Case ID: dc_8/html/0385-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Wylie", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MATTHIAS PABST vs. TRUSTEES, ETC., OF ECONOMICAL BUILDING ASSOCIATION.
    In Equity.
    No. 2680.
    I. The advance of money made by a building association to one of the stockholders upon the shares which he owns is not a loau of money, but a purchase of such stock, and is therefore not affected by usury, and an account rendered by the association in which such advance is charged as a loan, is erroneous.
    II. Where the constitution of the association provides that no stockholder shall be permitted to withdraw who has received any portion of his stock iu advance until the same has been fully repaid, he is entitled to withdraw on paying up any balance due by him on a settlement of the account, and it is repugnant to equity, in making such settlement, to aid in enforcing fines and penalties of an oppressive character, such as are found in the constitution of this association, and these may he properly excluded from the account.
    STATEMENT OE THE CASE.
    The complainant was a stockholder in the Economical Building Association of the city of Washington. Its constitution requires every stockholder to pay one dollar per share a month until the funds thus raised shall divide $200 to each share, less thirty per cent., when the association shall close up. In case the monthly dues are not paid, there is to be charged thereon a fine of ten ceDts a month on every dollar behind for such neglect. The following portions of the constitution are given in order that the scheme of the institution may be understood.
    The 7th seetiou of article 2 is expressed in the following language:
    “ Stockholders wishing to withdraw' from this association shall, after giving ten days’ written notice to the secretary, be entitled to receive from the treasurer the amount of dues, actually paid in, Avithout interest if withdrawn within the first year, and six per cent, interest per annum if withdrawn at any subsequent period, first deducting a portion of all losses and all fines and forfeitures so incurred: Provided, That no stockholder shall be permitted to withdraw who has received any portion of his stock in advance from the association until the same is fully repaid: Provided further, That not more than one-half of the amount of money paid in at any monthly meeting shall be available for the payment of withdrawals.”
    Article 8 in regard to advances:
    “Sec. 1. Each and every stockholder for each and every share of stock that he or they may hold in the association shall be entitled to purchase an advance of stock of two hundred ($200) dollars from the funds-of the association, and no more: Provided, That not more than ten shares shall be sold at any one bidding.
    “Sec. 2. Whenever the funds of the association shall warrant it, one or more advances shall be disposed of by the secretary to the highest bidder at the regular monthly meeting of the stockholders: Provided, The same shall not be sold under thirty per centum, and when it shall cease to sell at the minimum rate, then the board of directors are authorized to redeem stock. In the event of any money being in the hands of the treasurer for the redemption of stock, then the board of directors shall place the names of the stockholders who have not bought out in a box, and draw therefrom as many names as there is money in hand to redeem the same number of shares of stock, and the person whose name shall be drawn may, at his option, either take the amount paid in by him, with six per cent, interest per annum, or may take an advance at thirty per cent, premium.
    “Sec. 3. Whenevera stockholder shall purchase an advance he shall pay or cause to be deducted the premium offered by him or them for the same, and shall secure the association by bond, deed of trust on unincumbered real estate, (Provided, Beal estate conveyed by a tax-title, unless the title shall have been perfected, shall not be received as security,) and policy of insurance, the policy to be assigned to the trustees upon the trust for such amount as the board of directors may deem sufficient to cover the amount advanced, with all fines, costs, and charges which may accrue thereon.
    “Sec. 4. All costs and charges for drawing, acknowledging, and recording said deeds, as well as all deeds of release, shall be paid by the stockholder receiving such advance, and he shall assign at lease one share of stock for every advance of two hundred dollars so purchased.
    “Sec. 5. No stockholder shall be entitled to purchase an advance who is in arrears to the association, and no property shall be taken as security for such advance out of the District of Columbia.
    “Sec. 6. Any stockholder purchasing an advance may have the privilege of taking to the extent of ten shares; and if the funds in the treasury be not sufficient to pay the whole, he shall be entitled to receive the balance out of the next month’s receipts; and on failure or neglect on his part to give security required for such advance within one month after the date of purchase, the month’s extra payment of $1.00 per share shall be paid by such purchaser, and the money shall revert to the association.
    “Sec. 7. Stockholders taking an advance from the funds of the association shall, from the time of purchasing such advance, pay to the treasurer two dollars per month for every share of stock on which such advance may have been made, (instead of one dollar as hereinbefore provided for those who have received no advance,) and if the same shall be suffered to remain unpaid for more than two months, the board of directors may compel payment by ordering proceedings on the bond and deed of trust according to law, at the expense of said stockholder.”
    In 1868 the complainant owned 110 shares. Subsequently he purchased 30 shares more, and still later purchased 40 additional shares, canceling the 30 shares above mentioned, and leaving him the owner of 120 shares. Upon this he received advances amounting in all, as defendant claims, to the sum of $10,770, from time to time down to February, 1872. The answers admit payment amounting to $10,258. On receiving the advances he gave deeds of trust to secure the payment monthly of two dollars per share of his stock until the winding up of the association and of all fines that might be imposed, as is prescribed in section 6 of article 8 above cited. On the 29th day of February, 1872, the complainant having ceased to pay his monthly dues, he was served with a notice that if his indebtedness was not paid within ten days. the property embraced in the trust-deeds would be advertised for sale. The bill is filed for an injunction to enjoin the sale and for an account. He claims that he has paid money enough into the association from time to time, upon a true statement of his account, to cover and equal his indebtedness, and that he wishes to withdraw from said association. He also insists that the advances were loans at a usurious and exorbitant rate of interest, and that the fines and usurious interest should be deducted, and whatever the balance is he is ready to pay the defendant.
    An account was stated by the auditor showing $7,459.10 balance in favor of the association. Exceptions were filed by the complainant to the report, and three of them were sustained, and a decree made in part as follows:
    “And it is further ordered that the cause be referred to the auditor of the court to state the account between the parties, under the following instructions: he is to charge the plaintiff with all amounts received by him from the defendants, with legal interest thereon, commencing from the time each loan was made until the 1st day of March, 1872, and also with $40 paid by defendants for insurance, with interest thereon, and rejecting all fines; and he is to give credit to plaintiff for all moneys paid by him to defendants, with legal interest, from the date of each payment until the 1st day of March, 1872, and then strike the balance, which balance, if any there be, shall bear legal interest, beginning on and from the 1st day of March, 1872, until paid.
    “And it is further ordered, adjudged, and decreed, that John B. Blake and Moses Kelly, trustees, be, and hereby they are, enjoined and strictly prohibited from proceeding with the sale of the real estate referred to in these proceedings until further order of this court.”
    The decree is now before the general term on appeal.
    
