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therefore no means of determining the unnecessary to discuss the other assignments amount of loss by reason of this misrepresentation.

of error, as the questions presented by them are not apt to arise on another trial.

By reason of the erroneous theory as to the measure of damages upon which the case was tried, the findings neither support the judgment, nor exonerate the appellants. There must therefore be a new trial. The view we have taken of the case renders it


2. Under the provisions of said statute,

the premium for a loan, if reasonable in amount, need not be ascertained by competitive bidding for precedence in obtaining the loan, but it may be fixed at a uniform rate by the constitution and by-laws of the


Simon W. CRAMER, Piff. in Err.,

(who is now deceased) to foreclose a mortgage 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 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 p. 2130, which confers power on building and loan associations "to as

sess and collect from members and depositors such dues, fines, interest, and premium on loans made, or other assessments, as may be provided for in the constitution and bylaws," and which further provides that "such dues, fines, premiums, or other assessments, shall not be deemed usury, although in excess of the legal rate of interest,"-is a valid enactment, and is not in conflict with § 26 of art. 2, nor with § 2 of art. 1, of the Constitution of Ohio.

day of June, 1896, under an application in writing for that purpose, and submitted to said company, Cramer became a member of the company, and a stockholder to the extent of 17 shares of instalment stock of class B of $100 each share; that on the same day he made application for a loan of $1,700, and offered as security for the same the mortgage in suit, an assignment of all fire insurance on the buildings, and a transfer of the 17 shares of stock; that the application contained, besides a description of the real estate, several conditions with which he would comply; that, acting on the application, the company loaned to Cramer $1,700, and as security for which he gave the mortgage, assigned the fire insurance, and transferred the said shares of stock.

Statement by Price, J.:

The defendant in error began a suit in the court of common pleas of Paulding county against the plaintiff in error and his wife

*Headnotes by the COURT.

The judgment is reversed and a new trial granted as to both appellants.

NOTE. For other cases in this series as to validity of statute exempting building and loan associations from operation of the usury laws, see Smoot v. People's Perpetual Loan & Bldg. Asso. 41 L. R. A. 589, and Iowa Sav. & L. Asso. v. Heidt, 43 L. R. A. 689.

All concur.

Petition for rehearing overruled May 31, 1905.

(May 2, 1905.)

It is alleged that Cramer, as one of the

ERROR to the Circuit Court for Pauld- stipulations of the mortgage, "“agreed to pay

ing County to review a judgment reversing a judgment of the Court of Common Pleas in plaintiff's favor for a less amount than demanded in an action to foreclose a mortgage which had been given to secure the payment of a loan. Affirmed.

demand therefor, until said loan was fully repaid, as follows: "The dues upon said 17 shares of stock; the 5 per cent premium bid upon said $1,700, 5 per cent interest on said $1,700, and, in addition thereto, to pay all fines, penalties, and other charges which should become due against said shares, and all taxes, assessments, costs of insurance, and other charges upon said premises, in accordance with the constitution' and by-laws theretofore duly adopted by said company.' The dues were

As to usury in contracts by building and loan associations generally, see note to Reeve v. Ladies' Bldg. Asso. Perpetual, 18 L. R. A. 129;


Pioneer Sav. & L. Co. v. Cannon, 33 L. R. A. 112; Falls v. United States Sav. Loan & Bldg. Co. 24 L. R. A. 174; Bennett v. Eastern Bldg. & L. Asso. 34 L. R. A. 595; Smoot v. People's Perpetual Loan & Bldg. Asso. 41 L. R. A. 589; Iowa Sav. & L. Asso. v. Heidt, 43 L. R. A. 689; Borrowers' & Investors' Bldg. Asso. V. Eklund, 52 L. R. A. 637; and Pacific States Sav. Loan & Bldg. Co. v. Hill, 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 and foreclosure.

