Mitchell v. Doggett, 1 Fla. 356 (Fla. 1847)
Supreme Court of Florida
January, 1847
Mitchell v. Doggett, 1 Fla. 356 (Fla. 1847).
ISAAC W. MITCHELL vs. HENRY DOGGETT.
ERROR from Leon Circuit Court.
This case was tried at the Spring Term, 1846, his Honor Judge MACRAE, presiding.
Assumpsit on a Promissory Note.
Plea: Non assumpsit, and a notice setting up usury.
The Plaintiff insisted that so much of the law of 1833, "regulating the rate of interest," as prohibited the taking or reserving of a greater than a certain rate of interest therein expressed, having been repealed by the Act of 1844, there was no law in force, applicable to his case, against the taking of usury.
The facts of the case will be found in the opinion of the Court.
Headnotes
The 1 & 2 sec. of the Act of 1833, "regulating the rate of interest," were repealed by the Act of 1844; but prior to the repeal, a contract was made whereby a greater rate of interest than that thereby allowed was reserved and taken; held that the repeal of the Act of 1833, was no bar to the plea of usury under that Act; and that the rights of the parties must be governed by the law in force at the time of the making of the contract, and that they were not affected by the subsequent repeal of the said Act.
When a contract is, by force of a Statute, illegal at the time of its inception, no action can be maintained upon it, although the Statute declaring it illegal be repealed.
The law of 1833, which declared that the interest on any usurious contract shall be void and the obligor forever exonerated from the payment of the same, vested in the obligor a right which could not be divested by posterior legislation repealing such law.
When illegal interest is taken or contracted for, the whole interest becomes void from the time of the taking of the usurious interest.
To establish usury, it is not necessary to show that the Plaintiff actually took or received more for interest than the law declared lawful, but it is sufficient to show that it is promised to be paid; and it is immaterial whether the usurious interest is secured by a distinct instrument, or is included in the instrument which secured the principal.
In order to render the offence complete, so as to subject the lender to the penalty under the Statute, there must be an actual receipt of the usurious interest; but the contract may be rendered void without such receipt.
A contract to pay more than legal interest for past forbearance is illegal.
When the original contract is lawful no subsequent taking of, or contract to take, illegal interest, will invalidate it; and if sued on, Plaintiff may recover the principle and interest of such original valid contract; but when suit is brought on a new note, tainted with usury, which had been substituted for the original valid one, plaintiff can only recover the original and valid principal with interest thereon up to the time of the taking of illegal interest.
Attorneys
A. E. Maxwell, for Plaintiff in Error:
Contended it was the effect of the repeal by the Act of 1844, of the 1st and 2d sections of the Act of 1833, relating to interest, that except as to transactions past and closed, they are to be considered as if they had never existed; and, therefore, defendant cannot now sustain the defence of usury as to any contract made while these sections of the Act of '33 were in force. Statutes of usury are penal statutes, and the consequences which attach to penal statutes generally, also attach to those on the subject of usury. It is a well settled rule of law, that the repeal of a penal statute operates as a release to all who have incurred the penalty, unless there is a saving in the repealing clause to the contrary. Why shall not the same effect follow the repeal of a usury law? To avoid the force of this general principle in this case, it must be shown that statutes of usury form an exception to penal statutes generally. If it be said that the 3d section of the Act of 1833, which was not repealed, is the one relied upon here, it is a sufficient reply that that section does not declare what usury is; and to have any meaning or force, must be connected with the 1st and 2d sections. But these sections are repealed, and all connection between them and the 3d cut off; for they are to be considered as if they "never had existed." Dwarris on Stat., 676. 2 Cond. R. S. C. U. S., 256.
This doctrine, though, is not confined to penal statutes. In some cases, civil rights are affected in the same way by a repealing Act. 1 Hills. R., 324.
It may be contended, as was done below, that this view of the law will have the effect to render lawful and valid any contract which, at the time it was made, was unlawful. But this same objection would equally apply to the case of penal statutes; for their repeal has the effect of legalizing acts which, when committed, were unlawful. The objection is too sweeping. Our law is merely prohibitory. It does not declare the contract, or any part of it, void. The words in the 3d section, "and the interest on the same shall be void," are without meaning. It would be the same thing to say, that the money promised in a note shall be void. These words not making void the contract or any part of it, the whole of said section, fairly construed, amounts to giving a privilege to the "obligor or obligors" to get exonerated from the payment of the interest; so that any law which affects this privilege, affects only the remedy, and not the contract itself.
He contended, also, that the Act of 1833, operated only upon the usury which it prohibited, and did not forbid the recovery of the principal with legal interest. The 1st section of the Act of '33 declares, that all "bonds, contracts, &c., on which a higher rate of interest is received or taken than is hereby allowed, shall forfeit the amount of said interest." "Said interest," evidently refers to "higher rate of interest," for its antecedent; and "higher rate" must mean a rate above the legal rate; and therefore so much as is legal is not to be forfeited. This section declares what usury is, and the 2d and 3d, must be construed in connection, and not inconsistently, with it.
