Source: https://supreme.justia.com/cases/federal/us/35/497/
Timestamp: 2019-04-23 04:36:55+00:00

Document:
"Any borrower of money or goods may exhibit a bill in chancery against the lenders and compel them to discover on oath the money they really lent and all bargains, contracts, or shifts which shall have passed between them relative to such loan or the repayment thereof, and the interest and consideration of the same, and if thereupon it shall appear that more than lawful interest was reserved, the lender shall be obliged to accept his principal money without interest or consideration and pay costs, but shall be discharged of all the other penalties of this act."
The complainants in the Circuit Court of the County of Alexandria, in the District of Columbia, filed a bill to obtain relief under the statute against an alleged usurious loan, and made a contingent and prospective offer to pay the principal, when the affairs of the intestate (the borrower) "would admit it," and there was no averment that the complainants were unable to prove the facts sought from the conscience of the defendants by other testimony. Held that the bill was deficient in material averments essential to all such bills of discovery.
When the Legislature of Virginia passed the statute, it fixed the nature and extent of the jurisdiction of a court of equity to compel a discovery upon oath from an interested party in a suit either at law or in equity and the rules which equity had prescribed to itself to enforce its jurisdiction in this regard. It knew the distinction between a bill for such discovery from other bills in chancery, which are also bills for discovery. One of the former is a bill for the discovery of facts alleged to exist only in the knowledge of a person, a party to a private transaction with the person seeking the disclosure, essential to the establishment of a just right in the latter, and which would be defeated without such disclosure. In other words, it is a bill to discover facts which cannot be proved, according to the existing forms of procedure at law. The jurisdiction of a court of equity in this regard rests upon the inability of the courts of common law to obtain or to compel such testimony to be given. It has no other foundation, and whenever a discovery of this kind is sought in equity, if it shall appear that the same facts could be obtained by the process of the courts of common law, it is an abuse of the powers of chancery to interfere. The courts of common law having full power to compel the attendance of witnesses, it follows that the aid of equity can alone be wanted, for a discovery in those cases where there is no witness, to prove what is sought from the conscience of an interested party. Courts of chancery have established rules for the exercise of their jurisdiction to keep it within its proper limits and to prevent it from encroaching upon the jurisdiction of the courts of common law.
The rule to be applied to a bill seeking a discovery from an interested party is that the complainant shall charge in his bill that the facts are known to the defendant and ought to be disclosed by him, and that the complainant is unable to prove them by other testimony, and when the facts are desired to assist a court of law in the progress of a cause, it should be affirmatively stated in the bill that they are wanted for such purpose.
The general rule is that after a verdict at law, a party comes too late with a bill of discovery. There must be a clear case of accident, surprise, or fraud before equity will interfere. Such now is the established doctrine in England, and has been for a longer time the doctrine in the United States. And the doctrine, as applied to a case for relief from usury is that a defendant sued at law on a contract alleged to be usurious will not he entitled to a bill of discovery if he suffers a verdict and judgment to be taken against him, and especially when he does so without making a defense at law. The reason of the rule is that the proof of usury is a good defense at law, and when it is in the knowledge of the defendant, no satisfactory reason can be given why the discovery was not sought while the suit was pending.
Whenever a party seeking a discovery had knowledge of the facts during the pendency of a suit at law, equity will not permit him to do so afterwards to enjoin a judgment.
This is an appeal from the Circuit Court of the United States for the District of Columbia and County of Alexandria.
The bill of the appellees, who were the complainants in the circuit court, is for an injunction to stay further proceedings on a judgment at law confessed by the appellees to the appellant.
defendant and your oratrix's late husband was usurious, and they understood from their counsel that if the case was defended at law upon that ground and they should succeed, that the debt would be lost to the defendant. That your oratrix and orator were not disposed to push the matter to this extremity; your oratrix knew that her late husband had received the money, and she wished, at all events, that the amount borrowed should be returned to the defendant, and your oratrix's counsel, understanding her wishes, agreed, as he informed her at the bar at the time the judgment was rendered upon the bond, with the counsel of the defendant, and in the presence and hearing of the court, that your oratrix's plea of usury should be withdrawn and a judgment rendered on the bond, with an understanding that your orator and oratrix should have the privilege of resorting to a court of equity to have the claim settled upon the same principles as if she had instituted against the defendant a bill in chancery for the discovery of the usury. Your oratrix and orator have been advised that they are bound in a court of equity to pay nothing more than the principal debt, and that they are entitled to have credit for the moneys which she has paid, to be deducted out of the sum of $2,300, loaned as aforesaid, and only bound to pay the balance of principal after such deduction shall have been made."
