Mr. Justice Farmer
delivered the opinion of the court:
Whether the decree of the circuit court and judgment of the Appellate Court were correct or not depends upon the construction and effect to be given to a motion or resolution adopted by the board of directors of appellant May 23, 1892. Prior to that date there appears to have been no effort made by appellant to comply with the provisions of the act of 189.1, authorizing it to dispense with offering its money for bids in open meeting and loan it at a rate of interest and premium fixed by its by-laws, deciding the preference according to the priority of applications for loans. At a meeting of the board of directors held May 23, 1892, it was “moved and seconded the interest be reduced to six per cent and the premium increased to forty-eight per cent; carried.” Thereafter the association ceased loaning its money by offering it for bids in open meeting and pursued the method provided in the act of 1891. Appellant contends, first, that this motion or resolution should be treated and held as a valid bylaw, in pursuance of the act of 1891; and second, that if the board of directors had not the power to adopt by-laws but that that power' rested in the stockholders, Mary L. Edwards, being a stockholder, has acquiesced in the action of the board of directors so long that she should be held to have ratified and confirmed such action of the board, and is now estopped from questioning it. The circuit and Appellate Courts held against appellant on these contentions, and these are the material questions presented for our consider ation.
The original act required the shareholders to adopt a charter and by-laws and file the same in the office of the Secretary of State. It was then made the duty of the Secretary of State to submit the by-laws to the Attorney General for his approval, and if he approved them, a certificate of the.complete organization of the association would issue, “making a part thereof a copy of all papers” filed in the office of the Secretary of State; and these papers were required to be recorded in the office of the recorder of deeds in the county in which the principal office was located. This court held in Fritze v. Equitable Building and Loan Society, 186 Ill. 183, that under the act of 1879 the power to make by-laws was conferred upon the shareholders of the association, and that this was equivalent to the exclusion of such power from the board of directors. It was also held in that case that after the by-laws were adopted by the stockholders, approved by the Attorney General and recorded as required by statute, no power existed in the association to amend them. The amendments of 1891 and 1893 do not purport to change the by-law-making power of the association but leave it where it was vested by the original act. Garlick v. Mutual Loan and Building Ass. 116 Ill. App. 311.
There is a distinction between this case and Collins v. Cobe, 202 Ill. 469. In that case the stockholders adopted a by-law prior to the amendment of 1891, authorizing it to loan its money at a fixed rate of interest and premium. After the passage of that amendment this by-law was not re-enacted but was acted upon by the association and shareholders in making loans. Collins applied for a loan in September, 1892, at a premium of-five per cent per annum, and the note and mortgage recited that the premium was bid to secure the loan under the by-laws of the association. The by-law was adopted by the proper authority to adopt bylaws and appears to have been in proper form. The only question raised as to its validity was, that it was adopted before the passage of the amendment to the statute authorizing loans to be made in the manner provided by the bylaw and was not re-adopted by the stockholders after the amendment of 1891 became a law. It was there held that the borrowers were estopped from disputing the existence of the by-law by their recognition of it in procuring the loan in pursuance of its provision. In the case at bar there was no by-law, but simply a motion made and carried by the board of directors, and there is nothing in.this record to indicate appellees’ knowledge of or acquiescence in it, unless it be from the mere procuring of the loan and paying the premium thereon. There is not the slightest evidence that appellees had any knowledge on the subject of whether the loan was made by authority of the resolution adopted by the board of directors or of a by-law adopted by the stockholders. All appellees did was to malee application for and secure the loan and then pay the charges thereon up to eleven months before the foreclosure proceedings were begun. There is no evidence that the resolution of the board of directors was ever published for distribution among its stockholders, or that those who became stockholders after its adoption were informed of its existence when they subscribed for stock. We do not think appellees were obliged to inform themselves of whether the association was loaning its money in accordance with law or just what efforts it had made to comply with the law. It is well known that persons borrowing from homestead and loan associations usually accept the terms made by the association without any knowledge or investigation of the regularity of its method of doing business. Where the by-law under which the loan is made is known to and recognized by the borrower at the time of procuring the loan, and is acquiesced in for a considerable time thereafter, there is reason for holding that he is estopped from questioning its validity. Such, however, is not the case here.
