding to administer the estate in each of said states, subject to the direction of the courts which had appointed him; that upon taking charge of the property and affairs of said association he found that it was necessary to seek the direction of the court appointing him, in order that there might be a homogeneous, uniform, and equitable administration of the affairs of said association throughout the states wherein he had been appointed receiver, and he applied to the court of primary jurisdiction, which was presided over by the Honorable Charles Parlange, United States district judge for the Eastern district of Louisiana, for directions in the premises; that such application was referred to the Honorable E. B. Kruttschnitt as master and commissioner in chancery, who, after a thorough investigation into the affairs of said association, 'submitted his findings and recommendations in the premises to the court appointing him'; that said report was excepted to, but was confirmed by the court appointing him; that...