Third. There can be no usury under the Act of 1833, until the party has actually taken or received more than lawful interest. In that act there is nothing said about "reserving" interest, and in this respect it is different from other usury laws. The 1st section of the Act, which declares what usury is, and which imposes a forfeiture, &c., is penal, and must be construed strictly. That section nowhere says that to reserve, or contract for, more than ten per cent. interest, is usury; but to take, accept, or receive more, is prohibited by it. The 3d section is a nullity without the 1st; for it cannot be ascertained when a contract is usurious without reference to the 1st; and, consequently, only that is usury within the meaning of the 3d section, which is declared to be by the section upon which it depends for its construction. This proposition is fortified by reference to decisions under the statute of Anne. Under that Statute the clause which avoids the contract contains the words, "whereby there shall be reserved or taken above," &c.; but the clause making usury a penal offence, only contains the words, "take, accept and receive," &c. It has been repeatedly decided, that under this Statute, there must be an actual taking of excessive interest before the offence of usury is complete; whereas, the contract itself, and the note or other evidence of it, are voided from the time of the making thereof. Why this difference, unless the word reserve makes it. See Fisher, qui tam. vs. Beasly, Douglas' R. 235. Maddock vs. Hammet, 7 Term. R., 184, in 10 Eng. Com. Law, R. 91. This last case holds that the taking of a note for usury is not a sufficient taking to constitute the offence. Now, the Act of 1833, has nothing about reserving interest, but only of "taking," &c. Must we not give to this the same construction which has been given to the corresponding clause in the Statute of Ann. The same language is used--the same meaning should be given to both. The criterion of usury in England is different as affecting the contract and as affecting the penalty. In the former case, the criterion being "the reserving or taking," &c., in the latter, the criterion being the "taking, accepting or receiving," &c. Here, the criterion is the same with reference to both contract and penalty--it being the same which in England tests the usury with reference to the penalty. It should receive the same construction with reference to both contract and penalty, which is there given with reference to the penalty alone.
The reason to sustain this point becomes stronger under the principle that this Statute must be construed strictly. Unless this rule of law be departed from, the Court cannot make the words, "take, accept or receive," mean, "reserve or stipulate for," or any thing else, other than that imparted by their strict letter. "The Court must not, in order to give effect to what they may suppose to be the intention of the Legislature, put upon the provisions of a statute a construc-not supported by the words, though the consequence be to defeat the object of the act." Dwarris, 702--3.
But, the most conclusive point in the case is this--where a contract is originally legal and valid, it will not become tainted by a subsequent taking of, or contract to take, usury. The authorities upon this point are numerous, and they all sustain the proposition here laid down--not one to the contrary. It will be enough to cite merely a few of them. See Blydenburg on Usury, 97--102. 3 Camp., 119. 3 Barn. & Cres., 257. 8 Mass., 256. 19 John., 294. 5 Wend. 295. One, or more, of these cases shows that where there has been a renewal of a good note, and upon renewal there is usury, this shall not prevent a recovery of the old debt upon the money counts, though the new note be valid. Under this law, if usury is proved in the note here sued upon, we are, notwithstanding this, entitled to recover, under the money counts, upon the contract of 1839, which it is not pretended was usurious. Unless all these cases be founded in error, and are not law, the judgment of the Court below must be reversed.
J. & L. Branch, for Appellee:
Did the Court err in admitting the documentary evidence? The hand-writing of Mitchell was sufficiently proven. 2 Starkie, 651. And the most overwhelming circumstantial evidence proved that the figures related to the subject matter of this suit. These circumstances and the original papers, were commented on at large.
2. The Counsel for Appellant, contends that inasmuch as the usury law of 1833 was repealed prior to the commencement of this suit, though subsequent to the making of the contract, the act of 1833 cannot be pleaded to defeat this suit.
It is worthy of remark, that the act of 1844 did not indicate any change of policy by the State, but only reduced the legal rate of interest from ten to eight per cent.; and this contract is a greater violation of the act of '44 by two per cent., than the act of '33. But we contend that even if this contract would be legal under the act of '44, it is to be governed by the act of '33, which was in force at the time it was made.
The cases cited by the Counsel for Appellant, do not bear upon the case. 5 Chanch, 281; 1 N. Hamp., 61; and 11 Pick., 350; are all criminal prosecutions. 1 Hill, 320, was a case in which a right to redeem land within two years after a sale under execution, was claimed, after the law granting the privilege was repealed. Dwarris, 676, says, "a repealed statute is to be considered, as to all transactions not past and closed, as if it had never existed." We say this transaction--this contract--was "past and closed," before the repeal of the act of '33. From these cases, we may gather that--1. Criminal, or quasi criminal, (as qui tam), penalties cannot be inflicted after the repeal of the statute inflicting them. 2. Gratuitous favors granted by a law, which the State is under no obligation to grant or continue, are withdrawn by the repeal of the law and the adoption of a different policy. Not a single one of them involves a question of civil right between individuals. We admit that according to those authorities, the usurer in this case cannot be prosecuted and punished under the 2d sec. of the act of '33; nor can he be sued in a qui tam action by an informer under that section. The State will forego punishing him for an act which has ceased to be against its policy; for it is no longer desirable to deter him, or others, from a repetition of the act. But there is an obvious difference between refraining from punishing a man for an act which has ceased to be unlawful, and permitting him to recover the fruits of his iniquity. The doctrine contended for by the Appellant, would be most startling in a country where laws are so short-lived. In a country where a costract is rarely executed before the law under which it was made is repealed, the books would abound in cases in which it has been asserted.
Even in England, where the Parliament is considered omnipotent and knows no control, except the tacit and inherent right of revolution, the Courts have uniformly refused to give to laws a retrospective operation, "unless the legislature in the language used show a clear intention to vary the relation of such parties;" because it would be contrary to reason and subversive of natural rights. Camden, et al., vs. Anderson, 6 D. & E., 723. Jacques vs. Witley, 1 H. Blacks. 65. Chitty on Cont., 5 Am. from 3 Lond. ed., 698. Hitchcock vs. Way, 2 Nev. & P., 72. 6 Ad. & E., 943.
