DOROTHY W. KROLL v. CURT WINDSOR, ALSO KNOWN AS CURTIS H. WINDSOR, JR.
No. 38,041
Supreme Court of Minnesota
December 16, 1960
107 N. W. (2d) 53
John C. DeMoss, for respondent.
LOEVINGER, JUSTICE.
Suit for recovery of money loaned, plus interest, in which usury is asserted as a defense.
Defendant sought a loan of $2,000 from the plaintiff. About the same time, plaintiff transferred certain lots to a third party for $3,900, concurrently signing a contract for deed to repurchase the same lots in 6 months for $4,850, plus 5-percent interest. Out of this $3,900, plaintiff loaned $2,000 to defendant upon an agreement that defendant should repay $2,450 in 6 months, plus 5-percent interest.
When defendant failed to repay plaintiff, suit was brought for $2,450 plus interest at 5 percent from the date of the loan. Defendant pleaded that the agreement was void as usurious.
The case was tried to the court without a jury. After trial, the
The issue is whether or not the $450, representing approximately half of plaintiff‘s cost of securing the $3,900, in addition to interest, can properly be charged to defendant without violating the usury statute.1
It is the general rule that actual and reasonable expenses incident to the loan of money may be legally collected from the borrower, although if considered as charges for the use of money they would cause the transaction to be usurious.2 Such expenses may include the cost to the lender of procuring the money loaned.3 However, any charge by the lender to the borrower which results, directly or indirectly, in giving the lender a greater return for the use of money than is allowed by law is usurious.4
Assuming, as found by the trial court, that the transaction by which plaintiff secured $3,900 was a loan, then the charges paid by plaintiff for the use of this money were obviously usurious. This presents the question whether the cost of paying a usurious rate for money is an actual and reasonable expense which the lender may pass on to the borrower. We find no case precisely in point. However, it seems clear that the payment of a usurious charge for money cannot
In addition, we cannot overlook the fact that plaintiff‘s cost of obtaining the money in this case is not an actual expense at all. Assuming that plaintiff borrowed the money at a usurious rate, she was not bound to repay either the principal or the interest.5 Having repaid the principal and interest, she was legally entitled to recover the full amount of interest so paid.6 Consequently, if we permitted plaintiff to recover of defendant in this suit, she might then sue the third party from whom she had borrowed to recover the interest she had paid and thus be enriched far beyond the rate permitted by statute.
On the other hand, if the transaction by which plaintiff secured the money which she loaned was not in itself a loan but was, as it appeared to be on its face, a sale of certain lots with the right to repurchase them at a greater price, then the difference in sales and purchase prices was not a cost to plaintiff of obtaining the money loaned. In that event, this amount would not be an actual expense to plaintiff of the loan to defendant, and the agreement between the parties would be clearly usurious.
Upon no theory can a usurious charge paid by the lender for the use of money loaned be held to be an actual and reasonable expense which the lender is entitled to charge the borrower.
Reversed.
THOMAS GALLAGHER, JUSTICE (dissenting).
I am of the opinion that this case is governed by Stevens v. Staples, 64 Minn. 3, 65 N. W. 959. There is no contradiction that the money
DELL, CHIEF JUSTICE (dissenting).
I concur in the dissent of Mr. Justice Thomas Gallagher.