(47 Wash. 186)

LIBERT v. UNFRIED et ux. (Supreme Court of Washington. Sept. 18, 1907.)

1. USURY-PENALTIES AND FORFEITURES.

Under 3 Ballinger's Ann. Codes & St. § 3671, providing that if, in an action on a contract for payment of money and interest it be shown that a greater rate of interest than 12 per cent. per annum has been contracted for or taken, plaintiff shall only recover the principal, less the amount of interest accruing thereon at the rate contracted for, and defendants shall recover costs, and, if interest shall have been paid, judgment shall be for the principal, less twice the amount of the interest paid, and less the amount of all accrued and unpaid interest, where plaintiff loaned defendants $5,000 and received their notes for that amount. bearing 12 per cent. interest, secured by mortgage, and as a bonus for the loan also received their unsecured note for $1,000, bearing 12 per cent. interest from maturity, and plaintiff, exercising an option, foreclosed the mortgage before some of the notes secured were due, but after the $1,000 note had by its terms matured, defendants are entitled to have deducted from the $5,000 notes, as accrued interest thereon, all of the $1,000 note and interest thereon after its maturity. 2. SAME-ATTORNEY'S FEES.

Under Ballinger's Ann. Codes & St. § 3671, providing that in an action on an usurious contract all that can be recovered is the principal. less certain deductions, and that defendants shall recover costs, plaintiff cannot recover attorney's fees.

3. CHATTEL MORTGAGES — SIIEEP "INCREASE THEREOF."

The words "increase thereof." in a chattel mortgage of "ewe sheep and their increase," and "two year old wether sheep," do not include the yearly clip of wool, but the offspring only.

CROW, J. This action was commenced by the plaintiff, William A. Libert, against the defendants, Fred Unfried and Sylvia Unfried, his wife, to foreclose a chattel mortgage. In the fall of 1905 the defendants were about to purchase a large flock of sheep from one Hamilton Gill, and the plaintiff loaned them $5,000 to pay the purchase price. To secure such loan he took from the defendants three notes, dated October 23, 1905, one for $1,000, falling due June 15, 1906, one for $2,000, falling due June 15, 1907, and one for $2,000, falling due June 15, 1908, all bearing 12 per cent. interest from date, and being secured by a mortgage on land in Garfield county and a chattel mortgage on the flock of sheep. About October 25, 1905, the defendant Fred Unfried executed and delivered to the plaintiff his additional unsecured note for $1,000, due March 15, 1908, with 12 per cent. interest from maturity. The defendants claim this $1,000 note

was required of them as a further exaction and extraordinary charge of interest for the use of the $5,000 loaned them by plaintiff. The plaintiff denies this, claiming that he sold to Fred Unfried a one-half interest in a partnership existing between himself and Unfried, and took the note as payment. The plaintiff alleged that the defendants had impaired his security by selling 260 head of the sheep without his knowledge or consent, and that by reason thereof he had at his option declared the secured notes to be due and payable. Upon plaintiff's ex parte application the trial court, on April 19, 1906, appointed one Owsley receiver of the mortgaged sheep, and directed him to take immediate possession and hold the same pending the foreclosure proceedings. Upon motion of the defendants this order was afterwards vacated, and from such interlocutory order of vacation the plaintiff prosecuted a preliminary appeal to this court, which we have dismissed on this date in cause No. 6,427. 91 Pac. 774. The record on this present appeal shows that on the appeal from the interlocutory order the plaintiff gave 2 supersedeas bond, that under such bond Owsley has continued in possession of the sheep, that he has clipped a large amount of wool, that he has turned the proceeds thereof into the custody of the clerk of the superior court, that the plaintiff claims a lien on this wool under his chattel mortgage, and that the defendants claim they are entitled to the wool, or the proceeds of its sale, free from any lien.

