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therefore no means of determining the ; unnecessary to discuss the other assignments amount of loss by reason of this misrepre- of error, as the questions presented by them sentation.

are not apt to arise on another trial. By reason of the erroneous theory as to The judgment is reversed and a new trial the measure of damages upon which the granted as to both appellants. case was tried, the findings neither support the judgment, nor exonerate the appellants.

All concur. There must therefore be a new trial. The Petition for rehearing overruled May 31, view we have taken of the case renders it | 1905.

OHIO SUPREME COURT.

p.

power

on

Simon W. CRAMER, Piff. in Err., (who is now deceased) to foreclose a mort.

gage on certain real estate in that county, SOUTHERN OHIO LOAN & TRUST COM- and for a personal judgment against the husPANY.

band. The petition alleges that plaintiff is

a corporation under the laws of Ohio, and ..Ohio....... )

organized for the purpose of raising money

to be loaned among its members, and that it *1. Section 3836-3, Bates's Anno. Stat. is engaged in that business; that on the 24th

2130, which confers building and loan associations “to as

day of June, 1896, under an application in sess and collect from members and depositors writing for that purpose, and submitted to such dues, fines, interest, and premium on said company, Cramer became a member of loans made, or other assessments, as may be the company, and a stockholder to the extent provided for in the constitution and by- of 17 shares of instalment stock of class B laws," and which further provides that “such of $100 each share; that on the same day dues, fines, premiums, or other assessments, shall not be deemed usury, although in ex

he made application for a loan of $1,700, cess of the legal rate of interest,”—is a valid and offered as security for the same the enactment, and is not in conflict with g 26 mortgage in suit, an assignment of all fire of art. 2, nor with § 2 of art. 1, of the Con-insurance on the buildings, and a transfer

stitution of Ohio. 2. Under the provisions of said statute, of the 17 shares of stock; that the applica

the premium for a loan, if reasonable in tion contained, besides a description of the amount, need not be ascertained by com real estate, several conditions with which he petitive bidding for precedence in obtaining would comply; that, acting on the applicathe loan, but it may be fixed at a uniform tion, the company loaned to Cramer $1,700, rate by the constitution and by-laws of the and as security for which he gave the mortassociation,

gage, assigned the fire insurance, and trans(May 2, 1905.)

ferred the said shares of stock.

It is alleged that Cramer, as one of the E : ,

ing County to review a judgment re monthly, without demand therefor, until versing a judgment of the Court of Como said loan was fully repaid, as follows: mon Pleas in plaintiff's favor for a less "The dues upon said 17 shares of stock; the amount than demanded in an action to fore- 5 per cent premium bid upon said $1,700, close a mortgage which had been given to 5 per cent interest on said $1,700, and, in secure the payment of a loan. Affirmed. addition thereto, to pay all fines, penalties,

and other charges which should become due Statement by Price, J.:

against said shares, and all taxes, assessThe defendant in error began a suit in the ments, costs of insurance, and other charges court of common pleas of Paulding county upon said premises, in accordance with the against the plaintiff in error and his wife constitution' and by-laws theretofore duly *Headnotes by the COURT.

adopted by said company.'

The dues were

NOTE.-For other cases in this series as to Pioneer Sar. & L. Co. v. Cannon, 33 L. R. A. validity of statute exempting building and loan 112; Falls v. United States Sav. Loan & Bldg. associations from operation of the usury laws, Co. 24 L. R. A. 174; Bennett v. Eastern Bldg. see Smoot v. People's Perpetual Loan & Bldg. & L. Asso. 34 L. R. A. 595 ; Smoot v. People's Asso. 41 L. R. A. 589, and Iowa Sav. & L. Asso. Perpetual Loan & Bldg. Asso. 41 L. R. A. v. Heidt, 43 L. R. A. 689.

589; Iowa Sav. & L. Asso. v. Heidt, 43 L. R. A. As to visury in contracts by building and loan 689; Borrowers' & Investors' Bldg. Asso. v. associations generally, see note to Reeve v. Eklund, 52 L. R. A. 637; and Pacific States Ladies' Bldg. Asso. Perpetual, 18 L. R. A. 129 ; Sav. Loin & Bidg. Co. v. Ilill, 56 L. R. A. 163.

