Lyons v. Smith

JOHNSON, J. On December 18th, 1903, Fred B. Thompson, H. F. Slaughter and J. F. E. Ruhlman, partners doing business in Kansas Oity under the firm name of the Thompson-Slaughter-Ruhlman Engraving Company, executed and delivered to defendant their negotiable promissory note for four hundred dollars, due one month after date, bearing interest froni date at the rate of eight per cent per annum. At the same time, for the purpose of securing the payment of the note, they also executed and delivered to defendant a chattel mortgage covering their partnership property. They were in financial straits and shortly afterwards, February 27th, 1904, at the suit of one of the partners, plaintiff was ap [275] pointed receiver of their property and assets by the circiut court of Jackson county. No part of the debt evidenced by the note given defendant was paid and plaintiff made the claim, denied by defendant, that usurious interest had been exacted by defendant and paid by the makers of the note. Plaintiff and defendant thereupon entered' into a written stipulation in which it was provided,. “that said receiver may proceed to sell and dispose of said plant and property of said engraving company under proper order of court, and that said receiver hold thé proceeds of said sale,, or so much thereof as is necessary to pay said mortgage and the accrued interest, until such time as the validity of said mortgage may be judicially determined. Said suit to be brought by receiver in thirty days from date,” etc. Under order of court plaintiff brought this action Avithin the time provided in the stipulation. The object of the suit is to free the proceeds of the mortgaged property now held by plaintiff from the claim made to them by defendant under the mortgage lien. The issue of fact presented under the pleadings is the exaction and payment of usurious interest at the time of the execution of the note and mortgage. The learned trial judge decided this question in favor of plaintiff, held the mortgage invalid and that defendant had no claim thereunder upon the funds in plaintiff’s custody. Defendant appealed. It appears from the evidence the makers of the note applied to defendant for a loan of four hundred dollars, which they desired to borrow for one month, and offered a mortgage upon their property as security. Defendant agreed to make the loan and the papers were drawn and executed. The witnesses introduced by plaintiff— the three mortgagors — testified that defendant gave-them but three hundred and sixty dollars, retaining the remaining forty dollars as a bonus for making the loan, and that when the note matured defendant, as a condition to extending the time of payment for another month, [276] demanded forty dollars more. This demand was acceded to and a check given defendant by the mortgagors for the amount. Payment of this check, however, was refused by the bank upon which it was drawn because of lack of funds. Defendant testifying for himself denied exacting or receiving any usurious interest and claimed to have given the mortgagors, when the loan was made, the full sum of four hundred dollars. Also, he denied exacting forty dollars as a bonus for extending the time of payment, and said that the check given him for that amount was to be applied as a payment upon the note. Two other witnesses were introduced to corroborate his statements. Without burdening this opinion with the recital of the various discrepencies and contradictions to be found in defendant’s evidence, we will say that it does not bear close inspection and fails to impress us. The trial court rightly resolved the issues of fact in favor of plaintiff’s contention. Unquestionably, defendant gave the borrowers but three hundred and sixty dollars and retained the remaining forty dollors for the use of the sum paid for one month. The transaction is tainted with usury. But defendant says the action must fail because plaintiff does not in the petition tender or offer to pay to defendant the amount admitted to have been given the borrowers — the three hundred and sixty dollars; that in an equitable proceeding, such as this, the maxim that, “he who seeks equity must do equity,” applies to prevent a cancellation of the mortgage without repayment of the actual amount loaned; and that the receiver stands in the shoes of the borrowers, possessed of no greater rights than those enjoyed by them. The receiver represénts the interests of the creditors as well as that of the partners. He is the trustee for all parties having an interest in the fund. High on Injunction, sec. 314; Alexander v. Relfe,74 Mo. 516. Representing either class of [277] interested persons — creditors or partners — be may maintain tbis action without offering to repay tbe sum loaned. Section 3710 Revised Statutes makes invalid at tbe instance of either tbe borrower or bis creditors a chattel mortgage marked with tbe vice of usury. Amer. Rubber Co. v. Wilson, 55 Mo. App. 656; Voorhis v. Staed, 63 Mo. App. 370; Coleman v. White, 69 Mo. App. 530; Tolman v. Surety Co., 90 Mo. App. 274; Adams v. Moody, 91 Mo. App. 41. To give effect to tbe contention of defendant would be to nullify a clearly expressed legislative intent, and tbis cannot or should not be done in adminstration of either law or equity. There is no equity for plaintiff to do as a condition precedent to relief. Defendant of bis own volition corrupted bis security. His mortgage is and was' void ab initio and be cannot, as be seeks to do, predicate rights upon a lien that never existed. Tbe right to* charge interest for tbe use of money is in legal contemplation a creature of legislative enactment. It did not exist under tbe civil law ñor in England until authorized by Act of Parliament in tbe reign of Henry VIII. It therefore, is a matter peculiarly under tbe control of legislative power. For courts of equity to impose conditions amounting practically to a refusal to enforce a penalty provided by statute for tbe infraction of usury laws requires nothing less than tbe invasion of tbe rights of a co-ordinate branch of government. Kreibohm v. Yancey, 154 Mo. 85; Adler v. Corl, 155 Mo. 149; Drennon v. Dalincourt, 56 Mo. App. 128. Plaintiff is not endeavering to have tbe debt owing by tbe members of tbe partnership to defendant cancel-led, nor in anywise affected. His efforts are confined to obtaining tbe release of tbe funds in bis bands from tbe lien asserted by defendant under bis mortgage. We must bold that under tbe terms of Revised Statutes, section 3710, be is entitled to tbe relief sought. Tbe judgment is affirmed. All concur.