55 Iowa 424 | Iowa | 1880
Lead Opinion
I. The plaintiff was organized under the general incorporation law in 1868. Two of the mortgages were executed prior to .the passage of the curative act, Code/
It is, we think, quite evident there is no substantial differ
The amount loaned in no instance could exceed the par value of the stock owned by the borrower.
But on the supposition 'the payments will cease at the end of nine years, how will the account stand. The money actually received is $900. During the period of one hundred and eight months the defendant would pay $1,439.44. If he paid only ten per cent interest on the money actually received, the amount would have been $1,350. There is, and can be, no doubt that an agreement to pay ten per cent per annum on $1,000, when only $900 was loaned, is usurióus. Because of the plan of the association, this, it is said, is not the transaction or effect in the case at bar; that there is in fact no loan, but a mere advance of the ultimate value of the stock. But if this ultimate value is reached sooner than it otherwise would be by reason of usurious interest exacted and paid, does it not, nevertheless, constitute usury? The name given the transaction, as if it be called a loan, advance or purchase of shares, is not a controlling circumstance, but these parties designated it a loan. The defendant made written application for a loan, and it was made. The name of the plaintiff implies that it is a loaner of money, and we are authorized to infer from the record that this was its sole business. There is no pretense it ever engaged in the erection of buildings; we shall, therefore, designate this as a loan, which in form it was. It is said there must be an agreement that the money lent will be repaid without condition or contingency. In support of this proposition Burrows & Prettyman v. Cook & Sargent, 17 Iowa, 436, and other cases are cited. As applied to the case then in hand, we are not prepared to say such general proposition is not correct, but there is another proposition equally true, that it matters not what may be the form or device adopted; if more than the legal rate of interest is exacted on the money loaned it constitutes usury. . Code, § § 2079, 2080.
If the plaintiff had obtained only $500 and given his obligation to pay ten per cent interest on $1,000 for twenty years, and providing the principal was not to be repaid, the contract would be usurious, and it would make no difference if he ceased paying interest at the end of one year, because it is the contract or agreement which constitutes usury, and not the amount paid. It is quite apparent, therefore, we think, it is not absolutely essential that in all cases there must be an agreement to repay the principal. If this were so, devices could readily be adopted which would render the statute nugatory. Beside this, the proposition that the principal is not to be repaid is hardly sound. It is preposterous to suppose that the non-borrowers who own stock would be willing on business principles to permit their money or that of the institution to be loaned or advanced to other shareholders which was never to be repaid, unless they reaped some advantage therefrom greater than the loss of the pi’incipal. It may be as claimed, for aught we know, that associations like the plaintiff constitute important factors in the business of the country, and that they enable a class of persons, who otherwise would not be able to do so, to erect and procure homes for their families. Nevertheless, they are not charitable institutions, but are conducted on sharply defined business principles.
It was held in the Blackburn Case, under the curative act,
It is urged that the defendant at the time the loan was made was indebted to the plaintiff in the sum of one hundred dollars, and instead of paying the money over it was deducted from the amount loaned. If this be essentially true usury cannot lie predicated on such a transaction. But this supposed indebtedness is, we think, wholly imaginary. Had it existed, why not call it so instead of a premium. The only indebtedness of the defendant consisted of the monthly dues, and it is not claimed that any portion of such dues were due at the time the loan was made.
Whether A. 0. Heider was made a defendant does not appear. The cross-petition was filed by J. J. Heider only, and the answer purports to have been filed by a single defendant. The referee recommends a judgment against J. J. Heider only. Under these circumstances we are warranted in inferring that A. C. Heider did not plead usury, and J. J. Heider .having assumed, in consideration of the conveyance of the mortgaged property, to pay the mortgage, we are unable to see why he should be permitted to escape doing so by jfieading and establishing usury. He is a stranger to the contract and voluntarily undertook to pay the mortgage; not a part, but the whole, and we think he should do so. No one but a party to the contract can be permitted to plead usury. This view, is sustained by Hollingsworth v. Swickard, 10 Iowa, 385, and other cases cited in 2 Withrow & Stile’s Digest, 1091, Sec. 52.
Upon this mortgage the referee found there was due $404.11, and this must stand as the amount due. The court found there was nothing due on the mortgage, because it was tainted with usury.
III. For the mortgage executed in 1876, the defendant insists there was no consideration. Both the court and referee found againbt him in this respect, and he has not appealed. But if he had appealed and the cause were triable de novo, which we greatly doubt, we should not disturb this finding. The court correctly found this mortgage to be usurious. The decree must be affirmed in every particular
Modified and affirmed.
Rehearing
ON REHEARING.
Our attention has been called, in a petition for rehearing, to a mistake in the foregoing opinion in stating the amount the defendant would pay at the end of nine years, if he paid ten per cent interest on the money loaned and repaid the principal. The result reached, is not, we' think, affected by the mistake. .We have reexamined with care the whole record, and are of the opinion a rehearing should not be granted.
It would be useless to state at any greater length than has been done the reasons upon which our conclusion is based. The petition for rehearing is
Overruled.