Beck v. Tucker , 147 Miss. 401 ( 1927 )

^* Corpus Juris-Cyc. References: Limitation of Actions, 37CJ, p. 764, n. 26; p. 1052, n. 37; Payment, 30Cyc, p. 1185, n. 44; Usury, 39Cyc, p. 951, n. 96 New; p. 958, n. 35 New; p. 1035, n. 18; p. 1037, n. 37; On the question as to whether the taking of interest in advance at the highest legal rate is usurious, see annotation in 29 L.R.A. 761; L.R.A. 1915D, 1196; 27 R.C.L. 225; 4 R.C.L. Supp. 1746; 6 R.C.L. Supp. 1648. On July 1, 1916, Beck, the appellant, hereinafter called the "borrower," obtained a loan from Tucker, the appellee, hereinafter called the "lender," amounting to three thousand dollars, and executed his several notes for the principal and interest at six per centum per annum as follows: An interest note for sixty dollars due November 1, 1916; five interest notes for one hundred eighty dollars each, due, respectively, November 1, 1917, 1918, 1919, 1920, and 1921; and one principal note for three thousand dollars, due November 1, 1921.

The interest notes due up to January 31, 1919, were paid, and on that date the borrower secured an additional loan from the lender amounting to one thousand dollars, and executed his note for one thousand fifty-five dollars due January 1, 1920.

All of the above were secured by a deed of trust on borrower's plantation, known as the "Luckett Place."

In September, 1919, the borrower made a contract with Sweeney to sell the Luckett Place and to convey it to him free of liens. On February 18, 1920, the borrower applied to the lender to refinance his loan, and to have canceled the deeds of trust on the Luckett Place, in order that he might carry out his contract with Sweeney; the borrower agreeing to execute a new trust deed on his plantation known as the "White Place" for the sum of four thousand dollars. This was agreed to by the lender, and the two deeds of trust held by him on the Luckett Place were canceled, and a new deed of trust, as of that date, executed on the White Place.

At the time the borrower sought the exchange of securities and the release of the security formerly held, the lender refused to make the change unless the borrower would agree to pay the interest note for one hundred eighty dollars, which fell due on November 1, 1920, and this was agreed to, as well as that the lender would forego payment by the borrower of the interest note that matured on November 1, 1921. This change appears to have been made at the solicitation, and for the benefit and accommodation of the borrower. On February 18, 1920, a new note was taken for four thousand two hundred forty dollars, due one year after date, on the due date of which note the borrower paid interest amounting to two hundred forty dollars, having before that time paid the one hundred eighty dollars interest note which was due November 1, 1920, and these two items were claimed to be usury by the borrower in a suit which we shall hereafter mention.

On February 18, 1921, the parties agreed to extend the four thousand dollar principal note, which had not been paid, for one year. Very soon after this time, the lender complained to the borrower that he (the lender), on account of this loan, was under the necessity of borrowing sums of money from the bank, and that at the bank he had to pay eight per cent interest per annum. They went to the bank and ascertained the amount of loans made by said bank to the lender, after which they agreed that the borrower would make the lender whole in the matter of interest, and in April, 1921, Beck, the borrower, gave his note for sixty dollars, representing two per cent interest on three thousand dollars, in order to make Tucker whole in the amount of interest he had to pay the bank. The note was made due in July, but was paid October 17, 1921. The borrower paid the lender two hundred forty dollars interest, which was not due until February 18, 1922. On February 16, 1922, no part of the principal four thousand dollars was paid, and same was extended, by agreement of the parties, until one year after this extension. The borrower thereafter gave to the lender a twenty-five dollar note to make the lender whole on interest paid by him to the bank. This note was paid October 10, 1922, and on November 1, 1922, the borrower paid the lender two hundred forty dollars interest, and the four thousand dollars principal which was not due until February 16, 1923.

On April 28, 1925, Beck filed his bill in the chancery court of Madison county, seeking to recover all interest paid to Tucker since February 16, 1920, alleging, in said bill, the various transactions detailed above, in substance, and asserting that under chapter 70, Code of 1906 (Hemingway's Code, chapter 37), Tucker had charged him an unlawful and usurious rate of interest, being in excess of the rate of eight per cent per annum, and praying that he be given a decree against the lender for all interest paid.

On the trial, it developed, as the above-stated facts show, that the rate of interest charged and received by the lender had not exceeded eight per cent, which is the maximum contract rate of interest under section 1, chapter 229, Laws of 1912, and complainant then contended that he was entitled to recover all interest under and by virtue of the terms of section 2076, Hemingway's Code, entitled, "Evasions of six per cent interest law — Interest forfeited if higher rate secretly exacted," which section is as follows:

"If, after the passage of this act, any person shall lend to another any sum of money and take any note or evidence of debt which shall stipulate a rate of interest not greater than six per centum per annum, after the date or after maturity but who shall in fact contract for, charge, collect or receive as compensation or consideration for, or as the result of, such loan, directly or indirectly, a sum of money in excess of six per centum per annum from the date of the loan or a sum of money, taken with the interest contracted for is in excess of six per centum per annum from the date of the loan, such person shall forfeit all interest, and if the interest shall have been paid, same may be recovered by suit."

