Havens v. Woodfill
| Citation | 266 N.E.2d 221,148 Ind.App. 366 |
| Decision Date | 03 February 1971 |
| Docket Number | No. 2,Nos. 1070A175--1070A177,s. 1070A175--1070A177,2 |
| Parties | Harold V. HAVENS and Margaret E. Havens, Husband and Wife engaged in a Partnership, Appellants, v. Joseph E. WOODFILL, Appellee. Harold V. HAVENS and Margaret E. Havens, Husband and Wife engaged in a Joint Venture, Appellants, v. Joseph E. WOODFILL, Appellee. Harold V. HAVENS and Margaret E. Havens, Husband and Wife, Trustees, Appellants, v. Joseph E. WOODFILL, Appellee |
| Court | Court of Appeals of Indiana |
Patrick W. Mullen, Indianapolis, for appellants.
Ralph Hamill, Hamill, Price & Carroll, Indianapolis, for appellee.
This appeal arises from the overruling of defendants-appellants' motion to correct errors. Plaintiff-appellee initiated the action requesting a declaratory judgment that certain promissory notes bearing an interest rate of 9% were not usurious under the applicable statute.
Acts 1969, ch. 106, § 1, p. 248, Ind.Stat.Anno., § 19--12--101, Burns' 1970 Cum.Supp., reads as follows:
'Legal rates of interest on loans or forbearances.--The interest on loans or forbearance of money, goods, or things in action, shall be as follows:
(a) When the parties do not agree on the rate, interest shall be at the rate of six dollars ($6.00) per year per one hundred dollars $100);
(b) By agreement in writing signed by the party to be charged thereby, and not otherwise, any obligor other than a corporation or a partnership, limited partnership, joint ventures and trusts may lawfully agree to pay any rate of interest not in excess of eight dollars ($8.00) per year per one hundred dollars ($100);
(c) By agreement in writing duly signed by it, and not otherwise, any corporation, partnership, limited partnership, joint ventures and trusts may lawfully agree to pay any rate of interest whatever.
'Interest as used in this and the succeeding sections of this act (§§ 19--12--101--19--12--108) shall include discount and may be paid and collected in advance.' (Emphasis supplied.)
The emphasized words were added in 1969 by our Legislature. Those words gave rise to three transactions which led to the litigation presently before us for review.
This is an appeal of three actions which were properly consolidated in this court under Rule AP. 5(B), Indiana Rules of Procedure. All three cases were submitted to the trial court on an agreed statement of facts which may be summarized as follows:
On April 1, 1970, appellants, husband and wife, entered into a partnership agreement for the purpose of securing the loan in question, investing the proceeds, with a view towards long-term appreciation and resulting gain. On April 15, 1970, appellants, as partners, borrowed $100 at an interest rate of 9% per annum by properly executing a promissory note payable to appellee.
On April 15, 1970, appellants, husband and wife, entered into a joint venture for the purpose of obtaining the loan in question, investing the proceeds, with a view towards long-term appreciation and resulting gain. On the same day appellants, members of the joint venture, borrowed $100 at an interest rate of 9% per annum by properly executing a promissory note payable to appellee.
On April 15, 1970, appellants, husband and wife, entered into a trust agreement for the purpose of obtaining the loan in question, investing the proceeds, with a view towards long-term appreciation and resulting gain. On the same day appellants, as trustees, borrowed $100 at an interest rate of 9% per annum by properly executing a promissory note payable to appellee.
On April 15, 1970, appellee filed compaints for declaratory judgment on the notes executed by appellants as partners and as members of the joint venture. On April 16, 1970, appellee filed a similar complaint on the note executed by appellants as trustees. In each complaint appellee prayed that the court construe § 19--12--101, supra, and declare each of the notes not to be in conflict with the statute, and that the 9% per annum interest on the loans be held valid, binding and not usurious.
On April 22, 1970, appellants answered each of the three complaints admitting all material allegations of the complaints and praying that the notes be declared invalid as in violation of § 19--12--101, supra.
As previously stated, the cases were submitted on an agreed statement of facts. On May 28, 1970, the trial court entered judgment in each of the three causes for appellee. The court held the notes not to be in violation of § 19-- 12--101, supra. The court further held the notes to be binding obligations according to the terms set forth therein and that the notes were not usurious.
