Home Sav. & Loan Ass'n v. Sanitary Fish Co.

• Decision Date: 25 March 1930
• Docket Number: 21957.
• Citation: 286 P. 76,156 Wash. 80
• Court: Washington Supreme Court
• Parties: HOME SAVINGS & LOAN ASS'N v. SANITARY FISH CO. et al.

286 P. 76

156 Wash. 80

HOME SAVINGS & LOAN ASS'N v. SANITARY FISH CO. et al.

No. 21957.

Supreme Court of Washington

March 25, 1930

Department 1.

Appeal from Superior Court, Skagit County; George A. Joiner, Judge.

Action by the Home Savings & Loan Association against the Sanitary Fish Company and others, in which L. Walter and Jacob Borish were made parties defendant, and filed an answer and cross-complaint. From the judgment, the defendant Sanitary Fish Company and others appeal, and the defendants Walter and Borish cross-appeal.

Reversed with instructions.

Rummens & Griffin, of Seattle, and C.J. Henderson, of Mount Vernon for appellants.

Roberts Skeel & Holman, and Elwood Hutcheson, all of Seattle, for respondents.

BEALS J.

This action was commenced by Home Savings & Loan Association, a corporation, which filed its complaint asking for judgment on a note and the foreclosure of a mortgage, naming as defendants Sanitary Fish Company, a corporation, and the Carrolls. Jacob Borish and L. Walter were later made additional parties defendant, and filed their answer and cross-complaint asking for judgment on a note of the defendant Sanitary Fish Company and the foreclosure of a second mortgage given to secure the same.

No issue is raised here concerning the note and mortgage in favor of Home Savings & Loan Association, the judgment in favor of that corporation being apparently acquiesced in by all parties concerned. The defendants Sanitary Fish Company and the Carrolls contended that the Borish-Walter note was tainted with usury, and the trial court in its decree found that such was the case and made certain deductions from that note because of the usury which the court found inhered therein. The note was originally given for $3,500, but, before the trial, Messrs. Borish and Walter filed a written disclaimer to any portion thereof in excess of $3,000, they admitting that, in so far as they were concerned, $3,000 was the limit of the indebtedness evidenced thereby. The trial court eliminated the $500 covered by this disclaimer and made certain further deductions from the remaining $3,000, holding that such deductions were required by the usury statute.

From the judgment entered in favor of Messrs. Borish and Walter, Sanitary Fish Company and two of the other defendants have appealed upon the ground that the deductions made by the court, because of the finding of usury, were less in amount than they should have been, and Messrs. Borish and Walter have cross-appealed upon the ground that no deductions at all should have been made, save as to the amount eliminated by their disclaimer.

As the original plaintiff, Home Savings & Loan Association, is not concerned in this appeal, Messrs. Borish and Walter, defendants and cross-complainants below and cross-appellants here, will hereinafter in this opinion be referred to as plaintiffs, and defendants and appellants Sanitary Fish Company and John D. Carroll and wife will be referred to as defendants.

Plaintiffs in their cross-complaint alleged that defendant Sanitary Fish Company, December 19, 1927, by its president and secretary, executed in favor of plaintiffs Borish and Walter a promissory note in the principal sum of $3,500, bearing interest at the rate of eight per cent. per annum, payable in six installments, the first five installments being each in the sum of $200, and the last, payable December 1, 1928, in the sum of $2,500; that the note provided that if any installment thereof should not be paid when due the whole sum of both principal and interest should become immediately due and collectible, and that this note was secured by a mortgage executed by Sanitary Fish Company. Plaintiffs prayed for judgment on the note, and that the mortgage securing the same be foreclosed. Defendants in their answer admitted the execution of the note and mortgage but denied the validity thereof, and by way of an affirmative defense pleaded that the actual loan made by plaintiffs to defendants for which the note in the sum of $3,500 was given, was, in fact, a loan in the sum of $3,000 and no more, out of which $3,000 defendants paid plaintiff's agent, as a part consideration for the loan, the sum of $175, and that the note as given was usurious and that, in so far as same was tainted with usury, defendants claimed relief against the same.

The trial court found that only $3,000 had actually been advanced and loaned by plaintiffs to defendants but that the other items, aggregating $175, were not usury. The trial court deducted the $500, which it found to have been usuriously exacted from defendants (being the same $500 to which plaintiffs had disclaimed all interest prior to the trial), from the $3,500, the nominal principal of the note sued upon, computed interest on the note at eight per cent. per annum, and deducted that amount from the $3,000, entering judgment on the note against defendants for the sum of $2,760.

