MERRICK, Circuit Judge,
delivered the opinion of the court as follows:
The complainant is a member of one of those voluntary associations, with the principles and modes of operation of which the public has long been familiar, under the denomination of building associations, and bripgs his bill into this court against the trustees of the association, to restrain the enforcement of the stipulations he has entered into with them in the usual conduct of the business of the association, and in furtherance of the objects for which he, and all its other members enter into the co-partnership, upon the ground that those stipulations are usurious, unconscionable and oppressive. This case is understood to raise the question, presented by several of like character on the docket, of the lawfulness of the operations of .this--class- of .associations, and of a large number of kindred societies which are known as benefit societies, and have as their ostensible object the accumulation of a fund for each of their members by the periodical contribution of small savings, which are made productive by being advanced in certain amounts to individual members in the form of composition sales of their interests. All these societies combine two leading features, viz: hoarding savings, and making profits by compounding interest [1091] on the savings, on substantially the same principles as savings banks and mutual insurance companies, by the following simple process: A number of persons enter into a mutual agreement to subscribe and pay into a common fund, by regular instalments, say one dollar per month, for each share the member may take, until the fund shall have accumulated so as to divide $200, or any other given amount to each share, at which period the partnership is to cease, and the share of each member thus accumulated will be a fund for him to purchase a small freehold tenement, or to be applied to any other prudential use he may determine; and to secure punctuality each member neglecting his monthly payments is subjectedto-a fine, say of ten cents upon .every dollar he fails to pay at the regular monthly meetings. The period of distribution. is hastened and the common fund made productive by authorizing any member to make a composition sale of his interest in the ultimate distribution to .the other members of the association. Thus, whenever there are funds enough in the treasury for the purchase of one or more shares at any regular meeting of the association, the member who bids the highest premium, or in other words agrees to take the lowest price, is paid the price so bid by him for his ultimate share. He remains, however, a member of the society until the close, paying thenceforth a double monthly instalment on his shares, $2 per month .on each instead of $1, and subject to all the regulations of the society, liable to attend its meetings and to do any duties which might be devolved upon any other member, and liable to the regulated fines in default of punctual payment of monthly contributions, or any other default under the rules. Whenever a sale of this kind is effected, it is manifest that .unless some arrangement is made the society has no security that the member who has been advanced by his sale his ultimate share of profits will continue to bear his proportion of the burden of mutual contribution; therefore a bond in the penal-' ty of the ultimate value of the shares sold and a deed of trust upon real estate is executed to the society, conditioned for his faithful payment of the. monthly dues thereafter to accrue, and all fines and forfeitures which may, under the rule, be imposed on him for any defaults. There is in the bond and deed no stipulation for the return of the principal sum advanced to the member, nor is it at all in the power of the society to compel its return if he fulfill the conditions of the bond and deed of trust. Should the member fail to comply, the bond and deed of trust become forfeit, and the society may direct a sale of the property conveyed by the deed to raise the .amount of damages which are ascertained and liquidated by the deed of trust, and which are usually the return to the society of the advance paid upon the -bid of the member, with interest thereon, all the monthly dues and fines which may be in arrear; and the member is then and thereby reinstated in the condition of a member who has had no advance, and has paid his dues and fines, &c.