Appellants timely filed their motion to correct errors which was overruled by the trial court. In their brief appellants have chosen to brief and argue:
1. That the decision is not supported by sufficient evidence upon all necessary elements of a claim in that:
(a) The evidence is insufficient to sustain a finding that there exists a valid partnership--joint venture--or trust--between the appellants;
(b) The evidence is insufficient to support a decision that the parties' note is not usurious; and
(c) The evidence is insufficient to support a decision that the parties' 9% interest rate note is a valid and binding obligation as to interest.
2. That the decision is contrary to law in that:
(a) It is contrary to § 19--12--101, supra;
(b) It is contrary to Acts 1929, ch. 220, § 3, p. 804, Ind.Stat.Anno., § 19--12--104, Burns' 1964 Repl., in awarding plaintiff any interest over 6%; and
(c) It held that the parties' 9% interest rate note is not usurious.
It is clear that the Legislature, when amending § 19--12--101, supra, intended to expand the exemptions to the usury statute to include partnerships, limited partnerships, joint ventures and trusts as well as the only previous exception--corporations. This appeal must decide whether exemptions contained in the usury statute include transactions of the nature here involved.
We must, therefore, look to the language of the statute, the interaction of the statute with other legislative enactments, and the transactions which gave rise to this appeal.
Section 19--12--101, supra, of the usury statute is not wholly consistent with § 19--12--104, supra, which is as follows:
'Usurious rate of interest in contract--Debtor's recoupment.--When a greater rate of interest than is hereby allowed shall be contracted for, the contract shall be void as to the usurious interest contracted for; and if it appears that interest at a higher rate than eight per cent (8%) has been, directly or indirectly, contracted for by an obligor other than a corporation, the excess of interest over six per cent (6%) shall be deemed usurious and illegal, and, in an action on a contract affected by such usury, the excess over the legal interest may be recouped by the debtor, whenever it has been reserved or paid before the bringing of the suit.' (Emphasis supplied.)
Although § 19--12--101, supra, exempts partnerships, limited partnerships, joint ventures and trusts, as well as corporations from the 8% limit in § 19--12--104, supra, apparently all but corporations are given a right of recoupment.
One interpretation of this inconsistency is that a lender may loan money at a rate higher than 8% to all the named exceptions in § 19--12--101, supra, but if interest in excess of 8% is stated such note is voidable as to any interest in excess of 6% at the option of any named exception other than a corporation. This interpretation is not logical and cannot be accepted.
The words, '(w)hen a greater rate of interest than is hereby allowed', found in § 19--12--104, supra, relate back to § 19--12--101, supra, and deny a right of recoupment by the named exceptions in § 19--12--101, supra, regardless of whether or not they are again named as exceptions in § 19--12--104, supra. This interpretation makes the two sections consistent with each other and is the only one which will retain the effectiveness of each of the sections, i.e., not render one nugatory at the expense of the other.
It was clearly the intention of the Legislature to exclude partnerships, limited partnerships, joint ventures and trusts. This interpretation is consistent with 2 Sutherland, Statutory Construction (Horack, 3d Ed.), § 4704, at 339, where the following statement is made:
Appellants attack the validity of the partnership, joint venture, and trust involved in this appeal. It is not contended that they were not legally created or fail to conform to any 'technical' rules for the creation of a partnership, joint venture, or trust under the laws of the State of Indiana. Appellants argue that in the instant case they are mere shams disguising the individuals involved--admittedly formed for the purpose of borrowing money at 9% interest and, thus, as they relate to the usury statute § 19--12--101, supra, are not valid.
Appellee argues that the statute is clear and unambiguous. It makes no distinction or condition on the type of partnership, limited partnership, joint venture, trust or corporation that is excluded from § 19--12--101, supra. Thus, under the wording of the statute it makes no difference that the expressed purpose of the transactions was to obtain a loan which they could not have otherwise obtained.
Usury statutes or the condemnation of usurious rates have very deep roots into American society, indeed, all of western civilization. The Holy Bible relates that Moses was told:
'If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt...
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