Goodgame v. Dawson

• Decision Date: 19 February 1942
• Docket Number: 5 Div. 351.
• Parties: GOODGAME et al. v. DAWSON.
• Court: Alabama Supreme Court

7 So.2d 77

242 Ala. 499

GOODGAME et al. v. DAWSON.

5 Div. 351.

Supreme Court of Alabama

February 19, 1942

Rehearing Denied March 26, 1942.

G.C. Walker, of Clanton, and Herbert W. Peterson and Smith, Jackson & Rives, all of Birmingham, for appellants.

Gerald & Gerald and Reynolds & Reynolds, all of Clanton, for appellee.

FOSTER, Justice.

This is a suit filed by a mortgagor against the holder of two mortgages, setting up usury in each of them separately, and alleging that they are either paid by virtue of the usury and payments which have been made, or if not paid that an account be stated, the amount due be ascertained and redemption allowed.

The mortgages are between the same parties and cover the same real estate, but each is to secure a different debt with no connection between them. The first is dated June 12, 1930 for $10,009.85. The court found and held that the consideration of this mortgage was $6,500 made up of two items, one of $3,500 due November 1, 1930, by mortgage for that sum dated November 25, 1929, and the second was an item of $3,000 advanced by Edwards, the mortgagee, to Goodgame, mortgagor under a contract they made of June 12, 1930, the date of the mortgage, but that such latter transaction was affected with usury. Wherefore the court proceeded to state the account and credited all payments first on the principal of the usurious item of the consideration, then on the $3,500 with interest and other charges, leaving a balance due on that mortgage of $3,996.26.

When the mortgage was executed, it was for the full amount of $10,009.85, represented by one hundred and thirty notes, of which the first was due February 1, 1931, for $98.33, and each of the others was for thirty-three cents less than the amount of the last prior maturing note. On that basis, each note evidently included the principal sum of $50, and the balance of it is interest and reduced each month by the interest for a month on $50 at eight percent, which is thirty-three cents.

If the consideration of the mortgage was the principal sum of $6,500, each of the one hundred and thirty notes would have an excess charge of $5 over the amount of the legal rate and of course this would be usurious.

On the date of the execution of the mortgage, a written contract was entered into between the parties, which was prepared by E.R Piper, a disinterested witness. It recited an existing debt of $3,500 secured by a mortgage due November 1, 1930, and an agreement by the mortgagee, Edwards, to advance to the mortgagor, Goodgame, the additional sum of $3,000 for the erection of improvements on said property, and an agreement by Goodgame to pay interest on the $3,500 from the maturity of the mortgage November 1, 1930, to January 1, 1931, and to pay interest on the additional advancements to be made for the improvements, also to said date January 1, 1931; and the contract also recited that the mortgage that day executed to secure said debt was to bear interest from January 1, 1931.

The witness Piper testified that he then and there prepared a series of one hundred and thirty notes which were executed dated June 12, 1930, and the mortgage for $10,009.85, at the request of Edwards and on information given by him, who also requested him to figure interest on $50 for one month at eight percent., which is thirty-three cents. Each note is for a sum equal to that of the preceding month less thirty-three cents. This witness did not calculate the amount of each note, but testified that this was done by Edwards.

This evidence supports the finding of the court that the consideration of the mortgage was made up as stated in the contract of June 12, 1930, of $6,500, made payable in one hundred and thirty notes due monthly, the first one due February 1, 1931, of $98.33. As we have said this calculation shows a charge of $5 in each note, in excess of legal interest.

Goodgame testified in the case and later died, and Edwards had died before the suit was filed. Under his will, his widow took these mortgages and she assigned them to appellee also before this suit was brought. Appellants are the widow, heirs and representatives of W.H. Goodgame.

As against this finding by the court they contend that as to the $3,500 which entered into the consideration of the mortgage it represented a transaction by which Edwards made a loan to Goodgame, and took a mortgage for that amount dated November 25, 1929, due November 1, 1930, but that Goodgame only received $3,400 and that Edwards charged a bonus of $100 for making the loan besides lawful interest. They also contend that Goodgame only received $2,500 advanced after June 12, 1930, and that Edwards charged a bonus of $500 for making the loan; and that the true consideration of the mortgage was therefore $5,900, and not $6,500.