Upon trial the court made findings from which, with others, the following facts appear: That the defendant Fred Unfried had violated the terms of the chattel mortgage by selling certain of the sheep without plaintiff's knowledge or consent; that $435.60, a portion of the proceeds of such sale, was paid to plaintiff on November 24, 1905, $50 being applied on account of interest and $385.60 on the principal of his notes; that the unsecured note for $1,000, dated October 25, 1905, executed by Fred Unfried, was without consideration, except that it was given as an exaction of the plaintiff, made upon the defendant Fred Unfried for the loan of $5,000, evidenced by the three secured notes; and that the chattel mortgage does not cover the clip of wool from the sheep. The court also stated the following conclusions of law: "First. That the transaction set forth in plaintiff's complaint and in defendants' affirmative answer, arising out of the loan of defendants of the sum of five thousand ($5,000) dollars, and the exaction by plaintiff of the rate of interest specified in said notes, together with the further sum of one thousand ($1,000) dollars as a further and additional exaction for the use of said money, constitutes a usurious transaction, and that said one thousand ($1,000) dollar note was and is a usurious exaction and

an unlawful charge for the loan of money, by way of a premium which the plaintiff, William A. Libert, demanded and exacted of the defendant Fred Unfried.

Third. That by reason of the usurious nature of the loan, and of the transaction set forth in this case, the plaintiff is not entitled to recover interest or attorney's fees or costs herein. Fourth. That defendants are entitled to the following credits on said five thousand ($5,000) loan: (a) The sum of $1,000 as accrued usurious interest represented by the note. (b) The sum of $100, as being double the interest actually paid on November 24, 1905. (c) The sum of $385.60, as being payment on the principal of date November 24, 1905. (d) The sum of $379.20, being the amount of unpaid accumulated interest on the $5,000 notes from November 24, 1905, to August 1, 1906, the date of decree. (e) The sum of $42. as being the amount of interest on the $1,000 note contracted for from date of maturity thereof (March 15, 1906) to August 1, 1906, date of decree. Fifth. That the plaintiff is entitled to recover judgment against the defendants, Fred Unfried and Sylvia Unfried, for the sum of three thousand ninety-four and 20/100 ($3,094.20) dollars, without interest, attorney's fees, or costs." Upon these findings and conclusions a final decree was entered, awarding plaintiff $3,094.20 debt, without attorney's fees or costs, and foreclosing the chattel mortgage upon the sheep, but not on the clip of wool. The plaintiff has appealed.

There is a motion to dismiss the appeal, because (1) the notice of appeal is insufficient and (2) the certificate of the trial judge to the statement of facts is defective. We find no merit in either contention. The motion to dismiss is denied.

By his assignments of error the appellant contends that the trial court erred (1) in finding that the $1.000 unsecured note was part of an usurious contract and without other consideration; (2) in deducting excessive amounts as penalty for the usurious contract, if it be held usurious; (3) in holding that the clip of wool was not subject to the chattel mortgage lien; and (4) in refusing to award appellant attorney's fees or any costs.

The unsecured note for $1,000 and the three secured notes for $5,000 were, as we find from the evidence, parts of the same transaction. The appellant claims that he and the respondent Fred Unfried entered into an oral contract to join in purchasing the sheep from Hamilton Gill, that the appellant was to advance the necessary funds to make the purchase, that the respondent Unfried was to care for the sheep, and that the two were to be partners in the sheep business. His evidence shows that the sheep were not jointly purchased, that he never paid any money on the alleged contract of partnership, that

