Richeson v. Wood

• Decision Date: 24 March 1932
• Citation: 158 Va. 269
• Parties: H. T. RICHESON AND OTHERS v. BEN WOOD.
• Court: Virginia Supreme Court

Page 269

158 Va. 269

H. T. RICHESON AND OTHERS v. BEN WOOD.

Supreme Court of Virginia, Richmond.

March 24, 1932.

Present, Campbell, C.J., and Holt, Epes, Hudgins and Gregory, JJ.

1. PAROL EVIDENCE — Consideration — Showing True Consideration by Extrinsic Evidence. — Where the consideration for a written contract is mentioned therein merely by way of recital and is not a contractual term of the contract, the general rule is that the true consideration for the contract may be shown by either party by extrinsic evidence, although it is different from that expressed.

2. PAROL EVIDENCE — Illegal Contracts — Contract Legal on its Face. — The parol evidence rule has no application to prevent the introduction of extrinsic evidence to prove that a written contract, legal on its face, was in fact made for an illegal consideration, or was otherwise illegal in its inception. In such a case the proof offered goes to show that the written contract is, in whole or in part, without legal force, and not to vary or contradict the terms of a legal contract.

3. PAROL EVIDENCE — Illegal Contract — Merger of Parol Contract in Written Contract. — Where the contract is illegal in its inception the parol agreement cannot be said to be merged in the pretended written agreement, for it is only by virtue of its superior obligation that a written contract has the effect of extinguishing the verbal contract upon which it is founded; and, of course, when it has no obligation, it can have no such effect.

4. ILLEGAL CONTRACTS — Usury — Contract Giving Broker an Exclusive Sale-Agency for Certain Property for Ten Years — Case at Bar. — The instant case arose upon a contract under which plaintiff, a landowner, gave to defendants, real estate and loan brokers, an exclusive sale-agency contract for certain property for ten years. Plaintiff alleged that this contract was usurious.

Held: That the contract was not on its face usurious.

5. USURY — Parol Evidence Showing that Contract Legal on its Face was Usurious. — An usurious contract is illegal in its inception. The borrower may, therefore, always prove by extrinsic evidence that the contract, though legal on its face, was in fact made for an usurious consideration. This is true, though the written contract may be a sealed instrument which on its face is complete, states a legal consideration, and shows no appearance of usury; and though such extrinsic evidence may vary, add to, or contradict the written instrument.

6. USURY — Parol Evidence Showing that Contract Legal on its Face was Usurious — Relevant and Material Evidence to Show Real Consideration. — For the purpose of showing that a contract legal on its face was in fact made for an usurious consideration, all evidence relevant and material to show the real consideration for which the contract was made is admissible, including evidence showing the facts and circumstances leading up to, connected with and attending the making of the contract, the acts done in pursuance thereof, and, where relevant, the agreements collateral thereto.

7. PAROL EVIDENCE — Borrower Having Introduced Evidence to Show that Contract Legal on its Face was Usurious — Lender Introducing Parol Evidence in Rebuttal. — When a borrower has alleged and introduced evidence tending to prove that a written contract, legal on its face, was in fact illegal in its inception, because executed by him for an usurious consideration, upon that issue, the lender, or other party seeking to support the legality of the contract, may, without violating the parol evidence rule, introduce any competent extrinsic evidence, which is relevant and material to show that the contract was in fact executed for a legal consideration. And this is true though such evidence may tend to vary or contradict the terms of or recitals in the written instrument, or tend to prove a consideration different from either that expressed in the contract, or alleged by the borrower.

8. USURY — Contract Legal on its Face — Issue on Plea of Usury. — Where a contract is legal on its face, the issue on a plea of usury is, what is the true consideration — not what is the consideration stated in the contract. The truth is then the proper object of the investigation, and both parties should stand on the same footing, and have an equal opportunity to establish it.

9. USURY — Contract Legal on its Face — Consideration Recited or a Contractual Term of the Contract. — Where the contract is legal on its face, the borrower by his plea of usury necessarily asserts that the written instrument is not a true memorial of the consideration for which he executed the contract. This he is permitted to do whether the consideration be therein stated by way of recital or as a contractual term.

