
    MARY E. KLEINDIENST et al. vs. GEORGE J. JOHNSON et al.
    1. A bond given by husband and wife, though void as to the wife, will be good as to the’husband, and a deed of trust given by the wife upon her separate property to secure such a bond is valid.
    2. Although premiums paid for moneys advanced to borrowers by a building association be usurious, yet the Statute (Sec. 716 R. S. D. C.) confers no authority on the court on an accounting between the parties to set off against the principal debt the sums so paid.
    In Equity.
    No. 9,753.
    Decided March 5, 1889.
    The Chief Justice and Justices Hagner and James sitting.
    Appeal from a decree of the Special Term on a bill for injunction and an account.
    STATEMENT OK THE CASE.
    The bill in the case was filed by Joseph Kleindienst and his wife, Mary, against the trustees and officers of the Second Washington Co-operative Building Association for an account and release of deeds of trust given to secure advances.
    The 'association was organized in September, 1874, and its object is to aid stockholders in procuring homesteads, according to a plan set forth in a constitution. The shares were of the nominal value of $1,000, and on each share held the stockholder paid $1 per month. Advances were to be made of $1,000 on each share to the highest bidder at a rate of “premium” of not less than 50 per cent., which advances with the premium thereon, were to be repaid to the association at the rate of one hundredth part of each monthly.
    The plaintiff, Joseph Kleindienst, became the owner of four shares of stock and obtained $3,000 on three shares in December of 1875, at a premium of 135 per cent., and under the constitution became liable thereupon to pay the association monthly the one hundredth part of the loan of
    $3,000........................................................ $30.00
    One hundredth part of the premium $4,050......... 40.50
    Monthly dues on four shares of stock................. 4.00
    $74.50
    In September of 1876, being in arrears, in these payments, he obtained an advance of $500, which was applied to the payment of the arrears, by which the monthly payments required of him were increased to the extent of $11.75.
    Complainant was unable to make regularly the payments required but from December, 1875, to May, 1884, he repaid to the association the sum of $4,455.36. In November, 1885, the association rendered him an account, claiming the sum .of $4,410 as still due to it, and subsequently rendered him another account, claiming $3,502.45 as due, and still later rendered another account, claiming as due the association the sum of $2,453.19.
    The complainants executed a bond and deed of trust conveying, the separate estate of Mrs. Kleindienst to secure the performance of the conditions of the bond, which the bill alleged were not contracts in relation to the separate estate of the wife and were void ; that the “ premium ” which it was a condition 'of the bond should be paid in monthly portions with the principal was but another name for “ interest” and was in excess of any lawful rate, and that according to any lawful method of accounting the debt had been over-paid.
    The bill also averred that at the time the complainant became a stockholder, he was informed, in response to a request made to the defendant, Callan, the treasurer, for a copy of the constitution, that the supply was exhausted, but was given a copy of the constitution of another association which was said to be substantially similar ; and further averred the accounts rendered were not stated in accordance with the provisions of either instrument, and that in 1877, at the instance of the defendant Callan, and with a view to reducing his monthly payments he purchased through Callan three other shares of stock in the association and became entitled to $3,000 thereon at a premium of 112 per cent., but was not permitted to substitute the new loan for the old one.
    The answers of the defendant admitted the loans, bond, deed of trust, &c., stated that the shares upon.which the loans were made stood upon the books of the association in the name of Mrs. Kleindienst; averred that except as to the first three monthly payments, complainants had never complied with their contract; averred that complainants could have got a copy of the constitution by applying to the defendant, Reed, the secretary, and denied that a copy of the constitution of another and different association had been given them by defendant, or that either of the defendants had knowingly misdirected the complainants, and claimed that whether “premium” is another name for interest is a matter of law, and that the bond was a part of the deed of trust, and together they constituted the contract; that the complainants wrere indebted to the association in a large amount,' and that the deed should be enforced to secure payment of the unpaid indebtedness.
    Upon a reference to the Auditor he adopted the -last account as most favorable to the complainant, and at the request of counsel for complainant stated an alternative account charging the complainant .with the amounts advanced to him and crediting him with all moneys paid by him at any time, 'which latter method of accounting showed an overpayment by complainant to January 1, 1885, of $60.24.
    The case then came on to be heard upon the pleadings and the report of the auditor, and a decree was passed affirming the report and denying the injunction. From this decree the plaintiffs appealed to the General Term.
    