      William F. Mattingly and F. Schmidt, for complainants, presented the following brief:
    In this case the complainant received from the defendant about $10,770, and in about three years’ time paid back $10,258. The defendant claims that the complainant still owes $7,579.10. This is about seventy per centum interest for eighteen months, or at the rate of forty-six per cent, a year.
    ' The plaintiff claims that this contract is usurious. It has every element of usury. It is a loan of money. Its payment is secured. An illegal rate of interest is reserved. If this is so, no disguise will prevent its being so adjudged. Lloyd vs. Scott, 9th Peters, 408. Thyson vs. Ricard, 3 H. & J., 109.
    The cases of annuities relied on by the defendants have no bearing upon this question, because the repayment of the principal beyond all question is secured to the association. Its success and life depends upon it. As to annuities see 2 Blackstone, 461, and Lloyd vs. Scott, supra.
    
    The English cases relied on by the defendant to show that transactions of this character are not loans, but dealings between partners, are cases under statute law exempting them from the consequences of usury, and regulating the rights of members.
    
      Fleming vs. Self, 27 Eng. L. & Eq., 493, was Seagrave vs. Pope over again between the same parties, and the plaintiff in redeeming was allowed the same profits on his shares as withdrawing members.
    The case in 25th Barb., cited on defendant’s brief, was based upon the statute of New York, exempting building associations from the usury laws.
    The case in 21 Georgia was also expressly decided upon the law of that State j and an examination of the case will show that the reasoning and opinion of the court upon the merits of the case were against the association.
    
      Franklin Building Association vs. Marsh, 5 Dutch., 225, is also relied upon by the defendant. The court in this case sustained the validity of the mortgage under the law of New Jersey, which is exceedingly liberal. But in its opinion cites the language of the Lord Ch., in 27 Eng. L. & E., Fleming vs. Self:
    
    “ The gain to the society arises mainly from the high rate of discount, which members in want of money are ready to give. In truth, the whole scheme is but an elaborate contrivance for enabling persons having sums for which they have no immediate want, to lend them to others at a, very high rate of interest.”
    
