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(- R. I. -, 114 Atl. 181.) tion of the sum payable upon the indirectly, is prohibited, and every mortgage. This has been followed contract made in violation of the in later Massachusetts cases. The statute is declared usurious and court in that case appears to have void. In equity as well as in law the been affected to some extent by the superior court will not aid a lender provision of the Massachusetts Usu- in the enforcement of such a usuriry Statute, providing that the bor ous contract, nor should it require a rower might recover the penalty for borrower to perform such contract usury by a bill in chancery. We do as the condition of granting him not think it can be said fairly that equitable relief. As a court of equiin Hart v. Goldsmith, supra, the ty it will enforce the Usury Law, esMassachusetts court intended to cre tablished by the general assembly, ate an exception to the ordinary against the lender, and also for the rule. We are of the opinion that we protection of the borrower, in so far should conform to the generally ac as such enforcement does not lead it cepted equitable principle. 1 Story, to disregard those equitable prinEq. Jur. 14th ed. $ 424.
ciples which, as a court of conThe complainant further contends science, it must enjoin upon all that, if under the allegations of his suitors before it. When in equity bill a court of equity cannot properly the borrower, seeking relief from a grant him the relief of cancelation usurious contract, is the actor before of said note and mortgage, neverthe- it, the superior court should insist less, under said allegations, the bill upon the recognition by such borshould not have been dismissed, but rower of his moral obligation to reshould have been retained by the turn the money loaned at the time court for the purpose of restraining when in good conscience it is due, the threatened foreclosure of the with legal interest. Although in law mortgage. By "foreclosure" the the mortgage is of
no effect as security asarlons
Mortgage complainant intends the exercise by the respondent Palmer of the power
for the usurious enforcement in
equity. of sale contained in said mortgage. contract, in a suit The complainant bases this conten- by the borrower equity will treat the tion upon his claim that it appears mortgage as a valid security for the by the bill that the sum of usurious amount that it regards as justly due interest paid by the complainant be- from the borrower to the lender. fore the filing of the bill amounts to Upon the complainant's conten6 per cent on the principal of the tion, which we are now considering, loan from the time when said loan it is necessary to determine what, in was made, up to a time about four the circumstances of this case, equiyears after the beginning of this ty ought to regard as legal interest suit, or until June, 1923. The posi- upon the loan from Palmer to the tion of the complainant in that re complainant. Is it 6 per cent, or is gard is that equity should restrain it 30 per cent the highest rate althe threatened sale under the power,
lowable by law within the usurious because the complainant is not in de- rate taken by the respondent in the fault.
transaction? It should be borne in The general assembly has declared mind that the insistence of equity that it is against public policy to that, notwithstanding the statute, permit the taking of interest at a there still exists a moral obligation rate in excess of that which it has resting upon the borrower, does not prescribed. Under the statute, on proceed from any regard for the all sums loaned exceeding $50 lender, and is not for the purpose of the borrower is permitted to re- giving life to a contract which the serve, charge, or take by contract, general assembly has declared to be interest not exceeding 30 per cent void, but arises from the equitable per annum. The taking of interest consideration that it is contrary to at a greater rate, either directly or good conscience that a complainant
should be freed from liability, and an equitable suit to redeem premises still be permitted to retain the mon mortgaged to secure a usurious loan, ey of the lender and be required to have permitted the borrower to have make no proper compensation for its credit for the amount of the statuse. A contract for illegal interest utory penalty for usury, such penalis as void in equity as it is in law, ty being three times the usurious inand furnishes no standard for meas terest reserved. uring the borrower's moral duty to From the bill it appears that the pay interest. Under the allegations complainant ' has made payments of the bill the superior court was largely in excess of legal interest on warranted in holding that the lend the loan. There has been no aper, Palmer, had indirectly taken in- plication of this excess which the terest on the loan made to the court should recognize, but the court complainant, at a rate exceeding 30 should direct such application to be per cent per annum. No considera made as appears most beneficial to tion of conscience would require that the complainant. Ordinarily, it
court to hold that would be for the benefit of a borrowenforceable by
the rate of interest er that such excess should be applied equity in
which the complain- in reduction of the principal of the express stipu. ant ought to pay up
loan. The complainant is asking lation.
on that loan was that it shall be applied to the paymore than 6 per cent, the rate fixed ment of interest in advance on said by law in the absence of express loan, so that he may stipulation.
