Court Opinion

ID: 3384457
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:37:07.61573+00
Date Added: 2024-06-11T13:42:12.827261
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 137 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 138 
This was a suit to foreclose a mortgage given to secure a note dated December 17, 1926, payable three years from date, December 17, 1929, and containing the following clause:
    "This note is one of an issue of mortgage notes amounting in the aggregate to $14,000.00 number from one, __________, both inclusive, being for $14,000.00. each, all equally secured by a mortgage for like aggregate amount, of even date herewith, made by the undersigned to the Trustee herein."
The mortgage which the note secured contained the following clause:
    "If any of said sums of money herein referred to be not promptly and fully paid within thirty days next after the same severally become due and payable, or if each and every the stipulations, agreements, conditions and covenants of said promissory note(s) and this deed, or either, are not duly performed, complied with and abided by the said aggregate sum mentioned in said promissory note(s) shall become due and payable forthwith *Page 139 
with or thereafter, at the option of the Trustee, as fully and completely as if the said aggregate sum of __________ Dollars, or such unpaid balance thereof was originally stipulated to be paid on such day of default or breach, anything in said promissory note(s) or in this deed to the contrary notwithstanding, and the equity of redemption of the Mortgagor(s) may thereupon be immediately foreclosed by said Trustee."
Default occurred in interest payments and suit was filed on the 6th day of April, 1928, to foreclose the mortgage demanding payment of the principal in the sum of $14,000.00 and interest from date at the rate of 8 per cent. less the sum of $85.00 which it was alleged had been paid on the first annual interest installment. The interest accrued and claimed amount to $1,462,22, being interest for one year, three months and twenty days on $14,000.00 at the rate of 8 per cent. per annum.
The record shows that the defendant received for the note and mortgage the sum of $11,034.72; that the sum of $465.28 was paid to a broker who was the agent of the mortgagee. The pleadings present the issue as to whether or not this transaction comes within the purview of section 4855 R. G. S., 6942 C. G. L. of Fla., which is as follows:
    "Forfeiture and penalty in case of excessive interest or charges. — Any person, association of persons, firm or corporation, or the agent, officer or other representative of any person, association of persons, firm or corporation lending money in this State who shall wilfully and knowingly charge or accept any sum of money greater than the sum of money loaned and an additional sum of money equal to twenty-five per cent. per annum upon the principal sum loaned, by any contract, contrivance or device whatever, directly or indirectly, by way of commissions, discount, exchange, interest, pretended sale of any article, assignment of salary or wages, inspection fees or other fees, or otherwise, or for forbearing to enforce the collection of such moneys or otherwise, shall forfeit the entire sum, both principal and interest to the party charged such usurious interest, and *Page 140 
shall be deemed guilty of a misdemeanor, and on conviction, be fined not more than One Hundred Dollars, or be imprisoned in the county jail not more than ninety days, or both, in the discretion of the Court."
The complainant in this suit was the original mortgagee and the defendant was the original mortgagor.
The court below found and adjudged that in this transaction the complainant had not charged or accepted an amount equal to 25 per cent per annum in excess of the amount loaned, but had charged in excess of 10 per cent and for that reason should forfeit the interest. It was also found by the Master, and apparently concurred in by the Chancellor, that the amount of $465.28 was a proper charge against the mortgagor for the services of the broker. It is not necessary for us to determine whether this finding was correct or not, as without this, the amount sought to be collected by and through this bill of complaint is more than 25 per cent per annum in excess of the loan, whether we consider the loan $11,034.72 or $11,500.00. By the exercise of the option to take advantage of the acceleration clause the complainant in this case by its bill of complaint has attempted to force the defendant to pay interest and what is termed a bonus combined in the sum of $3,962.22 for the use of, at most, $11,500.00 for a period of 1 year, 3 months and 20 days. This demand was, and is, entirely within the terms of the contract.