      "It might have been further said that these associations are but organized societies of legalized usurers, and that by their operations the investments of the members are absorbed by the usury paid to those more able.”
    33 Barb., 103, Melville vs. Am. Ben. Bg. Association.
    
    The contract in this case was prior to the act of 1851; but the decision of the court was long afterward. The plaintiff received about $3,500, and executed mortgage for $4,693. Payments $84 per month until the termination of the association.
    The court says: “ Whatever aversion may be naturally felt to declaring a contract void for usury when the excess is but small, there should be no hesitation in pronouncing such a contract as this within the law against usury.”
    “ By calculation it is shown that the association could not terminate in from less than five to eight years, while probably it would continue longer than eight years; and that $84 per month would pay up principal and interest at seven per centum by plaintiff in about four years.”
    “Upon these facts I am forced to the conclusion that these transactions were intended to be loans to the plaintiff at more than seven per cent, interest, and that such mortgages and agreements are usurious and void. The English cases cited by defendant’s counsel are distinguishable from the present in that all those cases arose out of transactions of associations formed under and authorized by statute.”
    The English cases referred to are the same as cited by defendant’s counsel in this case. 14 Legal Int., 237, Kelly vs. The Accommodation Saving Fund and Loan Association.
    
    Lourie, J.: “ If these loan societies usually deal on such terms, the profits which the keen calculators among them make out of the simplicity and credulity of their less knowing associates, will not be sufficient to shield them from the charge of using their associate power to grind the faces of the poor, and perhaps of being instituted under the garb of benevolence when their real purpose is far different.”
    “ It seems to me that the law refuses to enforce agreements so unconscionable. Injunction allowed.”
    
      24 Conn., 147, the M. & W. Mutual Savings Bank and Building Association vs. Wilcox et al.
    
    In this case the contract which provided for a bonus of f-of one per cent, per month in addition to 6 per cent, interest was adjudged usurious, although the charter authorized the charging of a bonus in addition to legal interest. 12 Rich., 134, Eq. Rep., Columbia Building Association vs. Ballinger. Ballinger borrowed $2,000 on ten shares of stock, received $1,300, and was to pay $20 per month.
    O’Neall, C. J.: “Noto the contract which has thus earned more than the principal in a period of a little more than four years can be anything else than usurious is difficult to conceive. Indeed, it must task and has tasked human ingenuity in every tribunal when the question has been presented, to find the reasons whereby snch a contract could be sustained.”
    41 Pa., 478, Houser vs. Herman Building Association, Lourie, C. J.:
    “A woman made this mortgage, and it is one of the hardest we have seen of these building-association loans. The premium contracted for is sixty-eight per cent., and it is sought to be enforced at the end of three years, when the premium and legal interest on the nominal principal would make an interest of thirty-three per cent, per annum on the actual loan.”
    “ No wonder the woman applies to us for relief, and we have already many times decided in other cases that she is entitled to be discharged on payment of the actual amount borrowed with legal interest.” (See Wrigley on Building Associations, 64, 65, and “ How to Manage Building Associations,” by the same author, page 97, et seq.)
    
    
      Walter D. Davidge and Walter S. Cox, for defendants, argued that—
    Whether the transactions in question are usurious is the first inquiry.
    It is well settled that a debt payable in future may be purchased or discounted at any rate without violating the statutes against usury, (see Nichols vs. Fearson, 7 Pet., 103,) so that there could be no usuryjn the mere receipt by Pabst of a less sum than his future dividend, in full satisfaction of it, though the premium or discount exceeded six per cent, per annum.
    Again, when the principal sum advanced or paid is not to he repaid, but only an annuity or- periodical payments,' though these exceed the legal rate of interest on the principal, and even though they would pay off the principal in a short time, there is no usury in the transaction.
    Thus, where one gave £566 to have annually £139 for and during twenty-three years, the defendant had accepted £129 for the first year, and upon information against him in the King’s Bench for usury, it was held not usury. Finch’s Case, 1 And., 121.
    Again, where one gave £109 for annuity of £20 per annum, it was held no usury. DeGoad’s Case, Triv., 19 Eliz., in the Exchequer.
    So, in Fuller’s Case, Mich., 29 Eliz., 4 Leon., 208, where one gave £300 to another for an annuity of £50, assured to him for one hundred years, if he, his wife and four children should so long live, it was held not to be within the statute of usury.
    So, where the defendant had given plaintiff £100, and for that he granted the defendant £20 for eight years annually, as a rent charge, and after that for two years more, if three men live so long, it was held that if the original contract was for a rent-charge it was no usury. Simond vs. Cockerill, Noy., 151. (See these and other cases in Comyn on Usury, 43 et seq.)
    