fixed at $8.50 per month on the 17 shares. , in all respects as stated in the petition, The company alleged that Cramer failed to which loan was granted on July 24, 1896, keep and perform the agreement made in his and that sum was paid to Cramer, on the application and mortgage, so that on the terms and conditions aforesaid, and that to 14th day of October, 1902, the sum due upon secure the payment of the loan he gave to said loan, including principal, interest, pre- the association his mortgage deed on the miums, fines incurred on said stock, and real estate described in the petition; and cost of insurance paid by the company, ac- that the mortgage contained by reference cording to the terms of the agreement, thereto all the provisions and agreements in amounted to $2,787.35 and that Cramer had the application for stock and for the said paid thereon in cash and dividends to be ap- loan. This mortgage was filed for record plied only the sum of $1,391.83, leaving a on the same day and recorded the succeeding balance due at that date of $1,395.52. For day. this amount the petition prays judgment

The court found the terms and conditions and foreclosure.

of the mortgage to be as above stated, but The answer of Cramer admits that he ob- found that the premium mentioned in tained a loan from the Southern Ohio Loan said application and mortgage was not fixed & Trust Company for $1,700, and gave his by any competitive bidding, but by the mortgage to secure the same; admits that he terms and provisions of the constitution and has paid thereon the sum of $1,391.83; but by-laws of said association, the said dehe denies each and every other allegation of fendant and all other borrowers from said the petition. He further answered “that association of class B therein referred to § 3836–3 of the Revised Statutes of Ohio were required to pay interest on their (Bates's Anno. Stat. 2130), in so far as it respective loans at the rate of 5 per cent presumes to authorize building and loan as- per annum, payable in equal monthly insociations to collect dues, fines, interest, and stalments, together with a so-called prepremiums in excess of the legal rate of in. mium at the uniform rate of 5 per cent per terest, is unconstitutional, against the pub- annum on said loan, in addition to said solic policy of the said state of Ohio, and called interest. In addition to the findings, void.” He further claims in the answer it was conceded and agreed in open court “that any amount or sum of money exacted at the trial that the application and mortor attempted to be collected by the . gage were signed by Cramer, and that book company is usurious, and he claims the priv- exhibit C is a true copy of the constitution ilege of the usury statutes of the said state and by-laws of the association, and was such of Ohio.” For the purpose of a settlement, when the loan was negotiated and made, and and for no other purpose, he tendered in that before the loan was made Cramer had the answer the sum of $900, and he prays issued to him on his application 17 shares of that “all amounts collected and heretofore stock class B in said association, and that paid in excess of the legal rate of interest be before he received his loan he transferred credited to him as payments of that amount said stock to the association. of principal, and, if the amount found to be

It was further conceded that, if plaintiff's due is less than the amount here tendered, contention in this case is sustained, and its that the plaintiff be decreed to pay all costs basis of computation is correct, the amount after the date of making of the said tender.” | due it would be $1,480.89, but if the court A jury was waived, and the cause was heard should find the contract to be usurious, and and submitted to the court, who made find- determine that the rate of interest to be ings of fact in substance, that the plaintiff charged is 6 per ceni, computed on the basis in that court, on the 24th day of June, 1896, of partial payments, then the amount due was, and at the time of the trial, a domestic is $840.03 to December 10, 1902; but, if the building and loan association, duly organized the plaintiff should recover should be 5 per

contract be usurious, and the rate of interest and empowered under the laws of Ohio, as such associations are described and defined cent, then, computed on the basis of partial by § 1 of “An Act to Provide for the Organ- would be $646.68. The court found the con

payments to the same date, the amount ization, Regulation, and Inspection of Build- tract and mortgage to be usurious, and deing and Loan Associations, passed May 1, cided that the statute entitled “'An Act to 1891” (88 Ohio Laws, p. 469). Further, Provide for the Organization, Regulation, that on the 24th day of June, 1896, defend- and Inspection of Building and Loan Associant purchased from said company 17 shares ations, passed May 1, 1891 (88 Ohio Laws of its instalment stock of the par value of p. 469), in so far as it allows any such com$100 each, and became a member of said as- pany to assess and collect from members sociation, and that on the same day, and as and depositors such dues, fines, interest, and part of the same transaction, he made appli- premium on loans made, or other assesscation to the association for a loan of $1,700 ments as may be provided in the constitu

ror.

