O'Toole v. Meysenburg

• Decision Date: 02 April 1918
• Docket Number: 4879.,4875
• Citation: 251 F. 191
• Parties: O'TOOLE et al. v. MEYSENBURG et al. MEYSENBURG et al. v. O'TOOLE et al.
• Court: U.S. Court of Appeals — Eighth Circuit

251 F. 191

O'TOOLE et al. v. MEYSENBURG et al.

MEYSENBURG et al. v. O'TOOLE et al.

Nos. 4875, 4879.

United States Court of Appeals, Eighth Circuit.

April 2, 1918

Edward J. Vaughn, of Los Angeles, Cal., and John M. Moore, W. B Smith, J. Merrick Moore, and H. M. Trieber, all of Little Rock, Ark., for plaintiffs.

Marion C. Early, of St. Louis, Mo., and Rose, Hemingway, Cantrell Loughborough & Miles, of Little Rock, Ark., for defendants.

Before SANBORN, CARLAND, and STONE, Circuit Judges.

STONE Circuit Judge.

From a decree in foreclosure of deed of trust cross-appeals are here. The dispute is entirely concerned with the amount allowed by the decree. The appellants (defendants) claim that it should be materially reduced because of the inclusion of usurious items, and also because a credit should have been allowed for a sum realized in another foreclosure upon other land. The plaintiffs claim the decree should be augmented by the amount of a commission ($1,100) which was deducted by the court as usurious. The court excluded several items as usurious and gave judgment for the balance, with interest. Our determination is an affirmance of the action of the trial court, with a slight difference in the amount of the decree due doubtless to error in computation of interest.

The note secured by the deed of trust was dated April 30, 1914 and was for $38,500, bearing 6 per cent. annual interest. The foreclosure decree was of October 23, 1916, and covered this note and subsequent tax payments, with interest upon both. This note was composed of the following items: An earlier 90-day note, dated March 13, 1912, for $30,000, with interest. Of this interest $3,338.85 was unchanged in form; the remaining $450 had been included in a note for $1,000, dated June 12, 1912, with $550, which was a commission paid for an extension of the $30,000 loan. Therefore the first two items were $33,338.85 and $1,113 ($113 being interest on the $1,000 note). The next item was for $2,673.30, which represented principal ($2,500) and interest of a note given December 4, 1912, to procure a further extension. The other items, except two, were for undisputed expenditures made in connection with the property, such as taxes, abstracts, etc., which total $811.76. Of the two other items, one was the sum of $400 advanced to defendants to pay a broker for securing a loan to plaintiff, with the $38,500 note as collateral. The plaintiff refused to take a new note, unless the defendants procured such a loan for him. They were compelled to employ a broker, and borrowed this sum from plaintiff to pay the brokerage. The above items total $38,336.91. For the purpose of making the note an even amount to aid its business use, the parties added $163.09, the last item. Defendants contend that of the above items the $30,000 note, with its interest, the two notes for $2,673.30 and $1,113, and the added item of $163.09, are usurious. The $30,000 note was made up of three items-- $22,000 cash, $6,900 to additionally secure another loan, and $1,100 commission for making the loan. The cash item is not challenged. The other two are

These two items came from rather involved dealings as follows: At the time of and prior to the making of the note for $30,000, William H. Journey was the owner of 207 acres of farm land near Grafton, Ill., and at the same time his mother owned an adjoining 160 acres. The title to the farm owned by Journey, as well as to his home at Grafton, was in Meysenburg's name, but was really held by him as security for a debt of $24,000 due from Journey. Shortly before the execution of the note, Journey and other parties, desiring to acquire the Arkansas land covered by the deed of trust foreclosed in this case, had arranged a trade therefor under the following conditions: In return for the Arkansas land was to be given the farms of Journey and his mother, together comprising 367 acres, and $20,000 in cash, to be secured through a loan upon the farm property, less 20 acres; these 20 acres, containing a quarry, Journey was to repurchase for $2,000 cash and a note for $4,000, secured by mortgage on this quarry property. To make this trade it was, of course, necessary to secure the transfer from Meysenburg of the title to the Journey farm of 207 acres, which necessarily involved the release of that property as security for the above $24,000 debt. Journey's home place, the only other security for this debt, appears in the evidence as of little value, so that this step on Meysenburg's part involved the abandonment of practically all of his security for the Journey debt. Meysenburg agreed to reconvey to Journey this farm, taking thereon a deed of trust for $20,000, and to furnish the needed $22,000 cash, which was to be secured by a deed of trust upon the Arkansas property. As, however, this reduced the amount of Meysenburg's security for the $24,000 debt, it was agreed that the Arkansas property should stand as additional security up to $6,900 of the $24,000 indebtedness, so that if the Journey farm, on foreclosure, should not take care of this indebtedness, any balance should be made from the Arkansas property. As compensation or commission for his services in the above transactions, it was agreed that Meysenburg should receive $1,100, to be secured by the Arkansas property, so that the $30,000 note represented the sum of $22,000 cash and the above items of $6,900 and $1,100.

Later there was a foreclosure on the Illinois land, which resulted in a deficiency of more than the $6,900 above provided for. Under this statement it should be evident that this amount is not open to the objection that it was usurious. As to the item of $1,100, it is contended that this was a proper charge for the use of the services and credit of the plaintiff in making the exchange of the properties possible.

These services and credit were the rearrangement of certain securities for an existing indebtedness and the loan of an additional sum. We see in such no substantial difference from a commission to a lender for making a loan. The finding of the chancellor was to this effect, and should be sustained. Such commissions are usurious. 39 Cyc. 971, and citations.

Passing from the $30,000 note to the later items of the larger note which are challenged: The item of $2,673.30 was a note for $2,500 (with interest thereon) given for an extension of existing indebtedness. This was rightly found by the chancellor to be usurious as a...