Court Opinion

ID: 3387274
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:43:30.54666+00
Date Added: 2024-06-11T13:54:02.905744
License: Public Domain

This is an appeal from a final decree cancelling a mortgage on the ground of usury. The Court held that the bonus and interest charged and paid amounted to more than 10 per cent., and that when such usurious interest was doubled and forfeited under the statute, it exceeded the principal sum loaned.
Prior to July 1, 1927, Appellees, Warren Hammock and Julia R. Hammock, his wife, through their agent, advertised for a $7,000.00 loan on certain property in Pinellas County, Florida, offering to pay a reasonable commission. In response to this application, appellants offered to make a loan to said appellees of $5,000.00 for three years at 8 per cent. and a bonus of 5 per cent., or $250.00. The loan secured by mortgage was made through attorneys representing appellants on the 21st day of July, 1927. The semiannual interest payments were paid. On the 1st day of July, 1931, the interest on the old mortgage was paid up to date and a new mortgage was given by appellees, Warren Hammock and Julia R. Hammock, his wife, to appellants *Page 323 
in satisfaction of the old mortgage. This was made at a time when said appellees had sold a filling station and approximately 43/100 of an acre of the ground covered by the mortgage, at which time said appellees had to satisfy the old mortgage and clear everything up to that date. At the time of the sale, the purchasers of the filling station and the 43/100 acres of land, McKeithen  Ulmer, gave said appellees a note and a second mortgage for the excess in the purchase price as security that they would pay appellants' mortgage. By this transaction the appellees, Warren Hammock and Julia R. Hammock, his wife, made a prospective profit of approximately $4,000.00. But later on the purchasers, not being able to pay, conveyed the property back to Hammock. On the 21st day of January, 1933, the said appellees were in the act of making a lease with the Gulf Refining Company and desired an extension of the time of payment of the mortgage given July 1, 1931, by them to appellants, and in order to accomplish said purpose, were given an extension of said mortgage for five years from the 1st day of March, 1933, and specifically agreed in said paper that nothing contained herein should invalidate in any manner the security then held for the said debt, and appellees specifically ratified and confirmed their mortgage and note, and again promised and agreed to continue with the faithful performance of all of the conditions thereof. This situation continued until about February, 1935, when for the first time the appellees discovered that there had been usury in the original transaction back in 1927 to the amount of $25.00. In the meantime, they had taken back from McKeithen and Ulmer the property sold to them by appellees. They thereupon started the present suit on the 20th day of February, 1935, seeking a decree of the lower court declaring that the mortgage executed on July 1, 1931, was usurious and asking that the amount *Page 324 
of interest claimed to have been paid on the mortgage executed July 19, 1927, and the interest paid on the mortgage executed July 1, 1931, be doubled and charged against the mortgagees; that the appellants' note and mortgage be satisfied and that any overcharge be decreed to be paid to appellees, Warren Hammock and Julia R. Hammock, his wife.
The first question argued is: Are lenders proven guilty of willfully violating usury laws of the State of Florida by proving that they unknowingly accepted a sum in excess of the amount allowed by law for a loan?
This Court has held that one of the requisites of a usurious transaction is that there must exist a corrupt intent to take more than the legal rate for the use of money loaned (Clark v. Gray, et al, 132 So. 832, 101 Fla. 1058) and that usury is largely a matter of intent and is not fully determined by the fact of whether the lender actually gets more than the law permits, but whether there was a purpose in his mind to get more than legal interest for the use of his money. (Benson v. First Trust and Savings Bank, 105 Fla. 135, 134 So. 493.) Also to work a forfeiture under the statute the principal must knowingly or willfully charge or accept more than the amount of interest prohibited. Chandler, et ux., v. Kendrick, 108 Fla. 450,146 So. 551-2. A perusal of the evidence establishes clearly that there was no intent on the part of the appellants to exact any usury of the defendants and there was likewise no idea or intent on the part of the appellees that usury was being exacted from them, or in fact that there had been any usury in the transaction. Warren Hammock's testimony is that he did not discover that there was any usury in the transaction until he became disgruntled at Jesse Sewell Jones, one of the defendants, in the year 1935, because of something which transpired in said appellee's place of business; that up until that time *Page 325 
he did not know that anything was wrong with the transaction. Mrs. Jones testified that she came to Florida about 1926; that she had received some money from life insurance of which she was the beneficiary; that she had made but two loans, one to the appellees, and the other to Warren Hammock's brother. She decided to make the loan and went to her attorneys. Her attorneys made out the checks and she signed them. She never knew there was any contention by Mr. Hammock that the loan was improper until January, 1935, when this suit was brought; that she had not up until that time known the rate of interest on this loan and that she did not know the loan was in excess of 10%; that she left the transaction to her attorneys, Cummings  Earle; that she left everything with her attorneys.
