Taulbee v. Hargis

• Decision Date: 26 January 1917
• Citation: 191 S.W. 320,173 Ky. 433
• Parties: TAULBEE v. HARGIS ET AL.
• Court: Kentucky Court of Appeals

191 S.W. 320

173 Ky. 433

TAULBEE v. HARGIS ET AL.

Court of Appeals of Kentucky.

January 26, 1917

Appeal from Circuit Court, Breathitt County.

Action by S. S. Taulbee against A. H. Hargis and Hargis Commercial Bank. Demurrer of A. H. Hargis to amended petition sustained and petition as to him dismissed; and judgment for plaintiff against defendant Hargis Commercial Bank. Plaintiff appeals from the judgment in favor of A. H. Hargis, and from the judgment denying a recovery against the defendant bank for any of the sums sued on in excess of the judgment, and the bank takes a cross-appeal from the judgment against it. Judgment reversed as to defendant Hargis, and affirmed as to the defendant Hargis Commercial Bank, both on the original and cross-appeals, and cause remanded. without knowledge and it gives debtor an extension of time and accepts new note and releases old note and also releases assignor from liability debtor, paying new note, cannot recover usury brought forward into it, but must look to lender.

O. H Pollard and Kelly Kash, both of Jackson, for appellant.

Byrd & Hurst, of Jackson, and Hazelrigg & Hazelrigg, of Frankfort, for appellees.

HURT J.

The appellant, S. S. Taulbee, sought to recover, in this action, the sum of $2,705.08 from the appellees, A. H. Hargis and the Hargis Commercial Bank, which he alleged he had paid to them as usury. The court sustained a general demurrer to the petition and petition as amended, as far as any cause of action was attempted to be stated, as against the appellee, A. H. Hargis, and the petition as to him was dismissed. The Hargis Commercial Bank filed an answer, and issues were formed between it and appellant, proof was taken, and upon final hearing, a judgment was recovered against it by the appellant, for the sum of $467.97, with interest from April 19, 1913, until paid, and the petition, in so far as it sought any recovery in excess of this sum against the Hargis Commercial Bank, was dismissed. The appellant appealed from both the judgment in favor of A. H. Hargis and from the judgment denying a recovery against the bank for any of the sum sued for in excess of $467.97. The Hargis Commercial Bank has taken a cross-appeal from the judgment against it.

1. The first question for determination is the soundness of the judgment, which sustained the general demurrer filed by A. H. Hargis, and resulted in the dismissal of the action, as to him. A consideration of the allegations of the petition and amended petition becomes necessary. The petition as amended shows substantially that all the money borrowed, and which was the consideration for the original note and its various renewals, was the sum of $4,743.92, borrowed on September 17, 1907, and $4,431.83, borrowed on the 19th day of September, 1908; that interest was calculated upon these amounts at 10 per centum per annum and included in the notes, and that each renewal the interest at 10 per centum per annum was ascertained upon the amount of the old note and included in the new; that these notes were all executed to A. H. Hargis, and made payable in one year from the date of the renewals, until the one executed on April 12, 1911, when the note was for the sum of $11,988.90, when it was assigned by Hargis to the Hargis Commercial Bank, and thereafter, at the request of Hargis, it was renewed on April 12, 1911, by the execution of a new note to the Hargis Commercial Bank, and payable on April 12, 1913, and that upon its execution 10 per centum per annum interest was ascertained and included in the note; that it was renewed again to the Hargis Commercial Bank, at the request of Hargis, on April 12, 1913, but within a few days thereafter was fully paid off and satisfied; that at the time it was assigned to the Hargis Commercial Bank it had full knowledge of the usury embraced in it, and that upon the payment of the second note executed to the Hargis Commercial Bank there was paid $2,705.08 usurious interest, which appellant was compelled to pay to secure the release of his property, which was mortgaged to secure the note and had been mortgaged as a security for the indebtedness from the execution of the first note. The petition was filed on the 18th day of April, 1914, and, when considering the demurrer, the averments of the petition must be taken as true. It appears that Hargis was the lender of the money, and it was he who exacted the usurious interest for its loan. The statute (section 2219, subsec. 2, Ky. St.) specifically provides that the excess of interest, over the legal rate charged for and paid for the loan or forbearance of money, may be recovered from the lender, although paid to his assignee. The petition shows, beyond question, that a large sum of usurious interest was paid by the appellant, and that the note discharged finally by him contained the usury, which was embraced in the first note and each of the renewal notes.