In the United States, the prohibition against interfering with vested rights, or impairing the obligation of contracts, has been so often repeated in the Federal and State Constitutions, that it may be considered as the characteristic of our forms of government. We consequently find the decisions of our Courts uniform against retrospective laws. Ogden vs. Blackledge, 2 Cranch., 272. Lewis vs. Brackenridge, 1 Blackf., 220. Day's Digest, 433. Story on Confl. of Laws, 205. Hannay vs. Eve., 3 Chanch, 242. Springfield Bank vs. Merrick, 14 Mass., 322. Russel vs. Degrand, 15 Mass., 36. 1 Kent, 455. Brunswick vs. Litchfield, 2 Greenl., 28. Ib. 275. King vs. Dedham Bank, 15 Mass., 477. McMahon vs. The Mayor, 2 Harr. & J., 41. In most of these cases, the Legislature undertook, in express terms, to make the law retrospective, and the Courts declared the laws unconstitutional and void. How much less will Courts make them retrospective by mere construction and implication! The law existing at the time the contract is made enters into and forms a part of the contract; and to alter the rights given to either party by that law, is to impair the obligation of the contract. On this point we might, if they were not already so familiar to the Court, cite the decisions of the Supreme Court of U. S., and the Courts of almost all the States of the Union, against the validity of relief and stay laws--the numerous devices that have been unsuccessfully resorted to to delay the collection of debts, and the strictness with which the Courts have confined the Legislature to bona fide legislation on the remedy. But admitting that the cases cited for Appellant are applicable, our case is untouched. The act of '44, only repeals the 1st. and 2d. secs. of the act of '33, leaving the 3d. in force. That sec. (the 3d.) declares, "that if any note," &c, &c., "shall be given on a usurious contract, the interest on the same shall be void, and the obligor forever exonerated from the payment of the same." But, says the Counsel, what is "usury" after the 1st. and 2d. secs. are repealed? We reply, we can certainly refer to the 1st, and 2d. secs., to assist us in interpreting the 3d., and to enable us to ascertain what the Legislature meant by a technical word used in the 3d.
3. Appellant contends that money must be taken before the usury is consummated, and relies on Douglas' Rep., 235--6; and Maddock, qui tam. vs. Hammett, 7 D. & E., 183. These cases only prove that the offence is not committed until money is taken. The policy of the law is to prevent the money from being taken--to prevent the offence from being committed; and, therefore, it avoids the contract to pay it. He now asks this Court to enable him to take the money--to enable him to commit an offence for which he would be indictable under the 6th sec. of the act of '33. Would not this Court be particeps criminis if it were to do so? Counsel also relies on the phraseology of Stat. of Anne, to show that money must pass. The words of that Stat. are--"all notes by which usury is reserved or taken, shall be void," &c., showing that usury may be taken by note, Vide, Chitty on Cont., 548.
4. Appellant contends that he is entitled to his original claim with legal interest thereon.
If so, then our usury law would be a nullity. The law makes the whole interest void from the time the usury commenced; yet, Appellant insists on his right to recover interest on the same debt during the same time, by the simple expedient of falling back on a different evidence of the contract.
5. To what extent does the usury affect the contract? The 1st. sec. of the act says, "shall forfeit the amount of said interest." The 3d. sec. says, "the interest on the same shall be void." Under these two secs., we contend that the whole interest on the usurious contract is void--that is, that the interest on the debt ceased from the moment that usury commenced.
Long & Walker, also for Defendant:
This judgment is sought to be reversed on four distinct grounds: 1. That since the act of 1844, repealing the 1st and 2d sections of the usury act of 1833, it has become lawful to collect the interest contracted for on the note now sued on, although the same was void at the time the note was made.
The authorities cited to this point are not applicable. The case from Dwarris on Stat., 676, declares that the repeal of a Bankrupt law, without any reservation in favor of pending cases, deprives the Court of any further jurisdiction in such pending cases. The case from 5th Cranch, 281, declares that the repeal of a law under which a vessel and cargo are condemned, while the cause is pending in the Appellate Court, operates as an abatement of the suit. The case in 1st Hills. Rep., 324, simply declares that where a statute allows a person whose land is sold under decree of Chancery to redeem the same on certain terms, within a given time, and the statute is repealed after the sale and before the redemption, there remains no right to redeem--the same being a mere gratuitous privilege, which may be withdrawn at any time. The case in 1 N. Hamp. Rep., 61, declares that a qui tam action for a penalty, cannot be maintained after the repeal of the law imposing the penalty; and the case in 11 Pick., 350, only reiterates the familiar doctrine, that a man cannot be indicted after the repeal of the law which he is alleged to have violated.
The obvious reason why these cases, which are believed to be good law, do not apply to the case at bar, is this: Mitchell is neither indicted criminally for usury, nor is this a qui tam action against him to recover the penalty inflicted by the first and second sections of the usury act of 1833. On the contrary, he is seeking to enforce that part of a contract which was unlawful and void when made. I am unable to perceive any resemblance in principle between the two cases. But this is put beyond all question by the authorities, in point, cited by my colleague.