It would therefore appear that the element of intent in this transaction was entirely lacking and as evidence of the good faith of both of the parties, it is fair to say that the evidence indicates that neither of them had any idea or intent of evading the usury laws in any manner whatsoever, or in charging in excess of 10%. It is apparent from the record that the appellant, Mrs. Jesse Sewell Jones, did not know that the interest rate exceeded 10% until she was called on the phone by appellant's attorney in the early part of 1935, and Mr. Hammock did not realize that there was any usury involved in the transaction until very shortly before that time. In Clark v. Gray, et al., 101 Fla. 1058,  132 So. 832, it is said:
"There are four requisites of a usurious transaction: There must be a loan, express or implied; and understanding between the parties that the money lent shall be returned; that for such loan a greater rate of interest than is allowed by law shall be paid or agreed to be paid, as the case may be; and there must exist acorrupt intent to take more than the legal rate for the use of the money loan. *Page 326 
Illegal taint can be purged or eliminated, however, in either of two ways: First, by a renewal of the note or contract, after it has passed into the hands of a bona fide purchaser for value, without notice of the usury; secondly, by a reformation of the contract, by which the usurious interest is expunged by remitting the excess, and only lawful interest is retained or exacted."
In Chandler, et ux., v. Kendrick, 108 Fla. 450, 146 So. 551, it is said:
"The very purpose of statutes prohibiting usury is to bind the power of creditors over necessitous debtors and prevent them from extorting harsh and undue terms in the making of loans. Under the law and the decisions, usury is a matter largely of intent. It is not fully determined by the fact of whether the lender actually gets more than the law permits, but whether there was a purposein his mind to get more than legal interest for the use of his money, and whether, by the terms of the transaction and the means employed to effect the loan, he may by its enforcement be enabled to get more than the legal rate. Benson v. First Trust  Savings Bank (Fla.) 142 So. 887; R.C.L. pp. 223, 224.
"A thing is willfully done when it proceeds from a conscious motion of the will, intending the result which actually comes to pass. It must be designed or intentional, and may be malicious, though not necessarily so. `Willful' is sometimes used in the sense of intentional, as distinguished from `accidental,' and, when used in a statute affixing a punishment to acts done willfully, it may be restricted to such acts as are done with an unlawful intent. Clark v. Gray, 101 Fla. 1058, 132 So. 832; United States v. Boyd (C.C.) 45 F. 851, text 855; State v. Clark,29 N.J. Law, 96. *Page 327 
"To work a forfeiture under the statute, the principal must knowingly and willfully charge or accept more than the amount of interest prohibited by it. The evidence shows that Kendrick was an unsophisticated woodsman, and had no purpose whatever of charging more than the amount actually loaned, with 8 per cent. interest, that Chandler was a banker and a business man of experience, that the terms of the contract originated with Chandler, that Kendrick never intended to charge nor did he ever claim but the $7,250.00 actually loaned, * * *"
It is pertinent to observe that this is not a defensive action by mortgagors who are being sued in an attempt to enforce the amount of their obligation, but to the contrary it is an offensive action by the parties who borrowed the money, that is, the mortgagors, against the persons from whom they borrowed the money, in the proof of which action they admit that they knew nothing of the usurious character of the transaction until approximately seven and one-half years after the obligation was by them incurred, during which period of time they had received numerous accommodations from the persons lending money to them and during which time they had sought a new mortgage in satisfaction of their old one and had thereafter procured for their own accommodation an extension of their new mortgage for five years, and by virtue of that extension had been aided in making a sale wherein they had prospective profits of approximately $4,000,00, as well as the payment of several hundred dollars of interest on the mortgage debt paid by the parties who assumed it.
