Whitworth v. Davey

• Decision Date: 15 April 1916
• Docket Number: No. 1593.,1593.
• Citation: 185 S.W. 241
• Parties: WHITWORTH et al. v. DAVEY.
• Court: Missouri Court of Appeals

185 S.W. 241

WHITWORTH et al. v. DAVEY.

No. 1593.

Springfield Court of Appeals. Missouri.

April 15, 1916.

Appeal from Circuit Court, Jasper County; Joseph D. Perkins, Judge.

Action by A. M. Whitworth and others against Thomas N. Davey. From judgment for defendant, plaintiffs appeal. Reversed and remanded, with directions, with the further order that the cause be certified to the Supreme Court.

Frank L. Forlow, of Webb City, for appellants. Paul N. Davey, of Joplin, and R. A. Mooneyham, of Carthage, for respondent.

FARRINGTON, J.

This is a suit based on section 7182, R. S. 1909, brought to recover an alleged payment of usurious interest by the plaintiffs to the defendant. Judgment in the trial court was for the defendant, and plaintiffs have appealed.

On March 14, 1910, the plaintiffs procured a loan from L. N. Manley of $8,650 and secured the same by a deed of trust on certain real estate in Jasper county, Mo., and at the same time executed and delivered to Manley a note with six coupon interest notes attached, three of which were to fall due annually, and three semiannually, the principal note to fall due in three years from April 1, 1910. The principal note and the coupon interest notes bore interest at the rate of 8 per cent. per annum — the interest on the principal note for the three-year period being evidenced by the coupon notes referred to, and the interest on the coupon interest notes running from their maturity. On March 15, 1910, Manley assigned the note and coupons to the defendant Davey who was at all times thereafter the owner until paid. Each coupon note was for $346, except the first, which was for $378.76, and this was on account of adding to that coupon the interest from March 14, 1910, to April 1, 1910. When the interest became due (represented by the first coupon note) on October 1, 1910, it was not paid, nor was the second coupon note paid which fell due April 1, 1911, but the plaintiffs executed two new notes aggregating $739.91. There was included in these two notes aggregating $739.91 the sum of $15.16, which sum represented interest that was due April 1, 1911, on the (first) coupon note that had fallen due October 1, 1910; in other words, the interest on the first coupon note was compounded at 8 per cent. in six months, and included in the two notes, heretofore referred to, given in settlement of the first two coupon interest notes. The notes aggregating $739.91, which were given by the plaintiffs as above related, and in which was included an overcharge of $15.16, were not in fact paid by the plaintiffs until June 18, 1912. On May 7, 1914, a second mortgagee paid for plaintiffs the amount claimed by the defendant and had the deed of trust released.

The facts show that the plaintiffs never paid nor did the defendant ever take a sum greater than the principal lent and interest thereon computed at 8 per cent. per annum compounded annually for the time the plaintiffs had the use of the money borrowed.

I. The plaintiffs brought this suit to recover the amount claimed as usury paid, together with the penalty as provided by the laws of this state including a reasonable attorney fee, and contend first that the contract set forth in the principal note was usurious as well as the contract made in the coupon notes, and that the defendant, by compelling the plaintiffs to pay usurious interest at the very first settlement made, by taking notes therefor, could thereafter only legally charge 6 per cent. interest, and could not collect the contract rate of 8 per cent., and that all interest paid for the use of the money under the facts of this case in excess of 6 per cent. the plaintiffs were entitled to recover back in this action.

Appellants (plaintiffs) in their brief say:

"It stands admitted that the court allowed the defendant 8 per cent. per annum payable annually, although the evidence, oral and written, showed that the defendant charged and exacted usury from the plaintiffs."