      Messrs. Hugh T. Taggart and Randolph Coyle for complainants:
    The alternative account is the only proper account between the parties.
    The constitution, which the auditor treats as the “contract” between the parties formulates an elaborate scheme of operations for the loaning of money, but which analysis proves to be of a highly usurious character. It is not, therefore, a lawful contract and it should not be enforced.
    Upon the face of the scheme (1) the members a.re divided into two classes, investors or creditors, and borrowers or debtors; (2) the profits are derived solely from the interest account, and (3) no loan can be made except upon a usurious basis.
    The lowest rate of premium is 50 per cent. In the case of a loan to a stockholder on this basis he would have the use of $1,000 for 1 month, $990 for the next month, and so on to the 100th month, during which he would have the use of $10, or in all the equivalent of $50,500 for 1 month, and of $505 for 100 months; this would be the real substance of the transaction.
    “ Premium ” is to be considered as interest and to the extent it exceeds the lawful rate, usurious. 58 Md., 569.
    Interest being a charge for the use of money, the length of time over which the charge is to extend should be regulated by the length of time for which the use of the money is actually had. At 6 per cent, the interest for 1 year would be $30.30, and for 1 month, $2.52A; even at 10 per cent., the highest lawful rate, the interest for one year would be $50.50, and for one month, $4.20f. The constitution exacts $5 per month and $60 for the year, which is at the rate of 12 per cent., or 2 per cent, in excess of the highest lawful rate.
    But Kleindienst’s engagement with the association was not to pay 50 per cent, “premium,” but 135 per cent. While getting exactly the same benefit in the way of the use of money, he became by the “contract” subjected to nearly three times the burden of a fellow member who obtained like advances at the lowest rate.
    Through the requirement of a repayment of the one hundredth part monthly of the $3,000 lent him, the actual benefit to him in the'transaction was the use of three times $505, or $1515, for 100 months; at 6 per cent, the interest on this would be $7.57J per month, which, multiplied by 100, gives $757.50 as the lawful charge for interest against him. At 10 per cent, it would be $1,262.50, yet his engagement under the scheme of the “contract” demanded the payment on account of interest alone for this time of the enormous sum of $4,050 ($486 per annum, a rate of more than 32 percent.), a clear excess of $3,292.50 over the sum demandable at 6 per cent., and of $2,787.50 over the sum'demandable at 10 per cent., the highest lawful rate.
    It is familiar law that upon the repayment of any part of a loan, interest upon the part so repaid must cease, but under the “ contract ” in this case, although there is a constant reduction monthly of the principal, and at the end of fifty months the borrower has repaid half of it, yet there is no reduction in the monthly payment of interest. If this is a valid arrangement, then an arrangement would be equally valid which required the payment of one-fiftieth part of each monthly, or one which required the repayment of the loan' in one-fiftieth parts monthly and the premium in one one-hundreth parts monthly. They stand upon the same principle.
    'In the delusive inducements held out in the summary of advantages of membership in this association printed with the constitution under the title “Plan of the Association,” the period of six years is indicated as the shortest period of time in which the borrower can, by monthly payments, pay his advance in full; and under Section 9 of Article 11 an illustration is given of a settlement by a borrower at the end of forty-two months as follows :
    
      Dr.
    
    To cash on three shares............................. $3,000.00
    
      Or.
    