not be in default. Application of The question next arises : Shall In view of the terms usurions
interest-legal the complainant in an accounting, or of sale contained in interest in in a proceeding to determine wheth- the
mortgage, a er or not he is in default, be permit- copy of which is annexed to the bill, ted to have credit at the rate of 6 per it appears desirable that the comcent for the payments which he has plainant should be protected against made as interest upon the void note, a sale which may be had without acwhich payments have been credited tual notice to him. by the lender in accordance with the In our opinion the bill should not terms of the illegal contract? Some have been dismissed upon demurrer, courts of law have held that one who but should have been held for hearvoluntarily pays unlawful interesting upon the complainant's prayer upon a usurious contract cannot re for the restraint of the threatened cover it by suit, in the absence of a sale under the power contained in permissive statute; and some equity the mortgage. If, upon hearing, the courts, in stating an account be- complainant sustains his allegation tween the parties, or in a proceeding of usury, and it appears that payto redeem mortgaged premises, will ments in excess of legal interest not allow the borrower credit at the have been made by the complainant legal rate for such voluntary pay upon said loan, then the superior ments. We regard the contrary as court should direct the application
the sounder posi- of such payments to be made as shall usury-credit for tion, and as one be for the protection of the compayments
constituting a salu- plainant; and the court should make tary protection to the victims of such declaratory decree, and should usury, which position a court, with- give to the complainant such condiout violating equitable principles, tional relief, as equity may require may well take in conformity with in the circumstances of the case. the policy of the statute law. The complainant's appeal is susParmelee v. Lawrence, 44 Ill. 405; tained. The decree of the Superior Norvell v. Hedrick, 21 W. Va. 523. Court dismissing the bill is reversed. The Massachusetts court, in Hart v. The cause is remanded to the SupeGoldsmith, supra, and the cases fol rior Court for further proceedings lowing it, have gone farther, and, in in accordance with this opinion.
Payment of or offer to pay principal and legal interest as condition of relief
in equity against usurious contract.
I. View that both principal and legal II. View that principal only need be interest must be offered:
offered, 126. a. As condition of equitable relief III. View that neither principal nor legal generally, 123.
interest need be offered, 128. b. As condition of particular kind IV. Jurisdictions in which law is unof equitable relief, 125.
settled, 131. 1. View that both principal and legal Trumbo (1834) 6 Gill & J. 103;. Gwynn interest must be offered.
v. Lee (1850) 9 Gill, 137; Baugher v. a. As condition of equitable relief gen
Nelson (1850) 9 Gill, 299, 52 Am. Dec. erally.
694; Powell v. Hopkins (1873) 38 Md,
1; Walker v. Cockey (1873) 38 Md. 75; Equitable relief against a usurious
Hill v. Reifsnider (1873) 39 Md. 429; contract is granted in most jurisdic Smith v. Myers (1874) 41 Md. 425. tions only on the condition that the Michigan.-Vandervelde v. Wilson debtor shall pay, or offer to pay, the (1913) 176 Mich. 185, 142 N. W. 553; principal of his debt and legal interest
Dalton v. Weber (1918) 203 Mich. 455, thereon.
169 N. W. 946. Connecticut.-Kilbourn v. Bradley New Jersey.--Miller v. Ford (1831) (1809) 3 Day, 356, 3 Am. Dec. 273;
1 N. J. Eq. 358; Ware v. Thompson Welch v. Wadsworth (1861) 30 Conn.
(1860) 13 N. J. Eq. 66; Giveans v. 149, 79 Am. Dec. 239.
McMurtry (1864) 16 N. J. Eq. 468 ; Georgia. – Campbell v. Murray Okin v. Broad & Market Nat. Bank (1878) 62 Ga. 86; Whatley v. Barker (1921) – N. J. 113 Atl. 139. (1887) 79 Ga. 790, 4 S. E. 387; Brant North Carolina.–Ballinger v. Edley v. Wood (1895) 97 Ga. 759, 25 S. E. wards (1847) 39 N. C. (4 Ired. Eq.) 499; Moseley v. Rambo (1898) 106 Ga. 449; Beard v. Bingham (1877) 76 N. C. 597, 32 S. E. 638; Craft v. Link (1910) 285; Purnell v. Vaughan (1880) 82 135 Ga. 521, 69 S. E. 742; Weaver v. N. C. 134; Burwell v. Burgwyn (1888) Bank of Bowersville (1917) 146 Ga. 100 N. C. 389, 6 S. E. 409; Carver v. 142, 90 S. E. 864; Patterson v. Moore Brady (1889) 104 N. C. 219, 10 S. E. (1917) 146 Ga. 364, 91 S. E. 116; 565; Churchill v. Turnage (1898) 122 Matthews v. Banks (1917) 146 Ga. 732, N. C. 426, 30 S. E. 122; Owens v. 92 S. E, 52; Polite v. Williams (1920) Wright (1912) 161 N. C. 127, 76 S. E. 149 Ga. 726, 101 S. E. 791; Liles v. 735, Ann. Cas. 1914D, 1021. Bank of Camden County (1921) - Ga. Ohio. Shelton v. Gill (1842) 11 - 107 S. E. 490; Lanham v. State Bank Ohio, 417. (1920) C. C. A. – 268 Fed. 458 Rhode Island.—See the reported case (construing Georgia law).
