Messersmith v. Reilly
| Decision Date | 08 March 1941 |
| Docket Number | No. 6716.,6716. |
| Citation | 70 N.D. 638,296 N.W. 920 |
| Parties | MESSERSMITH v. REILLY et al. |
| Court | North Dakota Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court.
1. A promissory note containing a provision to pay interest at a rate which is lawful at the time the note is executed is not rendered usurious by the execution of a subsequent supplementary contract agreeing to pay interest in excess of the lawful rate as consideration for the extension of the time of payment of the original note.
2. In the absence of legislative intent showing the contrary, a statute is deemed to act prospectively only; and legislation reducing the rate of lawful interest which may be charged, enacted subsequent to the execution of a note providing for interest at a rate then valid, does not taint the promissory note with usury.
3. Where, after the execution of a promissory note, providing for the payment of interest at a valid rate, a contract is made to pay interest at a usurious rate, the payments of interest under such second contract must be credited upon the principal; but the rate specified in the promissory note stands.
Appeal from District Court, Stark County; Harvey J. Miller, Judge.
Action by Christine Messersmith against Leo R. Reilly, Joe F. Reilly and others to foreclose a mortgage, wherein the defense of usury was interposed, and wherein Joe F. Reilly filed a counterclaim and countersuit. From an adverse judgment, the plaintiff appeals.
Judgment affirmed.
C. H. Starke, of Dickinson, for plaintiff-appellant.
T. F. Murtha, of Dickinson, for defendants-respondents.
This is an action to foreclose a real estate mortgage given by one Anthony Reilly, and the defense of usury is interposed. The case was submitted to the trial court upon a stipulation of facts, the pertinent part of the stipulation being as follows:
“It is hereby stipulated and agreed by and between the plaintiff and defendants through their respective counsel as follows:
That in the Answer the defendants have set out a copy of the mortgage, which was recorded November 27, 1916 in Book 40 of Mortgages, and the first extension agreement which was dated December 1, 1922 and filed for record on the 7th day of December, 1922 and recorded in Book A-15 of Misc. Records on page 151; that the second extension agreement was executed March 25, 1927 and filed for record on March 26, 1927 and recorded in Book 62 of Misc. Records on page 365.
It is stipulated that this mortgage and two extension agreements be offered in evidence; that the defendants admit the note and execution thereof, and both parties admit the execution of the extension agreements and the mortgage.
That the plaintiff and defendants agree that Anthony Reilly died on or about the 31st day of January, 1937; that the defendants admit all of the other allegations in the Complaint; that the defendants move for judgment on all pleadings herein.”
The “other allegations in the Complaint” are summarized as follows:
Anthony F. Reilly gave his promissory note to the plaintiff on November 27, 1916, due five years after date, with interest at eight per cent per annum, payable semiannually, and to secure the payment of the note, gave the real estate mortgage in question.
On or about January 11, 1922, the parties made a written extension of the loan until November 27, 1922, and Reilly agreed to pay interest on the promissory note at the rate of ten per cent; that Anthony F. Reilly died; an administrator of his estate was appointed; the estate administered and a final decree entered whereby the real estate involved descended to and became the property of the defendants, and they are now the owners thereof; that no part of the note had been paid “except the sum of $700 paid on or about the 17th day of December 1924, and interest at the rate of 10% per annum on the balance of $800 paid up to and including the 1st day of November 1937: That there is now due and unpaid and owing to the plaintiff on said promissory note the sum of $800 with interest thereon at the rate of 10% per annum from November 1, 1937.”
The extension agreements referred to in the stipulation are known as Exhibits “B” and “C”. Ex. B was made December 1, 1922, and after reciting that the extension of the payment of the note had been made “from the 27th day of November A. D. 1922, to the 27th day of November, A. D. 1923, with interest at ten per cent from Nov. 27, 1922”, and at the instance and request of Reilly, shows that Reilly, in consideration of such extension, agreed: “To pay interest on said note until the 27th day of November A. D. 1923 at the rate of 10 per cent per annum, payable semi annually, on the 27th day of May & November in each year, to said Christine Messersmith.”
Ex. C was made March 25, 1927, and after stating an extension of the payment of the note “from the 27th day of November A. D. 1926, to the 27th day of November A. D. 1928, with interest at 10% from Nov. 27, 1926”, recites that in consideration of the extension of the payment, Reilly agrees: “To pay interest on said note until the 27th day of November A. D. 1928, at the rate of 10 per cent per annum, payable annually, on the 27th day of November in each year to said Christine Messersmith.”
The note bears the following endorsements:
“Interest paid to November 27-1921 by A. F. Rielly
Payment of this note and real estate mortgage given to secure it is extended until Nov. 27th 1922 at 10% interest.
Dec. 17-1924 Pd. by check on principal-700.00
Interest Pd. to Dec. 16-1924
11/11/25 interest pd. to Nov. 16-1925 $80.00
1-3-27 Int. Pd. to Nov. 27-1926-80.00”.
The answer sets up a “Counterclaim and Countersuit of Joe F. Reilly” for the recovery of double the amount of interest he claims to have paid after the death of Anthony Reilly. A demurrer to this counterclaim was sustained by the court, and Joe Reilly does not appeal; so the question of recovery on his part is not before us
From this evidence the trial court concluded: “That the 1927 extension agreementis usurious under the provisions of Section 6073 of the 1913 Compiled Laws, but that this fact does not affect or alter the conditions of the original note, which original note bears interest before and after maturity at the rate of 8% per annum; That since under said extension agreement the increased rate of interest of 10% was provided during the period of the extension only the plaintiff would be entitled to recover interest at the rate of 8% only from the date of the original note to the date of this judgment except during the period from November 27, 1922, to November 27, 1923, when the rate should be 10% per annum: That any payments of interest in excess of the rates just outlined must be considered payments on the principal debt, and such excess payment and interest on each occasion must be applied as a credit on the principal as of the date of each payment.”
The court thereupon ordered judgment in favor of the plaintiff, decreeing foreclosure to recover the sum of $454.22 with costs. Judgment was entered accordingly, and the plaintiff appeals, demanding a trial de novo.
The only matter in controversy is the amount due the plaintiff.
The note for $1,500 and the mortgage were not tainted with usury, nor was the first extension agreement. The maximum rate of interest which could be charged at the time the note and mortgage were executed was ten per cent per annum, “and in the computation of interest the same shall not be compounded.” Section 6073 of the C.L.,N.D.1913, as amended by chap. 176, S.L.1915. This remained the maximum rate of interest until 1925, when, by the terms of chap. 155, S.L.1925, sec. 6073, Supp., the maximum rate of interest was reduced to “nine per cent per annum, and in the computation of interest the same shall not be compounded.” Chap. 274 of the session laws of 1927 amended section 6073 of the Supp., but not in any way material to the issue involved.
[1] The practically universal rule is, where the original transaction is not tainted with usury in its inception the fact that subsequent transactions with reference to the same matter may be usurious does not render the first transaction usurious. As the Supreme Court of Texas puts it: “antecedent indebtedness is not affected by subsequent usurious renewals or extensions where the...
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