Beck v. Tucker

• Decision Date: 04 April 1927
• Docket Number: 26090
• Citation: 113 So. 209,147 Miss. 401
• Court: Mississippi Supreme Court
• Parties: BECK v. TUCKER. [*]

113 So. 209

147 Miss. 401

BECK v. TUCKER. ^[*]

No. 26090

Supreme Court of Mississippi

April 4, 1927

Division A

1 USURY. Payment of maximum interest before due held not to constitute "usury" (Hemingway's Code, section 2076).

Payment of maximum interest before it was due held not to constitute usury or violation of Hemingway's Code, section 2076 authorizing forfeiture of interest if more than six per cent is exacted, since creditor is not obliged to receive repayment of a debt or interest thereon before maturity.

2. USURY. Payments to recompense creditor for interest paid by

him after extending due date held violation of law authorizing forfeiture of interest on exacting more than six per cent. (Hemingway's Code, section 2076).

Payments by debtor of certain sums, in order to recompense creditor for greater rate of interest on sums borrowed by him after extending due date of debt, held to constitute a violation of Hemingway's Code, section 2076, authorizing forfeiture of interest in case of exaction of more than six per cent.

3. LIMITATION OF ACTIONS. Borrower's suit against lender to recover usurious interest tolls statute.

Bringing of suit to recover usurious interest against lender by borrower in good faith, with process issued in good faith, stops running of statute of limitations.

4. LIMITATION OF ACTIONS. Three-year statute applies to suits to recover illegal or usurious interest (Hemingway's Code, sections 2076, 2463).

Hemingway's Code, section 2463, requiring actions on unwritten contracts to be commenced within three years, applies in suit to recover illegal or usurious interest in violation of section 2076.

5. LIMITATION OF ACTIONS. Cause of action to recover usurious or illegal interest does not accrue until payment of principal debt (Hemingway's Code, section 2076).

Cause of action for recovery of usurious interest or interest in violation of Hemingway's Code, section 2076, does not accrue until payment of principal debt, since borrower as well as lender may credit interest forfeited on principal of debt until such principal has been paid or extinguished.

Suggestion of Error Overruled April 18, 1927.

APPEAL from chancery court of Madison county.

HON. V. J. STRICKER, Chancellor.

Suit by R. F. Beck against J. H. Tucker. Judgment of dismissal, and complainant appeals. Reversed and judgment rendered.

Judgment reversed.

E. B. Harrell, for appellant.

The court erred in holding that the one hundred eighty-dollars unearned interest paid to Tucker for "shifting securities and taking a new note" was not a violation of the usury statute. A correct answer to this question will be found in section 2076, Hemingway's Code. Justice COOPER has well defined the usury statute in Bass v. Patterson, 68 Miss. 312.

The court will bear in mind that all interest had been paid on the three thousand dollar note as it annually fell due. On February 18, 1920, the one thousand dollar note and the three thousand dollar note were merged into the four thousand dollar note and the security shifted from the "Luckett Place" to the "White Place." As a consideration for executing new papers, and shifting the security Tucker charged and collected one hundred eighty dollars of unearned interest as a premium or commission in making the change.

This was a scheme to get more interest than the law allows and at the same time place of record a contract that would disclose a transaction free from taxes. Bank of Manchester v. Nolan, 7 How. 508; Bethlehem Finance Corporation v. Schuler, 209 N.Y.S. 228; Pope v. Marshal, 78 Ga. 635; Newman v. Williams, 29 Miss. 222.

This was clearly a transaction by which Tucker was to receive more than the legal rate of interest and is fully within the prohibition of the statutes. Bond v. Jones, 8 S. & M. 368; Rozell v. Dickerson, 63 Miss. 538; Levy & Sons v. Jeffors, 105 So. 1; Hiller v. Ellis, 72 Miss. 709; Polkinghorne v. Hendricks, 61 Miss. 366; Robers v. Rivers, 135 Miss. 760.

W. H. and R. H. Powell, for appellee.

The gravamen of the bill in paragraph 5 is that Tucker collected on February 18, 1902, one hundred eighty dollars more than the interest. The answer, paragraph 5, fully explains that and shows that it is not true. Read it.

In paragraph 6 of the bill it is claimed that Beck gave his note April 13, 1921, for sixty dollars, which is claimed to be usurious, and note was paid October 17, 1921. But in the answer, paragraph 6, this is denied to be usurious and the facts are fully explained to show that there was no contract for usury, it being merely the difference between six and eight per cent and had nothing to do with the original loan, but simply a contract for reimbursement of what Tucker had to pay others.