(MOHCRIEF V. PALMER, ante, 119.) Illinois. Cushman V. Sutphen Wisconsin.-Rietz v. Foeste (1872) (1866) 42 Ill. 256; Tooke v. Newman 30 Wis. 695. Compare Haggerson v. (1874) 75 Ill. 215; Lehmann v. Shime Phillips (1875) 37 Wis. 364. all (1915) 195 Ill. App. 511; Chase & B. England. -Ex parte Skip (1752) 2 Co. v. National Trust & Credit Co. Ves. Sr. 489, 28 Eng. Reprint, 313; (1914) 215 Fed. 633 (construing Illi Scott v. Nesbit (1789) 2 Bro. Ch. 642, nois law).
29 Eng. Reprint, 355, 2 Cox, Ch. Cas. Kansas.-Holden Land & Live Stock 183, 30 Eng. Reprint, 84; Mason v. Co. v. Inter-State Trading Co. (1912) Gardiner (1793) 4 Bro. Ch. 436, 29 Eng. 87 Kan. 221, L.R.A.1915B, 492, 123 Pac. Reprint, 976; Benfield v. Solomons 733.
(1803) 9 Ves. Jr. 77, 32 Eng. Reprint, Maryland. - Trumbo V. Blizzard 530; Hindle v. O'Brien (1809) 1 Taunt. (1833) 6 Gill & J. 18; Jordan v. 413, 127 Eng. Reprint, 894; Ex parte
Scrivener (1814) 3 Ves. & B. 14, 35 to repay the principal sum actually
In Trumbo v. Blizzard (Md.) supra, With respect to a bill to enjoin the the court said, in distinguishing a sale of real property under a deed case wherein a mortgagor was defendtrust securing certain usurious notes, ing a suit in equity on the ground of the court said in Tooke v. Newman usury, from one in which he brought (1874) 75 Ill. 215: “When a person an action in that court for relief: applies to equity for relief against "Where a mortgage is given on usuriusurious contracts, the court will only ous consideration, the plea of usury, entertain jurisdiction on the condition either by the mortgagor or his alienee, that the debtor shall pay the principal, is a full defense to a bill in chancery with legal, but not with conventional, for a foreclosure by the mortgagee, interest. Six per cent being legal who goes to enforce a void instrument. interest, the court would require the But there is a recognized distinction payment of the principal with that between that, and the case of a mortrate of interest, as a condition to gagor, or his grantee, who goes into granting relief. And in such cases the chancery seeking relief against the debtor must tender, or at least offer mortgage on the ground of usury; to pay, the principal and such interest which will only be extended to him on to the creditor or holder of the instru his paying, or offering to pay, the ment." See to the same effect, Leh- principal and legal interest of the sum mann v. Shimeall (1915) 195 Ill. App. due, on the principle that he who 511.
seeks equity, to obtain relief, must do So, with respect to a statute barring equity.” A like distinction was made the recovery of any interest on a
in Ballinger v. Edwards (N. C.) supra. usurious obligation, the court said in In several English cases, a distincWelch v. Wadsworth (1861) 30 Conn. tion has been made between bank149, 79 Am. Dec. 239: “The right of ruptcy jurisdiction and equity juristhe defendant to insist upon the for diction generally. It has been held feiture by the plaintiffs of the whole that the debtor is not bound to tender interest was a legal, but not to the full either principal or legal interest, extent an equitable, one. Courts of where an application for relief from a equity do not view the statute as usurious obligation is made to the courts of law are compelled to do. If bankruptcy jurisdiction of the court, the borrower goes into equity in but that he is bound to tender both, respect to a security given in con as a condition of relief, where his nection with the usurious contract, or application is to the general equity to avoid extortion or oppression, the jurisdiction of the court. Ex parte court will compel him to pay the Skip (Eng.) supra; Benfield v. Soloprincipal and legal interest, because mons (1803) 9 Ves. Jr. 77, 32 Eng. there is a moral obligation resting on Reprint, 530; Ex parte Scrivener him to do so, and it is equitable that (1814) 3 Ves. & B. 14, 35 Eng. Reprint, he should be compelled to do it. In the 384. Compare, however, Roberts v. case of Kilbourn v. Bradley (1808) 3 Goff (Eng.) supra, wherein a rule nisi Day (Conn.) 356, 3 Am. Dec. 273, this was obtained to show cause why a court said: "The statute against usury, judgment entered on a warrant of on principles of public policy, renders attorney should not be set aside on the void contracts upon usurious consider ground of usury. Although the appliation. But the lender incurs no penal cation was made to the equity juristy, unless he actually takes usury; diction of the court, the rule was made and courts of equity, on relieving absolute, the court refusing to impose, against oppression or extortion, order as a condition of relief against the the repayment of the sum really judgment, a
a requirement that the loaned or due, with lawful interest. principal of the usurious contract be The moral obligation of the borrower paid with legal interest.
