Evening star. [volume] (Washington, D.C.) 1854-1972, 1881-01-06
An Important Building Association
Decision.

An Important Building Association
Decision.
TIE RIGHTS OF THE ASSOCIATIONS MAINTAINED.
THE STAR Of December 18th contained refer
ence to the case OF Forsyth vs. The Hlbernia
Building Association, wherein Mr. Justice Cox
holding the Equity Court, announced his i'm
pressiobs, to the effect, that the contract be-
tween the complainant and the building asso-
citation was usurious. The case, however, was
not formally decided until the 9th ult, when
the court delivered the suDjoined opinion fully
sustaining the claim OF the association and re-
during the complainant to pay in accordance
to withdraw therefrom. The court said:
The question presented by the excep-
IONS 10 the auditors report Is whether
In the settlement between an advanced
member Of the building association and the as
ISOLATION he is to be credited, as against the ad-
vance. with the additional dollar paid monthly
on each share. or that is to be deemed a lawful
premium or compensation to the association for
Inc advance. Now, In order to resolve this
question. 1t Will be necessary to go back to first
principles and ascertain upon what grounds the
scneme OF these associations Is sanctioned by
the courts. The theory Of such associations Is
simply this, viz: that a number OF individuals
associate themselves together and issue stock
say OF the nominal par value OF 800 DER share
and each Individual is to pay one dollar per
month on each share that he holds until the
accunu lated fund shall divide $500 to each
share.
1t is optional, under the scheme OF the pres
ent association, whether any individual mem
Der will continue his connection with it. b.
cause he Is privileged at any time to withdraw
and get re payne OF the money he has pad
l. II this were the whole scope OF the scheme
would be very simple. But il is obvious unat
! Is vastly to the advantage OF any member TO
receive his dividend OF 5000 In hand, instead OF
having 1t in prospec. after lapse OF 5. 10 or IL
years or more. and the scheme really conten-
plates the advancement Of the shares to me n.
They will. naturally, be willing to pay q pre-.
MUM for this privilege. And there is nothing
In this intr1ns1calE wrong, or In conflict with
the law against uSury.
IL a man owes ne one thousand dollars pay-
able at any time hereafter, and l agree to &C.
cept much less sum in hand and release the
debt, am at liberty to do it. II he finds that
he can purchase his debt at a sum mucn short
OF the principal Of the debt, there Is no law
which forbids himto do it. 1 may pay or allow
this premium or discount In any one OF several
ways. may be willing, In the first place. TO
receive the whole amount Of money and pay
premium for 1t in some other thing Of value, or
may De willing 10 deduct largely from the
principal ddo,p amount mo- and give release upon
to pay interest upon the money
receive up to the time 1t would become
due to me absolutely. or may be willing to
deduct some amount from the principal of the
debt due me ard besides that to pay interest up
to the time that it would become due to me.
Ihe authorities have gone extremely far in
Il
c1pal sum advanced is not to be repaid, interest
may be paid at much higher than the legal rate
without infringing the law against usury.
Thus, where one gave e566 to have annually
.el3O for and during twenty-three years. the
defendant had accepted e120 for the FIRST year.
and upon Information against him in the Kings
B snoh,, for usuary 1t was held not usury.
Again. where one gave el0O for annuity of
ego per annum 1t was held no usury. De
Goads case I'rlv., 10 Eliz., In the Exchequer.
N Lp lori
where one gave e30O to another for an annuity
OF ESQ. assured to him for one hundred years.
II he, his wife and four children should so long
i've, It was held not be within the statute Of
So, where the defendant had given plaintiff
Eloo, anG fOr that he granted the defendant
cse for eight years annually, as rent charge,
ana a1te! That for TWO years more, II three
men live so long, it was held that II the original
contract was for rent chargett was not uSury
Simond vs.. Cockerill. No. ISL. See these and
other cases In Comyn on usury. 43 ct seq.
Now there are three schemes as | gather
from the English theory, of these transactions
according to which the premium for these ad-
vances were PAID. One is called the gross plan
as when man receives less than the 5000 to be
paid to him ultimately, but pays interest on
that amount annually, which Is one dollar
month per share That Is to say he pays legal
Another Is called the net plan, as when party
receives less than the 5000 and pays interest on
the amount which he receives. And another Is
cailed me INSTRUMENT plan, as where he re-
ceives the whole $500 and pays the monthly
tnstallment OF interest, and also an installment
OF the agreed premiums so that In the course of
time he Will have paid up the whole interest
am not discussing the legality of these asso.
Citations as an original question, but am simply
endeavor1ng to get at the grounds upon which
they have been sustained
rtn arks Is, that the additional payment OF 81
per motif on the advance is just as much
part of the premium as the percentage bid and
IeServed upon the principal sum.
An important feature In this scheme Is that
II party desires to settle advances as it is
expressed In article Is OF the constitution Of
this association, he may cancel the transaction,
In Which case he snail be charged with certain
amounts and credited with certain amounts.
He may cancel the whole OF the advances In
other words, and put himself and the assocta-
by tie English statutes regulating building
associations, If a party has paid premiums for
advances, and he proposes settlement OF ad-
vances before the time out 1T Is enacted that
refunded to him. In this case, If a party
pays the monthly instruments Of say 50
per month on each share until the asso-
citation winds up its affairs. he will have paid
the whole OF the premium bid for the advance.
but until be has paid beyond the amount he
has actually received he has paid none OF that
part OF the premium which consists OF the per-
centage reserved. He has not yet paid 1t Into
the association and consequently they have
not received 1t from him. He has paid no part
of the premium which constitutes the reserved
percentage-the OHly thing that ne has paid as
premium Is this monthly 1nStalmenu of one
dollar additional per share. In fact the only
part of that which can be properly considered
q premium Is the excess over legal interest for
the use of the money.
Now, If this contract is legal In its inception;
that Is, II man may contract to pay these
monthly instruments, to continue until the end
of the association, which assume to be settled
by this court In general term, am unable to see
why he may not contract that If he chose to
settle advances he may pay 6. rateable proper
ton OF that premium up to the time when the
advance Is settled; and do not see why con-
tract to pay this additional dollar per month no
to the time OF that settlement IS not such a
during the time for which he has the use OF that
money or advance. 1t may be said that he
simply had the use OF the money, and can only
be compelled to pay interest 1t seems to me
that he has had more than that He has had
the privilege all the time he has had the money
to treat 1t as absolutely his and TO continue bis
monthly payments only till the association
winds up Its affairs.
He has all the time had the use of this money
before he was entitled to It, 80 that he has had
something more than the use OF the money for
the time intervening between the advances
and the time OF the settlement Of the advances
Then If he could contract to pay legal interest
for the use OF the money, and could contract
also for the additional premium with the special
privilege attached to this advance, do not see
that there ia anything illegal II at the time OF