40 Ill. 131 | Ill. | 1865
Lead Opinion
delivered the opinion of the Court:
A careful examination of all the evidence in this record fails to show that Stevens was not a bona fide purchaser of the note without notice of the defense of usury. Brown, who made the purchase as his agent, testifies, that he had no knowledge that the note was tainted with usury. He also testifies that appellant, Alvin Woodworth, solicited him to purchase the note, and assured him it was all right. But the instrument being negotiable and past due, he took it precisely as it was held by his assignor. If Mary P. Huntoon held it free from the defense of usury, he by his purchase succeeded to her rights. A note, tainted with fraud or other infirmity, passing into the hands of an innocent purchaser, not chargeable with notice, and for a valuable consideration, he acquires it purged of the defense, and any other person acquiring it of him succeeds to his rights in the same condition he held them. A defense to the instrument in the hands of the original holder, having been thus cut off, is not revived by the note being again transferred.
The assignment of this note to Mary P. Huntoon was before its maturity. This raises the presumption, until it is rebutted, that she received it without notice, and in the due course of business. It then devolves upon the party contesting the good faith of the transaction to show, that she had notice of the usury, or of such circumstances as would lead to notice, at the time she purchased.
In this we think the evidence fails. It is denied by the answers of the payees. The principal circumstances relied upon to prove notice is that she is sister of one of the payees. This of itself is not sufficient to impeach the transaction. Persons occupying that relation may and frequently do sell to, and buy property of, each other on precisely the same terms as they do of strangers. This fact, in connection with other circumstances, may be taken into consideration to determine whether the transaction was real or only colorable. There is nothing to show that she was not possessed of ample means to enable her to purchase notes, and if disposed to do so, it is natural that she should as readily purchase of a brother as of a stranger.
The usury is admitted by the payee, in his answer, and inasmuch as it can not be interposed as a defense to or relied upon for a decree against that amount of the note, can a decree be rendered against the payee for the usury % Had he continued to hold the note, there can be no doubt that the amount of the usury reserved might be deducted and a decree rendered for the balance. He has, by the sale of the note, prevented the defense to the note, has obtained money which, in equity and good conscience, he has no right to retain, and which the law forbids him to receive. It is true that he has not received it from the makers, but from third persons. It was not paid by the makers, and its payment by a third person does not estop them from insisting upon having it refunded. He has received this amount which was not owing him under the law, and has compelled the makers to pay that sum to the present holder. Suppose the note had been free from taint of usury and the makers had paid this sum, and it had not been credited, and the note sold before maturity, would any one doubt his liability to the makers % And, in principle, the two cases are the same, one is equally a defense as the other, and in each it would be the wrongful act of the payee which deprives the makers of their defense to the note. Courts of equity will, as a part of their inherent jurisdiction, lend their aid to recover back usury paid by the borrower, beyond legal interest. Story’s Equity, § 302. It is said, in Fonblanque’s Equity, vol. 1, 245, that, “ in usuious contracts, there is no doubt but equity will give relief to the borrower in case where the law will not reach him, as it is unjust for the lender to hold such exorbitant gains, and the borrower can never be considered partieeps criminis, but rather deserving compassion than punishment.” Before equity adopted this rule it had been held by the English courts of law that usury actually paid could not be recovered back by the borrower. Tompkins v. Bernett, 1 Salk. 22. And it seems that equity assumed jurisdiction because the borrower had no adequate remedy at law. But in more modern times, the ancient rule of the common law courts has been relaxed and it may now be recovered in the English courts by an action for money had and received. Browning v. Morris, Cowper, 192 ; Jaques v. Galightly, 2 Blk. 1073; Astley v. Reynolds, Strange, 915.
On the one hand, courts of equity will not relieve the debtor by declaring the contract void, and thus aid him in perpetratlug a fraud, but will require Mm to do equity by paying the principal with legal interest; on the other, it will not aid the usurer in perpetrating a fraud, by enforcing his illegal and unconscionable bargain. But to prevent fraud it will decree the repayment of the usury received from the debtor, and only permit the creditor to have his money with legal interest. It will not lend itself to aid either party in committing a fraud, but will require both parties to do equity; even if a court of equity would not entertain a bill for the recovery of usury already paid, it will interpose to prevent its collection, or to compel an assignor to pay the usury to the makers of the note where the assignment has cut off the defense. It will prevent such fraud. In this case Huntoon should not be permitted, by transferring the note before its maturity to an innocent holder, to consummate his fraudulent purposes, and thus acquire and hold money which the law has said he shall not have. The payment of the usury by Mary P. Huntoon, when she purchased the note, may be treated as money paid for the use of the makers. And in this case equity will require him to pay the usury over and above legal interest to the makers of the note. This relief may be granted under the general prayer, not being inconsistent with the special prayer for relief.
The court below should have rendered such a decree. The decree which was rendered being erroneous, it must be reversed and the cause remanded.
Dissenting Opinion
dissents.
This cause was originally argued at the April Term, 1864, and the foregoing opinion was filed as of that term. At the April Term, 1865, a rehearing was granted upon the suggestion of questions which were not presented to the court at the former hearing.
