Gilbert v. Fosston Mfg. Co.

• Decision Date: 09 March 1928
• Docket Number: No. 26153.,26153.
• Citation: 218 N.W. 451,174 Minn. 68
• Parties: GILBERT v. FOSSTON MFG. CO. et al.
• Court: Minnesota Supreme Court

218 N.W. 451

174 Minn. 68

GILBERT v. FOSSTON MFG. CO. et al.

No. 26153.

Supreme Court of Minnesota.

March 9, 1928.

Appeal from District Court, Ramsey County; Hugo O. Hanft, Judge.

On reargument. Former opinion modified.

For former opinion, see 216 N. W. 778.

Snyder, Gale & Richards, of Minneapolis, and Barthell & Rundall, of Chicago, Ill., for appellant.

Fowler, Carlson, Furber & Johnson, of Minneapolis, Arthur Christofferson, Wm. P. O'Brien, Tom J. McGrath, and F. W. Manthey, all of St. Paul, and Lew C. Church and Shearer, Byard & Trogner, all of Minneapolis, for respondent.

STONE, J.

There has been a reargument of this case, not because of any objection of counsel to what was in the former opinion, but because of their view that it did not go far enough. They ask a decision which will dispose of the case finally. Our further consideration has led us to the conclusion that we should comply. The issues of fact remaining are apparent rather than real and to be solved by reference to controlling facts already established and largely by mere computation. Our further conclusions in the case are really matters of law. Counsel are right in saying that, in the interests of the litigants and a speedy end of the case, we should obviate the necessity for very much in the way of further proceedings below.

1. The retained bonuses were usurious and forfeited by the lender pursuant to the Illinois law construed in our former opinion. Their amount was never received by the borrower, and so they must go in reduction of the loan as made rather than in payment of it afterwards. The bonus on the $30,000 loan was $4,650, and that on the $14,000 loan $2,030. Applying them in reduction of the loans puts the latter at $25,350 and $11,970, respectively. That reduction of principal probably should have gone to the lessening of all the installments pro rata. The debtor could have asked no more favorable disposition. The bonuses were not a payment, and so there was no right to elect how they should be applied.

But the next question is one of application of payments. Nine monthly installments were paid, as called for, on the $30,000 note. They were without allowance for any reduction by reason of the bonus. So each payment was more than was due at the time. Were the question before us of what application to make of the excess, the parties themselves having made none, the most we could do for the debtor would be to apply it in reduction of the payment next maturing. That would comply with the general rule that payments will be applied by the law to the items which are earliest in point of time. 21 R. C. L. 103; 5 Dunnell's Minn. Dig. (2d Ed.) § 7458. Furthermore, it would be logical and consistent with what good business sense probably would have required at the time in the interest of the debtor. We are not at liberty to make an arbitrary and unreasonable application of such payments simply to help the debtor.

These questions we mention only to indicate the utmost extent to which we might go in an effort to negative the existence of default on April 24, 1924, when the pledged bonds were sold. However the situation may be considered, there is no escaping the conclusion that there was a default which, under the contract of pledge, justified the sale. No proper method of computation escapes a default on the $30,000 note. No payments had been made on the $14,000 note. Even as reduced by the bonus, payments were due thereon which had not been made. That was enough under the collateral contract to authorize the sale. That contract did not require notice or that notice if given should state the amount due or claimed to be due. It is therefore immaterial, in the absence of fraud or prejudice, that the sale was made upon a claim excessive as to the amount due. Kerfoot v. Billings, 160 Ill. 563, 43 N. E. 804; Fairman v. Peck, 87 Ill. 156; Hamilton v. Lubukee, 51 Ill. 415, 99 Am. Dec. 562. The sale was for substantially less than the amount due, and there is no suggestion that the borrower was prejudiced by the creditor's erroneous and exaggerated assumption as to the latter. The implications of both record and argument are to the contrary. The right of the pledgee to sell the bonds was conferred not by law but by the contract. Peacock v. Phillips, 247 Ill. 467, 93 N. E. 415, 32 L. R. A. (N. S.) 42; Palmer v. Mutual Life Ins. Co., 114 Minn. 1, 8, 130 N. W. 250, Ann. Cas. 1912B, 957. We cannot find that the contract was broken. The law of Illinois is controlling, and we find nothing therein to invalidate the sale.

2. There having been a default which justified a sale of all the collateral, and the sale being otherwise unimpeachable, it remains to determine what rights it gave appellant Baker. It matters not, as we have already observed, that he may have been the representative of Bloss, for the latter had the contract right to purchase the pledged bonds, had he so elected, on his own account. In that situation it would have been immaterial, for present purposes, had the pledgee himself been the purchaser. In re Waddell-Entz Co., 67 Conn. 324, 336, 35 A. 257. The question is whether Baker may now...