no papers were drawn, and that no partnership business was actually transacted. In fact, according to appellant's testimony nothing was done except the making of the oral agreement. Appellant, however, contends that, within an hour, or less time, after the formation of the partnership, the respondent Unfried purchased his interest in the firm and its anticipated profits for $1,000, giving his unsecured note in payment, and that immediately thereafter appellant made the $5,000 loan as an entirely separate transaction, thereby furnishing funds which enabled the respondent Fred Unfried to individually purchase the sheep from Hamilton Gill. The respondents contended, and Fred Unfried testified, that the appellant exacted the $1,000 note as a consideration or bonus for the $5,000 loan, in addition to 12 per cent. interest. The court found with the respondent on this issue, and we are satisfied with such finding, it being sustained by the evidence. Section 5701, Pierce's Code (section 3669, 3 Ballinger's Ann. Codes & St.), reads as follows: "Any rate of interest not exceeding twelve (12) per centum per annum agreed to in writing by the parties to the contract, shall be legal, and no person shall directly or indirectly take or receive in money, goods or thing in action, or in any other way, any greater interest, sum or value for the loan or forbearance of any money, goods or thing in action than twelve (12) per centum per annum." As the appellant's three secured notes by their terms call for this maximum rate of interest, he was contracting, not only for 12 per cent. on the $5,000 actually loaned, but also for $1,000 in addition thereto, as compensation for such loan, which made the contract usurious. Section 5706, Pierce's Code (section 3671, 3 Ballinger's Ann. Codes & St.), provides: "If a greater rate of interest than is hereinbefore allowed shall be coutracted for or received or reserved, the contract shall not, therefore, be void; but if in any action on such contract proof be made that greater rate of interest has been directly or indirectly contracted for or taken or reserved, the plaintiff shall only recover the principal, less the amount of interest accruing thereon at the rate contracted for, and the defendants shall recover costs; and if interest shall have been paid, judgment shall be for the principal less twice the amount of the interest paid, and less the amount of all accrued and unpaid interest."

Appellant's principal contention seems to be that the trial court should not have deducted the entire $1,000, the face of the unsecured note, as interest accruing on the $5,000 loan at the rate contracted for. He contends that the statute should be strictly construed as against the respondent, that only interest accrued at the date of judgment should be deducted, and that the $1,000 was not accrued interest. The trial court was right in its

conclusion on this point. The $1,000 unsecured note by its terms had matured, and, with $48 interest thereon, was due and payable at the time of the entry of final judgment herein. It had undoubtedly been given as compensation to appellant for the use of the $5.000, in addition to the maximum rate permitted by statute. Had it been paid by the respondents, appellant could not seriously contend that they would not be entitled to credit for twice the amount as interest paid. The evident purpose of section 3671, 3 Ballinger's Ann. Codes & St., was to compel the money lender who makes an usurious loan to credit his debtor with every dollar of accrued value which he has contracted to receive as compensation for the debtor's use of the money actually loaned. Under any fair interpretation the $1,000 was past-due interest, and, being usurious interest, was properly deducted from the appellant's claim. This is also true of the $378.20 additional interest which had matured on the $5,000 after the payment of November 24, 1905, and the $42 interest which had matured on the $1,000 note.

A proper construction of the chattel mortgage requires us to hold that it did not give appellant a lien on the clip of wool. The mortgage described "twelve hundred head of ewe sheep and their increase; three hundred head of two-year-old wether sheep." Appellant contends that the words "and their increase" applied to the yearly clip of wool. California has a statute reading as follows: "Mortgages may be made upon the following personal property and none other:

Sixteenth. Neat cattle, horses, mules. swine, sheep, goats, and the increase thereof." In Alferitz v. Borgwardt. 126 Cal. 206, 58 Pac. 460, the Supreme Court held that the words. "and the increase thereof," as applied to sheep in a chattel mortgage, did not include their wool, but their offspring only. Stringfellow v. Sorrells, 82 Tex. 277, 18 S. W. 689. Considering the terms of appellant's mortgage in the light of the evidence and all the surrounding circumstances, we construe words "and their increase" to apply merely to the increase of lambs from the ewes. If it had meant wool, language definitely referring to the increase of wool from all the sheep would certainly have been used, and not language which excepted the wether sheep by referring only to the increase from the ewes. The evidence shows that at the time of the trial there had been an increase of about 500 lambs, and the trial court properly held they were subject to the mortgage lien, and that the clip of wool was not.

The trial court did not err in refusing to allow appellant any attorney's fees or costs. The statute (section 5706, Pierce's Code; section 3671, 3 Ballinger's Ann. Codes & St.) provides that he shall recover only principal, less certain deductions therein named, and

(Supreme Court of Oklahoma. Sept. 5, 1907.) 1. TAXATION-REAL ESTate-Sale for Taxes -TAX DEED.

