Bahl v. Miles

• Decision Date: 21 May 1928
• Parties: MAYME B. BAHL, APPELLANT, v. JOHN L. MILES, SHERIFF, ET AL., RESPONDENTS. [*]
• Court: Kansas Court of Appeals

6 S.W.2d 661

222 Mo.App. 984

MAYME B. BAHL, APPELLANT, v. JOHN L. MILES, SHERIFF, ET AL., RESPONDENTS. ^[*]

Court of Appeals of Missouri, Kansas City

May 21, 1928

Appeal from the Circuit Court of Jackson County.--Hon. Clarence A Burney, Judge.

AFFIRMED.

Judgment affirmed.

John A McGuire for appellant.

Ryland Boys, Stinson, Mag & Thomson for respondents.

FRANK, C. Williams, C., concurs. Trimble, P. J., absent.

OPINION

FRANK, C.

Plaintiff claims to be the owner of certain real estate in Jackson county, Missouri, and by this action seeks to enjoin defendants from selling said real estate under a deed of trust given thereon to securing a note in the principal sum of $ 2500, and also asks that said note and deed of trust be cancelled and for naught held. Upon the filing of plaintiff's petition, accompanied by the required bond, a temporary injunction was granted. On final hearing the finding and judgment was for defendants and plaintiff appealed. The pleadings are not assailed and we will not lengthen this opinion by a reproduction of them. The theory of the petition is that defendant Kelley, holder of the $ 2500 note secured by deed of trust on plaintiff's land, pledged said note to defendant, Skeer, to secure a usurious loan made by Skeer to Kelley, and on account of said usury, the pledge of the $ 2500 note to Skeer was invalid and illegal; that Skeer acquired no title to the pledged note and for that reason had no authority to sell plaintiff's land under the deed of trust securing it.

The petition alleges that defendant Miles, sheriff of Jackson county, acting as substitute trustee in said deed of trust had advertised plaintiff's land for sale on November 1, 1926, and would sell same on said day unless restrained from so doing. Defendants, Miles and Kelley defaulted. Defendant Skeer answered admitting that the note and deed of trust in question was delivered to him by defendant Kelley, and that defendant Miles, acting as substitute trustee in said deed of trust had advertised the land described in said deed of trust for sale and was proceeding to sell same. The answer denies that the transaction by which defendant Skeer secured the $ 2500 note from defendant Kelley was tainted with usury, and affirmatively alleges that the note was delivered to him by Kelley before maturity, for value, without notice of defect, if any, in the title of Kelley to said note, and without notice of plaintiff's equity, if any, in the property securing it; that defendant is the innocent holder of said note for value and that it is past due and unpaid.

The prayer of the answer is that plaintiff take nothing by her action, and that defendant be adjudged the legal owner and holder of said note and deed of trust; that said deed of trust be adjudged a first lien upon the property described therein, and that the court ascertain and determine the right of the substitute trustee to foreclose same and for such other and further relief to which defendant may be entitled. The trial court found for defendants and rendered judgment dissolving the temporary injunction and authorizing defendant Miles, as substitute trustee, and defendant Skeer to proceed with the foreclosure.

The record reveals the following facts: Defendant Kelley, one Johnson and Harry Bahl, husband of plaintiff were engaged in the real estate and building business in Kansas City, Missouri. They were the owners of and operated two companies, Kelley-Johnson Realty Company and Bahl Building Company. A lady by the name of T. G. Hill was employed by Kelley-Johnson Realty Company as a stenographer. It was the practice of this company when acquiring real estate, to take the title thereto in the name of its stenographer, T. G. Hill. When real estate was sold by the company, she would, at the request of the company, execute a deed to the purchaser.

On July 27, 1925, T. G. Hill executed a warranty deed conveying to plaintiff, Mayme F. Bahl all of lot 55, except the west thirty-nine feet thereof, except the south seventeen feet of said lot, Harpers' Meyer Boulevard Addition, an addition to Kansas City, Missouri, according to the recorded plot. Subject to easement for driveway.

This deed was not filed for record until October 15, 1926.

On September 24, 1925, defendant Kelley procured T. G. Hill to execute a deed of trust on the lands she had theretofore conveyed to plaintiff, for the purpose of securing a note for $ 2500. The note was executed by T. G. Hill and made payable to R. E. Hutchins, who endorsed it "without recourse" and delivered it to defendant, Kelley.

Kelley testified that he owed Bascomb-Daniels Lumber Company on a block of houses on Meyer Boulevard; that he procured Miss Hill to execute the $ 2500 note and deed of trust, and delivered them to the Lumber Company as security to prevent the filing of a lien on these houses. He also testified that at the time he procured Miss Hill to execute this deed of trust, he did not know that the land covered by it had theretofore been conveyed to plaintiff by Miss Hill. He also testified that he knew that the house on the premises in question was built for Harry Bahl, plaintiff's husband.

In December, 1925, Kelley procured the $ 2500 note and deed of trust back from the lumber company and deposited it with defendant Skeer as collateral security to a $ 3500 note (exhibit 4), which Kelley had theretofore executed to Skeer-Rose Investment Company.

The contention of appellant is that the $ 3500 note executed by Kelley was for a usurious loan; that this taint of usury rendered the pledging of the $ 2500 note as collateral to the $ 3500 note, invalid and illegal.

Usury is defined to be interest in excess of a legal rate charged to a borrower for the use of money. If a lender exacts from the borrower more than the legal rate of interest for the use of money, the contract is usurious, and it cannot be purged of the taint of usury by denominating the excess charge something other than interest, such as commission, discount or brokerage. [Western Storage & Warehouse Co. v. Glasner, 169 Mo. 38, 47, 48, 68 S.W. 917, 918.]

Section 6496, Revised Statutes of Missouri, 1919, renders invalid and illegal all pledges of personal property made to secure usurious indebtedness. This statute reads,

"Usurious Interest--Mortgage Invalid--In actions for the enforcement of liens upon personal property pledged or mortgaged to secure indebtedness, or to maintain or secure possession of property so pledged or mortgaged, or in any other case when the validity of such lien is drawn in question, proof upon the trial that the party holding or claiming to hold any such lien has received or exacted usurious interest for such indebtedness shall render any mortgage or pledge of personal property, or any lien whatsoever thereon given to secure such indebtedness, invalid and illegal."

The pledging of a note as collateral security to a principal note is a pledge within the meaning of the above-quoted statutes, and the validity of such a pledge must be determined in the light of the provisions of this statute. [Winfrey v. Strother, 145 Mo.App. 115, 117, 128 S.W. 849.]

The decisive question in this case is whether or not the obligation to which the $ 2500 note and deed of trust securing it was pledged as collateral security, is tainted with usury. If so, the pledge was void and the pledgee did not acquire title to the pledged note, and had no authority to foreclose the deed of trust securing it.

In determining whether or not a contract is usurious, usury is never presumed. The burden of proving it is on the party who asserts it, which in this case is ...