Florence v. New York Life Ins.

48 Ohio St. 2d 59 | Ohio | 1976

William B. Blown, J.

The issue before this court is whether a contract which guarantees a nonusuricms minimum rate óf interest, and also promises the payment of additional interest at a rate to be periodically declared by the- promissor, “stipulates” a rate of interest within the meaning of R. C. 1343.01 and 1343.08.

R. C. 1343.01, at the time the contract contested in this causé was entered into, provided, in pertinent part:-

-“The parties-to a bond, bill, promissory note, or other instrument of writing for the forebearaneeí or payment of money at any- future time may stipulate therein for the payment' of interest upon the amount thereof at' any. rate not exceeding eight per cent per annum payable annually.” (Emphasis added.)¹

“ R. C. 1343.03 supplements R. C. 1343.01' (no,w!;1343.-01 [A]) "by providing that “when money .becomes ¡due: and payable” to judgment creditors or.to creditors.Upon any “instrument of writing” not covered by R. C. 1343.01 and 3343.02; “the creditor is entitled to interest at-the.rate:of six per cent per annum, and no more.” ' 7

Appellee contends that, his New York Life insurance contract does not contain a stipulated rate of interest, -as that term is applied in R. C. 1343.01, because any interest above the three percent guaranteed minimum is not based on a “stipulated, numerical rate, or a stipulated-basis for arriving at a numerical rate.” He contends further that, since-the-policy’s provision for interest does-,not, comply with R. C. 1343.01, he is due the six percent statutory rate of interest provided by R. C. 1343.03. '■■■./ . ;'

Appellee’s argument that he deserves six percept; 4nr terest on his life insurance contract applies only.‘if the contract does not comply with R. C. 1343.01;., The “legislative intent” behind R. C. 1343.01 was “merely to. regulate the legal.rate of interest” (see New York Trust Co. v. Detroit T. & Ry. Co. [C. A. 6, 1918], 251 F. 514, interpreting an earlier Ohio statute which is a' predecessor of R. C. 1843.01),. and not to insure equal rates .of return on all instruments covered by the statute, as appellee’s argument seems to imply. To fall within the terms of R. C. '1343.01, one must merely (1) be a party to an appropriate contract and (2) stipulate any rate of interest not exceeding eight percent per annum payable annuaj-ly.

An insurance policy is an appropriate written instrument under R. C. 1343.01.² Appellee, as owner and beneficiary of the policy, is a party to that written instrument. Appéllee makes no assertion that he did not understand the terms- of the contract when he signed it or that his agreement to: the contract was the result of fraud or duress. The policy'makes a legally enforceable promise of a three percent minimum interest rate on lump sum death' benefits. Since New York Life’s promise of a minimum interest rate is legally enforceable, the contract “stipulates”; a rate of interest under R. C. 1343.01. Since that stipulated rate does not exceed “eight per cent per annum payable annually,” the stipulated interest rate is not usurious.

Given the fact that his contract with New York Life contains a stipulated, nonusurious, minimum rate of interest, appellee’s concern for precise measurement of the interest above the three percent minimum' guaranteed by New York Life is misplaced. It is irrelevant whether that additional: interest, as appellee contends, is based on a “stipulated numerical rate or a stipulated basis for arriving at a numerical rate.” The enforceable promise of a nonusurious minimum interest rate brings appellee’s contract with New York Life within the terms of R. C. 1343.0Í, and the statutory rate of interest provided by R. C. 1343.03 does not apply to this cause.

■ For the foregoing reasons, the judgment of the Court of Appeals is reversed.

Judgment reversed.''

O’NbULL, C. J., HERBERT, CORRIGAN, SlERíT, CeLEBREZZE and P. Brown, JJ., concur.

1 At the present time, R. C. 1343.01(B) excepts from the..usury rate, those contracts, in which “the original amount of the principal indebtedness stipulated’. * * *' exceeds., one hundred thousand dollars.” Él,!c!;1343:01(B) also excepts from usury limitations certain: contracts secured jby/stocks, bonds and other securities, instruments! ¡secured by jmortgh'é.éSr insured "by: the . federal' government or with interest rates limited to. three .percent -ab,ove-the discount rate on -ninety-day commercial .paper, and. .certain,, contracts, calling for payment on demand W ¿n, ójúe, iristallpifent. R. C. 1343.01(A) is .essentially the samé as former R. C. 1343.01.

2 The usury statute is applicable wherever the relation of debtor and creditor is formed by any instrument of writing for payment of money at any future time. Midwest Properties Co. v. Renkel (1930), 38 Ohio App. 503. An insurance contract is such an instrument of writing. Furthermore, other jurisdictions with statutes similar to R. C. 1343.01 and 1343.03 have held insurance policies to fall within their usury laws. See Di Leo v. United States Fidelity & Guaranty Co. (1964), 50 Ill. App. 2d 183, 200 N. E. 2d 405, 9 A. L. R. 3d 1399.