In Maxwell v. Jacksonville Loan  Improvement Co., 45 Fla. 425,  34 So. 255, this court, speaking through Mr. Justice Hocker, said:
    "Where it appears that A, a corporation, but one not operating under the building and loan association laws of Florida, makes a contract with B, who owns one share of stock in A, whereby A agrees on the 13th of February, 1893, to advance or loan B $7,300 at 7 per cent. interest per annum, and that the interest should be calculated and added to the principal, and the sum thus obtained should be divided into 120 equal monthly *Page 141 
payments of $82.13, due on the 11th day of each succeeding month, and that 10 per cent. of the whole sum, or $730 should be deducted as a bonus for making the advance and that therefore, the real transaction was an advance or loan of $6,570 at 10 per cent. interest per annum; and that under the terms of the contract a penalty of 10 per cent. was to be imposed on B if he made default in paying any one of these monthly installments, and that the installment should then also bear interest at 7 per cent. per annum, and that if B made default in the payment of three consecutive monthly installments, 'then and in such event the entire debt shall ipso facto become due, payable and collectible" with no provision in the contract for eliminating any part of the unearned interest, contained in the installments, thus precipitated to maturity, such a contract is unlawful and usurious under he second clause of the second section of chapter 4022, Laws of 1891, which makes unlawful and usurious 'any contract' contrivance or device whatever whereby the debtor is required or obligated to pay a greater sum than the actual principal sum received, together with interest at the rate of ten per centum per annum.' "
But under Section 4855 R. G. S., 6942 C. G. L., the lender must "wilfully and knowingly charge or accept" a sum of money that is greater than the sum of money loaned and an additional sum of money equal to 25 per cent. per annum upon the principal sum loaned before he can be held to have forfeited the entire sum, both the principal and interest, to the party who was charged such usurious interest.
When this condition prevails the lender not only forfeits the entire sum, both principal and interest, to the borrower, but he likewise commits a violation of the criminal law for which under the terms of the statute he may be fined not more than one hundred dollars or imprisoned in the county jail for not more than ninety days, or both.
In this case if the sum of money lent is not demanded until the full period of three years for which the loan was *Page 142 
made has expired, it must be conceded that the interest charged, though usurious, would not fall within the criminal law, nor would it warrant the forfeiture of the entire sum, both principal and interest, which is subject to forfeiture when the interest charged is criminally usurious.
Likewise, if the mortgagor in this case had paid her interest regularly during the three years for which the mortgage was made, it must be conceded that the acceleration clause of the mortgage could not have been invoked, even if the mortgagee had wanted to "call" the loan, and consequently the interest which would then be "charged or accepted" while usurious, would not be criminally usurious, nor would it be subject to forfeiture under the precise terms of the statute.
So the contentions of the appellant in this case to the effect that the court should have declared the entire sum, both principal and interest, to have been forfeited, when reduced to its last analysis, is that because the mortgagor by her own act in not paying interest and thereby producing a default, has in effect made the contract criminally usurious though not originally so. This is true because it is only by shortening the period of time for which the loan is to run that the interest which the mortgagee made a contract to "charge or accept" exceeds 25 per cent per annum upon the principal sum loaned.
The proposition to be decided then is, does the interest provided for become criminally usurious, though not originally so, when the mortgagee under the terms of a provision in his mortgage elects to invoke an acceleration clause and file a foreclosure suit to enforce collection of a sum which embraces that interest for a shorter period than was originally contemplated when the loan was made, if the borrower had performed her contract?
In order to work a forfeiture under the statute the mortgagee *Page 143 
must not only "charge or accept" 25 per cent per annum upon the principal sum loaned, but he must do so "wilfully and knowingly." The words in the statute, "charge or accept," have a well settled and definite legal meaning and it cannot be said that merely because the complainant has filed a bill to foreclose his mortgage, notwithstanding the fact that the filing of such bill is predicated on an acceleration clause therein contained, constitutes "wilfully and knowingly" charging or accepting more than twenty-five per cent. interest so as to render the principal sum subject to forfeiture. This is particularly true when, as in this case, there has been no usurious interest in excess of twenty-five per cent. actually collected or received by the lender, even though it has been demanded in a suit for foreclosure.
