Johnston v. Am. Fin. Corp.

• Decision Date: 22 March 1938
• Docket Number: Case Number: 27001
• Citation: 79 P.2d 242,1938 OK 195,182 Okla. 567
• Parties: JOHNSTON, Trustee in Bankruptcy v. AMERICAN FINANCE CORPORATION
• Court: Oklahoma Supreme Court

1938 OK 195

79 P.2d 242

182 Okla. 567

JOHNSTON, Trustee in Bankruptcy v. AMERICAN FINANCE CORPORATION

Case Number: 27001

Supreme Court of Oklahoma

Decided: March 22, 1938

Syllabus

¶0 1. EQUITY - Person Seeking Equitable Relief Against Usurious Contract Required to Tender Amount Justly Due.

Where a person seeks affirmative aid in a court of equity for relief against an alleged usurious agreement, he must do equity himself by tendering or offering payment of what is justly due.

2. CONTRACTS - Reasonable Amount Allowable for Making Collections Where no Definite Sum Agreed Upon.

Where it is understood between the parties that one is to pay for collections made on negotiable instruments placed in his possession and no definite sum is agreed upon, the trial court may allow a reasonable sum therefor.

3. PLEDGES - Collateral Security Extended to Become Lien for Other Obligations of Pledgor.

Where collateral security is pledged to secure a certain indebtedness named and the collateral specifically provides, "and all other liabilities of the undersigned, either as principal, endorser or otherwise, on this or any other obligation to the said pledgee, heretofore or hereafter contracted," such collateral is thereby extended to become a lien for other and different obligations of the pledgor held by the pledgee.

4. BANKRUPTCY - Validity of Assignments by Person Later Declared Bankrupt - Questions of Fact - Burden of Proof.

Whether or not certain assignments made by a person later declared a bankrupt were executed on the dates named therein or at a later date, and whether such person was solvent at the time of the conveyance, and whether the transferee had reasonable cause to believe that the conveyance was intended thereby to give a preference, were all questions of fact to be determined by the findings of the court, and the burden is upon the party alleging such facts to be true.

5. APPEAL AND ERROR - Trial - Credibility of Witnesses and Weight of Evidence for Trial Court in Equity Matters.

It is for the trial court in equity matters to determine the credibility of the various witnesses, and the weight, and the value to be given to their testimony. The conclusion there reached upon these points will not be disturbed on appeal, unless appearing to be against the clear weight of the evidence.

6. USURY - Statutory Provision for Recovery of Usurious Interest Applicable Alone as Between Parties to Usurious Contract or Legal Representatives.

The provision of our statute, section 9519, O. S. 1931, authorizing the recovery of usurious interest charged or collected, applies alone as between the original parties to the usurious contract or their legal representatives, and does not apply as to parties, who were not parties to such contract.

7. CONVERSION - "Conversion" Defined.

To constitute "conversion" there must be proof of a wrongful possession or of the exercise or assumption of a dominion over personal property in defiance or exclusion of the plaintiff's rights, or else a withholding of possession under a claim of right or title inconsistent with that of the true owner.

Appeal from District Court, Oklahoma County; Lucius Babcock, Judge.

Action by Gordon Johnston, as trustee in bankruptcy of the estate of C.B. Green, a bankrupt, against American Finance Corporation for accounting and discovery. Referee report approved. Plaintiff appealed. Affirmed.

Roger Stephens, Fred L. Hoyt, and F. Leonard Sibel, for plaintiff in error.

Abernathy & Howell, for defendant in error.

DAVISON, J.

¶1 This action was instituted by Gordon Johnston, as trustee in bankruptcy of the estate of C.B. Green, a bankrupt, against the American Finance Corporation for an accounting and discovery.

¶2 The plaintiff alleges in his petition that the defendant holds certain notes and mortgages deposited by C.B. Green as security for certain indebtedness due the defendant, the nature, amounts and number of which are not fully known to plaintiff. It is alleged that the defendant was to hold and collect same and apply the proceeds on the indebtedness, owing defendant. It is alleged that plaintiff has made demands upon the defendant for full accounting of all liabilities claimed against the bankrupt, and all collections made on such collateral and money owing to the bankrupt and for the uncollected collateral, and that defendant has refused to render such accounting or deliver to the plaintiff said collateral.