    By forty-two one-hundreths of advance repaid, $30 each........................................... $1,260.00
    “ 10 per cent, thereon............................... 126.00
    “ 42 monthly payments on three shares......... 126.00
    “ 10 per cent, thereon................................ 12.60
    “ Cash to balance.................................... 1,475.40
    3,000.00
    Whether the borrower settles upon this basis at the end of forty-two months or escapes entirely at the end of six years, the association is largely a gainer by the usury exacted.
    Take the case of a settlement at forty-two months of a loan on three shares, at 135 per cent, premium; the borrower has actually had the use (under the requirement of a return monthly of the one one-hundredth part of the principal), of $2,385 for the time, interest on which, at 6 per cent, would be $500.85 and at 10 per cent. $834.75. The borrower has actually paid the association forty-two times $40.50 for interest, amounting to $1701, an excess over interest at 6 per cent, of $1,200.15 and over interest at 10 per cent, of $866.25.
    To offset this imposition he is allowed 10 per cent, in gross, $12.60 on his monthly payments of $3.00 per month, on his shares of stock for forty-two months, .and he is also allowed 10 per cent, in gross, $126.00, upon the amount of principal repaid, being $30.00 per month for forty-two months, $1260, a total aggregate benefit of $138.60, which deducted from $1200.15 leaves the association a gainer of' $1,161.55 overa 6 percent, rate; and deducted from $866.25 leaves it a gainer of $727 over a 10 per cent. rate.
    If allowed to retire at the end of six years without further exaction, how would the case of a member stand, who had obtained a loan on similar terms?
    He would have repaid to the association $2,160.00 of the principal of $3,000, being at the rate of $30.00 per month for seventy-two months; and he would have paid for premium or interest at the rate of $40.50 for the same period, $2,916; he would have paid $3.00 per month for forty-two months on his thirty-eight shares of stock, $216, which pdded to amount paid for premium would make $31.32 paid, exclusive of his payments on the principal.
    If we take from this $840, the amount of the principal, payment of which he seems to escape, he would have fully repaid the principal and a balance of $22.92 would be left applicable to interest on the loan.
    Compare this with interest on the nominal amount of the loan, $3,000. For six years the interest at 6 per cent, would be $1,080, and at 10 per cent. $1,800, showing that he has paid $1,212 in excess of interest at 6 per cent, and $492 in excess of interest at 10 per centum. .
    This calculation is based, however, upon the assumption that the borrower has had the use of $3,000 for six years. In point of fact (owing to his monthly repayments of principal) he has had the use of but $1,935 for the time, on which interest at 6 per cent, would be $696.60 and at 10 per cent, would be $1,161. So that the association on the real substance of the transaction is a clear gainer at his expense of $1,595.40 over a 6 per cent, rate, and of $1,131 over a 10 per cent, rate, with the principal fully paid.
    Comment is unnecessary on this showing. By no process of reasoning can the cloak of a lawful partnership be held to cover such an arrangement; usurious loans constitute the very essence of its existence.
    This court held in the case of Burns vs. Building Association (3 Mackey, 333), that usury is involved “where there is an absolute undertaking binding the party to do a certain thing, namely, to pay back the principal of the loan, and whether by contract or some artifice to pay usurious interest.”
    In 84 Pa. St., 216, it was held that the contract of a married woman as a member of a building association could not be enforced, and in the same State it was held that an incorporated building association could not recover more upon its mortgages than the amount actually advanced with legal interest. 12 Phila., 250.
    Endlich, in his work on Building Associations, devotes less than five of the 526 pages of the book to'the subject of unincorporated building associations, the remainder is devoted to the consideration of questions affecting the nature and legal status of those which have the sanction of statutory authority for their existence. In Section 119 he says these statutes “ make a sweeping exception to many of the best settled rules of general policy applicable to dealings between man and man.” In Section 337, after speaking of the blending of the elements of loan and partnership venture in the building association advance, he says: “If the association is not proceeding under the protection of such express legislative sanction, the benefit of the doubt must be given to the individual seeking to escape an apparently exorbitant demand and against the association endeavoring to enforce a contract which partakes equally of two elements, one of which would render it lawful — the 'other unlawful” And in Section 356 he says that where “ there is no statutory sanction at all within whose protection the society .can bring itself and its contract, there no theory of partnership dealings and no complication or veiling of .the transaction will hold out to remove the fact of a substantial loan upon apparently extraordinary reservations.”
    
    Mr. Andrew C. Bradley for defendant:
    The contract was not usurious, but even if it was, Section 716 of the Revised Statutes, relating to 'the District of Columbia, precludes the complainants from setting up the fact in this action. Carter vs. Carusi, 112 U. S., 478.
    Messrs. H. T. Taggart and Randolph Coyle, for complainants, in reply:
    Section 716 does not apply to a case like the present. It applies to cases only where the usury is paid and received knowingly, and not to cases where it is paid by mistake or in ignorance.
    Usury depends on intention, and it does not necessarily follow that the taking of greater interest than is allowed by law constitutes usury. Duvall vs. Farmer’s Bank, 7 G. & J., 44.
    Usury does not consist in merely intentionally taking a larger amount of interest than is allowed by law, but there must be superadded to such intent a corrupt design to charge more than the legal rate. Duncan vs. Savings Institution, 10 G. & J., 300.
   Mr. Justice Hagner

delivered the opinion of the Court:

The first ground upon which the complainants insist the deeds of trust should be set aside, is that when they applied to the defendant company for the first loan, Mrs. Kleindienst asked Callan, its treasurer, for a copy of the constitution of the association; whereupon Callan informed her that the supply was exhausted, but gave her a copy of the constitution of the Washington Co-operative Building and Deposit Association, the provisions of which, he said, were substantially the same as those of the defendant association; and the complainants assert they believed this representation to be true until recently, but have now learned to the contrary. The intimation is that the agent of the defendant association deceived the complainants into agreeing to come under relations with them, by representing its charter as more favorable for stockholders than it really was. This may be considered as a charge of deceit and fraud, and if sustained, might entitle the complainants to relief from a contract thus fraudulently imposed upon them. The only proof on the subject is that of the complainant Mary, and if this were admissible, it is met by the positive denial on the part of Callan. He declares no such representation was ever made by him to Mrs. Kleindienst; that he was not the custodian of the copies of the constitution, and there was no difficulty in obtaining one from Need, the secretary, whose business it was to keep them. The charge would be without any significance, unless it also appeared that the provisions of the defendant’s charter were less favorable than those of the other association. But a comparison of the two discloses that in almost every particular the charter of the defendant association is the most favorable, and hence there could have been no injury to the complainants by the substitution of the one for the other, if it had taken place.

