Randall v. Home Loan & Inv. Co.

• Decision Date: 15 February 1944
• Citation: 12 N.W.2d 915,244 Wis. 623
• Parties: RANDALL v. HOME LOAN & INVESTMENT CO.
• Court: Wisconsin Supreme Court

244 Wis. 623

12 N.W.2d 915

RANDALL

v.HOME LOAN & INVESTMENT CO.

Supreme Court of Wisconsin.

Feb. 15, 1944.

Appeal from a judgment of the Circuit Court for Shawano County; Gerald J. Boileau, Judge Presiding.

Reversed.

Action commenced March 18, 1943, by Estelle Randall, plaintiff, against Home Loan & Investment Company, defendant, to recover under sec. 115.07, Stats., treble the amount of money alleged to have been paid as interest on a certain loan in violation of the maximum rate provided in sec. 115.05, Stats. On January 24, 1940, Ruby Cooper (plaintiff's deceased sister) procured a loan of $800 from the defendant. The note or bond evidencing the loan was secured by a real estate mortgage, and provided for monthly installment payments of $22.22 on the principal, and interest as specified in a schedule attached to and made a part of said note or bond. The interest rate is not separately stated. It is added to the monthly installment due on the principal. The installment schedule contemplated an interest charge of ten per cent, but due to dropping of fractions the final interest rate received by defendant on the loan was nine and eight-tenths per cent. It was further provided: ‘In order to secure the prompt payment of said monthly installments and to defray the costs and expenses to said obligee in the case of our failure to so promptly make such payments, we do jointly and severally for said consideration, hereby agree that in event of our failure to promptly pay any of said monthly installments on or before the 1st day of each and every month as the same becomes due, that we will pay as a penalty for our failure so to do 1% of said monthly payment for each and every month or part of month that said payment so remains past due and unpaid.’

If the one per cent per month penalty is treated as an interest charge, in that event the total interest would exceed the maximum rate of $10 upon $100 to the extent of $13.02.

Among other facts, the trial court found:

‘(8) That the rate of interest was clearly expressed in writing in said note, and was at the rate of $9.8 per cent.

‘(10) That after said Ruby Cooper's death and after the assignment of her estate to this plaintiff, the plaintiff, in order to remove said lien from said homestead, paid to the defendant the sum of $370.23 on September 18, 1942.

‘(14) That there was actually paid upon said note and mortgage the sum of $800 principal, $119.52 interest, $1.85 liquidating interest, and in addition thereto, the sum of $13.02 designated as penalties, but which were in fact interest payments on past due payments at the rate of 1% per month.

‘(15) That said interest payments of $13.02 were the result of a provision in the note which stated that in default of the payment of any monthly installment one per cent per month should be charged upon said monthly payment, whether said default was one day or more.’

As conclusions of law, the court found:

‘(1) That the interest paid on past due payments, at the rate of one per cent per month, aggregating $13.02, was in excess of the maximum rate of interest allowed and permitted by law and was therefore usurious.

‘(2) That plaintiff is entitled to recover three times $13.02, or $39.06, together with costs fixed at $15 and disbursements of this action.’

From a judgment accordingly entered on July 20, 1943, defendant appeals. Respondent filed a motion for review.

Winter & Koehler, of Shawano, for appellant.

Orville S. Luckenbach, of Shawano, for respondent.

MARTIN, Justice.

It is concluded that the regular interest rate on the $800 loan was nine and eight-tenths per cent per annum. If the penalty of one per cent on defaulted monthly installments must be considered as interest, then the total interest on the loan exceeded the maximum rate provided in sec. 115.05 to the extent of $13.02. Said section provides: ‘Maximum rate. No person, company or corporation shall, directly or indirectly, take or receive in money, goods, or things in action, or in any other way, any greater sum or any greater value, for the loan or forbearance of money, goods, or things in action, than at the rate of ten dollars upon one hundred dollars for one year; and in the computation of interest upon any bond, note, or other instrument or agreement, interest shall not be compounded, nor shall the interest thereon be construed to bear interest, unless an agreement to that effect is clearly expressed in writing, and signed by the party to be charged therewith.’

Sec. 115.06 provides: ‘Contracts for excessive rate. All bonds, bills, notes, assurances, conveyances and all other contracts or securities whatever, whereby there is reserved or secured a rate of interest exceeding ten dollars on one hundred dollars for one year, shall be valid and effectual to secure the repayment of the principal sum loaned; but no interest shall be recovered on such securities or on any money or other thing loaned by such contract except upon bottomry and respondentia bonds and contracts; and no corporation shall interpose the defense of usury.’

The instant action was brought under sec. 115.07(1), Stats., which provides: ‘Every person who, for any such loan or forbearance, shall have paid or delivered any greater sum or value than is above allowed to be received, may, by himself or his personal representative, recover in an action against the person who shall have taken or received the same, or his personal representatives, treble the amount of the money so paid or value delivered above the rate aforesaid if such action shall be brought within one year after such payment or delivery.’

Ruby Cooper died testate on the 25th day of January, 1942. Plaintiff paid defendant the balance due on principal, accrued interest, and penalties-in all, the sum of $370.23-on September 18, 1942; and commenced this action on March 18, 1943. This action was seasonably brought.

The trial court, in its decision, said: ‘* * * the provision providing for a ‘penalty’ for failure to make the payment when due is merely another way of stating that interest shall be charged on past due payments in the amount of one per cent per month. Such an interest charge is in excess of the maximum legal rate, and is therefore usurious.'

We think the court overlooked the purpose in providing a penalty of one per cent on delinquent monthly installments. If the borrower had complied with the terms of the contract and had not defaulted on the monthly installments, no penalty would have accrued. The question here involved was treated by the court in the case of Fisher v. Otis, 1850, 3 Pin. 78. That action was founded on a note and mortgage executed in Racine county, Wisconsin, payable one year after date, with interest after due at the rate of twelve per cent payable semiannually at the city of Boston, Massachusetts. Under the Massachusetts law the maximum interest rate was six per cent. At that time...