Wilcoxen v. Smith

• Decision Date: 06 February 1899
• Citation: 78 N.W. 217,107 Iowa 555
• Parties: WILLIAM M. WILCOXEN, RECEIVER, Appellant, v. T. L. SMITH et al., C. B. HOWARD et al., DANISH EVANGELICAL LUTHERN, OUR SAVIOR'S CONGREGATION, LARS JOHNSON et al., LARS P. LARSON et al., JOHN HEMINGSON (six cases)
• Court: Iowa Supreme Court

78 N.W. 217

107 Iowa 555

WILLIAM M. WILCOXEN, RECEIVER, Appellant, v. T. L. SMITH et al., C. B. HOWARD et al., DANISH EVANGELICAL LUTHERN, OUR SAVIOR'S CONGREGATION, LARS JOHNSON et al., LARS P. LARSON et al., JOHN HEMINGSON (six cases)

Supreme Court of Iowa, Des Moines

February 6, 1899

Appeal from Pottawattamie District Court.--HON. W. I. SMITH, Judge.

ACTIONS in equity to recover amounts alleged to be due, and to foreclose certain mortgages. Each cause was heard on its merits, and a decree rendered therein, from which the plaintiff appeals.

Reversed.

Wm. M Wilcoxen for appellant.

S. B Snyder for appellees.

OPINION

ROBINSON, C. J.

These cases are submitted together, for the reason that controlling questions are common to all of them. The case of Wilcoxen receiver, against Smith involves the following facts: The Union Building & Saving Association was organized to transact business as a mutual building association, under and by virtue of sections 1184 to 1187, inclusive, of the Code of 1873. On the twenty-eighth day of December, 1894, it was insolvent to the extent that it was unable to pay to the share-holders the full amounts paid by them to the loan fund of the association, and William M. Wilcoxen was appointed by the district court of Polk county receiver of the association, and he duly qualified and is acting as receiver. About the first of January, 1893, the defendant T. L. Smith subscribed for ten shares of Class A stock of the association, and thereby became a member thereof and shareholder. A few days later he and his wife and co-defendant applied to the association for a loan of one thousand dollars, and signed a written obligation, of which the following is a copy: "January 2, 1893. As the holder of ten shares of stock in the Union Building and Saving Association of Des Moines, Iowa, and in consideration of the sum of one thousand dollars advanced to T. L. Smith and wife, Elizabeth R. Smith, by said association, the receipt whereof is hereby acknowledged, we promise, contract, and agree to pay to said association, its successors or assigns, as follows, to-wit: The sum of eighteen and 80-100 dollars on the first day of February, 1893, and a like sum of eighteen and 80-100 dollars on the first day of each and every month thereafter,--the same being the sum of five and 80-100 dollars as monthly installments; the sum of five dollars for one month's interest at six per cent. per annum, on said loan; the sum of eight dollars monthly as and for premiums bid for said loan. Also all fines and penalties which we may incur as the holder of said ten shares of stock. In accordance with the by-laws of said association, all said payments are to be made on the first day of each and every month, and shall continue to be made until such time as the monthly installments paid in on said ten shares of stock, together with the profits thereon, shall equal their aggregate par value of one thousand dollars. We further agree that if default shall be made in the payment of said sums of money, or any of them, for the period of three months, after the same are due and payable, the whole of said principal sum, advanced as above, shall at once become due, and, if suit be commenced to enforce the collection of the amount due on this contract, a reasonable sum shall be allowed as plaintiff's attorney fee and taxed with the costs in the case. (Signed) T. L. Smith. Elizabeth R. Smith." To secure the payment of the loan, Smith and his wife executed to the association a mortgage on certain lots in an addition to the city of Council Bluffs, and Smith assigned to the association his certificate for ten shares of stock, to be held as further security for the loan. The plaintiff claims that the defendants are more than three months in arrears in the payment of dues, interest, and premiums, and that, by the terms of the loan, the entire amount thereof is due. The Smiths allege that they are entitled to credit as follows: One hundred and eighty-four dollars for premiums paid at the rate of eight dollars per month, ten dollars paid as certificate fees, one hundred and fifteen dollars paid as interest, and two hundred and two dollars and thirty cents paid as dues on stock, and to earnings. They further allege that the loan was usurious, and that the premiums paid were not in fact fixed on competitive bids by the members of the association, but were fixed by it for the use of the money loaned. It is admitted that Smith had made all payments due from him prior to the appointment of the receiver, and that he has not paid anything since that time. He paid as premiums one hundred and eighty-four dollars, and as interest, at the rate of six per cent. per annum, one hundred and thirty-eight dollars. It is also admitted that the association is insolvent, and that when the receiver was appointed the book value of the shares of stock held by the association was two hundred and fourteen dollars and ninety-one cents, including profits to the amount of thirty-five dollars and seven cents, which had been apportioned to the stock. The district court found that the loan was usurious and illegal; that the defendants were entitled to credits thereon for the interest and premiums paid and the book value of the stock to the aggregate amount of five hundred and thirty-six dollars and ninety-one cents; and rendered a decree against Smith for the balance of four hundred and sixty-three dollars and nine cents and for one hundred and seventy-six dollars and forty-eight cents for the use of the school fund, and also decreed the foreclosure of the mortgage. The other cases involve similar facts.

I. We first inquire whether the loans were usurious. The by-laws of the association provided that its funds should be loaned on real estate security, only to its members, "upon such conditions as the board of directors may dictate;" that the rate of interest should be six per cent. per annum on the money actually loaned; that all interest and premiums should be paid monthly; and that all applications for loans would "be granted according to the priority of the application," in case the security should be approved by the board of directors or executive committee. Although the by-laws contemplated the payment of premiums, they did not, in terms, require premiums, nor prescribe any rule for ascertaining what premiums should be paid. The evidence does not show that the board of directors ever adopted any formal rule in regard to them. But it appears that the amount of premium specified in the applications of the borrowers as that which they offered to pay for the desired loan was uniformly eighty cents for each one hundred dollars of the loan. There was no formal bidding for the loans. When a borrower asked for the terms on which he could procure a loan, he was informed, in effect, that a premium of eighty cents on each one hundred dollars of the loan would be required each month. That amount was as definitely fixed and as regularly exacted as was the payment of interest, and both premium and interest were placed in the loan fund of the association. Section 1185 of the Code of 1873, which applies to the transactions in question, provides that a mutual building association "shall be authorized and empowered to levy, assess, and collect from its members such sums of money, by rates of stated dues, fines, interest on loans advanced, and premiums bid by members for the right of precedence in taking loans, as the corporation by its by-laws shall adopt," and that "the dues, fines and premiums so paid by members, in addition to the legal rate of interest on loans taken by them, shall not be construed to make the loans so taken usurious." That section contemplated good-faith bidding of premiums to obtain the right of precedence. The statute does not require the payment of the premium in advance, and the fact that it is...