
    BUILDING AND LOAN ASSOCIATIONS — USURY.
    [Ashland Circuit Court,
    November Term, 1899.]
    Adams, Douglass and Voorhees, JJ.
    C. W. Mykrantz v. Globe Building and Loan Association.
    1. Exempting Building and Doan Associations from Usury Daws.
    Section 3836-3, Rev. Stat., in exempting building and loan associations from the operation of the usury laws, is in violation of secs. 1 and 2 of the bill of rights, and that part of the statute is void.
    2. Usurious Contract.
    A contract whereby a borrower agrees to pay a building and loan association for the loan of money six per cent, thereon per annum as interest, and six per cent, per annum as premium, is usurious.
    Appeal from the Court of Common Pleas of Ashland county.
   Adams J.

This cause has been submitted to the court on an amended petition, an answer and evidence.

The question between the parties is almost altogether one of law ; .and probably the only issue of fact is whether or not the plaintiff has made a tender to the defendant company of the amount the plaintiff •claimed to be due from him to the loan association, and whether he has 3cept that tender good by deposit with the clerk of the court.

In the petition Mykrantz seeks to have canceled two notes and two mortgages. As far as these two notes are concerned — and I will call these documents notes for the sake of convenience — executed and delivered by Mykrantz to the said building and loan company, he claims that he has tendered and paid to the clerk of the court the balance •remaining due on his note and mortgage to the building and loan association, and that by reason of that tender, and. keeping that tender good by •payment into the court, he is entitled to have his mortgage canceled.

The building and loan company, by its answer, make certain denials, as to what was said and done as to interest, and in issuing circulars and letters that the interest would only be six per cent., and deny that this Tender was made and kept good.

We find, as a matter of fact, that the plaintiff, Mykrantz, did tender to the building and loan association and has paid to the clerk of the court the amount alleged and the amount testified to by the clerk of the court, which was the amount due, at that time, to the building and loan association for the cancelation, according to plaintiff’s claim.

That brings us to the question between the parties, and that question grows out of the contract between the parties, which reads as follows :

■“ $800. Columbus, Ohio, July 20,1896.
‘ ‘ Received of the Globe Building and Roan Association of Columbus, Ohio, eight hundred dollars, as a loan on eight shares of stock, No. -, owned by me in said association.
“ I hereby agree to pay to said association, monthly, not less than twelve dollars and eighty cents.
“ First — To the payment of any fines or other assessments made against me in-pursuance of the by-laws of said association.
“ Second — To the payment of the interest and premium due on said loan, amounting to eight dollars per month.
“ Third — The balance of said payment shall be credited as dues on ■said stock. Said payments shall be continued until the dues so credited •on said stock, together with the interest accumulations, as per the tables adopted in the by-laws of said association, shall equal the amount loaned.
“Should I fail for three months to pay said payments, then the whole amount of said loan shall at once become due and payable.
“ C. W. MyeraNTZ.
“ Emma R. MykraNTz.

From the-by-laws it will appear that the dues on this number of shares of stoc'K will amount to exactly $4.80, so that it leaves of the $12.80 per month $8.00 per month to be paid as interest and premium on the bond.

It is provided by the by-laws of the association, which were in evidence, that the premium should be fifty cents per month on each one hundred dollars, which would make $4.00 per month premium and $4.00 per month interest. In other words, the borrower obligates himself to pay six per cent, per annum on the loan, payable monthly as interest, and six per cent, per annum, payable monthly, as premium, or six per cent, as interest and six per cent, premium. The question of law, the question that has been argued, is, first, whether or not that sort of arrangement, that sort of contract, is usurious; and, second, whether or not sec. 3836-3, Rev. Stat., is constitutional or not.

We have been cited to two Ohio decisions under this section, State ex rel. v. Greenville B. and S. Association, 29 Ohio St., 92; and we read from page 97 :

“ The matters charged as unlawful, in the first and third subdivision of this specification, may be considered and disposed of together. The testimony shows that the corporation, in the past, has been loaning its money to members, depositors, and persons other than members or depositors, upon their promissory notes, at the uniform rate of twelve per cent, interest per annum; and also in buying and discounting orders, bonds and promissory notes, at the same usurious rates of interest, from members and depositors, and persons other than members or depositors; and also that it is so dealing with its members and depositors, but not with persons other than members or depositors.
“The first section óf the law (S. & S., 194) declares the purpose of associations incorporated under it to be the ‘ raising of money to be loaned among the members and depositors of such corporation, for use in buying lots or houses or in building or repairing houses, or other purposes.’ The declared purposes here are plain and unmistakable; and this association, by the provisions of its constitution and by-laws, has, upon paper, kept itself strictly within the purpose declared, without attempting to bring into action any of the latent powers that may repose in the phrase ‘ or other purposes ’ with which the enumeration closes.”
“ There is no countenance to be given to the idea that associations, incorporated under the act above referred to, can be used by capitalists as instrumentalities for obtaining more than the legal rate of interest on their money by depositing it with the association, and having it used in modes foreign to the declared purposes of their organization. ”

We are also cited to Bates v. People’s Savings and Loan Association, 42 Ohio St., 665, and we read the first three paragraphs of the syllabus:

“ 1. The act of May 9, 1868, amending the act of May 5, 1868, commonly called the Building and Loan Association Act (S. & S., 194), which authorizes building and loan associations to receive deposits of money, was not an act granting ‘ banking powers ’ within the meaning of sec. 7. of art. 13, of'the constitution. Dearborn v. Northwestern Savings Bank, ante, approved and followed.
“2. A person who applies to a building and loan association for a loan of money, and deposits therewith a sum of money, however small, for the purpose of making himself eligible as a borrower, and thereby receives a loan, is estopped, when sued for the money by the association, from denying that he was, in fact, a depositor of the association.
“ 3. Compensation for the use of money advanced by a building and loan association to a member or depositor, in excess of the rate of interest allowed by law, and not derived from dues, fines or premiums paid by the borrower for the right of precedence in taking said loan, is usurious. The premium, -which shall not be construed to make the loan usurious, under sec. 2, of the act of May 9, 1868, is a premium bid by a member or depositor ior the right of precedence in taking aloan, at a competitive sale of such right.”