tion and by-laws,” and that "such dues, N. P. 86; Thornton & B. Bldg. & Loan Asso. fines, premiums, and other assessments 8 19; 4 Am. & Eng. Enc. Law, 2d ed. pp. shall not be deemed usury, although in ex- 1054–1056, 1073; McLaughlin v. Citizens' cess of the legal rate of interest,” is uncon- Bldg. Loan & Sav. Asso. 62 Ind. 264; Shafstitutional and void. The court also held frey v. Workingmen's Sav. Loan & Bldg. that the plaintiff's claim should be computed Asso. 64 Ind. 600; Vermont Loan & T. Co. v. on the basis of $1,700 as a loan at 6 per Whithed, 2 N. D. 82, 49 N. W. 318; Central cent interest, to be computed on the rule of Bldg. & L. A880. v. Lampson, 60 Minn. 422, partial payments for each payment, by 62 N. W. 544; Zenith Bldg. & L. Asso. v. which rule there was then due the sum of Heimbach, 77 Minn. 97, 79 N. W. 609; $981.67, to draw interest from the first day Winget v. Quincy Bldg. & Homestead Asso. of the term of court. Judgment was rendered 128 Ill. 67, 21 N. E. 12°; International for that amount, and foreclosure ordered. Bldg. & L. Asso. No. 2 v. Wall, 153 Ind. A motion for new trial was overruled, and 554, 55 N. E. 431; Security Sav. & L. Asso. the case taken on error to the circuit court, v. Elbert, 153 Ind. 198, 54 N. E. 753; Reeve where the judgment was reversed, and that v. Ladies' Bldg. Asso. 56 Ark. 335, 18 L. R. court rendered a judgment in favor of the A. 134, 19 S. W. 917; Bedford v. Eastern association for $1,480.89, with 6 per cent in Bldg. & L. Asso. 181 U. S. 227, 45 L. ed. 834, terest thereon from June 2, 1903, and or. 21 Sup. Ct. Rep. 597; Iowa Sav. & L. Asso. dered foreclosure of the mortgage. Cramer v. Heidt, 107 Iowa, 297, 43 L. R. A. 689, 70 prosecutes error to reverse the judgment of Am. St. Rep. 197, 77 N. W. 1050; Smoot v. the circuit court.

People's Perpetual Loan & Bldg. Asso. 95

Va. 686, 41 L. R. A. 589, 29 S. E. 746. Mr. Vance Brodnix for plaintiff in er

Price, J., delivered the opinion of the Messrs. A. M. Waters and Snook & court: Savage, for defendant in error:

The amount in controversy between the The legislation in question is not class parties is $499.22, the difference between the legislation, and does not grant special priv- judgment of the court of common pleas and ileges.

that of the circuit court. This amount the State v. Nelson, 52 Ohio St. 88, 26 L. R. plaintiff in error claims is all usury, and A. 317, 39 N. E. 22; State ex rel. Schwartz should not be charged against him. The v. Ferris, 53 Ohio St. 314, 30 L. R. A. 218, Southern Ohio Loan & Trust Company is 41 N. E. 579; Fox v. Fox, 24 Ohio St. 335; an Ohio corporation, organized under the Adler v. Whitbeck, 44 Ohio St. 539, 9 N. E. provisions of $83836–1 et seq., Bates's 672; Senior v. Ratterman, 44 Ohio St. 661, Anno. Stat. p. 2130.

That section pro11 N. E. 321; Marmet v. State, 45 Ohio St. vides: “A corporation for the purpose of 63, 12 N. E. 463; Kimbleawecz v. State, 51 raising money to be loaned among its memOhio St. 228, 36 N. E. 1072; Cass Twp. v. (bers shall be known in this act as a buildDillon, 16 Ohio St. 38; State ex rel. Ander- ing and loan association. Associations or. son v. Harris, 17 Ohio St. 608; State ex rel. ganized under the laws of this state shall Cline v. Wilkesville Twp. 20 Ohio St. 288; be known in this act as 'domestic associaState ex rel. Bates v. Richland Twp. 20 Ohio tions, and those organized under the laws St. 362; Holst v. Roe, 39 Ohio St. 340, 48 of other states or territories, as `foreign' asAm. Rep. 459; Anderson v. Brewster, 44 sociations. Associations may be organized Ohio St. 576, 9 N. E. 683; Hagerty v. State, and conducted under the general laws of 55 Ohio St. 626, 45 N. E. 1046.

Ohio relating to corporations, except as All questions of public policy are within otherwise provided in this act.” While the sole discretion of the general assembly, this company did not adopt a name directly and, if the law is not unconstitutional, it indicating that it became and is a building will not be disturbed on that ground.

and loan association, it organized as such, Probasco v. Raine, 50 Ohio St. 378, 34 N. and announced its purposes in the second E. 536.

article of the constitution follows: Mutuality is the essential principle of a “The Southern Ohio Loan & Trust Combuilding association.

pany is a corporation organized for the purEversmann v. Schmitt, 53 Ohio St. 184, pose of raising money to be loaned among 29 L. R. A. 184, 53 Am. St. Rep. 632, 41 N. its members to aid them in the purchase E. 139.

