73 Wash. 380 | Wash. | 1913
Lead Opinion
— On the 18th day of June, 1907, the plaintiffs, as first parties and the defendants, as second parties, entered into an agreement in writing, reciting that the plaintiffs had
“Whereas, it is now desired (1) to stay proceedings in the foreclosure of the aforesaid mortgages, and (&) to stay and terminate all other litigation affecting said lands, and to deed Lakeside City to a trustee absolutely, with full power to sell said lands and apply the proceeds of the sale of said lands to the payment of said mortgages and other indebtedness in the manner prescribed in the deed of trust, and
“Whereas, in order to facilitate the sale of said lands by the trustee as aforesaid it is desired that Knight and Williams, the first parties, shall, in addition to staying proceedings for the foreclosure of said mortgages, agree to execute and deliver partial releases of said mortgages from time to time as herein more specifically stated.
“Now, therefore, in consideration of the premises it is agreed as follows:
“(1) That the first parties will stay proceedings in said foreclosure proceedings for the period of one year from this date.
“(2) That the first parties will release from the lien of said mortgages and each of them, as well as all other liens held by first parties, from time to time, within the period of one year, tracts or parcels of lands, upon payment to the first parties for the. amount so released as follows.”
After providing the terms upon which the releases shall be given, the agreement continues:
“(4) That for the considerations and agreements herein contained the second party shall, from this date until said mortgages, interest, costs and attorneys fees are fully paid, pay to the first parties, or their assigns, the sum of $550 for each and every month or fraction of a month that the aforesaid mortgages, interest, costs and attorneys fees, or any part thereof, remain unpaid. Provided, however, that the*382 total sum thus paid for the considerations herein expressed for the entire year during which proceedings are stayed shall not exceed the sum of $5,000. The sum so agreed to be paid shall bear interest at the rate of eight per cent per annum and shall be paid within the year during which proceedings are stayed, and before the full satisfaction of said mortgages, and if not so paid said obligation shall be construed to be a lien on the land described in the mortgage and platted as Lakeside City, and may be foreclosed in any manner provided by law, and said land may be sold and the proceeds thereof applied to the payment of said obligation, and in any suit or action which may be brought for the recovery of said payments there shall be included in any judgment which may be recovered a reasonable attorney’s fee.
“(5) That Lakeside City shall be conveyed to a reputable trustee within thirty days from this date, which trustee shall have power to sell said lands and shall be instructed to apply the proceeds of said sale or sales to the payment of said mortgages, interest, costs and attorney’s fees and other obligations of the second party as provided in the deed of trust.
“(6) It is understood that the American Investment & Improvement Company is now in the hands of a receiver, and if the court orders a sale of said lands, through the receiver, and such sale is made, this agreement shall be void.”
The mortgages referred to in the agreement were executed by the defendant corporation to the plaintiffs, were purchase money mortgages, and secured the payment of two notes drawn respectively for $15,999 and $3,000, and bear interest at the rate of six per cent per annum, the former from a date several months anterior to the date of the note, the latter from the date of the note. The defendant Lee did not sign either the note or the mortgages. The mortgage indebtedness was paid prior to the commencement of the action, without the aid of the sale and release clause in the contract. At the time the contract was made, the defendant corporation was in default in the payment of interest on the two mortgage notes some $3,000, was heavily indebted to other parties in such a manner as to embarrass it in the sale of the land, and its property was in the hands of a receiver,
“That thereupon, while the said defendants stood in great danger of losing said lands as aforesaid, the defendants agreed with the plaintiffs that if the plaintiffs would stay and suspend proceedings in said mortgage foreclosures for the period of one year, and would during the year within which proceedings were to be stayed, release from the lien of said mortgages the lands therein described in small tracts from time to time on the payment on said mortgages of the amounts agreed upon in said agreement, that the defendants would pay to the plaintiffs the sum of five thousand dollars ($5,000), with interest thereon from the date of such agreement until paid at the rate of eight per cent per annum.”
The defendants pleaded affirmatively, that the mortgage notes bore interest at the rate of six per cent per annum; that the mortgages had been paid and discharged of record; that the real consideration for the promise to pay the $5,-000 was the extension of the time of payment of the mortgage notes for one year; that the amount agreed to be paid was largely in excess of the lawful rate of interest; that at the time the contract was executed, the property of the defendant corporation was in the hands of a receiver; and that the contract was usurious. Both mortgages provide for a release of certain lands upon the payment of stipulated sums of money. There was a judgment and decree for the plaintiffs, which the defendants have brought here for review.