    It will be observed that the transactions under consideration have both the features which have been held to exclude the taint of usury.
    In the first place, the association becomes bound to pay in futuro to each stockholder, on winding up, a certain sum, which may be lawfully discounted.
    In the next place, the principal sum received by the advanced stockholders is not to be returned, but only an annuity during the life of the association.
    There have been sundry decisions directly on the subject of these societies.
    
      The first case on the subject was Silver vs. Barnes, 6 Bing., N. C., 180, decided in 1839.
    It was a case of a mutual benefit society, in which the funds were put up at auction and advanced to the highest bidder, as in this case.
    It was left to the jury to find whether there was a bona-fide partnership, or the whole arrangement was a contrivance to cover usury. They found the former. On a motion for a new trial, Tindall, Ch. J., said: “The judge who tried the cause thought there had been uo loan, but merely au advance of partnership funds, in which the defendant was interested in common with the other members of the society. The defendant was interested in the fund when the money was advanced and when it was repaid. The rules of the society are, in effect, a mere agreement by partners that their contributions shall be advanced for the use of one or the other, as occasion requires, and the transaction in question was not a borrowing by the matter of the note from the payees.”
    
    In the case of Cutbill vs. Kingdon, 1 Exch. R., 494, (1847,) the question of usury was not made; but Parke, B., in allusion to the statutes, in argument, referred to Silver vs. Barnes, as giving the true rule, and said: “There is no usury in benefit societies lending their money to their members at more than £5 per cent.”
    In Wadley vs. Baker, 6 Hare, 87, (1848,) the plaintiff had filed a bill to redeem, on payment of the sum advanced and legal interest.
    Wigram, V. C., remarked that this was not the case of a loan, but was a discount of the plaintiff’s share, or an advance at its then present or conventional value, of his interest in the shares he held at the termination of the association, and that plaintiff was only entitled to redeem on payment of all the future subscriptions on his shares until the dissolution of the association, its probable duration to be ascertained by calculation, and the future payments to be treated as due.
    This case came on appeal before Lord Oottingham, and was affirmed; he holding also that all future monthly payments were to be paid at the time of redemption.
    
      Seagrave vs. Pope, 1 De Gex, McNachten & Gordon, 783, (1850,) held the same doctrine, overruling the vice-chancellor, Knight Bruce, who had held the transaction in this case to be substantially a loan.
    Lord Chancellor Truro said: "It was not a loan, but an anticipatory payment, by way of discount.”
    In Burbridge vs. Cotton, 8 Eng. L. and E. Rep., 51, on a bill charging usury, &e., in a similar case, Sir. J. Parker, V. C., held that the case was not that of a loan, but of an advance out of partnership funds, and not usurious.
    
    It is true that there is an English statute regulating building societies, which declares that a bonus or interest may be taken for an advance without being deemed usury. Some of the decisions, however, relate to what are called friendly or other benefit societies, not within the statute, and the same rule is held, showing that the statute is considered merely declaratory of the common law.
    In the United States, statutes have been passed in several States, very much in the terms of the English statute. Some of them seem to authorize the transaction under the name of loans, and some of the societies are called loan associations.
    And some of the decisions seem to recognize the same features in these dealings, before adverted to, as at variance with the theory of usury.
    In the case of the Citizens’ Mutual Loan Association vs. Webster, 25 Barbour, 263, decided in 1851, the court say:
    “ Whether the payments required to be made by this bond, in order to prevent forfeiture, will exceed the principal and legal interest of the amount advanced to the defendant, will depend upon matters not brought before the court. * * * If the principal were payable absolutely, there could be no doubt of the usury. But it is not so. And even when the mortgage has been foreclosed, and the moneys mentioned therein collected, they are to be applied only to the satisfaction of the dues, fees, and fines, and the surplus to be returned to the mortgagor.”
    And in regard to the increased monthly payments, they say: “Besides, the higher rate of interest to be paid by each member of the association, the shorter will be the period required to complete the accumulation, on the completion of which the association was to terminate and the payments to cease. The money collected by the association being the mutual property of all the members, and the greater the accumulation, the shorter being the period during which they will have to bear the burden of paying the moneys for the purpose of accumulation, the ordinary objection to the collection of interest beyond the fixed rates is removed.”
    
