Levy v. Blonder

• Decision Date: 29 June 1938
• Docket Number: Gen. No. 39900.
• Citation: 16 N.E.2d 146,296 Ill.App. 266
• Parties: LEVY v. BLONDER ET AL.
• Court: United States Appellate Court of Illinois

296 Ill.App. 266

16 N.E.2d 146

LEVY

v.BLONDER ET AL.

Gen. No. 39900.

Appellate Court of Illinois, First District, Third Division.

June 29, 1938.

Appeal from Circuit Court, Cook County; C. J. Harrington, Judge.

Suit by Henry R. Levy against Edward G. Blonder and others, to foreclose a mortgage. From a decree, named defendant and others appeal.

Affirmed. Hirsch E. Soble and Abraham W. Brussell, both of Chicago, for appellants.

I. B. Lipson and A. C. Lewis, both of Chicago, for appellee.

HEBEL, Presiding Justice.

This is an appeal brought jointly and severally by Edward G. Blonder, Samuel Rosen and the Chicago Title and Trust Company, a corporation, as Trustee, defendants below, from a decree entered by the court in a foreclosure proceeding.

The plaintiff instituted proceedings to foreclose a mortgage executed by the defendant Edward G. Blonder to secure an indebtedness of $50,000, wherein Edward G. Blonder was the principal debtor and the defendant Samuel Rosen guaranteed the payment of this indebtedness. The Chicago Title & Trust Company, as Trustee, was named defendant, and other persons claiming an interest in the said premises were also named as defendants. To the plaintiff's complaint the defendants, Edward G. Blonder and Samuel Rosen filed a joint answer, admitting, in substance, the execution of the mortgage and the creation of the indebtedness, but setting up the defense of usury and alleging tender of amount lawfully due the plaintiff. The Chicago Title & Trust Company as trustee filed an answer alleging that it had no knowledge of the facts stated in the complaint. The other defendants in the case were defaulted.

Upon the issue made, the case was referred to a Master in Chancery to take testimony, to file his report covering the testimony taken and his findings of fact and conclusions of law. Evidence was heard before the Master, and various exhibits were introduced in evidence. The Master filed his report, to which the defendants filed objections, which were overruled and permitted to stand as exceptions. These exceptions were heard by the court, and on September 23, 1937, the court entered a decree overruling the exceptions of the defendants Edward G. Blonder and Samuel Rosen and sustaining the exceptions filed by the plaintiff. The court in its decree made various findings of fact, among others, that there was no usury in the making of the loan; that the defendant Edward G. Blonder had failed to make payments of interest and principal in accordance with the terms of the loan; that defendants Edward G. Blonder and Samuel Rosen pay the expenses and costs of the foreclosure proceedings; ordered a sale of the premises to satisfy the lien of the mortgage; provided for the entry of a deficiency decree against the defendants Edward G. Blonder and Samuel Rosen in the event the sum realized by sale of the premises was not sufficient to satisfy the mortgage, and it is from this decree that appeal is taken.

No point is made as to the pleadings filed by the parties to the controversy.

One objection made by the defendants to the court's entry of the decree is that the evidence discloses that the loan made by plaintiff Levy to the defendant Blonder was usurious in that Levy intended to and did exact an interest rate of return of more than 7% on the money loaned to Blonder by demanding and obtaining a commission of $1,800 at the time of making this new mortgage and loan in the face amount of $45,000, and at the same time demanding and obtaining the sum of $150 as purported attorney's fees for his own use and benefit, in addition to the 6% interest rate as reserved in the instrument of indebtedness requiring prepayments of $2,000 semi-annually with the last prepayment being in the sum of $1,000 and interest payments semi-annually.

There is evidence that the sum of $150 was received by Levy, and that the arrangement with regard to allegedly turning over the $150 to attorney Joseph A. Golde was a device or makeshift to cover up the exaction by Levy of more than the maximum interest permitted by law.

