Garland v. Union Trust Co.
| Decision Date | 24 April 1917 |
| Docket Number | Case Number: 6265 |
| Citation | 63 Okla. 243,1917 OK 193,165 P. 197 |
| Parties | GARLAND et al. v. UNION TRUST CO. et al. |
| Court | Oklahoma Supreme Court |
¶0 1. Mortgages--Usury--Rate of Interest--Mortgage Loan-- Remedy. The mortgage sought to be foreclosed was dated May 25, 1912, and secured the repayment of a loan of $ 50,000, evidenced by 50 gold notes for $ 1,000 each, the first two being due December 1, 1912. All were payable to bearer or the registered holder thereof, with 6 per cent. interest per annum from June 1, 1912, and each provided that if any installment of principal or interest was not paid when due, "the principal of this and all of said notes shall become due and payable," and "said principal sum, if not paid at maturity, shall bear interest at the rate of 10 per cent. per annum with annual rests after maturity until paid." At the time the evidence of debt was made, executed, and delivered, mortgagee deducted $ 2,500 from the principal sum of the loan, and exacted of the mortgagors a note for $ 2,750, payable one year after date, with 8 per cent. interest per annum until paid, upon which, on November 25, 1912, mortgagors paid the semiannual interest, amounting to $ 110. At the time the first two notes fell due, December 1, 1912, mortgagors defaulted, but on December 21st paid, as interest on the loan, $ 1,572.22, whereupon the mortgagee elected to accelerate the maturity of the principal of the loan and sued to foreclose therefor. Held, accepting the concession that the $ 2,500 deducted to be interest paid, and the mortgage of $ 2,750 to be interest charged on the loan, and the $ 110 semiannual interest to be also interest paid, as all interest paid and charged for the entire time the loan had to run, had the contract been performed, did not exceed the lawful rate, the trial court did right in holding the transaction free from usury. Held, further, that because the mortgagee, under the contract, by the exercise of his option accelerating the maturity of the loan, was entitled to demand more than the amount of the loan with legal interest to the time the loan is called does not make the transaction usurious. Held, further, that neither was the evidence of debt usurious upon its face because it provided for interest on the principal sum at 6 per cent. per annum before maturity and 10 per cent. thereafter, with annual rests until paid. Whether the increase of 4 per cent. was for the "detention" of money, in contravention of the statute, or was a penalty, being an increase to the maximum legal rate of interest only, the evidence of debt was a valid contract for the payment of interest. Held, further, that plaintiff was not entitled to recover on and have fore-dosed its mortgage for $ 2,750, for, having been executed to secure the payment of interest charged and unearned at the time of the acceleration of the maturity of the principal debt of $ 50,000, said $ 2,750 mortgage, like the remaining unpaid interest coupons securing the interest on said debt of $ 50,000, was discharged.
2. Mortgages -- Foreclosure -- Interest -- Set- Off. The mortgage sought to be foreclosed was dated May 25, 1912, to secure the payment of a loan of $ 50,000, evidenced by 50 gold notes of $ 1,000 each, the two first being due December 1, 1912. All were payable to bearer or the registered holder thereof, with 6 per cent. interest per annum from June 1, 1912, and each provided that if any installment of principal or interest was not paid when due, "The principal of this and all of said notes shall become due and payable. * * *" At the time the evidence of debt was made, executed, and delivered, mortgagee deducted $ 2,500 from the principal sum of the loan, and exacted of the mortgagors a note for $ 2,750, payable 1 year after date, with 8 per cent. interest per annum until paid, upon which, on November 25, 1912, mortgagors paid the semiannual interest, amounting to $ 110. At the time the first two notes fell due, December 1, 1912, mortgagors defaulted, but as December 21st paid, as interest on the loan, $ 1,572.22, whereupon the mortgagee elected to accelerate the maturity of the principal of the loan and sued to foreclose therefor, which was done, whereupon the court rendered judgment in favor of plaintiff for $ 50,000, with interest thereon at 6 per cent. from December 1, 1912, to the date of the judgment, amounting in all to $ 52,666.67, together with 10 per cent. of that amount for an attorney's fee. Held, error, in that the court should have allowed interest at 6 per cent. on the $ 50,000 from June 1, 1912, to the date of the judgment, which, principal and interest, would be $ 54,166.66. And for this amount the court should have rendered judgment, had not defendants, on May 25, 1912, already paid $ 2,500, conceded to be interest in advance, upon which there should be allowed them interest at 6 per cent. from that date up to the date of the judgment, that is, in all, $ 2,711.16, and had not defendants also already, on November 25, 1912, paid $ 110 as the semiannual interest on the $ 2,750 mortgage, upon which a like rate of interest should be allowed them from that time up to the date of judgment, or in all $ 115.64, and had not defendants also paid, on December 21, 1912, $ 1,572.22 as interest on the debt, upon which should be allowed 6 per cent. interest up to the date of the judgment, or in all, $ 1,642.64, making the total of interest paid by defendants in advance $ 4,469.44, being an overpayment of interest on the debt of $ 302.78, which should be credited thereon, leaving due on the principal loan $ 49,679.22, for which the court should have rendered judgment, plus 10 per cent. of that amount as an attorney's fee, or in all, $ 54,647.14.
