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However, in Haggerson v. Phillips 397, 28 So. 469; Lindsay v. United (1875) 37 Wis. 364, it was held that, States Sav. & Loan Co. (1899) 127 Ala. where the debtor on the ground of 366, 51 L.R.A. 393, 28 So. 717. usury sought merely to restrain a fore- Iowa.—Morrison v. Miller (1877) 46 closure sale for more than the princi- Iowa, 84. pal of the debt and legal interest, it Virginia.-Young v. Scott (1826) 4 was not necessary for the debtor to Rand. 415; Clarkson v. Garland (1829) tender such principal and legal inter- 1 Leigh, 162; Turpin v. Povall (1837) est as a condition of obtaining equi- 8 Leigh, 93. Compare the following table relief.
cases, which have been in effect overA bill to enjoin the execution of a ruled: Marks v. Morris (1809) 4 Hen. judgment on the ground that the judg- & M. 463; Stone v. Ware (1820) 6 ment is based on a usurious obligation Munf. 541. cannot be maintained, it has been held, In Lindsay v. United States Sav. & in the absence of payment of, or offer Loan Co. (1899) 127 Ala. 366, 51 L.R.A. to pay, the actual principal of the 393, 28 So. 717, it was held that the obligation, with legal interest. Jordan rule requiring a borrower to pay, or v. Trumbo (1834) 6 Gill & J. (Md.) offer to pay, legal interest as a condi103; Gwynn v. Lee (1850) 9 Gill (Md.) tion of obtaining equitable relief 137; Hill v. Reifsnider (1873) 39 Md. against a usurious obligation, was not 429; Smith v. Myers (1874) 41 Md. changed by a statute providing that 425; Shelton v. Gill (1842) 11 Ohio, usurious contracts could not be en417. See also Giveans v. McMurtry forced, either at law or in equity, (1864) 16 N. J. Eq. 468. In the case except as to the principal. Thereafter last cited it was held that a complain- the Alabama legislature added a proant could not, without tendering the vision to the Usury Statutes, declaring amount actually due on certain bonds, that no borrower of money at a usurimaintain a bill in equity to have judg- ous rate should in any case be required ments on the bonds satisfied of record, to pay more than the principal sum and assignments of the judgments can- borrowed. This provision, in connecceled, on the ground that the bonds tion with the one considered in Lindwere tainted with usury.
say v. United States Sav. & Loan Co.
(Ala.) supra, has been construed as II. View that principal only need be
declaring a legislative intent to change offered.
the rule as to the condition on which Relief in equity against a usurious a debtor is entitled to relief in equity contract is granted in several juris- against a usurious contract. It has dictions, on condition that the debtor therefore been held that, under these shall pay, or offer to pay, the actual statutes, a debtor can enjoin the foreprincipal of his debt without any inter- closure of a mortgage securing a est.
usurious obligation, and redeem the Alabama.-Barclift v. Fields (1906) mortgaged property, on paying the 145 Ala. 264, 41 So. 84; 1st Nat. Bank principal of the debt without legal v. Clark (1909) 161 Ala. 497, 49 So. interest. Barclift v. Fields (1906) 145 807; Reynolds v. Lee (1912) 180 Ala. Ala, 264, 41 So. 84; 1st Nat. Bank v. 76, 60 So. 101; Law, C. &. Co. v. Clark (1909) 161 Ala. 497, 49 So. 807; Mitchell (1917) 200 Ala. 565, 76 So. Reynolds v. Lee (1912) 180 Ala. 76, 923; Lewis v. Hickman (1917) 200 Ala. 60 So. 101; Law & C. Co. v. Mitchell 672, 77 So. 46; Williams v. Noland (1917) 200 Ala. 565, 76 So. 923; Lewis (1920) 205 Ala. 63, 87 So. 818. Com- v. Hickman (1917) 200 Ala. 672, 77 So. pare the following decisions, which 46; Williams v. Noland (1920) 205 Ala. have been rendered ineffective by 63, 87 So. 818. subsequent legislation: Branch Bank And under the later Alabama statv. Strother (1848) 15 Ala. 51; Eslava v. utes it has been held that a purchaser Elmore (1874) 50 Ala. 587; Rogers v. of goods or other property on a forTorbut (1877) 58 Ala. 523; Turner bearance of the debt for the purchase v. Merchants Bank (1899) 126 Ala. price, as well as a borrower of money, is entitled, where the debt is secured Fields (Ala.) supra:
of by a mortgage, to enjoin the fore- opinion the contention cannot be succlosure of the mortgage, and to redeem cessfully maintained, and that it rests the mortgaged property, on paying the upon a misapprehension of the true principal without any interest. Law principles involved. Under the law as & C. Co. v. Mitchell (1917) 200 Ala. it existed when the mortgage was 565, 76 So. 923; Lewis v. Hickman taken, the agreement to pay usurious (1917) 200 Ala. 672, 77 So. 46. In the interest was illegal, and the mortgagee case first cited the court said: "Re- could not collect any interest when emspondent's insistence is that the word ploying the remedy by suit, either at ‘borrower' is used in the statute in its law or in equity, if the mortgagor innarrow and technical meaning, and terposed the defense of usury. The conhence signifies only the procurement of tract stipulating for a greater rate of a money loan, and not the forbearance interest than 8 per cent was tainted of a debt for the purchase price of with an evil and wrongful intent. Hawgoods. Technically considered, the ar- kins v. Pearson (1892) 96 Ala, 369, 11 gument is plausible enough; but our So. 304. There was no contractual right consideration of the original Usury to recover any interest, and that was so Statute, and the progressive policy of because the contract, to the extent of the legislature as evinced by succes- all interest, was offensive to the sive amendments, leads to the sure policy and positive mandate of the law. conclusion that the final amending Nor was the authority of the court of clause was intended to govern all equity to impose terms upon a borrowtransactions in which more than the
er seeking its aid conferred by statute, lawfui rate was charged for the use of nor 'exercised for the purpose of enmoney, whether that use was acquired forcing any contractual right.' Lindby a present loan, or by forbearance say's Case (Ala.) supra.