When a tax deed shows on its face that several lots in a town were sold at one sale, and that the county purchased them as a competitive bidder, the deed is void. While the county treasurer has the right under the law, to issue a second tax deed for the purpose of curing defects in the first, such authority cannot be exercised to overcome by false recitations in such second deed, the record upon which it is based. [Ed. Note.-For cases in point, see Cent. Dig. vol. 45, Taxation, §§ 1361, 1535.]

2. SAME-TAX CERTIFICATE-CONSTRUCTION.

A tax certificate, under the law, does not pass title to the land sold. It is a written certification by the county treasurer of the facts regarding the sale of real estate for taxes, and is the legal evidence upon which the holder thereof is, at the proper time, entitled to a deed, or the redemption money. It is prima facie evidence of the correctness of the facts recited therein, and, being made by the treasurer at or near the time of sale, where the recitations thereof are in conflict with the recitations of the tax deed based thereon, the recitations of the tax deed will prevail.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 45. Taxation. § 1463.]

3. SAME-SALE-PURCHASE BY COUNTY.

Where a county purchases real estate at a tax sale as a competitive bidder, the sale is void, and a tax certificate or tax deed which recites such fact or other facts from which such competition is necessarily disclosed is void.

[Ed. Note. For cases in point, see Cent. Dig. vol. 45, Taxation. § 1361.]

4. SAME-SALE-LOTS IN CITY.

Each lot in a city or town must be assessed and sold separately, and, where a tax certificate or deed shows upon its face that several lots. were sold together in one sale, such certificate or deed is void.

5. SAME-ACTION TO TRY TITLE.

Where one purchases real estate at a tax sale, and goes into possession of the same under a void sale and deed, and the original owner brings an action in ejectment to recover possession. he is not required, as a condition precedent to bringing the action, to tender to the tax deed holder the amount of taxes paid by him.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 45, Taxation, § 1586.j

6. ADVERSE POSSESSION-VOID TAX DEED.

A tax deed which is void upon its face is not admissible in evidence to support an adverse possession under a statute of limitations. A

[Ed. Note. For cases in point, see Cent. Dig. vol. 1, Adverse Possession, § 462; vol. 45, Taxation, § 1594.]

Burford, C. J., dissenting. (Syllabus by the Court.)

Error from District Court, Cleveland County: before Justice Clinton F. Irwin.

Action by S. C. Hawk against E. J. Keller. Judgment for plaintiff. Defendant brings error. Affirmed.

C. L. Botsford, for plaintiff in error. J. W. Hocker, for defendant in error.

BURWELL, J. The appellee, S. C. Hawk, was the owner of lots numbered 17 to 32, inclusive, in block numbered 11, in the town of Lexington, in Cleveland county. These lots were sold for taxes and bid in by the county. The county sold the certificate of purchase to the appellee, E. J. Keller, who, on December 24, 1898, obtained a tax deed for the same, and went into possession of the lots. On October 30, 1900, the appellee commenced this action in ejectment. The appellant answered, denying generally the allegations of the petition, and then affirmatively pleaded his tax deed. On the final trial judgment was rendered for S. C. Hawk, and Keller appeals to this court.

On December 24, 1898, the county treasurer made to Keller a tax deed, but this deed showed upon its face that all of these lots were sold together, that the county bought them as a competitive bidder, and that the sale was made at the door of the courthouse. Recognizing that this deed was void, Keller on November 13, 1900, obtained from the county treasurer another deed, which recited that there were no bidders other than the county, that the lots were sold separately (giving the amount for which each sold), and that the sale took place at the treasurer's office. This second tax deed was obtained after the commencement of this action. This fact, however, is not considered by us in deciding the case.

