Swanson v. Realization & Debenture Corp.

COLLINS, J. Appeal from a judgment entered on findings of fact and conclusions of law filed upon the trial of an action brought by a mortgagor of real property to enjoin and restrain permanently the defendant sheriff from selling at a foreclosure of the mortgage under the power, and also to have the mortgage and the notes thereby secured adjudged void and canceled upon the ground of usury. There was little or no dispute over the facts, but they are quite complicated, and had best be fully stated: Swanson, the plaintiff, was the owner of the mortgaged land, April 17, 1891, at which time he and his wife executed and delivered the mortgage in controversy. The Security Investment Company, a corporation, was the mortgagee; and the entire transaction was conducted and concluded by its president and general manager, Willis A, White. The mortgage was given to secure plaintiff's note for $1,500, payable to the corporation in five years, with six per cent, interest coupons attached, payable semiannually. At the same time this plaintiff and his wife executed and delivered another mortgage upon the land, in which White was named as mortgagee, and also a mortgage upon certain personal property with White as mortgagee. These last-named mortgages were given to secure three notes payable to White, — one for $300, bearing ten per cent, interest, and payable November 1, 1891; one for $150 with ten per cent, interest after maturity, payable January 1,1892; and the third for the same amount with the same rate of interest after maturity, payable November 1, 1892. This was all one transaction. Swanson actually received $1,800 in cash, and the three notes last mentioned, as well as the mortgages securing them, were really the property of the corporation. It was agreed that the loan was to bear ten per cent, interest, and it is claimed that the two notes, each for $150, represented, in — 386 — fact, nothing but the difference between the six per cent, annual interest on $1,500, evidenced by the coupons, and the ten per cent, agreed upon as the annual rate of interest. No bonus was charged, or agent’s fees deducted from the $1,800, and it was shown upon the trial that the fees or commissions of the local agent through whom the application for loan was made, $45, were paid by the mortgagee corporation. November 5, 1894, the $1,500 note and the mortgage securing the same were duly assigned by the mortgagee to this defendant, a foreign corporation, to enable the latter to act as trustee for the original mortgagee. The court did not find what coupons had then been paid, but from the evidence it seems that default in the payment of interest was not made until the November 1, 1894, coupon matured. Foreclosure proceedings under the power were instituted May 4, 1895, default having been made in the payment of at least one interest coupon; and, as authorized in the mortgage, the defendant assignee elected to declare, and did declare, the whole debt due. This action was soon afterwards commenced. June 14, 1892, Swanson and his wife executed and delivered a third mortgage upon this land to one Tronnes. This was given to secure the payment of a note for $800, and, default having been made in payment, a foreclosure under the power was had; sale of the premises being duly made December 9, 1895, to the mortgagee, Tronnes. October 29, 1892, one Mary Dowling duly obtained a judgment for the sum of $104.55 against said mortgagors, Swanson and his wife, in justice’s court, in the county in which the land was situated. A transcript of this judgment was duly docketed in the office of the clerk of the district court for Polk county May 31, 1893. The judgment was then sold and in writing assigned by said creditor, Dow-ling, to one Montague, and by Montague to one Meagley, and by the latter to Willis A. White, before mentioned. He was the owner of this judgment December 9, 1896, and no part of it had been paid. None of these written assignments had then been, or were thereafter, filed in the office of the clerk of said district court; and, of record, Dowling still appeared to be the judgment creditor. December 9, 1896, White filed due notice of his intention to re — 387 — deem as a judgment creditor from the foreclosure sale under the third, or Tronnes, mortgage. No redemption was made by the mortgagors, and, in due- form, White, as creditor, made the redemption by paying to the sheriff of the proper county the full sum necessary for the purpose; receiving from such sheriff a certificate of redemption, which was duly recorded December 11,1895. Tronnes refused to accept the money paid in redemption, of which White was duly advised. The sheriff still holds the funds. In April, 1892, one Maghan duly obtained a judgment for $14.33 in the municipal court for the city of Duluth, in St. Louis county, against Mary Dowling, the judgment creditor before mentioned. This judgment was duly transcripted and docketed in the office of the clerk of the district court for said county, and was also duly transcripted and docketed in the same office in Polk county. January 2, 1897, by virtue of an execution duly issued upon said judgment, the sheriff of the last-named county levied upon the judgment in favor of said Dowling and against said mortgagors, which had theretofore been assigned, and had been made the foundation of the redemption. A sale upon such execution was thereafter had of the judgment, and at such sale it was sold to one Austin. This was January 29, 1897, and on the same day the mortgagors (judgment debtors) paid the full sum due, and the judgment was satisfied by Austin. At some time during the year of redemption it was verbally agreed between the mortgagors and Tronnes, the purchaser at the foreclosure sale, that the period of redemption should be extended one year. The cause was tried by the court without a jury. Upon the facts as stated, the court’s conclusions of law were that the $1,500 note and the mortgage securing the same should be canceled and adjudged void, that White never redeemed from the Tronnes foreclosure sale, and that plaintiff was still entitled to redeem the premises from the sale just mentioned. While it is obvious that, from the very complicated facts, several questions were presented to the court below, we are of the opinion that two only will have to be discussed at this time; the first being raised by assignments of error pertaining to the findings of fact, as — 388 — well as to one of the conclusions of law. The question thus raised is whether, upon the facts, the court below was justified in finding that'the note for $1,500 was usurious. It bore interest at the rate of six per cent., although the agreement was that the full amount of the loan should bear interest at ten per cent. The two notes, each for $150, represented the difference between the six per cent, interest evidenced by the coupons, and the ten per cent, stipulated for, this difference being exactly $300. If the contract was