While the Supreme Court of Texas in the case of Shropshire v. Commerce Farm Credit Co., 30 S.W.2d 282, appears to have taken a contrary view with regard to a case similar to this one, it must be remembered that our own statute, (4855 R. G. S., 6942 C. G. L.) refers to a "sum" of money, which the lender must "knowingly and wilfully" charge or accept before both the principal sum and the interest can be forfeited and the lender prosecuted criminally. Used in connection with the words "sum of money" the word "charge" like its associated word "accept," in the sense that such word is used in this statute, means something more than a mere demand, which has not yet been acceded to or judicially enforced to the extent that the proceeds of such enforcement have been received and enjoyed by the lender in violation of the law.
So when usury is alleged under the particular statute here involved, and such usury is established by proof showing an agreement to lend a certain sum for a given number of years for a certain sum of money as interest, which sum as interest, if the loan runs for its full term as agreed on, *Page 144 
will not equal or exceed twenty-five per centum per annum, the legal consequences of such an arrangement must be tested by the results contemplated by the parties on the assumption that both lender and borrower will fully carry out their agreement rather than the special results which may follow, but are not necessarily certain to ensue, when the borrower breaches a covenant which accelerates the maturity of the principal at the option of the lender.
Forfeiture of the principal sum and criminal liability both follow a violation of this particular law. To hold that the effect of an acceleration clause, coupled with the borrower's default, is to render the principal sum subject to forfeiture because the term of the loan is shortened, is to hold that by the same token the borrower by his own default has made his lender guilty of a crime which he would not otherwise be deemed to have committed.
The mere filing of the foreclosure suit did not amount to a charge or acceptance of usurious interest to the extent of 40 per cent per annum as claimed here. On the contrary, it appears that by interposing the defense of usury in the suit the mortgagor has effectually prevented any interest from being collected at all. If it be said that the operation of the acceleration clause when invoked by a mortgagee produces a result by which 40 per cent. interest would be collected, the answer to this proposition is that when this fact is made to appear to the court, the acceleration clause will not be enforced by such court because of its usurious consequences if enforced.
This is not a case where 40 per cent. interest hasactually been collected. It is simply a case where according to the theory most favorable to the appellant an attempt is being made to collect 40 per cent. interest, which attempt has failed because of the defense of usury interposed by the mortgagor in the court below and the refusal of that court to allow any such result to ensue. *Page 145 
Therefore, it can not be held here that the mortgagee has wilfully and knowingly charged or accepted a sum of money greater than the sum of money loaned and an additional sum of money equal to 25 per cent. per annum upon the principal sum loaned, although it may be admitted that such mortgagee has attempted to do so, and if he had obtained the decree here sought in the court below he would in effect have done so.
Since the suit was filed to foreclose a mortgage under an alleged state of facts set forth in the bill which would have authorized such foreclosure, the court below necessarily had the right to determine the issues of fact made by the bill and answer. But having determined, as we think properly, that the complainant had charged in excess of 10 per cent. and for that reason had forfeited all interest under the mortgage, it was error for the court to have decreed a foreclosure of the mortgage under the acceleration clause for failure to pay interest when such interest was not legally enforceable because it had been in contemplation of law forfeited for usury.
Having been forfeited there was no obligation on the part of complainant to pay any interest at all, and the court should have so found and decreed.
It further appears that under the terms of the mortgage the principal sum loaned was not due until three years after the date of the loan. But the suit prayed for foreclosure based on the acceleration clause in advance of the actual maturity of the mortgage. This the court below should have denied and instead the court should have entered its decree postponing a foreclosure until the maturity of the mortgage, at which time if not repaid, the principal sum of the mortgage would become payable and enforceable under its terms.
The decree is affirmed in so far as it adjudicates that the principal sum due is $11,500.00, and in so far as it adjudges *Page 146 
a forfeiture of all interest and attorney's fees because of the usury found in the transaction. Such decree is reversed in so far as it orders a present foreclosure, which foreclosure should only be allowed after the full three years for which the loan was made shall have expired. Since all interest from the date of the loan to its maturity was adjudged forfeited, it follows that no interest for the period of time intervening between the making of the loan and the time the principal sum becomes due can be allowed.
Reversed in part and affirmed in part, and the cause remanded for further proceedings in accordance with this opinion.
WHITFIELD, P.J., AND TERRELL, J., concur.
ELLIS AND BROWN, J.J., concur in the opinion and judgment.
BUFORD, C.J., dissents.