Wilson v. Conner

• Decision Date: 14 June 1932
• Citation: 142 So. 606,106 Fla. 6
• Parties: WILSON et ux. v. CONNER et al.
• Court: Florida Supreme Court

142 So. 606

106 Fla. 6

WILSON et ux. v. CONNER et al.

Florida Supreme Court, Division B.

June 14, 1932

Suit by Roger Conner and wife and the Knight Construction Company against Edmund J. Wilson and wife. From the decree defendants appeal.

Reversed with directions for modification. Appeal from Circuit Court, Dade County; Paul D. Barns, Judge.

COUNSEL

S. J Barco, of Miami, for appellants.

Walsh Beckham, Farley & Ellis, of Miami, for appellees.

OPINION

DAVIS J.

Appellees brought foreclosure proceedings to which the defense of usury was interposed by the answer. The mortgage was given to secure the payment of a note in the principal amount of $10,000 payable on or before two years after date, with interest thereon at the rate of 8 per cent. per annum, payable semiannually in advance.

At the time the note was executed, the lender reserved the sum of $1,552.25, by reason of which there was turned over to the mortgagors only the sum of $8,447.75. The $1,552.25 so reserved was made up of items as follows: For one year's advance interest on $10,000 at 8 per cent. $800; for bonus for making the loan, $500; and for expenses to the appellees in connection with the making of the loan, $252.25. The latter item of $252.25 appears to have been attorney's fees and expenses which the mortgagees required the mortgagors to pay incidental to the perfecting of the title to the land given as security, and was made up of an item of $150 for clearing record title of defect, $100 for having title examined and services of counsel in closing, and $2.25 for having the mortgage recorded. These items appear to have been deducted from the sum lent before it was turned over to the borrowers.

A master found that there was due to the mortgagees $9,500 for principal; no interest on this amount being mentioned. The decree was for the principal sum of $9,500; for taxes and improvement liens payable, $1,550.72; interest on the latter to December 10, 1928; expense of abstract, $13, and $825 for complainant's attorneys, and the defendants appealed after having applied for and been denied a rehearing by the chancellor. The contention made here is that the final decree is erroneous as to amount, because of the usury established in the transaction which formed the basis of the suit, and that it should be materially reduced by the infliction of the statutory penalties applicable to those who exact usurious interest.

Our statutes (sections 6938, 6939, C. G. L., sections 4851, 4852, R. G. S.) provide that it shall be usury and unlawful to reserve, charge, or take for any loan, or for any advance of money, or for forbearance to enforce the collection of any sum of money, a rate of interest greater than 10 per cent. per annum, either directly or indirectly, by was of commission for advances, discount, exchange, or by any contract, contrivance, or device whatsoever, whereby the debtor is required or obligated to pay a sum of money greater than the principal sum received, together with interest at the rate of 10 per cent. as aforesaid. The penalty for violating the statute is the forfeiture of the entire interest charged, contracted to be charged, or reserved, when the violation is willful, and it is further provided that, when such usurious interest is 'taken or reserved, or has been paid, either directly or indirectly,' then and in that event the offender who has violated the statute shall forfeit double the amount of such usurious interest 'so reserved, taken or exacted.'

Since the chancellor in this case did not allow the appellant's claim that the sum of $252.25, hereinbefore referred to, was to be considered as a part of the interest being charged by the appellees, rather than a bona fide payment to indemnify appellees for expenses incurred in connection with getting adequate security for their loan, and since the proof on this point is not clearly to the effect that the exaction of this item was a mere device or subterfuge to increase the amount of the interest being demanded, we shall eliminate it from consideration and deal with the case on the assumption that the appellants applied for a loan of $10,000 and executed a mortgage for that amount, but only received from the lender the sum of $8,700 in cash; that is, the amount of $10,000, less $800, for one year's advance interest and $500 for the so-called 'bonus.'

Our statutes on the subject of usury (sections 3104-3106, Gen. Stats. 1906) were before this court in Purvis v. Frink, 57 Fla. 519, 49 So. 1023 and Pervis v. Frink, 61 Fla. 712, 54 So. 862. They were there construed to mean that the 'actual principal sum received' in a transaction such as we have now before the court is to be understood as referring to the actual amount of money which the lender turns over to the borrower when the note is signed and the loan completed.

Since Purvis v. Frink, supra, the provisions of the General Statutes of 1906, above referred to, have been amended by the Legislature (see chapter 5960, Acts 1909). Nevertheless, their meaning and effect remains the same as was decided in the case just cited. The changes in the statute which were wrought by the 1909 amendment were by way of strengthening the original legislative prohibitions against usury so as to forestall and denounce in terms certain specific subterfuges and devices by which the statute had, prior to the 1909 amendment, been evaded, thereby defeating its purpose.

In the case at bar, the 'actual principal sum received' by the lender must be considered as being $8,700, under the rule announced by this court in Purvis v. Frink, supra. That such was the holding of the court in the last-cited case has been confirmed by us by an examination of the original court files of that appeal in the archives of the Supreme Court.

Notwithstanding the actual principal sum received was only $8,700, the borrower in this case was required to sign, in addition to the mortgage, a negotiable promissory note which obligated the promisor to pay back to the lender, for the use of this $8,700 at the end of the first year of the loan, a total sum of $10,800. Thus the lender by this means charged for the use of $8,700 for one year, advance interest of $800, plus a bonus of $500, plus a year's interest on $10,000 at 8 per cent., or, in other words, $800 additional interest to be paid at the end of the year. This was accomplished by the execution of the promissory note which required the payment of 8 per cent. per annum interest on the state fictitious principal of $10,000 for the period beginning with its date and running until maturity.

The note signed was negotiable, and, because of this fact, was more than a mere contract to pay the amounts represented by it. By the terms of the usury law, the negotiation of this note into the hands of an innocent holder for value without notice would have irrevocably fixed the right of such holder to enforce its collection, even as...