It seems to be the theory of the appellants that because interest was compounded oftener than once a year and was included in the two notes aggregating $739.91, they are given a cause of action for the interest paid thereafter in excess of 6 per cent. per annum, or that because the defendant took said notes for interest containing an overcharge, then from and after taking them, irrespective of when they were paid, or that when paid the plaintiffs still owed a balance in excess of the payment on the principal recoverable under section 7182, R. S. 1909, such payment of said notes constituted usury. In making this contention appellants have confused two of the sections of our statutes which refer to usury. The one on which they base this suit (section 7182) clearly gives a cause of action when the borrower has paid and the lender has taken money — on the one hand where it is in excess of the lawful rate when fixed by written contract, or on the other where no rate is agreed upon in writing and absent a written contract it is taken in excess of the legal rate or 6 per cent. In a written contract the maximum rate allowed under section 7180 is 8 per cent. per annum; where the contract is not written the legal rate of interest is 6 per cent. per annum. It is the last-mentioned per cent. that is referred to as the "legal rate." See McDonnell v. De Soto Sav. & Bldg. Ass'n, 175 Mo. 250, 75 S. W. 438, 97 Am. St. Rep. 592; Arbuthnot v. Brookfield Loan & Bldg. Ass'n, 98 Mo. App. 382, 72 S. W. 132.

In speaking of section 7182, the Supreme Court, in the case of Long v. Abstract & Loan Co., 252 Mo. loc. cit. 167, 158 S. W. 307, said:

"The very purpose of this statute was to fully protect the debtor against usurious contracts, by authorizing him to recover by suit from the creditor all sums of money paid to him over and above the legal or contractual rate of interest, which could not have been done prior to its enactment."

Appellants' contention, as hereinbefore stated, is that the evidence showed that the defendant "charged and exacted" usury. This does not give a cause of action under the section above referred to, but is a ground for cancellation of a chattel mortgage or lien on personal property as provided in section 7184, R. S. 1909; and in reading the cases on usury, where the courts have given certain expressions concerning usury, the character of the proceeding under consideration in the particular case must be borne in mind, as it is manifest that a court in deciding a question under section 7184, R. S. 1909, would speak of usury where more than a lawful rate of interest had been received or exacted, and its language would not necessarily be applicable to a case where it is sought to recover usurious sums of money paid in excess of the principal and a lawful rate of interest on any loan by the borrower. For example, in the case of J. I. Case Threshing Machine Co. v. Tomlin, 174 Mo. App. 512, 161 S. W. 286, the court said:

"If the sum charged or exacted for the use of money loaned exceed the legal interest, it is usury no matter what words it may be clothed in."

There the court was passing on the validity of a chattel mortgage and was construing that case in the light of section 7184.

The law governing our case on this question has been settled by the St. Louis Court of Appeals in the case of Lawler v. Vette, 166 Mo. App. 342, 149 S. W. 43, wherein it is held that the mere taking of a note which contains usury does not give rise to a cause of action under section 7182, unless the note was given and taken as payment, and that not only must the amount charged as usurious interest or some part thereof have been paid, but the amount actually borrowed and the lawful interest thereon must also have been paid before any amount can be recovered as usury under section 7182.

It is also held, in Seaver v. Ray, 137 Mo. App. loc. cit. 82, 119 S. W. 527, that the forfeiture of interest under the section therein referred to (section 7183) is of the usury in excess of the lawful rate; such usury is to be considered a payment and goes to a reduction of the principal.

The decision in the case of Lawler v. Vette, supra, is supported by the authorities therein cited, and is manifestly a proper construction of this statute. We therefore adopt it as the law of this case on the point being considered.

On turning to what was done in this case as to actual payments of money, we find that on March 14, 1910, the plaintiffs executed a note for $8,650, bearing interest at the rate of 8 per cent. per annum, payable semiannually, with a provision that if interest be not paid when due it would become principal and bear interest at the rate of 8 per cent. per annum.

The contract on its face was unlawful in part (section 7185, R. S. 1909) because it provided for the compounding of three of the coupon notes — those falling due on October 1st of each year bearing interest at 8 per cent. after maturity — which compounded interest oftener than once a year. This alone, as the case relied upon (Lawler v. Vette, supra) holds, is not a sufficient ground upon which to base an action under section 7182.

The facts further show that the first money actually paid by the plaintiffs was the sum of $1,539.79. The next payment was made on April 29, 1913, of $717.53, which amount is claimed by the appellants to contain an overcharge of $13.63 paid on the semiannual coupon note to April, 1913; yet at that time there remained due on the note practically all of the original sum borrowed. The last payment, which was made on May 7, 1914, was $9,326.04, which amount, added to the two previous payments of money, does not in the aggregate exceed the amount of the loan, plus 8 per cent. per annum compounded annually, but which does, we hold, exceed the amount legally due under this note. With the provision as to compounding contained in the three coupon notes falling due on October 1st of each year made void under section 7185, to hold that the defendant was...