Cobe v. Summers

¶1(after stating the facts). 1. The fact® in this case as to the time, place, and manner of execution of the mortgage and note involved are the same as those it National Mut. Bldg. & Loan Ass’n v. Burch, 124 Mich. 57, and Hoskins v. Loan Ass’n, 133 Mich. 505. The fact that the local board organized at the home of the defendants in Michigan was not expressly provided *123for in the articles of association of the building and loan company does not affect the question. Such local agent was evidently recognized by the company, and the payments were all made to its local agents. The contract was therefore a Michigan contract under the above authorities. See, also, National Mut. Bldg. & Loan Ass’n v. Retzman, 69 Neb. 667.

¶22. A rather strict compliance with the law is required of these building and loan associations whose rules and methods of business are difficult for at least the average lay mind to readily comprehend. When, therefore, they seek to obtain more than the legal rate of interest under the plea of subscriptions to stock, bonuses, bids for loans, fines, etc., they must show that in making these loans 'they have complied with the provisions of the law under which they are operating. Sections 10 and 11 of article 3 of the by-laws of the association are as follows:

“Sec. 10. All applications for loans shall be made in writing on blanks to be furnished by the company, and all required questions must be fully answered.

“ Sec. 11. All members filing applications shall have the privilege of bidding for loans. Bids shall be opened on the second Tuesday in each month and on such other days as the directors may appoint.

“ Whenever the board is prepared to make a loan, a notice stating the time when the bids shall be opened, shall be sent by mail to every applicant at least fifteen days before the daj for opening the bids.”

¶3These by-laws, therefore, require the making of competitive bids which shall be opened at specified times, and notice when they are to be opened to be sent to the applicant. There is no evidence in this record to show that this was done, and it cannot rest upon presumption. Where this provision has not been complied with and the payments made are more than the legal rate of interest, the contracts are held usurious. Myers v. Building Ass’n, 117 Mich. 389. In that case a minimum premium was required in contravention of the law; See, also, *124Clarke v. Connors, 18 S. Dak. 600; 6 Cyc. p. 149; Wightman v. Suddard, 93 Ill. App. 142.

¶4Defendant Summers testified that he wanted a loan of $2,000 and talked with the company’s agent about it, and they talked about the stock, and that the agent told him:

“ If I borrowed it in that way, I could pay it in three years. I could pay it all up in three years. … Hayes [the company’s agent] did all of this business for me. He made this loan. It was talked over with him and with the agent, and the understanding was, when I paid the $2,000 and interest, that was all there was of it.”

¶5It is quite manifest that Summers understood, and he had good reason to so understand, that, when he had paid this loan, he was entitled to some stock, and that he did not understand that he was to pay $4,000, $2,000 for his mortgage and $2,000 for stock. Complainant seeks to apply $12 per month under the contract on the bonus stock in which defendants in fact had no interest whatever. For what purpose 40 shares of stock should be issued in the name of Mr. Summers, and 20 shares immediately assigned back to the company, is rather incomprehensible to me. At all events, Summers was required, under complainant’s theory, to pay $12 per month upon stock in which he had no interest. Defendants have paid considerably more than 6 per cent, on the loan. They paid 6 per cent, a year for many years on $2,000, when, in fact, they received only $1,860. Under the above authorities, and under National Mut. Bldg. & Loan Ass’n v. Burch, and Hoskins v. Loan Ass’n, supra, the contract must be held usurious.

¶63. It is next urged that defendants Sanders and Bark-ham are estopped to set up the defense of usury because they took the deed subject to the mortgage. In making the deed, both the grantor and the grantees treated this mortgage as securing only the loan of $2,000, and the defendants Sanders and Barkham purchased it, paying the value of the land less the amount which Summers had actually paid thereon. Where the grantee has received as a part of the consideration the benefit of the amounts *125claimed to be usurious, the law estops him to set up usury. But where such amount has not been deducted from the purchase price, he is not estopped. National Mut. Bldg. & Loan Ass’n v. Retzman, supra;Crawford v. Nimmons, 180 Ill. 143; Berdan v. Sedgwick, 44 N. Y. 626.

¶7The decree is affirmed, with costs.