The answer of Cramer admits that he obtained a loan from the Southern Ohio Loan & Trust Company for $1,700, and gave his mortgage to secure the same; admits that he has paid thereon the sum of $1,391.83; but he denies each and every other allegation of the petition. He further answered "that § 3836-3 of the Revised Statutes of Ohio (Bates's Anno. Stat. 2130), in so far as it presumes to authorize building and loan associations to collect dues, fines, interest, and premiums in excess of the legal rate of interest, is unconstitutional, against the public policy of the said state of Ohio, and void." He further claims in the answer "that any amount or sum of money exacted or attempted to be collected by the .. company is usurious, and he claims the privilege of the usury statutes of the said state of Ohio." For the purpose of a settlement, and for no other purpose, he tendered in the answer the sum of $900, and he prays that "all amounts collected and heretofore paid in excess of the legal rate of interest be credited to him as payments of that amount of principal, and, if the amount found to be due is less than the amount here tendered, that the plaintiff be decreed to pay all costs after the date of making of the said tender." A jury was waived, and the cause was heard and submitted to the court, who made findings of fact in substance, that the plaintiff in that court, on the 24th day of June, 1896, was, and at the time of the trial, a domestic building and loan association, duly organized and empowered under the laws of Ohio, as such associations are described and defined by § 1 of "An Act to Provide for the Organization, Regulation, and Inspection of Building and Loan Associations, passed May 1, 1891" (88 Ohio Laws, p. 469). Further, that on the 24th day of June, 1896, defendant purchased from said company 17 shares of its instalment stock of the par value of $100 each, and became a member of said association, and that on the same day, and as part of the same transaction, he made application to the association for a loan of $1,700

The court found the terms and conditions of the mortgage to be as above stated, but found that the premium mentioned in said application and mortgage was not fixed by any competitive bidding, but by the terms and provisions of the constitution and by-laws of said association, the said defendant and all other borrowers from said association of class B therein referred to were required to pay interest on their respective loans at the rate of 5 per cent per annum, payable in equal monthly instalments, together with a so-called premium at the uniform rate of 5 per cent per annum on said loan, in addition to said socalled interest. In addition to the findings, it was conceded and agreed in open court at the trial that the application and mortgage were signed by Cramer, and that book exhibit C is a true copy of the constitution and by-laws of the association, and was such when the loan was negotiated and made, and that before the loan was made Cramer had issued to him on his application 17 shares of stock class B in said association, and that before he received his loan he transferred said stock to the association.

It was further conceded that, if plaintiff's contention in this case is sustained, and its basis of computation is correct, the amount due it would be $1,480.89, but if the court should find the contract to be usurious, and determine that the rate of interest to be charged is 6 per cent, computed on the basis of partial payments, then the amount due is $840.03 to December 10, 1902; but, if the contract be usurious, and the rate of interest the plaintiff should recover should be 5 per cent, then, computed on the basis of partial payments to the same date, the amount would be $646.68. The court found the contract and mortgage to be usurious, and decided that the statute entitled "An Act to Provide for the Organization, Regulation, and Inspection of Building and Loan Associations,' passed May 1, 1891 (88 Ohio Laws p. 469), in so far as it allows any such company to assess and collect from members and depositors such dues, fines, interest, and premium on loans made, or other assessments as may be provided in the constitu

tion and by-laws," and that "such dues, | N. P. 86; Thornton & B. Bldg. & Loan Asso. fines, premiums, and other assessments § 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. Asso. 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 court:

The amount in controversy between the parties is $499.22, the difference between the judgment of the court of common pleas and that of the circuit court. This amount the plaintiff in error claims is all usury, and should not be charged against him. The Southern Ohio Loan & Trust Company is an Ohio corporation, organized under the provisions of §§ 3836-1 et seq., Bates's Anno. Stat. p. 2130. That section provides: "A corporation for the purpose of raising money to be loaned among its members shall be known in this act as a building and loan association. Associations organized under the laws of this state shall be known in this act as 'domestic' associations, and those organized under the laws of other states or territories, as 'foreign' associations. Associations may be organized and conducted under the general laws of Ohio relating to corporations, except as otherwise provided in this act." While this company did not adopt a name directly indicating that it became and is a building and loan association, it organized as such, and announced its purposes in the second article of the constitution as follows: "The Southern Ohio Loan & Trust Company is a corporation organized for the purpose of raising money to be loaned among its members to aid them in the purchase and building of homes, and to provide the 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 the above section of the statute. The name

The statute is valid.