The facts in the present case conform to the general scheme I have mentioned. John Johnston is a member of the Potomac Building Association, consisting of 170 members. On the 5th of May, 1851, he received from the society $260, bid on 2 shares of the ultimate value of $400. In other words, he sold to the members at 35 per cent, discount, and' gave bond and deed of trust for the payment of double monthly dues' thenceforth, or $4 per month, and lor such fines-and forfeitures as he might incur; and- falling in arrear for dues and fines in December, 1856, the trustees under .the deed of trust adver-. tised the property- for'sale,-and he has filed his bill charging that the stipulations he entered into were only a-device to cover an usurious loan, and praying to be discharged from his-contract on payment of the principal sum of $260, with interest from May 5th, 1851, and to be released'.from-the fines incurred by him as .a member of-the society, and to enjoin a sale-of the property by the trustees. The trustees in their answer deny that there was any corrupt intent or secret agreement to effect an usurious loan under the forms of stipulations entered into by parties, and sets out the -bond, deed of trust, articles of association, &c., and aver -that the contract was bona fide entered into and made and intended to be what it appears on the face of the papers, and none other.' In the present stage of the -cause the answer must be taken as true, that the contract between the parties was whatever it appears to be, and there was no other and different agreement behind the -ostensible arrangement. Were there another secret agreement to make an usurious loan, to-wMchthfe stipulations here shown were but an outward covering, and it were so charged in the bill by proper averments, it would become necessary, before a final hearing, to send down a case to a jury to ascertain whether there be in fact a secret, corrupt, usurious agreement for a loan; for whatever form parties adopt to hide usury, if they have secretly made a corrupt loan, the law will drag away the veil and penetrate the motive. But I do not understand the bill to charge any different agreement from that disclosed by the answer, and the question before us is therefore not one of intention, but one of construction upon the face of the .articles of association, bond ■ and deed of trust -exhibited with the answer. As a question of construction it seems to me, both upon principle and authority, that stipulations like those we are considering are not usurious. To constitute usury, there must be a loan of money in which the principal sum is not hazarded, and is to be repaid at all events with .more than legal interest. There was a time in the his[1092] tory of the law when the taking of any interest for the use of money was an heinous offense; but “usury has long since lost that deep moral stain which was formerly attached to it, and is now generally considered only as an illegal or immoral act, because it is prohibited by law.” Lloyd v. Scott, 4 Pet. [29 U. S.] 224. With this high warrant for a lenient construction of a penal law, no court should pronounce a contract usurious in which any of the. elements of the definition are wanting, or which is within the exemption of adjudicated cases; but, on the contrary, should seek to enforce the principle that every man has a right to make what contracts he pleases, if not restrained by some law, and that justice and equity require that such contracts should be executed if fairly made. The very, point involved in the present case was decided in Silver v. Barnes, 6 Bing. N. G. 180 (decided in 1839, after the act of Geo. IV.) Tindall, Chief Justice says, “The question was whether the .transaction was a loan of money or a dealing with the.partnership funds. If it was a loan, it was usurious. We think it was a dealing with the partnership funds, in which the defendant had an interest in common with the other members of the society, and that it was not a loan; the defendant was interested in the money when it was advanced and when it was repaid. The rules of the society are in effect a mere agreement by the partners that their joint contributions shall be advanced for the use of one or other, as-occasion requires, and the transaction was not a borrowing by the maker of the note from ■the payees.”
