29 Miss. 212 | Miss. | 1855
Lead Opinion
delivered the opinion of the court.
This was a bill filed by the appellant in the district chancery court at Natchez, and taken by appeal to the superior court of chancery, from which it is brought here. It is a bill to foreclose a mortgage, and the case made by the record is as follows:—
In November, 1840, Mary Williams and Stephen B. Williams executed their promissory note to Lewis Williams for five
The defendants set-up the defence of usury, and it appears that in the year 1843 or 1844, Lewis Williams was indebted to Newman, the complainant’s intestate, $4,500, and he not being prepared to pay it, Newman proposed to give him time for payment, if he would pay him ten per cent, interest on the debt; which was agreed to by Williams, and a calculation was made for one thousand dollars payable 1st January, 1846, one .thousand dollars payable 1st January, 1847, and the balance to be paid 1st January, 1848, amounting in the whole to $6,800, the interest included in or discounted from the notes, being calculated at ten per cent, and amounting to about $2,300. For the payment of the amount thus calculated, Williams indorsed to ■Newman three notes made by Mary Williams to him, one for one thousand dollars payable 1st January, 1846, one for one thousand dollars payable 1st January, 1847, and one for five thousand dollars payable 1st January, 1-848, the last being credited by two hundred dollars, and these being the notes secured by the mortgage; and thereupon the debt of Lewis Williams to Newman was discharged by delivering up his notes. The notes transferred by Williams to Newman are shown to be legal and valid as between the maker and payee, and the two notes for one thousand dollars are admitted to be paid.
The vice-chancellor decreed to the complainant the original debt due at the time of the transfer of the notes by Lewis Williams, with legal interest at eight per cent, upon the original notes of Lewis Williams to Newman, and to Lewis Williams the residue of the mortgage debt, restoring the parties to their rights as they existed before the transfer of the notes, and ordered a foreclosure.
Upon appeal, this decree was reversed in the superior court of chancery and the cause was ordered to be remanded for fur
From this decree, this appeal is prosecuted.
. The only question for consideration is, whether the note sought to be enforced is liable to the defence of usury under the circumstances of the case.
There is no pretence that any usury existed in the note as it stood between the maker and payee, and before the transfer to the complainant’s intestate. And it is, therefore, insisted in behalf of the appellant that, as it was a valid note, founded upon a legal consideration, and complete between the parties without reference to the use to which it was subsequently applied, and in that condition was purchased by the appellant’s intestate, the defence of usury cannot prevail. Let us examine these positions, and see how far they are applicable to the facts here presented.
The first point to be settled is, whether Newman can be held to be a purchaser, and his right to the note protected on that ground.
We consider the law to be well settled, that when a note is., made without any reference to a usurious loan" or raising of money, and is complete and valid in the hands of the holder, it may be sold for a sum less than its value and at a rate of discount that would render it usurious if it had entered into the original transaction, and that the holder is entitled to recover upon it. This principle has been much considered in the courts of this country; and though there are decisions to the contrary, it is sustained by the great weight and number of authorities. Munn v. Commission Company, 15 J. R. 44; Powell v. Waters, 8 Cow. 685; Nichols v. Fearson et al. 7 Peters, 103; Callin v. Nevill, 3 Dev. 30; French v. Grindle, 15 Maine (3 Shep.), 163; 3 McCord, 365.
But in order to render the transfer valid, it must be a bond fide sale of the paper, upon a consideration paid or secured, and, not in anywise a security for the usurious loan of money by the indorser or party taking the paper to or on account of the,party from whom he receives it, and it must not be taken at a
Let us apply these principles >to the circumstances of this case.
It appears that Lewis Williams was indebted to Newman, and being unable to make payment, Newman proposed to give him time for payment, if he would allow' him ten per cent, upon the amount then due; to which Williams acceded, and thereupon transferred to him the note in controversy, together with two others, to the amount of Williams’s debt and ten per cent, added thereto up to the time of payment allowed by the arrangement, and the notes constituting Williams’s original indebtedness were discharged and delivered up.
It is plain that this was not a purchase by Newman of-the notes transferred to him, in the sense of the rule. It was proposed as a mode of giving time of payment, and was carried out as such, in order to give indulgence to Williams and ten per cent, interest to Newman. The discharge of the original indebtedness of Williams did not change the nature of the transaction, for Williams still gave interest at the rate of ten per cent, for the indulgence and forbearance given him by transferring the notes, including that amount to Newman. It was, therefore, clearly a transaction by which Newman was to receive more than the legal rate of interest for “ the forbearance and giving day of payment ” of the debt due him, and is fully within the prohibition of the statute. Hutch. Dig. 641.