2. The second ground relied on for reversal, is--that the Court below erred in holding that by the act of 1833, a person who contracts for more than lawful interest, shall not be permitted to collect any interest whatever. The verbal criticism of the act, by which this conclusion is arrived at, seems rather deficient in force. The first clause of the third section declares, "That when any note, notes, bond or bonds, shall or may be upon, or on account of, any usurious contract, the interest on the same shall be void, and the obligor, of obligors, forever exonerated from the payment of the same."--This is too plain for comment.
3. The third ground assumed on the other side, is--that under our statute, in order to constitute usury, more than lawful interest must he actually received, not merely contracted for or reserved. If this be so, it follows, that a defendant can never successfully resist the payment of the interest arising upon a "note or notes, bond or bonds," "upon or on account of any usurious contract," although the third section of the act expressly declares the same to be void, and forever exonerates the obligor, or obligors, "from the payment of the same." It may be true that nothing short of actual payment of usury will justify a qui tam action for the penalty inflicted by the second section, or an indictment prescribed by the 6th section. But it is little less than absurd to say that a defendant must pay the usury before he can resist its payment, which he is expressly exonerated from ever doing. This distinction is clearly laid down in Blydenburg on Usury, so much quoted on the other side, at page 129, viz: "The difference in the effect of the stat. in the avoiding of the contract, and the accruing of the penalty, is therefore manifest. As soon as an usurious contract is made, it is ipso facto ab initio void. But the penalty does not arise upon the making of the contract. That is only incurred by the execution of the contract; or by the receipt of excessive interest without any previous usurious agreement." Quere--Whether Mitchell will not be subject to the penalty prescribed by the 2d section of the act of 1844, and indictable under the 6th sec. of the act of 1833, if he shall now recover and collect this interest? The contract is not executed until payment; and it is the execution of the lawful contract, which is penal and criminal, says the authority above quoted. It amounts to this: Mitchell is desirous to commit a crime and incur a penalty; and fiinding it difficult to accomplish this object, invokes the aid of the Court. It will scarcely be contended, we imagine.
4. But the fourth point seems to be relied upon with most confidence, viz: That the debt sued on, and evidenced by the note in question, may be recovered with legal interest, as the same was not originally tainted by usury, under the money counts in the declaration, although the interest secured by the note may be void, &c. The authorities read to this point, from England, Massachusetts and Maryland, do establish the principle that where a note is made wholly void on account of usury, the original debt for which the note was given remains, and may be recovered, if sued for in the proper manner and at the proper time. But that is not the case here. This note is not void, or ever was. Therefore, its execution and continued existence as a valid security for the debt, was a perfect extinguishment of the demand for which it was given. If the usurious note had been void, its execution would not, of course, have extinguished the claim. Therefore, it follows, that as the Flake notes were delivered up and cancelled, in consideration of the note sued on, the effect of the transaction was to give up a note bearing interest for one bearing no interest. This Mitchell had a right to do if he chose; and it may be presumed that he is willing to risk the chances of getting no interest at all, for the sake of the chances of realizing a greater sum than legal interest.
Our statute expressly declares that the interest shall be void--that is, the interest shall never be paid; "the obligor shall be forever exonorated from the payment of the same." Now, interest is the rent or hire money--a price agreed to be paid for forbearance in its collection. The money due upon the Flake notes was agreed to be forborne at an unlawful price; and when that occurs, the statute declares that no price for the forbearance shall be collected. Plaintiff has a judgment for his original debt; to ask interest also, is to ask to nullify the statute.
L. A. Thompson, for Plaintiff in Error.
Opinion
[*365] HAWKINS, Justice, delivered the following opinion:
This was an action of assumpsit brought originally against the defendant Doggett and J. W. Cotten. Cotten dying before the trial, the suit abated as to him, but continued as to Doggett.
The declaration contained a special count on the note, and the usual money counts. The note declared on was in the following words and figures, to-wit:
[*366] "On or before the first day of January next, we or either of us promise to pay Isaac W. Mitchell or order, fifteen thousand nine hundred and fifty-five dollars, with ten per cent. interest from date, for value received this the 2d day of January, 1841."
"H. DOGGETT,
"J. W. COTTEN."
(Endorsed),
"Received the interest on the within note up to the first day of January, eighteen hundred and forty-four, this the 5th January, 1844."
To the declaration the defendant pleaded the general issue and notice of usury. The notice sets up, that the defendants being indebted to the plaintiff in the sum of $ 14,504 65, on the second day of January, 1840, it was agreed by and between them, that in consideration of forbearance by the plaintiff for the space of one year, to wit, from the second day of January, 1840, until the first day of January, 1841, the defendants would agree to give and allow to the plaintiff the sum of $ 1,813.01, by way of interest for said forbearance. The notice then avers that this interest was at a greater rate than at the rate of ten per cent. per annum, to wit, at the rate of twelve and a half per cent.; and that in pursuance of such corrupt and usurious agreement, the defendants executed and delivered, and the plaintiff accepted, his further note for the (amount) of $ 362.61. That the defendant will insist, that the said note is void as to so much as is for interest on $ 14,504.65; that is to say, for the said sum of $ 1813.01. And the notice further avers that on the 2d day of January, 1841, the defendant being indebted to the plaintiff in the sum of $ 13,186.05, with the interest thereon, at the rate of ten per cent. per annum, from the 1st day of January, 1839, it was corruptly and usuriously agreed by and between them, that said plaintiff would forbear and give day of payment for the further space of one year, until the first day of January, 1842, in consideration that the defendant would give and allow to said plaintiff for interest on said sum of $ 13,186.05, for three years from the first day of January, 1839, to 1st January, 1842, the sum of $ 5125.98, being more than at the rate of ten per cent., but at the rate of twelve 95-100ths, for the forbearance of one hundred dollars for one year; and that in pursuance of such usurious agreement, the defendant did on the second day of January, 1841, execute and deliver to said plaintiff the note in the declaration mentioned; [*367] and the said defendant, Doggett, did on the same day and year execute and deliver his further note for $ 362.61, payable on the first day of January, eighteen hundred and forty-two, and his note for $ 398.87, payable on the first day of January, 1842, all which were accepted by plaintiff; and that it will be insisted that the sum of $ 5125.98, being for interest from the first day of January, 1839, when usurious interest was first taken, was and is void.
