Court Opinion

ID: 3518792
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:30:25.6638+00
Date Added: 2024-06-11T14:05:49.766564
License: Public Domain

The decree of the court below on both the direct and cross-appeal should be reversed and the bill of complaint dismissed.
It will be necessary for me to discuss only the appellants' claims (1) that the notes executed in 1921 were tainted with usury, and (2) that the price paid for the land at the trustee's sale thereof is so inadequate as to require the setting aside of the sale.
1. As to the Usury. In order to obviate referring therefor to the opinion in chief, I will briefly state the facts here pertinent.
The appellants are husband and wife, and in all of their dealings with the appellee bank, the husband, J.A. Hardin, acted both for himself and his wife, she not participating therein except to sign the necessary papers. On January 9, 1920, the appellants borrowed from the appellee, Grenada Bank, $45,000, agreeing to pay 6 per cent. interest thereon from date. Several notes were executed therefor aggregating $47,700, due January 2, 1921, secured by a deed of trust on land. The $2,700, additional to the principal of the loan, was for the 6 per cent. interest thereon for one year. Sometime prior to the maturity of these notes, J.A. Hardin advised the bank that he would be unable to pay any of the notes when due. Parol evidence and the following letter from the president of the bank to J.A. Hardin discloses that the bank did not wish to carry the loan longer, but desired that it be paid. The letter is as follows: *Page 717 
"Grenada, Miss. "December 20, 1920.
"Dr. J.A. Hardin, "Derma, Miss.
"Dear Doctor Hardin:
"Have letter from Bertram under date of the 18th, advising you would not be in position to pay any portion of note $45,000.00 maturing January 3rd. To say that I am surprised but half expressed my feelings.
"Don't you imagine you could secure a loan of say $25,000.00 to $30,000.00 on the property on first mortgage, when we might take second mortgage?
"If we must renew the paper in full, Doctor, will be necessary for you to pay 8% for the past year, and 10% on future loan and give additional security on the value of not less than $15,000.00.
"It is like this, we will be compelled to sell your note, and in order to do so will have to allow a liberal discount, possibly as much at 4%, maybe 5%, again, money is costing us 8% and we have paid practically 7% during the year, therefore, suggestion at 8% for interest rather than 6% seems fair and I feel will appeal to you.
"Bertram advised you would be glad to give the additional security asked. Would like the loan in two notes, one for $25,000.00 and the other for $20,000.00, taking second mortgage in order to sell first, if we can do so at all. Advise please.
"Please accept my best wishes,
"Yours truly, "J.T. Thomas, President."
Thomas testified that he did not intend to charge 10 per cent. interest on the loan if renewed, but that his statement in his letter that 10 per cent. would be charged was intended to induce Hardin to pay the notes, as the bank did not wish to carry the loan longer; and there is nothing in the evidence warranting the rejection of his testimony. It is hardly probable that he intended to *Page 718 
write into the notes an illegal rate of interest which would render all interest uncollectible.
Hardin paid the $2,700, the 6 per cent. interest on the original notes, by a check for $3,600, $900 of which was to meet the request of the bank that he pay an additional 2 per cent. interest on the loan, thereby making the interest thereon 8 per cent. allowed by the statute. Thereafter, new notes aggregating $45,000 were mailed to the bank, by whom it does not clearly appear. These notes bore 10 per cent. interest from date and were due January 1, 1923. It is clear from the evidence that no officer or employee of the bank noticed, or became aware, when the notes were accepted by the bank, that they bore 10 per cent. interest. In January, 1922, Hardin complained to the bank that he had been charged 12 per cent. interest on the notes executed in 1921. This he arrived at by adding the 2 per cent. which he had paid on the maturity of the 1920 notes to the 10 per cent. charged in the 1921 notes. Though the fact is not here material, he made no request then for the reduction of the interest to 6 per cent., but did make such a request some years later as will hereinafter appear. This claim of usury was satisfactorily adjusted between Hardin and the bank by the latter crediting him with 2 per cent. on the notes executed in 1921. The result was that the interest actually received by the bank on the loan for the years 1920 and 1921 was the 8 per cent. thereon permitted by section 1946, Code 1930.
