Tipton v. Ellsworth

• Decision Date: 10 May 1910
• Parties: ROBERT TIPTON et al., Respondents, v. EPHRIAM G. ELLSWORTH et al., Appellants
• Court: Idaho Supreme Court

109 P. 134

18 Idaho 207

ROBERT TIPTON et al., Respondents, v. EPHRIAM G. ELLSWORTH et al., Appellants

Supreme Court of Idaho

May 10, 1910

FORECLOSURE OF MORTGAGE-FRAUD-WAIVER OF-USURY-ATTORNEY'S FEE-BADGE OF FRAUD-BANK EXCHANGE-COVER FOR USURY-NOTE AND MORTGAGE-CONFLICT BETWEEN-DEFAULT IN PAYMENT-PENALTY FOR-PAYMENT OF INTEREST-STIPULATION FOR-SEPARATE PROPERTY OF WIFE-CONTRACTS OF WIFE.

(Syllabus by the court.)

1. Held, that there was no fraud, deception or failure of consideration in the contract for the sale of the land involved in this case.

2. Where an original contract has been made for the purchase of land and under that contract the purchasers take possession of the land and have full opportunity to ascertain all of the facts in regard to the water rights and roads connected therewith, and thereafter procure the seller to waive the contract and to deliver them a deed for the premises, and execute a mortgage for the purchase price upon different terms from that provided by the original contract, they thereby waive any question of fraud in the original contract.

3. Under the provisions of subd. 5 of sec. 3459, Rev. Codes, an attorney's fee may be legally stipulated for in case payment shall not be made at maturity, and such stipulation is not a usurious contract.

4. A stipulation to pay bank exchange on borrowed money is not usurious unless it appears that such stipulation is a device to cover a usurious contract and it was not intended that the money should be remitted to the place to which exchange is provided.

5. Where the provisions of a promissory note, secured by mortgage, vary from the terms of the mortgage, the provisions of the note must control.

6. Where it is stipulated in a promissory note that "the whole sum of both principal and interest shall become immediately due and collectible at the option of the holder of the note" if payment of interest and principal instalments are not made when due, such stipulation is a penalty, and will not be enforced as to the interest not yet earned on the principal.

7. Held, that Mrs. Ellsworth is one of the principals upon the promissory notes involved in this case and not a surety.

8. Under the laws of this state, a married woman may bind her separate property jointly by her contract for her own or her husband's debt.

APPEAL from the District Court of the Second Judicial District, for Nez Perce County. Hon. Edgar C. Steele, Judge.

Action to foreclose real estate mortgage. Judgment for plaintiff. Affirmed.

Judgment affirmed, with costs in favor of respondent.

Ben. F Tweedy, E. J. Doyle, and G. Orr McMinimy, for Appellants.

The decree is erroneous because it destroys the equity of redemption, not only of Ephriam G. Ellsworth, but also of Mrs. Ellsworth. A separate sale of the property should have been decreed because, under our statute, such sales are made subject to the right of the owner to redeem. (Raun v Reynolds, 11 Cal. 14-21.)

"The decree should have provided for a sale of the property embraced in each mortgage to satisfy the particular debt, and no other." (Strode v. Miller, 7 Idaho 16, 59 P 893.)

"A wife who has mortgaged her separate property for her husband's debt is in the position of a surety. When he has mortgaged or pledged his own property for the same debt, his property should in the first instance be applied to satisfy the mortgage." (1 Jones on Mortgages, 4th ed., p. 93, sec. 114, and cases cited.)

In consideration of the question of usury, "the subject of inquiry in such cases is whether or not a contract has been made whereby, either directly or indirectly, a greater rate may be charged than that authorized by law." (Ford v. Wash. Nat. B. & L. Assn., 10 Idaho 30, 109 Am. St. 192, 76 P. 1010.)

The notes upon their face show no necessity of transmitting the money paid to any other place within or out of the state, and the promise to pay exchange on New York is a mere device to collect interest, and is not an agreement to pay actual expenses of exchange on New York, there appearing upon the face of the note no necessity for the shipment of the money to New York or elsewhere to make payment of the notes. (Siter v. Sheets, 7 Ind. 132; Wood v. Cuthberton, 3 Dak. 328, 21 N.W. 3; Towslee v. Durkee, 12 Wis. 480; Stevens v. Lincoln, 7 Met. (Mass.) 526; Rock County v. Wooliscroft, 16 Wis. 22; Pacill v. Woods, 2 Ohio Dec. 381; Butterick v. Harris, 1 Biss. 442, 2 F. Cas. No. 2256.)

"Usury cannot be sanctioned under any name or guise, and where usury is contracted for, directly or indirectly, party making the loan cannot, under our statutes, recover any interest or cost." (Stevens v. Home Savings & Loan Assn., 5 Idaho 741, 51 P. 781, 986; Vermont Loan & Trust Co. v. Hoffman, 5 Idaho 376, 95 Am. St. 196, 49 P. 315, 37 L. R. A. 509; Cleveland v. W. L. & S. Co., 7 Idaho 477, 63 P. 885.)

The provision of the second Guernsey mortgage for the payment of attorney's fees is simply another device to collect interest, for there can be no such expense for collection of interest, separate and apart from the collection of the principal; there can be only one attorney fee contracted for legally; therefore, it must be a device to get interest upon interest in the guise of attorney's fees. (Towslee v. Durkee, 12 Wis. 544.)

