Dufrense v. Hammersten
| Decision Date | 23 October 1940 |
| Docket Number | 6832 |
| Citation | 106 P.2d 861,61 Idaho 714 |
| Parties | P. A. DUFRENSE, Appellant, v. OTTO A. HAMMERSTEN and Mrs. FRANCES HAMMERSTEN, Husband and Wife, Respondents |
| Court | Idaho Supreme Court |
USURY-RENEWAL NOTE.
1. Where the statute of limitations had not run against indebtedness evidenced by note bearing legal rate of 10 per cent interest when new note also bearing 10 per cent interest was given after maximum rate allowable was changed to 8 per cent, statute had not run against new note when action thereon was commenced, no additional consideration passed when new note was executed, and the only change made was naming a new maturity date, the new note was simply a "renewal note" and was not usurious. (I. C. A sec. 5-238; Sess. Laws, 1933, chap. 197, sec. 3.)
2. A "renewal" of a promissory note is the reestablishment of a particular contract for another period of time.
APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Isaac McDougall, Judge.
Action to recover money due on promissory note. Judgment in part for plaintiff, from which plaintiff appeals. Reversed.
Reversed and remanded with direction. Costs of appeal awarded to appellant.
P. C O'Malley, for Appellant.
This court has repeatedly held that usury must be in, and at the inception of the debt, or in other words at the time the loan was made.
"A contract, which in its inception, is unaffected by usury, can never be invalidated by any subsequent usurious transaction." (Stinson v. Bisbee, 55 Idaho 38 37 P.2d 236.)
The note in the case at bar, is just the evidence of the debt, and this court has held that the great weight of authority is that the renewal of the evidence of the debt, in the absence of an agreement between the parties, does not constitute payment of the debt.
"The great weight of authority is that the renewal of the evidence of the debt does not, in the absence of agreement between the parties, constitute in law payment of the debt." ( Walker v. Farmers' Bank of Kendrick, 41 Idaho 279 (quoted from page 284), 238 P. 968.)
In an early case our Supreme Court held:
"The taking of new and additional security for the same debt does not always operate as a release or cancellation of the original security; a new mortgage and note are payment of the old security when such is the agreement or understanding of the parties." (Vollmer v. Estate of Reid, 10 Idaho 196, 77 P. 325.
Carl C. Christensen, for Respondents.
When a note sued on is usurious on its face, no plea of usury is necessary, but it becomes the duty of the court to apply the statute of its own motion. (McDougall v. Kasiska, 48 Idaho 424, 282 P. 943; Cornelison v. United States Building & Loan Assn., 50 Idaho 1, 292 P. 243.)
The surrender of an old note and the giving of a new note in lieu thereof is a good consideration for the new note and generally creates a new contract between the parties. ( Fidelity State Bank v. Miller, 29 Idaho 777, 162 P. 244; Musser v. Murphy, 49 Idaho 141, 286 P. 618; 11 Corpus Juris Secundum, 104, 105.)
During the summer of 1928 appellant loaned respondents the sum of $ 428 to pay for the completion of a house. Respondents gave appellant their note, bearing ten per cent (10%) interest and due in three years from date. Interest was paid regularly on the note to and beyond the time of its maturity. December 8, 1935, at appellant's instance and request, respondents executed a note in lieu of the 1928 note, for the same amount of principal and bearing interest at the same rate, payable to appellant three years after date. Interest on the second note (at 10%) in the amount of $ 122.80 was paid up to December 8, 1938, and $ 28 on the principal, leaving a balance due on the principal of $ 400. From the above facts agreed upon between the parties, appellant claims he is entitled to payment of the principal in full and all interest accrued subsequent to December 8, 1938, at 10 per cent per annum, together with an attorney fee, the latter to be fixed and determined by the court.
Respondents claim they are entitled to an offset of $ 122.80, interest paid, and an additional $ 245.60 (which is "twice the amount of such interest", as penalty, for usurious contract, in accordance with 1933 Sess. Laws, chap. 197, sec. 3), leaving a balance of $ 31.60, together with a $ 15 attorney fee allowed by the court. It was agreed between the parties that the court consider and decide the issues presented upon the stipulated facts without other evidence or calling a jury. By the lower court's memorandum decision it was held that the only question involved is "whether or not the transaction in question is usurious and is governed by the provisions of Chapter 197 of the 1933 Session Laws". When the original note was executed in 1928 interest at 10 per cent per annum was legal but the rate was changed in 1933 and 8 per cent was fixed as the maximum rate allowable. Ten per cent was a usurious rate when the renewal note was executed. Judgment was entered that plaintiff recover from defendant the sum of $ 31.60 principal, without any interest save such as may accrue after judgment, and $ 15 attorney's fees. From this judgment plaintiff has appealed.
Under the statute, sec. 5-238, I. C. A. ():
"Any payment of principal or interest is equivalent to a new promise in writing, duly signed, to pay the residue of the debt." (Vollmer Clearwater Co., Ltd., v. Hines, 49 Idaho 563, 290 P. 397.) So it appears that at the time the new note was given, the statute of limitations had not run against the old indebtedness: neither had the statute run against the second or new note at the time this action was commenced. While the suit is prosecuted on the renewal note, the plaintiff also plead the execution and delivery of the original note, payments of interest and the execution and delivery of the new or renewal note, for the same principal sum at the same rate of interest, to take the place of the old one and extending the maturity date for a further period of three years.
That is what was sought to be done in the Cain-Bonner case. Such is not the case here. Indeed, the statute of limitations is not plead and, moreover, it affirmatively appears that the statute had not run against either the original or the renewal note. The new note in this case was simply a renewal and not a new and independent contract. No additional consideration passed; the only change made was naming a new maturity date.
A "renewal" of a promissory note means to reestablish a particular contract for another period of time. (Grace & Co. v. Strickland, 188 N.C. 369, 124 S.E. 856, 35 A. L. R. 1296; Live Stock Nat. Bank, etc., v. Minnehaha St. Bank, etc., 52 S.D. 172, 217 N.W. 180, 183; Lowry Nat. Bank v. Fickett, 122 Ga. 489, 50 S.E. 396; Kedey v. Petty, 153 Ind. 179, 54 N.E. 798, 800; Elk Horn Bank & T. Co. v. Spraggins, 182 Ark. 27, 30 S.W.2d 858; Sammons v. Nabers, 186 Ga. 161, 197 S.E. 284; 10 C. J. S., p. 758, sec. 263, n. 19; 8 C. J., p. 425, sec. 626, n. 11; 66 C. J., pp. 174, 175, sec. 65; 7 Am. Jur., p. 941, sec. 248.)
Clearly there was no corrupt intent in this transaction to circumvent the law and charge a usurious rate of interest. ( Anderson v. Creamery Package Mfg. Co., 8 Idaho 200 67 P. 493, 101 Am. St. 188, 56 L. R. A. 554; Olson v. Caufield, 32 Idaho 308, 182 P. 527; Easton v. Butterfield Live Stock Co., 48 Idaho 153, 279 P. 716; Stinson v. Bisbee, ...
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Bank of Hoven v. Rausch
...of a particular contract for another period of time. King v. Edel, 69 Ga.App. 607, 26 S.E.2d 365 (1943); P.A. Dufresne v. Hammersten, 61 Idaho 714, 106 P.2d 861 (1940); First Nat. Bank in Albuquerque v. Abraham, 97 N.M. 288, 639 P.2d 575 (1982). Each note signed in this action had a differe......