Irwin v. Washington Loan Ass'n

• Decision Date: 19 January 1903
• Citation: 42 Or. 105,71 P. 142
• Parties: IRWIN v. WASHINGTON LOAN ASS'N.
• Court: Oregon Supreme Court

71 P. 142

42 Or. 105

IRWIN v. WASHINGTON LOAN ASS'N.

Supreme Court of Oregon

January 19, 1903

Appeal from circuit court, Marion county; R.P. Boise, Judge.

Suit by W.J. Irwin against the Washington Loan Association. From a judgment for plaintiff, defendant appeals. Modified.

W.A Peters, for appellant.

John A Carson, for respondent.

BEAN, J.

This is a suit to cancel a mortgage to a building and loan association on the ground that the loan secured by it has been fully paid. The mortgage was given by J.A. Rotan and wife on the 15th of November, 1895, to secure the payment of a note for $1,400, due on or before seven years after date with interest thereon at 6 per cent. per annum, and also to secure the payment of a premium thereon of 6 per cent. per annum; the interest and premium payable monthly, together with a monthly payment of $9.10 on 14 shares of stock in the defendant corporation, which Rotan was required to subscribe for and assign to the defendant as additional security for such loan. The mortgage is substantially in the same form and given in pursuance of the same plan or scheme, as the mortgages in similar cases heretofore decided by this court. Association v. Stanley, 38 Or. 319, 63 P. 489, 84 Am.St.Rep. 793; Savings Co. v. Houston, 38 Or. 377 65 P. 611; Building Co. v. Hill, 40 Or. 280, 67 P. 103; Frost v. Savings Co., 70 P. 814. Rotan made monthly payments of $23.10 for interest, premium, and on the shares of stock until November, 1899, when he sold and conveyed the mortgaged property to the plaintiff, subject to the mortgage, and assigned to him his interest in the stock. The plaintiff thereafter continued to make like payments until and including the month of April, 1902, and, assuming that the debt had been paid, he brought this suit in June for a cancellation thereof. The case differs from that of Frost v. Savings Co., supra, where the purchaser expressly agreed to pay the mortgage as a part of the purchase price of the premises, while in the one at bar the purchase was made subject to the mortgage, but the purchaser did not assume or agree to pay it. It is not believed, however, that this difference can materially affect the result. The substantial question, under either state of facts, is whether the purchaser is entitled to a reapplication of payments made by his grantor. Under the decisions of this court, mortgages to building and loan associations of the kind now under consideration are not usurious on account of the original transaction, but only as to the payments under guise of premiums, installments on stock, and interest, when they are in excess of the interest permitted by law, in which case the person making them is entitled to insist that the surplus over the stipulated interest shall be applied in discharge of the principal. Where one buys land upon which there is a usurious mortgage, and assumes and agrees to pay the same as a part of the consideration, he cannot set up usury in the original transaction as a defense against the mortgage (see cases cited in Frost v. Savings Co., supra), because the mortgagor thereby in effect puts in his hand money with which to pay the debt, and it would be a fraud upon both the mortgagor and the mortgagee to permit the purchaser to escape payment on account of usury when the mortgagor had waived, or was unwilling to make, such defense. And it has been held in some jurisdictions that the same rule will apply to the purchaser of property subject to a mortgage or to a subsequent mortgagee. Warwick v. Dawes, 26 N.J.Eq. 548; Hill v. Building Co., 6 S.D. 160, 60 N.W. 752, 55 Am.St.Rep. 819; De Wolf v. Johnson, 10 Wheat. 367, 6 L.Ed. 343; Union Nat. Bank v. International Bank,...