Baum v. Thoms

• Decision Date: 27 April 1898
• Docket Number: 18,544
• Parties: Baum et al. v. Thoms
• Court: Indiana Supreme Court

50 N.E. 357

150 Ind. 378

Baum et al. v. Thoms

No. 18,544

Supreme Court of Indiana

April 27, 1898

From the Marion Superior Court.

Affirmed.

John W Keeling and Charles Averill, for appellants.

Hez. Dailey, H. M. Wyatt, G. R. Estabrook and G. W. Spahr, for appellee.

OPINION

Monks, J.

Appellee brought this action against appellants to set aside and cancel a note and mortgage executed by her, and to recover usurious interest paid to appellants.

The court tried said cause, and made a general finding in favor of appellee, and, over the separate motion of each appellant for a new trial, judgment was rendered in favor of appellee. Appellants filed separate motions to modify the judgment which were overruled.

The errors assigned call in question the sufficiency of the complaint, the action of the court in overruling the motions for a new trial, and in overruling the motions to modify the judgment.

The complaint charges, in substance, that the defendants in the court below were engaged in the business of loaning money at usurious interest, and that, while they had separate places of business, they had an understanding and arrangement between themselves by which the loans were changed from one to the other in order the more successfully to carry on the business of loaning money at illegal and usurious interest that appellee borrowed $ 25.00 in 1891, and $ 50.00 in 1892, under agreement that she was only to pay interest at the legal rate, and that she paid thereon, principal and interest, $ 175.00, when in 1894 they claimed that there was yet due $ 150.00,--when in fact the sum loaned had been fully paid, principal and legal interest, and she had paid them in addition thereto $ 50.00 usurious interest on said loan; that she finally executed the mortgage and note for $ 112.60, set out in the complaint, on account of the threats, importunities, and oppressive conduct of the parties, which are set forth in the complaint at great length. It is evident that said complaint was sufficient to withstand a demurrer for want of facts.

The causes assigned for a new trial are: (1) That the decision of the court was not sustained by sufficient evidence; (2) that the decision of the court is contrary to law; (3) that the damages assessed are excessive; (4) error in the assessment of the amount of recovery, the same being too large.

It is insisted by appellant Mackey, to whom the note and chattel mortgage in controversy were executed, that the evidence shows that he loaned $ 105.10 to appellee and took said note and chattel mortgage for $ 112.50, and that said appellee borrowed the same to pay what she owed appellant Baum, and that, when said note and mortgage were executed, a check for $ 105.10 was delivered to appellee, and that she, at the time, wrote her name across the back of said check, and the same was taken away by appellant Baum, whose claim the $ 105.10 was borrowed to pay, and that, therefore, the finding was not sustained by the evidence.

There was evidence to the effect claimed, but the court may have concluded from all the evidence that appellants were acting in concert, and that the check was given in order to cover up the real transaction, which was to procure the note and mortgage for an indebtedness which was already more than paid, and at the same time give it the appearance of a new loan, and thus cut off the defense of usury. To support such conclusion it was not necessary that any one should testify that such was the purpose of the transaction, or that there was an agreement or understanding between appellants to that effect, or that the money received on said check was returned by Baum to Mackey after the note and mortgage were executed. Such facts may be established by circumstantial evidence. The trial court heard the witnesses testify, saw their manner and conduct while testifying, and was the exclusive judge of their credibility, and was able to determine whether said affair in giving the note and mortgage to appellant Mackey, and the delivery of the check to appellee, and the indorsement by her of the same to Baum, was what it appeared to be, a new loan to appellee, or whether it was a mere form, a sham arranged to deceive and mislead appellee, and cover up the real transaction.

It is next insisted that while usurious interest voluntarily paid may, under section 7046, Burns' R. S. 1894 (5201, Horner's R. S. 1897), be recouped by the debtor in an action on the contract affected by such usury, the same cannot be recovered back in a direct action, and that, therefore, the finding and judgment against appellants for usurious interest paid by appellee was contrary to law.