The rule of an independently created indebted
that one asking equity must do equity ness. The distinction between the two
was but the invention of that court of transactions is one of form and ter
chancery for regulating its own prominology only, and in purpose and
cedure. “The power of the legislature effect they are identical. Whether the form of the transaction to prohibit courts of equity from apply
ing the maxim in cases involving usury be technically a loan or a forbearance
is undoubted,' Justice Sharpe of money, the policy of the law and the
declared in the prevailing opinion in reason for its application are exactly
Lindsay's Case; and we do not see that the same. It is to be observed, also,
the legislature owed the mortgagee, that the amending provision under consideration does not declare the law
claiming under a contract pro tanto
illegal, any constitutional duty to preof usury, but merely designs to make the law already declared fully effec
serve the rule of equity procedure for tive by removing an obstacle to its
her benefit, to the end that she might operation, viz., a rule of equity which
realize the usurious interest, or even had been persistently applied by the
legal interest, by a sale of the mortcourts, to the practical emasculation
gaged property under the power of of the law."
sale. Redemption from a mortgage Moreover, a retrospective effect has
before foreclosure, upon paying the been given to the statutes which re- debt secured, has always been allowed quire the payment of the principal by courts of equity. The valid legal only, without legal interest, as a con
debt in this case was the principal dition to relief in equity against sum borrowed, and no more.
At no usurious obligations. Barclift time could the mortgagee have colFields (1906) 145 Ala. 264, 41 So. 84; lected more than that sum by suit in Reynolds v. Lee (1912) 180 Ala. 76, any court against the mortgagor's 60 So. 101. As to the contentio that will; and the remedy for the collection the statutes, if given a retrospective of the legal debt by suit is in no way effect, would impair the obligation of altered or affected by the Act of 1901. a contract, the court said in Barclift v. The insertion of a power of sale in the
mortgage did not impart validity to the agreement to pay usurious interest; and, notwithstanding the power of sale, the contract remained legal only to the extent of the principal borrowed. The mortgagee had no vested right in the rule of equity pleading and practice, and cannot complain that its abrogation by the lawmaking power has enabled the mortgagor to have relief without paying any interest. The law existing when the loan was made and the mortgage taken declared the contract could not be enforced, except as to the principal, and to that extent it has been enforced. This preserves all the mortgagee's constitutional rights. The rule of equity practice was in no sense a part of her remedy."
And since the Alabama statutes merely abrogated a defense based on a rule of equity, they have been held to dispense with the necessity of tendering legal interest as a condition of equitable relief against a usurious obligation, though the creditor is a national bank and the substantive law as to usury is consequently subject to the Banking Laws of the Federal government. 1st Nat. Bank v. Clark (1909) 161 Ala. 497, 49 So. 807.
Under an Iowa statute requiring a borrower of money at a usurious rate to pay to the school fund an amount equ to interest at the rate of 10 per cent per annum, it has been held that the borrower need not tender interest at the legal rate to the lender, in order to obtain relief in equity against the usurious obligation. Morrison v. Miller (1877) 46 Iowa, 84.
36 Minn. 460, 32 N. W. 89, 864; Exley v. Berryhill (1887) 37 Minn. 182, 33 N. W. 567, on former appeal (1886) 36 Minn. 117, 30 N. W. 436; Mathews v. Missouri, K. & T. Trust Co. (1897) 69 Minn. 318, 72 N. W. 121; Missouri, K. & T. Trust Co. v. Krumseig (1899) 172 U. S. 351, 43 L. ed. 474, 19 Sup. Ct. Rep. 179 (construing Minnesota statute). Compare Patterson v. Wyman (1919) 142 Minn. 70, 170 N. W. 928.
