Harding v. Kentucky Title Trust Co.

• Decision Date: 25 June 1937
• Citation: 269 Ky. 622,108 S.W.2d 539
• Parties: HARDING v. KENTUCKY TITLE TRUST CO.
• Court: Kentucky Court of Appeals

108 S.W.2d 539

269 Ky. 622

HARDING v. KENTUCKY TITLE TRUST CO.

Court of Appeals of Kentucky

June 25, 1937

Rehearing Denied Oct. 1, 1937.

Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division.

Action by the Kentucky Title Trust Company against Colescott P Harding, wherein defendant filed a demurrer, a counterclaim and a set-off. From a judgment, defendant appeals.

Affirmed.

William G. Dearing, of Louisville, for appellant.

Oscar Bader and Shackelford Miller, Jr., both of Louisville, for appellee.

PERRY Justice.

This is an appeal from a judgment of the Jefferson circuit court rendered in favor of the appellee, Kentucky Title Trust Company, for the recovery of the amount of two mortgage notes, sued on in this foreclosure action, and directing that plaintiff's mortgage lien be enforced by the sale of the property held in lien therefor.

A synopsis of the record presenting the questions and matters here involved, as set out and appearing by the confusing multiplicity of pleadings filed or tendered and a large volume of evidence, including much that is irrelevant, shows, briefly summarized, the facts to be that in October, 1917, the appellant, Colescott P. Harding, entered into a contract with Mr. L. Jacobson, a building contractor, whereby the latter was to purchase a certain lot on Breckinridge street, Louisville, Ky. for Harding, for which he was to pay an agreed price of $3,000 ($1,000 of which was to be paid him in cash); also to tear down the buildings standing thereon and erect in their place a modern dry cleaning plant, in the construction of which he (the contractor) was to advance and pay for both the materials and labor required in its building, and in consideration for these services the contractor was to receive from Harding, as his compensation for such lot, sale, and building service, a profit of 15 per cent., computed on the full amount of the cost of the project, including the $2,000 balance owing on the purchase price of the lot.

It was further provided by the terms of this building contract that upon Jacobson's completion of the work, Harding would procure from the plaintiff trust company a mortgage loan, payable according to the agreed terms of a weekly installment payment plan, with the proceeds of which he was to pay the amount of his contract indebtedness owing Jacobson arising out of his building contract, and to secure the payment of such amount of loan as the plaintiff company might be willing to make him on the plant property, he was to execute to it a first mortgage thereon; and for securing payment to Jacobson of any balance of the building contract owing him or remaining unsatisfied or uncared for after applying thereon the plaintiff trust company's loan, Jacobson was to either further arrange therefor by procuring a second mortgage loan for Harding upon the property for the additional amount required for the full payment of his debt or was himself to take a note therefor, secured by a second mortgage on the property; that pursuant to such contract arrangement made, upon Jacobson's finishing this building project in October, 1917, Harding borrowed of the plaintiff trust company the sum of $8,000, to be paid upon the terms of an agreed weekly installment plan, which contained a "service charge" provision, whereby the appellant was to include in such payments to the plaintiff lender, in addition to the amount of the weekly installment payment of interest and principal, the further amount computed at 14 cents per $1,000 of the loan required as a "service charge" made by lender for services rendered and promised in connection with the loan; also, it appears that this $8,000 borrowed of the plaintiff trust company falling short of the amount owing Jacobson upon his contract for the balance owing on the lot, the building, and his 15 per cent. commission on the total amount of the project, in the sum of $7,300, Harding then executed his note to Jacobson for the sum of this amount, secured by a second mortgage, and directed the same made in the name of or else turned over to the trust company for its making of the agreed weekly installment collections upon it, together with those made it upon its own $8,000 note.

After Harding had, pursuant to such plan of paying the two notes, made some 440 weekly payments, in the installment amounts agreed upon, upon these two mortgage notes to the plaintiff company, he, in 1926, decided to refinance the balance then owing upon them, as stated supra, by securing a new or second mortgage loan from the plaintiff trust company sufficient in its amount to pay both this balance owing it and Jacobson and also provide an additional sum at the time desired for his personal use.