. In a later case (Burbidge v. Cotton,' 8 Eng. Law & Eq. 62) Sir J. Parker says, “The case of Silver v.. Barnes was a direct authority, that an advance out of the funds of an association of this kind, made pursuant to its rules, to one of its members, having in common with other members an interest in the fund out of which the advances were made and in the money to be repaid to him, was not a loan of money, but a dealing with the partnership funds, and was not usurious. He was not aware that the authority of that case had ever been doubted. It had been approved by Parker, Baron, in Cutbill v. -Kingdom [1 Exeh. 494], and he considered that a decision of a court of law on such a subject was binding in this court.” To the same effect are the cases of Seagrave v. Pope, 15 Eng. Law &-Eq. 480; Mosley v. Baker, 6 Hare, 87, find other cases. It has been supposed that the cases of Silver v. Barnes, Burbidge v. Cotton, and all the others rest the principles of their decision upon the late English statutes of 7 Wm. IV., and 7 & 8 Viet., and also a previous statute of Geo. IV., for the regulation of certain joint-stock associations. But this is a total mistake, as may be found by consulting Wadsworth on Joint Stock Companies, as well as the cases themselves. They do not profess to rest upon a statutory privilege, but upon common law principles. These statutes had their •origin with the statute of 6 Geo. I., c. 18,. passed in .1719, which was made to restrain the creation of associations with shares transferable at pleasure, which after the introduction of the South Sea bubble were used as means for the wildest forms of stock-gambling, and indulged to such a mad and ruinous extent as to require the check of legislative prohibition. When mutual -benefit and aid societies having funds accumulated from small monthly subscription, were adopted about the beginning of the present century, it was much doubted whether they did not fall within the prohibitions of the stock-gambling statutes, the provisions of which are numerous and very ■complicated. To remove these doubts, and ■to reduce into a system the manner of conducting these and other joint-stock associations having legitimate and beneficial objects, and to give greater facilities for the ■management and enforcement of the rights of these companies, the statutes of Geo. IV., •superseded' by 7 Wm. IV., and 7 & 8 Viet, were passed. These statutes are in no sense enabling statutes, but are in the nature of ■restraining enactments, requiring certain formalities, not at common law necessary, to give vitality to the association coming within their purview, and subjecting them to a certain inquisitorial control by boards-of justices, &e. But these statutes, although none of them in -force in this- district, may ■be invoked for one purpose, viz.: to show the sense of the people and parliament of Great Britain that associations of this sort are of most beneficial tendency; and, pruned of abuses to which some of them are liable, are of great utility to the public, especially to the poorer classes, by encouraging thrift and supplying them with advantageous agencies for the accumulation and management of the savings of their daily labor.
But, altogether outside of any decisions, touching joint-stock associations, it is well settled that if profit be derived through a bona fide partnership, the dealing with money is not usurious. Gilpin v. Enderbey, 5 Barn. & Aid. 954; Eereday v. Hordern,. Jac. 144. The reason running through all these cases is, that the principal sum is in hazard by the liability of the partners for-the debts of the concern to third persons;, and the principle is not varied by the fact, that under the particular arrangements of the business any loss is highly improbable. An inspection of the scheme in this case-will make apparent to any one, without-pausing to illustrate it, that each member is interested in every dollar belonging to the-concern; the greater the profits the less will be the amount of his weekly eontribution-to raise the common fund to the distribu[1093] tive amount; .and If no profit be. made, he will contribute all that he ultimately withdraws, 'and will only derive the' benefit, a .substantiál one indeed,' of the saving process. On the other hand, in payment of officers’ salaries, rent, and all other expenses, he is liable individually for all the debts of the concern; and therefore, to all legal intents and purposes, is a partner.
Independent of the partnership view of the case, as was argued at the bar, the contract may be likened to the purchase by the society from its member of an annuity. For the amount advanced or paid to 'him he agrees to pay double the monthly instalment on the shares represented during the life of the association. The duration of the society is altogether uncertain; it may, and probably will, expire before the monthly payments amount in the aggregate to the price he receives with simple interest, or it may continue until these exceed that amount. The purchase and sale of annuities and rent charges differ from a loan at interest in this: that in case -of a loan the principal sum, as such, is to be repaid at all events. In the case of annuities and rent charges, ■ redeemable, it may be repaid at the will of the purchaser, nor does it make any difference that the 'annuity is dependent upon a contingency other than the duration of a human life. Both in annuities and rent charges purchased the stated payments may amount to much more than the interest upon the price paid, and be -so great as in all human probability before the termination of an annuity largely