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However, in Haggerson v. Phillips (1875) 37 Wis. 364, it was held that, where the debtor on the ground of usury sought merely to restrain a foreclosure sale for more than the principal of the debt and legal interest, it was not necessary for the debtor to tender such principal and legal interest as a condition of obtaining equitable relief.

A bill to enjoin the execution of a judgment on the ground that the judgment is based on a usurious obligation cannot be maintained, it has been held, in the absence of payment of, or offer to pay, the actual principal of the obligation, with legal interest. Jordan v. Trumbo (1834) 6 Gill & J. (Md.) 103; Gwynn v. Lee (1850) 9 Gill (Md.) 137; Hill v. Reifsnider (1873) 39 Md. 429; Smith v. Myers (1874) 41 Md. 425; Shelton v. Gill (1842) 11 Ohio, 417. See also Giveans v. McMurtry (1864) 16 N. J. Eq. 468. In the case last cited it was held that a complainant could not, without tendering the amount actually due on certain bonds, maintain a bill in equity to have judgments on the bonds satisfied of record, and assignments of the judgments canceled, on the ground that the bonds were tainted with usury.

II. View that principal only need be offered.

Relief in equity against a usurious contract is granted in several jurisdictions, on condition that the debtor shall pay, or offer to pay, the actual principal of his debt without any interest.

Alabama.-Barclift v. Fields (1906) 145 Ala. 264, 41 So. 84; 1st Nat. Bank v. Clark (1909) 161 Ala. 497, 49 So. 807; Reynolds v. Lee (1912) 180 Ala. 76, 60 So. 101; Law, C. &. Co. v. Mitchell (1917) 200 Ala. 565, 76 So. 923; Lewis v. Hickman (1917) 200 Ala. 672, 77 So. 46; Williams v. Noland (1920) 205 Ala. 63, 87 So. 818. Compare the following decisions, which have been rendered ineffective by subsequent legislation: Branch Bank v. Strother (1848) 15 Ala. 51; Eslava v. Elmore (1874) 50 Ala. 587; Rogers v. Torbut (1877) 58 Ala. 523; Turner v. Merchants Bank (1899) 126 Ala.

397, 28 So. 469; Lindsay v. United States Sav. & Loan Co. (1899) 127 Ala. 366, 51 L.R.A. 393, 28 So. 717.

Iowa.-Morrison v. Miller (1877) 46 Iowa, 84.

Virginia.-Young v. Scott (1826) 4 Rand. 415; Clarkson v. Garland (1829) 1 Leigh, 162; Turpin v. Povall (1837) 8 Leigh, 93. Compare the following cases, which have been in effect overruled: Marks v. Morris (1809) 4 Hen. & M. 463; Stone v. Ware (1820) 6 Munf. 541.

In Lindsay v. United States Sav. & Loan Co. (1899) 127 Ala. 366, 51 L.R.A. 393, 28 So. 717, it was held that the rule requiring a borrower to pay, or offer to pay, legal interest as a condition of obtaining equitable relief against a usurious obligation, was not changed by a statute providing that usurious contracts could not be enforced, either at law or in equity, except as to the principal. Thereafter the Alabama legislature added a provision to the Usury Statutes, declaring that no borrower of money at a usurious rate should in any case be required to pay more than the principal sum borrowed. This provision, in connection with the one considered in Lindsay v. United States Sav. & Loan Co. (Ala.) supra, has been construed as declaring a legislative intent to change the rule as to the condition on which a debtor is entitled to relief in equity against a usurious contract. It has therefore been held that, under these statutes, a debtor can enjoin the foreclosure of a mortgage securing a usurious obligation, and redeem the mortgaged property, on paying the principal of the debt without legal interest. Barclift v. Fields (1906) 145 Ala. 264, 41 So. 84; 1st Nat. Bank v. Clark (1909) 161 Ala. 497, 49 So. 807; Reynolds v. Lee (1912) 180 Ala. 76, 60 So. 101; Law & C. Co. v. Mitchell (1917) 200 Ala. 565, 76 So. 923; Lewis v. Hickman (1917) 200 Ala. 672, 77 So. 46; Williams v. Noland (1920) 205 Ala. 63, 87 So. 818.

