Ford v. Washington Nat. Building & Loan Inv. Ass'n

• Decision Date: 20 May 1904
• Citation: 76 P. 1010,10 Idaho 30
• Parties: FORD v. WASHINGTON NATIONAL BUILDING AND LOAN INVESTMENT ASSOCIATION
• Court: Idaho Supreme Court

76 P. 1010

10 Idaho 30

FORD v. WASHINGTON NATIONAL BUILDING AND LOAN INVESTMENT ASSOCIATION

Supreme Court of Idaho

May 20, 1904

PLEA OF USURY-OPTION TO PAY BEFORE MATURITY-ESTOPPEL.

1. A contract whereby a loan is to be paid in a fixed number of monthly installments of $13 interest and $9.75 principal, and the aggregate amount of interest to be thus paid falls within the terms of the usury statute (Rev. Stats., sec. 1226), will not be relieved from the operation of such statute by reason of the fact that the contract reserves to the borrower an option to pay the entire debt at any time, and the earliest interest installments, prior to a reduction of the principal fall within the legal rate of interest which may be charged.

2. In such case the subject of inquiry is whether or not the contract provides, either directly or indirectly, for the payment of a greater rate of interest than authorized by law.

3. The defense of usury may be pleaded by anyone claiming under and in privity with the borrower.

4. The doctrine of estoppel may not be invoked to defeat the plea of usury when interposed by any person otherwise legally entitled to interpose such plea.

5. Anderson v. Oregon Mtg. Co., 8 Idaho 418, 69 P. 130 distinguished and held not decisive of the questions raised in this case.

(Syllabus by the court.)

APPEAL from District Court in and for the County of Latah. Honorable Edgar C. Steele, Judge.

From a judgment in favor of the plaintiff ordering the cancellation of a mortgage, defendant appeals. Affirmed.

Judgment affirmed. No costs awarded.

Forney & Moore, for Appellant.

Assignments of error: 1. The trial court erred in adjudging the contract usurious--the principle announced by this court in Anderson et al. v. Oregon Mtg. Co., 8 Idaho 418, 69 P. 130, being applicable; 2. The contract herein differs from those in the cases of Association v. Shea, 6 Idaho 405, 55 P. 1022; Trust Co. v. Hoffman, 5 Idaho 376 95 Am. St. Rep. 86, 49 P. 314, 37 L. R. A. 509, in that the debt could be paid at any time by the borrower, with interest at twelve per cent per annum and no more; 3. The evidence proved an estoppel upon the plaintiff's claim of usury under appellant's second defense; 4. On no theory has appellant received back his principal. (Frost v. Pacific Savings Co., 42 Or. 44, 70 P. 814; Irwin v. Washington Nat. Bldg. etc. Assn., 42 Or. 105, 71 P. 143.) The right to have money paid as usurious interest applied on the principal, or to recover the surplus, if any, after lawful interest has been paid, is a matter personal to the party making the payment and those in privy with him, which he may insist upon or waive, at his pleasure, and of which his grantee cannot take advantage. (Thompson on Building and Loan Associations, secs. 260, 522; Tyler on Usury, c. 31, p. 417; Bensley v. Homier, 42 Wis. 635; Ready v. Huebner, 46 Wis. 692, 32 Am. Rep. 749, 1 N.W. 344; Warwick v. Dawes, 26 N.J. Eq. 548; Reading v. Weston, 7 Conn. 409.)

No appearance on behalf of the respondent.

AILSHIE, J. Sullivan, C. J., and Stockslager, J., concur.

OPINION

The facts are stated in the opinion.

AILSHIE, J.

This action was commenced by the plaintiff for the cancellation of a mortgage appearing of record against certain of her real estate in the city of Moscow. The defendant answered denying among other things, the payment of the mortgage debt, and set forth the mortgage and alleged a balance due thereon praying judgment of foreclosure. The case was tried before the judge without a jury and judgment was entered in favor of the plaintiff. The defendant settled a statement and bill of exceptions and thereupon appealed from the judgment.