On Monday, the 25th day of May, 1846, the cause came to trial, and the plaintiff gave in evidence the note as before set forth.
On the part of the defendant witnesses were introduced, who swear that the following papers were in handwriting of Mitchell:
1. "On or before the first day of January next, we jointly and severally, promise to pay Isaac W. Mitchell, or order, thirteen thousand one hundred and eighty-six dollars, for value received, with ten per cent. interest from date, this the 1st January, 1839."
(Endorsed on face, "Paid--H. Doggett.")
2. "On or before the first day of January next, I promise to pay Isaac W. Mitchell or order, three hundred and sixty-two dollars sixty-one cents, for value received, this the 2d day of January, 1841.
"H. DOGGETT."
3. "On or before the first day of January next, I promise to pay Isaac W. Mitchell, or order, three hundred and ninety-eight dollars and eighty-seven cents, for value received, this the 2d January, 1841.
"H. DOGGETT."
"One day after date, I promise to pay Isaac W. Mitchell, or bearer, at Tallahassee, six thousand, six hundred and seventy-six dollars, and sixty-four cents, for value received, with ten per cent. interest from the first day of the present month, this the fifth day of January, 1844.
J. H. T. Lorimer was introduced as a witness, who proved that the following notes were in the handwriting of one William Flake:
5. "One day after date, we jointly and severally promise to pay William Flake, or bearer, five thousand and sixteen dollars, for value received.
"Jan'y 1, 1838."
(Endorsed),
"Jan'y 1, 1838. Received of the within note, four hundred and thirteen dollars and fifty cents. Received on the within note, one [*368] thousand three hundred and sixty-nine dollars and 11-100, January 1st, 1838."
6. "On or before the first of January, eighteen hundred and thirty-nine, we jointly and severally promise to pay William Flake, or bearer, eight thousand three hundred and thirty-three dollars, with interest from the 13th December, eighteen hundred and thirty-six, for value received.
"H. DOGGETT,
"J. W. COTTEN."
"January 1st, 1838."
Besides these notes, certain papers were introduced by the defendant Doggett. Upon them were figures and calculations, sworn to be those of Mitchell. They appear to have been so clearly made in connection with the note sued on, and the other notes before set forth, and so clearly to have reference to them and the transactions between the parties, and carry upon their face so strong evidence of the true nature of the whole affair, that we think the Court below was right in submitting them as testimony to the jury, for their consideration.
Upon this evidence the case went to the jury, and a verdict was found for the plaintiff for fourteen thousand one hundred and forty-one dollars and nine-nine cents.
From the notes as produced in evidence for defendant, and the exhibits containing the figures and calculations of Mitchell, the following may be stated as the facts of the case:
Originally there was two notes given by Doggett and Cotten to William Flake,
| One dated 1 Jan'y, 1838, | $ 5,016.00 |
| Credited by payments to, | 1,782.16 |
| . | |
| Which deducted leave, | $ 3,233.34 |
| Interest to first January, 1839, | 258.66 |
| . | |
| Making, | $ 3,492.00 |
| The other note from the same date, with interest from | |
| 13th December, 1836, | 8,333.00 |
| Interest to 1st January, 1839, | 1,361.05 |
| . | |
| Two notes added together, | $ 13,186.05 |
[*369] On the first day of January, 1839, a new note was given for this amount, by Dogett and Cotten, and payable to Mitchell, (see, 1), who would seem to have obtained the two notes from Flake. The following statement may illustrate the true situation of the whole affair:
| $ 13,186.05 | ||
| 10 pr. ct. int. to 1st Jan'y, 1840, | 1,318.60 | |
| . | ||
| $ 14,504.65 | ||
| (Inter't on this amt. 2 1-2, to 1840, is $ 362.61, | ||
| for which note marked 2 was given.) | 1,450.40 | |
| Int. to 1 January, 1841, | 1,450.40 | |
| . | ||
| For this amt. note sued on was given, | $ 15,955.05 | |
| 10 pr. ct. interest to January, 1842, is | 1,595.50 | |
| 1,595.50 | ||
| 2 1-2 pr. ct. to Jan., 1842, is $ 398.87, which | ||
| with compound interest at 12 1-2, to 1 Jan., | ||
| 1844, is (Note 3) | 507.06 | |
| . | ||
| $ 17,550.55 | ||
| Interest to Jan'y, 1843 | 1,755.05 | |
| 1,755.05 | ||
| 2 1-2 pr. ct. to Jan'y, 1843, is | 438.75 | |
| . | ||
| $ 19,305.60 | ||
| 10 pr. ct. to 1 Jan'y, 1844, | 1,930.56 | |
| 1,930.56 | ||
| 2 1-2 to 1 Jan'y, 1844 | 449.73 | |
| . | $ 21,236.16 | $ 6,676.65 |
The aggregate of these amounts carried out, would seem to constitute the note of 1844, marked 4.
