Court Opinion

ID: 9536902
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:09:14.144186+00
Date Added: 2024-06-11T14:55:29.879401
License: Public Domain

CROCKETT, Chief Justice
(dissenting) :
The facts are adequately stated in Justice Ellett’s opinion except in one or two particulars where my view is somewhat different as will be apparent below. Also, I am in accord with two basic propositions of law he states relating to usury. The first is, *286“ * * * the promise to make a payment of a commission or bonus to the lender or to his agent would render the transaction usurious if the interest promised to he paid together with the bonus or commission amounts to more than the lawful rate of interest.” The second is that “In determining the question of usury, one must consider the agreement as it existed at its inception. If the promise is to pay interest at a rate which is greater than that allowed by law on the money actually loaned,1 the contract is usurious.” Supplementing those statements, it is also true that in making that determination it is proper to look to all of the surrounding facts and circumstances to ascertain the true nature of the transaction. Without regard to the outward forms or the nomenclature used, as has been aptly stated, the court should “permit no scheme or device, however ingenious, to hide the face of usury.” 2
The critical question in this case is whether, under all of the circumstances disclosed by the record, reasonable minds could conclude that United American, in exacting the $45,000 so-called “deposit,” was employing a scheme to augment its remuneration for the loan. The first argument advanced by United American is that the $45,000 “deposit” was in fact a payment for the use of its credit in standing by as security to support the Willeys’ credit in obtaining a further loan from Zions First National Bank. The fact is that United American had already been paid a $9,000 commitment fee for standing by as credit on the aforesaid loan. And the further fact, which is of the utmost and controlling importance, is that under the agreement the $45,000 "deposit” was not to become United American's property tmtil and unless it was called upon to take over the loan and advance the money to Zions; and unless it did so the $45,000 was to be returned to the Willeys. If this $45,000 had been a payment for United American extending its standby credit only, it had already performed that service, and it would have had the right to the $45,000. But inasmuch as if it did not take over the loan, the $45,000 was to be returned to the Willeys, and the only way United American could get the $45,000 was to take over the loan and advance the money for the Willeys’ benefit, it seems quite inescapable that the $45,000 “deposit” cannot be regarded as payment for any other purpose than as a consideration for taking over the Zions loan and advancing the money for Willeys’ benefit.
What I have just said relating to United American’s argument that it was paid for *287lending its credit to Willeys, applies equally to its alternative argument that it received the $45,000 “deposit” as a fee for services rendered as an agent of the Willeys in being instrumental in obtaining the further loan from Zions.3 Further refuting that argument, in addition to the fact that United American had already been paid a $9,000 “commitment fee” for standing by as credit on the new loan, is the fact that the Willeys had engaged their own agents, a Mr. Jesse Noble and a Mr. Robert Campbell, who were paid separate fees, $9,000 and $13,000 respectively, for their services in obtaining the backing required by Zions. Mr. Wil-ley’s deposition shows that he considered that these payments were for their efforts in obtaining United’s agreement to take over the loan should Zions so demand.
Neither do I see how the plaintiff can gain any advantage from the argument that “if the borrower has it within his power to discharge the loan by paying the legal rate, the loan is not usurious.” I observe in passing that, in view of the fact that under the terms of the agreement Zions First National had the unconditional prerogative of making demand upon United American to take over the loan, it cannot realistically be said that the borrower had it within his control to obviate the usury exacted by its lender United American.4 This is particularly true of the phase of the transaction and the agreement upon which United American is now suing. Therefore, the doctrine just quoted and argued for by the plaintiff could have no proper application under the facts of this case. However, even more important and what should be controlling here, is the fact that the doctrine that if a borrower becomes in default, usury may be charged, does not find support in either the statutory or the decisional law of this State. It should be pointed out that the statement from-Corpus Juris Secundum cited in the main opinion is based on cases dealing with acceleration clauses and not with situations such as we have here. While there is admittedly some authority to the effect that after default, or after maturity, interest at higher than the lawful rate is not considered usurious, that text points out that there is authority to the contrary; 5 and that in any event “the courts will not, however, permit this principle [higher interest after default or maturity] to be used as a cloak for *288usury * * 6 Whatever basis can be found for such a doctrine emanates from circumstances where the debtor in fact has the situation under his control, so that he can precipitate the transaction into usury, he is not justified in voluntarily doing so, and then claiming the advantage of sanctions against the lender.7 But such a rule cannot justly be made to apply where in the inception of the transaction the lender is plainly in a position of exacting an unconscionable and excessive reward for lending money as appears in this case.
If there is reason and justice in protecting a person from usury, he certainly ought to have it when he needs it most: when he is in the embarrassment of being unable to meet his debt. To say that when he is in that position the dogs are unleashed upon him and he is deprived of protection is, in my judgment, a grievous injustice. Moreover, and more important than my opinion thereon, is the fact, as mentioned above, that I cannot see, nor has anyone pointed out, either in logic, or in justice, or in the statute or decisional law of this State, any justification for the artificial distinction that usury applies before and not after default. Our statute, Sec. 15-1-7, U.C.A. 1953, simply states that:
The taking, receiving, reserving, or charging of a rate of interest greater than is allowed by section 15-1-2, shall be deemed a forfeiture of the entire interest * * * [etc.].
It thus makes no distinction whatsoever as to before or after default, but plainly and unequivocally indicates that entering into a contract to charge excess interest results in the forfeiture provided for usury.
That this is the correct view is evident from expressions of our own court. In the case of Mathis, et al. v. Holland Furnace Co.,8 in considering this problem this court stated:
Only by an attempt to collect charges under the contract which would constitute usury could we find the required intent to justify a finding of usury.
If, * * * if should appear the seller intended to collect a sum as interest greater than allowed by law, because of optional provisions, we would hold the contract usurious.
The same concept is reflected in the more recent case of National American Life Ins. Co. v. Bayou Country Club, *289Inc.9 In a fact situation similar to the instant case this court treated excessive charges for a loan, by whatever name called, as' usury and stated:
* * * The test to be applied in any case is whether there was an expressed intention to charge a rate of interest greater than is allowed by law, and this is determined as of'the date of its inception. * * *
. It is submitted that an examination of the texts and the cases will reveal that what courts do is to look at the individual situation to see whether the lender is attempting to collect for loaning his money an amount exceeding the lawful rate of interest, and if he is doing so, by whatever name or guise it may appear, it is deemed usury.
If the law as above discussed is applied to the facts disclosed in this record on summary judgment, it appears to me that there is a basis upon which reasonable minds could conclude that United American advanced money for the benefit of the Willeys for which it contracted to make a charge the true effect of which was to exact in excess of the lawful rate of interest. Therefore, the summary judgment as to United American was improperly granted and the case áhould be remanded for trial.
(All emphasis added.)

