Darr v. Guaranty Loan Assoc.

81 P. 565, 47 Or. 88, 1905 Ore. LEXIS 104

• Court: Oregon Supreme Court
• Decided: July 17, 1905
• Status: Published

Opinion

Mr. Chief Justice Wolverton

delivered the opinion.

This suit is denominated by plaintiff as one to remove a cloud from title, but it is in reality for the cancellation of a mortgage upon the ground that the debt which it was given to secure has been fully paid and satisfied: The question presented is whether the complaint states facts sufficient to entitle plaintiff to the relief sought. The plaintiff evidently intended to bring himself within the principle enunciated by this court — that payments made to so-called building and loan associations by borrowers under the guise of premiums and dues would be treated as payments upon the principal, and. if sufficient to discharge it, the obligation and mortgage given for its security would be canceled, and the land freed of the incum-brance. The reason lying at the root of the principle is that the statute authorizing the organization of building and loan associations, and regulating the conduct of the business thereof, not having been previously construed by the courts, was in all probability not well understood byeither promoters, managers, stockholders or borrowers of such associations as attempted to engage in the business within the State, and it could not certainly be determined that the contracts with them were entered into with a mutual corrupt intent of evading the statute against usury; hence that the punishment for usury would not be visited upon the lender by forfeiting the principal to the school fund, but that the association would only be permitted to receive interest charged as such, and the payments of premiums, dues, etc., would be credited to the reduction of the principal: Washington Invest. Assoc. v. Stanley, 38 Or. 319 (63 Pac. 489, 58 L. R. A. 816, 84 Am. St. Rep. 793); Western Sav. Co. v. Houston, 38 Or. 377 (65 Pac. 611); Irwin v. Washington Loan Assoc. 42 Or. 105 (71 Pac. 142); Epping v. Washington Invest. Assoc. 44 Or. 116 (74 Pac. 923).

1. Now, it being the purpose of plaintiff to bring himself within this doctrine, and thereby secure the benefits of the payments of premiums and dues, as they are termed in the complaint, upon the principal, it was essential for him to show that he had contracted with a building and loan association having a plan or scheme for conducting its business different from that sanctioned by the statute, and other facts indicating that there was not a corrupt intent between himself and the defendants to receive and pay the excessive interest; otherwise the unpaid principal should be forfeited to the school fund. His complaint shows nothing of the kind. It appears merely that the defendant the Guaranty Savings & Loan Association was and is a corporation; but for what purpose it was organized, or what the nature of the business it was conducting, is not shown. Further, it appears that the plaintiff executed to the association a nonnegotiable first mortgage bond, by which he agreed to pay the association $900, with interest at the rate- of 6 per cent per annum, a premium at the rate of 7 per cent per annum,.and-monthly dues of 60 cents on each of nine shares in such association, and also executed a nonnegotiable mortgage to secure the payment of his obligation according to its tenor; that by the terms of such bond and mortgage it agreed to pay, and defendant agreed to accept from plaintiff, for the use of the money so loaned, more than 10 per cent per annum, namely, interest at the rate of 6 per cent per annum, and premium at the rate of 7 per cent per annum, payable monthly. There is here no indication as to who owns the nine shares of stock, or whether the plaintiff has any connection with the association, other than as a borrower; and if such is the relation, and the premium was intended as additional compensation for the use of the money, the contract is clearly usurious, and the debt ought to be forfeited to the school fund.

2. The succeeding allegation is merely a conclusion of law, and it is impossible to say whether the bond has been paid or not, and, if so, upon what basis. It is in effect that plaintiff has paid the association the principal and more, than 6 per cent thereon, and is entitled to have the-same applied to satisfy the debt. Good pleading requires that the amounts and times of the payments be shown, so that the court may be enabled to say whether the debt has been discharged or not.

3. Taking the complaint as a whole and construing it most strongly against the pleader, as the rule requires when tested by demurrer, it is totally lacking in the essentials to bring the pleader within the doctrine of the cases above alluded to, as seems to have been the especial purpose of the suit, and the demurrer ought therefore to have been sustained.

The order of the court will be that the decree of the circuit court be reversed, that the demurrer be sustained, and that the cause be remanded for such other and further proceeding as may seem meet. Reversed.