Cynthiana Building & Loan Ass'n v. Florence

| Ky. Ct. App. | Feb 24, 1900

JUDGE HOBSON

delivered the opinion of the court.

Appellees filed this action to recover of appellant $193.74, alleged usury paid it by them. They averred in their petition that they became members of the association, and subscribed for fifty-eight shares of installment stock, on April 16, 1895; that they borrowed from it on these fifty-eight shares of stock $5,800, to secure which they also executed to it a mortgage on a tract of land; that the loan was made on condition that they would pay thereon in monthly dues $34.80, as premium $29, and as interest $29, making in all (dues, interest and premium) $92.80 a month; that they made a number of payments on the debt monthly until December, 1896, and on November 26, 1897, paid appellant $4,895, which was $193.04 in excess of the balance then due, at the rate of six per centum per annum, and was usury.

Appellant filed an answer admitting the execution of the contract, and the payment of the sums of money set out in the petition, but alleging that at the time appellees subscribed for their stock, and executed the note and mortgage, it was doing business as a building and loan association under the statutes of the State, by which it was allowed to charge, in addition to interest, a premium on the use of the money loaned; that appellees, in their contract, accepted the terms providing for interest and premium on the loan, and made the payments as agreed until this court rendered a decision to the effect that the statute was- unconstitutional; that they then demanded a settlement with appellant, and demanded credit on the principal of their debt for a sum equal to the amount of premiums, initiation fees, and all fines paid by them, so as to make them bound only for the original debt and six per centum interest; that the additional credit so claimed amounted to $581.50; that appellant denied their right to this credit; that it had sustained loss and paid running expenses; that appellees, as stockholders, should bear such a part of said loss and running expenses, as would make this fall proportionately on each member, and that their part thereof amounted to $193.74, but, to save litigation, a compromise was made, and accepted by both parties, whereby appellees paid it $147, instead of $193.74, and were credited by $434.50, the balance of the credit claimed by them; that said agreement -was made through appellees’ attorneys, and was a final settlement of the differences between the parties; that it was thoroughly understood; that appellees were apprised of all their rights, and paid the $147 in consideration that appellant would waive all further claim against them for any other expenses or losses, or any other claim or claims of whatever kind.

To this answer the court sustained a demurrer, and, ■ appellant failing to plead further, entered judgment as prayed in the petition.

The action of the court is sought to be sustained on the ground that a compromise of usury is not binding, and that, if usury is paid upon a compromise, it may, under the statute, be recovered by action brought within twelve months thereafter.

We are unable to see that this principle -has any application here. The .$147, which is all the answer admits appellant received over and above the legal interest, was' not paid as usury, but as appellees’ part of the loss and running expenses, for which appellant had a claim against them as stockholders.

The answer admits the whole $581.50 to have been usurious, and that appellees would have been entitled to credit for the full amount of it, but for its claim upon them for their part of the loss and expenses. There was no compromise of usury. The usury was all admitted. The thing in dispute was how much appellees, as stockholders, were bound to contribute to make up their just part of the loss and running expenses. The parties, to avoid litigation, had a clear right to agree on what this amount was; and a compromise of such a matter, if made, as alleged in the answer, fairly, deliberately and with the advice of counsel, can not' be disregarded. By the arrange ment, appellees not only had their note canceled, and the mortgage on the land released, but got rid of all liability as stockholders in the association, and terminated all connection with it, or liability to it or to its creditors thereafter.

The law delights to uphold compromises, because they keep down strife and prevent litigation. The reasons which allow usury paid upon a compromise to be recovered have no application to a compromise made in good faith of other matters not tainted with usury, and for which a legal liability existed.

Judgment reversed, and cause remanded, with directions to overrule the demurrer to the answer, and for further proceedings not inconsistent with this opinion.