To such end an entirely new loan was obtained from the plaintiff company by the defendant Harding (here appellant) in the sum of $19,000, out of the proceeds of which he paid off the balance owing the trust company and Jacobson upon their aforesaid two earlier notes, without deduction allowed him from the amount of his payments made the trust company of the part thereof retained as service charges provided for in connection with the first loan agreement for examining title, executing papers, etc., required in making both the first and also the second loan.

This second loan procured of the plaintiff company was secured by a mortgage upon this same property put in lien to it for the first mortgage debt, and upon which the appellant proceeded to make weekly payments of something over $40 thereon until June, 1933, when he procured yet another or third loan from the plaintiff trust company, the proceeds of which he applied in part to refinancing the balance then owing by him to the trust company upon its second or $19,000 loan made him in 1926. In evidence of appellant's obligation incurred for this last or third loan he gave the trust company two notes, one in the principal sum of $10,800 secured by a first mortgage on the aforesaid real estate, and the other in the sum of $2,600 secured by a second mortgage on the real estate and a first mortgage on the personal property and equipment in the dry cleaning plant.

Each and all the notes executed for these three loans made successively to appellant, as set out supra, contained this same provision calling for the borrower's payment to the trust company of what is referred to in the notes and commonly called a "service charge," whereby the notes, so providing, might be regarded as containing two separate contracts, one of them providing for the payment of a specified sum weekly upon the accruing interest and principal of the debt for a period of 663 weeks and the other providing for the payment of a "service charge" of 14 cents on each $1,000 of the debt for certain services rendered and to be rendered by lender and certain rights thereunder extended the debtor with reference to the examination of his title, execution of certain instruments for closing the trade, in the event he made a contract to sell the property, or making such report for him in event he desired it. As a further item of promised service, for which the charge was made, the trust company agreed (if so requested by him) to appear before any board authorized to review an assessment of the property and endeavor, on behalf of the owner, to have any injustice in the assessment remedied.

On November 24, 1934, Harding having made default in his promised weekly installment payments upon these two notes executed to the trust company covering the amount of his third loan, it filed this foreclosure suit upon them, seeking their collection by an enforcement of its mortgage liens against the property and its sale to satisfy appellant's debt.

Plaintiff's petition consisted of two paragraphs, the first seeking the enforcement of the mortgage securing payment of the first of these two notes, of date June 3, 1933, in the sum of $10,800, in which it was provided that the weekly installments on this note, each in the sum of $24.84, were to be paid for a period of 104 weeks, when its unpaid remainder of $9,601.20, was to then become due and then to be paid.

Also the petition alleged that the plaintiff trust company had paid numerous items of state and county taxes and special assessments and fire insurance premiums on the property in lien and sought to recover the sum of $10,547.14, with interest from November, 1933, and the other sums mentioned paid by it for taxes, insurance, etc., and prayed that it be adjudged a lien on the property therefor and that the real estate be sold to satisfy the lien.

By the second paragraph of the petition, plaintiff asked recovery against the appellant upon its second note sued on in the amount of $2,445.33, with interest from November, 1933, as the balance owing it upon the second note, and the enforcement of its second mortgage lien held therefor on the real estate and its first lien on the personalty and equipment of the plant.

To this petition, appellant filed first certain dilatory pleas and then a demurrer, which was overruled, whereupon he filed an answer, counterclaim, and set-off, consisting of two paragraphs, by the first of which he denied there was any valid consideration given for the notes sued on and by the second alleged that the notes were usurious, illegal, and void, and asked judgment against plaintiff in the sum of $23.27 and that the notes and mortgages be canceled.

Demurrers were filed to each paragraph of this pleading, which were sustained, with leave given the defendant to amend. Thereupon, defendant filed an amended answer and counterclaim to which plaintiff again filed a demurrer to each of the two paragraphs thereof.

By the first of these paragraphs, he denied the execution of the notes and by...