26 F. 727 | U.S. Cir. Ct. | 1885
The first two mortgages, dated July 10, 1872, and April, 1873, to secure loans of $175,000 and $70,000 respectively, were executed by Anson Sperry as guardian of Henry W. Kingsbury. The money was borrowed to enable him to rebuild on his ward’s real estate, and to pay off incumbrances thereon. Hernán G. Powers, as> guardian, executed a third mortgage on December 1, 1.87G, to secure a loan of .$95,000. This amount was needed to pay off overdue interest on the preceding mortgages, and an indebtedness incurred by the former guardian in rebuilding. Default having been made in the payment of interest coupons attached to each of the mortgages, the Mortgage company on November 2, 1877, exercised the right given it by the terms of the mortgages.of declaring the principal sums due, and a few days thereafter filed its bill to foreclose.
John V. Le Moyne, who at this time had succeeded Powers as guardian, filed an answer averring that the county court had no jurisdiction to authorize the execution of the mortgages for the purposes specified, and denying their validity. The minor became of age December 23, 1883, and in May, 1885, filed his answer, which, in addition to the averments contained in Le Moyne’s answer, alleged that the rate of interest contracted for was unauthorized by the charter of the Mortgage company, and that the mortgages were invalid for that reason. The mortgages were decreed to be valid on the tenth day of September last, and the amount due the complainant remains to be determined. (24 Fed. Eep. S38.) The bonds which the three mortgages were executed to secure all drew 9 per cent, interest, with coupons annexed, and in his application to the court for authority to make the third loan and execute a mortgage to secure it, Powers stated the amount of interest due from his ward at the rate of 9 per cent, upon the first two mortgages, and at the same rate on all past due coupons. On this basis $53,194.27 of the third loan of $95,000 represented interest.
It is contended for the defendants that when the principal sums became due at the election of the Mortgage company the contract provided no rate of interest, and that thereafter the loans drew the rate allowed by the statute, viz., 6 per cent. It was held in Ohio v. Frank, 103 U. S. 697, that the creditor was entitled to the contract rate up to the maturity of the debt, and thereafter the statutory rate, unless a different local rule had been established. It was also held in the same ease that a different local rule had been established in Illinois by the supreme court of that state in Phinney v. Baldwin, 16 Ill. 108, in which it was decided that a note given for a sum of money, bearing interest at a given rate, continued to bear that rate as long as the principal remained unpaid. The rate of interest, therefore, on the
One of the coupons (all being alike except as to number) reads as follows:
“Due the United States' Mortgage Company $3,150 on the first day of October, A. D. 1873, in gold coin of the United States, payable at such place in the city of Chicago, in the state of Ulinois, as the said United States Mortgage Company, their successors, legal representatives, or assigns, shall in writing from time to time appoint, and, in default of such appointment, then at the agency of said company in the said city of Chicago, being for the pay-menf of an installment of interest due on that day on my bond to the said United States Mortgage Company of this date. Conditioned for the payment in gold coin of the United States of $70,000, with semi-annual interest at 9 per centum per annum on the whole sum from time to time remaining unpaid in gold coin of the United States, said bond being made to secure a loan made to"me in like gold coin. Said payments are to be made in gold coin of the quality and fineness of the present standard of llio United States.
“Anson Sperry,
“Guardian of the estate of Henry W. Kingsbury.”
While it is true that a promise in advance in a noto or other instrument to pay compound interest will not be enforced, still coupons given by an individual or a corporation for installments of interest to mature on bonds draw interest. This, however, is upon the theory that such coupons are separate instruments, promises to pay to bearer specified sums of money at specified times, and when severed from the bonds to which they are attached possess all the essential qualities of commercial paper. Gelpcke v. Dubuque, 1 Wall. 206; Thomson v. Lee Co., 3 Wall. 331; Aurora v. West, 7 Wall. 105; Clark v. Iowa City, 20 Wall. 583. But these coupons are only such in form. They hind neither the guardian nor the ward personally; in fact they bind no one personally. The bonds and coupons are made a charge upon the ward’s real estate, and the holders cannot maintain personal actions on them; their only remedy is in equity to enforce the charge or lien. It is expressly provided in the- bonds, the mortgages, and the orders of the court authorizing the guardians to make the loans, that they are not to be personally liable, and if the incumbered real estate proves to be an insufficient security tbe Mortgage company will bayo no remedy against the guardians or Kingsbury for the deficiency. It is not pretended that the Mortgage company took the bonds or coupons supposing the guardians were personally liable. The coupons, so-called, are not commercial paper, and they do not draw interest.
Section 2, c. 74, Ill. Rev. St., provides that creditors shall be allowed interest at the rate of 6 per centum per annum on all moneys after they become due on any bond, bill, promissory note, or other instrument in writing. It is claimed that under this statute the coupons are “instruments in writing,” and drew interest at the rate of 6 per cent, per annum after they became due. Courts of equity look to the substance and not to the mere form of transactions; and we
It is not to be presumed that 'a court, whose peculiar province it is to protect persons of tender years, would charge an infant’s estate with compound interest. It was the order of the county court that gave effect to the contracts, and bound the infant’s estate. It is true that the interest on the principal sums became due semi-annually, and that instruments in the form of coupons were attached to the bonds; but this of itself w’as not sufficient to show that the court intended to charge the estate with interest on the interest installments. It is plain that the Mortgage company demanded and received out of the $95,000 loan more than was due it as interest on the first and second loans, but it is claimed by counsel for the company that so far as the third mortgage related to interest, it was an agreement to pay the past' due interest on the principal of the first and second mort
The third loan embraced compound interest on the first and second loans, and more. The excess over 6 per cent., we have already seen, can be justified on no theory. -If the exaction of this excess did not constitute usury, it was because the parties thought 9 per cent, was allowable, and they did not contemplate usury. However this may have been, the court is at liberty to award such relief under the third mortgage as will be equitable. The guardian in his answer denied the validity of the mortgages, and after attaining his majority, Kings-bury filed an answer in which he denied their validity, and endeavored to avoid payment of both principal and interest, although he had received the benefit of the Mortgage company’s money. The mortgage company has been obliged to conduct a protracted and expensive litigation. If it had promptly enforced its remedy, the property charged would have boon sold -when its value was depressed, and for not more than the amount due on the three loans. Fortunately the premises will now sell for a sum largely in excess of the incum-brance. This is an admitted fact. The defendant should, therefore, be required to pay the Mortgage company a reasonable compensation for the use of its money.
Interest will be allowed on the principal sums at 9 per cent., until the ———■ of November, 1877, when Mr. Le Moyne was appointed guardian, and thereafter on the third loan at a rate which will be equivalent to 6\ per cent, on all the loans from the last named date.