Flounders v. Hawley , 1875 Pa. LEXIS 93 ( 1875 )

Mr. Justice Mbrcur

delivered the opinion of the court, May 10th 1875.

This-case arises under the 5th section of the Act of 12th April 1859, relating to “building associations.” Purd. Dig. 184, pl. 5.

The act contemplates that loans shall be made for a term of several years, and they may be at a rate of interest exceeding six per cent. The act however, does not compel a borrower to retain the loan until the day fixed for its final payment. He may repay it at any time. As he has paid in advance, the premium for the whole term of the loan, in case of an earlier payment, this section provides for the refunding of a portion of it. If the payment be voluntary, the proportion of the premium to be refunded is clearly stated, but in case of a recovery by process of law, the language of the act is obscure. It declares when the amount thus collected by, or distributed to, the corporation “ shall exceed the amount of loan taken by the borrower, with interest and charges, the money shall he re-loaned at the next stated meeting, and the excess recovered beyond the amount required to pay the loan with interest and charges, shall he returned to the borrower from whom the money was collected, or his or her legal representatives: Provided, that in case the said corporation shall have issued its stock in series such re-loan shall be made only to the stockholders of the same series; and Provided, that if the premium offered for the re-loan shall be greater than that originally given by the defaulting borrower, the amount of the original premium only shall be paid over by the said corporation.”

A literal reading of the portion of this section first quoted, would import that no part of the premium paid should be refunded to the borrower, when the loan was recovered by process of law, unless the amount collected or distributed to the corporation exceeded the amount of the loan taken by the borrower with interest and charges thereon. This, however, cannot be the correct reading of the section. The security is taken for no more than the loan or sum sold. Hence by no process of law could any more than that sum with interest and charges be recovered. It could not then have been the intent to provide for a contingency that cannot legally arise. Such a construction must then be given to the language as will not make the statute nugatory; but one that will harmonize with the spirit and design of the act.

The clear general intent of the act is not to require any borrower to pay the premium on a loan for a greater number of years than he shall retain it. The corporation shall not, on a re-loan for a premium, keep both the original and second premium for the same period of time. If, however, the second premium be greater than the first, the second proviso permits the corporation to retain the greater, and pay back the lesser to the first borrower from whom the corporation has received it. To give due effect to the true intent of the statute, in case of a recovery by process of law before the loan matures, we must construe “ the amount of loan taken by the borrower” to mean the sum of money actually paid to, or received by, him. As this part of the section does not go into effect until after the corporation shall have had an opportunity of re-loanirig the sum thus recovered at a greater rate of interest than the original loan, this construction protects both the first borrower and the corporation.

In this case it is shown that the first borrower paid, as a premium on the loan, the sum of $153.75. After the loan was recovered by process of law it was re-loaned for a premium of $188.80. It was thus within the language of the second proviso “greater than that originally given by the defaulting borrower.”

It, therefore, follows that the learned judge was correct in holding the amount of the original premium should be refunded to the first borrower. Judgment affirmed.