Edworthy v. Iowa Savings & Loan Ass'n

• Decision Date: 24 May 1901
• Citation: 86 N.W. 315,114 Iowa 220
• Parties: J. M. EDWORTHY et al., Appellants, v. IOWA SAVINGS & LOAN ASSOCIATION
• Court: Iowa Supreme Court

86 N.W. 315

114 Iowa 220

J. M. EDWORTHY et al., Appellants, v. IOWA SAVINGS & LOAN ASSOCIATION

Supreme Court of Iowa, Des Moines

May 24, 1901

Appeal from Polk District Court.--HON. CHARLES A. BISHOP, Judge.

ACTION in equity to secure an accounting as to the amount due on a mortgage given by plaintiffs to defendant, and to effect redemption therefrom. There was an answer, and also a cross petition, in which the foreclosure of the mortgage was prayed. From a decree fixing the amount due on the mortgage and foreclosing the same, plaintiffs appeal.

Affirmed.

Dudley & Coffin for appellants.

Bailey Ballreich & Preston for appellee.

OPINION

WATERMAN, J.

The question first discussed in this court is as to whether the loan is usurious. Plaintiffs borrowed the sum of $ 1,400 of defendant corporation, and secured its payment by a pledge of 14 shares of stock and a mortgage on real estate. After a number of payments had been made on said debt, and on the tenth day of July, 1897, a new mortgage was executed for the balance claimed to be still due, viz.: $ 900, and the present action is founded upon the latter instrument.

As a level premium was exacted from the borrower for the first loan, which, together with the interest charged, amounted to more than the legal rate, such loan was, as originally made tainted with usury. Iowa Savings Loan Ass'n v. Heidt, 107 Iowa 297, 77 N.W. 1050; Iowa Loan Savings Ass'n v. Curtis, 107 Iowa 504, 78 N.W. 208. The second mortgage debt, being but a renewal of a part of the first loan, was not purged of the usury. Smith v. Coopers, 9 Iowa 376; Campbell v. McHarg, 9 Iowa 354; Garth v. Cooper, 12 Iowa 364; Bank v. Eyre, 52 Iowa 114, 2 N.W. 995. There is no evidence that plaintiffs, when they executed the second note, intended to free the contract of usury. We held, however, in the Heidt Case, that chapter 48, Acts Twenty-seventh General Assembly, cured all prior contracts of this nature which were within the terms of section 1898 of the present Code, as the contract in suit seems to be, and made them enforceable against debtors, according to their terms, up to a maximum of 12 per cent. interest. But it is claimed on behalf of plaintiffs that the repeal of chapter 48, Acts Twenty-seventh General Assembly, by sections 12, 16, chapter 69, Acts Twenty-eight General Assembly, leaves the contract in the same condition as if the curative act had never been passed; that it was originally usurious, and, while purged thereof by the curative act, the repeal of the latter left it still tainted. The effect of this act of the Twenty-eighth General Assembly is the only question, as we think, which we have to consider.

Section 1898 of the Code regulates the business and governs the contracts of building and loan associations, and, among other things, fixed the maximum interest rate which they may exact at 12 per cent. Section 1, chapter 48, Laws Twenty-eighth General Assembly extended the provisions of such section 1898 to all contracts of such associations with members, entered prior to the taking effect of the Code, and provided that such contracts might be enforced, "anything in the statutes in force when such contracts were made to the contrary notwithstanding." Section 12, chapter 69, Acts Twenty-eight General Assembly, repeals chapter 48, above mentioned; and section 16 of said acts of the Twenty-eight General Assembly legalizes all loans affected by the repeal of chapter 48, and permits a recovery of interest thereon at a rate not exceeding 8 per cent. The position of defendant is that by the curative act its original contract was validated, and that the attempt to take away this benefit or right was within the inhibition of both the federal and state constitutions, as impairing the obligation of contracts. On the other hand, it is insisted that the obligation of a contract, which may not be impaired by retroactive legislation on the part of the states, is what is included in the law existing when the contract was made. Such prior law, it is said, enters into, and becomes a part of, the agreement, and this element of the contract is what is meant to be protected by the constitutional principle under consideration; that what was gratuitously added thereafter by the legislature may at any time be taken away.

With this brief statement of the claims of the respective parties, we shall proceed to the solution of this, to us, novel problem. First, however, it is necessary to notice another claim made by defendant. It is asserted the enactment of the curative act effected the repeal of the statute against usury so far as this contract is concerned, and that, under section 48 of the Code, the repeal of the curative act would not have the effect to revive such previously repealed statute. This position is not tenable. The curative act merely removed a bar to the enforcement of this contract. It did not repeal the statute against usury. That statute stood, and still stands. A law curing defective acknowledgments cannot be said to repeal the statute prescribing the form to be observed in taking them. It merely dispenses with some matter which it recognized as required, in the absence of such dispensation.

We go now to the main question. It has been said that, so far as the provisions of the federal constitution are concerned, if a law divesting private rights does not impair the obligation of contracts, or is not ex post facto, it is within the legislative power. Satterlee v. Matthewson, 2 Peters 380 (7 L.Ed. 458); Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 11 Peters 430 (9 L.Ed. 773). How far, if at all, this rule has been modified by the fourteenth amendment to the national constitution, we have no occasion to inquire for section 9 of the bill of the rights of our state constitution, which guaranties property rights, save where taken by due process of law, doubtless protects all rights which have vested, even though they may not have arisen out of contract. Brinton v. Seevers 12 Iowa 389; Wade, Retroactive Laws, section 297; Sutherland, Statutory Construcstruction, section 480; Cooley, Constitutional Limitations, 436. We are of the opinion that the rights which accrued to defendant under the curative act are saved to it, both because the repeal, if it affected them would impair the obligation of a contract, and because it would disturb or take away vested rights. While it is true the laws creating the obligation of a contract are only such as are in existence when the contract is made (Pomeroy, Constitutional Statutory Law, 593, 594; McCracken v. Hayward, 2 HOW 608 (11 L.Ed. 397); Walker v. Whitehead, 16 Wall. 314 (21 L.Ed. 357); yet it is equally true that a contract between the state and an individual may be made by the passage of a law. Although the repeal of the curative act did not affect the terms of the agreement as made between plaintiffs and defendant, the General Assembly did thereby attempt to take a way a right which it had given after this agreement was made. It is said on behalf of defendant that the parties altered their situation in reliance upon the curative act. That statute, it is contended, increased the apparent assets of the association; that new members joined and withdrawing members were settled with on the basis of these apparent assets. There is, however, no evidence of these facts in the record. The most that appears is that defendant is a going concern. We cannot assume sufficient on the strength of this single fact to warrant us in defeating the legislative will. But may there not have been a right which vested under the curative act, even though the situation of the parties was not changed by their acting under it? The curative act gave a right to defendant--a right to enforce this contract according to its terms, and collect thereunder 12 per cent. interest. Though wholly gratuitous, this right accrued to defendant immediately on the taking effect of the act. It does not follow that because the General Assembly could give, it could also take away. Let us suppose it gratuitously granted title to a tract of swamp land to some certain person by an act passed; certainly on no sustainable theory could it be said that thereafter it could devest this title by a repeal of the act. See Dobbins v. Bank, 112 Ill....