The certificate of sale was issued by R. Aniol, who was county treasurer and who made the sale. The first deed was executed by him also, and its recitations are in harmony with the tax certificate. The second deed was executed by J. W. Stow, who was elected in the place of Mr. Aniol, and took charge of the office at the end of Mr. Aniol's term. The tax certificate, under the law, does not pass title to the land sold. It is a written certification by the county treasurer of the facts regarding the sale of real estate for taxes, and is the legal evidence upon which the holder thereof is, at the proper time, entitled to a deed, or the redemption money. It is a prima facie evidence of the correctness of the facts recited therein.

urer while the facts are fresh, and when there is slight probability of error of memory. And, where there is no other evidence. offered as to what actually occurred at a sale, the recitations of the tax certificate will prevail over conflicting recitations in a deed executed by another treasurer some four years after the sale occurred, when the recitations in the tax certificate shows that the treasurer had no legal authority to execute the deed. It is true, perhaps, that, if there were a discrepancy between the records of the treasurer's office and the recitations in the tax certificate, the former will prevail; but in this case the facts, as recited in the tax certificate, are not controverted. The validity of the deed depends upon the validity of the proceedings leading up to it. If those proceedings are void, the deed is void also. The only evidence offered on the trial as to what was actually done is the tax certificate and portions of the record which are not in conflict. The tax certificate recites that these lots in question were purchased by the county; it "being the highest and best bidder," and this court has held that such a recitation shows that the county was a competitive bidder, and, if so, the deed is void. Hanenkratt v. Hamil, 10 Okl. 219, 61 Pac. 1050. And under the rule announced in the case of Wilson v. Wood, 10 Okl. 279, 61 Pac. 1045, the recitations of a tax deed do not overcome facts in conflict therewith, as shown by the tax certificate. In this last case the court expressly held the recitations of a tax deed might be contradicted by one claiming adversely to it. The tax certificate also shows that these lots were sold at one sale for $8.73. This alone would render the sale void. Each lot in a city or town should be assessed and sold separately, and, while more than one lot may be included in the same deed, the deed must affirmatively show the amount for which each lot sold. Frazier v. Prince, 8 Okl. 253, 58 Pac. 751; Lowenstein v. Sexton (Okl.) 90 Pac. 410 (not officially reported); Eldridge v. Robertson, decided at the present term of court (not yet officially reported) 92 Pac. 156.

The contention that, when a deed is defective, another deed may be issued to conform to the facts, adds nothing in favor of the appellant. The second deed should conform to the facts, and it is said in 27 Cyc. p. 963, that "the authority [to issue a second deed] cannot be exercised to overthrow by false recitals in a deed the records upon which it is based." That is exactly the effect of the second deed in this case. The recitals therein, when compared with the record, are false. It is also suggested by counsel for the appellant that the appellee, plaintiff below, never tendered the taxes to the appellant. No tender was necessary. As we have heretofore said, the tax deed was

void. The United States Circuit Court of Appeals for the Eighth Circuit, in the case of Paine v. Germantown Trust Co., 136 Fed. 527, 69 C. C. A. 303, said: "Where a tax sale of land is void, the payment of the taxes by the purchaser was the act of a mere volunteer, so that the landowner was not bound to pay the taxes, and interest so paid by such purchaser as a condition to his right to have the purchaser's certificates and deeds vacated." The Supreme Court of Kansas had occasion to consider the question in the case of West v. Cameron, 39 Kan. 736, 18 Pac. 894. That case, like this one, was a suit in ejectment. The court said: "In an action of ejectment, when it appears that the plaintiff is the owner of the property, and that the defendant holds the same under a void or voidable tax deed, as in this case, the plaintiff's action cannot be defeated by showing that the plaintiff has not tendered the amount of the taxes paid by the defendant on the land"-citing authorities. above rule should apply in this case, especially in view of the fact that the plaintiff tendered the taxes to the treasurer and they were refused. The court, however, as a condition precedent to giving possession to the appellee, required him, in the judgment, to pay the taxes.

