Stinson v. Bisbee

• Decision Date: 23 October 1934
• Docket Number: 6114
• Citation: 55 Idaho 38,37 P.2d 236
• Parties: ALVENA STINSON, Respondent, v. CLARENCE E. BISBEE and JESSIE ROBINSON BISBEE, Husband and Wife, Appellants
• Court: Idaho Supreme Court

37 P.2d 236

55 Idaho 38

ALVENA STINSON, Respondent, v. CLARENCE E. BISBEE and JESSIE ROBINSON BISBEE, Husband and Wife, Appellants

No. 6114

Supreme Court of Idaho

October 23, 1934

USURY-CONTRACT NONUSURIOUS IN INCEPTION - SUBSEQUENT USURIOUS TRANSACTION-APPLICATION OF USURY PAYMENTS TO ORIGINAL INDEBTEDNESS.

1. Contract which in its inception is unaffected by usury is not invalidated by any subsequent usurious transaction, and usury payments made under subsequent usurious transaction will be applied on original indebtedness.

2. Note and mortgage bearing legal rate of interest were not rendered usurious by payment of compound interest in accordance with custom of mortgagors in such transactions without any request by mortgagee, but compound interest paid was deductible from principal sum (I. C. A., sec. 26-1905 to 26-1907).

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. Adam B. Barclay, Judge.

Appeal from judgment and decree of foreclosure determining contract not to be subject to penalty of usury. Affirmed.

Judgment affirmed, with costs to respondent.

J. H Barnes, for Appellants.

Knowingly taking or receiving compound interest, in the absence of an agreement in writing, forfeits all interest called for by the contract, and interest already paid must be deducted from the principal indebtedness. (C. S., sec. 2554; I. C. A., sec 26-1907; Cleveland v. Western Loan etc. Co., 7 Idaho 477, 63 P. 885; Madsen v. Whitman, 8 Idaho 762, 71 P. 152; Curtis v. Western Reporting & Credit Co., 39 Idaho 784, 230 P. 771.)

Turner K. Hackman, for Respondent.

Where voluntary payments of usury are made they cannot be set up in an action on the original debt, where the original debt itself was not usurious. (27 R. C. L. 248; Pollard v. Baylor's Devisees, 4 Hen. & M. (14 Va.) 223, 233 (1809); Parker v. Cousins, 2 Gratt. (43 Va.) 372, 44 Am. Dec. 388.)

BUDGE, C. J. Morgan and Holden, JJ., concur, Givens, J., concurs in the conclusion. Wernette, J. , dissents.

OPINION

BUDGE, C. J.

Alvena Stinson, assignee of C. H. Stinson, instituted this action to foreclose a real estate mortgage given to secure the payment of a promissory note in the principal sum of $ 1,500, payable three years after date, with interest at the rate of ten per cent per annum, dated December 28, 1926, and made and executed by appellants as renewals of a note and mortgage in like amounts and with like terms, dated November 21, 1923, which evidenced and secured a loan of $ 1,500, made by C. H. Stinson, since deceased, to appellants. Defendants Bisbee affirmatively alleged in their answer that they had paid compound interest to plaintiff's assignor; that they had never agreed in writing for the payment of compound interest upon said loan; and that the exaction thereof was the taking, receiving and retaining, with knowledge and intent on the part of Charles H. Stinson, of a greater rate of interest than is allowed by law. The evidence is without conflict to the effect that it was appellants' custom to make interest payments due upon the note by check. On some nine occasions, occurring at intervals during the entire loan term, appellants in addition to the interest payments gave to C. H. Stinson checks for small sums ranging in size from fifty cents to six dollars and five cents, amounting in all to the sum of $ 25.20. These checks had written thereon the notation that they were for compound interest or for the use of delinquent interest, appellants testifying that these notations were on the checks when delivered to C. H. Stinson. These checks were accepted and cashed by C. H. Stinson or by Mrs. Stinson. From a judgment in favor of plaintiff, defendants appeal.

A determination of the question of whether, in the absence of a written agreement for compound interest (I. C. A., sec. 26-1906) there was such a taking, receiving, reserving or charging a rate of interest greater than is allowed by law within the meaning of I. C. A., section 26-1907, as to render the transaction subject to the consequences of usury prescribed by I. C. A., section 26-1907, answers all of appellants' assignments of error.

I. C. A., section 26-1907, provides that:

"The taking, receiving, reserving, or charging a rate of interest greater than is allowed by this chapter, when knowingly done, shall be deemed a forfeiture of the entire interest which the contract carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representatives, may recover back the amount of the interest thus paid from the person taking or receiving the same. . . ."

The case before us appears to be rightly governed by the rule which finds support in many cases that: A contract which, in its inception is unaffected by usury, is not invalidated by any subsequent usurious transaction, and that usury payments made under a subsequent usurious transaction should be applied on the original indebtedness. The rule is stated in 66 C. J., section 194, page 243, as follows:

"A contract not tainted with usury in its inception will not be affected by subsequent usurious transactions in connection therewith, such as payments on account of interest in excess of the legal rate, or contracts to make such payments. In order to render the transaction subject to the consequences of usury because of usury it must have been so tainted in its inception, although such illegal payments or contracts to pay may well be usurious and void or unenforceable in themselves. Usury payments made will be applied on the original indebtedness."

"A contract which, in its...