Defendants contend that the court should have deducted the $500, which the court found had been usuriously exacted, from the actual loan of $3,000, and also that the court erred in refusing to deduct $75 of the $175 paid by defendants, which $75 the defendants contend constituted a further usurious exaction.

Plaintiffs could not, of course, escape the consequences of a usurious contract by filing a disclaimer to the $500 bonus just prior to the trial. If the contract as and when made was in fact usurious, plaintiffs, upon that fact appearing under proper pleadings, and by the preponderance of competent and sufficient evidence are, upon the record in this case, liable to the penalties provided by statute.

The loan from plaintiffs to Sanitary Fish Company (which will hereinafter be referred to as the company) was negotiated by one Samuel Freeman, who testified at the trial on plaintiff's behalf. His testimony was to the effect that one of defendant company's brokers, during the month of December, 1927, approached the witness on behalf of the company stating that it desired a loan in the sum of $3,000, to be secured by a second mortgage, and that the company, being in great need of the money, was willing to pay $500 as a bonus to any one who would procure such a loan; it being the theory of plaintiffs that Mr. Freeman, in arranging the loan which was actually made, had included this $500 in the note executed by the company in favor of the plaintiffs.

Plaintiffs contend that no usury existed; that they are not responsible for what Mr. Freeman did, and that in any event the company is estopped from urging the defense of usury. The trial court by its judgment found against plaintiffs upon all of these questions, and a careful reading of the record convinces us that its action as to these matters was correct.

Defendants contend that the evidence shows that Mr. Freeman was, in fact, one of the principals in the transaction, and that the note ran to plaintiff Jacob Borish as trustee for Mr. Freeman. Whether such was the fact, or whether Mr. Freeman was in law the agent of plaintiffs, we do not find it necessary to determine. In either case, under the circumstances disclosed by this record, plaintiffs are responsible under section 7304, Rem. Comp. Stat. infra, for Mr. Freeman's acts. Ridgway v. Davenport, 37 Wash. 134, 79 P. 606; Peter v. Boling, 140 Wash. 466, 249 P. 776.

Plaintiffs cite the opinion of this court in the case of Miesen v. Motter, 115 Wash. 49, 196 P. 659, 660, in which this court held that under the facts disclosed by the record an oral promise to pay $500 as a bonus did not render usurious a contract between the parties whereby Mr. Miesen loaned certain money to Mr. Motter. The finding of the trial court on this point, as quoted by this court in its opinion, is as follows:

'That the said defendant Carl Motter voluntarily and orally agreed to pay to the plaintiff in consideration of the money loaned and services rendered in connection with the financing of the construction of said mill the sum of $500, but that said sum was never paid and is not claimed by the plaintiff.'

It appeared that the original note given by the debtor Motter to the plaintiff Miesen was for $2,000 and that Motter received this amount in cash, $1,500 at or just before the note was signed, and the balance of $500 two or three weeks later. This note called for no interest and was unsecured. Later, Mr. and Mrs. Motter executed and delivered to Mr. Miesen a deed to their home in Chehalis for which Mr. Miesen signed a receipt stating that the deed was security for '$2,500 which I have loaned to you.' Later on, Mr. Motter borrowed from the bank $2,500 more upon his notes indorsed by Mr. Miesen. The money due the bank was thereafter paid, and the $2,000 note was paid all but $525.60. After receiving the deed to the real property, Mr. Miesen paid a mortgage thereon, together with taxes and assessments, later bringing suit on the note for a balance due thereon in the sum of $525.60, for judgment for the other items disbursed by him, and praying that the deed be declared to be a mortgage securing the amount found to be due and foreclosed.

The defendant contended that the transaction was tainted with usury because when Mr. Miesen received the deed he gave a receipt stating that he had loaned Mr. Motter $2,500, when, as a matter of fact, at that time he had loaned only $2,000.

It was held that the transaction was not usurious as the original note was clearly not tainted with usury, no interest had been collected and no attempt had ever been made to enforce any oral promise to pay a $500 bonus, nor had any portion thereof ever been paid. The action being founded upon the $2,000 note, it was properly held that the transaction was not usurious. The case was decided upon the...