It is well settled that the cause of action for the reclamation of usurious interest arises when it has been paid. Marion National Bank v. Thompson, 101 Ky. 277, 40 S.W. 903, 19 Ky. Law Rep. 436; Breckenridge v. Churchill, 3 J. J. Marsh. 11; Rodes' Ex'rs v. Bush, 5 T. B. Mon. 467; Hodge v. Owings, 5 T. B. Mon. 91; Anderson v. Trimble, 37 S.W. 71, 18 Ky. Law Rep. 507; Rudd v. Anderson, 14 S.W. 340, 12 Ky. Law Rep. 489; Smith v. Young, 11 Bush, 393; Parker v. Zweigart, 56 S.W. 678, 22 Ky. Law Rep. 113.

The debtor may elect to have all payments made by him upon the indebtedness to be treated as payments, first, upon the legal interest and principal, and in such case no usury can be sued for until the entire debt has been paid. Neal v. Rouse, 93 Ky. 151, 19 S.W. 171, 14 Ky. Law Rep. 126; Hill v. Cornwall, 95 Ky. 536, 26 S.W. 540, 16 Ky. Law Rep. 97. It has often been held that the mere substitution of the name of a new payee for an old debt does not amount necessarily to a novation, and is not a payment of the usury in the old debt. The petition alleges that Hargis procured the change in the name of the payee to be made, and that the debt was finally paid to him and his assignee jointly, and that the bank did not receive the transfer in good faith, and this seems to be a transaction amounting to no more than the mere change of the name of the payee, with the assignor, in whose hands the note was usurious, as the real owner of the note.

It is insisted that the petition as amended, upon its face, shows that the cause of action against Hargis for usury embraced in the note is barred by the statute of limitations, and for that reason that the demurrer was properly sustained. The rule formerly was that if one desired to make use of the statute of limitations as a bar, he was required to rely upon it, by way of a plea in his answer, unless the petition showed, not only that the cause of action was barred, but that there did not exist any ground for the avoidance of the statutory bar. This doctrine was announced in Rankin v. Turney, 2 Bush, 555, and causes preceding it and since. The case, supra, was an action for the recovery of usury, which had been paid. The petition showed that more than one year had elapsed after the cause of action had accrued before the action was instituted. The circuit court sustained a demurrer to the petition, but upon appeal to this court, the judgment was reversed, the court announcing the above rule. Since, however, a different rule has been established, upon the theory that a defendant has a right to waive the statute, if he desires to do so, and if he would avail himself of lapse of time as a peremptory bar to the maintenance of a cause of action against him, he must interpose the statute by a plea to that effect. Baker et al. v. Begley, 155 Ky. 234, 159 S.W. 691; Yager's Adm'r v. Bank of Kentucky, 125 Ky. 184, 100 S.W. 848, 30 Ky. Law Rep. 1287; Swinebroad v. Wood, 123 Ky. 675, 97 S.W. 25, 29 Ky. Law Rep. 1202; Childers v. Bales, 124 S.W. 295; Green County v. Howard, 127 Ky. 385, 105 S.W. 897, 32 Ky. Law Rep. 243; Jolly v. Miller, 124 Ky. 115, 98 S.W. 326, 30 Ky. Law Rep. 341; Davie's Ex'r v. City of Louisville, 159 Ky. 252, 166 S.W. 969. Hence the court was in error in holding that the petition as amended did not state a cause of action against appellee Hargis, and dismissing the action as to him.

2. The facts as disclosed by the evidence, taken upon the issues made between the appellant and the Hargis Commercial Bank are not involved with any contradiction, so far as affects the rights of the bank. There is some disagreement between the testimony of appellant and appellee Hargis, who testified as a witness for the bank, as to what sums were embraced in the original note and renewals, and when it was that the 10 per centum interest was agreed to be paid and embraced in the notes, but there is not any contrariety of statement as to the amount of either of the notes, or when executed. There is not any claim by appellant of any fraud or mistake or overreaching having occurred with regard to the execution of the original note and its various renewals, but it is simply a question of how much usury was embraced in the notes and from whom appellant may reclaim it. The note for the original debt was secured by a mortgage upon the real estate and each renewal of that note was similarly secured. The notes were made payable to A. H. Hargis, but negotiable at some banking institution named in the notes, and the note which was executed on April 12, 1911, and which became due on April 12, 1912, for the sum of $11,988.90 was payable to A. H. Hargis, but negotiable and payable at the First National Bank of Jackson. On November 21, 1911, A. H. Hargis sold this note to the Ph nix & Third National Bank of Lexington, Ky. and indorsed it to the purchaser by writing his name across the...