Ferguson v. Grand Rapids Land Contract Co.

• Decision Date: 03 April 1928
• Docket Number: No. 7.,7.
• Parties: FERGUSON v. GRAND RAPIDS LAND CONTRACT CO.
• Court: Michigan Supreme Court

242 Mich. 314

218 N.W. 685

FERGUSON

v.GRAND RAPIDS LAND CONTRACT CO.

No. 7.

Supreme Court of Michigan.

April 3, 1928.

Appeal from Circuit Court, Kent County, in Chancery, William B. Brown, Judge.

Suit by Meta M. Ferguson against the Grand Rapids Land Contract Company. From the decree dismissing the bill, plaintiff appeals. Reversed and decree entered.

Argued before the Entire Bench, except FLANNIGAN, C. J.Renihan & Lilly, of Grand Rapids, for appellant.

Jewell, Face & Messinger, of Grand Rapids, for appellee.

McDONALD, J.

This bill was filed for an accounting and to compel the conveyance of certain real estate to the plaintiff in accordance with a land contract between the parties hereto on March 1, 1924.

The plaintiff was the owner of two lots on Guild street in the city of Grand Rapids, Mich. On these lots she desired to build a riding stable. She made an agreement with the defendant to finance its construction. By the terms of the agreement, the building was to cost $6,500, which the defendant was to advance as the construction progressed. The plaintiff was to deed her two lots to the defendant at an agreed valuation of $1,500, and when the building was completed, the defendant was to reconvey them by land contract at a consideration of $8,722.22 on which $1,500, the agreed value of the lots, was to be credited; and the balance was to be paid by the plaintiff in equal monthly installments with interest at 7 per cent. per annum. The building was completed and paid for by the defendant and the land contract executed according to agreement. After she had paid a considerable amount on the contract, a dispute arose between the parties as to the balance. The plaintiff claimed that the correct balance was $2,819.63. She tendered this amount to the defendant and demanded a conveyance of the property. The tender was refused. The principal difference between the parties concerned an item of $722.22 which the plaintiff refused to pay on the ground that it was usurious. The defendant insisted that it was a proper charge and should be paid as agreed. This suit was the result of the controversy. On the hearing, the circuit judge found against the plaintiff and dismissed her bill. From the decree entered she has appealed.

The question involved is whether the item of $722.22 is usury.

The defendant claims that the $722.22 is not an interest charge; that it should be allowed as an agreed compensation for services rendered or as a legitimate profit on the transaction which was in effect a purchase and sale of property.

A reasonable charge for services in financing a building proposition does not amount to usury. Was this a charge for services? Considerable oral testimony was taken as to the understanding and intention of the parties, but their intention as shown by the written stipulations in the agreement should control. On this question the agreement is very clear. It provides:

‘It is further understood and agreed that said first party (defendant) shall not be obligated to provide plans or alterations therein, or to pay for said plans, or to negotiate a contract for the building of said riding club stable or to superintend the construction of the same, but that said first party shall have a supervisory authority over the construction of said building only to the extent that the value of the security to the land contract herein provided for shall not be impaired by any failure or neglect on the part of the contractor to erect said building according to said plans and specifications, and to the extent that any building contract that said first party may enter into with said contractor shall be executed according to the terms thereof; the intent being that said first party shall finance the purchase of the above-described premises, and the cost of the building, at the time and in the manner specified and as security of so financing shall take title to said premises and reconvey the same by a land contract as hereinbefore provided, and that its duty shall end therewith.'

This agreement was drawn by Mr. Kinsey, president of the defendant company. He is an educated man with large business experience and was familiar with the work of drafting papers concerning real estate transactions and financing propositions. It is fair to assume that the stipulations of the agreement which he prepared are in strict accordance with the preliminary understanding of the parties as to services. It will be noted by reference to that portion of the agreement above quoted that the services to be rendered were such as were deemed necessary to protect the security of his company. They were services usually incident to such a financing proposition for which the defendant may not charge. Miller v. Ashton, 241 Mich. 46, 216 N. W. 448, and cases cited.

But this charge of...