Anderson v. Oregon Mortg. Co.

• Decision Date: 31 May 1902
• Parties: ANDERSON v. OREGON MORTGAGE COMPANY
• Court: Idaho Supreme Court

69 P. 130

8 Idaho 418

ANDERSON v. OREGON MORTGAGE COMPANY

Supreme Court of Idaho

May 31, 1902

ACTIONS ON USURIOUS CONTRACTS.-The provisions of section 1266 of the Revised Statutes of 1887, include only actions between the lender or his assignee, as plaintiff, and the borrower, as defendant.

PLEA OF USURY A PERSONAL RIGHT.-No one but a party to a contract can avail himself of the defense of usury.

SAME.-The grantee of a mortgagor, who assumes the payment of the mortgage cannot set up the defense of usury.

TO WHAT ACTIONS PROVISIONS APPLICABLE.-The provisions of said section 1266 do not do away with usury as a defense, but they impose a specific duty on the court whenever it ascertains in an action on a contract that an illegal rate of interest has been charged, but do not apply to the action of a stranger to compel the cancellation of the usurious contract.

(Syllabus by the court.)

APPEAL from the District Court, Latah County.

Reversed and remanded, with instructions. Costs awarded to appellant.

Orland & Smith, for Appellant.

The Idaho statute does not make a contract void because of containing usury. (Portneuf Lodge v. Western L. & S Co., 6 Idaho 673, 59 P. 362.) It simply takes away from the lender all his interest and makes the borrower pay ten per cent per annum on the entire amount of the original contract to the school fund, and this irrespective of the rate of interest contracted for in the usurious contract. Usury is personal, and in the contracting debtor alone, and when property is purchased subject to, or the purchaser assumes and agrees to pay the usurious mortgaged debt, as a part of the consideration for the property purchased, he cannot take advantage of his grantor's usurious contract. (Hollingsworth v. Swickard, 10 Iowa 385; Powell v. Hunt, 11 Iowa 430; Carmichael v. Bodfish, 32 Iowa 418; Frost v. Shaw, 10 Iowa 491; Drake v Lowry, 14 Iowa 125; Perry v. Kearns, 13 Iowa 174; Sternburg v. Callanan, 14 Iowa 251; Grither v. Alexander, 15 Iowa 470; Allison v. King, 25 Iowa 56.) The statute protects those who are or who may be liable on the usurious contract, and they alone can interpose the illegality as a defense. (Lyon v. Welsh, 20 Iowa 578; Huntress v. Patten, 20 Me. 28; Gray v Brown, 22 Ala. 273; Holladay v. Holladay, 13 Or. 523, 11 P. 260, 12 P. 821; Sujette v. Wilson, 13 Or. 514, 11 P. 269.) That the current of authorities is practically universal, that the right to take advantage of statutes of usury is personal to the borrower and his privies, and that a stranger to the contract can take no advantage of it, admits of no denial. (Bensley v. Homier, 42 Wis. 631; Ready v. Huebner, 46 Wis. 692, 32 Am. Rep. 749; Nichols v. Bellows, 22 Vt. 581, 54 Am. Dec. 98; Nance v. Gregory, 6 Lea, 343, 40 Am. Rep. 41; Dolman v. Cook, 14 N. J. Eq. 56; Ohio etc. R. Co. v. Kasson, 37 N.Y. 218; Bullard v. Raynor, 30 N.Y. 197; Bearse v. Barstow, 9 Mass. 45, 6 Am. Dec. 25; Lamoile Co. Nat. Bank v. Bingham, 50 Vt. 105, 28 Am. Rep. 490, and note; Cramer v. Lepper, 26 Ohio St. 59, 20 Am. Rep. 756; Studebaker v. Marquart, 55 Ind. 341; Ransom v. Hays, 49 Miss. 445; Mordecai v. Stewart, 37 Ga. 364; Union Nat. Bank v. International Bank, 123 Ill. 510, 14 N.E. 859; Gardner v. Matteson, 38 Mich. 200; Stickney v. Moore, 108 Ala. 590, 19 South, 76; Parker v. Bethel Hotel Co., 96 Tenn. 252, 34 S.W. 209; Mechanics' Bank v. Edwards, 1 Barb. 271; Farmers' etc. Bank v. Kimmel, 1 Mich. 84; Campbell v. Johnson, 4 Dana, 178; Wright v. Bundy, 11 Ind. 398; Stevens v. Muir, 8 Ind. 352, 65 Am. Dec. 764, and note; Reading v. Weston, 7 Conn. 409; Fenno v. Sayre, 3 Ala. 458; Loomis v. Eaton, 32 Conn. 550.)

Forney & Moore, for Respondents.

