Darden v. Schuessler

McCLELLAN, J.

The sole question on this appeal is whether the indebtedness of W. C. Darden, appellant’s deceased husband, is properly chargeable against appellant. On reference to the register to state the account between appellant and appellees, she was charged therewith, and her exceptions to the register’s report in that connection were disallowed by the chancellor. The exceptions made the points, first, that the alleged contract to assume the indebtedness of W. C. Darden (if-made, which was denied) was violative of the statute of frauds; and, second, if exempt from that criticism, it was usurious. Whether the contract was one wholly without the statute of frauds, because it was a new and independent agreement resting upon its own consideration, or wheth*376er, as made, the contract met the requirements of the statute of frauds if within it, assuming in both events the assumption by appellant of her husband’s debt, without deciding either, we are of the opinion that the contract as asserted by appellees is usurious. Hence consideration will be alone given that phase of the cause.

Generally speaking, usury is the taking of more for the use of money than the laws allow. — Woclsey v. Jones, 84 Ala. 88, 4 South. 190; Harmon v. Lehman,, Durr & Co., 85 Ala. 379, 5 South. 197, 2 L. R. A. 589; Code 1896, §§ 2626, 2630. However, it is not in every instance usury to take more than the laws allow, since an extra and reasonable sum for incidental service or expense is not interest. — Woolsey’s Case, supra. This extra sum exacted cannot, we apprehend, in any case exceed the sum of the loan; nor can it so subvert the transaction as to make the loan a mere incident of the demanded extra charge. If such was not the rule, a subterfuge to avoid the usury statutes would be invited, and the result is apparent. Under our decisions intention has been accorded a large influence in the determination of the query: Is the contract usurious? But these adjudications do not impinge upon the rule, equally sound in reason, that intention is presumed when on its face the contract is usurious. — Van Biel v. Fordney, 79 Ala. 76. It is only when the contract is not usurious on its face that intention becomes a material inquiry.

To state the case with the utmost favor to the appellee, the appellant was a pressed and distressed' debtor, >a mortgagor, to one Hyde. The possession and ownership of a large landed estate was involved in her ability to raise and pay a balance due on the mortgage debt. Her husband had died, practically insolvent, indebted to appellee to the amount of approximately $6,000, secured only by void (as to her) mortgages on her real estate. *377She applied to appellees for a loan to save the real estate from sale by Hyde, and in response appellees agreed to loan her at interest, $8,026, the necessary snm to pay said Hyde, provided conveyance of the whole land was made to them by Hyde as security to them for such loan, and for an indebtedness of about $800 due from her to appellees, and for the husband’s debt of about $6,000, which she would assume, and which appellees charged or were to charge to her on their books. She was to remain •in possession of the land for 15 years upon condition that she kept the aggregate amount then above $10,000, by February 1st of each year, at or below $9,000. Payment of the whole sum, of course, acquitted the land. The loan was made and the conveyance executed to appellees. It is conceded by appellees that the transaction was, in legal effect, a mortgage to secure an indebtedness to them. Our conclusion is that the sole and only consideration passing from appellees to appellant was the loan of $3,026. That sum was to be repaid in any event, and to that end was secured by real estate of many times that value. The maximum remuneration lawfully to be exacted for the use of said loaned sum was 8 per cent per annum. By the addition of the burden of the payment of the W. C. Darden indebtedness, a sum nearly twice the amount of the loan itself, usury was exacted . — Miller v. Life Ins. Co., 118 N. C. 612, 24 S. E. 484, 54 Am. St. Rep. 741; Shober v. Hauser, 3 and 4 Dev. & Bat. (N. C.) 222; Banking Co. v. Hagan, 1 La. Ann. 62. In the Shober Case, supra, it is said: “Nay when it distinctly appears that the lender is to receive and the borrower to part with something valuable besides the lawful interest on the sum lent and there is no consideration shown other than the loan for this additional advantage to the lender, or the consideration shown is plainly inadequate, the influence of an usurious contract is so irresistible *378that it is properly regarded as an inference of law.” Quoting from Owen’s Case, 2 Pet. (U. S.) 537, 7 L. Ed. 508, in the Hagaoi Case, supra, it is said: “A profit made or loss iinposed upon the necessities of the borrower, whatever form, shape, or disguise it may assume, where the treaty is for a loan and the capital is to be returned at all events, has always been adjudged to be so much profit upon a loan, and to be violative of those laws which limited the lender to a specified rate of interest.”