The contract of transfer of the note being, therefore, usurious, it remains to be considered whether the makers of the note can set up a defence on that ground to the suit of the indorsee, there being no usury in the note at the time of the transfer.
This presents the simple question, whether the assignee or
It is immaterial in questions of this nature, what may be the obligation of the defendant to pay. The first question to be settled is, whether the plaintiff has a right to recover; and it is unquestionably true, that if his title be founded on an illegal consideration, he cannot be heard in a court of justice to assert a fight under it. This principle has been repeatedly applied by this court to cases of illegal contracts. In the case of Adams v. Rowan et al. 8 S. & M. 638, the notes of Adams to Runnels, founded on a valid and sufficient consideration, were transferred by Runnels to Rowan' & Harris for an illegal consideration; and it was held that the maker could set up the illegality of the consideration paid by Rowan & Harris, in defence of a suit brought by -them upon the notes. In that case the defence went to the entire suit. The same principle is held in the case of Gaither v. Farmers and Mechanics Bank, 1 Peters, 37.
When the illegality of the consideration extends only to a part of the plaintiff’s demand, as in the present case, where the contract of transfer is illegal and void only as to interest, the same rule must apply, and the defence must prevail so far as to prevent the recovery of all interest. .Because where thfe consideration is illegal as to a part of the demand, the defence must prevail to that extent upon the same principle by which the whole action is defeated where the entire claim is rendered void by illegality of consideration. This rule is fully recognized in Coulter et al. v. Robertson, 14 S. & M. 18; and it is now settled beyond controversy in this court, that, under the provisions of our statute, the plaintiff can recover nothing but the principal of his debt on usurious contracts.
In this case a question of some difficulty arises as to who is entitled to the interest on the note.
We have seen that the complainant is not entitled to recover it; and there is no just reason why the makers should not pay it according to their contract. If it had been usurious interest paid by Lewis Williams to the complainant’s intestate, upon a
It appears, therefore, proper that it should be decreed to Lewis Williams, he being a party to the suit.
The decree of the chancellor reversing the decree of the vice-chancellor is affirmed, and a decree ordered in favor of the appellant for the amount of the principal due upon the note without interest, and in favor of Lewis Williams for the amount of interest due thereon, and for a foreclosure accordingly; and that Lewis Williams pay the costs.
Dissenting Opinion
delivered the following dissenting opinion : —
Declining a concurrence in the opinion of the majority of the court, the importance of many of the questions involved in this case, aside from the provisions of the statute, leaving me without discretion on the subject, requires that I should state fully the reasons and principles of law, which, have operated to bring my mind to a conclusion different from that arrived at by my brethren.
The bill was filed by the complainant, as administrator of the estate of Reuben B. Newman, deceased, in the vice-chancery court at Natchez, for the purpose of foreclosing a mortgage executed by Stephen D. and Mary Williams, to Lewis Williams, with a view of securing him in the payment of the note now in controversy.
The mortgagors and mortgagee, all being made parties to the bill, set up by their respective answers, the defence of usury, growing out of the indorsement of the note, by Williams the payee and mortgagee, to Newman, the complainant’s intestate.
The facts as connected with this defence are briefly as fol
In carrying out this arrangement, interest was calculated on the amount of Newman’s debt at ten per cent, per annum up to the several periods when the notes above mentioned matured, and being added to the principal made the aggregate sum of $6,800; whereupon a credit was entered on the note of five thousand dollars, for two hundred dollars, so as to make the balance due on the notes, correspond with the balance of principal and interest due to Newman under the new arrangement.
This is in substance the transaction, which the majority of the court hold to be usurious, or in violation of the first section of the statute regulating the rate of interest, and prohibiting a creditor from receiving more than eight per cent, per annum, for giving day of payment to his debtor. It is admitted that if-Newman were a bond fide purchaser of the notes, or in other words, if he took them at the rate of interest, namely, ten per cent, above named in payment of his debt, and not on a contract to forbear or give day of payment of his debt to his debtor, that then the statute was not violated. J fully concur with the majority of the court in this view of the law; but I differ with them as to the construction of the contract to which the law must be applied. The general rule is, that when a. debtor indorses the note of a third person to his creditor, corresponding in amount with the debt, or if the note be credited so as thus to correspond, and the original evidence of debt is taken
But this point is settled by authority. The supreme court of the United States quote with approbation the doctrine as recognized in New York and other States, that whenever a bill or note in its inception is a real transaction, so that the payee or promisee may, at maturity, maintain a suit upon it, a transfer by indorsement on a discount, though beyond-the legal rate of interest, shall be regarded as a sale of the note or bill, and a valid and legal transaction. Nichols v. Fearson et al. 7 Peters, 103. -, The presumption, then, in the case at bar, is that a sale of the notes by Williams was intended, and that Newman purchased them in payment of his debt. There is but one inquiry to be made on this subject, and that is, whether the testimony destroys the force of this legal presumption; so far from this being the case, the facts that the original indebtedness was can-celled, that the liability of Williams was changed from that of principal to that of indorser, which is only a conditional and secondary liability under our law, and that the notes which were transferred were credited so as to make them correspond with the amount of Newman’s debt, are of themselves sufficient to create a presumption of payment, and sale of the notes for that purpose, even if the rule of law were different from what it is.
