The opinion
DUNLOP, Chief Judge,
dissented, and delivered -a separate opinion as follows;
A voluntary, unincorporated association, called the Potomac Building Association, was formed in Washington in the year 1850, by the complainant and others. The constitution of the society provided that a monthly subscription of $1 should be paid by the members in respect of each share held by them until the joint contributions were of an amount to enable each member to receive $200 in respect of each share. Power was given to the society to advance to any member his share at a discount, such member paying an additional $1 monthly on each share, as aforesaid, and executing a bond and deed of trust to defendants to secure the due payment of his future subscriptions. The complainant took an advance upon his two shares at a discount of 35 per cent, per share; that is to say, on his two shares, estimated as worth $400, $140 was deducted for discount, and he received in cash from the company $260, and executed to the defendants, the trustees of .the building association, the bond and deed of trust set out in the proceedings in this cause for securing the payment of the future subscriptions. The deed of trust contained no covenant for the payment of the advance. The complainant having failed to pay his dues, &c., for more than 60 days, the defendants, as trustees, advertised to sell for the amount claimed by the building association in their account filed, which is tn the following terms:
Johnston, the complainant, filed his bill in this case, charging usury in the contract, and claiming to set it aside and to avoid the deed of trust on .payment of principal and interest on the advance, and for an injunction to stay the sale by the trustees. The defendants, in their answer deny usury, and assert their right to sell for the balance claimed by them in the foregoing account The complainant was a stockholder in the company to the amount of two shares, and had signed the constitution. The shares at the winding up were to be made worth $200 each. Johnston’s two shares, $400 less $140, the premium bid by him for the advance, would be worth $260 at the winding up of the association, and to be accounted for to him in his settlement with the company at that value.
The articles of the constitution of the building company, which bear on this case, are' as follows: Article 2, § 3: “Each and every stockholder, for each and every share of stock that' they hold in this association, shall pay the sum of $1 in bankable funds, on the first Monday of each and every month, to the treasurer, or such other person or persons as shall from time to time, by the laws or regulations of the association, be authorized to receive the same, until the value of the whole stock shall be sufficient to divide to each share of stock the sum of $200, at which time the association shall determine and close.” Article 8 (“Advances”) §§ 1, 2, 3, and 7: Section 1: “Every stockholder, for each share, entitled to purchase an advance of stock of $200, to be paid from the funds of the association,” &c. Section 2: “When the funds of the association warrant it, one or more advances shall be disposed of by the secretary to the highest bidder, at regular meetings of stockholders, not under par,” &c. Section 3: “Whenever a stockholder shall purchase an *1096 advance,' he shall pay, or canse to -.be deducted, the premium offered by him or them tor the same, and shall secure the association by bond,- deed of trust, and policy of insurance, .the policy to be assigned to the trustees upon the trust for such amount as the board of directors may deem sufficient to cover the amount advanced, with all fines, costs, and charges which may accrue thereon.” Section 7: “Stockholders taking an advance from the. funds, of. .the .association shall, from the time of purchasing such advance, pay to the treasurer $2 per month for., every 'share' of 'stocfc ’ on which such advance may have been made, (instead of $1, as hereinbefore provided, for those who have received no advance) and if the same shall be. suffered to remain unpaid more than two ’ months,' the" board óf directors may compel payment by ordering proceedings oh the bond and deed -of 'trust according to law.”""
- This additional $1 per month on each share to a stockholder buying an advance is $12 per year, or '6 per cent., the legal rate of interest,- valuing the share at $200, which is its computed value on the close of the concern. Johnston bought an advance on his two shares at 35 per cent, premium, received $260 in money, paid or had deducted $140 premium, gave his bond to the treasurer for $400, conditioned to pay monthly dues of $2 per share on each share, and all fines, until the value of the whole stock 'shall be sufficient to divide to each share of stock $200, and also a deed of trust to Messrs. Ratcliff and Clarke to secure these dues and fines, &c.
The condition of the bond is worthy of special notice, and shows plainly the nature. of the contract, and together with the deed of trust, makes apparent the rights of the association and the duties and obliga-' tions of the borrower, and, as I construe them, are designed to carry into effect the true meaning of the constitution of the building company. The bond óf date 15th May, 1851, is in the sum of $400. The condition of the bond is in these words: “Where-' as the said John Johnston, a stockholder to the extent of two shares in said association, has, by virtue of and in accordance with the provisions of the constitution and obligation attached thereto of the said association or joint-stock company, received advances from the funds of the said association, advances on said stock; now If the said John Johnston, or his he.irs, executors and administrators, shall well and truly pay, ' or cause to be paid unto the said Ephraim Wheeler,' treasurer as aforesaid, or to his successor in office, the sum of $2 on each of the shares of stock on which he has received advances as aforesaid, monthly, and every month, commencing with the first Monday in June, 1851, and continues to pay the-same on the first Monday of each and every month thereafter,-'together with any fines and forfeitures for the non-payment of said monthly dues, as is provided in said constitution and obligation as aforesaid, until the funds of the said association shall divide to each share of stock' the sum of $200, then this obligation to be void, or else to remain in full force and virtue in law.” And the deed of trust to Messrs. Ratcliff and Clarke, of the date the 2nd of June, 1851, under which they now claim to sell complainant’s house and lot, after reciting said bond and its condition, in substance as above set forth, and that said deed was to secure the said monthly dues, fines, and forfeitures, conveyed to them the property described in said deed upon the following trusts, that is to say: “If the said Johnston, his heirs, executors and administrators shall fail to pay the said monthly payments and the fines and forfeitures aforesaid, so that any one or more of the same shall be due and unpaid for the space of sixty days, then the said writing obligatory shall be deemed and taken as forfeited, and upon request in writing, &c., the trustees shall sell, &e., and convey to the purchaser, &c., and out of the proceeds of the sale pay first the costs and charges attending said sale; secondly, pay to-the treasurer whatever sum or sums of money shall then be found due by the said John Johnston to the said association, on an account to be stated by the treasurer, in Which the said Johnston shall be charged with the sum of money received by him from the said association, and the monthly payments; fines and forfeitures intended to be secured by these presents, and the said writing obligatory, and credited with the amount of dues paid by him, and the residue, if any, pay over to the said Johnston, his heirs and assigns,” &c. It is evident that the account herein to be stated; and the whole terms of the bond and deed of trust contemplate Johnston, to vjhom the advance has been made on the two shares, as still a partner, and to continue to be so till the final close of the association, when the two shares will be of the value of $200 each, and so to be estimated in the final settlement between him and his co-partners, less the premium bid by him at the time of the advance, and it is on the assumption only that he is so to continue a partner that he can be made to pay dues up to the close of the concern, when each share is to be made of the value of $200. As such partner and contributor he is to share in the profits, present and to come, of the partnership.
