Madsen v. Whitman

QUARLES, C. J. — This action was commenced by appellants to obtain judgment foreclosing two trust deeeds executed by the respondents Martha J. Whitman and Marcus E. Whitman to secure two certain loans made by the Western Loan and Savings Company in the first instance. By novation the appellant became the owner, and new trust deeds were executed. The record is voluminous, and the findings of fact are quite lengthy. The trial court found the contracts usurious, and the findings favor the respondents in the main. The original, transaction shows an utter disregard of the usury statutes of this state. Compound interest was provided for by way of coupon notes for monthly interest, each of which coupon notes for interest drew interest after its maturity. Large premiums were demanded and extorted by the lender in order that the debtors, the Whitmans, might obtain the loans. The transactions were unquestionably usurious. The assignments of error-are many, but a careful consideration of the record shows us that they are without merit in the main. It is not necessary to review each action of the trial court excepted to in ordeT to reach a determination of this ease upon its real merits. The-court found that the principal of the debts had been fully paid, except the sum of twenty-two dollars and sixty-five cents upon one loan, and the sum of forty dollars and sixty cents upon the other, and that respondents had broken their obligation in said trust deeds contained, by failing to pay taxes for the year of 1901, and that same were paid by appellants in the sum of thirty-one dollars and thirty-five cents, and entered a judgment of foreclosure for the amount due to appellants, ninety-four dollars and fifty cents. The respondent Gray made a loan to the respondents Whitman, and took a mortgage upon said premises as security, subsequent to the execution of said trust deeds to> appellant. After the execution of the mortgage to respondent Gray upon the same premises, the appellants and the respondents Whitman met together and made an arrangement between themselves for the purpose of purging the original transactions, of usury, and made what is called in the record a “compromise agreement." After this so-called compromise agreement was made, the respondent Gray sued on his mortgage debt, and ob [767] tained a foreclosure decree against the respondents Whitman, foreclosing his mortgage; and at decretal sale thereunder he purchased the premises described in said trust deeds, in his mortgage, and in the complaint herein, for the sum of $915.95. Appellants were not parties to the last-named action. The decree herein adjudges the rights of respondent Gray, subject to-the said lien of appellants for ninety-four dollars -and fifty cents. The real question here is whether by the so-called comp promise agreement the transactions between appellants and the Whitmans were purged of usury, so as to leave the amount agreed upon to be due to appellants from the Whitmans a lien secured by said trust deeds as against respondent Gray? But we will take the argument of the appellant in their written brief, where it is first asked: “Was this suit brought upon a contract which was usurious at the commencement of this action?” Then, after showing that the original indebtedness was, $1,800, appellant says: “The total payments were twenty-seven dollars per month on the entire loan of $1,800. This would be just eighteen per cent per annum on the $1,800 — a rate which was at that time legal and authorized by the interest laws-of Idaho. When the Whitmans paid this, they were simply paying the interest on the loan. They had the $1,800 all the time, loss commissions which had a consideration of their own.”' By the term “commissions” we presume appellants’ able counsel means the premiums exacted in order to secure the two loans, which were in one ease eighty dollars cash retained, and a mortgage for $400, and in the other $100 cash retained, and a mortgage for $500, making $1,080 in all, or more than one-half of the amount of the loans. Can there be any question about the usurious character of the transactions in the first in-stance? We think not, and say there is no doubt that they were usurious. Being usurious, the trust deeds secured the principal of the loans, but secured no interest or costs. See the following eases decided by this court: Stevens v. Association, 5 Idaho, 741, 51 Pac. 779; Fidelity Sav. Assn. v. Shea, 6 Idaho, 405, 55 Pac. 1022. Under the statute, every payment, made, whether as a premium for obtaining the loan, upon the; [768] interest, or upon the principal, is to be credited upon the principal of the debt. Now, securing only the principal of the debt, the contracts being usurious, the law applying all payments to the extinguishment of the debt, can the parties, by agreement between themselves, remove the usurious character of the transactions, and make the trust deeds liens for something that they were not liens for prior to such agreement, as against a third party whose rights will be affected thereby? We think not. Respondent Gray was not a party to the so-called compromise agreement. That agreement could not, in law, and did not, extend the obligations of the trust deeds so as to make the same a lien for a single dollar that they did not secure prior to such agreement. Section 3351 of the’ Revised Statutes provides that “a mortgage can be created, renewed, or extended only by writing, executed with the formalities required in the case of a grant or conveyance of real property.” These trust deeds executed to secure the payment of loans are mortgages. Hence the lien of same could not be extended by the so-called compromise agreement, especially as against the respondent Gray. (January 20, 1903.) We find no error in the record, wherefore the judgment is affirmed. Costs awarded to respondents. Sullivan and Stoekslager, JJ., concur.