It appears, too, that the complainant had' been associated with at least one building association before he became connected with the defendant association, and the loan of $3,000 was obtained by him to pay that association a debt which must have been standing for some time. Twice he obtained loans from the defendant association, and one ground of complaint in the bill is that on a third occasion, when he applied to borrow money he was refused on insufficient grounds. That he should have remained from 1875 until 1885 in ignorance of the scheme of these societies, with which he seems to have been so extensively engaged, seems at least improbable.

Second. It is insisted the deed of trust of 1875, conveying the property standing in the name of Mrs. Kleindienst, is void, because it was executed to secure a bond signed by the husband and wife to pay the instalments required at the time of making the loan of $3,000. It is argued that Mrs. Kleindienst, as a married woman, was not competent to sign a bond; that the bond being void -as to her, was void m toto; and the bond being void, the deed of trust could be of no force. We conceive this contention to be quite unfounded. In Bacon’s Abridgement, “ Obligation,” (D) the law is thus stated:

“But if an infant, feme covert,■ monk, &c., who are disabled by law to contract and bind themselves in bonds, enter together with a stranger, who is under none of these disabilities, into an obligation, it shall bind the stranger, though it be void as to the infant.”

The signature of a bond by a feme covert is analagous to the signature by an infant; and there is no doubt that although the bond would be void as to the infant, yet a party jointly executing it with the infant remains bound.

So, where the bond is executed by one obligor under duress, it remains good as to the other party who signed it under no such duress. In 2 Greenleaf’s Ev., Sec. 302, the law is thus stated: “ But in all cases the duress must affect the party himself; for if there be two obligors, one of whom executed the bond bj' duress, the other cannot take advantage of this to avoid the bond as to himself.” Spalding vs. Crawford, 27 Tex., 159, is a case directly sustaining the text.

The bond, then, though void as to the wife, was valid as to the husband; and being his debt, the wife had the power to secure its payment by a conveyance with her husband, of her real estate. Stephens vs. Beall, 22 Wall., 337.

This is not like the case of a deed executed to secure a note of the wife alone, which, of course, would be a totally void obligation, like a note given for an immoral or illegal purpose. • ‘ .

Third. The remaining defense is based upon the ground of usury. It is insisted the scheme of lending provided by the articles of association an d actually carried out in the case before us, contemplates an usurious loan of money, and the return of the loan itself with the usury. This defense has repeatedly been in numerous cases brought before this court, where borrowers from such associations have endeavored to get clear of the oner ous obligations they have incurred. The charters of these various associations seems studiously to differ from each other in. some particulars; but they all appear to be based upon the same theory which has been stated substantially thus: The members of such an association from time to time pay in their monthly dues as required by the terms' of the charter. The association also makes profits from loans it may have made since it began op'erations, and thus at a certain time it will have a sum of money on hand which it is willing to lend out. An individual then joining it for the first time, applies for a loan of a portion of these accumulations. By becoming a member and punctually making the payments incident to his membership, he wmuld, at the winding up of the association, be entitled to share in its accumulations and receive a sum in excess of all his payments. Thus holding a certain interest in the ultimate succes of the association, conditioned upon his fulfillment of the duties of membership, if, instead of waiting for the realization of his profits upon the final settlement, he desires to anticipate that contemplated result, by obtaining from the society in advance an amount bearing a certain proportion to his interest, the requirements of strict mutuality would require him to pay to the society an amount of money, premium or bonus, not only commensurate with the advantages he may derive from the accommodation, but also in the nature of a contribution to the common treasury to indemnify those who competed with him for the loan, but failed to obtain it. The propriety of imposing this premium has been defended upon the ground that the ■ association is after all in the nature of a co-partnership; and Endlich, in his work on Building Associations, Chapter 20, Sec. 517, says that an unincorporated association (like the present) is nothing more nor less than a co-partnership.

Whether the scheme of such association is a beneficial one to all the parties who embark in it, may well be questioned. To those who simply pay their dues, borrow nothing from the association, and await in silence the winding up of the affair, it. doubtless would prove profitable, provided the affairs had been honestly managed. And to 'those who borrow and pay their loans, it may, perhaps, be beneficial; but to those who borrow and fail to pay, the result must always be disastrous.

