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

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

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).

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

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 corporation.)

The note and agreement, to secure which the mortgage was given, and the mortgage, in part provide:

"For value received, I, we or either of us, promise to pay, in lawful money, to the order of the United States Building & Loan Association, a Montana Corporation, at its office in Butte, Montana, the sum of Four Thousand Dollars, with interest thereon at the rate of six per cent per annum and one per cent premium per annum on the total principal sum until fully paid. Payments to be made in 108 equal monthly installments of ($ 60.38) each payable on the 26th day of each and every month, commencing with the month of March, 1923, each installment being a payment on the principal sum of ($ 4000.00) and ($ 2520.00) agreed interest and premium."

It is conceded the contract would return 11 and 15/16 per cent interest on unpaid balances and is usurious.

The plaintiff paid 65 monthly installments as and when they became due, thereupon claimed to have paid $ 3,924.70, which was more than the amount received on account of the loan. He refused to make further payments on the ground the contract was usurious, and demanded a release of the mortgage, but to procure release of the mortgage he claims he was required to pay $ 1805.25, unjustly and illegally. In this action plaintiff seeks to recover that sum and the other excess claimed in the sum of $ 4.70.

The trial court found the note and mortgage in question were usurious; that the interest was forfeited; that plaintiff was entitled to have all payments made on account of the note and mortgage credited on the sum actually loaned plaintiff; that by virtue of said monthly payments, amounting to $ 3,924.70, he paid $ 4.70 in excess of all indebtedness of plaintiff to defendant, and that the payment of $ 1805.25 for the purpose of procuring the release of said mortgage was not voluntarily made and did not constitute a settlement between the parties of the dispute which is the foundation of this cause. Judgment was for plaintiff for $ 1809.95. Defendant appeals the case.

It is first claimed the court erred in...