I may say right here, in connection with the three paragraphs of this' syllabus, that there is nothing in this case, either in evidence or otherwise, to show that Mykrantz or any other depositor, or any member of this company, ever bid a premium for this loan from the defendant company, and that this premium is simply fixed by action of the directors in establishing the by-law that it shall be fifty cents on the $100.00 per month, and that in the contract it is simply shown that there shall be paid $8.00 per month as premium and interest, and it can be figured out Irom the constitution and by-laws, as we have already indicated, i. e., six per cent, for interest and six per cent, for premium.

Again, on page 672, in this same case, the court say :

“ The provision of the statute is that such corporation may collect from its members stated ‘dues, fines, interest on loans advanced, and premiums bid by members and depositors for the right of precedence m taking loans,’ etc. ‘ Provided, that the dues, fines and premiums so paid by members or depositors of such corporation, although paid mi addition to the legal rate ot interest on loans taken by them, shall not be construed to make the loans so taken usurious.’ The premium named in the note is unlike the premium named in the statute. It was not measured or ascertained by competitive bidding among the members and depositors, as we understand the statute to require. It was, in fact, a part of the price named by the lender to be paid by the borrower for the use of the money loaned. The assent of the borrower to pay the price required did not make bim a bidder within the meaning of this statute. Calling the excess above the highest legal rate a premium did not change the nature of the transaction. It was usurious.”

Under the rulings of the Supreme Court this applies directly to this case at the bar. There was no competitive bidding, and the building and loan association charge this plaintiff with the twelve per cent, per annum, payable monthly, on this loan. Now, it is claimed, under this statute, sec. 8886-3, that it is not usurious, because the building and loan association have chosen to call six per cent, “premium” rather than “interest.” And that brings us to the question whether or not that character of legislation is constitutional or not ? It is said that the section of the statute is in violation of sec. 26, art. 2,“of the constitution, which requires that all laws of a general nature shall be uniform in operation throughout the state. It is also said that this is in violation of art. 13 of the constitution, that prohibits special acts granting corporate powers. As we view it, this act does not violate either of these provisions of the constitution. This law, whatever else may be said about it, is a law of a general nature and is uniform throughout the state. It applies to all building and loan associations in whatever corner of the state they may be found. It is not granting, as we view it, a special or corporate power by special act of legislation.

In Palmer v. Tingle, 55 Ohio St., 423, the Supreme Court of Ohio .held that a part of the mechanics’ lien law of Ohio was unconstitutional because it violated certain provisions of the constitution' of the state, found in the bill of rights. On page 440, in the opinion of Judge Burket, after citing the preamble of the constitution: “We, the people of the state of Ohio, grateful to Almighty God for our freedom, to secure its blessings and promote our common welfare, do establish this constitution,” he says: “ To make this more emphatic, the'first section of the bill of rights provides that: 1 All men are by nature free and independent,, and have certain inalienable rights, among which are those of enjoying, and defending life and liberty, acquiring, possessing and protecting property, and seeking and obtaining happiness and safety.’ In the second-section it is provided that: ‘ All political power is inherent in the people. Government is instituted for their equal protection and benefit.’ ” See Coal Co. v. Rosser, 53 Ohio St., 12-28; State ex rel. v. Ferris, 53 Ohio St., 315; State of Ohio v. Gardner, 58 Ohio St., 610.

John W. Mykrantz and H. A. Mykrantz, for plaintiff.

H. L, McCray and D. B. Ulrey, for defendant.

If government is instituted for the protection of the people, them all law which gives special privileges to a certain class of people, and. to a certain class of corporations, is not for the equal protection and benefit of the people. See how it applies to this case. It has been decided in Hade v. McVay, 31 Ohio St., 231, that national banks can charge eight per cent, in advance, and it is not usurious, although it is held in Insurance Co. v. Carpenter, 40 Ohio St., 260, that when the individual charges and receives eight per cent, in advance it is usurious, and if sec. 3836-3, Rev. Stat., is constitutional, the building and loan association can charge any rate of interest that they can get their needy members or depositors to. pay. There is no limit placed on their power of exacting interest. They may go as far as the building and loan association in the case reported in 7 Am. R. R. and Corp. Rep., 115, which took a note for $1,000, with eight per cent, interest, for an actual loan of $600; the other $400 being the so-called premium. No other corporation within this state, except it be a national bank, which, under the decision given, may receive eight per cent, in advance, no other corporation in the state, no other individual in the state, could charge more than eight per cent, for loans and not have his claim cut down to the six per cent. rate. He would have the loan declared usurious. It seems to us very clear that legislation of this kind is class legislation of the most vicious character, and that if the constitution of the state of Ohio-is worth anything at all, it must and does prohibit that kind of legislation, and we hold, from the facts in this case, that usury was exacted from this man, and we hold that the company is not protected in exacting usury by the provisions of sec. 3836-3, Rev. Stat., to which we have referred, because it is a violation of secs. 1 and 2 of the bill of rights. There will be a decree for the plaintiff.  