Plaintiff sued defendant for balance due on debt evidenced by promissory note and to foreclose on collateral security.
The point in controversy in the trial court was whether plaintiff had reserved and collected usurious interest for which defendant counterclaimed. Otherwise there was no question as to the amount.
Essential facts are that plaintiff was engaged in the business of lending money and also of selling interest-bearing certificates of investment in plaintiff's company to the investing public. When this particular transaction originated defendant gave plaintiff their note for $10,870 due in one year, with interest at 10 per cent per annum after maturity, and assigned as security certain bills receivable or open accounts, and a certain installment certificate of investment in plaintiff's company for $10,870, which was then issued to defendant. Plaintiff made an advance deduction of 8 per cent interest for one year on the face amount of the note. Defendant was to pay for the investment certificate in 12 monthly installments, 11 at $500 each and one at $5,370. The installment certificate accumulated interest at 3 per cent on each payment made on it, and when it was paid up it could be surrendered in payment of the note or the note could be paid otherwise and the certificate held as an investment. The plaintiff sold its investment certificates to persons who were not borrowers and made loans to persons who were not owners or purchasers of investment certificates when there was other satisfactory security. The plaintiff is supervised by the Oklahoma State Bank Commission and is duly licensed to sell its investment certificates.
In this action the defendant sought to go back to three or four former borrowing transactions with plaintiff. Each of them was handled in substantially the same manner as to the installment certificate feature. Defendant sought to connect them up with the present transaction, and it was his theory that the installment payments he made were payments on his note to plaintiff, and that such payments, together with the advance interest deductions on all of the several transactions, amounted to the payment of interest in excess of 10 per cent per annum.
A jury was waived, and after hearing all the evidence the trial court found that the several borrowing transactions were each separate and distinct from the others, and also that in each instance, and particularly in the present *Page 557 instance, the purchase of the investment certificate was separate from the borrowing of the money. The trial court found that the installment payments were knowingly made on the purchase price of the installment certificate involved in this action, and were not made as payments on the loan.
There was testimony that the defendant never saw the installment certificate here involved, but it was shown that at the time plaintiff received the note sued on, the plaintiff gave defendant a book containing 12 coupons in which appeared a form of the installment certificate. The coupons were numbered consecutively from 1 to 12, each bearing the certificate number and specifying that payment was to be made monthly in the sums above set out. Opposite each coupon was a stub on which appeared the following:
"When properly stamped this stub is a receipt for the amount of your monthly payment which is applied on your installment investment certificate."
It seems clear from the evidence that the installments were paid by defendant according to and upon this plan, and that the trial court properly so found.
It does not appear that this court has heretofore passed upon the exact business plan here involved. We have passed upon similar situations in building and loan company cases. Aetna Building Loan Association v. Hahn, 82 Okla. 110, 198 P. 331; Collins v. Industrial Savings Society, 78 Okla. 319,190 P. 670, and Collings v. El Reno Bldg. Loan Ass'n, 175 Okla. 216,52 P.2d 57.
The reasoning of those cases supports the finding and conclusion of the trial court here.
The defendant urges that such rule should be restricted to building and loan cases, and while, as above stated, this court has not heretofore passed upon the exact business plan here involved, we find that the question has been considered in other jurisdictions.
In Morris Plan Co. of Springfield v. Lillie, 265 Mass. 98,163 N.E. 749, the court considered a plan which was quite similar, if not almost identical, and it was there reasoned that the installment payments were made on the installment certificate of investment, and the action of the trial court in directing a verdict for recovery against the borrower was sustained.
Under citation of Masaba Loan Co. v. Sher, 203 Minn. 589,282 N.W. 823, we observe consideration by the Supreme Court of Minnesota of three cases involving loans under the Morris Plan with the use of installment certificates, wherein it was held that the taking of the installment payments on the certificate while the loan was maturing did not render the loan usurious. The court there stressed the fact that at maturity the borrower could elect to pay the note and keep the certificate as an investment, and the theory was followed that the purchase and sale of the certificate was properly treated as separate from the lending of money to the borrower.
In Simpson v. Smith Savings Society, 178 Ark. 921,12 S.W.2d 890, the Supreme Court of Arkansas considered a case in which the borrower suffered an advance deduction of 10 per cent for one year's interest and agreed to purchase an installment investment certificate for an amount equal to the loan, paying therefor in ten equal monthly installments, the certificate accruing interest at 4 per cent on the payments made on it and present the right of the borrower at his option to pay his note and retain ownership of the investment certificate, but in the beginning assigning it as collateral security to his note. The court there reached the same conclusion and affirmed the trial court treating the purchase of the certificate as severable from the borrowing of the money, and emphasizing the rules that the burden of proving usury rests upon the party alleging it, and that usury will not be inferred where from the circumstances shown the opposite conclusion can be reasonably and fairly reached.
In Mondie v. General Motors Acceptance *Page 558 Corp., 178 Okla. 584, 63 P.2d 708, we pronounced the rule as follows:
"To prove usury in a transaction the evidence must be clear and cogent. Usury is never presumed. A party in pleading usury assumes the burden of proving that there was a loan of money and that the contract for a loan was for a greater than the legal rate of interest. Where the issue of usury is submitted to the jury on the evidence and the jury returns a verdict against a party, the party is bound thereby."
In this case, upon jury waiver, the trial court was satisfied and found that the evidence disclosed a legitimate business transaction between the parties, and that the defendant had failed to show that usury was charged, and found that the plaintiff did not make use of its business plan or the sale of its investment certificate as a cloak or subterfuge for the exacting of usurious interest, and we are convinced that the record supports that finding and conclusion.
Our attention is directed to the conclusion of this court in Security Thrift Syndicate v. Tidwell, 190 Okla. 377,123 P.2d 955. There the particular plan of doing business was so arranged as to taint the considered transaction with usury, and we upheld the trial court in so finding. That case, however, is clearly distinguished upon the facts from this case and from our conclusion in the building and loan company cases. In that case, the Security Thrift Syndicate Case, we emphasized the fact that the lending company never sold its so-called "thrift bonds" to the public as investments; that they accumulated no interest upon installment payments made thereon; that the lender made no loans without the borrower purchasing a so-called thrift bond; that there was no option in the borrower to keep them as an investment, but that they must be used and given up in liquidating the loan. We there pointed out the clear distinction between that situation and a situation like the one in this case and in the building and loan company cases. In the Security Thrift Syndicate Case the trial court from all the evidence found that the business plan was nothing more than a cloak and subterfuge for the collection of usurious interest, which conclusion we found to be justified, but chiefly by reason of the facts which distinguished the situation there disclosed, and which bound the so-called "thrift bonds" to, and made the same a part of, the money-lending transaction, and prevented any possible separation of the two at any time.
We have again considered the distinguishing language used in that opinion and apply the same as distinguishing the circumstances of this case from that one.
The judgment appealed from is affirmed.
CORN, C.J., GIBSON, V.C.J., and DAVISON and ARNOLD, JJ., concur. RILEY, OSBORN, BAYLESS, and HURST, JJ., dissent.