    So in Bibb County Loan Association vs. Richards, 21 Georgia R., 592, (1857.)
    The association had been incorporated expressly.
    The court say: “ Perhaps the best argument in support of this transaction, is the risk and uncertainty attending the result. Stock is put up at auction, the terms of sale are distinctly understood, and a purchase is made, taking into view all the contingencies attendant on the society during the few or many years of its existence.
    “ The stock may be worth a premium, or it may be a dead loss at the end of the operation. This, each must decide for himself. If he concludes to take half now for then, that is, one hundred dollars for stock now, nominally worth two hundred dollars six, eight, or ten years hence, who has any right to say he judges foolishly ? ”
    
    So in the case of Savings Association vs. Vandevere, 3 Stockton, 382, (1857.)
    The court considered a bond similar to that in the present case as not importing a return of the principal, and therefore involving no usury.
    
    So in Franklyn Building Association vs. Marsh, 5 Dutcher, 225, (1861,) the statute providing that no premium given for the priority of loan or discount on the redemption of shares shall be deemed usurious, the court did not consider the indefinite period for which the monthly installments might run, or the fact that they might exceed the money loaned and laivful interest, or the fact of the additional monthly payments, as affecting the validity of the transactions.
    So in Shannon vs. Bunn, 43 N. H., 194, (1861,) the court say : “ If the transaction here is to be regarded as an advance to Dunn, it was from funds in which he had a common interest with the other members, and in which he continued interested, and is to be regarded as dealing with the partnership funds rather than as a loan. If it is to be deemed a sale by Bunn for a present sum of his right to a future divi
      
      dend of five hundred dollars upon each share, it seems to be no more open to objections than somewhat similar transactions in post-obit bonds, annuities, stock-contracts, and negotiable securities. The contract does not provide for the return of the sum advanced at all events.”
    So in Delano vs. Wild et al., 6 Allen, 1, (1863,) which was a suit brought to recover back alleged usury. The discount was as large as $205 on the expected final dividend of $500 per share.
    The court say: “ The money which the plaintiff received was not a loan, but an advancement to him by the company.” “ But no provision is made and no stipulation required for the repayment of the principal, because this is not the end and purpose intended to be accomplished by the parties in the transaction. For, though the proceeding is in form a sale or disposition of its funds, it is in fact a redemption by the company of the share or shares of the member who is nominally a purchaser of its money.”
    “ Finally, the transaction between the parties cannot be deemed to embrace an agreement between them for the payment or reservation of usurious interest, because it was a dealing between them as partners in relation to a partnership fund in which they had a common interest.” “In such case there can be no violation of the statute regulating the rate of interest.” Citing Silver vs. Barnes, sup. (See, also, Trask vs. Wheeler, 7 Allen, 109.)
    The case of Robertson vs. American Homestead Association, 10 Maryland R., 397, (1857,) was that of a petition by the appellee to sell mortgaged premises, &c.
    Curia. “ The only remaining question to be considered is the objection to the decree on the gronnd that the mortgage is usurious in its terms. To this, it is sufficient to say that the contract, so far as it is disclosed in the record, contains no proof or element of usury. The only proof of the contract is to be found in the mortgage, which appears to be such an instrument as is contemplated by the act of .1852, the consideration for which was not a loan of money to be repaid, but the sum of $460 paid to the mortgagor by the society as the ascertained value, in advance, of his shares of stock in the corporation, while the mortgage contains no covenant or obligation whatever for the repayment of said sum or any part of it. This court cannot regard the principal sum named in the mortgage as in any sense a loan, nor the contract, as it appears on the record, as usurious.” “We adopt the views expressed in Silver vs. Barnes,” &c. (See, also, Oak Cottage Building Association vs. Eastman and Rodgers, 31 Maryland, 556 (1869,) particularly as to the mode of settlement.)
    In the case of Columbia Building and Loan Association vs. Ballinger, 12 Richardson’s S. C. Ex. R., 124, though the ultimate decision was against the association, the reasoning of the chancellor, who was reversed, is more satisfactory than that of the other court.
    He says: “By his contract with the association B. agreed, in lieu of the $200 for each of his shares, to which he would be entitled when the funds of the association would suffice to pay that sum to each share of its whole capital stock, to accept the sum of $2,000 in cash, reduced, however, by $700, payable presently, and by the further sum of $10, payable monthly thereafter, during the existence of the association.”
    “If this be a just conception of the contract, then the transaction was not a loan. It was an advance by anticipation to B. of the present value of what he would be entitled to receive upon shares he held at the termination of the association. If the contract be regarded as a sale by Ballinger, and a purchase by the association of his interest as stockholder, the inhibition of usury would have no application to sucha transaction.”
    
