Davis v. Tandy

Decision Date30 May 1904
Citation81 S.W. 457,107 Mo.App. 437
PartiesDAVIS, McDONALD & DAVIS, Respondents, v. A. H. TANDY, Appellant
CourtKansas Court of Appeals

February 15, 1904;

Appeal from Jackson Circuit Court.--Hon. E. M. Gates, Judge.

Reversed and remanded.

T. A Witten and Roland Hughes for appellant.

(1) The mortgage was void on account of usury. R. S. 1899, sec. 3710. (2) Defendant claiming to be the owner of the cattle, had a right to rely upon this defense. Keim v. Vette, 167 Mo. 389; Storage Co. v. Glasner, 169 Mo. 48; Johnson v. Simmons, 61 Mo.App. 395; Rubber Co v. Wilson, 55 Mo.App. 656; Voorhees v. Stead, 63 Mo.App. 370; Coleman v. Cole, 158 Mo.App. 253; Marx v. Hart, 166 Mo. 503. (3) The issue that the mortgage was invalid and void on account of usury or for any other reason was sufficiently raised by defendant's general denial; and was also properly in the case because plaintiff voluntarily proved the usury in making out his case. Hardwick v. Cox, 50 Mo.App. 509; Johnson v. Simmons, 61 Mo.App. 395; Cavender v Wadingham, 2 Mo.App. 551; Adams v. Moody, 91 Mo.App. 41; Thomas v. Ramsey, 47 Mo.App. 84; Sprague v. Rooney, 104 Mo. 349, overruling 82 Mo. 493. Plaintiffs failed to show either: (a) Title in Hale, his mortgagor: Carter v. Feeland, 17 Mo. 383; Sweitzer v. Wilvers, 24 Kan. 384; Lewis v. Ruthrick, 102 Mass. 412; Whistler v. Foster, 32 L. J. Cp. 161; 1 Benj. on Sales (3 Eng. Ed.), p. 12; The Fannie, 9 Wheat. 658; Ventries v. Smith, 10 Pet. 176; Quigley v. Bank, 80 Mo. 289; Robinson v. Bird, 158 Mass. 357; Church v. Sterling, 16 Conn. 388; Follesbee v. Kilbreath, 17 Ill. 522; Crockner v. Deuesterman, 3 N.W. 276. (b) Or that defendant was estopped: Hill et al. v. Epley et al., 31 Pa. St. 334; Acton v. Daily, 74 Mo. 63; Deberry v. Wheeler, 128 Mo. 84.

Cowan & Burney and Botsford, Deatherage & Young for respondents.

(1) The mortgage was upon property situated in the State of Texas, executed, delivered and recorded in Texas, to secure a note providing the Texas rate of interest, and they must therefore be tested by the laws of Texas as to their validity respecting interest and usury. Adams v. Robinson, 37 Ill. 45; Webb on Usury, sec. 256; Security Co. v. Varder, 28 F. 265; Security Co. v. McLaughlin, 87 Ga. 1; Thompson v. Edwards, 85 Ind. 414; Bank v. Smart, 2 McArthur 371; Bankhouse v. Selden, 29 Grattan 581; Duggen v. Lewis, 14 S.W. 1024; 22 Am. and Eng. Ency. Law (2 Ed.), p. 1330; Bedford v. Loan Assn., 181 U.S. 227. (2) Usury is a defense which must be pleaded in actions of this character. Mullamphey v. Phillipson, 1 Mo. 135; Weiner v. Shelton, 7 Mo. 237; Davis v. Tuttle, 10 Mo. 201; Davis v. Bowling, 19 Mo. 651; Gunn v. Head, 21 Mo. 432; Bond v. Wolsey, 26 Mo. 253; Webb on Usury, sec. 397-398a, 399, 401, 402, 403 to 415; 22 Ency. Pl. and Pr., pp. 421-441; R. S. 1899, sec. 3709-3710. (3) There is no presumption that the mortgage is void even though it should be held that there is a presumption that the rate of interest charged in Texas is the Missouri rate, and was usurious; in other words, presumption will not be indulged that the penalty of the Missouri statute as to forfeiture would be the same in Texas. Webb on Usury, sec. 280. (4) Defendant must have pleaded that the mortgage was invalid by the laws of Texas before he could assert it. See authorities under point 2. (5) The forfeiture or penal feature of the statute only applies where the usurious interest is in fact paid. It does not apply where such interest is charged or agreed upon but not paid. R. S. 1899, sec. 3710. (6) If the defendant wished to rely upon the mortgage being void for the usury it was his duty to plead it, the mortgage being a Texas contract, in order that the plaintiff would be given an opportunity to prove the laws of Texas. Davis v. Bowling, 19 Mo. 651. (7) The presumption is that a contract made in one State to be partly performed in another was intended to be governed by the laws of the State under which it would be valid. Pritchard v. Norton, 106 U.S. 137; 22 Ency. Law (2 Ed.), p. 1329. (8) Appellant not being a privity with Hale as a subsequent purchaser or as a general or lien creditor, could not assert the defense of usury, even if he had pleaded it. Ranson v. Hays, 39 Mo. 445; Hall v. Taylor, 125 Mo. 331; Vette v. Geist, 155 Mo. 27; Gribel v. Imboden, 158 Mo. 632.

