Nicrosi v. Walker

DOWDELL, J. The purpose of the bill in this case was the foreclosure of a mortgage given by appellees to secure a debt for a loan of money. It is admitted that the contract was usurious in its inception, and it is further admitted that one payment of usurious interest was made on the debt. After this payment was made an extension was granted, the parties agreeing that thereafter only legal interest should be paid. It is now contended by the’ appellant that such agreement and extension purged the contract of the taint of usury, except on the first payment of interest which was usurious and which-he says should have been applied as a credit on, and pro tanto a reduction' of, the principal debt. The parties, however, did not do this in their agreement of extension. The. loan was for f1,500 and for one year, the note was for $1,650, ten per cent, per annum on the amount of the loan being calculated and included in the note. At the maturity of the note, $150.00, the amount of the interest on the loan was paid, and thereafter under the extension agreement, $120.00 was paid annually as and for interest at 8 per cent, on the original loan of $1,500. Applying the tlieoi’y of appellant, the first payment of usurious interest of $150.00, when applied as a payment on the original loan of $1,500.00, would reduce the principal debt to $1,350.00, and the charge thereafter, and talcing of $120.00 per annum as interest, was in excess of the legal rate of 8 per cent, per annum. It is well settled that the mere renewal of a note between the same parties does not purge the original transaction of the taint of usury. In Masterson v. (Jrubbs, 70 Ala. 406, it is said: “The illegal taint (of usury) can be purged, or eliminated, however, in either of two ways; first, by a renewal of the note or contract, after it has passed into the hands of a bona fide purchaser for value, without, notice of the usury; secondly, by a reformation of the contract, by which the usurious interest, is expnnyed by remitting the excess, and only lawful interest is retained or exacted.” Here there was no bona fide purchase for value without notice 372 of the usury; the parties to the contract remained the same. It is, therefore, evident that the case does not come under the first class above mentioned. There was no reformation of the contract, unless it can be said that the agreement of extension after maturity of the note at legal rate of interest amounted to a reformation. Nor was there any restitution of the usurious interest which was paid. So it is equally clear that the case does not come under the second class. The contract being usurious, and that defense being set up, under the law all payments are to be applied to the principal debt, and it is wholly immaterial that the payments when made were termed-and made as interest on the debt. Under the facts the plea of usury was fully sustained, and the court below so ruled. If the payments which were made subsequent and pursuant to the agreement of extension, had not been made, and suit had been brought on the note, it would hardly be contended under a plea of usury where there had been no restitution of the usurious interest paid, when the agreement as to extension was made, that any more than the balance of-the principal debt after crediting the same with the $150.00 paid, could have been recovered, and that would have been $1,350.00. The subsequent payment equaled this amount, which satisfied the debt. The decree will be affirmed.