134 So. 471 | Ala. | 1931
The first assignment of error is predicated on the court's ruling on the demurrer, going to the equity of the bill. If the bill is without equity, the other assignments of error are not important.
It is well settled, as a general rule, that a court of equity, at the instance of the maker who has a good defense thereto in the hands of the payee, will enjoin the transfer of negotiable notes or other negotiable instruments, if the effect of such transfer is to cut off or destroy such defense, and on proper showing the court will order the instrument delivered up to the maker or cancel the same. 32 C. J. 152, § 202; Oden v. King,
So the question to be decided is whether or not the defense of usury is available to the maker, in the hands of a purchaser for value, in due course, without notice. If so, the complainants have an adequate remedy at law.
The statute provides that: "All contracts for the payment of interest upon the loan or forbearance of goods, money, things in action, or upon any contract whatever, at a higher rate than is prescribed in this chapter, are usurious, and cannot beenforced either at law or in equity, except as to the principal. Nor shall the borrower of money at a usurious rate of interest ever in any case in law or equity be required topay more than the principal sum borrowed, and if any interest has been paid the same must be deducted from the principal and judgment rendered for the balance only." Code of 1923, § 8567. (Italics supplied.)
Before its amendment by the Act of March 9, 1901 (Acts 1900-01, p. 2685), the statute was applied in Barclift v. Fields,
Some of the cases decided before the last amendment of the statute heretofore noted hold that usurious contracts are not void, but voidable as to the interest, but they all agree that the courts will not compel the borrower to pay usurious interest, by proceedings at law or in equity; nor will courts of equity require the payment of legal interest as a predicate to relief from usurious contracts. Gross v. Coffey,
And in Blue v. First National Bank of Elba,
And in Pearson et al. v. Bailey,
In Masterson v. Grubbs,
In Saltmarsh v. Tuthill,
To quote from the opinion of the court in Saltmarsh v. Planters' Merchants' Bank,
In Hanrick v. Andrews, 9 Port. 9, 37, a case arising under and governed by the laws of the state of New York, the court, after quoting from a decision of the New York Court (Hockley v. Sprague), reported in 10 Wend. 113, applying the usury statutes of that state, further observed: "Thus, we discover that it is incumbent upon an indorsee, if he would prevent usury from being set up against him, to show that he became theinnocent holder of the paper, for a valuable consideration,before its maturity. Nothing of this kind seems to have been shown or attempted by the defendant in error." (Italics supplied.) From these expressions it appears that this utterance was not only dictum, but it was in respect to the laws of New York, and is not in conflict with the utterance of this court in the cases heretofore referred to.
In Sewell v. Nolen Bank et al.,
The rule established by the cases decided before the last amendment of the statute is that a negotiable paper in the hands of a holder in due course, who acquired it for value and before maturity, without notice, is subject to the defense of usury to the extent of restricting the amount of the recovery to the sum actually paid by such holder, and the question is, Has the subsequent amendment of the statute changed the rule so as to limit the recovery to the principal sum, in every case?
From the Historical Statement, 27 R. C. L. 203, § 1, we take the following as shedding light on the purpose of the statute: "There is no people, known to history, with any considerable financial or commercial structure, that has not had laws against usury. It has always been recognized that in the power of the lender to relieve the wants of the borrower lies the germ of oppression. This view, carried to its extreme, and finding support in the now discredited economic theory that money, being barren, cannot beget money, at one time led to the prohibition of all interest. The doctrine that any interest is usurious was never adopted in this country. On the contrary, by the common law as here adopted no rate of interest is illegal, in the absence of statutory enactment, unless so great as to be unconscionable, and at the present time usury must be regarded merely as malum prohibitum, not malum in se. It rests wholly in statute."
It is a matter of history that the statute on this subject has been repeatedly amended to meet decisions of this court, making a liberal application in favor of the lender, and, in its present form, it prohibits the enforcement of usurious contracts, as to the interest, and in emphatic language declares: "Nor shall the borrower of money at a usurious rateof interest ever in any case in law or equity be required topay more than the principal sum borrowed, and if any interest has been paid the same must be deducted from the principal and judgment rendered for the balance only." (Italics supplied.) Code 1923, § 8567.