The English cases referred to in the argument, clearly the transaction of usury are based upon the assumption that the party to whom the advance is made is a partner at the time of the advance and when' the advance is repaid, and so a sharer in the profits then and to the dose of the concern. It can in no other sense be said to be a'dealing in partnership *1097 -effects by the partners inter se. In the case of .Silver v. .Barnes, 6 Bing. N. 0. 180, Tindal,. C. J., says: “A motion has been made for n new *trial, on the ground of misdirection, but we think the case was properly left to the jury. The question was whether the transaction was a loan of money nr a dealing with the partnership. If it was a loan it was usurious. We think it was a dealing with the partnership fund, 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 ■fund when the money was advanced and, when it was repaid. The rules of the society are, in effect, a mere agreement by partners that their joint contributions shall be advanced for the use of the one or the other, as •occasion requires, and the transaction in question was not a borrowing by the maker of the note from the payees.. In a case before Alexander, chief baron, in the year 1828, he held an advance, from a similar society to one of its members, to be a partnership transaction and not a loan.” If the partner receiving the advance is turned out of the concern and dispossessed of. his profits by an arbitrary valuation of the two shares, as is claimed in the ac•count presented with the defendants’ answer, who value and take the shares to the use of the association at $100 each, when they are to be made worth $200 each, less the premium bid on them in part by the complainant’s monthly contributions to the end and winding up of the association, then he is no longer a dealer in partnership effects, having a common interest with his co-partners in all profits to the «lose, but an outsider and a borrower of funds owned by strangers, and in that light the contract is clearly usurious. I refer to the case of Beehtold v. Brehm, 26 Pa. St. 269, decided by the supreme court of Pennsylvania in 1856.
The additional monthly payments of $12 a year on a computed $200 share, greatly ex-«eeds the legal rate of interest on the advance of $130 on that share, deducting 35 per cent, premium bid by the complainant and retained by the association when the advance was made. If the complainant is not a partner, nnd is subject to be ousted before the concern closes, he is not receiving his share by anticipation; he is not a sliarer of profits present •and to come. In that sense, by whatever name the transaction is called, it is a mere loan of money. It is a loan at a higher rate of interest than the law allows for the forbearance •or giving day of payment, and the bond and •deed, to secure the repayment of the principal, in which aspect the defendants treat said bond •and deed in their account rendered (as I think, wrongfully), being securities tainted with usury, are both void by the statute. I entertain some doubt whether the contracts of this building association, as to advances, even •when executed in good faith, according to the terms, of their written constitution, are free from usury. ' Some of the English cases certainly go to that extent. ‘The doubts there have been removed by statutory-provisions, which legalize these advances and provide for the imposition of fines on members-for failure' to pay monthly dues within prescribed limits; the legislature of that country thinking such societies of beneficial tendency, and calculated to elevate the social condition of men, having no other means than the fruits of their daily labor. . Their expediency and utility is not so certain here, where any laboring man, with the high rate of wages prevailing in this country, can, with the exercise of ordinary prudence and carefulness, soon secure a home-, stead without involving himself in the expensive machinery of a building association, the articles of which are not easily understood by unlearned people, and very liable to be perverted to their oppression. These considerations, however, belong to the legislature, and not to the courts of justice, and if such associations are deemed beneficial, they ought to be regulated and protected by statute, as has been done, it is believed, in some of our states.
' The fines which, by their constitution, the members.agree to pay in default of punctuality in the monthly dues, are in the nature of forfeitures, and are, in fact, sometimes so called by the society itself. If they were called liquidated damages their nature would not be changed. All the courts in this country, as I understand Kent, Story and Marshall, both at law and in equity, are unwilling to enforce forfeitures and lean against them. ‘ In England they have been sanctioned by the statutes to which I have referred. In the absence of any statutes here, I think we- ought only to enforce payment of the dues by directing our auditor to allow interest on them from the periods when they accrue -and fall due. As the trustees in this case claim to sell the complainant’s property upon an account- stated, and for a sum not warranted by law, nor even by the constitution of the building society itself, I think the injunction ought to be granted, and to have effect till the cause is fully heard. Notes to the case.
As to fines, penalties and forfeitures, the following cases are to the point: Skinner v. Dayton, 2 Johns. Ch. 535 ; Livingston v. Tompkins, 4 Johns. Ch. 431 ; 2 Story, Eq. Jur. §§ 1313-1316; Hill v. Barclay, 16 Ves. 403, 405, and 18 Ves. 58; Sparks v. Liverpool Water Works, 13 Ves. 428; Tayloe v. Sandiford, 7 Wheat. [20 U. S.] 13; Reynolds v. Pitts, 19 Ves. 140.