Whatever the rule may be in other states it has been uniformly held in this jurisdiction that usurious interest could at common law be recovered back in an action brought for that purpose. Lacy v. Brown, 67 Ind. 478, and cases cited. Musselman v. McElhenny, 23 Ind. 4, 6, 85 Am. Dec. 445; Wood v. Kennedy, 19 Ind. 68; Smead v. Green, 5 Ind. 308, 309; Berry v. Makepeace, 3 Ind. 154; State Bank v. Ensminger, 7 Blackf. 105, 107, and cases cited. See note to Crawford v. Harvey, 1 Blackf. (2d ed.), p. 382. See, also, Palmer v. Lord, 6 Johns Ch. 95, 100-106; Wheaton v. Hibbard, 20 Johns 290, 292, 293, 11 Am. Dec. 284; Nichols v. Bellows, 22 Vt. 581, 54 Am. Dec. 85, and note; Bexar, etc., Association v. Robinson, 78 Tex. 163, 22 Am. St. 36, 14 S.W. 227, and note p. 41; Zeigler v. Scott, 10 Ga. 389, 54 Am. Dec. 395, and note pp. 400-402; 27 Am. and Eng. Ency. of Law, 959, and cases cited in notes 3 and 4.

The rule is that the borrower who has paid more than the legal rate of interest is not confined to the remedy given by statute, but may maintain assumpsit at common law to recover back the excess of interest paid, on paying or offering to pay the money lent with lawful interest. Berry v. Makepeace, supra; Palmer v. Lord, supra; Wheaton v. Hibbard, supra.

The R. S. 1843, p. 580, sections 25, 26, fixed the legal rate of interest per annum, and section 29, p. 581, provided that "No contract or assurance for the payment of money with interest, or upon which interest has been received, contracted for, taken, or reserved, after a greater rate than is allowed by the preceding sections of this article, shall be thereby rendered void; but whenever in any action brought on such contract or assurance, it shall appear upon a special plea to that effect, or otherwise, that a greater rate of interest has been directly or indirectly reserved, contracted for, taken, or received, than is allowed by law, the defendant shall recover his full costs in such suit, and the plaintiff shall only recover judgment for the principal sum due him without interest thereon; or if he shall have taken or received such interest, or any part thereof, before the rendition of such judgment, the same shall be deducted from such principal sum, and the judgment shall be rendered for the balance as above."

It was provided in section 30, p. 581, that "Any person who shall have paid a greater amount of interest or value than is above allowed, or his personal representatives may recover against the person or the corporation who shall have taken the same, or against the personal representative of such person, the whole amount of interest or value which he may have paid, if such action be brought within a year after the payment of the same."

In Berry v. Makepeace, supra, the appellant sued appellee to recover usurious interest paid in excess of six per cent. per annum, the legal rate fixed by the R. S. 1843. Appellee, upon the theory that the action was brought under section 30, p. 581, R. S. 1843, to recover the whole amount of interest paid, filed a plea which in effect alleged that the action was not brought within a year after the payment of such usurious interest. This court held that the action was not brought under said section 30 of the statute to recover the whole amount of interest paid, but was to recover the interest paid in excess of the legal rate, and that such action could be maintained at common law independently of the statute. The court said, "The plea might have been applicable if the action had been brought under the statutory provision (R. S., c. 31, s. 30, p. 581), to recover the whole of the interest paid as illegal, but such is not the case. The suit is for the excess of interest paid, which may be recovered back in this form of action, by the common law, and independently of the statute of the state. State Bank v. Ensminger, 7 Blackf. 105."

This rule of the common law that usurious interest could be recovered back, was modified by statute in 1865, when the legislature passed an act (Acts Sp. Sess. 1865, p. 176, 3 Davis' R. S. 1876, p 316, 1 Davis' R. S. 1876, p. 600), amending sections five and six of the act of 1861, regulating interest on money. Acts 1861, p. 138, 2 Gavin & Hord, pp. 656, 657. The last clause of said section five, as amended, provided "that in all cases in which money or any thing of value shall have been voluntarily paid as interest for the loan, use or usance of money the same shall not be recovered back, either directly or by way of set-off or counterclaim or payment." While this section as amended was in force, usurious interest voluntarily paid could not be recovered back in a direct action for that purpose, nor could the debtor in any action against him by the party receiving such usurious interest recover the same back by way of set-off, counterclaim or payment. Bowen v. Phillips, Admr., 64 Ind. 226, 235, 236.

In Musselman v. McElhenny, supra, decided at the November term 1864, under the interest law of 1861, and before the amendment of section 5 in 1865, this court, at p. 6, said, "If usurious interest is paid on the note...