Washington Nat. Building & Loan Ass'n v. Andrews

• Decision Date: 20 November 1902
• Citation: 53 A. 573,95 Md. 696
• Parties: WASHINGTON NAT. BUILDING & LOAN ASS'N v. ANDREWS et al.
• Court: Maryland Court of Appeals

53 A. 573

95 Md. 696

WASHINGTON NAT. BUILDING & LOAN ASS'N v. ANDREWS et al.

Court of Appeals of Maryland

November 20, 1902

Appeal from circuit court, Anne Arundel county, in equity; James Revell, Judge.

Suit by the Washington National Building & Loan Association against William R. Andrews, as trustee in bankruptcy, and another. From the decree, complainant appeals. Affirmed.

Argued before McSHERRY, C.J., and BRISCOE, BOYD, PEARCE, and SCHMUCKER, JJ.

James M. Munroe, for appellant.

James W. Owens, for appellees.

SCHMUCKER J.

This is an appeal from an order of the circuit court for Anne Arundel county ratifying one, and rejecting the other, of two alternative auditor's accounts, which distributed the proceeds of land sold under a building association mortgage. Neither the validity of the mortgage, nor the regularity of the sale, is challenged. The sole dispute is over the distribution of the proceeds of sale, the main question being whether the mortgage transaction was or was not usurious. Account A which was ratified, allowed the appellant, as mortgagee, only the amount loaned, with interest at 6 per cent., less the sum of the payments made on account, and awarded the balance of the fund to the appellee, as owner of the equity of redemption. Account B, which was rejected, distributed the proceeds of sale in accordance with the terms of the mortgage, which made the fund insufficient to pay the appellant's claim.

The appellant was incorporated in the state of Virginia, but it has its principal office in Washington, and also does business in Maryland. Its charter does not appear in the record, which contains only a few extracts from its by-laws but we will assume that it is a building or homestead association, within the contemplation of the laws of this state. It appears from the by-laws that the corporation from time to time advanced, to such of its members as applied for it, the matured or par value of their stock, upon acceptable mortgage security. The by-law authorizing the making of the advances distinctly provides "that the rate of interest thereon shall be six per cent. per annum, with such monthly premium as may be bid therefor." Stock was regarded as matured when the payments standing to its credit in the loan fund, together with its apportioned share of the profits of the association, amounted to $100 per share; that being its par value. The recipient of the advance was required at the time of its receipt to transfer the shares of stock upon which it was made to the corporation. The time requisite for the stock to thus mature was, of course, uncertain, depending mainly upon the success of the enterprise; but the borrowing member was in some measure protected by a by-law providing that the payment of monthly dues upon redeemed stock would not be exacted for more than 84 months on each share.

In the present case, William T. Davidson, having subscribed for 12 shares of the stock of the appellant, applied for an advance of $1,200 thereon; offering in his application to pay a premium of 50 cents per month per share of stock, in addition to 6 per cent. interest on the money to be advanced. The advance was granted to him on March 25, 1895, and he secured its repayment by his bond to the appellant, with a mortgage on two lots of ground in Anne Arundel county. Both the bond and the mortgage require Davidson to pay into the association the lump sum of $19.20 per month until the stock matures, not exceeding 84 months, after which time, if the stock has not then matured, he is to pay interest at 6 per cent. on the sum advanced to him until the stock does mature. Neither the bond nor the mortgage discloses the items which make up the gross monthly payment of $19.20, but the pass book issued to the mortgagor indicates that it consists of $7.20 dues, and $12 interest and premium. Davidson held the mortgaged property until August, 1895, when he sold it to Timothy D. Keleher who held it until 1901, when he was adjudicated a bankrupt, and the appellee Andrews was made his trustee. Both the trustee and Davidson, the original mortgagor, came into this case by leave of court, and filed exceptions setting up the defense of usury. While Keleher owned the property he made payments to the appellant, which were accepted by it on account of the mortgage debt, sufficient to meet all of the payments called for by the terms of the mortgage, up to May 31, 1899. The property was sold for a failure to make the payments thereafter falling due.

In Association v. Gross, 71 Md. 456, 18 A. 896, and Hough v. Horsey, 36 Md. 181, 11 Am.Rep. 484, it was held that where it appeared on the face of the deed, or by evidence aliunde, that the grantee of property subject to an usurious mortgage had agreed specifically to pay the mortgage debt, he would not be permitted to set up the defense of usury to the mortgage, although the right of the original mortgagor to make that defense was there recognized. The present case differs from the two just cited, in that the deed from Davidson to Keleher does not specifically mention either the mortgage or the debt thereby secured. The only reference in that deed to liens on the property conveyed by it appears in the covenant of warranty, which warrants the title, ...