10. PAROL EVIDENCE — Usury — Prima Facie Case of Usury. — When the borrower has introduced extrinsic evidence which makes out a prima facie case of usury, he has, until this evidence is rebutted, established that the contract is an illegal agreement, and, therefore, lacks the superior authority to merge a prior, or contemporaneous, oral agreement in the written memorial thereof. Then, until the party seeking to support the contract has rebutted this evidence and proven that the true consideration for the contract was a legal consideration, the parol evidence rule is inapplicable.

11. PAROL EVIDENCE — Where One Party has Introduced Parol Evidence Adverse Party may also Introduce Parol Evidence. — Where one party has been permitted to introduce extrinsic evidence of the facts and circumstances leading up to and connected with the execution of a written contract, the other party may introduce evidence as to the same matters, notwithstanding that the evidence offered by him tends to vary or contradict the writing.

12. USURY — Brokerage Charges — Loan Not Procured by Brokers — Case at Bar. — The instant case was an action by plaintiff against defendants to recover a sum paid to defendants by plaintiff and claimed by him to have been usurious. The evidence introduced by defendants proved that the loan was not a loan procured by them for plaintiff, but a loan made by them to him; therefore, a five per cent brokerage charged plaintiff by defendants was an usurious exaction.

13. USURY — Brokerage Charges — Loan Not Procured by Prokers — Case at Bar. — The instant case was an action by plaintiff against defendants to recover a sum paid to defendants by plaintiff and claimed by him to have been usurious. From the evidence it appeared that defendants either borrowed the money which they lent plaintiff from a bank on their note secured by plaintiff's note as collateral, or subsequently borrowed from that bank on their note, secured by plaintiff's note as collateral, an equal amount.

Held: That neither of these facts was sufficient to make this a loan by the bank to the plaintiff.

14. USURY — Brokerage Charges — Loan Not Procured by Brokers — Forbearance or Loan — Case at Bar. — The instant case was an action by plaintiff against defendants to recover an usurious payment in the form of brokerage. Defendants claimed that they procured the loan to plaintiff from a bank, but the evidence was wholly insufficient to show that the loan made by the bank was in any sense made as a loan to plaintiff, or that it was intended by the parties that the loan to plaintiff should be other than a loan made by the defendants to plaintiff. On the contrary, the evidence showed that the transaction was a forbearance for three years of the amount formerly lent plaintiff by the defendants.

Held: That it was immaterial whether the transaction was a loan or merely a forbearance of money formerly lent. It was still usurious to charge brokerage for procuring a loan when the defendants made the loan themselves.

15. USURY — Sale-Agency Contract — Loan to Landowner as Part of Consideration — Case at Bar. — In the instant case plaintiff, a landowner, gave defendants an exclusive sale-agency contract for plaintiff's land for ten years. The sale-agency contract recited that a part of the consideration for which it was executed was the procuring by the defendants of a loan for plaintiff. Though the loan was proven to have been made by the defendants instead of procured by them, the recital in this contract, though subject to contradiction, remains strong and cogent evidence that the making of this loan was a material part of the consideration for which plaintiff executed it. It established that fact until the contrary was shown.

Held: That neither the evidence admitted, nor that excluded by the court, was sufficient to overcome the recital that the making of the loan was a part of the consideration for the sale-agency contract.

16. USURY — Taking an Exclusive Sale-Agency Contract as Consideration for a Loan in Addition to Six Per Cent Interest — Case at Bar. — In the instant case defendants took a ten year exclusive sale-agency contract as a consideration for a loan, or forbearance, in addition to six per cent interest on the loan.

Held: That this constituted the taking of above the value of six per cent per annum for the loan or forbearance, and rendered the sale-agency contract usurious.

17. USURY — Taking an Exclusive Sale-Agency Contract as Consideration for a Loan in Addition to Six Per Cent Interest — Other Considerations — Case at Bar. — In the instant case defendants took a ten year exclusive sale-agency contract as a consideration for a loan, or forbearance, in addition to six per cent interest on the loan. There were other considerations for the sale-agency contract in addition to the one tainted with usury, but the contract was not so severable that any part thereof could be assigned to the usurious consideration, and the other part of the legal considerations.

Held: That the whole contract, therefore, was subject to such consequences as the statute attaches to usury.

18. USURY — Questions of law and Fact. — Whether a contract is usurious or not is generally...