Eugene A. Cox, and E. O'Neill, for Respondents.

No warranty of title was made by the plaintiff. In the ordinary contract of purchase and sale there is an implication that the conveyance to be made thereunder will transfer the title to the property; but, in the absence of any special agreement upon the subject, it is incumbent upon the vendee to examine the title for himself, and to point out any objections he may have to the title tendered him by the vendor. (Easton v. Montgomery, 90 Cal. 307, 25 Am. St. 123, 27 P. 280; Goodell v. Sanford, 31 Mont. 163, 77 P. 522; Lake v. Churchill, 39 Wash. 318, 81 P. 849; Lee v. McClelland, 120 Cal. 147, 52 P. 300.)

In the absence of fraud, the acceptance of a deed merges all of the prior transactions and agreements of the parties into the deed itself, and thereafter the vendee must rely solely on the covenants in the deed. (Hampe v. Higgins, 74 Kan. 296, 85 P. 1019; Curtley v. Security Savings Society, 46 Wash. 50, 89 P. 180; Robison v. Robison, 44 Ala. 227.)

If an independent examination is made, the vendee cannot claim that he relied upon the vendor's representations, and no rescission will be granted on the ground that such representations were false. (Attwood v. Small, 6 Cl. & F. 232, 7 Eng. Reprint, 684; Southern Development Co. v. Silva, 125 U.S. 247, 8 S.Ct. 881, 31 L.Ed. 678, 15 Morr. Min. Rep. 435; Brown v. Smith, 109 F. 26; Hill v. Bush, 19 Ark. 522; Muir v. Pratt, 18 Colo. App. 363, 71 P. 896; Brackett v. Carrico (Ky.), 38 S.W. 694; Watson v. Austin, 63 Miss. 469; Whalen v. Tipton, 31 Ore. 566, 50 P. 1016; Clapp v. Hoffman, 159 P. 531, 28 A. 362.)

Since an attorney's fee is payable to the attorney, and not to the plaintiff, that provision, whether contained in one or more notes, is not usurious. (Broadbent v. Brumback, 2 Idaho 366, 16 P. 555; Rinker v. Lauer, 13 Idaho 163, 88 P. 1057; Warren v. Stoddart, 6 Idaho 692, 59 P. 540; Jones v. Stoddart, 8 Idaho 210, 67 P. 650.)

The Guernsey notes and mortgages are not usurious on account of the provision for exchange. (Central Bank v. Bank of St. John, 17 Wis. 157; Cornell v. Barnes, 26 Wis. 473; Buckingham v. McLean, 13 How. (U.S.) 150, 14 L.Ed. 90; 1 Jones on Mortgages, 6th ed., par. 637; 29 Am. & Eng. Ency. of Law, 499; Stuart v. Saddlery Co., 21 Tex. Civ. App. 530, 53 S.W. 83; Anderson v. Creamery Package Mfg. Co., 8 Idaho 200, 101 Am. St. 188, 67 P. 493, 56 L. R. A. 554.)

The provision for payment of a higher rate, after default, is to be construed as a penalty and not as usury. The increased amount is payable, not because the borrower agreed to pay and the lender agreed to receive that amount, but because the borrower has breached his contract to make payments or perform other conditions. (Lloyd v. Scott, 4 Pet. (U. S.) 205, 7 L.Ed. 833; 29 Am. & Eng. Ency. of Law, 507; Havemeyer v. Paul, 45 Neb. 373, 63 N.W. 932; Trust Society v. Hogue, 37 Ore. 544, 62 P. 380, 63 P. 690; Omaha Loan & Trust Co. v. Hanson, 46 Neb. 870, 65 N.W. 1058.)

The note is the evidence of the debt and is the principal obligation of the debtor, the mortgage being simply incidental thereto, and, in case of variance or repugnance in their respective conditions or terms, the note will control. (Mortgage Security Co. v. Casebier, 3 Kan. App. 736, 45 P. 452.)

Under the provision that upon default the whole indebtedness shall become due and payable, such stipulation is to be construed as a penalty, which will not be enforced except upon canceling the unearned interest notes, and does not make the contract usurious. (Dugan v. Lewis, 79 Tex. 246, 23 Am. St. 332, 14 S.W. 1024, 12 L. R. A. 93; Goodale v. Wallace, 19 S.D. 405, 117 Am. St. 962, 103 N.W. 651, 9 Ann. Cas. 545.)

The mortgage indebtedness is not Ellsworth's debt; it is the joint debt of himself and his wife. Mrs. Ellsworth was legally competent to buy land, and to bind her separate property for the purchase price. She did not become a surety because she joined with her husband in the purchase, any more than she would have been a surety if she had made a joint purchase with some one else. (Bank of Commerce v. Baldwin, 12 Idaho 202, 85 P. 497; Booth Mercantile Co. v. Murphy, 14 Idaho 212, 93 P. 777; Hall v. Johns, 17 Idaho 224, 105 P. 71.)

SULLIVAN, C. J. Stewart and Ailshie, JJ., concur.

OPINION

SULLIVAN, C. J.

This action was brought by the plaintiff to foreclose three mortgages executed by the appellants. Two of the mortgages were executed by O. E. Guernsey, one to secure the payment...