Bank Of Radford v. Kirby

• Decision Date: 12 September 1902
• Citation: 42 S.E. 303
• Parties: BANK OF RADFORD. v. KIRBY.
• Court: Virginia Supreme Court

42 S.E. 303

BANK OF RADFORD.

v.KIRBY.

Supreme Court of Appeals of Virginia.

Sept. 12, 1902.

100 Va. 498

USURY—PAYMENT—ACTION TO RECOVER.

1. Where there is an assignment of a security, with an absolute guaranty of its payment at a discount greater than the legal rate of interest, the transaction is usurious.

2. Where payments have been made upon a usurious debt, and the borrower applies the payments to the interest, or the lender makes the application with the assent of the borrower, the appropriation will not be disturbed, unless the borrower within one year thereafter, as provided by Code, § 2823, brings an action to recover the same.

Appeal from circuit court, Pulaski county.

Suit by Elizabeth Kirby against the Bank of Radford. Judgment for plaintiff. Defendant appeals. Reversed.

D. S. Pollock, for appellant.

L. H. Larew. for appellee.

CARDWELL, J. The facts out of which this appeal arises are as follows:

On the 1st day of January, 1895, H. S. Kirby made an assignment by deed to J. D. Chumbley and J. A. Pratt, trustees, of all his property, both real and personal, to secure his various creditors. Among the assets conveyed was a debt against one L. T. Jennings for the sum of $6,500, evidenced by eight notes dated August 14, 1894; the first seven of the notes being for the sum of $800 each, and the last for $900, and all bearing interest from the 1st day of September, 1894, and being for a part of the purchase money for a tract of land conveyed by the said H. S. Kirby and wife to Jennings. This tract consisted of 605 acres, but to secure the payment of the aforesaid notes a vendor's lien was retained by Kirby on only 100 acres of the tract; Kirby covenanting in the deed to look alone to the vendor's lien retained upon the 100 acres for the payment of the sum of $6,500 evidenced by the said notes.

One of the debts for which H. S. Kirby made provision in his assignment to Chumbley and Pratt, trustees, was a debt due to the Bank of Radford for the sum of $1,700, evidenced by a note, and the sum of $1,500, evidenced by another note, which had been re-newed, and was not yet due; and Elizabeth Kirby, the mother of H. S. Kirby, was one of the indorsers on these two notes and some other notes also secured by the deed of assignment.

In March, 1895, after the bank had brought suit on the if 1, 700 note against H. S. Kirby as maker, and Elizabeth Kirby and others as indorsers, Elizabeth Kirby concluded that she would take an assignment of the property of H. S. Kirby which he had conveyed to Ohumbley and Pratt, trustees, for the benefit of his creditors, and make herself responsible for the debts thereby secured. The object she had in view was to get time within which to meet the debts for which she was bound as indorser, and protect her own property against liability therefor in case the trust property should prove insufficient to pay them.

To effect this arrangement ultimately agreed to by the creditors thereby secured, including the Bank of Radford, H. S. Kirby and wife, Chumbley and Pratt, trustees, and all of the creditors provided for in the trust deed, joined in a deed to her (which is spoken of in this record as a "composition deed") Conveying all of the trust property; and she by the same deed created a charge upon 600 acres of her own land as security for the payment of the debts of the creditors of H. S. Kirby provided for in his deed to Chumbley and Pratt, trustees, with interest on these debts from March 1, 1805.

In this deed the debt of the Bank of Radford, evidenced by the two notes, —the one for $1,700 and the other for $1,500, —is provided for, and stated to be $3,250, with interest from March 1, 1895; the difference being on account of accrued interest on the $1,700 note and costs in the suit brought thereon previously. By this deed Elizabeth Kirby covenanted and bound herself to take the property conveyed to her in trust for the payment of the debts mentioned therein, and to sell, collect, and apply the proceeds therefrom to that purpose alone.

About the time, or shortly before, "the composition deed" of March 5, 1895, was executed, Elizabeth Kirby applied to the Bank of Radford, through a friend, as her agent, to find out whether, in the event she perfected the arrangement then contemplated, it would buy from her the Jennings debt, and the bank at that time stated that it did not desire such paper; but after some delay,; and insistence on the part of Mrs. Kirby's agent, it finally agreed to purchase the debt, and made her a tentative offer therefor, which was thereafter to be more accurately stated. Some days afterwards the sale and transfer of the Jennings debt by Mrs. Kirby to the Bank of Radford was effected. Up to this time Jennings had not executed the bonds, but they were then executed by Jennings to H. S. Kirby, and Mrs. Kirby indorsed her name in blank upon each of them and delivered them to the bank; the bank agreeing to pay her the sum of $5,090.13, and she to execute, acknowledge, and have admitted to record a deed of trust to one R. L. Gardner, trustee, reciting the fact that she had sold, transferred, and assigned the Jennings bonds to the bank for value received, and that, as the vendor's lien retained on only 100 acres of the Jennings' land was deemed insufficient security for their payment, she conveyed a tract of 200 acres of land in trust as further security for the payment of the said bonds, and to secure their prompt payment to the bank at maturity, and for no other purpose, provided that, if Jennings should make default in the payment of either of the bonds, she was to have 120 days' notice of such default before the trustee (Gardner) was authorized to proceed to sell the land thereby conveyed. This deed to Gardner, trustee, was duly executed by Mrs. Kirby and admitted to record.

In making this sale of the Jennings debt to the bank, it was agreed between Mrs. Kirby and the bank that the debt payable to the bank, above mentioned, which Mrs. Kirby had assumed and provided for the payment in the "composition deed, " should be allowed as part of the purchase price of the Jennings debt, and the balance of the purchase price placed to the credit of Mrs. Kirby at the bank, which was done, and that balance was shortly thereafter drawn out by her.

When the first of the series of the Jennings bonds became due and payable, and Jennings failed to pay the same, the bank brought suit at law thereon against him, and recovered the amount thereof; and when...