And under the later Alabama statutes it has been held that a purchaser of goods or other property on a forbearance of the debt for the purchase price, as well as a borrower of money,

is entitled, where the debt is secured by a mortgage, to enjoin the foreclosure of the mortgage, and to redeem the mortgaged property, on paying the principal without any interest. Law & C. Co. v. Mitchell (1917) 200 Ala. 565, 76 So. 923; Lewis v. Hickman (1917) 200 Ala. 672, 77 So. 46. In the case first cited the court said: "Respondent's insistence is that the word 'borrower' is used in the statute in its narrow and technical meaning, and hence signifies only the procurement of a money loan, and not the forbearance of a debt for the purchase price of goods. Technically considered, the argument is plausible enough; but our consideration of the original Usury Statute, and the progressive policy of the legislature as evinced by successive amendments, leads to the sure conclusion that the final amending clause was intended to govern all transactions in which more than the lawful rate was charged for the use of money, whether that use was acquired by a present loan, or by forbearance of an independently created indebtedness. The distinction between the two transactions is one of form and terminology only, and in purpose and effect they are identical. Whether the form of the transaction be technically a loan or a forbearance of money, the policy of the law and the reason for its application are exactly the same. It is to be observed, also, that the amending provision under consideration does not declare the law of usury, but merely designs to make the law already declared fully effective by removing an obstacle to its operation, viz., a rule of equity which had been persistently applied by the courts, to the practical emasculation of the law."

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Moreover, a retrospective effect has been given to the statutes which require the payment of the principal only, without legal interest, as a condition to relief in equity against usurious obligations. Barclift V. Fields (1906) 145 Ala. 264, 41 So. 84; Reynolds v. Lee (1912) 180 Ala. 76, 60 So. 101. As to the contention that the statutes, if given a retrospective effect, would impair the obligation of a contract, the court said in Barclift v.

Fields

(Ala.) supra: "We are of

opinion the contention cannot be successfully maintained, and that it rests upon a misapprehension of the true principles involved. Under the law as it existed when the mortgage was taken, the agreement to pay usurious interest was illegal, and the mortgagee could not collect any interest when employing the remedy by suit, either at law or in equity, if the mortgagor interposed the defense of usury. The contract stipulating for a greater rate of interest than 8 per cent was tainted with an evil and wrongful intent. Hawkins v. Pearson (1892) 96 Ala. 369, 11 So. 304. There was no contractual right to recover any interest, and that was so because the contract, to the extent of all interest, was offensive to the policy and positive mandate of the law. Nor was the authority of the court of equity to impose terms upon a borrower seeking its aid conferred by statute, nor 'exercised for the purpose of enforcing any contractual right.' Lindsay's Case (Ala.) supra. The rule that one asking equity must do equity was but the invention of that court of chancery for regulating its own procedure. "The power of the legislature to prohibit courts of equity from applying the maxim in cases involving usury is undoubted,' as Justice Sharpe declared in the prevailing opinion in Lindsay's Case; and we do not see that the legislature owed the mortgagee, claiming under a contract pro tanto illegal, any constitutional duty to preserve the rule of equity procedure for her benefit, to the end that she might realize the usurious interest, or even legal interest, by a sale of the mortgaged property under the power of sale. Redemption from a mortgage before foreclosure, upon paying the debt secured, has always been allowed by courts of equity. The valid legal debt in this case was the principal sum borrowed, and no more. At no time could the mortgagee have collected more than that sum by suit in any court against the mortgagor's will; and the remedy for the collection of the legal debt by suit is in no way altered or affected by the Act of 1901. 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 equal 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.

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)

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

this act, the court shall declare the same to be void, and enjoin any proceeding thereon, and shall order the same to be canceled and given up." The construction given to the statute was explained by the court as follows: "Bearing in mind that the question is whether the legislature intended that the relief authorized by § 6 of the Act of 1879 (Laws 1879, chap. 66) should be afforded to a plaintiff only upon his complying with the general rule of equity by paying the principal debt with legal interest, or whether it was intended that the specified relief should be decreed without that condition of repayment, we find, in a section of the same act, preceding that which we are called upon to construe, a provision which is strongly indicative of the latter intention. At the end of § 3, after making provision for the protection of bona fide purchasers of negotiable paper, it is declared: 'In any case, however, where the original holder of a usurious note sells the same to an innocent purchaser, the maker of the note or his representatives shall have the right to recover back from the said original holder the amount of principal and interest paid by him on said note.' By force of this statute, the maker of a note affected with usury, who has paid it in full to an innocent indorsee, may institute an action against the payee in the same court whose jurisdiction is invoked in this case, and recover not merely the usurious interest, but the whole principal and interest paid. The reason upon which the equity rule above referred to was founded was the court's abhorrence of forfeitures. It cannot be considered to have been the intention of the legislature that the unqualified terms of § 6 should be read in subordination to that rule of equity, if it is apparent that the enactment embodied a purpose directly opposed to the very reason upon which alone the rule itself rests. It is not probable that the legislature intended that the provisions of § 6 should not be so applied in favor of a plaintiff as to operate as a forfeiture of the debt, if it is apparent that the legislative purpose was that the usurious debt 17 A.L.R.-9.