"that the defendant may, upon her corporal oath, true and perfect answers make to the several allegations of the bill and the matters therein charged, as if the same were again repeated and she were interrogated thereto; that the complainants might have an injunction from the court restraining the defendant from proceeding further upon the judgment and from executing the same in any manner; and that the defendant may render a true and perfect account of all moneys received by her on account of the aforesaid debt."
"of the cause in equity by virtue of the third section of the statute of usury of Virginia, although the plaintiffs have not stated in the said bill that they cannot prove the usury without the aid of the defendant's answer and although judgment had been rendered at law, and the court ordered the demurrers to be overruled so far as they proceed upon these grounds."
The plaintiffs had leave to amend their bill, and the injunction was reinstated as to the whole amount of the judgment in the bill mentioned, except the sum of $899.70. The supplemental bill was filed, and the defendant put in a demurrer and answer thereto.
"although the plaintiffs have not stated in their bill that they cannot prove the usury without the aid of the defendant's answers, and although judgment has been rendered at law."
the interest and consideration for the same, and if thereupon it shall appear that more than lawful interest was reserved, the lender shall be obliged to accept his principal money without interest or consideration, and pay costs, but shall be discharged of all the other penalties of this act."
The first question then to be considered is can the bill of the complainants be brought within the operation of the section? We think not. Besides only making the contingent and prospective offer to pay the principal when the affairs of the intestate "would admit of it," which is altogether insufficient, as any other indefinite offer or acknowledgement of obligation to pay the principal would be, the bill is deficient in the material averment, essential to all such bills of discovery as this is, that the complainants are unable to prove the facts sought from the conscience of the defendant by other testimony, but on the contrary, facts are stated in it from which a different presumption may be fairly raised.
and to prevent it from encroaching upon the jurisdiction of the courts of common law.
The rule to be applied to a bill seeking a discovery from an interested party is that the complainant shall charge in his bill that the facts are known to the defendant and ought to be disclosed by him, and that the complainant is unable to prove them by other testimony, and when the facts are desired to assist a court of law in the progress of a cause, it should be affirmatively stated in the bill that they are wanted for such purpose. Such is the rule in Virginia, as may be seen in Duval v. Ross, 2 Munf. 290, and in Bass v. Bass, 4 Hen. & Munf. 478, and it will be applied to the construction of the third section of the statute against usury upon the authority of her own courts.
Many other authorities to the same purpose might be cited from English and American reports. Unless such averments are required, is it not obvious that the boundaries between the chancery and common law courts would be broken down and that chancellors would find themselves, under bills for a discovery from an interested party, engaged in the settlement of controversies by evidence aliunde which the common law courts could have procured under the process of a subpoena, in delaying proceedings at law by pretenses that a discovery is wanted for the sake of justice, and in enjoining judgments, upon indefinite allegations of the plaintiff having a knowledge of facts which give to a defendant an equity to be released, though the defendant might have availed himself of the evidence of third persons to establish the same facts in the progress of the cause, or of the powers of chancery to procure them by a discovery to assist the court in deciding it, which last is the case now under consideration.
pay costs. This advantage given to the borrower must be viewed by a court of equity in the nature of a penalty, upon the same principle that other forfeitures imposed by statutes against usury are viewed as penalties, which equity will not assist to enforce at all, much less by any evidence aliunde. If the lender denies the usury charged upon his oath, the oath should decide the question before the chancellor. If it be not so, equity will be converted by the section into an assistant for the enforcement of a penalty, which has never been its province.
By limiting the operation of the section to a denial upon the oath of the defendant, the harmony of chancery jurisdiction to its civil law original is preserved, and surely it is not unreasonable that a complainant's bill seeking a discovery for the want of all other testimony should be not retained after the answer has denied the matter sought. So it was decided in this Court in the case of Russell v. Clarke, 7 Cranch 69, and the same position is laid down by other courts. Ferguson v. Walters, 3 Bibb 303; Nourse v. Gregory, 3 Litt. 378, and in Hawkins' Executors v. Sumpter, 4 Dessaus. 105.
We think, too, that this construction of the operation of this section is justified by its letter. The words "and if thereupon it shall appear more than lawful interest was reserved" have a direct reference to the oath of the lender denying the usury charged, and are exclusive of evidence aliunde, to establish it.
