Jaffa v. Lopez

• Citation: 31 P.2d 988,38 N.M. 290,1934 -NMSC- 003
• Decision Date: 09 January 1934
• Docket Number: 3870.
• Parties: JAFFA v. LOPEZ et al.
• Court: New Mexico Supreme Court

31 P.2d 988

38 N.M. 290, 1934 -NMSC- 003

JAFFA v. LOPEZ et al.

No. 3870.

Supreme Court of New Mexico

January 9, 1934

On Rehearing April 2, 1934.

Appeal from District Court, Santa Fé County; Otero, Judge.

Suit by Nathan Jaffa, as trustee for the creditors and stockholders of the Santa Fé Bank, against Sofia Q. Lopez, Juan B. C Lopez, and the Union Savings & Loan Association, in which first and second named defendants and last-named defendant filed cross-complaints. From an adverse judgment, last-named defendant appeals.

Reversed and remanded for modification.

Brice & Sanchez, of Santa Fé, for appellant.

Gilbert & Hamilton, of Santa Fé, for appellee Jaffa.

Reed Holloman, of Santa Fé, for appellees Lopez.

WATSON Chief Justice.

In June, 1926, the property here in question, owned by Sofia Q Lopez, was under first mortgage of $3,500 to the Mutual Building & Loan Association of Santa Fé, and under second mortgage of $8,400 to Nathan Jaffa, then receiver of the Santa Fé Bank, and now trustee for its stockholders and creditors. At that time Union Savings & Loan Association, a Wyoming corporation, though it had not qualified according to the statute to do business in this state as a foreign corporation, was actually engaged herein in the savings and loan business; one Byron O. Beall being its Santa Fé agent and representative.

After some negotiations with said Beall looking to readjustment of her loans, Mrs. Lopez agreed with Jaffa that, if the negotiations were successful and the latter would reduce his debt to $4,750, she would, from the proceeds of the new loan, pay off the Mutual Building & Loan Association mortgage and pay Jaffa $2,600 in cash; the latter to have a mortgage for the balance of the reduced debt in the sum of $2,150, to be second to the mortgage securing the new loan.

The negotiations were successful, and in execution thereof Mrs. Lopez purchased of the savings and loan association three of its 8 per cent. savings certificates of the respective maturity values of $3,500, $2,500, and $4,000. She also executed and delivered to the savings and loan association her two notes in the sums of $3,500 and $2,500, bearing annual interest of 10 per cent. and annual premium of 2 per cent., payable monthly, and secured by mortgages on the property. The savings certificates stood also as security for the loan. In closing the loan, a $25 attorney's fee and a $15 appraisal fee were deducted as expense on each of the two mortgages. The attorney's fee was paid out as expense. The appraisal fee was not, as the appraisal was made by a salaried officer or employee of the savings and loan association. Beall also exacted from Mrs. Lopez a charge of $120 for procuring the loan; this without authority from or knowledge of the savings and loan association, but in the knowledge that he would not be otherwise compensated.

In December, 1926, having determined to modify its interest rate on loans in New Mexico, the savings and loan association prepared and sent to Beall supplemental contracts to be executed by Mrs. Lopez, waiving the 2 per cent. annual premium and adjusting the monthly payments accordingly. Beall thereupon, without the authority or knowledge of the savings and loan association, underlook for a further cash payment to him of $191, to obtain for Mrs. Lopez this reduction of interest. She paid the sum and signed the supplemental contracts.

While these supplemental contracts adjusted the monthly payments to a 10 per cent. basis, they did not affect payments previously made, and it was not until after the commencement of this litigation that credits were made covering the earlier payments.

After making thirty-one monthly payments on the $2,500 certificate and twenty-seven monthly payments on the $3,500 certificate, these certificates were surrendered by Mrs. Lopez and the surrender value thereof applied upon the indebtedness.

Such, in summary, are the facts here deemed material, as found by the trial court.

