Bittner v. Jones

Plaintiff in error, William P. Bittner, is in this court complaining of insufficiency in the amount of judgment rendered in his behalf by the trial court in a foreclosure action. His cross-petition alleges three notes secured by a second mortgage. To this the defendants in error, Carrie M. and Fred S. Jones, filed an answer admitting the execution of the notes and mortgage, but claiming that there was usury in the transaction and that therefore the amount actually due was considerably less than the sum asked in the prayer of the cross-petition. Briefly the agreed statement of facts presents the following: In 1922 defendants in error wanted to borrow some money. July 10th of that year they executed a note in the sum of $14,500 to a lady by the name of E.M. Court. Simultaneously they also executed to her a second mortgage as security. Then on September 26, 1922, E.M. Court executed a $14,000 note to C.C. Bittner, the father of plaintiff in error. This latter note was delivered to C.C. Bittner by defendants in error. Also at the same moment they delivered to C.C. Bittner the note and mortgage that had been executed July 10, 1922, and which had been indorsed and assigned to him by E.M. Court. It was arranged that this note and mortgage were to be held by him as security for payment of the $14,000 note of E.M. Court. The following day he issued his check to E.M. Court in the sum of $12,880, which represented the proceeds of the loan. This check was at once indorsed by her to defendants in error. Until his death June 5, 1924, C.C. Bittner received various payments from defendants in error. After *Page 192 that date the payments were made to plaintiff in error, who was appointed administrator of his father's estate. Then in November, 1926, defendants in error decided to increase the amount of their first mortgage loan. This was arranged, and, although the second mortgage note had not matured, all evidences of the original loan were canceled and surrendered. In their place three new notes of substantially equal amounts were executed to E.M. Court by defendants in error for the unpaid balance of the loan. They also executed to her a new mortgage on the same property as security for the three notes, and she immediately assigned the mortgage and indorsed the notes in blank. The notes and mortgage were then delivered to plaintiff in error for the three heirs of C.C. Bittner. It is these notes upon which judgment was obtained below. The sole question presented to this court is whether the dealings between these parties constituted but one continuous transaction, or two that were separate and distinct. If there was but a single continuous transaction, the trial court was correct in permitting defendants in error to interpose the usury in the original note as a defense in the present action on the three renewal notes. On the other hand, if two separate and distinct transactions were involved, the original usury was waived when the first transaction was closed, and may not be pleaded in this action. The chief difficulty in this case arises from the fact that not a word appears in the record to indicate any expression of mutual intention by the parties. Did they regard the execution of the three new notes and mortgage as payment and discharge *Page 193 of the original, and as the negotiation of a new loan, or did they consider the original loan as still in existence in the form of three notes instead of one? In view of this unfortunate lack of expressed intention, the only remaining recourse is to scrutinize the dealings of the parties to see whether there were circumstances from which the intentions of the parties might reasonably be inferred. Plaintiff in error's chief contention is that his consent to the increase in the amount of the first mortgage was a detriment to him, and therefore constituted a new consideration for the execution of the three new notes. Unfortunately for him, the record contains nothing to substantiate this claim. The agreed statement of facts indicates that the principal of the original second mortgage note had been substantially reduced before the execution of the three new notes, but there is nothing to show whether the value of the mortgaged property had depreciated, remained the same, or increased. Obviously plaintiff in error suffered no detriment if the value of the property had increased so that his margin of security remained the same as it was originally. Plaintiff in error also contends that an intention to negotiate a new loan is manifested by the execution of three new notes to the three heirs of C.C. Bittner. It is true that the original note was replaced by the three new ones, but it should be observed that they were not executed to the three heirs. They were executed and delivered to E.M. Court. Then they were indorsed by her and delivered to plaintiff in error. Thus the parties on the three new notes were exactly the same as on the original. But plaintiff in error argues that the *Page 194 presence of E.M. Court on both occasions is of no significance. Then why were all four notes executed to her? The manifest truth is that she was there for a very definite purpose, and that was to enable the Bittners to defend their usury by appearing to be innocent holders of value. The entire course of dealing between the parties shows an intention to violate the usury laws. Plaintiff in error admits that defendants in error are entitled to a credit for the usury involved in the three renewal notes, but asks this court to countenance and protect the usury in the original note by inferring a mutual intention to regard the new notes as payment and discharge of the original. In view of the well-recognized principle of law, that contracts shown to be usurious are construed strongly against the lender, and in view of the total lack of any expression of intention by the parties, it is the opinion of this court that the circumstances of the case do not warrant the inference of mutual intention to consider the three new notes as payment and discharge of the original. No error appearing in the record, the judgment of the trial court is hereby affirmed. Judgment affirmed. LEVINE, J., concurs.