1 La. Ann. 265 | La. | 1846
The judgment of the court was pronounced by
On the 8th June, 1840, Taylor & Ferguson, on the recommendation of Taylor to his partner, loaned to Reid the sum of $4,800, and took from him his note for the sum of $6,000, payable at New Orleans on the 1st June, 1841, to the order of Taylor Ferguson, thus charging Reid for the use of $4,800, for a period a little less than a year, $1,200, being over twenty-four per cent per annum. It also is .shown that the $4,800 was given to Reid in Illinois bank notes, which were then at about five per cent below specie value. With regard to this portion of the usurious transaction the plaintiff has not asked relief.
The note was protested at maturity on the 4th June, 1841, having been previously endorsed by Taylor & Ferguson to Taylor Sf Duncan, a firm of which Taylor, of Taylor & Ferguson, was a partner, and who had knowledge of the
When the time thus given expired, Reid failed to pay, and Duncan, as surviving partner of Taylm• & Duncan, and as the executor of his deceased partner, obtained an order of seizure and sale, asking, in his petition, that he be. paid from the proceeds of sale, the sum of $6,000, with interest from the 26th February, 1842, at the rate of ten per cent per annum. The present suit was brought by Reid, to enjoin the execution of the writ of seizure and sale. He alleges the usurious contract by which he had obligated himself to pay $1,200 for the use of the $4,800 as above stated; he also alleges that he has paid on the note $1060 18 in cotton, and prays relief accordingly. The defendant answers by a general denial, and also pleads that the proceeds of the cotton should be applied to certain advances made thereon to the defendant. The court below decreed as follows: “ That the injunction be sustained for the sum of $1,200, claimed as usury, to be credited on the note at its date; and for the further sum of $1060, to be credited on the said note, on the 21st April, 1842; and that the sheriff proceed with the sale to make the balance of the said debt, viz : the sum of $4,800, with interest at five per cent per annum, from June 24, 1841. to 26th Feb. 1842, and interest on the said sum from the last date, at ten per cent per annum, until paid, credit by said sum of $1060, 21st April, 1842, with such costs as were taxed in the order of seizure and sale.” The court rejected the defendant’s claim for advances, without prejudice, however, to the rights of suit therefor. From this judgment Reid has appealed; and the appellee, in his answer, also asks that the judgment be amended in his favor.
Our first inquiry is, did the court below err in declaring void so much of the note, to wit, $1,200, as was given for usurious interest from its date to maturity 1 There are two classes of interest known to our law, conventional and legal interest. Civil Code, art. 1930. The former flows from the convention of the parties; the latter is given by the law under certain circumstances, in
Turning then to the consideration of conventional interest, that is, the obligation to pay interest which arises from this convention of the parties, we find that the law, from grave considerations of public policy, has laid down certain rules to regulate and restrain these agreements. The amount of conventional interest cannot exceed ten per cent. The same must be fixed in writing, and testimonial proof of it is not admitted in any case. Civil Code, art. 2895. The statute is prohibitory. Whatever is done in contravention of a prohibitory law is void, although the nullity be notformally directed. Civil Code, art. 12. The agreement then to pay this $1,200 of interest, being a violation of a prohibitory law is void, and as such we can give it no effect whatever. We cannot say that we will let the convention stand up to the highest limit permitted by the law, and disregard it for so much as it exceeds the legal limit. The convention is a whole, and tho nullity covers the whole.
Again: The contract for conventional interest derives its existence, not from the law, but from the agreement, and must be fixed in writing. Civil Code, art. 2895. The parties here made no convention for any lower rate; if we substitute a lower rate, we create a convention for the parties. But the law gives us no such authority. The only case in which the law creates an obligation to pay interest being, when the debtor is put in default for the payment of the principal, and then only from the date of the default. The convention then of the parties to pay the twenty-four per cent interest, from the date of the loan till the time when it was exigible, being void, and the law having made no provision for legal interest anterior to default, the sum of $1,200 stipulated by the parties is a sum for which no legal liability ever existed, and the payment of no part of which can be enforced.
Nor does the fact that Reid, after the maturity of this note, in the notarial act of mortgage, recognized the existence of the note and indebtedness for $6,000, stipulated for an extension of time, and gave a mortgage, affect his right to be relieved from the contract to pay usurious interest. The note was not novated by this agreement; the notarial act expressly declared that it was not novated. It was merely recognized as an existing contract and indebtedness, which the debtor secured by a mortgage, and upon which he promised to pay ten per cent interest from the date of the notarial act. The cases wherein payments were made, and the debtor was held to be thus estopped from getting back the usurious interest, or being relieved with regard to it, have no analogy to the present case. Here the original promise to pay the usurious interest still stood unchanged, and retained its original form and force. This case is a much stronger one against the creditor, than the case of Rosenda v. Zabriskie, (4 Robinson, 4-93,) where the original notes had been several times renewed.
We come now to the consideration of so much of the judgment of the court below, as allows interest at the rate of ten per cent per annum upon the debt, from 26th February, 1842. This interest of ten per cent is stipulated in the mortgage upon the whole note, $6,000; as a part of this note was usurious interest, it obviously follows that this new stipulation was usurious. The rate of ten per cent is a lawful rate ; but here it is the sum upon which it is stipulated, which makes it unlawful; $1,200 of the note being made up of usurious interest, it was in reality a stipulation compounding usurious interest. This case is not distinguishable from the case of Flood v. Shamburgh, 3 Mart. N. S. 634. There a note for $10,000, payable in one year, was given for a loan of $8,800. By a subsequent act of mortgage passed to secure the payment of this note, the borrower had stipulated to pay interest at ten per cent, if it was not regularly discharged at the end of the year.' The judge below was of opinion that ten per cent interest could be recovered on the sum really lent, from the date of the failure to comply with the original contract. The Supreme court reversed the decision.
But it is said that the party is, at least, entitled to maintain his order of seizure and sale, for the lawful rate of interest, from the date of the maturity and pror test of the note, upon the amount of the principal debt. There is strong reason to infer from the evidence in the record, and especially from Duncan’s own pleadings, that this interest, up to the date of the mortgage, had been paid or released. Be this as it may, it suffices to say that, this proceeding is by order of seizure and sale to sell the mortgaged property, and is based solely upon the notarial act. That act, by which alone the real estate seized was made liable, is entirely silent as to the legal interest which accrued by protest of the note. Not a word is said in the act of mortgage of any interest but the conventional interest, which it stipulates from the date of the notarial act itself; and such was the interpretation which the creditor has himself put upon the mortgage, for in his petition for an order of seizure and sale, he asks to be paid, out of the proceeds of the sale, the sum of $6,000, with interest thereon at the rate of ten per cent, from the 26th day of February, 1842, until final payment.
As to the claim of the defendant to have the proceeds of the sale of the cotton appropriated to his account, for sundry items alleged to have been advanced on the consignment, we concur with tire district judge, in considering it as established by the evidence that, the agreement of the parties was that those proceeds
It is therefore decreed, that the judgment of (he court below be reversed; and it is further decreed that, the sheriff proceed with the sale of the mortgaged property, to make the sum of §3,951 86, with costs of .said seizure and sale; and it is further decreed that, the said defendant pay the costs of this suit. This decree not to prejudice the rights of said defendant, as to the account for supplies and advances in his answer pleaded, and a copy whereof is on file in this cause. And it is further decreed that, for the residue of the amount mentioned and directed to be collected in said order of seizure and sale, the injunction be perpetuated.