While this statute does not in terms declare that such usurious contracts are void as to the interest, by necessary implication it does, and to that extent it is void ab initio.
Daniel on Negotiable Instruments, vol. 1, p. 959, § 806, says: "There are some defenses which are as available against a bona fide holder for value, and without notice, as against any other party. They are those which go to show that the instrument was absolutely and utterly void, and not merely voidable, (1) by reason of the incapacity of the party assuming to contract; or, (2) by reason of some positive interdiction of law; or, (3) by reason of the want of consent of the party sought to be bound to the particular contract." Fraud in the factum, Brannan's *84 Negotiable Instruments Law (4th Ed.) p. 436, § 55, subsec. 3.
What inhibition could be more positive than "Nor shall theborrower of money at a usurious rate of interest ever in anycase in law or equity be required to pay more than theprincipal sum borrowed." Section 8567, Code. (Italics supplied.)
The Negotiable Instruments Law was adopted into the Code along with section 8567 (Code of 1923) as a part of the system of general laws of the state, and there is no basis for holding, as some courts have done, that the laws against usury are repealed by the Negotiable Instruments Law, section 57 of which provides: "A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves and may enforce payment of the instrument for the full amount thereof against all parties liable thereon." Code 1923, § 9083.
Dr. Brannan, "Professor of Law Emeritus, Harvard University," treating this subject, has this to say (Brannan's Negotiable Instruments Law, pp. 440, 441, § 55, subsection 4):
"It has sometimes been held that illegality ceases to be a real defense under the N. I. L. unless made so by a subsequent statute, and that the statutes previously in force declaring void instruments given for gaming or upon usurious interest or other forbidden transactions are impliedly repealed by the N. I. L. Wirt v. Stubblefield,
"The great weight of authority, however, is contra. Perry Savings Bank v. Fitzgerald,
"It is submitted that the weight of authority and the better reasoning is in favor of the view that the Negotiable Instruments Law does not impliedly repeal statutes which expressly or by necessary implication declare an instrument void. Sections 55 and 57 are those chiefly relied upon in favor of the contrary view, but they do not seem to compel this conclusion. If an instrument is made void by statute, then it is as if there were no instrument at all, and, as was said in the case of Martin v. Hess, supra, where section 57 was relied upon by counsel for the plaintiff, 'that this act was not intended to inject life into a written instrument that by law was null and void ab initio is apparent from the use of the word "liable" in section 57 in this act. * * * The liability is defined to be the state of one who is bound in law and justice to do something which may be enforced by action; Bouvier, p. 206. The maker of a note given in payment of a gambling transaction is not liable on such instrument, as by law such an instrument is null and void and of no effect.' "
The language of the statute of the state of Iowa, construed and applied in Perry Savings Bank v. Fitzgerald,
In Gross v. Coffey,
That case (Gross v. Coffey, supra) was incidentally referred to in Cooledge et al. v. Collum,
The provision of the statute added by amendment after the decision in Gross v. Coffey, supra, was, to wit: "Nor shall theborrower of money at a usurious rate of interest ever in anycase in law or equity be required to pay more than theprincipal sum borrowed." (Italics supplied.) Section 8567, Code.
This amendment and the authoritative holding in Jones v. Meriwether,
The conclusion is inescapable that the statute, by necessary implication, renders contracts made in borrowing money, where usurious interest is contracted for, void ad initio, as to the interest, and no legal liability to pay interest arises from the execution of such contract. To hold otherwise, would be to disregard the positive mandate of the statute, "Nor shall the borrower of money at a usurious rate of interest ever in anycase in law or equity be required to pay more than the principal sum borrowed." (Italics supplied.)
There being no legal liability to pay such interest, no legal contract for its payment, the contract being void to the extent of the interest, the defense may be made as against a holder in due course. Perry Savings Bank v. Fitzgerald,
The result is that complainants had a complete and adequate remedy at law, and the defendant's demurrers to the bill were due to be sustained.
The decree of the circuit court is therefore reversed, and the cause remanded.
Reversed and remanded.
ANDERSON, C. J., and SAYRE and THOMAS, JJ., concur.