Section 11 of the Homestead and Loan Association act provides that “no interest, premiums, fines nor interest on such premiums that may accrue to said corporation, according to the provisions of this act, shall be deemed usurious,” etc. It will be seen that by the terms of the act itself, in order to avoid the penalties of usury the association must conduct its business and make its loans in accordance with the provisions of the statute. The board of directors having no power to enact a by-law authorizing loans to be made in accordance with the amendment of 1891, loans made in the manner provided by said amendment were not in accordance with the provisions of the statute, but were in violation thereof. The fact that the directors may have acted in good faith in adopting the resolution of May 23, 1892, and the further fact that thereafter all its loans were made in accordance with said resolution and that appellees secured a loan and paid the charges thereon for several years, does not make the resolution a valid by-law nor estop appellees from setting up the defense of usury. Here the corporation never attempted, by the only power having authority to adopt bylaws, to adopt a by-law authorizing the association to dispense with offering its money for bids in open meeting and in lieu thereof loan its money at a fixed rate of interest and premium. Clearly, therefore, the loan was not made in accordance with the provisions of the act under which appellant was incorporated, but was made in violation of it and was usurious. By no act of the stockholders, the by-lawmaking ■ power of the association, was any attempt ever made to adopt a by-law authorizing loans to be made at a fixed rate of interest and premium.
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Mr. Justice Farmer
delivered the opinion of the court:
Whether the decree of the circuit court and judgment of the Appellate Court were correct or not depends upon the construction and effect to be given to a motion or resolution adopted by the board of directors of appellant May 23, 1892. Prior to that date there appears to have been no effort made by appellant to comply with the provisions of the act of 189.1, authorizing it to dispense with offering its money for bids in open meeting and loan it at a rate of interest and premium fixed by its by-laws, deciding the preference according to the priority of applications for loans. At a meeting of the board of directors held May 23, 1892, it was “moved and seconded the interest be reduced to six per cent and the premium increased to forty-eight per cent; carried.” Thereafter the association ceased loaning its money by offering it for bids in open meeting and pursued the method provided in the act of 1891. Appellant contends, first, that this motion or resolution should be treated and held as a valid bylaw, in pursuance of the act of 1891; and second, that if the board of directors had not the power to adopt by-laws but that that power' rested in the stockholders, Mary L. Edwards, being a stockholder, has acquiesced in the action of the board of directors so long that she should be held to have ratified and confirmed such action of the board, and is now estopped from questioning it. The circuit and Appellate Courts held against appellant on these contentions, and these are the material questions presented for our consider ation.
The original act required the shareholders to adopt a charter and by-laws and file the same in the office of the Secretary of State. It was then made the duty of the Secretary of State to submit the by-laws to the Attorney General for his approval, and if he approved them, a certificate of the.complete organization of the association would issue, “making a part thereof a copy of all papers” filed in the office of the Secretary of State; and these papers were required to be recorded in the office of the recorder of deeds in the county in which the principal office was located. This court held in Fritze v. Equitable Building and Loan Society, 186 Ill. 183, that under the act of 1879 the power to make by-laws was conferred upon the shareholders of the association, and that this was equivalent to the exclusion of such power from the board of directors. It was also held in that case that after the by-laws were adopted by the stockholders, approved by the Attorney General and recorded as required by statute, no power existed in the association to amend them. The amendments of 1891 and 1893 do not purport to change the by-law-making power of the association but leave it where it was vested by the original act. Garlick v. Mutual Loan and Building Ass. 116 Ill. App. 311.
There is a distinction between this case and Collins v. Cobe, 202 Ill. 469. In that case the stockholders adopted a by-law prior to the amendment of 1891, authorizing it to loan its money at a fixed rate of interest and premium. After the passage of that amendment this by-law was not re-enacted but was acted upon by the association and shareholders in making loans. Collins applied for a loan in September, 1892, at a premium of-five per cent per annum, and the note and mortgage recited that the premium was bid to secure the loan under the by-laws of the association. The by-law was adopted by the proper authority to adopt bylaws and appears to have been in proper form. The only question raised as to its validity was, that it was adopted before the passage of the amendment to the statute authorizing loans to be made in the manner provided by the bylaw and was not re-adopted by the stockholders after the amendment of 1891 became a law. It was there held that the borrowers were estopped from disputing the existence of the by-law by their recognition of it in procuring the loan in pursuance of its provision. In the case at bar there was no by-law, but simply a motion made and carried by the board of directors, and there is nothing in.this record to indicate appellees’ knowledge of or acquiescence in it, unless it be from the mere procuring of the loan and paying the premium thereon. There is not the slightest evidence that appellees had any knowledge on the subject of whether the loan was made by authority of the resolution adopted by the board of directors or of a by-law adopted by the stockholders. All appellees did was to malee application for and secure the loan and then pay the charges thereon up to eleven months before the foreclosure proceedings were begun. There is no evidence that the resolution of the board of directors was ever published for distribution among its stockholders, or that those who became stockholders after its adoption were informed of its existence when they subscribed for stock. We do not think appellees were obliged to inform themselves of whether the association was loaning its money in accordance with law or just what efforts it had made to comply with the law. It is well known that persons borrowing from homestead and loan associations usually accept the terms made by the association without any knowledge or investigation of the regularity of its method of doing business. Where the by-law under which the loan is made is known to and recognized by the borrower at the time of procuring the loan, and is acquiesced in for a considerable time thereafter, there is reason for holding that he is estopped from questioning its validity. Such, however, is not the case here.