While the adjustment of this usury charge was pending, the bank expressed a desire for the payment of the notes instead of a renewal thereof, and a letter dated January 30, 1922, from the president of the bank to Hardin, contains this sentence: "and in order to convince you that we have no inclination to work a hardship, if you will give us back in thirty days our money we will waive interest charges. In other words, be pleased to favor you in this way for the favor you might do us in paying the amount of the large loan from which, of *Page 719 
course, as you understand, we have derived no profit, inasmuch as the business does not carry a corresponding account." Hardin declined to accept this proposition, but, after the adjustment of the usurious claim, made a payment on the notes, and the bank permitted him and his wife to execute renewal notes for the balance, bearing 8 per cent. interest, payable one year after date. When these notes became due, they were again renewed and the same process continued until the last renewal, in December, 1932. Some of the renewal notes included new loans, and, beginning in 1926, bore only 6 per cent. interest. This reduction in interest came about in this way. Hardin advised the bank that he was having difficulty in paying the notes, and that, if it would restate his account with it from the beginning charging him only 6 per cent. interest per annum thereon and accept renewal notes bearing 6 per cent. interest for the amount so appearing to be due by him, he would be able to meet the payment thereof. The bank declined to do this, but advised him that if he would pay a certain amount on the notes it would accept renewal notes for the balance, bearing 6 per cent. interest. This proposition Hardin accepted. The interest on all of these notes was paid annually, and all were secured by deeds of trust on land.
Section 1946, Code 1930, is as follows: "The legal rate of interest on all notes, accounts and contracts shall be six per cent per annum; but contracts may be made, in writing, for a payment of a rate of interest as great as eight per centum per annum. And if a greater rate of interest than eight per centum shall be stipulaterd for or received in any case, all interest shall be forfeited, and may be recovered back, whether the contract be executed or executory. If a rate of interest in contracted for or received, directly or indirectly, greater than twenty per centum per annum, the principal and all interest shall be forefeited, and any amount paid on such contract may be recovered by suit."
"To constitute usury, there must be an agreement between *Page 720 
the lender and the borrower of money, by which the borrower knowingly gives or promises, and the lender knowingly takes or reserves, a higher rate of interest than the law allows, and with an intention to violate the statute." Planters' Bank v. Snodgrass, 4 How. 573. The appellants' claim of usury in the notes executed by them in 1921 is based on two facts: (1) The payment by them of 2 per cent. additional interest on the notes executed in 1920, as a condition for the renewal thereof, and (2) the 10 per cent. interest charged on the face of the 1921 notes. The reason assigned by the appellee for the exaction of the 2 per cent. increase in the interest agreed to be paid by the appellants on the 1920 notes was that the bank itself was borrowing money during that year, for which it paid interest sometimes as high as 6 per cent. I will assume, however, though the question is not without difficulty, that this 2 per cent. must be held to constitute a part of the interest charged the appellants on the 1921 notes. On the evidence, as will hereinbefore appear, the court below could have found that the appellee did not intend to charge 10 per cent. interest on the notes executed in 1921 and was not aware that the notes so stipulated until its attention was called thereto by Hardin when the notes matured. The finding of the court, however, to the contrary, is conclusive here.
