Andrews v. Andrews
| Decision Date | 11 February 1927 |
| Docket Number | No. 25541.,25541. |
| Citation | 170 Minn. 175,212 N.W. 408 |
| Parties | ANDREWS v. ANDREWS et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Hennepin County; E. F. Waite, Judge.
Claim by Harry H. Andrews against Grace G. Andrews and others, as administrators of James C. Andrews, deceased, filed in the probate court. After disallowance, an appeal was taken to the district court. Verdict for plaintiff. From an order denying defendants' motion in the alternative for judgment or a new trial, defendants appeal. Affirmed.
Ueland & Ueland, of Minneapolis, for appellants.
Cobb, Wheelwright, Hoke & Benson, J. B. Faegre, and C. G. Krause, all of Minneapolis, for respondent.
James C. Andrews died intestate at Minneapolis February 8, 1924. His brother, Harry H. Andrews, filed a claim for $93,082.87 against his estate, based on two instruments reading as follows:
Exhibit A.
The claim was disallowed by the probate court and an appeal taken to the district court, where pleadings were made up pursuant to section 8989, G. S. 1923.
Among other things the answer alleged that Exhibits A and B called for an usurious rate of interest, and that any cause of action which the claimant might have accrued more than six years before the death of James C. Andrews.
The district court held, as a matter of law, that the loan was not usurious, and that Exhibits A and B showed that the parties intended that the money should not be repaid before payment was actually demanded at some indefinite time in the future, that it was claimant's duty to demand payment within a reasonable time, and instructed the jury to return a verdict in his favor for $42,044.09, if it was found that a reasonable time within which to demand payment had not expired more than six years prior to February 8, 1924. A verdict in that amount was returned, and this appeal was taken from an order denying appellants' motion in the alternative for judgment or a new trial.
Exhibits A and B were prepared by James, then a clerk employed by the Pillsbury Washburn Flour Mills Company. Harry was engaged in business for himself as an exporter of flour. The relations of the brothers were cordial and intimate. In the year 1905 the Brunswick Hotel property in Minneapolis was purchased by James C. Andrews, E. L. McGrory, a real estate dealer, and Edgar S. Coffin, a manufacturer of boxes. None of them had any previous experience in the hotel business. Mr. Coffin was the only one of them who was available as a witness at the trial. He testified that the property was purchased for $40,000; that Andrews put in $20,000; the witness, $10,000; and McGrory $10,000 in services. In May, 1905, the purchasers organized a corporation known as the Brunswick Hotel Company, and transferred the property to the corporation; 502 shares of stock were issued to Andrews, 249 to Coffin, and 249 to McGrory. Each share was of the par value of $100. Of the $20,000 furnished by James, $12,300 was borrowed from Harry. As evidence of the loan, he gave him Exhibits A and B and three demand notes for $1,000, $1,350, and $1,200 respectively. At the time of James' death, Harry had received nothing in return for the money loaned, but at intervals of approximately six years James had replaced the demand notes with new notes for the principal and accrued interest.
It is a fair inference that James' venture was highly speculative. The hotel building was not of modern construction, the purchasers were not practical hotel men, and James was under the necessity of borrowing the major portion of the money he invested.
In December, 1910, the hotel was destroyed by fire together with most of the corporate books and records. Following the fire the Andrews, a new and modern hotel, was erected, without any additional investment by the stockholders of the Brunswick Company. The insurance on the old building and a mortgage loan of $150,000 seem to have provided funds sufficient to pay for the new building. The new hotel was operated until the summer of 1911 by the Brunswick Company. James and the other stockholders then organized a corporation known as the Andrews Hotel Company, which took a lease of the property and operated the hotel until March, 1920, when the Brunswick Company purchased the stock of the Andrews Company and took over the management of the hotel.
The trial court found that in the purchase from the Andrews Company, the Brunswick Company expended $133,931.25, and that this amount, plus the original investment of $40,000, represented the total investment of the Brunswick Company in the hotel property, and held as a matter of law that 8750.00/ 173931.25 of the net annual earnings of the Brunswick Company after the year 1920, and 8750/40000 prior thereto, represented the amount which claimant was entitled to recover if the jury found that payment had been demanded within a reasonable time. In the aggregate, these earnings amounted to $297,374.05, and claimant's pro rata share thereof, ascertained as aforesaid, plus interest thereon after February 8, 1924, to the date of the verdict, was the amount awarded. In January, 1917, Harry wrote James, saying:
"The $8,750 agreement, I wish you could arrange so we could get some income on it; you see we have never received any cash as interest or income on any of this money or the other notes for 12 years, and while you renew the other notes or of course pay them if you wish, don't you think you ought to and feel that you can arrange in some way so we can have some of the hotel regular income while it is paying so well?"
In February, 1921, he wrote again asking for a renewal of the demand notes. He received a reply inclosing the new notes for which he had asked. In his letter James said:
It appears that the last statement was not true, for between June 1, 1905, and February 1, 1921, $54,368 in cash dividends had been paid.
After James' death, the books of the Brunswick and the Andrews Companies were audited. The claim in litigation is based on the facts disclosed by the audit.
The trial court held that the claimant had no right to share in the earnings of the Andrews Company, and that his share of the earnings of the Brunswick Company, plus interest from February 8, 1924, to the date of the verdict, amounted to $42,044.09.
As to the defense of usury, it is an established rule that if a contract for the loan of money is valid when made, it does not become void for usury, although it subsequently develops that the lender will receive a greater return for the use of his money than the highest rate of interest which may be exacted lawfully. Rugland v. Thompson, 55 Minn. 466, 57 N. W. 205; Smith v. Parsons. 55 Minn. 520, 526, 57 N. W. 311. It is also a rule of general application that when the payment of full legal interest is subject to a contingency which puts the lender's lawful profit in hazard, the interest so contingently payable need not be limited to the legal rate, provided the parties contract in good faith and without intention to avoid the usury statute. See 39 Cyc. 952, and cases cited, and Bowman v. Kohlhase (Minn.) 211 N. W. 828.
The rule was applied in Temple v. Davis, 115 Minn. 328, 132 N. W. 257, the court saying that it did not appear from the contract with any degree of certainty that performance thereof would result in securing to the lender a greater rate of interest than is lawful. So here, where there was no certainty that the Brunswick Hotel property would produce profits, it cannot be said that it appears that the parties intended to evade the usury laws, or that it was claimant's purpose to exact a greater return for the loan than the law allows.
We conclude that the court correctly ruled that the defense of usury was not available. This conclusion finds some support in section 7041, G. S. 1923.
As to the statute of limitations, it is argued that, since Exhibit A is in the form of a promissory note and does not specify the time of payment, in law it became payable immediately. Horn v. Hansen 56 Minn. 43, 57 N. W. 315, ...
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