should be forfeited. Such a purpose is expressed, with respect to usurious notes, in the provision above recited, and thus contributes to the conclusion that while, by enforcing the provisions of § 6 according to its terms, the court will be enforcing a forfeiture, yet that is in accordance with the purpose of the law. The maker of the notes might defend and defeat an action by the payee to recover upon them, and upon the ground that they were void. If they have been transferred to an innocent purchaser, and the maker then pays them, he may, by force of § 3, recover the whole amount from the usurer; and without payment having been made, a similar result is accomplished under § 6, by a judgment declaring their invalidity and directing their cancelation, or by injunction 'whenever it satisfactorily appears to a court' that the obligations are usurious and void. It is true that the provision in § 3, above recited, is not applicable to all usurious instruments, but it is applicable in prehaps the largest class of instruments in which usury is involved; and this provision, in connection with that in the same section declaring all usurious contracts void, affords strong reason for the conclusion that the legislature did not intend that the unqualified terms of § 6 should be impliedly qualified by a rule, the whole reason for which was to prevent forfeitures." Se to the same effect, 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.

The decision in Scott v. Austin (1887) 36 Minn. 460, 32 N. W. 89, 864, was also followed in Missouri, K. & T. Trust Co. v. Krumseig (1899) 172 U. S. 351, 43 L. ed. 474, 19 Sup. Ct. Rep. 179 ̧ affirming (1896) 71 Fed. 350, wherein it was held that mortgagors were entitled to the cancelation of usurious notes and a mortgage securing them, without tendering either the principal or legal interest of the notes. The court, in holding that the construction given to the Minnesota statute by the supreme court of that state was

properly applied in the Federal courts, stated: "But it is strenuously argued, and of that opinion was Sanborn, C. J., in the present case, that Federal courts, in the exercise of their equity jurisdiction, do not receive any modification from the legislation of the states, or the practice of their courts having similar powers, and that consequently no act of the legislature of Minnesota could deprive the Federal courts sitting in equity of the power, or relieve them of the duty, to enforce and apply the established principle of equity jurisprudence to this case, that he who seeks equity must do equity, and to require the appellees to pay to the appellant what they justly owe for principal and lawful interest, as a condition of granting the relief they ask. We think it a satisfactory reply to such a proposition that the complainants in the present case were not seeking equity, but to avail themselves of a substantive right under the statutory law of the state. It seems to be conceded, or, if not conceded, it is plainly evident, that if the cause had remained in the state court where it was originally brought, the complainant would have been entitled under the public policy of the state of Minnesota, manifested by its statutes as construed by its courts, to have this usurious contract canceled and surrendered without tendering payment of the whole or any part of the original indebtedness. The defendant company could not, by removing the case to the Federal court on the ground that it was a citizen of another state, deprive the complainants of such a substantive right. With the policy of the state legislation the Federal courts have nothing to do. If the states, whether New York, Arkansas, Minnesota, or others, think that the evils of usury are best prevented by making usurious contracts void, and by giving a right to the borrowers to have such contracts unconditionally nullified and canceled by the courts, such a view of public policy, in respect to contracts made within the state and sought to be enforced therein, is obligatory on the Federal courts, whether acting in equity or at law. The local law, con

sisting of the applicable statutes as construed by the supreme court of the state, furnishes the rule of decision." In Patterson v. Wyman (1919) 142 Minn. 70, 170 N. W. 928, the court was required to determine the rights of a debtor to equitable relief against certain usurious notes and mortgages executed in North Dakota. The court held that, although the debtor was the defendant in an action to foreclose the mortgages, he was not entitled to have the mortgage debt declared to be paid in full, and the mortgage canceled of record, without paying the principal and legal interest. It is clear, however, that the court did not consider that the law of Minnesota applied to the securities executed in North Dakota, and, on the other hand, the court expressly stated that the penal statutes of North Dakota would not be given effect in Minnesota. It would seem, therefore, that the decision is an authority only on the general rule which is to be applied in the absence of a statute abrogating it.

In New York the general rule which was formerly enforced in that state, requiring a debtor to tender principal and legal interest as a condition of obtaining relief in equity against a usurious obligation, has been altered by the following statute: "Whenever any borrower of money, goods, or things in action shall begin an action for the recovery of the money, goods, or things in action taken in violation of the foregoing provisions of this article, it shall not be necessary for him to pay or offer to pay any interest or principal on the sum or thing loaned; nor shall any court require or compel the payment or deposit of the principal sum or interest, or any portion thereof, as a condition of granting relief to the borrower in any case of usurious loans forbidden by the foregoing provisions of this article." 19 McKinney, Consol. Laws, chap. 25, § 377.

The courts, however, have given the word "borrower," as used in the statute, a strict construction, and have held that any person other than the party bound by the original contract to pay the loan is obliged to tender the principal of the debt, and legal inter

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