The errors assigned by the plaintiff are as follows:
1. The Court erred in admitting as evidence the papers marked C. D. E. F. G. & H., and A. & B.
2. The Court erred in refusing the 1st, 2d and 3d instructions asked for by the plaintiff, and in substituting the instruction it gave for the 3d above named.
[*370] 3d. The Court erred in allowing the 1st, 2d, 3d, 4th and 5th instructions asked for by defendant.
4th. The Court erred in giving instructions 1st and 2d, named in the bill of exceptions, and given after allowing instructions for defendant.
The first question for the consideration of the Court, is the effect of the repeal of the statute of usury of 1833, by the act of 1844. The first section of the act of 1833, is to this effect: That no person shall upon any contract take, directly or indirectly, for the loan of any money, &c., above the date of ten dollars for the loan of one hundred dollars for one year; and all bonds, &c., for payment or delivery of any money, goods or merchandise, to be lent, on which a higher rate of interest is received or taken, shall forfeit the amount of said interest. Section 2d, is to the effect, that any person taking, accepting or receiving, above the rate of ten dollars for the forbearance of one hundred dollars for one year, shall forfeit and lose for every such offence the whole amount of interest due; one half to be paid into the treasury of the county where the offence is committed, and the other half to him or them who will inform and sue for the same, to be removed in an action of debt in any competent court. Section 3d declares, that when any note or notes, &c., shall be upon, or on account of, any usurious contract, the interest on the same shall be void, and the obligor, or obligors, forever exonerated from the payment of the same, &c.
On the 15th day of March, 1844, the two first sections of the foregoing act of 1833, were repealed, and new sections substituted.
There can be no truth of the truth or validity of the assertion, that where there is a repeal of a penal statute, no penalty can be enforced, nor punishment inflicted, for violations of the law while in force, unless some special provisions were made for the purpose.--This principle is too well settled to admit of controversy. Nor can it be denied that the Legislature can alter or modify the remedy as to the enforcement of contracts, unless carried to the extent to take away virtually, or substantially, the remedy.
If this were the case for the enforcement of the penalty, as prescribed under the second section of the act, the conclusion of the Court would be at once in accordance with the views of the counsel for appellant; but the Court think there is a broad distinction between a [*371] law affecting the remedy, or creating a penalty, and a law in relation to the contract itself. The authorities, as cited for the plaintiff in error, are mainly directed to one or the other of the two first cases, viz., the law affecting the remedy, or in regard to the enforcement of a penalty, where the law creating it has been repealed. The case at bar must stand upon the law in relation to the contract itself, and we can find no authority that declares, that a contract rendered void by statute, can, upon a repeal of that statute, acquire a vitality which it did not before possess. Sound policy, justice and morality, unite in stern opposition to such a principle.
On the other hand there are authorities entitled to the highest possible respect, which can be cited in support of the principle, we are prepared to assert, viz., where a contract is illegal, at the time of its inception, by force of a statute, no action can be maintained upon it although the statute is repealed, which declared it illegal "ex nudo pacto, non oritur actio." Judge Story remarks, "where a contract was made in France to smuggle goods into our own country in violation of our laws, the contract will be treated by our Courts as utterly void, as an intended fraud upon our laws. And in such a case, brought into controversy in our Courts, it will be wholly immaterial whether the parties are citizens or foreigners. So, if a collusive capture and condemnation are procured in our Courts by fraud of our laws by foreigners, who are even enemies at the time, their contract for the distribution of the prize proceeds will be held utterly void by our Courts; and it will make no difference that the laws have since been repealed, or that the war has since ceased, for the contract being clearly in fraud of the laws existing at the time, the execution of it ought not to be enforced by the Courts of the country, whose laws it was intended to evade." Story's Conflict of Laws, 205.
In Hannay vs. Eve, 7 U.S. 242, 3 Cranch 242, 2 L. Ed. 427, we find the same doctrine as laid down by Judge Story, and the opinion of the Court pronounced by Chief Justice Marshall.
So in Jacques vs. Withy & Reid, 1 H. Black. R., 65. This case would appear analogous to that at bar. There was a statute of 19th George the 3d, in relation to the purchase and insuring of lottery tickets, with a penalty for an infringement of its provisions. It was repealed by a statute of 22d of George 3d. The decision in this [*372] case goes to the effect to declare that a contract declared by statute to be illegal, is not made good by a subsequent repeal of the statute.