3. Usury--Set-Off of Usury--Foreclosure of Mortgage. The second mortgage upon the same property was made, executed, and delivered to secure a loan of $ 15,750 for 3 years, with coupons thereto attached for $ 787.50 each, payable semiannually, with interest at 10 per cent. per annum. $ 750 was deducted from the principal at the time of the loan, and retained as interest paid upon the loan, and the first coupon was paid when due. Upon failure to pay the second coupon, the mortgagee exercised his option, and accelerated the payment of the loan and foreclosed, whereupon he was met with a plea of usury, which the court sustained, and set off the debt with $ 4,650, and rendered judgment in favor of the mortgagee, foreclosing his mortgage for the balance of the debt. On appeal by the mortgagors, assigning that the court erred in allowing a set-off for said amount only, held, construing Rev. Laws 1910, sec. 1005, that the $ 750 deducted from the principal at the time the loan was made and the $ 787.50 paid to take up the first interest coupon, or in all, $ 1,537.50, was interest paid on the loan which left 2 years and 6 months' interest charged and unpaid, or $ 3,937.50, twice the amount of which, or $ 7,875, the mortgagors were entitled to have set off against the mortgaged debt, and not $ 4,650, as found by the trial court, leaving due thereon $ 7,875, plus 10 per cent. thereof as an attorney's fee, for the payment of which the mortgage should be foreclosed.
Stuart, Cruce & Cruce and L. D. Mitchell, for plaintiffs in error.
Ames, Chambers, Lowe & Richardson, for defendants in error.
¶1 On January , 1913, in the district court of Oklahoma county, Union Trust Company, a corporation, and the same Company as trustee, defendant in error, sued D. N. Garland and Inez, his wife, J. C. Barr and Ollie, his wife, plaintiffs in error, upon their 50 certain real estate gold notes of $ 1,000 each, made, executed, and delivered by them on May 25, 1912, to the Union Trust Company as trustee, all of which later came into its hands as registered holder. Two of said notes were payable December 1, 1912, 3 June 1, 1913; 2 December 1, 1913; 3 June 1, 1914; 2 December 1, 1914; 3 June 1, 1915; and 35 June 1, 1918. Each was made payable to bearer or to the registered holder thereof, and provided for 6 per cent. interest per annum from June 1, 1912. Each further provided that the principal sum, "if not paid at maturity, shall bear interest at the rate of 10% per annum with annual rests after maturity until paid." At the same time plaintiff sued to foreclose a mortgage or deed of trust, in favor of the Union Trust Company as trustee, given by defendants upon a certain 10-story building in Oklahoma City to secure the payment of said notes. Among other things the petition alleged that, by reason of defendants' failure to pay the two $ 1,000 notes falling due December 1, 1912, plaintiff had elected to declare the whole debt due and payable, pursuant to the terms of the mortgage, which provides that in case default should be made in the payment of any coupon or notes thereby secured when the same became due, the trustee may, upon certain conditions (complied with), declare the principal of all notes thereby secured immediately due and payable; that, although its lien was prior to that of all others upon the property, one Silas Rowland claimed some interest therein inferior to that of plaintiff's lien, and prayed judgment for the full amount of the mortgage debt, to wit, $ 50,000, with interest at 10 per cent. per annum and an additional 10 per cent. as an attorney's fee, and for a foreclosure of the mortgage, and that Rowland's interest in the property, if any he have, be declared inferior and subject to the lien of the mortgage. For answer defendants, after denying every allegation in plaintiff's petition, except such as were specifically admitted, as a second defense, admitted the execution and delivery of the notes and mortgage sued, and alleged that the consideration for same was the loan of $ 50,000; that plaintiff, through its officers and agents, knowingly and wrongfully and with intent to violate the laws of the state, with reference to the charging of usurious interest, charged, reserved, and...
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