Rowland v. Old Dominion Building & Loan Ass'n

• Decision Date: 20 February 1894
• Citation: 18 S.E. 965,115 N.C. 825
• Parties: ROWLAND v. OLD DOMINION BUILDING & LOAN ASS'N et al.
• Court: North Carolina Supreme Court

18 S.E. 965

115 N.C. 825

ROWLAND v. OLD DOMINION BUILDING & LOAN ASS'N et al.

Supreme Court of North Carolina

February 20, 1894

Appeal from superior court, Vance county; Bryan, Judge.

Action by W. H. Rowland against the Old Dominion Building & Loan Association, a Virginia corporation, and T. M. Pittman, for an accounting. From the judgment on report of referee Pittman appeals. Modified.

When the mortgagor and his land were in North Carolina, and he there applied for a loan to a Virginia association having a local board of managers and treasurer, and there executed the mortgage, the North Carolina usury laws apply, though the application was sent to the home office, and the money remitted from there, and the bond is payable there, and the local board and treasurer are styled agents, not of the association, but of the local members.

Pittman & Shaw, for appellant.

H. T Watkins, for appellee.

BURWELL J.

The defendant association is a corporation of the state of Virginia. Its home or principal office is in Richmond, in that state. It organized a branch of its business at Henderson, in this state, and there had what is styled a "local board" of officers or managers. One Noell of Vance county, applied, through the local board, to the home office, for a loan of $1,000, on May 31, 1890 "upon bond and mortgage of the property" mentioned and described in his application. He stated in his said application that he understood he was to pay, if he secured the loan, the necessary expenses of securing the repayment of the money, including the charges of counsel for examining title and preparing securities, and that he would furnish an abstract of title. This application was accompanied by a certificate of the local board that the property offered as security was worth $1,500, and that the loan was one which it was desirable for the association to make. In order that he might have the privilege of borrowing money from this association, it was necessary that he should become one of its stockholders; and it seems that, at this stage of the business, it was required of those who would be borrowers that they should subscribe for stock whose par value was double the sum proposed to be borrowed. And so Noell subscribed for 20 shares of the stock, par value $2,000, in order to get a loan of $1,000. He then received the sum loaned him, ($1,000,) and secured its repayment to the association, with 6 per cent. interest thereon, and also the payment of installments due on the stock subscribed for, (60 cents per share each month till the stock was worth par,) by a deed of trust on his property mentioned in his aforesaid application, and worth $1,500. At the same time, and as a part of the same transaction, he executed the following paper: "For value received, I hereby assign to Old Dominion Building and Loan Association twenty shares capital stock therein, this day redeemed at $50 per share. Witness my hand this 7th day of July, 1890. [Signed] T. A. Noell."

We gather from the record that this Virginia corporation insists that, by virtue of these contracts and this conveyance in trust, it has the right to exact from this borrower, in return for the $1,000 loaned him, payments on 20 shares of stock, at $12 per month, until the stock reached the par value of $2,000, and also $5 per month interest on the sum borrowed until the same time, and also fines for lack of the promptness prescribed in the by-laws of the association for the payment of these dues. Considered apart from all questions about expected profits, the contention of this association is that this borrower has agreed to pay back the money borrowed, with 6 per cent, interest, and then to give it, in addition, a bonus of $1,000 for making the loan, and when this is done it will call the game over, and quit. Upon such a settlement, the account would stand thus: The association loans $1,000. It receives entrance fees, $20 appraiser's and attorney's fees, $15; interest on $1,000 at 6 per cent., $5 per month for 166 2/3 months, $833.33; dues at 60 cents per share per month till they amount to $1 per share, $2,000; total receipts, $2,868.33; to which should be added as a proper debit, 6 per cent. interest on $2,000 for one-half of 166 2/3 months, $833.33; grand total, $3,701.66. In other words, the borrower assumed, it says, a liability to pay $3,701.66 for $1,000 and its use for 166 2/3 months, or about 20 per cent. for money. And against this liability is held up the hope that the business of the association will be immensely profitable, so that by reason of such profits the shares will arrive at their par value in a much shorter period than 166 2/3 months. The foundation of such a hope is not easily discerned. Profits, if any come, must come from the pockets of the members alone. They must feed upon one another,--the borrowing members on the non-borrowing members, or vice versa,--for no other victims are in reach. Expenses must be met. Losses, inevitable in every business, will occur. And expenses and losses may not only destroy all hope of profits, but may bring the deluded borrower to the necessity of paying back for the benefit of creditors of the association the money he borrowed after he had settled the debt, as he thought, by the payment of...