The same principle is enforced in the case of the President, Directors & Co., of the Springfield Bank vs. Samuel Merrick, et al., 14 Mass. 322. In Massachusetts there was a law that the bills and notes of Banks not incorporated by law, should not be received or negotiated by the banking corporations of that State, under a heavy penalty. It was holden, that a promissory note payable in such bills to a banking corporation, made while the statute was in force, was void; and that no action could be maintained upon it, by the promisees after the statute was repealed. Chief Justice Parker remarks, that "the subsequent repeal of a statute could have no effect upon a contract made while it was in force. As well might a contract made for the purpose of trade with an enemy, during a war, be purged of its illegality by the return of peace." In the argument of the cause, the case of Camden vs. Anderson, 1 Bos. & P. 277, was cited by the counsel for the plaintiff in support of his side of the question.--Judge Parker says in relation to it: "The case of Camden vs. Anderson does not prove the point it was cited to support. It would seem rather, from the provisions of the statute commented upon in that case, that when a penal statute was repealed, it might still be pleaded against any contract made in contravention of it, unless in the repeal act provision was made to the contrary." We have examined the authorities cited for the plaintiff in error with attention; but we cannot think they are in point as to this case; and even if they were, they must be borne down by the decisions cited, sanctioned as they are by the names of the great and illustrious jurists we have quoted. The plaintiff in error has cited the following from Dwarris on Statutes: "When an act of Parliament is repealed, it must be considered (except as to those transactions past and closed) as if it never had existed." Without intending to controvert this as a general proposition, we must remark that except as to the law in relation to remedies and penalties, it seems rather broadly and unqualifiedly declared. Without stopping to ask if a contract consummated (though we think there is force in the suggestion) is not embraced by the terms "transactions past and closed," so as to bring it within the exception of this dictum, we find this principle met by another, which is not only the doctrine of the English law, but is [*373] founded on principles of general jurisprudence, and it is this, "that no statute shall be construed to have a retrospective operation without express words to that effect." 7 Bacon Abr. Statute C., 439. "A retrospective statute would partake in its character of the mischief of an ex post facto law as to all cases of crimes and penalties, and in measures relating to contracts or property, would violate every sound principle." Dwarris on Sta., 680, 681. Would we not, by applying the principle asserted to the case at bar, give the repealing law of 1844, an ex post facto operation, and really impair the obligation of contracts? The relative rights of the parties would certainly be changed by granting to one a privilege not before enjoyed, and imposing upon the other an obligation which previously did not exist under the law as it stood, at the time the contract was made. The law of 1833, declares that all interest over the rate of ten per cent. shall be void, and the obligor forever exonerated from the payment of the same. Is not this exoneration by virtue of the law governing the contract at the time it was entered into, a right--a right vested by the law of the land, (that it is a mere negative right can create no difference in principle), and can it now be divested by posterior legislation?
To admit all this, and to say that a contract declared a nullity by a statute, a contract that never had an existence, can, by the galvanic process of repeal of that statute, have infused into it a new life and being, so as to be enforced in a court of justice, we must admit, is at variance with all our notions of sound policy, morality and law. Having decided that the repeal of the statute of 1833, does not affect contracts entered into before its repeal, the case before us must therefore be governed by that statute, as though no repeal had ever taken place.
We are clearly of the opinion, that by the letter and spirit of the statute, whenever illegal interest is taken or contracted for, the whole interest is void. The legal interest, when agreed for in conjunction with usurious interest, receives the taint of usury, and is extinguished and becomes at once nudum pactum. Nor is it necessary to establish usury as contended for by plaintiff in error, that the plaintiff actually took or received more for interest than the law declared lawful; and it is enough that it is only promised to be paid. Hammond vs. Hoppin, 13 Wend. 505. So, if at the time of a loan, a note be taken as a security for principal and usurious interest, it will be inferred [*374] that the money was lent on usurious terms. Scott vs. Mitchell, 4 Doug. 318. And "if parties enter into usurious agreement, any remote security for any part of the illegal interest, or to enforce the tainted contract with a distinct and valid debt, cannot be enforced." 7 Pick. 40. Chitty on Con., 706. 1 Greenleaf 167. Moncure vs. Dermott, 13th Peters, 345.
In Jackson vs. Packard, 6 Wend. 415, we see that a mortgage taken on a loan of money including the taint of usury, destroys the whole security.
The point as to the necessity of proof of the receiving the interest, is clearly laid down in Clark vs. Badgley, 3 Halstead 234. It is there decided, that if the contract be for usurious interest, although no usurious (interest) is taken, the contract is usurious; and it is immaterial whether the usurious interest is secured by a distinct instrument, or is included in the instrument which secures the principal.
So, in Warren vs. Crabtree, 1 Greenl. 171, we find, "if the principal and interest are secured by distinct notes, or the usury by a parol promise only, and both are executed at the same time, all are void; because such promise to pay such interest, constituted a part of the contract for the loan, and the statute declares the whole contract void. If such a device could protect the lender from the penalties of the statute, it would always be evaded with impunity."
In order to render the offence complete, so as to subject the lender to the penalty under the statute, there must be an actual receipt of the usurious interest; but though the penalty of the statute be not incurred till the usurious interest be received, still the contract may be void, without such receipt. Chitty on Contracts, 712. And this law seems in compliance with our statute, (second section), which contains the words, "take, accept or receive." Blydenbr. on Usury, 129.
We come now to the discussion of the last point assumed by plaintiff in error, "that where the original contract is lawful, no subsequent taking of, or contract to take, illegal interest, will invalidate it; and, therefore, that plaintiff may recover principal and interest of the original valid contract." The authorities are full and decided upon this point, and the doctrine cannot be denied. 8 Mass. 256. 5 Wendell, 595. Blydenburgh on Usury, 97, 102. Authorities cited by counsel for plaintiff in error. So also, 3 T. R., 539. 1 Wms. Saund. 294.
[*375] The notes given by Doggett and Cotten to Flake, were extinguished by the new and substituted note given by them to Mitchell on the 1st Jan'y., 1839.