By Hemingway's Code, section 2075, the legal rate of interest is six per cent. Eight per cent can be charged and is not usury. To constitute usury, there must be an agreement between lender and borrower by which the borrower knowingly promises and the lender knowingly takes a higher rate of interest than the law allows and with an intention to violate the statute. Planters Bank v. Snodgrass, 4 How. 573, especially pages 621-24 and 633. Amounts paid voluntarily and not as a condition of the loan are not usurious. Ib. 573, 631. Cited and approved in Smythe v. Allen, 67 Miss. 146, 150.

A person can be estopped from setting up usury as a defense. Henderson v. Hartman, 65 Miss. 466. Usury is determined by what the creditor has the right, according to the terms of the contract if enforced, to demand in any situation during its life, and not by what he may ask under an accidental situation. Crofton v. New South Loan Ass'n, 77 Miss. 166.

Beck does not charge in specific terms in his bill that Tucker intended to evade section 2076, for he knew that that was not a fact that he could prove; but suppose he had: That section must be read and construed to mean at the time that the loan was made. Such intention must exist. That section relates only to contract made at the time of the loan and not to any subsequent transaction during the life of the loan.

By section 1780, Hemingway's Code (section 2112, Code of 1906) it is provided that an executor or administrator may pay a debt which is not due and save the unearned interest, but there is no law compelling a creditor to accept payment from a live man before maturity of the debt and thereby lose the interest not earned.

If Beck had borrowed four thousand dollars at six per cent for one year and had given his note for four thousand two hundred and forty dollars and on the very next day desired to repay the four thousand dollars and one day's interest only, he could not have compelled Tucker to accept the one day's interest.

If, therefore, Beck for his own convenience had paid the four thousand two hundred and forty dollars on the next day after the loan had been made and Tucker had accepted it, then certainly there would have been no element of usury in such a transaction.

H. B. Greaves, also, for appellee.

The following is the law governing usury:

(a) Interest collected in advance at the highest legal rate is usurious. See Polkinghorne v. Hendricks, 61 Miss. 365, which is cited and approved in 81 Miss. 306; 82 Miss. 606; 108 Miss. 165; 100 Miss. 749; 95 So. 519; 100 So. 385. Payment of highest rate semiannually usurious. Redgress v. Ribers, 135 Miss. 756.

(b) A bonus charged by the lender to make a loan renders the contract usurious, if the bonus added to the interest charged exceeds the legal rate. Levy & Sons v. Jeffords, 105 So. 1.

(c) Ignorance of the law does not excuse anyone, and if a person knowingly receives more than eight per cent interest, even though he thought he had a right to it, the same renders the loan usurious.

(d) The charging and collection of the highest legal rate of interest for a whole year renders the whole loan usurious provided the loan does not run one year. Hiller v. Ellis, 72 Miss. 709.

(e) Under section 2076, Hemingway's Code (Acts of 1914, chapter 137) if appellee with a view of evading the six per cent interest law had taken appellant's note which showed the rate of interest to be six per cent, but had in fact "secretly" contracted for, directly or indirectly, a sum of money in excess of six per cent, all interest would be forfeited.

These loans were called in by Beck and not by Tucker. This transaction was in every respect legitimate. It is indulged in by the federal land banks and practically all building and loan associations and individuals and banks lending money in this state, and has been adjudged by this court to be legitimate. Kornegan v. Loan Ass'n, 91 Miss. 551, opinion 556, and authorities cited in opinion.

The chancellor found that this was legitimate and that there was no intention thereby to evade the state; and this finding is supported by the overwhelming preponderance of the evidence.

E. B. Harrell, for appellant, and H. B. Greaves, for appellee.

OPINION

MCGOWEN, J.

On July 1, 1916, Beck, the appellant, hereinafter called the "borrower," obtained a loan from Tucker, the appellee, hereinafter called the "lender," amounting to three thousand dollars, and executed his several notes for the principal and interest at six per centum per annum as follows: An interest note for sixty dollars due November 1, 1916; five interest notes for one hundred eighty dollars each, due, respectively, November 1, 1917, 1918, 1919, 1920, and 1921; and one principal note for three thousand dollars, due November 1, 1921.

The interest notes due up to January 31, 1919, were paid, and on that date the borrower secured an additional loan from the lender amounting to one thousand dollars, and executed his note for one thousand fifty-five dollars due January 1, 1920.

All...