. It should be noted that Willeys never had the use of the $45,000 “deposit.” When United took over the loan from Zions, United had the “deposit” under its control. Due to this, and the $9,000 “commitment” fee United had received, the amount actually advanced by United for the Willeys was considerably less than $450,000.

. 91 c.J.S. Usury, § 11 C.

.As to any contention that the excess charge for making the loan was a service charge allowed by law, there is no indication that there is any specific provision for a service charge as our statute clearly requires. Sec. 15-1-2(a), U.C.A. 1953, provides: “That a loan or any renewal thereof * * * may specifically' provide for a service charge, which charge shall not exceed four percent of the principal sum of said loan; such service charge shall not he subject to any additional charge of interest.”

. That where the contingency is under the., control of the creditor the contract is usurious, see 91 C.J.S. Usury § 31 a & b.

. See 91 C.J.S. Usury § 31 e (2), p. 610, citing cases for both views.

.Ibid.; additional recent cases which hold that contracts containing acceleration, clauses which exact excess interest are usurious are: Home Credit Corp. v. Brown (Fla.), 148 So.2d 257; First Mortgage Corp. v. Stellmon (Fla.App.). 170 So.2d 302.

. See statement in Small v. Ellis, 90 Ariz. 194, 367 P.2d 234, 238.

. 109 Utah 449, 166 P.2d 518.

. 16 Utah 2d 417, 403 P.2d 26.