and building of homes, and to provide the The statute is valid.

advantages usually expected from savings Spies v. Southern Ohio Loan & T. Co. 24 banks and other similar institutions." This Ohio C. C. 40; Brooklyn Bldg. & L. Asso. Co. article embraces in terms the definition of v. Desnojers, 2 Ohio Law Rep. No. 6, p. 337; a building and loan association found in People's Sav. & L. Asso. v. Roberts, 5 Ohio l the above section of the statute. The name

as

of the corporation so organized is not ma- , $1,700, and in order to obtain a loan of terial, if it has the purposes and character that sum subscribed for 17 shares of the istics named in the statute and in its own stock in the association, and thereby be. constitution. This requirement seems to came one of its members. He signed a writhave been fully met, for we find it further ten application for the loan to the full par provided in the same article: "All stock value of the shares, and, according to the reis paid for in cash, or in monthly instal. quirements of the association found in its ments, as provided for by the by-laws of constitution and by-laws, he executed and this company. Whenever the amount of delivered to it a mortgage on real estate dedues paid and dividends credited on any scribed in the petition, and as further seshare shall equal the face value of said curity transferred back to the association share, it shall be fully paid in and be con the 17 shares of stock. The constitution sidered to have fully matured, at which and by-laws were made part of the covetime it is subject to withdrawal.” etc. nants and stipulations of the application Again, from same article: “Annually on and mortgage. The condition of the mortthe first business day of January, so much gage now involved obligates Cramer to pay of the earnings as may be necessary shall be (1) the sum of $8.50 per month, being the set aside to pay the current expenses of the monthly dues on the 17 shares of stock, to company and the interest on deposits; so be credited as provided in the constitution much as shall be decided by the board of and by-laws; (2) the interest due on $1,700, directors shall be reserved for the payment or money so advanced, payable monthly, as of contingent losses, and the residue shall specified in the same instruments; (3) the be transferred as a dividend and credited to premium bid on said $1,700, or money so the shares of stock in force in proportion to advanced, as specified in said constitution their average monthly balances.

and by-laws; (4) all fines, penalties, and Article 10 of the by-laws provides that the other charges which said Cramer shall incur funds of the company shall be loaned only as a member of the association; (5) all to members on real estate security; and, rents, taxes, assessments, costs of insurfurther, that the borrower "shall in all cases ance, and other charges upon said premises, receive the full amount applied for, for in accordance with the constitution and bywhich he shall pay 5 per cent interest, and laws. When we turn to the by-laws for bid 5 per cent premium per annum. In the rates of interest and premium, we find terest and premium must be paid in month the interest charged to be 5 per cent and ly instalments, and accompany the dues to the premium fixed at 5 per cent. The court the home office.” The same article provides below found, as we do, that the premium that, if a member neglects to make his pay. was not ascertained by competitive bidding, ments according to the terms of his mort- or, as sometimes called, at auction in open gage and application, he shall be liable to meeting of the members; and on that acan action at law for their recovery, besides count it is claimed that the association dethe principal, all dues, interest, premiums, termined an arbitrary or level premium, cost of insurance, taxes, fines due and owing which renders the contract usurious when the company (association). We have re such premium and interest are added toferred to so much of the constitution and gether: Here it becomes necessary to exby-laws of this association as seems neces. amine the legislation of this state upon the sary to show that its organization and oper- authority committed to such associations, ation are clearly within the scope of $ 3836 and we find their first statutory authority -1, supra. The clause in article 2 of the in the act of February 21, 1867 (64 Ohio constitution of the corporation, "and to pro- Laws, p. 18). It authorized any number of vide the advantages usually expected froni persons not less than five to associate themsavings banks and other similar institu- selves together and become a corporation tions,” is not involved in this case. It is " for the purpose of raising moneys to be not assumed by it that general banking pow-loaned among its members for use in buyers will be exercised, and in the present case ing lots or houses, or in building or repairit is apparent that such powers were not ex- ing houses, and such corporation shall be ercised. Dearborn v. Northwestern Sav. authorized and empowered to levy, assess, Bank, 42 Ohio St. 617, 51 Am. Rep. 851. and collect from its members such sums of Therefore we find, as did the lower court, money by rates of stated dues, fines, interthat the defendant in error, plaintiff in the est on loans advanced, and premiums bid by foreclosure action, was and is a domestic members for the right of precedence in takbuilding and loan association, organized ing loans as the corporation by its by-laws and empowered under the laws of Ohio as shall adopt.