The chancellor, in a written opinion, held that there was no agreement between the parties for an amount in excess of six per cent at the time the loans in this case were made, or when the security was transferred, or when the extensions were agreed to, and that the extra payments of eighty dollars and twenty-five dollars were not contemplated by the parties in the original contract, and that, in his opinion, an agreement for a greater rate of interest than six per cent must have been contemporaneous with the making of the contract, and dismissed the bill.

As to the items of the one hundred eighty dollar note and the two hundred forty dollars paid in advance, and the payment of the interest at other times in advance, we agree with the chancellor that this did not constitute usury or a violation of the six per cent statute, which is here applicable, because it is clear that the creditor is not obliged to receive repayment of a debt or interest thereon before maturity. 26 Encyc. of Law, 483;Kornegay v. Loan Ass'n, 91 Miss. 551, 44 So. 783.

But we cannot agree with the chancellor in his finding that the payments of sixty dollars and twenty-five dollars, respectively, in the years 1921 and 1922, do not violate the six per cent statute.

We think, if that statute was construed to mean that the agreement for six per cent interest secretly made and not shown in the contract must be contemporaneous with the making of the original contract, or then be in the minds of the parties, this would defeat the manifest purpose of the statute. The legislature not only intended to protect the borrowers from usury, but intended that the parties should, in making the contract, state the truth, and the whole truth. Under our statutes, in force at the time this statute was enacted, money loaned at a rate of interest not exceeding six per centper annum was exempted from taxation, and it is very evident that the legislature intended to encourage this character of loans, and prohibit the making of secret contracts by which the tax laws of the state could be easily evaded.

We cannot take the narrow restricted view of the statute invoked by the chancellor in his decision in this case. We think in the year 1921, the lender collected sixty dollars more than six per cent interest per annum, and the fact that it was paid voluntarily only intensifies, rather than obviates, the rigor of the statute. The parties contracted for a higher rate of interest than six per cent. The purpose of the contract so to do has nothing to do with it. It was a violation of the statute, as was the payment of twenty-five dollars in addition to the sixty dollars interest for the year 1922, and, in view of the fact that the statute forfeits all interest in such cases, these interest payments work a forfeiture of all interest paid by the borrower to the lender during those years. In this case there was clearly an extension of the due date of the note, and the interest is to be forfeited from the date of the extension next preceding the collection of the unlawful amount of interest. That would mean that all interest paid in 1921 and 1922 would be recoverable by the borrower from the lender.

Counsel for defendant, the lender, insists that the statute of limitations applies, and that more than three years had intervened between the date of payment of interest and date of the judgment in the court below. The bringing of a suit against the lender, by the borrower, in good faith, with process issued in good faith, stops the running of the statute of limitations.

The question then presented is, When did the cause of action accrue to the borrower in this case? Was it the date of the payment of the extra interest, or the date of payment of all interest, on the due date of the note, or was it the date of final settlement?

In Buntyn v. Building Loan Association, 86 Miss. 454, 38 So. 345, this court held that:

"An obligation to repay interest collected upon an usurious agreement . . . is in its nature an implied contract, and a suit thereon will be barred by limitation unless brought within three years next after the cause of action accrued: . . . Code 1892, section 2739, providing that actions on unwritten contracts, express or implied, shall be commenced within three years."

Section 2739, Code of 1892, is brought forward in the Code of 1906 as section 3099, and in Hemingway's Code as section 2463. So it is settled in Mississippi that the three-year statute of limitations applies in suits to recover illegal or usurious interest in violation of the six per cent statute.

Applying the three-year statute of limitations, to the items sued on this case, the interest paid in 1921 could not be recovered if the cause of action accrued on the date of payment, which was more than three years prior to the bringing of this suit.

We deem it unnecessary to review the authorities outside our own state. There is ample authority on the outside, and many well-reasoned cases holding that the cause of action accrues on the date of payment, and that usurious interest may be recovered without regard to whether the principal debt shall have been paid by the debtor or not, but our state has aligned itself with those authorities which hold that, so long as the principal debt remains unpaid, the borrower, as well as the lender, has a right to credit the interest forfeited on the principal of the debt until said principal has been paid or extinguished.

Since the decision in Bank v. Auze, 74 Miss. 609, 21 So. 754, our court has consistently held that, before a suit for usurious interest can be maintained, the borrower must pay or extinguish the principal debt due the lender, and any and all usurious payments will be applied to such debt until it is satisfied. It was further held in that case that the suit was not for the recovery of a penalty, eo nomine, and was not barred by the statute of limitations as to a penalty.

Notwithstanding the number of decisions contra in other jurisdictions, we are content to continue to follow the manifestly just and equitable rule above laid down.

The cause of action in this cause did not accrue until the final settlement on November 1, 1922, and then, for the first time, the cause of action accrued to the borrower.

In this cause, it follows from the above statements that Beck is entitled to recover from Tucker sixty dollars paid on October 17, 1921, two hundred forty dollars paid on December 27, 1921, twenty-five dollars paid on October 10, 1922, and two hundred forty dollars paid on November 1, 1922, together with six per cent per annum thereon on from November 1, 1922, when this cause of action accrued.

The judgment of the court below will be reversed, and judgment will be entered here accordingly.

Reversed, and judgment here for appellant.