tainted with usury, it was because the payment of four-tenths of the interest agreed upon was in part advanced; for $150 became payable in about nine months, instead of being spread out over 2-J years in semiannual payments of $30 each, while the other $150 matured in about 18 months, all thereof being advanced, instead of being spread out in semiannual payments of $30 each, commencing three years from the date of the note. Does this fact alone, in the absence of all other evidence of a usurious intent, establish a corrupt design, — an attempt to evade the law? For there must be an intent to violate the law to constitute usury; and when this intent is wanting the transaction is not usurious, whatever its appearance. Ward v. Anderberg, 31 Minn. 304, 17 N. W. 630; Jackson v. Travis, 42 Minn. 438, 44 N. W. 316. We must answer this question in the negative. It is true that, by advancing the interest due days as to four-tenths of the ten per cent, agreed upon, the payee of the $1,500 note actually received and secured to itself a slightly greater rate of interest than that permitted by statute; the total sum so reserved and secured, and the total gain to the payee, being less than $30, according to an actual computation, in which interest at ten per cent, is figured upon each anticipated or advanced interest payment from the time of payment until the due days. But this, of itself and alone, will not condemn the transaction as usurious; and, as heretofore stated, this was the only fact tending to establish a corrupt intent. There was no bonus exacted a.s a condition for making the loan. The full sum of $1,800 was actually paid over to the mortgagor. The mortgagee itself paid the agent’s fees or commission. There was no effort made to conceal or cover up any part of the transaction. There was a complete absence of such badges — 389 — of an unlawful and forbidden agreement as are usually found about an attempt to receive or secure a usurious rate of interest. Plaintiff’s counsel relies upon the case of Smith v. Parsons, 55 Minn. 520, 57 N. W. 311, as directly in point here. It will be seen that there were several earmarks which characterized that transaction aside from the mere fact that the contract, as agreed upon, resulted in securing to the lender a much greater rate of interest than is permitted by statute. The devices there employed to evade our usury laws were very plain to be seen, and the trial court was quite right when it declared that they were mere covers for usury. We agree that the findings of fact upon which the court below based its conclusions of law that the note was usurious, and, together with the mortgage, must be declared set aside and canceled, were not warranted by the evidence. The result is that a new trial must be had. In view of this, it is advisable for us to express our views in relation to the redemption made by White as the apparent owner of the Dowling judgment. Was it valid when made, and, if it was, what effect did the subsequent sale upon execution of this judgment have upon it? As between the parties these assignments, whereby White finally became the owner, apparently, of the judgment, were valid without being filed or entered as provided by G. S. 1894, § 5431. The statute is for the benefit of such parties as are therein designated, creditors attaching or levying on the same, and subsequent purchasers in good faith for value. As against these parties, unfiled assignments ' are void, but as to all others the statute is silent. So that at the time White obtained his assignment, and when the redemption was made, he was the absolute owner of the judgment, and was therefore entitled to make the redemption, under the provisions of G. S. 1894, § 6044, and without causing the assignments upon which he relied to be filed or entered in accordance with section 5431, supra. When making redemption, he complied with the statute, section 6042, in every detail. His redemption was therefore valid, and by virtue thereof and of the certificate issued to him by the sheriff he succeeded to the interests acquired in the premises by the purchaser at the foreclosure sale. We are compelled to hold that the re — 390 — demption was valid when made, notwithstanding the provisions found in section 5431. It is evident that the statute should require a redemptioner who is proceeding under an assignment of a judgment to file such assignment as provided in section 5431. But it does not, — an omission in the statute which the legislature, not the courts, must be called on to supply. Proceeding then to the next inquiry, what effect upon this valid redemption did the subsequent levy upon and sale of the Dowling judgment have? It is difficult to suggest upon what ground it could be held that a valid redemption could be invalidated, and White deprived of his perfected title, by means of the subsequent levy and sale of the judgment, unless we should read the provision of section 5431 into the law which provides for redemption by judgment creditors. Through this failure of the mortgagors to redeem from the sale, and the redemption by White in strict compliance with the statute, he had become the absolute owner of the land. His title had become perfect. And this title, it is claimed, must be held to have been forfeited or extinguished by reason of the levy upon, sale of, and subsequent satisfaction of, the judgment. We cannot so hold, but, on the contrary, we are of the opinion that the redemption was not affected by either or any of the steps taken, and that White became and is the fee owner of the real estate. It is perhaps important to state that there is no merit in plaintiff’s contention that the verbal agreement between Tronnes, the purchaser, and himself, whereby he was granted an extension of the period of redemption, could operate in any manner upon White’s right to redeem. The purchaser could, if he chose, waive his own rights by such an extension, but he has no control over statutory rights held by a judgment creditor. The rights of the latter are fixed by statute, and a strict compliance with the statutory provision is demanded. There can be no nullification of a creditor’s right to redeem by any agreement made between other parties. See Sprague v. Martin, 29 Minn. 226, 13 N. W. 34; Smith v. Buse, 35 Minn. 234, 28 N. W. 220; Todd v. Johnson, 50 Minn. 310, 52 N. W. 864. Possibly it may be inquired what interest the mortgagor may — 391 — have in this action, or upon what grounds can he maintain it, if the redemption made by White is valid, and he has become the owner of the land covered by the mortgage in dispute. The answer is that the plaintiff is the maker of the note, and, if it was usurious, he is entitled to maintain an action for its cancellation, without regard to the status of the real property. The present action has assumed that form. The judgment appealed from, with the findings of fact and the conclusions of law upon which it was predicated, are set aside and vacated, and a new trial granted.