Court Opinion

ID: 4916111
Source: CourtListenerOpinion
Date Created: 2021-09-22 00:09:38.052784+00
Date Added: 2024-06-11T08:13:52.295916
License: Public Domain

Maxwell, J.,
dissenting. — -Section 8 of chapter 4158 of the acts of 1893, entitled “An act in relation to foreign building and loan associations,” provides “that no fines, interest or premiums paid or loans made by any building and loan association shall be deemed usurious, and the same may be collected as debts of like amount are now collected by law in this State, and according to the terms and stipulations of the agreement between the association and the borrower.”
If this act applies to the appellee, the Southern Home Building and Loan Association of Atlanta, Georgia, the loan made by it to the appellants will not be usurious because of the stipulation that a fixed premium amounting to six per cent, per annum be paid by the borrower, in addition to six per cent, as interest on the loan. If the appellee is a foreign building and loan association, as its name indicates, the act does apply to it and to this transaction. The opinion of the majority of the court denies its right to be so classed because of its demand of a fixed premium upon its loans instead of a premium to be ascertained by competitive bidding.
All premium charges contemplate the possibility of payment of more than the legal rate of interest on the money received. Otherwise there would be no necessity for making an exception in favor of building and loan associations in the usury law. And this is equally true whether the payment is of six per cent, interest on double the amount of money actually received on the loan (the other half being deducted in advance as a premium) or of six per cent, as interest and six per cent, as premium on the amount of the loan actually received. The one form of premium is as obnoxious .to the spirit of the usury law as the other, and the adoption of the one rather than the other, therefore, would not exclude the corporation from classification as a building and loan association; and in fact our statute in regard to domestic associations does not prescribe the manner of payment of premiums, but onty the method of ascertaining their amount.
*557It is true that the plan for domestic building and loan associations provided in our statute adopts the rule of ascertaining the premium to be required of the borrower by competitive bidding for the money to be loaned. The question is whether that feature of the plan is so essential a one that without it an association though not incorporated under that statute loses its character as a building and loan association.
To my mind the essential feature of the building and loan plan is that of providing for the repayment of loans by the maturing of the shares of stock belonging to the borrower, which are to be matured by the small regular payments stipulated in the articles of association. This enables and encourages the stockholder of limited means and small income to invest his money in a home and pay for it in installments within his reach, when without this opportunity he might be unable or unwilling to purchase a home. It also gives him as a stockholder the benefit of the earnings and profits of the association in more quickly maturing his stock and discharging his indebtedness.
The premium in addition to the regular interest charged is one of the means of profit contributing to an early maturity of the stock. The premium and interest together may amount to more than legal interest on the loan, but the law tolerates this in its willingness to encourage the building of homes by those not able to do so by other means, and the more willingly because the larger payments made by the borrowers so add to the value of their own investment in the stock of the association that by effecting an early maturity of the shares it may ultimately preclude payment of more than a fair interest on the loan.
Incidentally the premiums where they are fixed by competitive bidding are made a means of determining the priority in the making of loans where there are several applicants therefor, the loan being made to the highest bidder. The real reason of this bidding, however, is not simply to determine the order in which the loans shall be *558made, as this could be determined by the order of application for the money, or in other ways more equitable than that of bidding for the money. It is done in order by trading upon the necessities of the borrower to secure as large a bonus as possible for the association, in pursuance of the policy of maturing shares as early as possible. If, then, the policy of the law with respect to these associations is to make the premiums, and by necessary consequence the interest, paid by the borrower as large as possible, there is no good reason to object to any reasonable premium as infringing the usury law.
Fixing the amount of premium by competitive bidding in making each loan merely introduce into the association an element of chance whereby one class of borrowers will profit at the expense of the others. All who bid less than the average of all the premiums paid will profit at the expense of those who bid more than the average. The association as a whole will not benefit by the inequality. Its profits will be equally great if all pay the average premium, and the equitable plan would be to require this uniform payment. I can not conceive that this inequality of burden, the extent of which is dependent upon the number and necessities of those who may happen to desire a loan at the same time, as the successful bidder is so inherently essential to the purpose which the statute was designed to favor, that an association not adopting it should be excluded from the benefits of the act in reference to such associations.
The appellee is a foreign building and loan association. Such associations doing business over a wide territory can not assemble their members as can the local companies, and put their money up at auction. So far as my acquaintance with them extends, they invariably adopt the fixed premium, and' no other would be reasonably practicable. It was in reference to these associations doing business in this way that the act above quoted was passed, and they should have the benefit of it.