The Mutual Home and Savings Association v. Worz

• Decision Date: 10 July 1903
• Docket Number: 13,254
• Parties: THE MUTUAL HOME AND SAVINGS ASSOCIATION, ETC., v. FELIX WORZ et al
• Court: Kansas Supreme Court

73 P. 116

67 Kan. 506

THE MUTUAL HOME AND SAVINGS ASSOCIATION, ETC., v. FELIX WORZ et al

No. 13,254

Supreme Court of Kansas

July 10, 1903

Decided July, 1903.

Error from Wyandotte district court; E. L. FISCHER, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. BUILDING AND LOAN ASSOCIATIONS--Usurious Loan. Where the controlling statute requires that directors of building and loan associations hold stated meetings at which loans of money shall be offered to all the members in open meeting and that the shareholder who bids the highest for the preference or priority be entitled to receive the loan, any loans made without competitive sales as required, the premiums being fixed by arbitrary rule, are illegal, and the premiums, dues and charges in excess of legal interest will be deemed usurious.

2. BUILDING AND LOAN ASSOCIATIONS--Missouri Statute. In the absence of proof to the contrary, the statute of Missouri relating to usury will be presumed to be similar to the statute of this state.

Vinton Pike, for plaintiff in error.

Junius W. Jenkins, for defendants in error.

JOHNSTON C. J. All the Justices concurring.

OPINION

JOHNSTON, C. J.:

This was an action brought by the Mutual Home and Savings Association against Felix Worz and his wife to recover on a certain bond and mortgage executed by them for the sum of $ 900, on which there was alleged to be due $ 762.56, with interest at the rate of six per cent. from March 1, 1899. The loan was alleged to have been made to Felix Worz as a shareholder in the association. He denied that he was a shareholder, and alleged that if any stock was issued to him in the association it was not done in good faith, but for the sole purpose of making the loan. It was also alleged by the defendants that they were induced by false and fraudulent representations to borrow the money, and that the contract under which the loan was made was usurious, and that by reason of that fact and the payments already made there was nothing due to the association. A trial before a jury resulted in favor of the defendants.

The principal errors brought to our attention are raised on the instructions given and refused by the trial court. There was testimony introduced tending to show that the transaction between the parties was a mere loan and that the issuance of stock to Worz was no more than a matter of form and fiction. If it was no more than a loan, and the membership arrangement was made as a guise to the obtaining of a usurious charge for the use of the money, the only relation between the parties was that of creditor and debtor. (Building Association v. Thompson, 19 Kan. 321; Savings Association v. Kidder, 9 Kan.App. 385, 58 P. 798.)

Passing, however, the sufficiency of this evidence or the right to insist upon this defense, and assuming that Worz actually became a member at the outset, we will take up the charge of usury. The corporation was organized under the laws of Missouri, and, having failed in 1897, it is closing up its business. The statute under which it was organized prescribes the manner in which money may be loaned as follows:

"The directors of the corporation shall hold stated meetings, at which such sums of money as they may determine shall be offered for loan to all the members in open meeting. The shareholder who shall bid the highest for preference, or priority of loan, shall be entitled to receive a loan," etc.

The premiums, dues and extra charges cannot be brought within the protection of the building and loan association privilege and exempted from the charge of usury unless there is free and open competition between the borrowing shareholders. The rule is that if there was no bid and no competitive sale at an...