Cornelison v. United States Building & Loan Ass'n

• Decision Date: 15 October 1930
• Docket Number: 5540
• Citation: 50 Idaho 1,292 P. 243
• Parties: EZRA CORNELISON and ERSAL CORNELISON, Respondents, v. UNITED STATES BUILDING AND LOAN ASSOCIATION, a Corporation, Appellant
• Court: Idaho Supreme Court

292 P. 243

50 Idaho 1

EZRA CORNELISON and ERSAL CORNELISON, Respondents, v. UNITED STATES BUILDING AND LOAN ASSOCIATION, a Corporation, Appellant

No. 5540

Supreme Court of Idaho

October 15, 1930

USURY-PLEADING-EVIDENCE-LIMITATION OF ACTIONS-MORTGAGES - ACTION TO CANCEL.

1. Complaint in action to cancel note and mortgage as usurious contract held sufficient (C. S., sec. 2554).

2. Even if complaint in action to cancel note and mortgage as usurious did not state cause of action, court did not err in receiving evidence where contract was usurious on its face (C. S., sec. 2554).

3. In action to cancel usurious contract, that lender did not intend to exact usurious interest is immaterial (C. S., sec 2554).

4. Evidence in action to cancel note and mortgage for usury held to support finding that lender knowingly charged interest in excess of ten per cent (C. S., sec. 2554).

5. Where contract was usurious, all payments, whether on principal or as usurious interest, held properly deducted from principal (C. S., sec. 2554).

6. Statute of limitations held not to bar application of usurious interest payments to reduction of principal, as statute cannot be invoked against plea of payment (C. S sec. 2554).

7. Plea of limitation statute barring application of usurious interest payments to reduction of principal held waived by failing to demur to counterclaim seeking same relief as in complaint (C. S., secs. 6700, 6701).

8. Mortgagor suing to cancel held not required to pay principal and all of usurious interest and then bring separate action for recovery of usurious interest (C. S., sec. 2554).

9. In action to cancel usurious contract, mortgagor could recover or offset for previous interest payments made by him (C. S sec. 2554).

10. Portion of contract providing for usurious interest created no lien against which usurious interest could be satisfied (C. S., sec. 2554).

11. In action to cancel usurious mortgage after payment of more than principal, mortgagor held entitled to penalty for mortgagee's refusal to cancel mortgage (C. S., sec 6369).

12. Attorneys' fees incurred in action to compel cancelation of usurious mortgage after payment of principal held recoverable as "damages" within statute (C. S., sec. 6369).

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. J. L. Downing, Judge.

Action to cancel note and mortgage as usurious contract. Judgment for plaintiffs. Affirmed.

Judgment affirmed. Costs awarded to respondents.

H. R. Turner, for Appellant.

The usurious transaction occurs when the usurious interest is actually paid and each payment of usurious interest is a cause of action and the statute of limitation commences to run on each payment when made. (First Nat. Bank of Dorchester v. Smith, 36 Neb. 199, 54 N.W. 254; Mitchell v. Joplin Nat. Bank, 200 Mo.App. 243, 204 S.W. 1125; National Bank v. Carpenter, 52 N.J.L. 165, 19 A. 181; Brown v. Second Nat. Bank, 72 Pa. 209; Hintermister v. First Nat. Bank, 64 N.Y. 212.)

The remedy afforded by the statute is exclusive and a party who claims the right to recover usury paid must avail himself of the remedy prescribed by the statute. (Lindberg v. Burton, 41 N.D. 587, 171 N.W. 616; Carter v. Carusi, 112 U.S. 478, 5 S.Ct. 281, 28 L.Ed. 820; Garland v. Union Trust Co., 63 Okla. 243, 165 P. 197.)

Usurious interest paid cannot be recouped against the principal.

When this usury law came before the United States supreme court they held that usurious interest paid could not be applied as a counterclaim. (Wiley v. Starbuck, 44 Ind. 298; Carter v. Carusi, 112 U.S. 478, 5 S.Ct. 281, 28 L.Ed. 820; Chas. S. Riley & Co. v. W. T. Sears & Co., 154 N.C. 509, 70 S.E. 997; Garland v. Union Trust Co., 63 Okla. 243, 165 P. 197; Matthews v. Paine, 47 Ark. 54, 14 S.W. 463; National Exch. Bank v. Boylen, 26 W.Va. 554, 53 Am. Rep. 113; Farmers Nat. Gold Bank v. Stover, 60 Cal. 387; Rockwell v. Farmers' Nat. Bank, 4 Colo. App. 562, 36 P. 905.)