This Court has held in an action where usury was interposed as a defense, in Benton v. Wilkins, 118 Fla. 491, 159 So. 518, that: *Page 328 
"Defense of usury, where interposed to avoid or defeat obligation to pay money, must be established by clear and satisfactory evidence."
This brings us to the question before the Court as to whether or not lenders are proven guilty of willfully violating the usury laws when the only proof is that they accepted a $250.00 bonus for a three year eight per cent. loan of $4,750.00 on a note and mortgage for $5,000.00, which was allowed to run for a year after maturity and subsequently renewed by means of a new note and mortgage for the same amount for three years, which was later extended for five years more. The court below held that as the excess above ten per cent. interest, by reason of the bonus of $250.00, was a mere matter of calculation, by so doing they were guilty of willfully violating the usury laws regardless of their protestations and proof, not only that it was not done willfully, but that they did not even know that they were charging more than ten per cent. The chancellor's language indicated that he reached this conclusion with considerable reluctance. By calculation it appears that the excess for usury in this case amounts to but $25.00 over the three year period. In other words, if Mrs. Jones had by either acceptance or demand charged a bonus of $225.00, it would have been legal. As it was, she accepted $25.00 more than was allowed by statute, but without actually knowing that this raised the interest rate to a fraction over 10% for the three years. And if the new mortgage of 1931 could be considered as a renewal or extension of the old mortgage, and relating back thereto, then the bonus of $250.00 as applied to the full period of time covered by both mortgages would not render the loan usurious, regardless of intent.
The statute, Section 6939, Comp. Gen. Laws of Florida, by its terms applies to persons "willfully violating" Section *Page 329 
6038, which section forbids the charging of a rate of interest greater than 10 per cent. This Court in the case of Chandler, etux., v. Kendrick, hereinbefore referred to, specifically held that to work a forfeiture under the statute, the principal must knowingly and willfully charge or accept more than the amount of interest prohibited by the statute. In that case, Kendrick was an unsophisticated woodsman, as in this case the appellant actually furnishing the money was and is, as we judge from her testimony, an educated yet unsophisticated woman who has made but two loans in the State of Florida, the present loan, and one to the brother of Warren Hammock, and clearly from the testimony, as in the Kendrick case, had no purpose in charging more than the legal rate of interest. This fact is further established by proof that after deciding to make the loan, she did not even handle the transaction, but permitted her lawyer to make out the checks which she signed.
Our attention is directed to pages 39 and 40 of the transcript, which is the agreement entered into on the 21st day of February, 1933, at which time the appellees, Warren Hammock and his wife, Julia R. Hammock, were making a lease of part of the property involved in this action with the Gulf Refining Company, and which paper recites that it is the desire of the said appellees to extend the time of payment of the indebtedness for five years from the 1st day of March, 1933, that is, to make the original loan made in July, 1927, continue until March, 1938. At the time of seeking this extension, the said appellees agreed that in consideration of the further extension of time they would pay appellants the sum of $5,000.00 together with interest as provided in the note and specifically covenanted that nothing contained in said agreement should invalidate the security held for said debt, and ratified and confirmed the original mortgage and note and promised and agreed to *Page 330 
continue with the faithful performance of all of the conditions of the original mortgage and note as they were modified by the agreement. It was a new agreement as to maturities which appellants were under no obligation whatsoever to make. They gained nothing by it, although appellees, Warren Hammock and his wife, Julia R. Hammock, were thereby enabled to make a lease with the Gulf Refining Company which they did make. By this modification the loan was allowed to extend over a period of approximately eleven years. This agreement imposed a new obligation on the part of both appellants and appellees in so far as the time of payment was concerned. Thus the original contract was twice renewed from time of original transaction, in which through inadvertence, or possibly mis-apprehension of appellants' lawyers, they did charge $25.00 more than, under the statute, they should have charged for a three year loan. This was done at a time when some of our courts were laboring under possibly the same misapprehension as the lawyers here evidently were, because it was not until the case of Sullivan v. Thummn, 101 Fla. 1412,136 So. 439, a Pinellas County case, decided by this Court in 1931, that this Court definitely decided that the deductions to be made under the statute should be made from the actual sum loaned and not the fictitious sum stated on the face of the mortgage and note.
