Davisson v. Smith
| Decision Date | 30 October 1906 |
| Parties | DAVISSON v. SMITH et al. |
| Court | West Virginia Supreme Court |
Submitted June 7, 1906.
Syllabus by the Court.
A conveyance of land, founded upon compensation for the use of borrowed money in excess of the rate of interest allowed by law as the sole consideration therefor, will be set aside in equity.
When such conveyance is collateral to the loan, and notes for the full amount of the money lent, including interest thereon at the full legal rate, have been executed by the borrower, and payment thereof secured by a deed of trust, and before suit is instituted to set aside the deed the money borrowed and all legal interest thereon has been paid in money, the value of the real estate conveyed will not be treated as a credit on the debt, or the legal interest thereon, as of the date of the conveyance, and the borrower thereby limited to a recovery in money.
In the enforcement of the statutes for the suppression of usury courts do not disturb, overthrow, or annul contracts to an extent beyond the necessity of the case; but there is no restraint upon their power to treat principal and collateral transactions, entered into with intent to evade the law against usury, as a single transaction, when enforcement of the statute, liberally construed, renders such action necessary.
Since the statute of this state nullifies usurious contracts only to the extent of the interest stipulated for or taken in excess of the legal rate, when the payment of such excess, or the agreement to pay it, has been made by express agreement of the parties wholly collateral to the principal transaction, the proceeding for relief, either at law or in equity, may be limited to the collateral payment, delivery transfer, conveyance, or agreement. When the illegal has been so separated from the legal part of the transaction, courts will not unite them, if relief can be given without doing so nor is either of the parties entitled to have them treated as a single transaction.
Delay for a period of three years, after the payment of the debt and interest, in suing to set aside a conveyance, the sole consideration whereof is usurious interest, does not bar relief, as between the parties thereto, under the operation of either the statute of limitations or the principle of laches, although there has been an appreciation in the value of the land, not due to any outlay in money or labor on the part of the grantee.
Appeal from Circuit Court, Harrison County.
Bill by M. B. Davisson against T. B. Smith and others. Decree for plaintiff, and defendants appeal. Affirmed.
John Bassel, for appellants.
J. E. Law, for appellee.
Thomas B. Smith and Daniel S. Smith complain of a decree of the circuit court of Harrison county, made and entered on the 23d day of October, 1905, in the chancery cause of Marcellus B. Davisson against the appellants and the South Penn Oil Company, requiring said appellants to execute a deed reconveying to Davisson a one-half interest in and to all the oil and gas in and under a tract of 50 acres of land situated in said county; the court having found and determined that the sole consideration for the conveyance of said interest in the oil and gas to the appellants by Davisson was compensation for the use of money in excess of the legal interest thereon.
Davisson, being the owner of the tract of land, obtained from the appellants, on the 5th day of May, 1899, a loan of $550, evidenced by his five promissory notes, payable one, two, three, four, and five years after date, with interest thereon from date, the first four of which were for $100 each and the last one for $150, and executed a deed of trust on the land to secure the payment thereof. On the 6th day of May, 1899, Davisson and his wife executed a deed conveying to the appellants one-half of the oil and gas in and under the tract of land. On the 19th day of February, 1900, the appellants executed to the South Penn Oil Company a lease on said land for oil and gas purposes, under which, at some time in the year 1904, said company entered upon the land and began to develop it for oil and gas, and their operations resulted, on or about the 27th day of June, 1904, in the discovery of oil in paying quantities. Meanwhile Davisson, in June, 1901, having made a sale of the coal under the tract of land, had paid off his entire indebtedness to the appellants, including the interest thereon at the legal rate. At July rules, 1905, he filed his bill, setting up the facts hereinbefore stated, and charging that there was no consideration for the conveyance of the oil and gas to the appellants, other than the loan hereinbefore described, and that said conveyance was made as compensation for the use of the money borrowed in excess of the legal interest thereon, stipulated for in the notes and secured by the deed of trust. He prayed that the deed be canceled and annulled, that the lease executed by the appellants to the South Penn Oil Company be canceled, that an injunction be awarded inhibiting said company from delivering to the appellants any part of the oil produced from the premises, and that a receiver be appointed to take charge of the one-half of the royalty, or one-sixteenth of the oil produced, which was claimed by the appellants, as well as the cash rentals which might accrue from gas wells under the lease. The South Penn Company claimed protection as a bona fide purchaser for value without notice, and the appellants denied that the consideration for the conveyance was usurious interest, but claimed that, if the court should be of the opinion that it was, the measure of relief to the plaintiff would be a decree for money equal in amount to the value of the interest conveyed at the time of the conveyance thereof, with interest thereon from the date of the conveyance. The court, upon the hearing of the cause upon its merits and with the consent of the plaintiff, held the South Penn Oil Company to be a purchaser for value without notice, and set aside the deed as to the appellants Thomas B. Smith and Daniel S. Smith.
The denial by the appellants of the usurious character of the consideration is based upon the circumstances under which the loan was made. Davisson, having no means of his own, except a one-fifth interest in the land, desired to purchase the interests of his three brothers and a sister therein. It required about $550 to accomplish this and pay delinquent taxes for which it was about to be sold. Unable to obtain the money elsewhere, he applied to the appellants, who, after much importunity on his part, not being money lenders themselves, agreed to let him have it; he agreeing to convey to them half of the oil and gas in the land. Pursuant to this understanding, the interests of the brothers and sister were conveyed to Davisson, paid for by him with money furnished by the Smiths, the notes and deed of trust executed and delivered, and the deed made conveying the oil and gas interest. Upon these facts and the oral testimony of the appellants is based the argument and contention that the appellants entered upon the transaction, not as lenders of money, but in the dual character of money lenders and purchasers of an interest in the land. The fact that they took the obligation of Davisson for all of the money they furnished him, together with the interest thereon at the full legal rate, amply justifies the finding and conclusion of the court below that they were not in any sense purchasers. It is perfectly apparent that they took the oil and gas for the use of the money furnished. No other benefits exchanged for it accrued to Davisson or to his brothers and sister, who owned four-fifths of the land at the time the agreement was made. Nothing but the use of the money could be regarded as consideration for the land, and, as full legal interest was provided for in the notes and the security taken, the interest represented by the value of the oil and gas, added to the interest stipulated for in the notes, made the transaction undoubtedly an usurious loan, and precluded the theory of a purchaser.
The principal complaint of the appellants is predicated upon the action of the court in depriving them of the title to the oil and gas, instead of giving a decree against them for the value thereof at the date of the conveyance, with interest. This objection is founded upon two different theories, one of which is that both the common-law and statutory remedies contemplate a money recovery in all cases in which a debtor sues to recover usurious interest, and the other that a conveyance founded on an usurious consideration is neither void nor voidable. For the first proposition the rule laid down by this court in Davis v. Demming, 12 W.Va 246, is referred to. That was a general rule applicable under the circumstances which usually attend usurious transactions. Ordinarily usurious interest is paid in money. No expression in the opinion in which that rule was prescribed indicates that it was intended for universal application. Like all other general rules and principles, it is necessarily subject to such exceptions as peculiar circumstances necessitate. The right to recover property delivered as and for compensation for the use of borrowed money in excess of the legal rate of interest is affirmed by numerous decisions of the courts. Webb on Usury, at section 479, says: "In England it was settled long ago that an action of trover was maintainable against a usurious bailee, after demand and refusal, without offering or tendering the principal sum, or any part thereof, as the action was strictly legal, and the deposit void." To sustain this proposition a number of well-considered decisions are cited, in which both trover and replevin...
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