The note of 1839, was clearly upon a good and valid consideration, and if that note had been sued on, we are not prepared to say but that it would have remained unaffected by any subsequent usurious contract, and all the legal interest upon it, have been enforced. It would seem by circumstances of the case, the inference is clear, (and usury may be inferred from circumstances.-- Fulmer vs. Hays, 14 S.C. L. 256, 3 McCord 256), that illegal interest was bargained for from 1 January, 1840 to 1841, as evidenced by the small note for $ 362.61, and dated 1 Jan'y., 1841, and clearly given for the excess over and above legal interest on $ 14,504.65, for the period above set forth, to-wit, from 1st January, 1840, to 1st January, 1841. This small note and the note sued upon, were given at one and at the same time, the legal portion of the interest from 1840 to 1841, being secured in the note in suit, the illegal interest in the note marked 2, or small note.
The note of 1839, was extinguished by the substituted note of 1841, and the question now arises, was the latter note based upon or on account of any usurious contract?
If the amount contained in the small note had been embraced in the note in suit, clearly the contract would have been usurious. The fact that the notes were separate, we see, creates no difference.--Their separation was a mere device, a shift, a shallow artifice. The true question is, what was the contract? and we are indifferent as to the mode or manner of its enforcement. If the contract was usurious, the means resorted to to enforce its execution become impotent. These two notes, therefore, must be considered as constituting one entire transaction--as an (entirety), and embracing the same subject-matter.
It appears, that these notes, the small note altogether, and the note in suit in part, were given to secure the interest or premium for past forbearance on the note of 1839, from 1840 to 1841. Is a contract to pay illegal interest for past forbearance illegal? Clearly so; and we refer to the case of Joseph L. Willie vs. Ezra Green, 2 N.H. 333. Here it was decided that a contract to pay more than legal interest for past forbearance is illegal. With these views, there can be no doubt but that the note sued on, intending to secure the [*376] payment of illegal interest from 1840 to 1841, became an usurious contract. The interest contained in the small note being usurious, and being as it were a portion of the note in suit, it taints the legal in that, corresponding in time, for which it was given, to-wit, from 1 Jan'y., 1840, to Jan'y., 1841, for the law says that when usurious interest is taken, the interest shall be void.
We are therefore of opinion, that as much of the interest on $ 14,504.65, from 1 Jan'y., 1840, to 1 Jan'y., 1841, as is embraced in the note sued is void, and was properly deducted by the jury in their verdict.
The facts further shew, that at the time the note in suit was given, another small note for $ 398.87 (3) was given, embracing the illegal interest on the note sued up to 1842, and that the amount of this note with compound interest at twelve and a half per cent. to Jan'y., 1844, and all the accruing interest upon the note in suit, legal and illegal, were embraced in a separate note given on 1 Jan'y., 1844, marked 4. Here is another distinct note intended, beyond doubt, to evade the statute of usury. We think we have said enough in relation to this point, to declare that no interest is payable on the note declared on from the day it was given, it being clearly based on usurious consideration and therefore void.
It is contended that the original consideration being valid, a new note substituted, though tainted with usury, would be valid, inasmuch as it was a subsequent agreement. We have already said, perhaps sufficient upon this subject; but we have authority strongly in point to show the reverse. Here it must be recollected there is a new note substituted and given in lieu of the old one. How much soever the principle contended for might have applied to the former note, it has no reference to the new contract. The case of Swartout vs. Payne, 19 John. 296, is directly in point, and we set it out at some length.
The plaintiff in this case received from the defendant a note for four hundred dollars, drawn by Titus Goodman and endorsed by Visscher and Goodman, in payment for lands sold and conveyed by plaintiff and wife to defendant. The note was received as part of the consideration money, upon defendant's assurance that it was good as the bank, and would be punctually paid.
Judge Spencer, who delivered the opinion of the Court, remarks: [*377] "If it shall appear that the note was void for usury, and that the defendant knew it to be so, there can be no doubt of the plaintiff's right to recover;" that is, on the original consideration of the contract, viz., the value of the land sold.
"It appeared by the evidence, that the defendant received this note which he passed to the plaintiff, in renewal of a former note, and that on giving up the first note, and taking the note in question, the defendant exacted and took from T. Goodman, jun., an additional note for a premium for renewing the first note.
Judge Spencer further goes on to say: "The first note is not shewn to be usurious, and we must therefore consider that as a bona fide security, and a bone fide debt from the parties on it to the defendant. The amount of the argument on the part of the defendant is, that the subsequent usury in taking the new note did not affect or destroy the antecedent debt, which was free from usuary. This is undoubtedly true, and Gray vs. Fowler, 1 H. Bl. 462, and 1 Wms. Saund. 295, A, and the authorities here cited, fully maintain the position. But is is equally certain, that if in receiving the new security, a rate of interest above seven per cent. was received for forbearance, the new securities are void by the statute; and in this view, it is immaterial whether the illegal interest was reserved and made payable by a distinct note, or was incorporated into one note. They are considered as one assurance and all are void, into whose hands soever they may come. The note being a nullity, according to the case of Markle vs. Hatfield, (B John. R., 455), the plaintiff had a right to sue on the original contract." Judgment for plaintiff.
With our view thus expressed, we think the verdict of the jury in the Court below was in compliance with law, and should not be disturbed. In the decision of the question we have, of course, regarded the the subject in a point of view purely legal. Whether the law governing interest is founded upon true policy or political expediency, is not for us to enquire, nor for us to ask whether the taking usury is an act immoral in itself, or only rendered immoral by arbitrary enactment. We cannot draw distinctions in our decisions between malum prohibitum and malum in se, but must declare the law as we find it.
Per Curiam. The judgment of the Court below is affirmed.