J. I. Case Threshing Mach. Co. v. Tomlin

• Decision Date: 17 November 1913
• Citation: 174 Mo. App. 512,161 S.W. 286
• Parties: J. I. CASE THRESHING MACH. CO. v. TOMLIN et al.
• Court: Missouri Court of Appeals

161 S.W. 286

174 Mo. A. 512

J. I. CASE THRESHING MACH. CO. v. TOMLIN et al.

Kansas City Court of Appeals. Missouri.

November 17, 1913.

1. USURY (§ 80)—CHATTEL MORTGAGES.

Under the express provisions of Rev. St. 1909, §§ 7180, 7182, 7184, a chattel mortgage securing a note bearing more than 8 per cent. interest is void for usury.

2. USURY (§ 48)—"INTEREST" AFTER MATURITY —STATUTES—CONSTRUCTION.

Under Rev. St. 1909, § 7182, providing that "interest" includes any sum taken directly or indirectly for forbearance, as well as for the use of money, a note bearing a lawful rate before maturity and an unlawful rate after that time

is usurious, if forbearance is exercised and the unlawful rate is charged or exacted.

3. USURY (§ 2)—CONTRACT—WHAT LAW GOVERNS —PLACE OF PERFORMANCE.

A contract for the sale of a threshing machine on time, a part of the purchase price to be secured by notes and a chattel mortgage on the machine, was made and signed in Missouri, where the machine was to be shipped, delivered, and used. Defendants, who were the purchasers, however, resided in Kansas, and the notes and mortgage were sent there for their signature, but were payable at a bank in Missouri, and all acts connected with the transaction except the signing of the notes and mortgage were performed in Missouri, and the contract did not contain any provision that it was to be construed according to the law of any particular state. Held, that the validity of the notes and mortgage should be construed according to the law of Missouri, the place of performance, and, being void for usury under that law, they were unenforceable.

4. CONTRACTS (§ 101)—CONSTRUCTION—WHAT LAW GOVERNS—PRESUMPTIONS.

Where the circumstances surrounding the making of a contract indicate that the parties intended that it should be governed by the law of a particular state, the rule that it will be presumed that the contract was made with reference to the law which recognizes it as valid does not obtain.

5. CONTRACTS (§ 142)—WHAT LAW GOVERNS— QUESTION FOR COURT OR JURY.

Where the intent of parties shown by their outward acts indicated that they intended a contract to be governed by the law of Missouri and not of Kansas, and there was no conflict in the testimony as to such acts, the question whether the contract was governed by the law of Missouri or Kansas was for the court.

Appeal from Circuit Court, Platte County; Alonzo D. Burnes, Judge.

Action by the J. I. Case Threshing Machine Company against W. E. Tomlin and others. Judgment for defendants, and plaintiff appeals. Affirmed.

Kirkpatrick, McCollum & Kirkpatrick, of Kansas City, and James H. Hull, of Platte City, for appellant. Wilson & Wilson and Guy B. Park, all of Platte City, for respondents.

TRIMBLE, J.

Appellant sold respondents a threshing machine and took an old one in part payment of the purchase price and, for the remainder, took eight notes, aggregating $1,500, secured by a chattel mortgage on the new machine. These notes bore 6 per cent. interest until due and 10 per cent. after maturity. The first note was not paid until some time after it was due, and, when it was paid, the company exacted and received the full amount of interest thereon including the 10 per cent. from maturity. Defendants complained that the machine did not work according to warranty, and, after appellant had spent some time in endeavoring to make it work and had failed according to defendants' view, the latter refused to pay the remaining notes. There was a provision in the mortgage rendering all the notes due and payable in case any one of them became due and remained unpaid. And when this occurred, the company brought this suit in replevin, under its chattel mortgage to recover the machine. It was taken from defendants by the sheriff under the writ, and, upon appellant giving bond, the machine was delivered to it. The defendants set up, among other defenses, that appellant had charged and exacted usurious interest on the first note, and that the chattel mortgage was invalid by reason of usury in the notes secured thereby. Appellant, in reply, pleaded that the chattel mortgage and notes constituted a Kansas contract, and that, under the pleaded statutes of that state, 10 per cent. interest was a lawful rate. After all the testimony bearing upon the question of usury had been offered, agreed to, and admitted by both sides to be true, the court ruled that under the admitted facts the mortgage was invalid because of usury, and sustained defendants' demurrer to the evidence. Thereupon, without waiving any point on either side, it was agreed that the value of the machine was $1,000 and that the damages for its taking and detention were $125. The jury was then directed to find for defendants and against plaintiff, which was done, and plaintiff appealed.

The law in Missouri is that a greater rate of interest than 8 per cent. is usurious (sections 7180, 7182, Rev. St. 1909), and a mortgage securing an usurious rate is invalid. Section 7184, R. S. Mo. 1909. Therefore, if the mortgage fails, plaintiff's replevin suit, based thereon, must also fail.

Our statute, section 7182, makes interest include any sum taken, directly or indirectly, for "forbearance" as well as for the "use" of money. Consequently a note, bearing a lawful rate before maturity and an unlawful rate after that time, becomes usurious if forbearance is exercised and the unlawful rate is charged or exacted. White v. Anderson, 164 Mo. App. 132, 147 S. W. 1122. "If the sum charged or exacted for the use of money loaned exceed the legal interest, it is usury, no matter what words it may be clothed in." Coleman v. Cole, 158 Mo. 253, loc. cit. 260, 59 S. W. 108. The case of Taylor v. Buzzard, 114 Mo. App. 622, 90 S. W. 126, does not conflict with this rule. In that case the test of usury in a contract is said to be "whether it would, if performed, result in securing a greater rate of profit on the subject-matter than is allowed by law." There is a difference between a penalty or forfeiture for not performing a contract according to its terms, and the exaction of interest as a part of its terms. But 10 per cent. interest is a legal rate under Kansas law. Hence, if the contract claimed to be usurious is a Kansas and not a Missouri contract, it has no taint of usury in it.

The facts bearing on this question are admitted, so that if, as a matter of law, it is a Missouri contract, there was no error in directing a verdict. Those facts are as follows: The chattel mortgage and notes grew out of, and were provided for in, a contract for the sale of the machine which was drawn up in Kansas City, Mo., by appellant's agent, and there signed by respondents. In form, it was an order, dated Kansas City, Mo., June 13, 1911, addressed to appellant, requesting it to ship, or deliver, to Beverly, or other convenient station in the state of Missouri, in care of appellant, for purchaser, the machine in question. In consideration of which, purchaser agreed to receive same on cars on arrival, subject to warranty thereinafter stated, and to pay freight and charges, and to execute eight notes, bearing 6 per cent. until maturity and 10 per cent. after that date, and secured by chattel mortgage on the machine. The contract further provided that, if purchaser failed to execute the notes and mortgage, the contract should, at the company's option, have the same force and effect as a mortgage for all sums not paid in cash, and the whole amount of purchase money should be due and payable. The warranty in the contract provided what the machine should do, and, if it failed to fulfill the warranty, purchaser was to give the company written notice, and the company was to send a man to remedy the difficulty; the purchasers to render friendly assistance. If the company failed to send a...