The

The appellant also insists that the action of appellee was barred by the statute of limitations, by reason of it not having been commenced within the statute after the first deed was recorded. The first deed was void upon its face. Therefore the statute of limitations did not run against it. There is apparently some conflict in the decisions upon this point; but an examination of some of these cases will show that the courts rendering them failed to distinguish between a deed which is void upon its face and one which appears upon its face to be regular, but may be defeated by reason of the irregularity of the prerequisite steps, or total failure to perform some necessary duty named in the statute as the basis for a tax deed. The Supreme Court of the United States in the case of Rerfield v. Parks, 132 U. S. 239, 10 Sup. Ct. 83, 33 L. Ed. 327, in an opinion prepared by Mr. Justice Miller, reviews the authorities, and in positive language declares that the statute of limitations cannot be invoked in aid of a tax deed which is void upon its face. The court considered the statutes of Arkansas, which were equally as favorable to a purchaser at a tax sale as our own. Finally the court said: "We do not discover in the statute of Arkansas, nor in the decisions of its courts cited by counsel for defendant, anything to contravene these views, and we think that both the weight of authority and sound principle are in favor of the proposition that, when a deed founded on a sale for taxes is introduced in support of the bar of a possession under these statutes of limitations, it is of no avail if it can

be seen upon its face and by its own terms that it is absolutely void." To the same effect are the following cases: Coulter v. Stafford (Circuit Court of Appeals for the Ninth Circuit) 56 Fed. 564, 6 C. C. A. 18; Moore v. Bron, 11 How. (U. S.) 414, 13 L. Ed. 751; Daniels v. Case et al. (C. C.) 45 Fed. 843; Id., 159 U. S. 251, 15 Sup. Ct. 1038, 40 L. Ed. 140; Callahan v. Davis, 90 Mo. 78, 2 S. W. 216; Land & River Imp. Co. v. Bardon (C. C.) 45 Fed. 706; Shoat v. Walker, 6 Kan. 65; Sapp v. Morrill, 8 Kan. 677; Hubbard v. Johnson, 9 Kan. 632. The last three cases were where the original owner of the land remained in possession, but in the case of Watterson of Watterson v. Devoe, 18 Kan. 223, the Supreme Court of Kansas said that, even though the purchaser at the tax sale was in possession, the statute of limitations would not run in favor of his tax deed, which was void upon its face. The justice who wrote this opinion cites the other Kansas cases referred to above. And again, in the case of Larkin v. Wilson, 28 Kan. 513, Chief Justice Horton, speaking for the court, said: "This court has already held that a tax deed, to be sufficient when recorded to set the statute of limitations in operation, must of itself be prima facie evidence of title; that a tax deed void upon its face will not start the statute of limitations; and also that a tax deed void upon its face will not protect a person in possession of the premises for two years thereunder." See, also, the following cases: Mason v. Crowder, 85 Mo. 526; Sheehy v. Hinds, 27 Minn. 259, 6 N. W. 781; Cutler v. Hurlbut, 29 Wis. 152; Wofford v. McKinna, 23 Tex. 36, 76 Am. Dec. 53. And in the case of Hurd v. Brisuer et al., 3 Wash. 1, 28 Pac. 371, 28 Am. St. Rep. 17, it is said: "If the sale was void [referring to a tax sale], which we think it was, none of the claims made by the appellant under the statute of limitations are good." It is true that there are some cases holding that statutes of limitations will run against a void deed, but the weight of authority is against that doctrine, and with the latter line of authorities are the decisions of the Supreme Court of the United States. These decisions are binding upon this court; and, besides, we believe that the Legislature did not intend that time should breath life and force into an instrument from the face of which it could be seen that it was absolutely void. The law was intended to protect purchasers at tax sales and their grantees from hidden defects in the proceedings, and not from those which the tax deed shows upon its face, and which, under the law, persons dealing with the title are bound to know.

The judgment of the lower court is hereby affirmed, at the cost of appellant. All of the Justices concurring, except IRWIN, J., who presided at the trial below, not sitting, BURFORD, C. J., dissenting, and GARBER, J., absent.