O'Malley v. United States Building & Loan Ass'n, 5628

• Court: Idaho Supreme Court
• Writing for the Court: MCNAUGHTON, J.
• Citation: 298 P. 675,50 Idaho 583
• Decision Date: 24 April 1931
• Docket Number: 5628
• Parties: P. C. O'MALLEY, Respondent, v. UNITED STATES BUILDING & LOAN ASSOCIATION, a Montana Corporation, Appellant

298 P. 675

50 Idaho 583

P. C. O'MALLEY, Respondent,

v.
UNITED STATES BUILDING & LOAN ASSOCIATION, a Montana Corporation, Appellant

No. 5628

Supreme Court of Idaho

April 24, 1931

USURY-PREMIUM FOR LOANS-LIMITATION OF ACTIONS-COMPROMISE AND SETTLEMENT.

1. In action to recover sum paid as interest, evidence sustained finding there was no voluntary settlement of dispute regarding usury (C. S., sec. 2554).

2. Evidence sustained finding that lender's withholding of $80 of $4,000 loan was not independent transaction, but was charge in addition to interest (C. S., sec. 2554).

3. Statute of limitations applying to action to recover interest on usurious loan did not begin to run on dates instalment payments were made (C. S., sec. 2554). [50 Idaho 584]

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. Robert M. Terrell, Judge.

Action to recover sum paid as interest on loan, claimed to be usurious. Judgment for plaintiff. Affirmed.

Judgment affirmed, with costs to respondent.

H. R. Turner, for Appellant.

C. S., sec. 2554, and similar statutes contain two categories.

The first category corrupts the contract and only makes provision where the contract provides for taking, reserving and receiving usury. It has its effect on usury unpaid.

The second category corrupts the payment. That category and that only provides the remedy where usury has been actually paid. (Barnet v. Muncie Nat. Bank, 98 U.S. 555, 25 L.Ed. 212; Lundberg v. Burton, 41 N.D. 587, 171 N.W. 616.)

The $ 80 paid by plaintiff for membership stock in the association to qualify him as a borrower from the association cannot be deemed a payment on the loan particularly where, as in this case, he still owns and can use it or sell it to others who can use it without further payment. (Western Loan & Bldg. Co. v. McGillivrae, 141 Wash. 392, 251 P. 770; 96 C. J., p. 975.)

Where a usurious contract has been settled and paid it cannot thereafter be opened for the purpose of raising the question of usury nor the borrower cannot thereafter object to such settlement where neither fraud nor mistake enter into such settlement. (Hoopes v. Ferguson, 57 Iowa 39, 10 N.W. 286; Bullard v. Raynor, 30 N.Y. 197; Presnall v. D. R. Burgess & Co., 181 Ala. 263, 61 So. 804; Dean v. Maxfield, (Tex. Civ. App.) 209 S.W. 466.)

P. C. O'Malley and H. J. Swanson, for Respondent.

"The statute of limitations does not begin to run against a recovery of usury in case of a series of usurious transactions, until they are closed." (27 R. C. L. 270; Slover v. Union Bank, 115 Tenn. 347, 89 S.W. 399; 1 L. R. A., N. S., 528, and note; 39 Cyc. 1080; Flannery v. Three Forks Deposit Bank, 21 Ky. Law, 626, 52 S.W. 847.

The $ 80 deducted from the principal by defendant and appellant was nothing less than a commission or premium, and was correctly applied to the principal by the lower court.

"Premiums exacted for making loans and retained, or secured by mortgage, are unlawful interest, when, added to the rate provided by the contract of indebtedness, they make a rate greater than the statutes authorize, and payments upon such premiums, and all payments, whether upon interest or principal, must be applied to reducing the principal of the debt." (Madsen v. Whitman, 8 Idaho 762, 71 P. 152.)

MCNAUGHTON, J. Lee, C. J., and Budge, Givens and Varian, JJ., concur.

OPINION

[50 Idaho 585] MCNAUGHTON, J.

Prior to the 26th day of February, 1923, the plaintiff desiring funds with which to pay a mortgage on his property in Pocatello negotiated with defendant a $ 4,000 loan, and on said date executed and delivered the note and mortgage in question to defendant loan company and received therefor $ 3,910. The loan company deducted and withheld from the amount of the mortgage $ 90, $ 10 of which was to pay for examination of plaintiff's abstract of title to the property mortgaged, and $ 80 for membership fee imposed by the board of directors of the loan company as a requirement to making the loan. (In 1928 this requirement was incorporated in the by-laws of the...