Messrs. A. M. Waters and Snook & Savage, for defendant in error:

The legislation in question is not class legislation, and does not grant special privileges.

State v. Nelson, 52 Ohio St. 88, 26 L. R. A. 317, 39 N. E. 22; State ex rel. Schwartz v. Ferris, 53 Ohio St. 314, 30 L. R. A. 218, 41 N. E. 579; Fox v. Fox, 24 Ohio St. 335; Adler v. Whitbeck, 44 Ohio St. 539, 9 N. E. 672; Senior v. Ratterman, 44 Ohio St. 661, 11 N. E. 321; Marmet v. State, 45 Ohio St. 63, 12 N. E. 463; Kimbleawecz v. State, 51 Ohio St. 228, 36 N. E. 1072; Cass Twp. v. Dillon, 16 Ohio St. 38; State ex rel. Anderson v. Harris, 17 Ohio St. 608; State ex rel. Cline v. Wilkesville Twp. 20 Ohio St. 288; State ex rel. Bates v. Richland Twp. 20 Ohio St. 362; Holst v. Roe, 39 Ohio St. 340, 48 Am. Rep. 459; Anderson v. Brewster, 44 Ohio St. 576, 9 N. E. 683; Hagerty v. State, 55 Ohio St. 626, 45 N. E. 1046.

All questions of public policy are within the sole discretion of the general assembly, and, if the law is not unconstitutional, it will not be disturbed on that ground.

Probasco v. Raine, 50 Ohio St. 378, 34 N. E. 536.

Mutuality is the essential principle of a building association.

Eversmann v. Schmitt, 53 Ohio St. 184, 29 L. R. A. 184, 53 Am. St. Rep. 632, 41 N.

E. 139.

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 beconstitution. 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 from 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, organizeding 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

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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. Asso. 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 institu taining 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, or 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, p. 2130. The statute now in force, and which was in operation when the mortgage in suit was executed, omits the former requirement, or, rather, condition, of competitive bidding as to the premium to be paid, and therefore, if the statute is valid, usury cannot be asserted as tainting the loan in question.

In Licking County Sav. Loan & Bldg. Asso. v. Bebout, 29 Ohio St. 252-254, Gilmore, J., says: "The object of these associations, and the powers with which they are clothed on becoming incorporated, are expressed in very general terms in the statute authorizing their incorporation. Each association, when incorporated, is left at liberty to adopt such a scheme or plan for working out and accomplishing its object as the members of the association may, by its by-laws, provide; and so long as these do not violate any of the provisions of the statute, nor transcend the powers granted, they will be binding and obligatory upon and between the members and the association." In Eversmann v. Schmitt, 53 Ohio St. 174, 29 L. R. A. 184, 53 Am. St. Rep. 632, 41 N. E. 139, this court stated in the syllabus: "(1) The members of a building association, whether borrowers or nonborrowers, have a mutual interest in its af fairs; and, sharing alike in its earnings, must assist alike in bearing its losses. (2) A borrowing member is one who receives in advance the par value of his shares, and agrees in consideration of such advance to pay the weekly dues on the shares and the interest on the loan until the dues paid and the dividend declared and not paid are equal to the par value of his shares. He then ceases to be a member, and is entitled to a cancelation of the mortgage given to secure the obligations arising from the loan." In

The legislature, we must assume, had a reasonable motive for this material change, for before that time this court, in the cases cited under the former law, held that, if the premium was not bid for precedence in obtaining the loan, it was usurious in case it and the interest exceeded the legal rate to be charged under the interest laws. We think a reason for the change in the statute may be readily found. Experience with competitive bidding did not tend to fairness nd equality among the members. The amounts of premiums bidden at different times and by different borrowers were not uniform. At one time competition may be stronger than at another, thus increasing the sum to be paid. There was opportunity at least for fictitious competition to run the premium up. And, whatever the premium, high or low, the dividends were the same to all. The member who paid a high rate of premium received no greater dividend than the one who paid the lowest. There was no certain standard, and the rights of members thus varied with the

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