Whitworth v. Davey

279 Mo. 672 | Mo. | 1919

BLAIR, P. J.

This cause was heard in the Springfield Court of Appeals (185 S. W.-241), and was certified here because one of the judges deemed the opinion to be in conflict with decisions of this court.

On March 14, 1910, appellants executed a note for $8650, payable April 1, 1913, to L. N. Manley, with interest “from date at the rate of eight per cent per annum payable semi-annually according to the tenor and effect of the interest coupons hereto attached and bearing even date herewith.” Six coupons notes were executed. The first was for $378.76 and represented the interest on the principal note from March 14, 1910, to October 1, 1910. Each of the five remaining coupons was for $346, six months’ interest on the principal note. The five fell due, respectively, on April 1, 1911, October 1, 1911, April 1, 1912, October*!, 1912, and April 1,1913. Each coupon note was expressed to bear interest at eight per cent from maturity. April 11, 1911, new notes were given to cover the interest to April 1, 1911. Each of' these drew interest at eight per cent compounded annually. June 18, 1912, appellants made the first cash payment $1539.97. A second cash payment of $717.53 was made April 29, 1913. May 7, 1914, a final payment of $9413.79 was made. Of this sum $87.75 was for publication of trustee’s notice of sale and trustee’s commission, which was paid directly to the trustee, who had advertised a sale but did not actually make it because the debt was discharged by payment on the day set therefor. The sums paid respondent were, therefore, $1539.97, on June 18, 1912; $717.53, on April 29, 1913, and $9326.94, on May 7, 1914.

The petition alleges that the “bond or obligation and coupons . . . was and is usurious and unenforceable on its face in requiring the plaintiffs to pay more than eight per cent per annum, payable semiannually for the money loaned to them; and in compounding interest oftener than once a year,” and that by reason thereof respondent was entitled to no more than his principal and six per cent simple interest, whereas he demanded and was paid the sum of $718.91 in excess of that amount. Judgment for that amount and for costs, expenses and a reasonable attorney’s fee is prayed. The trial court gave judgment for defendant.

Commissions

I. We agree with the 'Court of Appeals (185 S. W. 1. c. 247) that the sums paid the trustee for eommissi°ns and expense of publication of notice cannot be charged against respondent.

sury.

II. The petition alleges and appellants’ evidence shows that the overpayment, which they contend resulted from a usurious exaction, was made to cover semiannual interest upon interest. As pointed out by the Court of Appeals, this is an action under Section 7282, Revised Statutes 1909. This section provides for the recovery by the payor of any sum paid in • excess of the rates prescribed by the “three' preceding sections” These sections provide that (1) in the absence of an agreed rate, six per cent shall be collectible on moneys due on written contracts and accounts and in other cases in which interest is agreed to be paid, but the rate is not fixed; (2) the parties may agree, in writing, for the payment of interest, not exceeding eight per cent, ‘ on money due or to become due upon any contract,” and (3) interest upon judgments upon contracts bearing more than six per cent shall bear the contract rate, and other judgments shall bear six per cent.

In 1845 (R. S. 1845, secs. 6 and 7, p. 615) provisions permitting the compounding of interest once a year were enacted. Section 7185, Revised Statutes 1909, reads as follows:

“Parties may contract, in writing, for the payment of interest upon interest; but the interest shall not be compounded oftener than once a year. Where a different rate is not expressed, interest upon interest shall be at the same rate as interest on the principal debt. ’ ’

Under these sections it is lawful for parties to contract in writing for interest at the rate of eight per cent per annum, compounded annually. In this day and age, in the absence of a law limiting the rate of interest, there can be no usury. [Newton v. Wilson, 31, Ark. 484.] Further, unless the rate of interest exceeds the applicable statutory maximum, there is no usury in a particular case. [Black’s Law Dictionary; Webster’s International Dictionary; Parkham v. Pulliam, 45 Tenn. 497; Rosenstein v. Fox, 150 N. Y. 354; Kreibohm v. Yancey, 154 Mo. 67.] The interest contract in this case is in writing and it fixed an eight per cent rate, to be compounded semi-annually. The provision for compounding oftener than once a year was void. [Western Storage Co. v. Glasner, 169 Mo. l. c. 46, 47.] Section 7182, Revised Statutes 1909, under which this action is brought, gives a right of action, by specific reference, solely for violation of Sections 7179, 7180 and 7181. It does not purport to give a cause of action for a violation of Section 7185, which prohibits compounding interest oftener than once a year. Compounding interest in violation of Section 7185 is illegal but it is not, of itself, usury. Such is the necessary effect of the ruling in Western Storage Co. v. Glasner, supra, and that rule has the support of reason and the great weight of authority. [Webb on Usury, sec. 127; Tyler on Usury, p. 243; Mowry v. Bishop, 5 Paige’s Ch. l. c. 103; Palm v. Fancher, 93 Miss. 785; 33 L. R. A. (N. S.) 295 and note.] The collection of compound interest is the sole basis of the charge of usury in this case. The right to compound interest is a creature of the statute. Courts denied it, not because it constituted usury, but on the ground that it was harsh and oppressive and “tended to usury.” A computation discloses that the amounts paid on the notes do not aggregate a sum equal to the amount of the principal note with interest at eight per cent, compounded annually. In view of this fact and of the principles stated, there can be no recovery in this case under Section 7182, since every right of action under that section must be grounded on usury actually paid to the creditor, and the test of usury under that section is the payment of interest in excess of the applicable statutory rate.

interest?*1

III. With most of the opinion of the Court.of Appeals we agree. In our opinion, it fell into error, when it held, as we understand its holding, that a payment of compound interest constitutes usury in every case in which it exceeds the written contract, although the total amount paid does not exceed the amount which could lawfully be exacted and paid on a written obligation. Other than the semiannual compounding feature of the contract, there is no suggestion that there was any trick, fraud or intent to cover up or secure usurious interest. This disposes of the only question raised by appellants.

The judgment is affirmed. All concur.