Agostini v. Colonial Trust Co.

• Decision Date: 02 March 1944
• Citation: 36 A.2d 33,28 Del.Ch. 30
• Court: Court of Chancery of Delaware
• Parties: JOSEPH AGOSTINI, ROSE AGOSTINI, CARLO AGOSTINI, and VENDURINA AGOSTINI, v. COLONIAL TRUST COMPANY, a corporation of the State of Delaware

36 A.2d 33

28 Del.Ch. 30

JOSEPH AGOSTINI, ROSE AGOSTINI, CARLO AGOSTINI, and VENDURINA AGOSTINI, v. COLONIAL TRUST COMPANY, a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

March 2, 1944

BILL to require defendant, a Delaware corporation, to accept a tendered sum in payment of indebtedness of complainants to defendant, and to require the latter to satisfy a certain mortgage and deliver it up, together with other instruments pertaining to the indebtedness. Heard on demurrer to the bill.

James R. Morford, of the firm of Marvel & Morford, for complainants.

Daniel De Pace, for defendant.

OPINION

PEARSON, Vice-Chancellor.

Complainants ask for an injunction ordering defendant to accept a sum tendered by them in satisfaction of their obligation under a note or loan agreement, bond and mortgage. By the demurrer several questions are raised. The principal dispute is whether the interest called for by the loan agreement exceeds that permitted by Delaware statutes, and if so, whether defendant should be directed to accept the sum tendered in payment.

On July 19, 1941, complainants executed a document purporting to be a promissory note or loan agreement, the pertinent parts of which read as follows:

"July 19, 1941

"8000.00

"Three Years after date, according to the terms and conditions hereinafter more fully set out, for value received, the undersigned promise to pay to the order of

"Colonial Trust Company

(hereinafter called the Bank) at its office in the City of Wilmington Delaware, Eight Thousand Dollars ($8000.00) with interest at the rate of six per centum, per annum, having deposited with the bank the following collateral and property, viz:" [Here follows reference to a bond and mortgage given by complainants on the same date, in the principal amount of $8000.00, the mortgage covering certain real estate in New Castle County; after which the agreement continues:]

"The said sum of Eight Thousand Dollars ($8000.00) shall be payable on the expiration of three years from date hereof payable in monthly portions of Two hundred twenty-two and 22/100 dollars ($222.22) each on the nineteenth day of each month, the first payment to be made on the nineteenth day of August, A. D. 1941; provided, however, that the said debtors shall have the right and privilege of paying any sum between one hundred dollars ($100.00) and two hundred twenty-two and 22/100 dollars ($222.22) each month, but it is expressly agreed that the difference between the said sums of one hundred dollars ($100.00) and two hundred twenty-two and 22/100 dollars ($222.22), shall be paid and made up at the expiration of each six months hereafter so that the average monthly payments shall amount to the sum of two hundred twenty-two and 22/100 dollars ($222.22) * * *

"The undersigned debtors agree this day to pay in advance three years interest on the above sum of Eight Thousand Dollars ($8000.00) at the rate of six per centum per annum, and if the above sum of Eight Thousand Dollars ($8000.00), or any balance remaining unpaid, is either paid voluntary [sic] or by operation of the law before the time specified to be paid, there shall be no rebate of interest whatsoever."

The loan agreement, bond and mortgage were delivered and complainants received from defendant the sum of $6,560, which sum was arrived at by deducting the amount of three years' interest at the rate of 6% per annum, from the face amount of the loan ($8000 x .06 x 3=$1440; $8000-$1440=$6560). Complainants received, by reason of the note, bond and mortgage, no money, credit or property other than that just stated.

In the period from August, 1941, to September, 1942, complainants made several payments, aggregating $2,622. 24, on account of the loan. ^[1] On October 21, 1942; one of the complainants offered defendant the sum of $4,336.79, and demanded that defendant accept it in full payment of the loan, and of the fee for satisfying the mortgage, and that defendant satisfy the mortgage of record and deliver to complainants the bond and mortgage. Complainants compute this sum in the following manner: (1) they treat $6,560, which was the sum they actually received, as the amount lent or principal indebtedness ; (2) they deduct from $6,560 the payments which they made between August, 1941, and September, 1942; (3) they add interest at the rate of 6% per annum computed separately upon each principal balance: first upon the amount lent for the period between the date of the loan and the date of the first payment on account; then upon the resulting principal balance for the period between the first payment and the second payment, and so on ; interest on the last such principal balance being computed for a period ending two days after the date of the tender. ^[2]

