Appeal from order of Court of Common Pleas of Lycoming County, No. 73-1382, in case of Jessie H. Olwine v. A. Madeleine Torrens.
Ronald C. Travis, and Candor, Youngman, Gibson and Gault, submitted a brief for appellant.
George M. Hess, with him Hess and Hess, for appellee.
Watkins, P. J., Jacobs, Hoffman, Cercone, Price, Van der Voort, and Spaeth, JJ. Opinion by Hoffman, J.
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Appellant contends that the lower court erred when it found the repayment provision in appellant's loan usurious under the version of the Pennsylvania usury law*fn1 applicable at the time of the loan.
On November 19, 1958, appellant made a loan to the appellee and her husband for the principal sum of $7000.00 plus 6% interest, and a bond and mortgage were
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executed. The bond and mortgage provided that the amount of principal to be repaid should be increased or decreased by a percentage equal to the difference between the average purchasing power of the dollar for the months of July, August and September, 1958, and the average purchasing power of the dollar for the three months immediately preceding repayment, if the difference was greater than five points. The average purchasing power of the dollar was to be measured by the consumer price index. The consumer price index for the 1958 period was $100.00, and for the period immediately preceding payment was $150.80. Under the loan provision, therefore, the appellee owed an additional $3,556.00.
On May 21, 1973, the appellee filed a complaint in equity seeking to force the settlement of the mortgage and bond. During the proceedings, the lower court raised the issue of whether the provision violated the Pennsylvania usury law, supra, and the appellee was permitted to filed an amended reply to new matter raising this issue. In November of 1974, the lower court certified the case from the equity side of court to the law side of court, pursuant to Rule 1061 of the Pennsylvania Rules of Civil Procedure. On November 22, 1974, the lower court found that the repayment clause violated the Pennsylvania usury law, supra, and ordered the mortgage be marked satisfied. This appeal followed.
At the time the mortgage was executed by the parties, the Pennsylvania usury law, supra, provided: "The lawful rate of interest for the loan or use of money, in all cases where no express contract shall have been made for a less rate, shall be six per cent, per annum . . ." Black's Law Dictionary (4th ed. 1957) defines interest as "the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money." See also, Bair v. Snyder County State Bank, 314 Pa. 85, 171 A. 274 (1934); Mack Paving & Construction Co. v. American Pipe & Construction Co., 283 Pa. 449, 129 A. 329
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(1925); McDermott v. McDermott, 130 Pa. Superior Ct. 127, 196 A. 889 (1938). Since usury is often accompanied by subterfuge and circumvention to present the color of legality, it is the duty of the court to examine both the substance and form of a transaction. Richman v. Watkins, 376 Pa. 510, 103 A.2d 688 ...