Section 11 of the Homestead and Loan Association act provides that “no interest, premiums, fines nor interest on such premiums that may accrue to said corporation, according to the provisions of this act, shall be deemed usurious,” etc. It will be seen that by the terms of the act itself, in order to avoid the penalties of usury the association must conduct its business and make its loans in accordance with the provisions of the statute. The board of directors having no power to enact a by-law authorizing loans to be made in accordance with the amendment of 1891, loans made in the manner provided by said amendment were not in accordance with the provisions of the statute, but were in violation thereof. The fact that the directors may have acted in good faith in adopting the resolution of May 23, 1892, and the further fact that thereafter all its loans were made in accordance with said resolution and that appellees secured a loan and paid the charges thereon for several years, does not make the resolution a valid by-law nor estop appellees from setting up the defense of usury. Here the corporation never attempted, by the only power having authority to adopt bylaws, to adopt a by-law authorizing the association to dispense with offering its money for bids in open meeting and in lieu thereof loan its money at a fixed rate of interest and premium. Clearly, therefore, the loan was not made in accordance with the provisions of the act under which appellant was incorporated, but was made in violation of it and was usurious. By no act of the stockholders, the by-lawmaking ■ power of the association, was any attempt ever made to adopt a by-law authorizing loans to be made at a fixed rate of interest and premium. The board of directors had no more power under the statute to adopt such method of making loans than the attorney and secretary of the association would have had, and to hold that because the board of directors adopted and pursued that method for a number of years, during which time appellees negotiated a loan and paid the premiums and interest thereon, would legalize the transaction, would be to nullify the statute. The association is in no better position than it would have been if there had been no statute providing a method of making such loans. The authorities are clear that where a corporation has no power to contract, performance on either side will not give the unlawful contract validity. (National Home Building and Loan Ass. v. Home Savings Bank, 181 Ill. 35.) Usury is prohibited by our statute, and while homestead and loan associations are authorized to charge more than the rate of interest allowed by our interest laws, they can only do so by a compliance with the act- under which they are incorporated. (Borrowers’ and Investors’ Building Ass. v. Eklund, 190 Ill. 257; Jamieson v. Jurgens, 195 id. 86.) It is just as illegal and contrary to public policy for associations like appellant to charge more for a loan than is allowed by our interest laws, without a compliance with the provisions of the statute authorizing them to do so, as it would be to charge a usurious rate in the absence of the statute. In the Britze case, supra, the association sought to avoid liability under a by-law or resolution adopted by the board of directors April 23, 1892, appointing and employing Fritze as manager of agencies for one year, and it was contended, even if the corporation had not authority to make the contract, it was in good faith performed by Fritze, and as the corporation had received the full benefit of his services it could not avail itself of the defense of ultra vires, and on this subject the court said (p. 199) : “The doctrine, however, that a corporation can not avail itself of the defense of ultra vires when a contract has been in good faith performed by the other party and the corporation has had the full benefit of its performance, was never held to have any application where such contract is immoral or illegal or prohibited by statute, or where its enforcement would be against public policy.”
The payment of usurious interest' and other charges made by appellee was, under the circumstances, not a recognition of the validity of the resolution of the board of directors as a by-law. Appellant, by reason of its failure to comply with the act under which it was organized and doing business, occupied no better position than would an individual who had charged a higher rate of interest than is allowed by statute.
We are of opinion the Appellate Court properly affirmed the decree of the circuit court dismissing appellant’s bill, and the judgment of the Appellate Court is affirmed.
Judgment affirmed.