Tiller v. Cincinnati Discount Co.

• Decision Date: 01 June 1937
• Citation: 270 Ky. 685,110 S.W.2d 420
• Parties: TILLER v. CINCINNATI DISCOUNT CO.
• Court: Kentucky Court of Appeals

110 S.W.2d 420

270 Ky. 685

TILLER v. CINCINNATI DISCOUNT CO.

Court of Appeals of Kentucky

June 1, 1937

As Modified on Denial of Rehearing December 7, 1937.

Appeal from Circuit Court, Jefferson County, Chancery Branch, First Division.

Suit in equity by the Cincinnati Discount Company against Armand A Tiller, who filed a counterclaim. From the judgment, the defendant appeals.

Reversed.

Richard Priest Dietzman and Steinfeld & Steinfeld, all of Louisville for appellant.

Booth &amp Conner and Walter Huffaker, all of Louisville, for appellee.

STANLEY Commissioner.

The appellee, the Cincinnati Discount Company, brought suit in equity against the appellant, Armand A. Tiller, alleging in substance and effect that the defendant had been its agent to collect installment payments due on conditional sales contracts assigned to it by F. M. Tiller; that since the death of F.M. Tiller, the defendant had been engaged in the same business of selling musical instruments and had himself transferred similar contracts to the plaintiff, with the agreement that he would collect the amounts due thereon and make weekly remittances; that he had made, and was continuing to make, large collections without remitting the same according to the terms and contracts of agency and assignment; that he had refused to desist making the collections and to disclose names and addresses of the purchasers whose salary contracts had been sold to the plaintiff. An injunction was asked against the defendant and an accounting and judgment prayed according to the itemized statements filed with the petition.

The answer traversed the allegations of the petition respecting the nature of the relationship and the transactions between the parties and other material things. As a counterclaim, it was averred that the defendant and his father, F. M. Tiller, for a number of years had conducted a piano business in Louisville; that, after the father's death, he had individually carried it on; that between the years 1921 and 1932 he and his father had borrowed from the plaintiff $250,000 at various times and in various sums and had repaid to it $350,000, the last payment being made March 1, 1935; that of the sum so paid in excess of $63,400 was usury. It was further alleged that the defendant and his father had pledged to the plaintiff conditional sales contracts and mortgages executed by their customers, including those mentioned in the petition; that the plaintiff had treated the account for money so advanced as a loan to F.M. Tiller and the defendant as one continuous account, and had charged same to the defendant and demanded payment thereof from him. Judgment for $63,400 with interest from March 1, 1935, was asked.

The plaintiff filed a motion that the counterclaim be made more specific and set out the date each alleged loan was made, the amount and the collateral pledged, the dates of repayments and the amounts, and the computation of what would be legal interest. The motion was sustained. An amended answer and counterclaim was then filed. In it the defendant averred he had no knowledge or record of the respective dates or sums borrowed by his father or himself, nor the collateral pledged to secure each loan, nor the repayments made (except copies of a small portion of the items, which had been furnished him by the plaintiff), nor did he have within his knowledge or record the amount of interest due on each of the loans referred to or the dates of payment of the $63,400 of usury. It was further alleged that neither he nor F. M. Tiller kept such records. This amendment averred that the plaintiff was in possession of all the detail facts, and he, the defendant, was not, and that the only way the amount of usury involved in the account sued on could be ascertained was by a full disclosure of the facts by the plaintiff. Interrogatories addressed to the plaintiff, asking for the respective dates and amounts of money paid to F. M. Tiller and the defendant and the dates and sums repaid by them, were attached. The pleading prayed that the plaintiff be required to answer the interrogatories and asked all equitable relief.

A demurrer was filed to the counterclaim as thus amended and also a motion to strike it. In support of the motion an affidavit was filed stating the volume and character of the business transactions between the parties and showing that great expense would have to be incurred in order to make the disclosures sought by the counterclaim and the interrogatories. The court sustained the motion and ordered the counterclaim as amended and the interrogatories stricken. The defendant declined to plead further with reference to the counterclaim and it was dismissed, but made a part of the record for purposes of appeal.