    “The additional sum of $1 to be paid monthly by B. on each share was as much a parcel of the premium for the advance as was the $700.” “ The sum advanced B. never engaged to return. The bond he executed is not, and never icas, intended to be a security for its repayment. Twenty dollars are required by the condition of the bond to be paid monthly. Of this sum it is in proof that the one moiety is for the primary monthly dues, and the other for the additional dues that arose upon the same shares .for the advance upon them. The former moiety cannot be regarded as interest on the sum advanced to B,, for the obligation to pay it existed prior to such advance, and was assumed by the original subscription for his shares. Ms to the latter moiety, it was in truth but parcel of the abatement 
      
      agreed to be paid, and is no more interest than were the $700 deducted at the outset.”
    It will been that in most of the States there are some statutory enactments which would relieve the cases from the objection of usury, even were they considered cases of loan. But the pertinency of the decisions above referred to is, that they declare the transactions in question not to be loans, but advances, discounts, and purchases.
    As to the fines. It is true that equity will never interpose actively to enforce penalties and forfeitures. On the other hand, it will not, except in special cases, interfere to prevent their enforcement at law. -
    Especially, where there can be no clear estimate of the damages resulting from a breach for which the penalties are incurred, they refuse to interfere in either way. The very illustration given of this in 2 Story’s Eq. Jur., sec. 1325, is the case of failure to pay installments on stock.
    In the case of Shannon vs. Howard Mutual Building Association, 36 Md., it was held that the fine of a building association did not come within the principle which forbids a court of equity to lend its assistance to enforce the payment of fines and forfeitures, and that they ought to be allowed even where the court were applied to to foreclose.
   Mr. Justice Wylie

delivered the opinion of the court:

Complainant was a member, and the defendants were either officers of or trustees for “The Economical Building Association” of this District. The controversy is as to the amount due- by the complainant to the association; the latter claiming that on the 14th of February, 1872, Pabst was its debtor to the amount of $7,579.10.

In the year 1868, complainant became first a member of the association, and in the course of the following year was the owner of 120 shares, the value of which was $200 a share after all the payments should have been made up. The shares were to be paid for at the rate of one dollar on each, per month, or $120 for the 120 shares. At this rate, his shares would all have been paid for at the end of sixteen years and eight months; but the actual value of the shares at any intermediate date depended upon the amount of payments which had previously been made on their account, and the business of the association and its future prospects.

At different periods daring the year 1869, Pabst was advanced money by the association to the amount of $10,770. This was a much larger sum than had been paid by him, at that time, on account of his shares, and, of course, a much larger sum than the shares were actually worth of themselves. But for the purpose of securing the association, he executed deeds of trust upon a valuable lot and its improvements in this city, and entered into obligations thereafter to pay to the association $140 a month, or two dollars on each share held by him, until the whole amount of $200 a share had been fully paid up, or the association brought to a close. The security given was not for the purpose of protecting a debt of an ascertained sum, but to compel the member obtain» ing the advance to meet his monthly payments. The money advanced was not a loan by the association, but a purchase of the member’s shares, leaving him without further interest in the association, except his obligation to pay for them to the uttermost farthing, by monthly installments to the end. If the association should not be able to close up its business until the full completion of the period of sixteen years and eight months, the member who was advanced on 120 shares would have paid $24,000 into the treasury, in an average period of eight years and four months.