OPINION

ELLISON, J.

Plaintiffs charge defendant with having wrongfully converted to his own use in the State of Texas 240 head of cattle which they claim were theirs by reason of a chattel mortgage securing a promissory note for $ 3,803, with ten per cent interest, both executed to them by one Hale. The answer was a general denial. The judgment in the trial court was for the plaintiffs. The plaintiffs are citizens of this State while Hale and defendant at the time of the execution of the note and mortgage were citizens of Texas; and those instruments were dated and executed in that State, in proper form, and the cattle were located there, but plaintiffs finding defendant in this State, brought this action against him for conversion they charge that he committed in the State of Texas and consummated in Oklahoma, whence he removed the cattle. One phase of the case is that Hale had been clothed with such indicia of ownership as to make his conveyance valid as to innocent parties.

Defendant claims to be the owner of the cattle. That they had been bought for him by Hale and one Hudson. That he knew nothing of Hale having given a mortgage on them until notified by plaintiffs. And in this condition of the case, defendant attacks the validity of the mortgage under which plaintiffs claim, on the ground of usury, the note which it secures bearing ten per cent on its face, when eight per cent is the maximum rate allowed in this State, though ten per cent is a lawful rate in Texas. Defendant also claims that while the note is not usurious on its face by the law of Texas, it nevertheless is usurious under the laws of that State, in that it has included as fictitious principal, about $ 300 which was in fact in interest charge of near seven per cent more than the highest rate in Texas. Defendant's claim, therefore, is, that the note is usurious under the law of both States and that the mortgage securing it is therefore void under the terms of our statute, section 3710, Revised Statutes 1899, reading as follows:

"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 claim 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."

Plaintiffs contend that defendant is not a proper party to take advantage of the fact that usury was included in the note. It is undoubtedly true that a mere stranger can not avail himself of the plea of usury. It is a personal privilege of the debtor. But such rule must be accepted with certain qualifications, such as that those in privity with the debtor may show usury in defense as he himself could. American Rubber Co. v. Wilson, 55 Mo.App. 656; Coleman v. Cole, 158 Mo. 253, 59 S.W. 106; Marx v. Hart, 166 Mo. 503, 524, 66 S.W. 260. In the cases just cited, it was held that an attaching creditor stood in such relation. But it is manifest that a stranger, as for instance a mere general creditor who has not connected himself with the property, does not stand in privity with the debtor so as to be enabled to set up usury. It is in no instance disputed that the plea of usury is personal to the debtor and that those others who set it up must obtain their right through the debtor; that is, they must stand in some legal privity with him. That privity is in representation, as, for instance, the debtor's executor or administrator; or, in blood, as his heir; or, in estate, as his grantee. A grantee of the entire title to property encumbered by a lien securing usury is in privity with the grantor and may enter the plea of usury as effectually as the grantor himself could, for the grantor has transferred to him that right. And so a judgment creditor, where a judgment is a lien on the property affected, and execution or attachment creditors, where the property has been seized, may interpose the plea. But the right of all such creditors comes through the original party. It comes in this way: A purchaser under a judgment is an assignee of the debtor by operation of law and so stands in legal privity with him. Dix v. Van Wyck, 2 Hill 522, 525. A judgment creditor, or an attachment creditor, has taken the initiatory steps to an ultimate conveyance of the debtor's title; that is to say, to an assignment of the property by operation of law and thereby become possessed, by legal privity, of the debtor's right to interpose the defense of usury, just as his grantee would be. American Rubber Co. v. Wilson, 55 Mo.App. 656. But each of these rights comes through the original debtor charged with usury. And any right to question the validity of a usurious contract must be based on the original debtor's right. It is personal to him and he may waive it except in instances where it has passed to some one in privity with him. Missouri Syndicate v. Sims, 179 Mo. 679, 78 S.W. 1006; Vette v. Geist, 155 Mo. 27, 34, 55 S.W. 871; Chapuis v. Mathot, 91 Hun 565, 36 N.Y.S. 835.

And, as to this rule, it makes no difference that the statute declares usurious contracts void. They are void if the debtor wishes to avoid them, but they may be recognized by him as valid. He may...

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