The interest notes made by Randolph and wife were void, and in no case was Randolph liable to appellant for more than $ 2,000, the principal sum loaned, less all payments made and without interest, and to this extent only was appellant's mortgage security good. (Vermont Loan etc. Co. v. Hoffman, 5 Idaho 376, 95 Am. St. Rep. 186, 49 P. 314; Vermont Loan etc. Co. v. Tetzlaff, 6 Idaho 105, 53 P. 104; Fidelity Sav. Assn. v. Shea, 6 Idaho 405, 55 P. 1022.) The principal sum loaned to Randolph having been more than paid, the mortgage given to secure the payment of the same was satisfied. (Portneuf Lodge etc. v. Western Loan etc. Co., 6 Idaho 673, 59 P. 362; Cleveland v. Western Loan etc. Co., 7 Idaho 477, 63 P. 885.) Appellant has waived all rights it had, if any, under its mortgage by not setting them up by counterclaim or cross-complaint. (Stevens v. Home Sav. etc. Assn., 5 Idaho 741, 51 P. 779, 986.) In our state usury is not a defense; the rights of the parties and the duty of the court are absolutely fixed by statute. (Ocobock v. Nixon, 6 Idaho 552, 57 P. 309.)

SULLIVAN, J. Stockslager, J., concurs. QUARLES, C. J., dissent.

OPINION

SULLIVAN, J.

This action was brought for the cancellation of a mortgage, to recover judgment for $ 793.34 for overpayments on said mortgage, and for $ 100 damages for a failure to satisfy and cancel said mortgage. The plaintiffs to this action, who are respondents here, were not parties to said mortgage, and the mortgagors are not parties to this suit. The following facts appear from the record. On the eleventh day of September, 1889, John S. Randolph (being then the owner of the land described in said mortgage) executed jointly with his wife a mortgage on said land to secure the payment of $ 2,000, borrowed money, from the appellant herein, the Oregon Mortgage Company, whereby the mortgagors agreed to pay interest upon interest, in case the interest was not paid when by the terms of said mortgage it became due. A number of payments were made of interest coupons attached to the promissory note for $ 2,000, the payment of which said mortgage was given to secure, but no payments had been made on the principal. On January 16, 1899, the said mortgagors conveyed said mortgaged premises to respondent Ellen T. Anderson, who is the wife of the other respondent. The consideration named in said deed is $ 3,000, and the deed contains the following provision, to wit: "Subject to one certain mortgage of two thousand dollars ($ 2,000), executed by John S. Randolph and wife, which the said second party agrees to assume and pay." The consideration that Randolph received for said land was another tract of land, valued at $ 1,600, and $ 300 in money, and the purchasers (the respondents) were to pay the amount due on the $ 2,000 mortgage and to pay the railroad company $ 150. The record shows that the respondents had some correspondence with D. K. McDonald, of Spokane, Washington, agent of the mortgage company, after they had purchased said land in regard to the payment of said mortgage; that said agent made them a proposition in reference to the payment thereof on the twentieth day of March, 1899, and on the twenty-third day of that month respondents accepted the proposition offered and remitted to said McDonald, agent, $ 1,108.34 as a payment on said mortgage indebtedness. About the month of October, 1900, one of the respondents, accompanied by a Mr. Hannah, went to the office of the agent of appellant in the town of Moscow, Latah county, state of Idaho with a view of paying the balance on said mortgage. The agent informed them of the amount due, and also informed them that the company wanted a bonus of twenty-five dollars for giving the privilege of paying the mortgage off, as there had been an extension of two years given on the payment thereof. Respondent Anderson refused to pay said bonus, claiming that the mortgage was five years past due. In a very short time thereafter, perhaps on the same day, the agent informed Mr. Hannah that he would waive the twenty-five dollars bonus, and accept just what was due on the mortgage, and requested him to inform the respondent, and afterward Mr. Hannah informed the agent that he had told Mr. Anderson, and he (Anderson) replied that he had been to the courthouse and looked up the records, and had gotten the idea that the mortgage was outlawed, and consequently he did not have to pay it. Thereafter this suit was brought for a cancellation of said mortgage, and other relief as above stated, and was tried by the court without a jury, and judgment was entered in favor of respondents for a cancellation of said mortgage and costs of suit.

A number of errors were assigned, the most important of which is the court erred in finding that a purchaser of mortgaged property, who has assumed and agreed to pay the mortgage, can obtain a cancellation of the mortgage upon the ground that there was usury existing in the contract between his grantor and the holder of the mortgage. It appears from the record that John T. Randolph sold to respondents a mortgaged tract of land, and they, in part consideration therefor, agreed to pay the amount due on said mortgage. They paid more than $ 1,000 on said mortgage debt, and now refuse to pay the balance, and ask to have the mortgage canceled. Randolph is not seeking to avoid the payment of said debt because of the usury in his contract, neither is the mortgagee seeking to foreclose its mortgage in this action. The mortgagor is willing the appellant should recover every dollar due on said claim, both principal and interest. He has in effect put the money in the hands of respondents with which to pay said debt, and they agreed to pay it, and without authority from him they are trying to avoid the payment thereof by setting up the usurious contract. Randolph considered it compatible with honor and integrity to pay said debt, and did pay it to respondents, by letting them retain it out of the consideration to be paid for the land, and now they seek to retain the money and defeat their express contract with Randolph. The borrower...