But while I am thoroughly satisfied that this is the proper construction to be given to the contract, I am nevertheless indifferent on this point, and think it quite unimportant which con-
Again, it must be admitted that if the indorsement was inoperative to pass the title to the $2,300 to Newman, the title must have remained in Williams to that extent; and further, if it be said that the title to the whole of the notes for seven thousand dollars passed under the general indorsement to Newman, as I contend it did, and that the title for no part, after the indorsement, remained in Williams, then I ask upon what principle is it that he, Williams, obtains a decree for any thing; for such a
I .now put the question whether Williams, who was the payee of three notes for one thousand dollars, could indorse them so as to vest the legal title in the indorsee to the amount of $4,500, and retain the legal title as to the other $2,500 in himself? If such a contract could be made, then I am willing to admit that I may be wrong upon every point arising for consideration in this cause. It is only necessary, however, to refer to authority to settle this point. The authorities will all be found collected and reviewed by the supreme court of the State of New York, in the case of Douglass v. Wilkason, 6 Wend. 639-648, and they will all be- found to be harmonious, beginning with the case of Hawkins v. Cardy, in 1698, followed up by every subsequent case to the present time. “ The assignment of part of a demand due on a promissory note, does not enable the assignee to maintain an action against the maker.” “ Nor can an indorsement be made for the transfer of less than the full sum appearing to be due upon the bill or note.” Bay-ley on Bills, 72. A bill cannot be indorsed for part only of its contents, unless the residue has been extinguished. 3 Kent, 59. The court say in the case in 6 Wend., that “ the language of all the books is, that the indorsement transfers the property of the bill or note to the indorsee. What does less than that,
The effect of every general and unrestricted indorsement is, to invest the indorsee with the payee’s title to the note, and to enable such indorsee to maintain an action on the note against the maker, and to recover to the same extent that the payee could if no indorsement had been made, and he were the party suing.
The rule is only different when the indorsement is wholly void. The maker can, then, resist a recovery, not that he does not owe the money to some one, but the indorsement being absolutely void, the indorsee acquired., no title to the note, and consequently no right to receive the money or to prosecute the suit. But in every case where the indorsee acquires the payee’s title, he at the same time acquires all the incidents of such title, and can, under all circumstances, recover at least what the payee could recover, and in many cases much more. The case of Adams v. Runnells et al., 8 S. & M. 624, and Gaither v. The Farmers, &c. Bank, &c., 1 Peters, 37, only establishes what I admit, that where a party has to trace his title through an indorsement which is void, he cannot recover against the maker of the note, for the very reason heretofore stated, that such a thing as a recovery without title was never heard of in a court of justice; and a void indorsement can confer no title. The other authorities cited by the majority of the court, in the main 'sustain my view of the law, and do not therefore require special notice. I will, however, cite two authorities of my own selection, to prove that a note which is fair in its inception may be indorsed at an usurious rate of interest, and that the indorsee can recover the full amount from the maker.
The supreme court of North Carolina said: “ If the contract be good in its origin, the subsequent transfer of it, usuriously, does not affect it against the maker,” who is bound to pay to the holder according to his contract with the payee. No recov
Again, the court of appeals of Kentucky said, that “ However unfair and usurious the contract between the assignor and assignee may have been, the obligor could not have been injured by it; payment to the holder of the writing, under a regular assignment to him, would have been a complete discharge of the obligation ; and the person injured by the usurious contract would have been left to his remedy against the person who practised the usury.” Littell v. Hord, Hardin’s R. 82.
Both upon principle and authority it is to my mind clear that the complainant is entitled to a decree for the full amount of his note, and to all the interest accruing since the maturity of the note to the present time.
The majority of the court, however, not only give to Williams the $2,300, which they say was the interest agreed to be paid at ten per cent, per annum, for the forbearance from 1843 to 1848, but they go further and give him all the interest which has accrued from the 1st of January, 1848, on the note for five thousand dollars, up to the present time, and interest, too, which has not accrued in virtue of any contract between the parties to pay illegal interest, for the illegal contract, if illegal it be, was at an end on the 1st of January, 1848, the day on which the note for five thousand dollars fell due. Newman only agreed to extend the time of payment of his debt till January, 1848, if that is the construction which must prevail. On that day he looked not to Lewis Williams, the party to the illegal contract, for payment, at least not as the party pecu-niarily liable, but to the maker of the note, the title to which' Newman held as indorsee of Lewis Williams. The majority of the court, however, say, that instead of the makers of the note being indebted to Newman on the 1st of January, 1848, in the sum of $4,800, the balance due on the note, they were only indebted to him in the sum of $2,500, and that they owed the balance of the $4,800, namely, $2,300 to Lewis Williams.
