Granite City National Bank v. Cross , 1914 Ill. App. LEXIS 487 ( 1914 )

Mr. Presiding Justice Thompson

delivered the opinion of the court.

The only questions raised on this appeal are whether the loan for which the note for $74,925 was taken was or not usurious, and if it was, then what law applies and governs the remedy in the proceeding to collect the note in this State.

The note was given and made payable in the State of Missouri. The law of the State where the contract is made governs as to whether or not the transaction is usurious. Mineral Point R. Co. v. Barron, 83 Ill. 365; Burchard v. Dunbar, 82 Ill. 450. The statute of Missouri provides that the taking of interest either directly or indirectly at more than eight per cent, per annum is usury.

There is no controversy over the facts. The appellant contends that the transaction was a sale of bonds by the Trust Company to Mrs. Cross and associates. The Trust Company refused to buy the bonds. Mrs. Cross and her son-in-law, E. M. Davis, were interested in the extension of the railway that issued the bonds. After the Trust Company had refused to buy the bonds, negotiations were continued in reference to procuring a loan with which to continue the railway construction. W. V. Delahunt, the trust officer of the Trust Company, dictated the proposal signed by Mrs. Cross and the reply of the Trust Company to the proposal. The note signed by Mrs. Cross was for the same amount that the Trust Company paid for the $83,250 of bonds, and the Trust Company transferred $73,250 of the bonds to Mrs. Cross and took her note for the same amount of money that the Trust Company paid for the $83,250 of bonds. The Trust Company retained $10,000 of the bonds as' a bonus for making the loan to Mrs. Cross and associates. Mrs. Cross’ proposal simply was that the Trust Company should buy the bonds at ninety cents and sell sufficient of them to her at 102.287 per cent to make up the sum the Company paid for the bonds and take the note of Mrs. Cross for the amount paid, drawing eight per cent, interest, and keep the $10,000 of bonds taken from the Railway Company. Delahunt testified that the Trust Company would not have had anything to do with the bonds except for Mrs. Cross’ proposal to take the bonds and leave the Trust Company with the $10,000 of bonds. The only money that changed hands was the deposit of the amount of the note to the credit of the Railway Company. As was said in Ferguson v. Sutphen, 8 Ill. 547 (567): “The law looks at the nature and substance of a transaction, and not to the color or form which the parties in their ingenuity have given it. No imaginable act or contrivance to cover up or conceal the usury will avail the parties. They will not be permitted successfully to evade the provisions of the statute by any conceivable scheme or expedient. The courts will follow them through all their shifts and devices, and ascertain the true character and design of the transaction. And if upon such investigation it appears that there was in substance a loan at an illegal rate of interest, no matter what form or shape the contract has been made to assume, it will be declared usurious, and the proper remedy applied.”

“The form of the agreement is immaterial, since any shift or device by which illegal interest is arranged to be received or paid is usurious.” Kreibohm v. Ycmcey, 154 Mo. 67. The transaction as shown by the undisputed facts was a shift or device to evade the law against usury. The note was usurious under the law of the State where it was made and was payable, and being usurious in Missouri must be held to be usurious in Illinois. Sherman v. Gassett, 9 Ill. 521.

The law of the forum governs as to the mode and extent of the remedy. Burchard v. Dunbar, supra; McCoy v. Griswold, 114 Ill. App. 556. The statute of this State provides that where a contract is usurious only the principal sum shall be recoverable. It is also the rule in this State that where a note is usurious all payments made on interest on the note will be applied on the principal. Woolley v. Alexander, 99 Ill. 188; Cobe v. Guyer, 237 Ill. 568. The trial court correctly applied the value of the usurious bonus and the payments made on the interest in reduction of the principal of the note. There is no error in the case and the decree is aErmed.

Affirmed.