"August 11, 1941

$100.00

Sept. 18, 1941

100.00

Dec. 6, 1941

300.00

Dec. 13, 1941

100.00

Feb. 4, 1942

955.58

March 11, 1942

444.44

May 8, 1042

222.22

June 15, 1942

100.00

July 17, 1942

100.00

August 15, 1942

100.00

Sept. 8, 1942

100.00"

(Period)

(Principal Balance)

(Interest)

7/19/41 to 8/11/41

on $65.60.00 - 23 days

$ 25.15

8/11/41 " 9/18/41

" 6460.00 - 38 "

40.91

9/18/41 " 12/6/41

" 6360.00 - 79 "

83.74

12/6/41 " 12/13/41

" 6060.00 - 7 "

7.07

12/13/41 " 2/4/42

" 5960.00 - 53 "

52.64

2/ 4/42 " 3/11/42

" 5004.42 - 35 "

29.19

3/11/42 " 5/ 8/42

" 4559.98 - 58 "

44.08

5/ 8/42 " 6/15/42

" 4337.76 - 38 "

27.47

6/15/42 " 7/17/42

" 4237.76 - 32 "

22.60

7/17/42 " 8/15/42

" 4137.76 - 29 "

20.00

8/15/42 " 9/ 8/42

" 4037.70 - 24 "

16.15

9/ 8/42 " 10/23/42

" 3937.76 - 45 "

29.53

$398.53

Principal

$3937.76

Interest

398.53

Satisfaction fee

.50

$4336.79

Defendant declined the tender. Complainants allege that they have continuously kept the tender open for acceptance. In December, 1942, they petitioned the Superior Court to have the mortgage satisfied, and deposited the tendered sum with the prothonotary, claiming a right to relief under a certain statute. After a hearing, that court dismissed the petition on the ground that the statutory remedy asserted was inapplicable in the situation presented. In re Agostini, 3 Terry (42 Del.) 347, 42 Del. 347, 3 Terry 347, 33 A.2d 306. Complainants then brought the instant suit, and upon their application, an order was entered authorizing them to pay to the Register in Chancery the sum of $4,336.79, the amount of the tender, to be held until further order in this cause.

Complainants' position is

"that the loan agreement is usurious and illegal, under Code Sections 3101 and 4047; that In any event Code 4047 is unconstitutional; that even if it were valid, any deduction of more than one year's interest in advance would taint the whole transaction with usury; that the tender, kept good and now paid into court, discharges the lien and is an equitable satisfaction of any valid debt; and that, while no question of anticipation is properly involved, the loan agreement by its term contemplates that the complainants may anticipate monthly payments so long as the defendant is permitted to keep all the advance interest payments."

The grounds of demurrer relied on are that it appears from the bill that the loan is not due and payable until July 19, 1944, and that the amount tendered is insufficient.

The first ground is readily disposed of. It is based upon contradictory and misleading expressions in the agreement concerning the time when the loan is payable. Although the agreement in certain parts states that the principal sum of $8,000 is payable three years from its date, these provisions are so modified by other language that they have a very limited meaning, indeed. They do not mean, as they might normally be understood, that the borrowers were to have the use of $8,000 for three full years, and that they were not obligated to repay it, or any of it, before the expiration of three years. From other provisions, we find that the borrowers were actually required to make monthly installment payments, none less than $100, so that for each six months' period of the three years following the date of the loan, the average monthly payments would amount to $222.22. Moreover, it was specifically contemplated by the last-quoted paragraph of the agreement that the sum of $8,000, "or any balance remaining unpaid," could properly be paid voluntarily by complainants "before the time specified to be paid", that is, before the dates fixed for the installment payments by which such balance would otherwise be liquidated. In view of the modifying directions, the statements that the loan is payable three years after date do no more than designate a maximum period during which complainants must pay defendants the sum of $8,000, either in defined minimum monthly installments, or in greater amounts at any time before the expiration of three years if complainants should voluntarily so elect. Consequently, there can be no question here, as contended by defendant, of an attempted anticipation of payment before the debt was due.

The next ground of demurrer (insufficiency of the amount tendered) requires a more extended discussion. If the agreement was effective in accordance with its terms, the sum offered was certainly insufficient. But complainants say that the agreement was not so effective, because it provides for a rate of interest in excess of the maximum permitted by the Delaware usury statute (Rev. Code of Del. 1935, § 3101). That statute reads, in part, thus:

"Legal Rate; Usury; Penalty:--The lawful rate of interest for the loan or use of money, In all cases where no express contract shall have been made for a less rate, shall be six per cent per annum; and when a rate of interest for the loan or use of money exceeding that established by law...