Provided, that the described and defined by the act of the dues, fines, and premiums so paid, legislature above named.

although paid in addition to the legal rate The plaintiff in error desired to borrow of interest on loans taken by them, shall

not be construed to make the loans so taken seasons, or the financial stress in which the usurious.” The act was amended in some borrower might be found. The old law derespects May 5, 1868, and again May 9, feated the principle of mutuality, which is 1868, but the feature of a competitive bid- the basic principle of such associations. ding was retained. Under these statutes Now all borrowers are treated as upon a we have the cases of State ex rel. Atty. Gen. common level, and the premium is uniform, v. Greenville Bldg. & Sav. Ass0. 29 Ohio St. and all fare alike in that respect, and, of 92, State ex rel. Colburn v. Oberlin Bldg. & course, share alike in the dividends to be L. Asso. 35 Ohio St. 258, and Bates v. Peo- credited. Therefore the present law is not ple's Sav. & L. Asso. 42 Ohio St. 655; and vicious, as declared by one of our circuit they decide that under the statutes then in courts, but, on the contrary, it is fair, and force, in order to save the premium from be- is sanctioned by the 'rule of mutuality. ing obnoxious to our laws against usury, We do not judge these associations by the it must have been paid for precedence in ob-operation and powers of banking institutaining the loan, and at competitive bidding. tions. A member of the former sustains a Undergoing some changes subsequently, not relation of mutuality to each and all of the important here, the statutes were recast in other members. If he becomes a borrower, an act passed May 1, 1891 (88 Ohio Laws, he is at the same time one of the lenders. p. 469), from which we have quoted in the In making a loan it is not contemplated earlier part of this opinion. Under the that the principal debt will be repaid in head of “Powers” ($ 3) it is now provided : bulk, but in instalments of dues, interest, "Such corporation shall have power, dividends, and perhaps premiums. When to assess and collect from members and de- these amount to the sum borrowed, the positors such dues, fines, interest, and pre- mortgage is canceled, the stock returned to mium on loans made or other assessments, the borrower, which he may hold free of as may be provided for in the constitution liens, dr he may withdraw from the associaand by-laws. Such dues, fines, premiums. tion under its rules for that purpose. or other assessments, shall not be deemed Therefore the relation of debtor and creditusury, although in excess of the legal rate or, it may be said, does not strictly exist. of interest." Bates's Anno. Stat. § 3836–3, In Licking County Sav. Loan & Bldg. p. 2130. The statute now in force, and Asso. v. Bebout, 29 Ohio St. 252–254, Gilwhich was in operation when the mortgage more, J., says: “The object of these associin suit was executed, omits the former re- ations, and the powers with which they are quirement, or, rather, condition, of competi- clothed on becoming incorporated, are extive bidding as to the premium to be paid, pressed in very general terms in the statute and therefore, if the statute is valid, usury authorizing their incorporation. Each ascannot be asserted as tainting the loan in sociation, when incorporated, is left at libquestion.

erty to adopt such a scheme or plan for The legislature, we must assume, had a working out and accomplishing its object reasonable motive for this material change, as the members of the association may, by for before that time this court, in the cases its by-laws, provide; and so long as these cited under the former law, held that, if the do not violate any of the provisions of the premium was not bid for precedence in ob- statute, nor transcend the powers granted, taining the loan, it was usurious in case it they will be binding and obligatory upon and the interest exceeded the legal rate to and between the members and the associabe charged under the interest laws. We tion.” In Eversmann v. Schmitt, 53 Ohio think a reason for the change in the statute St. 174, 29 L. R. A. 184, 53 Am. St. Rep. may be readily found. Experience with 632, 41 N. E. 139, this court stated in the competitive bidding did not tend to fairness syllabus: “(1) The members of a build. and equality among the members. The ing association, whether borrowers or nonamounts of premiums bidden at different borrowers, have a mutual interest in its af. times and by different borrowers were not fairs; and, sharing alike in its earnings, uniform. At one time competition may be must assist alike in bearing its losses. (2) stronger than at another, thus increasing A borrowing member is one who receives in the sum to be paid. There was opportuni- advance the par value of his shares, and ty at least for fictitious competition to run agrees in consideration of such advance to the premium up. And, whatever the pre- pay the weekly dues on the shares and the mium, high or low, the dividends were the interest on the loan until the dues paid and same to all. The member who paid a high the dividend declared and not paid are equal rate of premium received no greater divi- to the par value of his shares. He then dend than the one who paid the lowest. ceases to be a member, and is entitled to a There was no certain standard, and the cancelation of the mortgage given to secure rights of members thus varied with the I the obligations arising from the loan.” In

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