As to whether $150 attorney's fees amounted to usury, the plaintiff in his answer makes the statement that this is a question of fact; that both the master who heard the testimony and the chancellor who reviewed the record have found against the defendants on this factual question. The second point made by the defendants is one of law. The master in chancery instead of prorating the $1800 advance interest over the entire period, charged it against the first year alone and on that basis found the loan to be usurious. The chancellor in his decree made this finding:

“At the time of making said loan the defendant Edward G. Blonder paid to the plaintiff Henry R. Levy the sum of $1,800 as a commission for making said loan, and that said sum, together with interest reserved by said note and trust deed, did not exceed 7% per annum for the period of said loan, and that no usury was in fact charged, exacted or paid, and that it was not the intention of the parties to charge, exact or pay interest at a greater rate than 7% per annum.”

It appears from the facts that the defendants were indebted to the plaintiff in the sum of $50,000; that the note evidencing the indebtedness had matured; that an extension was desired, and that an extension was finally agreed upon by the parties. During the negotiations for this extension the plaintiff referred the matter to his attorney, Joseph A. Golde, who took up negotiations for an agreement, prepared a draft of the necessary papers and passed upon the title, and it appears that the defendant Blonder both orally and in writing agreed to pay the charge of the attorney. At the close of the transaction $150 fee was agreed upon between the defendant and Mr. Golde. The defendant Blonder executed his check for $150, payable to Henry R. Levy, the plaintiff. On the back of the check Blonder wrote: “My share of attorney's fees.” This check was delivered to Mr. Golde and was by him mailed to the plaintiff with the request that the plaintiff issue his check for this sum in payment of the fees. Subsequently a check for $150 was mailed by the plaintiff to Mr. Golde, his attorney.

From the facts as they appear, and evidently the court considered the question, it seems but reasonable to conclude that this $150 attorney fee was paid to Mr. Golde by the plaintiff upon receipt of defendant Blonder's check for $150. There seems to be no real dispute about this. From anything we have been able to find in the record we cannot conclude that this payment of $150 for attorney's fees was for the purpose of avoiding the usury law, and we believe in this respect the court did not commit error.

As to the second contention of the defendants, that is, that the payment of $1,800 to the plaintiff as interest in advance on the five-year loan was usurious, from the facts as called to our attention by the plaintiff, the defendant was indebted to the plaintiff--about which there is no doubt--and the loan was secured by a real estate mortgage; the mortgage was about to mature and the defendant desired an extension of the loan in the sum of $45,000. During the negotiations it appears that $2,000 semi-annual prepayments were agreed upon, with interest at 6%. The proof shows that the plaintiff called Mr. Wolter, his secretary, into his office and asked him to compute the amount of commission so that the interest charge, including the commission, would be 7%. The matter was then referred to the plaintiff's attorney, and after further negotiations the papers were drafted and executed.It also appears that in the course of time correspondence was had regarding the payment of the loan, which correspondence appears in evidence, and in which the matter of illegal interest or usurious interest was never mentioned.

The plaintiff contends it has long been established in Illinois that taking interest in advance does not constitute usury if the interest reserved plus that contracted to be paid when prorated over the entire period for which the loan is to run does not exceed the highest rate allowed by statute.

Upon the question of rate of interest allowed, Ch. 74, entitled Interest, sec. 4, provides [Ill.State Bar Stats.]: “In all written contracts it shall be lawful for the parties to stipulate or agree that seven (7) per cent. per annum, or any less sum of interest, shall be taken and paid upon every one hundred (100) dollars of money loaned or in any manner due and owing from any person to any other person or corporation in this state, and after that rate for a greater or less sum, or for a longer or shorter time, except as herein provided * * *.” And further, Sec. 5 provides: “No person or corporation shall directly or indirectly, accept or receive, in money, goods, discounts, or thing in action, or in any other way, any greater sum or greater value, for the loan, forbearance or discount of any money, goods or thing in action, than as above prescribed, except from a corporation, and...