But by means of the rapid compounding of interest by means of monthly loans, and the fund derived from fines for default of members in paying up their monthly dues, the period for closing the business of an association may be greatly abridged. For at whatever period the funds of the association will enable it to “ divide to each share of stock the sum of two hundred dollars, less thirty per centum, the association shall determiue and close.” The more prosperous, therefore, is the association, the briefer its existence. It cannot be told for what length of time a member who has an advance upon his stock may be required to pay up his monthly dues. If the profits derived from compounding interests at high rates, and short intervals, and from fines, arelarge, thisperiod will be short. If these profits are not large, it will be more remote. If the period be short, the member advanced will have the benefit, for by the close of the association he is relieved from making his monthly payments, and so, although no longer a member of the association, he is a sharer in its profits. If the time for closing up the business be.more protracted, the member advanced loses that advantage; but under no circumstances is he required to pay beyond the nominal value of his stock.

Whether the arrangement shall turn out to be favorable to the member advanced, or otherwise, depends upon the success of the association. If it be successful, although no longer a member for some purposes, he shares in the profits; if unsuccessful, he may be a loser, but only to a limited extent.

We discover nothing, therefore, in the nature of this association which is unlawful, or in any wise necessarily more objectionable than other associations whose object is to make profit for their members. On the contrary, so far as it holds out encouragement to its members to save their earnings instead of squandering them in idleness and vice, it deserves to be supported and encouraged.

If, however, persons will join these associations in the expectation of borrowing money at pleasure, with no obligation ever to repay it, or subscribe for an amount of stock on which they are unable to meet the monthly dues, and thus subject themselves to fines at the rate of 120 per cent, per annum interest on the sums in arrear, disappointment and bankruptcy are to be expected.

There is another class, also, for whom these associations are unprofitable, namely, those who, having subscribed for shares and received advances for which they have mortgaged their homesteads, are afterward overtaken by sickness, or other inevitable calamity, depriving them of the power to meet their payments.

But for the laboring man, blessed with health, industrious, frugal, temperate, and resolute, these associations, if controlled by men like himself, are admirable institutions. Such a man, however, may win his fortune without their aid; and by joining them, takes the risk of wasting his time, and forming a connection with those who may defraud him of his. property. So much as to the subject of building-associations iu general.

In respect to the particular matter in controversy in the present case, the facts seem to be as follows: In March, 1869, Pabst was the owner of 120 shares of stock in this company, on which he, or those of whom he purchased, had been making monthly payments. At that time he obtained advances from the association amounting to $10,770. These advances, he it remembered, were not loans. In order to secure the association for these advances, he executed two deeds of trust upon certain improved real estate in this city, both of the same form, from one of which the following is an extract:

“Whereas, heretofore, to wit, on the- day of-, in the year of our Lord one thousand eight hundred and sixty-nine, the said party hereto of the first part, by his writing obligatory of that date, acknowledged himself to be indebted to Nicholas Callan, the treasurer of said association, in the sum of twenty-two thousand dollars, and delivered the same to the said treasurer; and whereas the said writing obligatory is subject to a certain condition thereunder written to the effect that he, the said Matthias Pabst and his heirs, executors, and administrators, shall well and truly pay, or cause to be paid, to the treasurer of the association, and to his successor in office, the sum of two dollars current money per month for every share of stock which he, the said Matthias Pabst, holds in said association, commencing from the date hereof, and to be paid on the first Wednesday of each month thereafter, and also all fines and forfeits which may be imposed upon or incurred by him, by virtue of the provisions contained in the constitution, by-laws, and obligations of the said association, until the said association shall determine and close; and in order to secure the faithful performance of the condition in said writing obligatory mentioned, and stipulated to be performed by the said party hereto of the first part, he, the said party of the first part, hath agreed, to execute these presents:
“Now, this indenture witnesses,” &c.

Here we find no obligation to pay any debt, but only that the party of the first part shall pay two dollars a month on each share of his stock, and all fines and forfeits, until the close of the association.

The deed further provides that, on default in making these payments for a period of four months, the trustee, on being requested so to do by the association, shall proceed to sell the property so conveyed in trust, &e.

The date of this deed is the 10th of December, 1869. The other is dated 21st December, 1S70.

Each of them was given to secure the punctual payment of the monthly dues only from and after their respective dates. So that the payment of no dues, if any such exist, could be enforced even under the oldest of these deeds, except such as have accrued on and since the first Wednesday in January, 1870.

