Tucker v. Fouts

• Decision Date: 09 June 1917
• Citation: 76 So. 130,73 Fla. 1215
• Parties: TUCKER v. FOUTS.
• Court: Florida Supreme Court

76 So. 130

73 Fla. 1215

TUCKER v. FOUTS.

Florida Supreme Court

June 9, 1917

Appeal from Circuit Court, Pinellas County; O. K. Reaves, Judge.

Bill to foreclose mortgage by J. L. Fouts against Mrs. Virginia H Tucker. Decree for complainant, and defendant appeals. Reversed.

Additional Syllabus by Editorial Staff.

Syllabus by the Court

SYLLABUS

If a third person, in order to get some benefit for himself, or for any personal reasons, without the knowledge or consent of the borrower, pays a lender a bonus as an inducement for a loan, the borrower receiving the full amount and paying no part of the bonus and not affected pecuniarily thereby, the transaction is not an usurious one.

If a borrower promises to pay, or is in any wise obligated to pay a bonus or any part thereof for a loan, which bonus is paid or promised to be paid by a third party as any consideration for the loan, and the amount so paid or promised to be paid for which the borrower is in any wise liable is in itself, or in addition to any interest paid or promised to be paid, more than the rate of interest which the statutes of Florida allow to be charged, collected, or received, the transaction is usurious.

When a defendant sets up usury as a defense, the burden of proof is on him to establish it; but, when the usury is proven, the burden of proving that the holder of usurious paper purchased it before maturity without notice of the usury is upon the party relying on such purchase.

COUNSEL Chas. B. Parkhill, of Tampa, for appellant.

McKay Withers & Phipps, of Tampa, for appellee.

OPINION

BROWNE C.J. J. L.

Fouts brought a bill to foreclose a mortgage against Mrs. Virginia H. Tucker in the circuit court of Pinellas county, Fla. The bill alleges, in substance, that Virginia H. Tucker, on the 10th of December, 1914, gave to the Bank of Safety Harbor her promissory note of that date for $3,000, payable 90 days thereafter, with interest after maturity at 8 per cent.; that on the same day she executed a mortgage deed to the Bank of Safety Harbor for certain lands described in the bill, and that the Bank of Safety Harbor, for value received, assigned transferred, sold and delivered to J. L. Fouts said note and mortgage on the 16th day of March, 1915. The bill was sworn to by the complainant.

Attached to the bill and made a part thereof is an assignment of the mortgage and note to J. L. Fouts, dated March 16, 1915, and the notarial certificate affixed to the assignment shows that it was executed on March 16, 1915. To this bill the defendant filed her answer, setting up by way of defense that the Bank of Safety Harbor did willfully and knowingly charge her $475 as interest on the principal sum of $3,000 lent by said bank to defendant for a period of 90 days, and that she gave the bank a promissory note for $400 payable 90 days thereafter; that the note for $400 was signed and executed by the Espiritu Santo Springs Company, a corporation of which the defendant was at the time president and a holder of the majority of the stock, and that upon the completion of the transaction the sum of $3,000 so borrowed was placed to the credit of the Espiritu Santo Springs Company, which company checked it out from the bank and used the same. She prays that the principal sum of $3,000 and all interest thereon be forfeited to the defendant.

On the succeeding rule day the complainant filed an amendment to his bill of complaint, wherein he alleges that the assignment of the note and mortgage to him by the Bank of Safety Harbor was made on March 6, 1915, and that he was a bona fide purchaser of the note and mortgage for value before maturity and without notice. To the bill as amended the plaintiff filed her answer, which was substantially the same as the answer to the original bill, except that it denied that for value received the Bank of Safety Harbor assigned, transferred, and delivered to the complainant all its right, title, and interest in said note and mortgage on March 6, 1916, and denies that John L. Fouts was a bona fide purchaser of same for value before maturity and without notice.

The complainant filed his replication, and testimony was taken before a master, and a decree rendered by the circuit judge in favor of the complainant for the sum of $3,333.32, and $250 solicitor's fees. From this final decree the defendant takes her appeal.

There are six assignments of error, but only the first five are argued by appellant, and as these present the question whether the judge erred in rendering the final decree herein, we will follow the course adopted by the appellant in his brief, and discuss them together.