to exceed both principal and interest; yet the validity of the purchase is not-thereby affected. The -case of Lloyd v. Scott, decided in 4 Pet. [29 TT. S.] 224, and afterwards tried in this court upon procedendo [Case No. 8,434], on an issue of usury before the jury, was the purchase -of an annuity or -rent charge, very like in its practical results to the present ease; and in that case the court held that the covenant that a party might re-purchase within a given period at the same price, and upon the repayment of that price, with all arrears of instalments of the annuity which was equivalent to 10 per cent, per annum, to be entitled to re-conveyance of the premises charged, did not give the transaction in law the character of a loan so as to taint it with usury, provided the original purchase was in good faith. But it is further said, that although the sale of the shares upon a discount, coupled with an agreement to pay the double monthly instalment, may not be usurious, considered in the light of a partnership dealing, or an annuity sale, or a contract in which the principal sum is not, at all events, returnable, together with more than legal interest, yet the imposition of fines of ten cents for each dollar of monthly dues not punctually paid is usurious inter-, est upon the monthly dues. This does not. appear to me to be either a just construction of that part of the regulations of the -society;-' nor if It were meant to be a -reser-vation of interest, as interest-would-it be usurious. The: eases' :of-;: Roberts v. -'Tro-nayne, Oro. Jac. 509; Floyer v. Edwards, Cowp. 113;!and Wells v. Girling, 4 Moore, 78; same-case, TBrod.'& B. 447; all deciding that, where the party may relieve himself from any interest at all by payment at a day certain,-the. reservation*of more than legal interest in.case of default is not usurious within the statute. But the fair, construction-of this part -of the regulations of these societies seems to be that, in as much as punctuality and -exactitude are essential to the just and profitable conduct of -the business of the concern, • the- reservation -of legal interest on non-payment of -.monthly dues being so inconsiderable, hard to compute and next to impossible to collect, and account for, it -would be no compensation to the society for these defaults, nor any security against their ■ frequent recurrence. Hence their rules fix as a measure of liquidated damage -for each default, under the. name of a fine, a certain small sum, in this and most other societies 10 cents on every dollar. The 16th rule of the articles in the case of Silver v. Barnes, already cited, calls these fines by the name of “liquidated damages.”
'Now, If tile contract in this case was not usurious, was it an unconscionable and oppressive bargain, which a court of equity ought to relieve against? By reference to the tables of calculation which are published in the explanatory treatise on these subjects, or which, with a- little trouble, may be calculated by any person for himself, it will appear that the average duration of these societies is from eight to nine years, dependent upon the range of premium which their advances command. A society with an average premium of 35 per cent., which the complainant in this case paid, will wind up in eight years and a fraction. What does an advance at thirty-five per cent, discount cost the member during eight years, ás compared with the admitted standard of moderation, a loan at six per cent.
$400 at thirty-five per cent, discount is..$260 00 Interest at six per cent, for eight years is.L. 124 80
$384 80
Double monthly dues for eight years at $2.00 per share. 384 .00
Balance in favor of an advance' over an ordinary loan at six per cent, is.$ 80
Thus it appears in point of fact, that if the complainant were faithfully to comply-with the terms of his contract, and be in no default for monthly dues, instead -of paying more than legal interest he would get-the advance and use of -$260 for-eighty ■ cents -less than simple interest, while the profit to the co-partnership [1094] would be the active employment of his and other weekly dues in the interval. Suppose •the contract be terminated, and the complainant released from his connection with the society, and he claims in his bill:
By .payment of the advance.$260 00
Legal interest thereon for five years and-seven months.. 87 10
$347 10
Crediting the account with dues paid as per answer... 200 00
Balance due to the society...$138 10
Suppose, on the other hand, the complainant be released upon the terms offered by the respondents in their answer, ■ the account will stand:
Debtor'to amount advanced.: $260 00
To amount of fines, as per detail statement. 14 00
Whole amount of dues prior to and after advance. 282 00
$556 00
Crediting him by estimated ■ value of his shares.$200 00
And by monthly dues already paid .... 209 00
409 00
The balance claimed by them is...' $147 00 —Or $8.90 more than by calculation of simple interest.
