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    BUILDING & LOAN ASS'N OF DAKOTA v. PRICE, 169 U.S. 45 (1898)

    U.S. Supreme Court

    BUILDING & LOAN ASS'N OF DAKOTA v. PRICE, 169 U.S. 45 (1898)

    169 U.S. 45

    BUILDING & LOAN ASS'N OF DAKOTA
    v.
    PRICE et al.
    No. 158.

    January 10, 1898

    J. H. Hauser, for appellant.

    W. S. Simkins, for appellees.

    Mr. Justice PECKHAM delivered the opinion of the court.

    The appellant herein commenced this action against the defendants in the circuit court of the United States for the Northern district of Texas, the complaint in which was filed on the 3d of October, 1895. The defendants demurred, on the ground that the court had no jurisdiction of the several subjects-matter set forth in the complaint, one of the objections being that the matter in dispute did not exceed $2,000 exclusive of interest and costs.

    The cause was heard in the circuit court; the demurrer was sustained; and the bill dismissed, with costs and without prejudice, for want of jurisdiction of the subject-matter in controversy. The complainant appealed to this court, which appeal was allowed and granted solely upon the question of the jurisdiction of the circuit court, and that question alone [169 U.S. 45, 46]   has been certified. Whether the bill shows facts sufficient to invoke the consideration of a court of equity is not such a question of jurisdiction as is referred to in the judiciary act of 1891, and we have therefore no concern with that question. 26 Stat. 826, 5; Smith v. McKay, 161 U.S. 355 , 16 Sup. Ct. 490.

    The decision of the only question before us depends upon whether the allegations contained in the bill of complaint show the matter in dispute to be of sufficient value to give the circuit court jurisdiction.

    The appellant was incorporated under the laws of the state of South Dakota, and has its principal place of business in the city of Aberdeen, in that state. The action was brought for the purpose of recovering the amount of an alleged debt, damages, and costs against the defendants Price, Rothschild, and Miller, and for a decree of foreclosure against the defendants H. M. Price and W. B. Luna, under a certain mortgage and vendor's lien on the premises described therein.

    The bill alleges, among other things, that on the 1st of January, 1890, one Jacob Rothschild applied for membership in the complainant's association, and subscribed for 40 shares of its capital stock, which application was accepted; and on that day a certificate for 40 shares of the capital stock was issued and delivered to him, and he paid the application or subscription fee due thereon; and the stock was accepted and received by him upon the terms and conditions therein set forth, and he thereupon became a member of the association and the holder and owner of 40 shares of its capital stock.

    The bill then proceeds as follows:

    The complainant then prays for a decree against defendants for the amount of the above-named debt, damages, and costs, and for a decree of foreclosure of the mortgage above set forth.

    We think, upon the face of this pleading, the matter in dispute exceeds the amount of $2,000, exclusive of interest and costs. 25 Stat. 433, c. 866.

    The by-laws of the complainant are not made a part of the bill, and they cannot be referred to for the purpose of aiding or marring the pleading itself. In truth, they are not in the record, and we are ignorant of their contents, except as some matters set forth in the bill are alleged to be in conformity with certain of their provisions. Nor can the inference be indulged, on a question of jurisdictional amount, that the whole scheme is a mere cover to conceal a usurious exaction of interest for the loan of a sum of money not exceeding in any event $2,000. No such legal inference arises from the facts stated in the bill. On the contrary, it appears on the face of the bill that the company was duly incorporated by legislative act; that Rothschild, the original owner of the stock, applied for membership in the company, subscribed for 40 shares thereof, and promised to pay for it in the manner stated. We cannot not assume, as a matter of legal inference, [169 U.S. 45, 53]   that the circumstances set forth in the bill constitute a cover for usury, and we must take those allegations as they are made, and assume their truth for the purpose of our decision.

    The bill shows an application to complainant for an advance of $2,000 in anticipation of the maturity value of the shares of stock owned by Rothschild; that the application was granted and the advance applied for duly made, and the amount paid to Rothschild; and that it was made on the faith and in the expectation that he would, according to his agreement, continue the monthly payments on his stock until it became fully matured, and of the value of $100 per share. The bond given as part security for the repayment of this advance contains distinct contracts. The obligor agreed to pay in nine years from the date thereof $4,000, and interest on $ 2,000 at 6 per cent. from February, 1890, until paid, the interest being payable monthly in advance; or, instead of this payment, he agreed to pay $ 24 on the 1st of every month at the home office of the company as monthly dues, being at the rate of 60 cents per month on each share, there being 40 shares of stock; and he agreed to continue these payments until the stock became fully paid up, and of the value of $100 per share, when he was to surrender it to the compant; and he agreed also to pay the interest as stated above.

    We cannot assume, as against the allegations contained in the bill, that the payment of these monthly dues upon the contract was pursuant to an agreement to pay interest on the loan, and that such payment was merely another name for interest. It is alleged to be separate and distinct from that, and it is set up as a material portion of the obligation of the borrower, who, by subscribing for the shares and being accepted, etc., thereby became a shareholder, and entitled to dividends and profits coming to the shares he held. Upon default in either of these distinct obligations, to pay interest, and to also pay his monthly dues, the whole sum at the option of the association became due, less whatever sum had been paid it as the monthly dues at the time the default might be enforced. The bill here shows that there had been a default [169 U.S. 45, 54]   for six months, and that there was due from defendants, at commencement of suit, the sum of $4,000, less the sum of $1,200 of monthly dues which had been paid up to and including March, 1894, leaving due the sum of $2,800, together with and in addition to the interest on $2,00 , at the rate of 6 per cent. per annum, from April, 1894.

    The matter in dispute, therefore, is not merely $2,000 money loaned, together with the interest on that sum, but the claim on the part of the complainant is for the payment of the principal sum above stated, which exceeds the sum $2,000, exclusive of interest and costs. All these facts are admitted by the demurrer.

    The nature of this association is not very clearly set forth in the bill, but it is probably not materially different from those which have been incorporated to a great extent in many different states, and referred to generally in Endlich in his work on Building Associations.

    A question somewhat similar to this has been decided in Richard v. Association, 21 South. 643, 49 La. Ann. 481, where it was held that a loan of this nature was not to be treated as usurious, for the reason that the payments supposed to constitute the usury were, by the terms of the contract, made upon the stock debt, and not upon the loan. To the same effect is Association v. Vance (Sup. Ct. S. C., May, 1897) 27 S. E. 274.

    The stock is not, as is claimed by counsel for appellees, a mere fiction. It is issued, it is to be assumed on this appeal, in accordance with the provisions of the charter of the complainant; and the owners of it are entitled to share in the profits of the corporation which it is supposed it will be enabled to make during its existence, and his position of shareholder is entirely separate from his position of borrower from the company.

    Without determining any of these questions on the merits, we think the matter in dispute was within the jurisdiction of the circuit court, and we therefore reverse the judgment [169 U.S. 45, 55]   dismissing the bill, and remand the case to the circuit court, with directions to take such further proceedings as may be in conformity with this opinion.

    Reversed.

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