Omaha daily bee., 1896-11-29
COOPERATIVE HOME BUILDING
Importance of Decision Lately Given by
the Nebraska Supreme Court.
RELIEF FROM THE FINANCIAL SCARE
Illinois Courts Give n Black Eye 10
Foreign Associntions-Pnyin
Mnturcd Shnrcs-Asso-
citation Notes.

The Importance or the recent decision ol
the Nebraska supreme court on the principal
issues affecting building and loan associa-
tions was oyershadowed at the time OF its
deliverance by the absorbing questions of
the presidential campaign The decision wac
awaited with considerable anxiety, not alone
by the appellants, the Livingston associa-
tlon of Plattsmouth, but by every associa-
tion in the state The opinion of the court
is by Commissioner Irvine, and Is an able
discussion of the questions presented and an
exhaustive review of the authorities, The
building associations of Nebraska, as well
as the Livingston and it's attorney, Mr.,
Matthew Gering, are all to be congratulated
upon the result.
The Livingston prior to 1891, had loaned
TO the defendant, Drummond, who was the
owner OF ten shares of it's stock, $4,000, for
which he had bid a premium Of $3.50. This
premium was paid or deducted in advance
The defendant gave n bond to pay 81 per
month on each share, and 10 per cent in
terest on 10000 until by the payment OF
dues and the addition of earnings the shares
became par. 5000, and secured this by a
mortgage upon real estate.
In an action TO foreclose this mortgage the
defendant urged that the loan was usurious,
that the act of 1873 providing for the in
corporation of building or homestead as
sociations. and permitting them to charge
their members premiums and interest on
loans amounting to more than the ordinary
legal rate of interest was unconstitutional
and that this contract was in violation OF
even that law, because interest was charged
on the premiums.
In the dictrict court Judge Chapman held
the loan unsurious, and from this decision
the Livingston appealed to the supreme
court where the judgment Of the district
court was reversed and remanded, with
directions to award a decree of foreclosure
on the basis of a legal contract.
The act of 1873 was sustained under the
constitution in existence at the time of Its
passage and under the present constitution
1t was urged that this act was local oil
special law regulating the interest on money
To this the court replied that "a law is not
special when 1t applies to all citizens and
persons who may be brought under the cir
CumstanCes affected thereby. In other states
having similar constitutional provisions such
legislation has, on the ground herenbefore
indicated, been uniformly. 50 far as we can
ascertain, sustained" Citing cases from
Michigan, Illinois and Indiana The court
however, follows decision IN the Seventh
Nebraska reports and holds upon that much
debated question, that such a transaction
is a loan and not an advancement upon
stock.
THE QUESTION OF USURY.
Upon the remaining question, whether
exacting interest on the so-caled premium
makes the loan usurious, the court adopts
the better reason and holds that II does not,
following the decisions in New York and
New Jersey as against those in Ohio, Iowa
and West Virginia. If sucn an association
has the right to charge any rate of interest,
and in order to make such a loan usurious
it is necessary to consider the so-called
premium the interest on this premium and
the so-caled interest taken together as the
interest charged, then it must follow that
these all together are in fact the interest
charged from which can be computed the
rate of interest on the money actually ad-
vanced which is within the rate authorized
by law, and consequently not usurious.
1t was shown by the testimony that the
defendants stock would have matured in
eight years from its issuance, so that if
he had complied with the terms of his con
tract it would not have been a hard bar
gain for him.
Many OF the Nebraska associations have
already abandoned the old practice SO that
now all of their charges, by whatever name
designated, are within the usual rate of
interest.
But a decision declaring the ordinary
building association loan usurious would
have been disastrous to all alike by destroy
ing the well-merited confidence of the public
in these cooperative savings banks. No
other form of business institution the whole
country over has better withstood the stress
of hard times than the bonaide local build
ing association. Here depositor and bor-
rover meet at the least possible expense and
both become thereafter actually interested
in the economical and safe conduct of the
affairs of the association, for on these lines
only can the stock be matured and the loans
repaid by the fewest payments.
THE ELECTION SCARE.
Omaha associations. and doubtless, every
association in the state, have felt the effect
of the campaign on their treasures. The
influences that operated to reduce the sur
plus of every financial institution were felt