On the rehearing, it was insisted by Mr. L. B. Wagner, on behalf of the appellee, James H. Huntoon, with whom was Mr. S. W. Brown, that to enter a decree requiring James Harvey Huntoon to pay to the Woodworths the usury in this note and deed of trust, would be clearly inconsistent with the case made by complainants’ bill, and if so would be erroneous. Citing Colton v. Ross, 2 Paige Ch. 397; Lloyd v. Brewster et al., 4 id. 537; Beebe v. Bank of New York, 1 Johns. 559; Mitford’s Pleadings, 38; Wilkin v. Wilkin, 1 Johns. Ch. 117; Grimes v. French, 2 Atk. 142; Darmer v. Fortescue, 3 id. 132; 2 Peters, 595.
Counsel further urged:
The complainants examined James Harvey Huntoon as a witness in the cause, and this operates as an equitable release to the defendant, and there can be no relief against him, and cited 3 Greenleaf’s Evidence, § 316; Wrymouth v. Boyer, 1 Vesey, 417; Lewis v. Owen, 1 Ired. Eq. 93; Palmer v. Van Dorn, 2 Edw. Ch. 193; Bradley v. Root, 5 Paige, 633; Lingan v. Henderson, 1 Bland, 263.
The statement, in the opinion in this case, that Huntoon admitted the usury in his answer, is a mistake. Huntoon neither admits nor denies it in his answer, but testified to it when called as a witness by complainant.
Mr. B. F. Parks and Messrs. Leland & Blanchard, for the appellants, contra.
Mr. Chief Justice Walker delivered the opinion of the Court:
This case comes before us at this term on a rehearing. After careful reflection and reconsideration of the ground upon which the former opinion was based, we see no reason to change our views as there expressed. But upon questions now raised which were not then considered, we have arrived at a different conclusion from that announced on the former hearing.
In granting relief against usury collected, as the record shows it was in this case, we would not in the least modify the former decisions of this court, but place it upon the ground that the payment was not voluntary, but was compulsory and so that the defense could not be made. In the former cases the court proceeds upon the ground that a debtor who has voluntarily paid usury is, after the whole debt is paid, estopped from suing and recovering it back. While in a case like this it is involuntary, and by the transfer of the note before its maturity to a bona fide purchaser without notice, the defense is cut off. Nor can a debtor in such a case resort to a court of equity for relief by injunction of the usurious portion of the debt, as by the assignment before maturity the assignee acquires the note freed from all defense, either legal or equitable. As the payment is compulsory, and by the' assignment of the note the payee has, to say the least, obtained an unfair advantage, a court of equity will give relief, and it may be that the maker has a remedy at law for money paid for the use of the payee.
It is now urged, that it appears from the evidence, that complainants had made an assignment of their property for the benefit of creditors, and if so, they have no right to recover the usury back, but that the assignees would be. entitled to recover. It is true, that Wagner incidentally states in his testimony that they had made an assignment and were insolvent. To whom, when, or what was assigned, he does not state. The record affords no evidence, if an assignment was made, that it embraced this claim. This evidence is too meagre and unsatisfactory upon which to reject the claim to recover back the usury.
It is insisted that James H. Huntoon does not admit that the note contained usury, and that it was not otherwise proved. He does not m terms admit it, but clearly does by implication. The bill charges that the transaction was usurious, and in his answer he says, that Mary P. Huntoon “ was a bona fide holder and owner thereof, and had no notice of usury or any other defense to said note.” The answer was obnoxious to an exception for failing to answer the. allegation in the bill, but no exception was taken to it. It might perhaps, as evidence, have been .regarded as such an admission as would warrant the conclusion that the note did contain usury, as charged in the bill
It is likewise insisted at this time, that James H. Huntoon, being called by complainants as a witness on the hearing, they are precluded from taking a decree against him. Hnder the general chancery practice, there are cases and circumstances that preclude such a decree, but there are other cases where the courts have stricken out the evidence of the party, when there was other evidence, and permitted a decree to pass. And if necessary in this case to the support of the decree, we would incline to hold that Huntoon’s evidence might be stricken out, and a decree rendered on his answer. But by a recent statute, adopted on the 20th day of February, 1861 (Sess. Laws, 11), it is provided that after making and filing an affidavit, either party may call on the other to testify. It declares that in cases where there are two or more plaintiffs or defendants, the opposite party may call either or all of the plaintiffs or defendants as witnesses to the fact mentioned in the affidavit. We find no affidavit in the record, but we will presume that it was waived unless the contrary appears. This statute, it is true, declares that whenever a party to any original suit pending in a court of record, upon contracts express or implied, shall file an affidavit, he may resort to this character of evidence. While a bill in equity may not be embraced, in terms, in the act, such a case as this is clearly within its spirit, as there is an implied promise by the payee, when he sells a note and cuts off the defense of usury, that he will repay the usury to the maker.
However, upon a careful examination of the bill, we find, that, as it is framed, the relief cannot be granted. If properly framed in other respects, the relief could have been granted under the general prayer. But the bill proceeds upon the ground that the purchasers of the note had notice of the usury and were not bona fide holders—Mary P. Huntoon being charged with notice—and that Stephens purchased after the maturity of the note. The evidence fails to sustain these allegations, but the evidence does show that James H. Huntoon did sell the note so as to cut off the defense of usury. The bill makes one case and the proof another. Had the bill been properly framed the relief should have been allowed. But we feel ourselves unable to reverse the decree of the court below, but it is so modified that the bill stand dismissed without prejudice, and appellant pay the costs of this court.
Decree modified.