The question then is: Did the appellants lose the right to complain of this usury by what occurred between them and the bank when the notes in renewal of the 1921 notes were executed? Where a loan of money is usurious, the usury is brought forward into all successive mere renewals of the loan. But we are not faced here with mere renewals, but with renewals permitted to be made after the borrower's claim of usury in the original loan has been compromised and settled to his satisfaction. "Though a contract is tainted with usury, the abandonment of the usurious agreement and the execution of a new obligation for the amount of the actual *Page 721 
debt, free from the usury, and bearing only legal interest, purges the original usury and makes the second obligation valid and enforceable." Note to Ector v. Osborne, 13 A.L.R. at page 1220. This statement is followed by a legion of court decisions among which is DeWolf v. Johnson, 10 Wheat. 367, 6 L.Ed. 343, and there seems to be no dissent in the authorities therefrom. It is true that here the notes executed in 1921 were not surrendered and new notes executed in lieu thereof, but what here occurred was the equivalent thereof. Section 1946, Code 1930, is for the protection of borrowers, which protection they may waive, Wetter Mfg. Co. v. Dinkins, 70 Miss. 835, 12 So. 584, 13 So. 226, and their claims of usury may be compromised and settled, and a renewal of the loan then made bearing a legal rate of interest is free from the usury of the original loan. Ector v. Osborne,179 N.C. 667, 103 S.E. 388, 13 A.L.R. 1207; Beck v. Bank of Thomasville, 161 N.C. 201, 76 S.E. 722; Thomas v. Coffin, 5 Cir., 62 F. 665, 10 C.C.A. 582; Credit Finance Corporation v. Mox,125 Cal.App. 583, 13 P.2d 937; Morris v. Taylor, 22 N.J. Eq. 438. See, also, Pattison v. Albany Bldg.  Loan Association,63 Ga. 373; Dannenmann v. Charlton, 113 La. 276, 36 So. 965; Ryan v. Newcomb, 125 Ill. 91, 16 N.E. 878. Cf. Jefferson Standard Life Ins. Co. v. Davis, 173 Miss. 854, 163 So. 506. Moreover, if the facts necessary to constitute an estoppel exist, the borrower will be estopped from pleading usury. Henderson v. Hartman,65 Miss. 466, 4 So. 549; 66 C.J. 278. Do such facts exist here?
To briefly repeat what has heretofore been stated, when the time arrived for the payment or renewal of the appellees' notes, executed in January, 1920, the appellant, who also represented his wife, complained to the bank that they had been charged 12 per cent. interest on the notes. This complaint was adjusted to their satisfaction by crediting the notes with 8 per cent. interest, and the appellants were then permitted to renew the notes with legal interest on the notes. It is clear from *Page 722 
the evidence that the bank did not desire to carry the loan longer and permitted the renewal notes for the accommodation of the appellants. Had the Hardins not acquiesced in this settlement of their claim of usury, but informed the bank that they would not abide thereby, the bank, of course, would not have permitted them to renew the notes, but would have fully collected them by foreclosure of the deed of trust securing them, if necessary, in which event it would have lost only the interest from 1921. Baldly stated, the appellants, by agreeing to the settlement of their claim of usury, induced the bank to permit them to renew the notes in which this usury appears and many subsequent notes running over a long period of years for a portion of the original loan, without at any time intimating to the bank that they did not intend to abide by the settlement. They now seek to disavow this settlement, and thereby be relieved from paying the bank anything for the use of its money over a long period of time. In equity and good conscience this should not be permitted. Section 1946 of the Code of 1930 furnishes the borrower with a shield and not a sword; is intended to protect him from injustice, but not enable him to inflict injustice.
"Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy." Pomeroy on Eq. Jur., vol. 2, (3 Ed.), section 804. This definition of equitable estoppel has always been accepted and never heretofore departed from by this court. It should be adhered to here.
This case may be approached from another angle. Had the appellants paid the notes executed in January, *Page 723 
1920, and the interest charged thereon, and then called on the bank to repay this interest, and had accepted from the bank less than the amount thereof in full settlement, the bank would have thereby been relieved from further liability to them. Clayton v. Clark, 74 Miss. 499, 21 So. 565, 22 So. 189, 37 L.R.A. 771, 60 Am. St. Rep. 521. That case while different on its facts from the case here is at one with it in principle.
2. The Alleged Inadequacy of the Price for which the Land wasSold at the Trustee's Sale Thereof. A large part of the land had been sold for taxes, but I will not pause to determine whether all or any of these tax titles had matured. The appellant J.A. Hardin appeared at the sale, read to the persons there assembled, and distributed a written notice setting forth that the land proposed to be sold was not subject to sale under the deed of trust and that "the said pretended sale, if accomplished, is utterly void and can form no basis of claim of ownership of the said lands, and any and all parties pretending to buy any part of said lands or all of the same do so with full and complete notice hereby given that the said sale in all of its features is utterly void and of no effect in conveying title to the land." It thus appears that Hardin himself contributed largely to the sale of the land for an inadequate price, if the price therefor was in fact inadequate, and he cannot now complain thereat.