Take the majority of the court upon their own ground, and how is it possible to sustain their decree ? They, in the first place, decide that Stephen and Mary Williams were indebted
I submit that this conduct establishes two important facts. First, that Lewis Williams was acting in collusion with the debtors, and inducing them not to pay their debt to Newman when it became due, or at any other time, if he could be defrauded out of his security. And secondly, such would be the natural effect of his acts upon the minds of the debtors, unless they were liberally endowed with those faculties which do not stand out very prominently in this transaction — a sense of justice and of right in performing their contracts. It may be mentioned as a further fact, that the very answers of the several defendants tend strongly to prove a combination between and among them to defraud Newman’s estate.
But the majority of the court rest their decision on the fact that the debtors are but performing their contract, by paying interest; and the question is, therefore, whether Williams or Newman shall receive it. This question is easily answered. We will suppose that Newman extorted from Williams $2,300 illegally, and that what was thus illegally extorted shall be paid back. What shall be the measure of damages in such case ? Certainly not more than the principal and legal interest ? I put this case: Suppose the debtors were to come forward voluntarily to settle with Williams, no bill having been filed or suit commenced, could they pay him more than his principal and legal interest on the principal ? Certainly not. The title to the note only remained in him to the amount of $2,300, if any title at all remained, and. it is upon this title that he receives the money, — the debt as the principal, and interest as the incident. The majority have lost sight of the fact, that though Williams is a defendant in the suit, that yet when he recovers or obtains a decree in his favor for the payment of money to
But the majority of the court say that the contract is execu-tory, and as Williams is defendant, he can therefore recover the interest. I deny the truth of the very first proposition, that the contract as to Lewis Williams is executory. Did he not indorse and.deliver the notes to Newman ; and was not this contract, so far as Newman’s title to the notes is concerned, as completely executed the moment the indorsement, was complete, as it ever can be? The majority would be right if Williams were sought to be held liable on his indorsement. He then could say the contract in that respect was executory; and not having paid the illegal interest, the law excused him from performing this part of his contract as indorser. But there is no effort to make him liable on his indorsement. He is a party to the bill, merely because he holds the naked legal title to the mortgaged property, and because he made the fraudulent entry of “ satisfaction” of the mortgage on the record. The makers of the note are the only persons pursued for the debt; and there is but one question to be considered in this connection, and that is, whether the complainant, who has the legal title to the whole note, shall be permitted to collect the whole of the money, principal and interest, due from the makers, and retain it; or whether Lewis Williams, who has no legal title to the note or any part of it, shall be permitted to set up what is supposed . to be an equitable title to part of the money which is sought to be collected from the makers, and whether they shall pay such part directly to him, instead of to the complainant who has the legal title. We will again remark, that whatever decree is made in favor of Williams, must be regulated by the same rules which would govern the court, if Williams were the complainant in the cause. Having been made a defendant in this cause, we will suppose his case regularly presented by a cross-bill against his codefendant and the complainant, what relief could he obtain upon his cross-bill ? This question may be answered in few words, and it is, that he could recover only as much as he could recover in a suit directly against the com
.. I will merely remark, in conclusion of this opinion, that under the most unfavorable view of the law for the complainant, I think he ought to recover the interest accrued on his debt since 1848. It is admitted that the sum of $>2,500 was then honestly due him, and that he had a legal title to the note to that amount. The language of the statute is, that no interest or premium shall be recovered for “ forbearance or giving day of
But the case presents this novel attitude : Williams’s principal, under the decision of the majority, was, on'the 1st of January, 1848, $2,300; he recovers this sum under the decree, interest on it, and. interest on Newman’s principal, which is f2,500. By this operation Williams has been getting a fraction over sixteen per cent, per annum interest on his principal since January, 1848, to present time, to secure which he has got his own entry of satisfaction of the mortgage set aside, it reestablished, and a decree merely upon his answer to foreclose the mortgage for the payment of his debt. As the investment is a good one, and the debt well secured, he will no doubt become thoroughly persuaded that debtors ought to be pursued with great leniency, and that the complainant ought to be held to a strict observance of all the forms of law, especially so long as Williams can get the interest which the complainant’s debt is drawing.
My opinion is, that the complainant ought to recover the full amount of the note in controversy, and legal interest thereon since due.