This suit was commenced by Jaffa against Mrs. Lopez and her husband, Juan B. C. Lopez, for the foreclosure of his mortgage. The Union Savings & Loan Association was named as a defendant holding a prior mortgage of record. As to it, Jaffa alleged that its mortgage was of no force or validity as a prior incumbrance for two reasons: First, as the result of its unlawfully engaging in business in this state; and, second, because usurious, resulting in statutory penalties, which, applied against the debt, would entirely cancel it. He prayed in the usual form as against Mrs. Lopez and husband. As against Union Savings & Loan Association he prayed that its mortgages be held void; or, if not held void, that they be held usurious and that the statutory penalties be credited against the debt, and that the debt and securities be adjudged discharged and satisfied of record; or that, if not completely satisfied thus, the association be required to apply any collateral it might have upon the debt before resorting to the real estate.

After unsuccessfully demurring to the complaint, the savings and loan association answered it, first by way of admission and denial; and, second, by way of new matter, setting up plaintiff's agreement that his lien should be second and the payment made to him out of the proceeds of the loan as estopping him from claiming priority. Plaintiff replied.

Mrs. Lopez and husband filed an answer and cross-complaint. The answer admitted the allegations of the complaint. The cross-complaint named the Union Savings & Loan Association as defendant, set up substantially the same facts as set up in the complaint, and prayed judgment decreeing their indebtedness to the association to be fully paid and satisfied by payments made plus statutory penalties for usury and prayed money judgment for any excess.

The Union Savings & Loan Association answered this cross-complaint, first, by way of admission and denial, and then "by way of new matter," concluding with a prayer that the cross-complainants take nothing. Then, under the head "affirmative relief," the answer proceeded with allegations upon which it prayed for foreclosure of its mortgage and sale of the property.

Mrs. Lopez and husband replied to this pleading as an answer and answered it as a cross-complaint; in the answering part of the pleading adopting all of the allegations of their own cross-complaint and renewing its prayer.

Upon these pleadings and found facts the trial court adjudged complete satisfaction of the Union Savings & Loan Association mortgages, and a recovery by Mrs. Lopez and her husband of the sum of $3,204.87 as being the amount by which payments and statutory penalties for usury exceeded the amount of the debt. Plaintiff was adjudged a foreclosure of his mortgage as a first lien and a sale of the premises. Union Savings & Loan Association has appealed.

Appellant, in one of its briefs, says:

"The calculations by which the judgment was arrived at against the defendant association in favor of defendants Lopez are as follows:

Lopez was due defendant association on two notes, cash actually received ......................................................... $6,000.00 (Finding No. 27, Rec. pps. 117"8) Credits Cash paid on principal of $3,500 note ............................... $1,571.49 Cash paid on $2,500 note ............................................. 991.68 Double interest paid ($1,782.36) on $3,500 note ...................... 3,564.72 Double interest paid ($1,328.25) on $2,500 note ...................... 2,656.50 Amounts paid Lopez ................................................... 311.00 Accrued unpaid interest on the $3,500 note ........................... 61.76 Accrued unpaid interest on the $2,500 note ........................... 47.82 ---------- Total credits ................................................... $9,204.97 Less face of notes ........................................... 6,000.00 ---------- Judgment for defendants Lopez .............................. $3,204.97"

The first four points relied on for reversal are stated thus:

"Point I. Under the New Mexico statutes, usury is a defense to an action upon the usurious instrument, and the cross bill of defendants Lopez sets up no cause of action against the defendant association; nor is there any evidence authorizing any decree against it, and the decree herein is without authority of law, and should be reversed.

"Point II. The statutory remedy for usury, being inclusive, and personal to the borrower, the plaintiff had no cause of action against the defendant association, and could not plead usury for the purpose of establishing his inferior mortgage as a superior mortgage.

"Point III. Both the plaintiff's action, and the cross action of the defendants Lopez, were suits in equity, and could not be maintained without first tendering to the defendant association the principal due it, together with legal interest.

"Point IV. The plaintiff, by his acts, having caused the defendant association to make this loan, and he agreeing to take an inferior mortgage, and accepting the sum of $2181.87 of the association's money represented by the Lopez' notes, he is estopped to maintain this suit, and could not under any circumstances maintain it without returning the money paid to him out of the proceeds of said loans."

Further than necessary to a disposition of this case, we have no desire to pursue the numerous abstract propositions of law brought to our attention and elaborately discussed. How would these points, if sustained, affect the judgment?

The judgment affords relief of three kinds. It cancels appellant's...