The questions presented by this appeal for our consideration are set forth in the following assignments of error: "1. The trial court erred in adjudging the contract usurious--the principle announced by this court in Anderson et al. v. Oregon Mtg. Co., 8 Idaho 418, 69 P. 130; being applicable; 2. The contract herein differs from those in the cases of Fidelity Sav. Association et al. v. Shea, 6 Idaho 405, 55 P. 1022; Vermont Loan etc. Co. v. Hoffman, 5 Idaho 376, 95 Am. St. Rep. 86, 49 P. 314, 37 L. R. A. 509, in that the debt could be paid at any time by the borrower, with interest at twelve per cent per annum and no more; 3. The evidence proved an estoppel upon the plaintiff's claim of usury upon appellant's second defense; 4. On no theory appellant received back his principal."

As suggested by the second assignment, the only material or essential difference between the facts upon which this case rests and those in Fidelity Sav. Assn. v. Shea, 6 Idaho 405, 55 P. 1022, and Stevens v. Home Savings etc. Assn., 5 Idaho 741, 51 P. 779, is that in this case the borrower might at any time "or on before" seven years from the date of the contract pay off the entire debt by paying the annual interest of six per cent and annual premium of six per cent.

On the eighteenth day of May, 1893, Honorable W. C. Piper, then judge of the second judicial district of this state, made a written application to the Washington National Building and Loan Investment Association (a corporation), appellant herein, for a loan of $ 1,300, offering as security therefor a first mortgage on his residence property in the city of Moscow. At the time of making this application, Judge Piper was not a member of the association, and under the by-laws of the corporation it seems that loans could not be made to anyone but members who had their dues paid up on their stock for at least six months. After going through with the regular routine, usually required by such companies, the mortgage was executed of date October 16, 1893, and was acknowledged on the eighteenth day of the same month. November 3, 1893, the association issued a check for $ 1,195 to "the Wash. Nat. Bank, account William C. Piper," which it had been agreed should be used to pay off a pre-existing mortgage indebtedness upon the same property on which the subsequent mortgage was given. Another check for the balance of $ 105 was issued to "William C. Piper or bearer," but was never delivered to the mortgagor, but was turned into the association for the ostensible purpose of paying the following items to the company: Membership fee, $ 16; attorney fee, $ 10; application, $ 13; cancellation fee, $ 7.50, and $ 58.50 for six installments on the stock, covering the six months' installments immediately preceding the loan as required by the by-laws. The actual sum, then, received on this loan was $ 1,195. By the terms of the contract Piper was to pay a fixed sum of $ 13 per month as interest and a monthly installment of $ 9.75 on the principal or stock, as it was termed by the contract. While the principal would be constantly diminishing, the interest payments would still remain fixed, and although starting out at a rate of about 12.56 per cent, by the end of seven years would exceed thirty-six per cent. It is true that if the debtor had paid the debt at such a time prior to the reduction of the principal that the monthly interest paid would not have raised the rate above eighteen per cent per annum, as allowed by law at the time of execution of the contract (Rev. Stats., sec. 1264), then no usury would ever have been collected or payable. But this was not done. This contract did not mature in full within that period of time, but only to the extent of the monthly principal and interest installments. It cannot be presumed that the contract was executed with any view to payment in any other manner or at any different time than that stipulated therein. The contract shows on its face the intent of the parties thereto. That intent was to charge and collect under devious and specious pretexts what amount to a higher rate of interest than that allowed by law. A contract of this kind granting an option to pay before maturity and where the interest grows into a usurious rate before such maturity is a usurious contract, and does not fall within the rule announced by the courts permitting a higher rate by way of a penalty after maturity where the debt is not paid at maturity. The test of usury, fixed by our statute (section 1266), is not what might have happened under possible contingencies, but rather, that if "a rate of interest has been contracted for greater than is authorized" by law it is usurious and must be so treated by the courts. The subject of inquiry in such cases is whether or not a contract has been made whereby, either directly or indirectly, a greater rate may be charged than that authorized by law. (Vermont Loan etc. Co. v. Hoffman, 5 Idaho 376, 95 Am. St. Rep. 186, 49 P. 314, 37 L. R. A. 509; Stevens v. Home Saving etc. Assn., supra; Fidelity Savings Assn. v. Shea, supra.)

Does this fall within the rule announced in Anderson v. Oregon Mtg. Co., 8 Idaho 418, 69 P. 130? I would answer this in the negative. There may be expressions in that opinion which would look to the conclusion reached by the appellant here but as I read that case, the only question material to its determination was whether or not the purchaser of the mortgaged premises who retained sufficient out of the purchase price of the land to cover the debt and agreed to pay the mortgage could be heard to say that the debt he thus agreed to pay was usurious. A...