Suppose, on the other hand, that the advance be restored to the society, and the complainant restored to the condition of a member having received no advance, which, .under the terms of the articles of association, is all that the society can insist upon, without his consent to a dissolution of their relations, the account would be stated thus:
Debtor to advance.$260 00
To amount of fines incurred. 14 00
Total dues prior to and since his advance . 2S2 00
$556 00
And crediting the dues already paid in.. 209 00
Leaving an apparent balance of.. .$347 00
But to show the true attitude of the parties it will be remembered that this balance of $347 represents within itself his remaining interest in the association and the value of his ultimate distributive share. This share he may sell to any third person or to the society, as they offer by their answer, at its market value of $200, and the balance against him will be exactly as before, $147, or less than $9 above legal interest for the use of the advance for five years and upwards. Suppose the member resorts to the other alternative of voluntarily quitting the society after having enjoyed the benefit of his advance for five years and seven months. He has a right to. do it without the assent of the association, as provided in their constitution, by returning the money advanced, with interest thereon, paying all fines incurred, and being credited with the dues already paid in. The account would then be:
Advance ....$260-00
Interest for five years and seven months..... 87 .10
Fines incurred . 14 00
$361 10
Amount of dues paid in. 209 00
Balance due the association.$152 00
—Or $14 more than simple interest for the use of the advance ' during five years and seven months.
No man who will give a thought to the subject can call ¿ contract voluntarily entered into, which presents these results, unconscionable or oppressive.
But suppose that the forfeitures and fines imposed upon a defaulting member were much larger than those claimed in the present case, would it be the province of this court, upon the bill of the defaulter, to relieve him from the consequences of his own contract and his voluntary acts? The distinction must always be remembered between calling upon a court of equity to relieve against a forfeiture or to enforce a forfeiture. In the latter case they may refuse to interfere. But the doctrine of relief has been restored from confusion of “the oldest decisions and narrowed to this, that unless the court can clearly see that full compensation can be made, and the forfeiture was not voluntarily .and persistently incurred, it will not relieve, but let the party abide by the contract he has formed. In 2 Story, Eq. Jin:. § 1323, It is thus summed up: “The doctrine seems now to be asserted in England, that in all cases of forfeiture for breach of any covenant, other than a covenant to pay rent, no relief ought to be granted in equity, unless upon the ground of accident, mistake, fraud or surprise, although the breach is capable of a just .compensation.” And in section 1325 he gives the special phase of reasoning, which fits the present and like cases, viz.: “It is upon grounds somewhat similar, aided by considerations of public policy, and the necessity of a prompt performance in order to accomplish public or corporate objects, that courts of equity, in cases of non-compliance by stockholders with the terms of payment of their instalments of stock at the time prescribed by which a forfeiture of their share is incurred under the by-laws of the institution, have refused to interfere by granting relief against such forfeiture.”
In the case of Sparks v. Liverpool Water Works, 13 Ves. 433, which was a ease of purely accidental forfeiture of stock in a corporation, under one of its by-laws requiring instal-ments to be paid at a certain time, the master of the rolls uses language precisely adapted to the business and objects of societies organized upon the principles we are considering. He says: “It is essential that the money should be paid, and that they should know their situation. Interest is not an adequate compensation even among individuals, much less in these undertakings. In particular cases [1095] interest might be a compensation, but in a majority of cases it is no compensation from the uncertainty in which they may be left. The effect is the same whether money has been paid or not They know the consequence.” I agree with those enlightened judges and chancellors of England, Lord Eldon, and a host of others, who have always regretted that courts of equity had ever undertaken to relieve against forfeitures and breaches of private contract They have all admitted it to be “delicate and dangerous,” and some have denounced it as “mischievous and arbitrary.” See Eaton v. Lyon, 3 Yes. 693; Sanders v. Pope, 12 Yes. 291; cases of Hill v. Barclay, 16 Ves. 403, and 18 Ves. 58; Bracebridge v. Buckley, 2 Price, 206; Rolfe v. Harris, Id. 210, note; and other cases cited in 2 Story, Eq. Jur. §§ 1320, 1325. Eor myself, I adopt the maxim laid down by Crunch, C. J., in Lloyd v. Scott [supra], on motion for a new trial: “Every man has a right to make what contracts he pleases, if not restrained by some law; and justice and equity require that such contracts should be executed, if fairly made.” I am of the opinion that upon the case made by the answer the special injunction should be refused.