Court Opinion

ID: 3384460
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:37:07.634561+00
Date Added: 2024-06-11T14:02:41.028412
License: Public Domain

I am in entire accord with what has been said in the opinion prepared by Mr. Justice Davis down to the end of the quotation from the case of Maxwell vs. Jacksonville Loan  Improvement Company, 45 Fla. 425, 34 So. 255, but I can not concur in the remainder of the conclusion reached.
My views as to the law of this case are clearly expressed in an opinion by Mr. Justice Greenwood of the Supreme Court of Texas rendered June 18, 1930, in the case of Shropshire vs. Commerce Farm Credit Co., et al., reported 30 S.W. (2nd Series) 282, in which it is said:
    "The argument for defendants in error proceeds on the misleading hypothesis that the borrower had the right to retain the $4,200 for a term of  ten years. Thus, it is argued: 'In this case the borrower was entitled to use the money for ten years, and not merely for one year or five years, and the interest he agreed to pay was to be paid, not for the use of the money for one year or for each of the ten years considered separately, but for its use during the whole term of the loan.' But the *Page 147 
contract, by means of the acceleration clause, deprives the borrower of the right to retain the money beyond the date of default in discharging an annual installment of interest, if the creditor so elects. A borrower is no longer entitled to use money after he is obligated to no longer withhold it, and after his creditor can compel collection through sale of his mortgaged property.
    The only way this contract can be upheld is by applying the doctrine invoked by defendants in error, announced by most text writers and supported by abundant authority, which Mr. Williston formulates as follows: 'The provision in a pecuniary obligation that on default of the debtor in payment of either principal or interest the entire indebtedness including interest for the full term, or a greater sum than legal interest to the time of default, shall thereupon become immediately payable, is not usurious, though recovery of any excess over legal interest is generally disallowed as penal. Similarly, a provision that on default by the maker an obligation shall thereafter bear a rate of interest higher than the legal rate, though it may be objectionable as penal if the rate is excessive, is not usurious. The principle applicable to those cases has been thus stated: 'Wherever the debtor by the terms of the contract can avoid the payment of the larger by the payment of the smaller sum at an earlier date, the contract is not usurious but additional, and the larger sum becomes a mere penalty.' 3 Williston on Contracts, section 1696; Webb on Usury, sec. 119 p. 134; Long vs. Storie, 9 Hare 546, 41 Eng. Ch. 545; Lloyd vs. Scott, 4 Pet. 226, 7 L. Ed. 840; Ward v. Cornett, 91 Va. 681, 22 S.E. 494, 49 L.R.A. 550.
    This doctrine, while quite generally followed, has not escaped criticism. Mr. Sutherland said of the theory that the contract should be upheld because the debtor had it within his power to prevent the increase of his debt by promptly discharging his installment payments; 'This reasoning overlooks the possibility that for want of money the debtor will be unable to avail himself of this relief; this is the very inability, with its distressing consequences, from which it is deemed humane and politic by statutes against usury to shield him. * * * * *Page 148 
If the creditor's power over the necessitous to extort oppressive terms at the lending is deserving of legal check, why limit that restriction to the period of credit? High rates of interest to commence at the end of that period are as likely to be oppressive as when applied before, and more likely to be assented to.' 1 Sutherland on Damages (4th Ed.) No. 318, pp. 997-1000."
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And further, in the same opinion, it is said:
    "The principle controlling the decision of the question of usury in Parks vs. Lubbock was again announced in Investment Company vs. Grymes, 94 Tex. 613
-615, 63 S.W. 860, 861, 64 S.W. 778, where the court said: 'The question presented is: Did the parties embrace in the 120 notes for the use of the principal debt a sum greater than the original debt would produce at ten per cent. per annum for the time the payor of the note had the use of the money?' Holding the 120 notes usurious, the Court differentiated the Grymes case from the Grider case in 89 Tex. 597, 35 S.W. 1047, as follows: 'In the one now before the court the manner of payment imposes upon the payor a charge for more time than he had the money. By the contract in the other case he paid only for the time it was used.' So, the vice in the contract now under consideration is that the acceleration clauses impose on the debtors a charge, enforceable at the creditor's option, in excess of the maximum permitted in this State. Chief Justice Gaines dissented not on the correctness of this principle, but with respect to the construction in the majority opinion of Grymes' contract as regards application of payments. After stating the rule under most authorities that a rate beyond statutory limits to be paid on a loan only after maturity was to be regarded as a penalty, Mr. Sutherland adds in a foot note: 'A statute defining interest as, "the compensation allowed by law or fixed by the parties to a contract for the use of forbearance or detention of money" changes the rule, citing Parks vs. Lubbock, 92 Tex. 635, 51 S.W. 322. 1 Sutherland on Damages (4th Ed.) p. 999.
    Likewise, it is stated in 27 Ruling Case Law, No. 33 *Page 149 
p. 323: 'Where a borrower has agreed to pay a rate of interest not forbidden by law, but has stipulated that in the event of his not making payment at the time specified, the obligation shall bear a higher rate of interest, either from default or from the date of its execution, or that some specific sum shall be paid in addition to the principal and interest contracted for, the increased rate is generally regarded as a penalty and not within the usury laws. * * * * * But under a statute defining interest as the compensation allowed by law or fixed by the parties to a contract for the use or forbearance or detention of money, that which would have been deemed a penalty at common law is made interest, and a stipulation for interest after maturity at a rate in excess of the legal rate is usurious.'
    Mr. Page, after giving the general rule treating acceleration clauses like those before us as having no other effect than to provide penalties for nonpayment, adds: 'Under some statutes a contract for a rate of interest after maturity exceeding the legal rate, is usury. This result is reached in Texas under the statutory definition of interest as a sum allowed for the detention of money. In some states which under former statutes allowed interest after maturity in excess of the legal rate, statutes have since been passed specifically forbidding such contracts and making them usurious.'
    Page on Contracts, No. 465.
    A clear statement of the law which governs our decision is made in 27 Ruling Case Law, at #24 on pages 223 and 224, in these words: 'To constitute usury it is of course essential that an excess of the legal maximum be enacted in consideration of the loan or forbearance. By this is meant an excess of the maximum prescribed by statute. Though there is authority to the contrary, it does not seem requisite that an excess be payable in any event. On the contrary, a contract is usurious when there is any contingency by which the lender may get more than the lawful rate of interest, whether it is so apparent that it becomes the duty of the court to so declare, or whether it is a case in which it is necessary that the jury should find the facts. Usury, it is considered, *Page 150 
does not depend on the question whether the lender actually gets more than the legal rate of interest or not; but on whether there was a purpose in his mind to make more than legal interest for the use of the money, and whether, by the terms of the transaction and the means used to effect the loan he may, by its enforcement be enabled to get more than the legal rate.' "
On authority of the opinions above referred to, and the cases there cited, my conclusion is that section 4855 R. G. S., 6942 C. G. L. is applicable to the loan here sought to be enforced and that the decree appealed from should be reversed, with directions that the Chancellor enter a decree in favor of the defendants, adjudging a forfeiture of the entire amount claimed, both principal and interest.
                          ON REHEARING. En Banc.