Case Name: Edwin S. McNeal vs. Joseph Leonard & another
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1861-01
Citations: 1 Allen 399
Docket Number: 
Parties: Edwin S. McNeal vs. Joseph Leonard & another.
Judges: 
Reporter: Massachusetts Reports
Volume: 83
Pages: 399–400

Head Matter:
Edwin S. McNeal vs. Joseph Leonard & another.
A forfeiture for usury must be ascertained judicially upon an issue between the parties, before it can be applied to the reduction of the debt so as to affect the title of the lendei to property held by him for collateral security.

Opinion:
Hoar, J.
This is an action of replevin, in which the defendants rely upon the title of one Shannon as mortgagee of the goods replevied. The plaintiff's title is a bill of sale from the assignee in insolvency of the mortgagor. The mortgage debt has not been paid; but the plaintiff offered to show that the mortgage was given upon a usurious consideration, and that, if threefold the usurious interest reserved or taken were to be deducted from the mortgage debt, it would be wholly satisfied and extinguished ; and thereupon claims the right to treat the debt as if it were paid, and to take and retain possession of the mortgaged property.
The case is not free from difficulty upon the question whether the plaintiff has the same right to avail himself of the objection of usury in the contract, which the mortgagor or his assignee in insolvency would have had, if they were parties to the action. But we have no occasion to decide that question, because, upon another ground, we are all of opinion that the action cannot be maintained, and that the verdict ordered for the defendants must stand.
By Rev. Sts. c. 35, § 2, 3, a contract or assurance for the payment of money, with interest at a greater rate than is allowed by law, is not thereby rendered void; but the borrower has a remedy, if a suit is brought to enforce the contract, by making the deduction of the forfeiture which the law imposes upon the plaintiff; or by a suit for the penalty, if the usurious interest has been actually paid. In either case, we think it clear that the benefit to be derived from the exaction of the forfeiture can only be obtained upon a judicial decision that the forfeiture has been incurred, upon a trial in which the usury is directly in issue between the parties; and that the borrower cannot avail himself of it collaterally, or by his own act in pais, before such a decision has been had. The right to deduct the forfeiture in a suit brought to enforce the contract is by no means equivalent to a payment of the debt pro tanto.
B. Dean, for the plaintiff.
J. W. Emerson, for the defendants.
The recent case of Hart v. Goldsmith, ante, 145, decided nothing more than that, in a bill in equity brought to restrain the sale by the mortgagee of the mortgaged estate, it was competent for the mortgagor to rely upon usury in the contract, to reduce the sum payable in order to redeem. It gives no countenance to the idea that the debtor could himself make the appropriation of the penalty towards the extinguishment of the debt; The contract being valid, the title of the creditor to the collateral security which he holds is perfect, until, upon an issue between the parties, the fact and amount of usury, are ascertained, and a judgment authorizing the application of the sum prescribed by the statute to the reduction of the debt has been rendered.
The result would therefore have been the same, if the as-, signee in insolvency of the mortgagor had retained the title, and were the plaintiff in this suit.
Judgment for the defendant on the verdict.