The consideration for the contract was two-fold: (1) Extension of time of payment of the mortgage notes for a period of one year from the date of the execution of the contract,
Counsel for the respondents argue that the contract provided a scheme of liquidation, and that a charge of $1,440, the difference between the rate of interest in the mortgage notes and the rate allowed by law, could have been exacted. The latter part of the statement may be admitted, but this was not done, and the evidence shows that it was not even considered. He also argues that, in addition to the extension, the respondents lost their place upon the trial calendar. This, as counsel for appellants have pertinently suggested, is
It is argued that the clause in the contract to the effect that, if the land is sold through the receiver, the agreement “shall be void,” creates a contingency which makes the contract lawful. The word “void” as there used means only that, if the sale is made through the receiver, the contract shall terminate. The rule is, however, that the contingency provided for must put in peril some part of the principal or some part of the interest that may lawfully be reserved. This did neither. The interest reserved in the mortgage notes was subjected to no hazard. Where there is no contingency which subjects the lender to the hazard of a loss other than through a depreciation of the security or the inability of the borrower to pay, these not being classed as hazards- or contingencies, and the event happens which imposes a liability in excess of that which the statute permits, the contract is usurious. Bang v. Phelps & Bigelow Windmill Co., 96 Tenn. 361, 34 S. W. 516; Ford v. Washington Nat. Bldg. & Loan Inv. Co., supra; 29 Am. & Eng. Ency. Law (2d ed.), 486.
The respondents have cited in support of this contention Truby v. Mosgrove, 118 Pa. St. 89, 11 Atl. 806, 4 Am. St. 575. It affords them no comfort. The court there said that, where the lender risks the principal with the chance of getting interest exceeding the lawful rate, there is no taint of usury.
The last point pressed by the respondents is that the contract is lawful as to the appellant Lee, under the rule announced by this court in Grubb v. Stewart, 47 Wash. 103,
The judgment is reversed, with directions to dismiss the action.
Parker, Ellis, Main, Fullerton, and Chadwick, JJ., concur.
Dissenting Opinion
(dissenting) — I .am unable to concur in the majority opinion, and will.state my reasons for not doing so.
In order to determine whether or not. this contract was usurious, it is necessary to review the situation of the parties at the time of the execution of .the contract, with a view of ascertaining its true import and the. intent of the parties. In addition.to the facts recited in the.contract, it appears that these two mortgages were being, foreclosed. The day of trial had been set for June 17, and the parties were then in court awaiting' the calling of the case, when D. H. Lee, the moving spirit in the appellant co.mpany, with his attorney, .conceived the idea of an adjustment of the difficulties facing the company which would enable it to extricate itself from
It is apparent, I think, from these facts that the equities of the case are all with respondents. By delaying foreclosure of these mortgages, the company was able to put these lots on the market with releases as sold, until it had accumulated enough money to meet its obligations and save for itself a property of value which otherwise, the chances are, would have been lost. Ordinarily the plea of usury is made by a borrower who has been made the victim of oppression, and whose" necessities have been so taken advantage.of by another as to deprive him of that freedom in contracting which the law requires and place him at the mercy of his creditor." It would hardly seem-as though such, a situation was before us. This scheme was the proposal of- the bor
“Where there is a loan, although the profit derived to the lender exceeds the legal rate, yet if that profit is contingent or uncertain, the contract, if bona fide and without any design to evade the statute, is not usurious.”
Missouri, K. & T. Trust Co. v. McLachlan, 59 Minn. 468, 61 N. W. 560, is also quoted to the effect that, where the contract has the form of a contingency, the court will scrutinize it for the purpose of ascertaining whether that contingency is a real one or a mere shift or device to cover usury. Applying these rules of law to the facts in this case, it does not seem to me there can be any question but that this contract was entered into in good faith, and that the parties at the time had no thought of the usury statute or any intent or purpose to avoid it. The appellants wanted to save their
For these reasons I dissent.
Crow, C. J., and Mount, J., concur with Morris, J.