New York. See Rexford v. Widger (1848) 2 N. Y. 131; Schermerhorn v. Talman (1856) 14 N. Y. 93; Allerton v. Belden (1872) 49 N. Y. 373; Wheelock v. Lee (1876) 64 N. Y. 242; Buckingham v. Corning (1883) 91 N. Y. 525; Post v. Bank of Utica (1844) 7 Hill, 391; Slosson v. Duff (1847) 1 Barb. 432; Beecher v. Ackerman (1863) 1 Abb. Pr. N. S. 141; Marsh v. House (1878) 13 Hun, 126; Wright v. Clapp (1882) 28 Hun, 7; O'Brien v. Ferguson (1885) 37 Hun, 368; Matthews v. Warner (1881) 6 Fed. 461 (affirmed in (1884) 112 U. S. 600, 28 L. ed. 851, 5 Sup. Ct. Rep. 312, referring to New York statute); Re Fishel (1912) 117 C. C. A. 224, 198 Fed. 464, appeal dismissed per stipulation in (1914) 235 U. S. 712, 59 L. ed. 437, 35 Sup. Ct. Rep. 202 (construing New York statute). Compare the following decisions, which have been rendered ineffective by a subsequent act of the legislature: Dunham v. Dey (1818) 15 Johns (N. Y.) 554, 8 Am. Dec. 282; Fanning v. Dunham (1821) 5 Johns. Ch. (N. Y.) 122, 9 Am. Dec. 283; Livingston v. Harris (1832) 3 Paige (N. Y.) 528.
In Scott v. Austin (Minn.) supra, the court, on a rehearing, overruled its decision previously announced, supporting the more generally accepted rule, and held that neither a tender of legal interest nor a tender of the principal was necessary to entitle a debtor to the surrender and cancelation of usurious notes and a mortgage. The decision was based on the following statute: “Whenever it satisfactorily appears to a court that any bond, bill, note, assurance, pledge, conveyance, contract, security, or evidence of debt has been taken or received in violation of the provisions of
III. View that neither principal nor legal
interest need be offered. In a few jurisdictions, a borrower is entitled to equitable relief against a usurious contract without the payment of, or the offer to pay, either the principal of the usurious loan or legal interest thereon.
Arkansas.—Lowe v. Loomis (1890) 53 Ark. 454, 14 S. W. 674. Compare the following decisions, which have been rendered ineffective by a later statute: Ruddell v. Ambler (1857) 18 Ark. 369; Anthony v. Lawson (1879) 34 Ark. 628.
Minnesota.-Scott v. Austin (1887)
this act, the court shall declare the should be forfeited. Such a purpose same to be void, and enjoin any pro- is expressed, with respect to usurious ceeding thereon, and shall order the notes, in the provision above recited, same to be canceled and given up.” and thus contributes to the conclusion The construction given to the statute that while, by enforcing the provisions was explained by the court as follows: of § 6 according to its terms, the court “Bearing in mind that the question is will be enforcing a forfeiture, yet that whether the legislature intended that is in accordance with the purpose of the relief authorized by § 6 of the Act the law. The maker of the notes of 1879 (Laws 1879, chap. 66) should might defend and defeat an action by be afforded to a plaintiff only upon his the payee to recover upon them, and complying with the general rule of upon the ground that they were void. equity by paying the principal debt If they have been transferred to an with legal interest, or whether it was innocent purchaser, and the maker intended that the specified relief then pays them, he may, by force of should be decreed without that condi- $ 3, recover the whole amount from the tion of repayment, we find, in a section usurer; and without payment having of the same act, preceding that which been made, a similar result is acwe are called upon to construe, a pro- complished under 6, by a judgment vision which is strongly indicative of declaring their invalidity and directing the latter intention. At the end of their cancelation, or by injunction $ 3, after making provision for the pro- 'whenever it satisfactorily appears to tection of bona fide purchasers of a court' that the obligations are usurinegotiable paper, it is declared: 'In ous and void. It is true that the proviany case, however, where the original sion in $ 3, above recited, is not applicholder of a usurious note sells the able to all usurious instruments, but it same to an innocent purchaser, the is applicable in prehaps the largest maker of the note or his representa- class of instruments in which usury is tives shall have the right to recover involved; and this provision, in connecback from the said original holder the tion with that in the same section amount of principal and interest paid declaring all usurious contracts void, by him on said note.' By force of this affords strong reason for the conclustatute, the maker of a note affected sion that the legislature did not intend with usury, who has paid it in full to that the unqualified terms of $ 6 an innocent indorsee, may institute an should be impliedly qualified by a rule, action against the payee in the same the whole reason for which was to court whose jurisdiction is invoked in prevent forfeitures." Se to the same this case, and recover not merely the effect, Exley v. Berryhill (1887) 37 usurious interest, but the whole princi- Minn. 182, 33 N. W. 567, on former pal and interest paid. The reason appeal (1886) 36 Minn. 117, 30 N. W. upon which the equity rule above 436; Mathews V. Missouri, K. & T. referred to was founded was the Trust Co. (1897) 69 Minn. 318, 72 court's abhorrence of forfeitures. It