The transactions described in the pleadings seem to be such as are regarded as borrowing and lending rather than sales or assignments. Home Bond Company v. McChesney, 239 U.S. 568, 36 S.Ct. 170, 60 L.Ed. 444.

It is a familiar rule that a counterclaim is to be measured as is a petition. By such measurement this pleading was not sufficient. A blanket statement that during the period of eleven years the defendant and the one whom he represented paid to the plaintiff $350,000, of which $63,400 was usury, is but a conclusion. It alleges usury without facts and is too indefinite and general to authorize a judgment that there was usury and a recovery for a definite sum. Latham v. Glasscock, 10 Ky.Law Rep. 77; Blythe v. Hardy, 3 Ky.Op. 693; Boyd v. Smoot, 5 Ky.Law Rep. 119; 22 Enc., Pleading & Practice, 430, § 7; 66 C.J. 298; Kase v. Bennett, 54 N.J. Eq. 97, 33 A. 248. See, also, Woolfolk v. Thomas, 164 Ky. 43, 174 S.W. 739; Winberg v. Camp Taylor Development Company, 264 Ky. 612, 95 S.W.2d 261. But coupled with these general allegations is the prayer for discovery and a demand for an answer to interrogatories. If allowed and given it would enable the pleader to cure the defect of his pleading. Without it he cannot possibly do so. The right to have that information from the adverse party is the particular question before the court.

Ordinarily the right of discovery authorized by the modern code of practice is strictly incidental to the pleading only as affords facility of proof. It is an accessory to the suit to recover. Having properly pleaded material operative facts, there may be discovery of evidence or the compulsion of production of documents in the possession of the adversary party to be used in establishing the pleaded facts. In short, there must be a case well stated in order to authorize it. King's Adm'r v. Evans, 6 Ky.Op. 114; Marion National Bank v. Abell's Adm'r, 88 Ky. 428, 11 S.W. 300, 10 Ky.Law Rep. 980; Childs v. Missouri, K. & T. Ry. Co. (C.C.A.) 221 F. 219; General Film Company v. Sampliner (C.C.A.) 232 F. 95; Gasoline Products Company v. American Refining Company (D.C.) 12 F.2d 98; 18 C.J. 1066. If there be no sufficient statement of a cause of action, the incidence of discovery falls with the principal.

But this case is peculiarly ruled by a statute and not by the code of practice.

Section 2219, Statutes, after declaring all contracts and assurances made directly or indirectly for the loan or forbearance of money at a greater rate than legal interest shall be void as to the excess interest, and expressly authorizing recovery thereof, provides: "A court of equity may grant relief for any such excess of interest, and to that end compel the necessary discovery from the lender or forbearer."

In Pearce v. Hedrick, 13 Ky. (3 Litt.) 109, decided in 1823, may be found an interesting discussion of the procedure followed in seeking relief from usury. The statute of that day subjected the lender to the loss of his whole debt where usury was pleaded and proved. Yet it also provided that: "Any borrower of money or goods may exhibit a bill in chancery against the lender, and compel him to discover, upon oath, the money or thing really lent, and all bargains, contracts or shifts, which shall have passed between them relative to such loan, or the re-payment thereof, and the interest or consideration for the same; and if thereupon it shall appear that more than lawful interest was reserved, the lender shall be obliged to accept his principal money without interest or other consideration, and pay costs; but shall be discharged of all other penalties."

The opinion interprets the statute as giving the party oppressed, or the borrower, the right of election between proceeding at law or in equity. If he proceeded at law, he might save the entire debt, but could not avail himself of the chancery remedy of discovery, even by way of extracting evidence to be used at law. If he proceeded in equity, he could have discovery and repayment of usury and interest, but was compelled to pay the principal of his obligation. Such was the predecessor to our current statute which now serves only to purge the obligation or to permit recovery of usury.

The question we have before us is narrowed. Is the right of discovery allowed by the statute to be as circumscribed as that allowed by the code in its several applications? Is it also incidental so as to require likewise a good pleading of a cause of action for the recovery of usury? The intention of the Legislature at the time of the enactment of a statute is controlling. This calls for some historical research in the genesis and development of the statute in order to ascertain what it means.

The...