Lee Construction Corp. v. NewmanLee Construction Corp. v. Newman
This is an appeal from a final decree dismissing a suit by a borrower to cancel a note and mortgage for usury, and granting the lenders’ counterclaim for foreclosure.
The appellant corporatiоn borrowed $44,000 from appellees Benjamin and Anna Newman, hereinafter called the lenders, who were doing business under the firm name and style of Benann Mortgage Company. In return the lenders received a note аnd mortgage for $52,000 payable in eight months, with interest thereon at the rate of 12.69% per annum.1 When the note matured there remained unpaid thereon $36,400 and certain interest. The lenders then accepted $2,800 for four months’ forbearance. By the time suit was filed the borrower had repaid in principal and interest the sum of $29,439.04 and there remained unpaid a principal balance of $29,900 plus certain interest.
In addition to the above facts the borrower‘s complaint alleged that in order to circumvent the usury laws the parties used a scheme to make the loan appear as a sale and profit. It was alleged that the borrowеr held a contract to buy certain lands for $52,500, which it had made in September of 1958, and was in need of $44,000 to complete the purchase. The loan amount of $44,000 was advanced by defendants on July 22, 1959. On that date the borrower assigned its land purchase contract to the lender Anna Newman. The $44,000 advanced by the defendants went to the seller of the property, which then was deeded to Anna Newman the same day. Anna and her husband immediately reconveyed the property to the borrower-purchaser. Thereupon, on said date of July 22, 1959, the borrower gave the lenders Anna and Benjamin Newman the note and mortgage involved here for $52,000.
Thе defendant lenders answered the complaint. They averred the $8,000 excess of the note over the amount loaned was taken because they understood they were to receive from the borrower а profit of $200 on each of forty parcels of land. The defendant lenders admitted they participated in the scheme or “contrivance” by executing the documents involved, but averred the scheme was thе borrower‘s idea, and denied an intent to charge usurious interest. They counterclaimed for foreclosure for the admittedly unpaid principal balance of $29,900 plus certain interest. Their position on the аppeal is disclosed by the following quotation from the argument section in appellees’ brief:
“Appellees do not now, nor did they ever in the Court below, contend that there was no loan, that there was nо understanding that the money loaned should have been returned; nor that as a result of the scheme precipitated by the Appellant, more money was to have been repaid than that which would have been paid had the statutory maximum interest been applied to the loaned principal. Appellees-Defendants’ principal defense in the Court below has been and continues to be that the Plaintiff
was the precipitating and moving party in the scheme and that there could be no showing of a corrupt or evil intent on the part of the Defendants, because no such intent ever existed.”
Appellant presented five points on appeal, which may be compressed into two: first, a contention that the transaction, despite the device used to make it appear otherwise, was a loan at a usurious rate оf interest, in violation of
“Any person, or the agent, officer or other representative of any person, lending money in this state who shall willfully and knowingly charge or accept any sum of money greater than the sum of money loaned, and an additional sum of money equal to twenty-five per cent pеr annum upon the principal sum loaned, by any contract, contrivance or device whatever, directly or indirectly, by way of commissions, discount, exchange, interest, pretended sale of any article, assignment of salary or wages, inspection fees or other fees or otherwise, or for forbearing to enforce the collection of such moneys or otherwise, shall forfeit the entire sum, both the principаl and interest, to the party charged such usurious interest, and shall be deemed guilty of a misdemeanor, and on conviction, be fined not more than one hundred dollars, or be imprisoned in the county jail not more than ninety days.” [Italics supplied]
The chancellor denied relief to the borrower on the main suit on the basis of two findings. The first was that the scheme utilized to circumvent usury was suggested by the borrower. That fact could not excuse the lenders from the effect of the usury which resulted when they embraced and participated in the scheme. The statute condemns the charging of usurious interest directly or indirectly by any scheme or device, and is opеrative regardless of whether the scheme in which the parties engage is proposed by the one or the other of them. See Beach v. Kirk, 138 Fla. 80, 189 So. 263, 269; Hormuth v. Dickson, 115 Fla. 790, 156 So. 127.
The second finding of the chancellor was that the defendants “never intended to receive or charge usurious interest.” That finding is against the manifest weight of the evidence. The device employed was wholly ineffective to evade the statute. Mears v. Mayblum, Fla. 1957, 96 So.2d 223; Griffin v. Kelly, Fla. 1957, 92 So.2d 515, 518-519; Beach v. Kirk, supra, opinion on rehearing, 189 So. 265, 268-269; 55 Am.Jur., Usury § 19. The lenders knew the prescribed rate of intеrest and were aware that the amount they were charging on the loan was more than was allowed under the usury statutes. They were not like the “unsophisticated woodsman” who was found to be without corrupt intent in an еarlier case.2 These were informed and experienced lenders. They were in the business of making loans, and admitted having engaged in from one hundred and fifty to two
Wilful violation as referred to in
“This court has held that one of the requisites of а usurious transaction is that there must exist a corrupt intent to take more than the legal rate for the use of money loaned (Clark v. Grey et al., 101 Fla. 1058, 132 So. 832), and that usury is largely a matter of intent and is not fully determined by the fact of whether the lender аctually gets more than the law permits, but whether there was a purpose in his mind to get more than legal interest for the use of his money (Benson v. First Trust & Savings Bank, 105 Fla. 135, 134 So. 493, 142 So. 887, 145 So. 182). * * *”
In the Chandler case (146 So. at 552), the Supreme Court said: “To work a forfeiture under the statute, thе principal must knowingly and willfully charge or accept more than the amount of interest prohibited by it. The evidence shows that Kendrick was an unsophisticated woodsman, and had no purpose whatever of charging more than the amount actually loaned, with 8 per cent. interest, * * *.”
Here it is established by the manifest weight of the evidence, as well as through the lenders’ admissions, that they knowingly and intentionally charged and reserved а sum which amounted to over 40% per annum on the sum loaned, and which was more than 30% per annum for the subsequent period of forbearance. The fact that they did so in reliance on a scheme they felt would prеvent those exactions from constituting a violation of the law, does not make their intentional action which resulted in the usurious contract any less wilfully and knowingly done and undertaken. Beach v. Kirk, supra.
Where the circumstances point unerringly to an intentional taking of an amount above the sum loaned which is more than the rate of interest allowed by law, and particularly where the intent to exact such an excessive amount is further indicated by the fact that an illogical or spurious transaction is entered into for the purpose of making that which is usurious appear otherwise, the lenders will not be excused from the penalties of the usury statute by pleаding ignorance of the law or that they did not intend usury. Shorr v. Skafte, Fla. 1956, 90 So.2d 604.
Accordingly, the decree is reversed and the cause is remanded for entry of a decree in favor of the plaintiffs and against the defendants as authorized under
Reversed and remanded.