¶3 The plaintiff petitioned for a full accounting and for judgment against the defendant for such sum as may be due to plaintiff and for costs.

¶4 Answer was filed consisting of general denial, want of sufficient allegations in the petition to constitute a cause of action in accounting, and alleging that plaintiff had obtained a full and complete audit of the transaction and had knowledge of the facts. Upon the hearing of the cause the trial court found the defendant liable to account and ordered defendant to file its account, and the account was filed accordingly. The plaintiff filed exceptions to the account, and the defendant filed its answer to the exceptions of the plaintiff.

¶5 The matter was heard before the referee, upon the account, the exceptions, and the answer thereto. The referee made his report, with findings of fact and conclusions of law. The plaintiff filed his exceptions to the report of the referee and claimed usury on certain of the notes. The defendant filed its exceptions and objections to the referee's report and denied the right in equity to claim usury and plead the statute of limitations. The court sustained the report of the referee. The plaintiff has appealed.

¶6 The record discloses that the defendant was engaged in the purchase and discounting of automobile papers from various automobile dealers and other concerns and upon which defendant made direct loans. It is shown that C.B. Green and his father, W.O. Green, were engaged in various lines of business involving considerable sums of money; that in addition to the Broadway Billiard Supply Company business of C.B. Green, his father owned, either separately or in connection with C.B. Green, a transfer business with a number of trucks used as common carriers, operated under the name of P. D. Q. Transportation Company.

¶7 The record discloses that W.O. Green died August 19, 1929, and that C.B. Green appointed administrator of his estate, and as such he continued to operate the transfer company under the order of the county court. In connection therewith, C.R. Green had numerous transactions with the defendant in which considerable sums of money were borrowed. There seems to have been an agreement between the defendant and C.B. Green that notes which had been given to C.B. Green as part consideration for merchandise sold and payable in monthly installments for a period of one year and less would be taken by defendant as collateral for money advanced to C.B. Green. Some of the notes given the defendant by C.B. Green were signed by Green as administrator and some individually. The record shows that there was a charge of 10 per cent. of the amount loaned which was denominated as carrying charges. The plaintiff by counterclaim or set-off claimed usury in the transactions.

¶8 Eight assignments of error are presented for consideration. It is first contended that the referee and court erred in their method of applying the usury statute to the facts developed in connection with the Supply company notes.

¶9 The referee and the trial court refused to allow the plaintiff the penalties and forfeitures for usury and required plaintiff to pay legal interest upon the money borrowed from the defendant by the bankrupt. The rule adopted by the referee and the court was that equity abhors and will not enforce penalties and forfeitures, and that he who seeks equity must do equity. This suit was brought by the plaintiff. It is a suit in equity for discovery and for an accounting on notes and mortgages deposited with the defendant as collateral. The plaintiff alleges in his petition that the nature, amount, and number of such securities is not fully known to the plaintiff. The particular objection to the finding of the referee and court is their refusal to apply the forfeiture of double the amount of usury found to exist in the notes in view of the usury statute. The defendant should not be deprived of a jury trial and of the plea of the statute of limitations by bringing a suit against it in equity and then refuse to apply the rules of equity merely because the plaintiff had an adequate remedy at law for usury.

"One seeking the affirmative aid of equity for relief against an alleged usurious agreement must himself do equity by tendering or offering payment of what is justly due. Hubbard v. J. Kennedy Todd et al., 171 U.S. 474, 43 L.Ed. 246.

"In cases of usury, courts of equity will give no relief to the borrower if the contract be executory, except on the condition that he pay to the lender the money lent, with legal interest. Nor if the contract be executed will they enable him to recover any more than the excess he has paid over the legal interest." Tiffany v. Boatman's Savings Institute, 85 U.S. 375, 21 L.Ed. 868.

¶10 These penalties the plaintiff seeks to enforce are given by statute. They are legal rights to be administered in legal actions, or as defenses, but not as affirmative equitable rights, where the debtor, an actor, voluntarily comes into court asking for equitable relief. We think the finding of the referee and court is correct.

¶11 It is next contended that the referee and court erred in allowing the defendant an arbitrary 3 per cent. of its collection from the Supply Company collateral, as compensation for its efforts in making collections, after having found there was no special agreement to pay for this service.

¶12 In his 18th finding of fact, the referee allowed defendant $1,756.31 on the ground that 3 per cent. of its collections from the Supply Company collateral as compensation...