The first question presented for determination is, Was the initial transaction an usurious one? The charges in the answer as to the circumstances of the transaction connected with the loan are sustained by the testimony. Briefly the facts gleaned from the answer and the testimony are these: The appellant was the president of the Espiritu Santo Springs Company, and owned a majority of its stock. That extensive developments were being made by the company on its property, and it was in pressing need for money to continue the work. When the mortgage and note were executed, the $3,000 loaned thereon was placed to the credit of, and checked out by, the Espiritu Santo Springs Company, and it was the beneficiary of the loan. W. E. Sinclair was the vice president and general manager of the company and the confidential adviser and trusted agent of Mrs. Tucker. He negotiated the loan with the Bank of Safety Harbor for Mrs. Tucker. There is no doubt that a charge of $475 for a loan of $3,000 for 90 days is over 25 per cent. per annum, and comes within the condemnation of the provisions of section 5, c. 5960, Laws of 1909 (Comp. Laws 1914, § 3107b), which provides:

'Any person, association of persons, firm or corporation, or the agent, officer or other representative of any person, association of persons, firm or corporation lending money in this state who shall willfully and knowingly charge or accept any sum of money greater than the sum of money loaned, and an additional sum of money equal to twenty-five per centum per annum upon the principal sum loaned, by any contract, contrivance or device whatever, directly or indirectly, by way of commissions, discount, exchange, interest, pretended sale of any article, assignment of salary or wages, inspection fees or other fees, or otherwise, or for forbearing to enforce the collection of such moneys or otherwise, shall forfeit the entire sum, both the principal and interest, to the party charged such usurious interest, and shall be deemed guilty of a misdemeanor, and on conviction, be fined not more than one hundred dollars, or be imprisoned in the county jail not more than ninety days, or both, in the discretion of the court.'

It is contended by the appellee that because the note for $400 which was given for the loan, in addition to the $75, was the note of the Espiritu Santo Springs Company, it was a mere bonus, and that a bonus for a loan paid by a third person is not usury. A bonus paid by a third person may or may not cause a transaction to be usurious, according to the circumstances. Thus, if a third person in order to get some benefit for himself, or for any personal reasons, without the knowledge or consent of the borrower, pays the lender a bonus as an inducement for a loan, the borrower receiving the full amount and paying no part of the bonus and not affected pecuniarily thereby, the transaction is not an usurious one. This proposition is supported by the authorities cited by appellee, but neither this doctrine nor the facts in the cases cited fit the facts in the instant case. Thus in Madison University v. White, 25 Hun (N. Y.) 490, the facts were that John L. White and George C. White wanted to borrow $12,000 with which to purchase land. As an inducement to Madison University to make the loan, one Joseph Mason subscribed and paid to the university library fund $250, without the knowledge or consent of either of the borrowers, who had the full benefit of the $12,000 without paying or promising to pay any part of the bonus, or anything but the legal rate of interest. Mason gave the bonus as an inducement for the loan, so that he might make a sale of the lands to the Whites, who were to pay for the same with the borrowed money. This transaction was held not to be usurious. In the case of McArthur v. Schenck, 31 Wis. 673, 11 Am. Rep. 643, cited by appellee, A., wishing to buy a farm of B. for $2,500, applied to C. for a loan of that sum. C. refused to make the loan unless a bonus of $30 was paid. A. refused to pay the bonus. Rather than lose the sale, B. paid the bonus, and the loan was made at legal rate of interest. This transaction was held not to be usurious.

In Clarke v. Sheehan, 47 N.Y. 188, cited by appellee Sheehan entered into a verbal contract with Clarke & Allen to furnish them with his composition for converting iron into steel, for which Sheehan held a patent, to be used by them in making pump barrels. Sheehan was also to harden pipes for them if they desired, at a stipulated price, and agreed not to furnish any of the composition to any other parties. Ten days later Sheehan applied to Clarke & Allen for a loan of $500 to enable him to 'go right along and furnish * * * the composition without delay.' The parties acted upon this verbal agreement, and regarded themselves, when the loan was applied for, and agreed to be made, morally, though not legally, bound by it. On application for the loan Clarke & Allen suggested that the verbal agreement be reduced to writing, and that a bond and mortgage be executed for the $500, conditioned for the payment thereof with interest, and that Sheehan...