N. W. 121. cannot be considered to have been the The decision in Scott V. Austin intention of the legislature that the (1887) 36 Minn, 460, 32 N. W. 89, 864, unqualified terms of 8 6 should be read was also followed in Missouri, K. & T. in subordination to that rule of equity, Trust Co. v. Krumseig (1899) 172 U. S. if it is apparent that the enactment 351, 43 L. ed. 474, 19 Sup. Ct. Rep. 179, embodied a purpose directly opposed affirming (1896) 71 Fed. 350, wherein to the very reason upon which alone it was held that mortgagors were the rule itself rests. It is not probable entitled to the cancelation of usurious that the legislature intended that the notes and a mortgage securing them, provisions of § 6 should not be so without tendering either the principal applied in favor of a plaintiff as to or legal interest of the notes. The operate as a forfeiture of the debt, if court, in holding that the construction it is apparent that the legislative given to the Minnesota statute by the purpose was that the usurious debt
of that state was 17 A.L.R.-9.
properly applied in the Federal courts, sisting of the applicable statutes as stated: “But it is strenuously argued, construed by the supreme court of the and of that opinion was Sanborn, C. J., state, furnishes the rule of decision.” in the present case, that Federal In Patterson v. Wyman (1919) 142 courts, in the exercise of their equity Minn. 70, 170 N. W. 928, the court was jurisdiction, do not receive any modifi- required to determine the rights of a cation from the legislation of the debtor to equitable relief against cerstates, or the practice of their courts tain usurious notes and mortgages exehaving similar powers, and that con- cuted in North Dakota. The court sequently no act of the legislature held that, although the debtor was the Minnesota could deprive the Federal defendant in an action to foreclose the courts sitting in equity of the power, mortgages, he was not entitled to have or relieve them of the duty, to enforce the mortgage debt declared to be paid and apply the established principle of in full, and the mortgage canceled of equity jurisprudence to this case, that record, without paying the principal he who seeks equity must do equity, and legal interest. It is clear, howand to require the appellees to pay to ever, that the court did not consider the appellant what they justly owe for that the law of Minnesota applied to principal and lawful interest, as a the securities executed in North condition of granting the relief they Dakota, and, on the other hand, the ask. We think it a satisfactory reply court expressly stated that the penal to such a proposition that the com- statutes of North Dakota would not be plainants in the present case were not given effect in Minnesota. It would seeking equity, but to avail themselves seem, therefore, that the decision is an of a substantive right under the statu- authority only on the general rule tory law of the state. It seems to be which is to be applied in the absence conceded, or, if not conceded, it is of a statute abrogating it. plainly evident, that if the cause had In New York the general rule which remained in the state court where it was formerly enforced in that state, was originally brought, the complain. requiring a debtor to tender principal ant would have been entitled under and legal interest as a condition of obthe public policy of the state of Minne- taining relief in equity against a usurisota, manifested by its statutes as ous obligation, has been altered by the construed by its courts, to have this following statute: "Whenever any usurious contract canceled and sur- borrower of money, goods, or things rendered without tendering payment in action shall begin an action for the of the whole or any part of the original recovery of the money, goods, or things indebtedness. The defendant company in action taken in violation of the could not, by removing the case to the foregoing provisions of this article, it Federal court on the ground that it shall not be necessary for him to pay was a citizen of another state, deprive or offer to pay any interest or principal the complainants of such a substantive on the sum or thing loaned; nor shall right. With the policy of the state any court require or compel the paylegislation the Federal courts have ment or deposit of the principal sum nothing to do. If the states, whether or interest, or any portion thereof, as New York, Arkansas, Minnesota, or a condition of granting relief to the others, think that the evils of usury borrower in any case of usurious are best prevented by making usurious loans forbidden by the foregoing procontracts void, and by giving a right visions of this article.” 19 McKinney, to the borrowers to have such contracts Consol. Laws, chap. 25, § 377. unconditionally nullified and canceled The courts, however, have given the by the courts, such a view of public word "borrower," as used in the statpolicy, in respect to contracts made ute, a strict construction, and have within the state and sought to be en- held that any person other than the forced therein, is obligatory on the party bound by the original contract Federal courts, whether acting in to pay the loan is obliged to tender the equity or at law. The local law, con- principal of the debt, and legal inter