H. J. Swanson, for Respondents.

The defendant attempts in its amended answer to avoid the consequences of the usurious contract by pleading that it inadvertently used the note and agreement in question. There is, however, no proof of this allegation anywhere in the record, and the law is that when the usurious transaction is revealed on the face of the instrument, the unlawful intent to charge or receive an illegal rate of interest for the money loaned will be inferred from the instrument itself. (27 R. C. L., "Usury," sec. 23, p. 222; Fiedler v. Darrin, 50 N.Y. 437; Midland Savings & Loan Co. v. Tuohy, 69 Okla. 270, 170 P. 244.)

The contract being usurious, the interest provided for is deemed forfeited and all payments made are to be applied to the principal. (C. S., sec. 2554; United States Bldg. & Loan Assn. v. Lanzarotti, 47 Idaho 287, 274 P. 630; Cleveland v. Western Loan & Savings Co., 7 Idaho 477, 63 P. 885.)

It is not necessary in Idaho to plead usury; when discovered the statute operates automatically. (McDougall v. Kasiska, 48 Idaho 424, 282 P. 943.)

The plea of payment, and/or reduction, and/or recoupment is never barred by the statute of limitations. (King v. King, 9 N.J. Eq. 44; Mason v. Peterson, (Tex. Com. App.) 250 S.W. 142; 37 C. J., "Limitations of Actions," p. 804, sec. 149.)

BUDGE, J. Givens, C. J., and Lee, Varian and McNaughton, JJ., concur.

OPINION

BUDGE, J.

Respondents brought this action to cancel a certain mortgage of record given to secure a note executed and delivered to appellant. Proper demand for the discharge of the mortgage was made and refused. The statutory penalty for refusal to cancel said mortgage, and damages, are also sought to be recovered. The cause was tried to the court. Judgment was had for respondents, from which this appeal is taken.

Briefly stated, the material facts are as follows: On November 11, 1922, respondents borrowed $ 3,000 from appellant and delivered to it a note and mortgage. The note provided on its face for the payment of six per cent interest and one per cent premium, and further provided that the principal, interest and premium should be paid in 108 equal monthly payments of $ 45.20 each, commencing December 11, 1922. The note further provided that each installment should be applied by appellant for the payment of said principal sum of $ 3,000 and $ 1,890 interest and premium.

In respondents' complaint it is alleged among other things that appellant is a Montana corporation authorized to do business in this state and is engaged in making loans; that its note heretofore mentioned purports to carry interest not to exceed seven per cent per annum but in truth and in fact exacts practically twelve per cent per annum and is a usurious contract under the statutes of this state, and that "said contract was well and truly known to defendant to be a usurious contract at the time the same was executed." The complaint further alleges that respondents have paid said principal sum and thereby paid the note in full, are entitled to have the mortgage canceled and satisfied of record and to recover $ 350.72, such sum being the excess paid over and above the principal; and the further sums of $ 100, the statutory penalty, and $ 500 damages sustained by reason of the fact that it was necessary for respondents to employ an attorney to maintain the present action.

To the complaint appellant filed an answer denying each and all of the allegations of respondents' complaint and also filed a cross-complaint for the foreclosure of the mortgage, alleging that the mortgage had not been fully paid. Respondents answered the cross-complaint and set up counterclaims seeking substantially the same relief prayed for in their original complaint. Appellant filed no demurrer to respondents' counterclaim.

Appellant specifies and relies upon eighteen assignments of error. We do not deem it necessary to discuss seriatum the errors assigned but shall consider only such as are deemed material to a proper decision of the questions before us.

Appellant predicates error upon the action of the court in overruling its objection to the introduction of any evidence upon the ground that the complaint does not state facts sufficient to constitute a cause of action.

An examination of the complaint discloses that it meets the objection urged by appellant, in that it is alleged therein that the contract was entered into with knowledge that the same was usurious and that usurious interest had been knowingly demanded, paid to and accepted by appellant. Furthermore, the contract sought to be enforced is shown upon its face to be usurious. (Olson v. Caufield, 32 Idaho 308, 313, 182 P. 527.) If it was conceded that the complaint was lacking in the respects pointed out by appellant, we would still be of the opinion that the court did not err in receiving evidence. In McDougall v. Kasiska, 48 Idaho 424, 282 P. 943, 946, it is held that "whenever in the process of trial, the statute meets usury, it operates automatically; and the forfeiture is complete, independent of any special pleading by the party entitled to the benefit of such forfeiture." Though the lender may not intend to be guilty of usury, yet he is nevertheless guilty for he intends to do what he does but mistakes the law. (27 R. C. L., sec. 23, p. 222.)

It is conceded that the contract herein was usurious. In United States B. & L. Assn. v. Lanzarotti, 47 Idaho 287, 274 P 630, 631, the same kind of contract was before this court and was held to be usurious. The contract was drafted by appellant or its agent, presented to and signed by respondents, and payments received thereunder. It would therefore hardly be consistent to hold upon the record before us that there was no violation of the provisions of C. S.,...