The evidence offered by appellants to sustain that contention consists of a proposal to prove it by Goodgame, and by the testimony of others of certain statements made and conversations between Goodgame and Edwards to that effect. The court sustained objection to that proposed testimony of Goodgame on the ground that he was disqualified under section 7721, Code of 1923, Title 7, section 433, Code of 1940. This ruling of the court was correct. The exclusion contained in the statute applies to those claiming in succession to the deceased, Edwards, acquired after his death, the same as to his estate. Federal Land Bank v. Curington, 233 Ala. 263, 171 So. 361; Williams v. Dent, 233 Ala. 109, 170 So. 202; Black v. Black, 233 Ala. 425, 172 So. 275; Key v. Jones, 52 Ala. 238; Boykin v. Smith, 65 Ala. 294; Barnes v. White, 195 Ala. 588, 71 So. 114; Jernigan v. Gibbs, 206 Ala. 93, 89 So. 196; Loring v. Grummon, 176 Ala. 240, 57 So. 819. It is said not to apply to the protection of those who though claiming title through the deceased, derive such claim from transactions inter vivos. Nelson v. Howison, 122 Ala. 573, 578, 25 So. 211.

On the other hand, appellee claims that Edwards advanced to Goodgame as much as $17.96 more than the $3,000 as agreed on June 12, 1930, and also had advanced sums aggregating $584 from December 9, 1929, to June 9, 1930, or a total of $601.96 above $3,000, and also that the $3,500 evidenced by the mortgage due November 1, 1930 was due to bear interest.

As to both contentions, it is sufficient to say that there was ample evidence to sustain this finding by the court as to the consideration of the mortgage of June 12, 1930. As we have said, he also found that there was usury in the $3,000 item of the consideration, but none in the $3,500 item. Upon the assumption that the consideration was $6,500, with interest paid to January 1, 1931, as stipulated in the contract would be due, and considering the $3,500 as though it were also a loan made under the mortgage, the entire amount of the consideration would be affected with usury, since each note is for $5 in excess of principal and legal interest.

But we will also accept the finding of the court that the item of $3,500 did not bear usurious interest prior to its inclusion in the transaction of June 12, 1930. So that the question of law which appellants' insistence presents, is whether or not that item as it entered into the computation making up the consideration for the mortgage must have like burden with the item of $3,000 new money, when illegal interest was computed on the whole as a single item, charged and inserted in the notes signed by Goodgame.

We do not seem to have cases directly in point, but have some of a kindred nature of more or less value here.

In Davis v. Elba Bank & Trust Co., 216 Ala. 632, 114 So. 211, it is said that when several separate and distinct debts, some usurious and some not, are combined in one mortgage, the entire indebtedness is not infected with usury (by that circumstance alone we may add), Compton v. Collins, 190 Ala. 499, 67 So. 395; Noble v. Moses, 74 Ala. 604. In those cases, there was no usurious agreement made as to the combined amount which formed the consideration of the new transaction, and it is said in the Davis case, supra, that the principle has no application to such a situation.

We also have a line of cases which hold that when the original transaction is not usurious, a subsequent agreement to pay illegal interest, in consideration of forebearance, will not impart to the original contract the taint of usury, so long as it remains in force without renewal, discharge or cancellation. Read v. Flaketown Graphite Co., 206 Ala. 611, 91 So. 258; Bernheimer v. Gray, 201 Ala. 462, 78 So. 840; Nance v. Gray, 143 Ala. 234, 38 So. 916, 5 Ann.Cas. 55; Van Beil v. Fordney, 79 Ala. 76, 77.

In all those cases, the principle is stated with the provision that the original contract which is free from the taint remains in force without renewal, discharge or cancellation, and that the creditor, for such usurious consideration, merely agrees to forbear from its enforcement, holding that such agreement so tainted is itself without consideration and void. Dismukes v. Weed's Ex'rs, 203 Ala. 64, 82 So. 24.

But those authorities are not directly in point when a debt free from usury is combined with a new loan, and their aggregate is taken as the consideration for a new mortgage, and treated in it as a new debt, and on that amount illegal interest is agreed upon.

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