Solicitors for appellees have insisted that the case of Valentine v. Conner, 40 N Y. 248, 100 Am. Dec. 476, is decisive, in their favor, of this question. We do not think so, since that case is easily distinguishable from this by reference to the majority opinion, wherein it appears that the property in part involved had been previously sold by the defendants to the third party whose indebtedness was assumed by the borrower, and there was a claim on or against the property by them. Besides, we are unable to see how the majority declaration in the Valentine Case, supra, can be reconciled with the later announcement of broad principles found in Clarke v. Sheehan, 47 N. Y. 188. If appellees had stipulated that to secure the loan appellant must promise to pay, in addition to the legal rate of interest, $6,000, and she so agreed, and the loan was consummated, we feel sure no one would be found to say that the contract was not usurious. When, on the hypothetical case stated, she agrees to pay $6,000 by way of settlement of a third party’s debt for which she is wholly unresponsible, in our judgment, the conclusion must be the same. Here appellees, with' full knowledge of the distressed financial condition of the appellant and with the purpose to profit by her extreme necessity by compelling her assumption, without other consideration, of the very doubtful, if not val - ueless, debt of her deceased husband, agreed to and did *379loan her the amount stated. It would be difficult, indeed, to imagine a condition more perfectly within the beneficent provisions of the usury statutes.

But the appellees insist that the tenure of the appellant of the land in question affords consideration for her promise to pay the W. O. Darden debt. We cannot assent to this, for the reason that the transaction, being confessedly a mortgage to secure an indebtedness, and within a court of equity, not law, the mortgage is regarded as a mere security, and the appellant entitled, in the absence of stipulation to the contrary, to the possession. —Welsh v. Phillips, 54 Ala. 309, 25 Am. Rep. 679; High v. Hoffman, 129 Ala. 359, 29 South. 658. Besides this, the record, as it' reveals the testimony, refutes any idea on the part of the appellees but the idea, uppermost, .at all times, that the loan was made in order to secure ultimate payment of the W. C. Darden debt. In fact, it is affirmatively stated that without this inducement the loan would not have been made. If, then, the appellant was entitled to the possession pending the performance of the condition, her promise to pay the W. C. Darden debt can find no support in that as a consideration. It follows that there was no consideration for her assumption of her deceased husband’s debt to appellees, and that to the extent the agreement undertook to charge her therewith it is usurious, and in consequence the appellant is not chargeable with that indebtedness. The exceptions to the register’s report, going to the exoneration of appellant from liability for the W. C. Darden debt, should have been sustained.

The decree of the lower court is affirmed in so far as it declares the deed from Hyde to Sehuessler, trustee, dated January 11, 1895, and the written agreement between Mrs. Darden and Sehuessler, construed in connection, a mortgage for the sum lawfully due them from *380her; and it is also affirmed in so far as it determines by confirmation of the register’s report, the irregularity of the reference being avoided by the agreement of the respective solicitors in the cause, the invalidity of the two mortgages executed to- the Schuesslers by W. C. Darden on appellant’s lands for his indebtedness to them; and it is also affirmed in so far as the report of the register is confirmed, except as above stated and held by this opinion. But the decree is reversed wherein it fixes and declares the sum total of the indebtedness from Mrs. Darden to Schuessler, and wherein it directs and requires a sale of the lands in question to pay that sum, the indebtedness of W. C. Darden to the Schuesslers being improperly included in such aggregate sum; and the cause is remanded, that the true account may be stated between the parties in accordance with this opinion. The costs of the appeal in this court and below will be taxed against appellees.

Affirmed in part, reversed in part, and remanded.

Tyson, C. J., and Haradson and Anderson, JJ., concur. Simpson, J., dissents. Dowdeud and Denson, JJ., not sitting.