Dufrense v. Hammersten

AILSHIE, C. J. During the summer of 1928 appellant loaned respondents the sum of $428 to pay for the completion of a house. Respondents gave appellant their note, bearing ten per cent (10%) interest and due in three years from date. Interest was paid regularly on the note to and beyond the time of its maturity. December 8, 1935, at appellant’s instance and request, respondents executed a note in lieu of the 1928 note, for the same amount of principal and bearing interest at the same rate, payable to appellant three years after date. Interest on the second note (at 10%) in the amount of $122.80 was paid up to December 8, 1938, and $28 on the principal, leaving a balance due on the principal of *716 $400. From the above facts agreed upon between the parties, appellant claims he is entitled to payment of the principal in full and all interest accrued subsequent to December 8, 1938, at 10 per cent per annum, together with an attorney fee, the latter to be fixed and determined by the court. Respondents claim they are entitled to an offset of $122.80, interest paid, and an additional $245.60 (which is “twice the amount of such interest”, as penalty, for usurious contract, in accordance with 1933 Sess. Laws, chap. 197, see. 3), leaving a balance of $31.60, together with a $15 attorney fee allowed by the court. It was agreed between the parties that the court consider and decide the issues presented upon the stipulated facts without other evidence or calling a jury. By the lower court’s memorandum decision it was held that the only question involved is “whether or not the transaction in question is usurious and is governed by the provisions of Chapter-197 of the 1933 Session Laws”. When the original note was executed in 1928 interest at 10 per cent per annum was legal but the rate was changed in 1933 and 8 per cent was fixed as the maximum rate allowable. Ten per cent was a usurious rate when the renewal note was executed. Judgment was entered that plaintiff recover from defendant the sum of $31.60 principal, without any interest save such as may.accrue after judgment, and $15 attorney’s fees. From this judgment plaintiff has appealed. Under the statute, sec. 5-238, I. C. A. (as amended in 1923, 1923 Sess. Laws, chap. 49, sec. 1): “Any payment of principal or interest is equivalent to a new promise in writing, duly signed, to pay the residue of the debt.” (Vollmer Clearwater Co., Ltd., v. Hines, 49 Ida. 563, 290 Pac. 397.) So it appears that at the time the new note was given, the statute of limitations had not run against the old indebtedness ; neither had the statute run against the second or new note at the time this action was commenced. While the suit is prosecuted on the renewal note, the plaintiff also plead the execution and delivery of the original note, payments of interest and the execution and delivery of the new or renewal note, for the same principal sum at the same rate of interest, *717 to take the place of the old one and extending the maturity date for a further period of three years. As we understand the ease of Cain v. Bonner, 108 Tex. 399, 194 S. W. 1098, 3 A. ,L. R. 874, on the -authority of which the trial court rested his conclusion, the decision is predicated upon the proposition that, “A creditor cannot plead a usurious renewal of a contract for the purpose of avoiding the bar of the Statute of Limitations against the original contract, and not be bound by its usurious character.” (Italics supplied.) That is what was sought to be done in the Cain-Bonner case. Such is not the case here. Indeed, the statute of limitations is not plead and, moreover, it affirmatively appears that the statute had not run against either the original or the renewal note. The new note in this case was simply a renewal and not a new and independent contract. No additional consideration passed; the only change made was naming a new maturity date. A “renewal” of a promissory note means to reestablish a particular contract for another period of time. (Grace & Co. v. Strickland, 188 N. C. 369, 124 S. E. 856, 35 A. L. R. 1296; Live Stock Nat. Bank, etc., v. Minnehaha St. Bank, etc., 52 S. D. 172, 217 N. W. 180, 183; Lowry Nat. Bank v. Pickett, 122 Ga. 489, 50 S. E. 396; Kedey v. Petty, 153 Ind. 179, 54 N. E. 798, 800; Elk Horn Bank & T. Co. v. Spraggins, 182 Ark. 27, 30 S. W. (2d) 858; Sammons v. Nabers, 186 Ga. 161, 197 S. E. 284; 10 C. J. S., p. 758, see. 263, n. 19; 8 C. J., p. 425, sec. 626, n. 11; 66 C. J., pp. 174, 175, sec. 65; 7 Am. Jur., p. 941, see. 248.) In the Cain-Bonner case, supra, relied upon by respondents, the court stated the prevailing rule that, “A contract, originally valid, is not rendered invalid by a subsequent agreement. It is therefore recognized that antecedent indebtedness is not affected by subsequent usurious renewals or extensions where the transactions are distinct. .... This simply means that the holder of an indebtedness is not obliged to declare upon a contract of renewal accepted in payment of the debt; that such a usurious renewal is no defense to an originally valid debt; and that the holder of such a debt may declare, and, where not subject to other de *718 fenses, recover upon it, notwithstanding the usurious renewal. ’ ’ Clearly there was no corrupt intent in this transaction to circumvent the law and charge a usurious rate of interest. (Anderson v. Creamery Package Mfg. Co., 8 Ida. 200, 67 Pac. 493, 101 Am. St. 188, 56 L. R. A. 554; Olson v. Canfield, 32 Ida. 308, 182 Pac. 527; Easton v. Butterfield Live Stock Co., 48 Ida. 153, 279 Pac. 716; Stinson v. Bisbee, 55 Ida. 38, 37 Pac. (2d) 236; Equitable Trust Co. v. A. C. White Lumber Co., 41 Fed. (2d) 60, 66.) The judgment is reversed and the cause is remanded to the trial court with direction to enter judgment in favor of the plaintiff for the principal and interest accrued on the renewal note. Costs of appeal awarded to appellant. Budge, Givens and Holden, JJ., concur.