1. As condition of particular kind of (Ill.) supra, it was held that in a suit equitable relief.
for the redemption of real estate from In a number of decisions it has been a mortgage the master properly comheld that a mortgagor who brings a puted interest at 6 per cent, where the bill to enjoin a sale of property under interest agreed on was usurious. The a mortgage, on the ground that the decision was based on a statute promortgage secures a usurious obliga viding that if a greater rate of interest tion, is not entitled to the relief than 6 per cent was not for money prayed unless he shall pay, or offer to loaned, the rate, on the establishment pay, the actual principal of his debt of that state of facts, should be 6 per with legal interest. Whatley v. Barker cent. (1887) 79 Ga. 790, 4 S. E. 387; Brant Similarly, the payment of, or offer to ley v. Wood (1895) 97 Ga. 759, 25 S. E. pay, the actual principal of a usurious 499; Moseley v. Rambo (1899) 106 Ga. obligation, and legal interest thereon, 597, 32 S. E. 638; Craft v. Link (1910) has been held to be a condition of the 135 Ga. 521, 69 S. E. 742; Liles v. right of the debtor to have canceled a Bank of Camden County (1921) – Ga. mortgage deed or other instrument -, 107 S. E. 490; Powell v. Hopkins securing the obligation. Campbell v. (1872) 38 Md. 1; Walker v. Cockey Murray (1878) 62 Ga. 86; Patterson v. (1873) 38 Md. 75; Vandervelde v. Moore (1917) `146 Ga. 364, 91 S. E. Wilson (1913) 176 Mich. 185, 142 N. W. 116; Matthews v. Banks (1917) 146 553.
Ga. 732, 92 S. E. 52; Weaver v. Bank The right to the redemption of of Bowersville (1917) 146 Ga. 142, property from a mortgage securing a 90 S. E. 864; Polite v. Williams (1920) usurious obligation has likewise been 149 Ga. 726, 101 S. E. 791; Lanham v. held to be available only on the condi State Bank (1920) C. C. A. tion that the mortgagor shall pay the 268 Fed. 458 (construing Georgia actual principal of the obligation, with law); Miller v. Ford (1831) 1 N. J. Eq. legal interest. Cushman v. Sutphen 358; Rietz v. Foeste (1872) 30 Wis. (1866) 42 I. 256; Holden Land & Live 695. See also the reported case (MONStock Co. v. Inter-State Trading Co. CRIEF V. PALMER, ante, 119). (1912) 87 Kan. 221, L.R.A.1915B, 492, In Miller v. Ford (1831) 1 N. J. 123 Pac. 733; Dalton v. Weber (1918) Eq. 358, supra, an action to enjoin 203 Mich. 455, 169 N. W. 946. In the certain proceedings on mortgages and case last cited, it was held that certain to have the mortgages canceled on mortgagors were entitled to redeem the ground of usury, it was held property mortgaged to secure a usuri that the plaintiff's bill was demurrous obligation, on the payment of the able, since it contained no offer to principal of such obligation and legal pay the principal and legal interest to interest. In their bill the mortgagors the mortgagee. had offered to pay the sums, principal So, in Patterson V. Moore (1917) and interest, which the court should 146 Ga. 364, 91 S. E. 116, it was held determine to be due, but contended that, although a usurious salary asthat no interest should be paid. On signment was void and worthless, the this point the court said: "In making debtor could not demand the surrender this contention, they are asking a court and cancelation of the security, withof equity to enforce a penalty, a for out tendering the amount which he feiture. It is clear, however, that the had actually received, and legal interusurious lender is not in this case, nor est thereon. in any other judicial proceeding, seek The right of the maker of a usurious ing to enforce usury. Upon the note to have it canceled has also been authority of Vandervelde v. Wilson held to be conditional on the payment (Mich.) supra, plaintiffs, having had
or tender of the actual principal of the the use of a certain sum of money for note, with legal interest.
Rietz v. a certain period of time, ought to pay Foeste (Wis.) supra. See also the rethe legal rate of interest therefor for ported case (MONCRIEF V. PALMER, the time.” And in Cushman v. Sutphen ante, 119).