Upton v. O'Donahue

Maxwell, J. This is an action to foreclose a mortgage. It is alleged in the petition, in substance, that on the 1st day of May, 1888, the defendant executed a mortgage upon certain real estate, therein described, to the plaintiff to secure the sum of $1,300 with interest at six per cent, payable semi-annually, and the note to be due and payable in five years from the date thereof. There is also a provision that in case of default in the payments, then the plaintiff shall receive ten per cent not only on the whole sum but also [566] on the payments in default, and that he had an option h> declare the whole sum due. The defendant filed an amended answer to the petition as follows: “ The defendant denies that there is due the plaintiff from him upon the note, coupons, and mortgage set up in plaintiff’s petition, $1,382, or any other sum in excess of $1,000' without costs. For a further defense, defendant alleges that he borrowed from the plaintiff on May 1, 1888, the sum of $1,100 for the term of five years, agreeing to give-to plaintiff for said sum of $1,100, and for the use thereof, his note and coupons attached thereto set up in plaintiff’s petition, and to secure the payment thereof by executing and delivering the mortgage set forth in said petition-In pursuance of said agreement, plaintiff did lend and advance to defendant said sum of $1,100 for five years, and defendant made, executed, and delivered to plaintiff the note, coupons, and mortgage set forth in plaintiff’s petition; that said sum'of $1,100 was all the consideration that defendant ever received for said note, coupons, and mortgages. “ Therefore defendant prays that plaintiff recover nothing but the $1,100 so loaned to defendant, and that defendant recover his costs.” The plaintiff, Hiram I). Upton, “ in reply to the defendant’s answer in the above entitled cause, denies each and every allegation and matter of defense therein contained not hereinafter expressly admitted, and especially denies that he has or ever had any agent in Butler county, Nebraska, and avers that whatever business he did with this defendant was done through his agent C. E. Holland, at Seward, Nebraska, and further replying to defendant’s answer, plaintiff avers that said defendant Thomas O’Donahue applied to him through his said agent, C. E. Holland, for a loan of $1,300 for the term of five years, with interest at ten per cent per annum, payable semi-annually567 that in pursuance thereof papers were executed by defendant O’Donahue for said loan of $1,300 for five years, with interest .at six per cent, pajmble semi-annually; that instead of taking a second mortgage to secure the payment of the remaining four per cent interest for five years, amounting to $260, said agent accepted from defendant, by his own request and consent, and in lieu of a mortgage of $260, the sum of $200 in cash; that by reason of the refusal and neglect of defendant to pay interest when due the whole principal sum of $1,300 is now due, together with interest at the rate of six per cent per annum from the date of said loan.” The case was submitted to the court below on the pleadings, which found there was usury in the transaction, and rendered judgment for the plaintiff for $1,100 without interest, and costs. The statute authorizes the parties to contract for any rate of interest they see fit, not exceeding ten per cent per annum. The contract in this case, as set forth in the pleadings, was to pay six per cent and a bonus of $200 on the loan of $1,100. The agreement to pay ten per cent in case the defendant failed to make payments as they became due is in the nature of a penalty and will not increase the rate of interest previously agreed upon by the parties. (Weyrich v. Hobelman, 14 Neb., 432.) This agreement to pay ten per cent as a penalty, therefore, did not render the contract usurious. The bonus of $200 and interest at six per cent on $1,100, makes less than ten percent per annum for five years. The contract, therefore, was not usurious, and the court below erred in so holding. It is doubtful if the answer states facts sufficient to show the defense of usury, but taken in connection with the petition and reply it wholly fails to show such defense. It is questionable if the petition contains a sufficient statement to show a forfeiture whereby the plaintiff could declare the principal sum due. No objection is made on that ground, however, [568] and as the plaintiff is entitled to a decree foreclosing his mortgage, the question as to the amount should .be determined in the first instance by the trial court. The judgment of the district court is reversed and the cause remanded . to the district court with instructions to enter a decree in that court for the amount of the note and the mortgage, and six per cent interest thereon. Decree accordingly. The other judges concur.