Cook v. Courtright (40 Ohio St. 248, 1883)

Granger, C. J.

Clarissa M. Courtright sued in Rich-land common pleas upon a note reading as fellows:

“$8,000.

“ One year after date we, or either of us, promise to pay Clarissa M. Courtright or order, eight thousand dollars, with interest from March 1st, 1871, at eight per cent, per annum, payable semi-annually on the 1st day of September aud March each, until paid for value received. March 20, 1871. “ Henry Cook,

“Cyrus W. Cook.”

And also upon a mortgage securing the same. The Cooks by answer averred that the note was by its terms usurious, and was written by the plaintiff to evade the usury laws of the state; that the3r had paid on said note the entire principal, and interest thereon at six per cent, payable annually, and therefore owed the plaintiff nothing. She demurred to this defence. The common pleas overruled her demurrer, and the case proceeded to a final judgment dismissing the action at her costs. On her petition in error, the district court held her demurrer good, reversed the judgment and remanded the cause. The Cooks here ask a reversal of the judgment rendered b3r the district court.

Was the note-usurious? The act of May 4, 1869 (66 Ohio L., 91), was in force when it was delivered. The' first section reads thus: “ That the parties to any * * * promissory note * * * for the forbearance or payment of mone3T at any future time, may stipulate therein for the pa3rment of interest upon the amount of such * * * note * * * at any rate not exceeding eight per centum per annum, payable annually.”

If the words “pa3',able annually” were absent, the meaning would be plain. Being present, what is their effect?

Did the' legislature intend that no contract for a rate greater than six per cent, should be legal unless it contained a stipulation that -the interest should be pa3rable annually? Strict^’ speaking, no such stipulation could apply to any obligations other than those payable in two, or more, years. The mass of the notes in use were then, as they now are, payable after so many days or months. To place the words “payable annually” in notes payable in thirty, sixty or ninety days, or in three, six or nine months, would postpone the right to collect the interest beyond the day fixed for payment of the principal. A like result would follow as to all notes running longer than one year if made payable within the last year of their term. Such a construction seems so unreasonable that we decline to adopt it.

But to hold the words applicable only to notes having more than one year to run would involve another difficulty. While it would erase them from the statute, so far as concerns the most numerous classes of interest bearing contracts, it would furnish a guide for all lenders to escape their effect. After a decision that these words do not apply to contracts for, less than one year, all notes to bear interest at a greater rate than six per cent, would be so written as to mature in less time than one year. Six months notes at eight per cent, per annum would be used. Although collectible after six months, the parties, on payment of the interest, could extend them, either by express contracts for successive half years, or by sufferance. In holding that the first section of the act of 1869 does not require, in all contracts under it, a stipulation that the interest must be “payable annually,” we follow Marietta Iron Works v. Lottimer, 25 Ohio St., 621.

Do the words “payable annually” form part of a phrase intended to guide the contracting parties in computing the legal rate on contracts made under the first section of this act? If so, such rates as 7.8887, 7.8888, 7.8889, 7.8899, would become common. Only skilled mathematicians could determine with precision the proper figures for the decimal part of the rate. Instead of a single rata per annum applicable to all contracts, there would fee different rates