On the 29th of February, 1872, the secretary of the association gave a written notice to Mr. Pabst that his property would be advertised and sold under these deeds of trust unless his indebtedness to the association were paid within ten days, and inclosed a statement of amount claiming a balance due of $7,579.10. To restrain such sale, -.and -to obtain a settlement of his account with the association^ the present bill was then filed.

According to defendant’s answer, Pabst’s

Advances amount to............................$10, 770

And his payments to........................... 10,258

Balance, without calculation of interest.......... 512

And yet defendant claimed there was still due $7,579.10, and was threatening to sell the property unless this sum were paid in ten days.

The fines amounted to only $522.45, and the insurance advanced by the association on account of Pabst to only $40 more.

Conceding that from the first Wednesday of January, 1870, inclusive, to the 29th of February, 1872, when the account was rendered and payment demanded, that Pabst made default in every one of his monthly dues, the sum would have amounted to only $6,000. But he had in fact paid within that time $10,258 on account, and which ought to have been applied so far as was necessary to the payment of any of these- monthly dues. In that case the dues would all have been paid, and no fines could have been laid; and a large balance have remained in the treasury of the association to the credit of Pabst, to be appropriated as he might choose to direct, or might be agreed upon. The great error in the account is in the item of $8,807.50 charged to Pabst in June, 1869, as “loan on 110 shares.”

Now, as we have seen, there was no loan in the case, much less any loan secured by either of these deeds of trust. The company took his stock and advanced him money in consideration of what had already been paid, and on the monthly dues yet to be paid by Pabst. All that Pabst had to do to pay that loan,” as it is here called, was to pay his monthly dues at maturity until the close of the association. The same error appears in a subsequent item of the account, where he is charged with “ loan on forty shares of stock in December, 1870” — $4,420.

If these were loans, they are not secured by these deeds of trust, and, besides, would be clearly usurious.

If they-constitute the advances which were intended to be, and which in fact were, so secured, they ought not to appear in the account, so long as the property remains unsold. Under these contracts, Pabst was obliged only to the payment of his monthly dues at maturity. These had been paid up and more than paid, in advance. If he continue to pay them until his payments shall reach $200 on each share, or until the company can wind up its business by paying that amount, less thirty per cent., his debt will be paid, because that is the contract of the parties, and agrees exactly with the scheme and constitution of the association. By a proviso to be found in the seventh section of the constitution of this society it is declared “that no stockholder shall be permitted to withdraw who has received any portion of his stock in advance from the association until the same is fully repaid.”

At the argument of the case, counsel for the association were asked by the court to say what was their construction of this proviso, and seemed to be at a loss as to how it should be interpreted. Its language is certainly far from being clear. We are inclined to think it should be construed ás if it had been written, any advances upon his stock, &c. In that sense it seems to have been understood by both the complainant and the defendants. The former is anxious to withdraw, and prays for an account. He is entitled to withdraw on paying up any balance due by him on a settlement of the accounts, and this was the precise effect of the decree which was passed by the court below. The fines or penalties for default in the monthly payments were excluded, and properly so, for, independently of the repugnance of a court of equity to aid in enforcing penalties of the oppressive character of those prescribed in the constitution of this association, the sums which the complainant had paid into the treasury of the defendant, from time to time, though not by regular payments of $240 a month, far exceeded the sum which these payments amounted to at the time the account was rendered.

We have seen that on the 19th of February, 1872, the association rendered its account, charging Pabst with the full amount of the advances received by him, calling them loans, and threatening that it would proceed to have his property sold under the deeds of trust unless within ten days he should pay up these loans, as well as the other claims set out in the account. We have seen, also, that at this date Pabst was 'notin default as to his monthly payments, but, on the contrary, was entitled to a large balance to his credit, and that his property was not liable to sale under the deeds of trust so long as that was the condition of the account between him and the association. By this step the association elected to treat him as a borrower. He might have still claimed his right to continue his connection with the society, and have the amount then to his credit applied, from time to time, to the payment of his monthly dues until that amount was exhausted, and afterward to meet the monthly dues by new payments, and ultimately have the advances made to him repaid from his share in the profits of the association at its close. He has chosen, however, to take the association at its own word, and has come into court praying an account, and asking to be relieved from his connection with the association ; and to this relief we think he is entitled upon the very terms prescribed in the decree of the court below, namely, that the advances shall be treated as loans, and his payments as credits upon them.

The decree at special term is affirmed with costs.