The defendants, in their amended answer, filed by leave of Court specifically raised the question that the alleged cause of action of the plaintiffs did not accrue within two years prior to the filing of the bill of complaint. The bill of complaint was filed February 20, 1935. If there was usury in the transaction, it originated at the time of making the original loan which was on the 21st day of July, 1927. The second loan or the mortgage made in satisfaction of the first mortgage was made on the 1st day of July, 1931. *Page 331 
We recognize the rule that such a limitation is not necessarily binding upon a Court of Equity. But there is also a rule that in the absence of contrary equities, a Court of Equity may follow the law. 21 C.J. 195-198. The limitation governing this action, if it were in law, is Section 4663, Comp. Gen. Laws, sub-paragraph 6:
"Within Two Years. — An action by another than the State upon a statute for a penalty or forfeiture; * * *"
Thus this, if brought as an action at law to recover the forfeiture of double the interest in excess of the amount loaned, would be an action by another than the State strictly involving a forfeiture and a penalizing of the lender. If the people of Florida, through their Legislature, determined that a person other than the State of Florida, bringing such an action on the law side of the Court, should bring it within a period of two years, the question arises, would it not be reasonable to hold that a Court of Equity should not only, as an equitable principle, but as a matter of right, follow the same limitation, where justice and equity require it? But it is hardly necessary to decide that question here. At least, these considerations indicate that there is a showing here of gross laches.
In addition to what may be the law applicable, equity would indicate that the appellees should not be allowed to take advantage of this situation, of which they were ignorant just the same as the appellants were ignorant; that it is unjust that the appellees should have the use of appellants' money from July, 1927, until February, 1935, before raising this question, and after the lapse of approximately seven and one-half years, the appellees should be barred from asserting their charge in an attempt not only to take away from appellants their original loan, made to appellees in good faith and received by them in the same manner, but also attempt to require appellants to pay to them double the *Page 332 
amount of the interest on the obligation, to the extent that this exceeds the sum originally loaned. It was probably in recognition of this principle, in part at least, that the lower court refused to do more than cancel plaintiff's mortgage. It did not charge defendants with the excess doubled. The proof substantiated the answer that the action did not accrue within two years prior to the filing of the bill.
If the appellees had brought their suit when or before the original mortgage fell due, on the same theory as the present suit, they could not have claimed anything like as much as they did by waiting for seven and a half years and then claiming a forfeiture of double the amount of the interest accruing over the longer period. But by getting Mrs. Jones to renew and extend the original note and mortgages they claim a forfeiture which wipes out the mortgage entirely and leaves Mrs. Jones owing the Hammocks some thirteen hundred dollars. Thus Mrs. Jones' considerate treatment of the borrowers has, if the decree below stands, worked her own undoing.
Our conclusion is that on the facts of this case, the plaintiffs in the court below did not successfully carry the burden which rested upon them to prove that the defendant, Mrs. Jones, willfully, and intentionally charged the plaintiff more than ten per cent. for the use of the money borrowed by him, and if it was not "willfully" done the statute (Sec. 6939) was not violated.
While the facts here are not exactly the same, we think this case falls within the principle laid down in the case of Chandler v. Kendrick, supra.
If the principle underlying the final decision on rehearing in the case of Benson v. First Trust  Savings Bank, 105 Fla. 135,142 So. 887, were applied here, it is doubtful if there would be any usury, regardless of intent, in a loan of this kind, such as would work the forfeitures claimed in *Page 333 
view of the fact that by way of a renewal note and mortgage and an extension, the loan had run for seven and a half years before any question of usury was raised. It was held in that case that where usury is charged, the amounts recoverable should be determined, not from the time the mortgagee took advantage of the acceleration clause by filing foreclosure suit, but as of the date of the foreclosure decree, which holding spread out the time to which the bonus payment was applicable in such a way as to save the forfeiture of both principal and interest. If the bonus charged by Mrs. Jones in this case was spread out over the period that the loan had actually run, or had been extended to it, together with the eight per cent. interest, would have amounted to considerably less than ten per cent. But we do not need to invoke that principle here. Neither of the parties knew, or willfully intended, that more than ten per cent. should be charged.
We cannot believe that the Legislature, by the statute here involved, ever intended any such unjust result as the decree below would inflict, on such a state of facts as those presented in this case.
The decree appealed from is accordingly reversed with directions to dismiss the bill.
WHITFIELD, TERRELL and CHAPMAN, J.J., concur.
ELLIS, C.J., and BUFORD, J., dissent.