Bird & Co. v. Kendall , 62 S.C. 178 ( 1901 )

The opinion of the Court was delivered by

Mr. Justice Gary.

This is an action of foreclosure brought by the plaintiffs, the holders of a junior mortgage and junior judgments against the defendant, E. D. Kendall, who was the mortgagor, and other defendants. The other defendants were incumbrancers, some prior and some subsequent to the plaintiffs’ mortgage and judgments. The defendant, Georgia State Building and Loan Association, is the holder of a mortgage prior to the plaintiffs’ mortgage and judgments. It is admitted that plaintiff had no notice other than disclosed by said defendant’s mortgage as recorded of the terms of the contract between said Kendall and said association, and is a subsequent creditor and purchaser. The action was commenced on July 19th, 1900. The other facts are set forth in the decree of his Honor, the Circuit Judge, which omitting the formal portion thereof will be incorporated in the report of the case.

The plaintiffs appealed upon exceptions which will also be reported. The appellant’s attorney in his argument states that it will not be necessary to consider the exceptions seriatim, as the eleventh exception is intended to embody the main contentions of the appellants, which exception is as follows:

1 “n. Because his Honor should have held that the debt became due three months after the default was shown by the entries of the association on the pass book of the defendant, Kendall, to wit: 31st March, 1899; and that as against the plaintiff and subsequent bona ñde lien creditors without notice, the amount due the association should be ascertained by adding to the face of the loan interest at the rate of eight per cent, per annum to the date of default, and from the sum so ascertained deducting the amount admittedly paid as dues, interest, premiums and. fines, aggregating $3,575.18; and also the book value of $8.20 per share of said fifty shares of stock, and to the balance so ascertained adding interest at six per cent, to date of decree.” Conceding the fact that the monthly payments of dues, interest, premiums and fines when made by Dr. Kendall then amounted to more than the interest due on the bond and mortgage, which he executed in favor of the building and loan association, it does not follow that the plaintiffs are entitled to have the excess credited as payments on the principal of the said indebtedness. In the first place, the question of usury is not raised by the pleadings; and the plaintiffs are not, therefore, in a position to take advantage of such fact. Bank v. Miller, 39 S. C., 175; Ryan v. B. & L. Association, 50 S. C., 185. In the second place, the plea of usury, in a case like this, is personal to the mortgagor, and could not be interposed by the plaintiffs. Allen v. Petty, 58 S. C., 240; Zeigler v. Maner, 53 S. C., 115; Turner v. B. & L. Association, 47 S. C., 397. The act of 1898, 22 Stat., 749, relative to usury, is not applicable to this case.

2 The payments of the monthly instalments of dues, interest, premiums and fines were made in pursuance of stipulations in the contract between Dr. Kendall and the building and loan association, when he became a member thereof, and there is nothing in that agreement, nor any subsequent agreement, showing .that the excess beyond interest at the rate of eight per cent, per annum, was to constitute payments upon the principal of the sum borrowed from said association. If the association received from Dr. Kendall sums of money which it had no right to collect, it was for him and not the plaintiff to recover the same. In the absence of a stipulation to that effect, such sums did not, by operation of law, become payments upon the principal of his indebtedness to the association secured by the mortgage. To allow the appellants the benefit of said payments in excess of interest at the rate of eight per cent, per annum, would accord to them advántages to which they would not have been entitled, if they set up the plea of usury, and it had been sustained. For, even if Dr. Kendall had interposed the plea of usury against the association, and it had appeared that the association took-from him interest in excess of the legal rate, this would not have converted the interest into a payment on the said principal. This question has so recently been discussed in an elaborate opinion by Mr. Chief Justice Mclver in the case of Butler v. Butler, just filed, that we deem it only necessary to refer to that case to sustain this proposition. Under this construction of the law, it is immaterial for us to consider whether the debt became due on the 31st March,' 1899, as contended by the appellants.

3 It is also unnecessary to consider the question as to the book value of the shares of stock for which Dr. Kendall sub•scribed, for the following additional reasons to what has been said: When a person subscribes for shares of stock and becomes a member of a building and loan association, and thereafter borrows money from the association, pledging his shares of stock to secure its payment, he thereby practically ceases to be a member of the association. The new relation between him and the association is that of debtor and creditor, and it can only recover the principal sum loaned together with the legal rate of interest. There are dicta in some of our cases contrary to this statement of the law, but after mature deliberation this Court has reached the conclusion just mentioned.

4 In so far as the right to attorney’s fees is concerned, this Court is satisfied with the conclusions reached by the Circuit Judge for the reasons stated by him in decree. These views practically dispose of all the exceptions.

It is the judgment of this Court, that the judgment of the Circuit Court be affirmed.