Such proof has heretofore been only used to advance the policy of statutes against usury in courts of common law, as for the greater purposes of strict justice between borrowers and lenders in courts of equity. Unless a statute then, in so many words or by an inference which does not admit of a doubt, commands the courts of equity in Virginia to give relief from usurious contracts by evidence aliunde, without requiring the borrower to pay principal and interest, the law should not be so construed. The great principles of equity securing complete justice should not be yielded to light inferences or doubtful construction.
that he should do equity, and in cases of usury, relief has heretofore only been given upon the payment of principal and interest. Shall then a construction be given to this section by which a borrower may in all cases, even after judgment has been obtained against him, resort to a court of equity in Virginia to establish his statutory right, by evidence aliunde, to be relieved from the payment of interest upon money of which he has had the use. If he has such proof, let it be used in a court of common law to get under the statute still greater advantages from the lender; to throw upon him all the forfeitures and penalties of the act. This would be to advance the policy of the law to the full extent of what it is intended to prohibit, and to embrace the state in the forfeitures which may be recovered. He should not be allowed to use it for his own interest exclusively in a court of equity, by which a result follows far short of those sanctions existing in the law to restrain and to punish what it declares to be an offense. It seems to us that this section was intended to give to a borrower relief from an usurious contract by an appeal to the conscience of the lender for a discovery when the former, from the want of all other testimony, is obliged to refer his cause to the oath of his adversary in a bill of discovery, and that oath decides the question before the chancellor; and that it was not intended to exclude the ordinary interference of a court of equity between borrowers and lenders in usurious contracts to enforce the payment of the principal and that interest which the statute itself fixes as a fair rate of compensation for the loan of money. The fact of the legislature's having released the lender from all other penalties in the act except the loss of interest can make nothing against the construction of the statute, for that is only the consequence of the inability of every legislature in this country to compel a person to make a discovery by which he may be subjected to legal pains, penalties, or forfeitures.
The construction now given to the section is that which has been given to it by the Court of Appeals in Virginia in the case of Marks v. Morris, 2 Mun. 507. The points decided in that case, and that particularly which has been under our consideration in this, have been questioned by judges of the same court, but the case has never been overruled. In our opinion, from an examination of all the cases since in the Court of Appeals down to the case of Fitzhugh v. Gordon, 2 Leigh 626, the reasoning of the first is not shaken.
complainant can have relief in equity, the transaction having been carried into judgment. We think he cannot. The bill states the circumstances under which the judgment was confessed. There was neither accident nor surprise. The plea of usury was withdrawn and the judgment confessed in the belief by the defendants that they might afterwards resort to a court of equity to prove the usury, and upon the entry of the judgment, there is annexed a reservation in terms for a resort to equity. That such reservation was made by any understanding with the counsel of the plaintiff at law is denied by him, and the court had no authority to make it a part of the record so as to give any benefit to the complainants.
The right to resort to a court of equity for relief under the statute to its full extent exists independently of any reservation of the courts of common law when relief is asked in time. The courts of common law can neither add to nor take away from the right, nor by any qualification of their judgments give parties any right to be relieved from them in equity contrary to its established principles.
"If a defendant has a good legal defense, but the matter has not been tried at law, it becomes a serious question whether a party who, being competent, does not choose to defend himself at law can come into equity and change the jurisdiction. Consider the effect: he might not have succeeded at law, but by coming into equity he secures so much additional time."
"Lord Thurlow was very tenacious of the doctrine that a party who had an opportunity of a trial at law and would not avail himself of it could not come here."
3 Johns.Ch. 395, is one directly in point, meeting the case before us also in this -- that an injunction will not be granted against a judgment where a party seeks a discovery of usury and claims a return of the excess beyond the legal interest. The reason of the rule is that the proof of usury is a good defense at law, and when it is in the knowledge of the defendant, no satisfactory reason can be given why the discovery was not sought while the suit was pending. It is our opinion, then, that whenever a party seeking a discovery had knowledge of the facts during the pendency of a suit at law, equity will not permit him to do so afterwards to enjoin a judgment.
The bill will be ordered to be dismissed, and the injunction is dissolved.
This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Columbia holden in and for the County of Alexandria, and was argued by counsel, on consideration whereof it is ordered, adjudged, and decreed by this Court that the decree of the said circuit court in this cause be and the same is hereby reversed and annulled. And this Court, proceeding to render such decree as the said circuit court ought to have rendered in the premises, doth order, adjudge, and decree that the order for a perpetual injunction be and the same is hereby dissolved, and that the bill of the complainants in this cause be and the same is hereby dismissed, and that this cause be and the same is hereby remanded to the said circuit court with directions to the said court to carry this decree into effect.

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