The principal decisions which have been referred .to in this argument were cited in most of the cases in which this court has sustained the right of the building associations to exact a compliance with the contracts. But it is insisted by the complainants that the scheme of the defendant’s assocition differs in vital respects from those of the association in the cases referred to. It is not necessary to go into a consideration of this contention, as we think a point presented by the defendant, which we shall now consider, is fatal to the claim of the complainants in this suit.

It appears that all the alleged payments of usurious interest were made by the complainants more than twelve months (the greater part of several years) before the filing of this bill; and it is insisted that under the authority of cases in the Supreme Court of the United States and of this court, the complainants cannot be allowed to avail themselves of the defense of usury in the present proceeding. Sections 713 and 714 of the Revised Statutes fix the rate of interest in the District of Columbia, and Section 715 declares that one contracting for a higher rate shall forfeit the whole of the interest. Section 716 provides that if any person or corporation within the District shall receive any greater amount than the rate of interest so provided by law, it shall be lawful for the person paying the same to sue for and recover all the interest paid upon such contract or agreement from the person receiving such unlawful interest, “ but the suit to recover back such interest shall be brought within one year after such unlawful interest shall home been paid or taken.”

The Supreme Court, in Barnett vs. National Bank, 98 US., 555, and Drysback vs. National Bank, 104 U. S., 52, decidéd that under a similar statutory provision applicable to the national banks, it was not competent for the borrower, after the expiration of the ^time limited in the statute for bringing the action, to reduce the claim of the bank by crediting the excess of interest as against the principal. In Cook vs. Lillo, 103 U. S., 792, the Supreme Court made a similar decision with reference to a statute of the State of Louisiana, which provided that if a person pays on a contract a higher rate of interest than the 8 per cent, authorized by the law of the State, the money paid for usurious interest may be sued for and recovered back .within twelve months of the time of payment. It had been held by the court in Louisiana that a reclamation could not be made under the statute, nor the usurious interest be imputed to the principal, unless the suit for the recovery was begun, or the plea of usury set up to the claim, within twelve months after the payment was made. The Supreme Court, following these rulings, held that in a suit brought to recover a balance upon notes, the debtor was not entitled to any credit on the principal of his debt by reason of usurious interest paid, where his last payment was made more than twelve months before the suit was begun.

In Walsh vs. Mayer, 111 U. S., 31, the same statute was examined. There the maker of a note and mortgage, in his answer to a bill brought for the sale of the mortgaged property, claimed to credit upon the principal of his debt the usurious excess over the legal interest. But it appearing he had made all these payments to the lender more than a year before the commencement of the suit, the Supreme Court again held the statute conferred no authority to apply the usurious interest to the reduction of the principal, and that the exclusive remedy w^as ah action brought within twelve months for the recovery of the money so paid.

In Carter vs. Carusi, 112 U. S., 478, the same ruling was made by the Supreme Court with reference to the statute of the District of Columbia, before referred to, affirming the ruling of this court. Mr. Justice Woods, after restating generally the law as laid down in the foregoing cases, says: “ The counsel for the plaintiffs sin error contend that if he is not entitled to relief under the statute, his common law right to reclaim or set off usurious interest paid still remains to him. But this court has repeatedly decided against this contention of the plaintiff in error.” In the case last cited (that of Walsh vs. Mayer), it was held generally that a statute which prescribes a legal rate of interest and forbids the taking of a higher rate, under penalty of a forfeiture of the entire interest, and declares that the party paying such higher rate of interest may recover it back by suit brought within twelve months, confers no authority to apply the usurious interest actually paid to the discharge of the principal debt, and that 'a suit for its recovery, brought within twelve months, was the exclusive remedy.

The same construction was put upon the District statute, in the case of Eastwood vs. Kennedy, 44 Maryland, 564, where a defendant attempted to set off against the principal debt the excess of usurious interest he claimed to have paid more than twelve months before the bringing of the action. All these were cases where. the party relying upon the defense of usury was a defendant resisting the suit of the holder to enforce the collection of his claim, and therefore occupying a more favorable position than that of the complainants here, who are asking for affirmative relief.

It seems clear to us the complainants can have no relief upon this last ground.

The “ Schedule A,” prepared by the auditor, is more beneficial to the complainant thau a statement would be, based upon either the ninth or tenth sections of the charter of the association. We think it makes all the allowance the complainants are entitled to, and we decide that the decree below directing the payment of the balance shown by that schedule, with interest, shall in all things be affirmed.  