Case Name: A. M. Hemphill v. Nathan Watson
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1884-03-14
Citations: 60 Tex. 679
Docket Number: Case No. 4302
Parties: A. M. Hemphill v. Nathan Watson.
Judges: 
Reporter: Texas Reports
Volume: 60
Pages: 679–683

Head Matter:
A. M. Hemphill v. Nathan Watson.
(Case No. 4302.)
1. Usury —Constitution construed.—Art. ZVI, sec. 11, of the constitution, which declares the charging of a higher rate of interest than twelve per cent, to be usurious, and which required the legislature to provide appropriate pains and penalties to prevent and punish usury, was self-executing in its nature, so as to render all contracts for a higher rate than twelve per cent, illegal, from the date of the adoption of the constitution, and independent of laws afterwards enacted in obedience to that provision.
2. Sahil— Any provision of a constitution is self-executing to the extent that anything done in violation of it is void. Following Buen v. Williamson, 4 Humph., 259; and Watson v. Aiken, 55 Tex., 536.
8. Same—Usury.— A contract for more than twelve per cent, interest, entered into after the adoption of the constitution of 1876, but before the enactment of laws in obedience to its provisions, being a contract prohibited by organic law, subjected the creditor to the loss, both of legal and illegal interest, as provided by the after-enacted statute.
4. Mortgage sale — Usury.— A purchaser at trust sale, made under amortgage with power of sale, executed to secure both principal and interest, on a contract which is usurious, obtains title, if the principal sum due was not tendered before sale. The debtor cannot afterwards procure a cancellation of the sale by offering to pay the principal sum due.
5. Same.— The remedy of the mortgagor is to pay or to offer to pay what is due before the sale is made.
Appeal from Parker. Tried below before the Hon. A. J. Hood,
On April 1, 1880, Hemphill brought this suit against Watson to vacate and set aside a sale of land, and to set aside and vacate the trust deed under which the sale was made. The case made by the petition was in effect that on the 22d day of July, 1876, appellant secured a loan from appellee of $300, and agreed to pay interest, thereon at the rate of two and one-half per cent, per month; that the interest was calculated at that rate and added to the $300, making $420; that appellant gave his note for that amount, and also executed a deed of trust to B. B. Milam as trustee, on the land therein described, to secure tlje amount; that power was given in the deed to Milam to make the sale in default of payment; also conferring power upon the sheriff of the county to make the sale in the event Milam did not. Appellant claimed that the contract was in contravention of the constitution regulating interest, and void, and, if not void as to the principal, that the saíne was void as to the interest; that after the note fell due, the sheriff advertised the land for sale in accordance with the terms of the trust deed. At the sale he appeared and objected to the sale. That Watson bought in the property for $600; that its value was then $1,500; claimed the note, deed of trust and sale were all void on account of the usury; prayed that the same be vacated and held for naught. Watson answered by general demurrer and general denial. Upon hearing the court below sustained the demurrer and rendered judgment dismissing the case.
J. R. Curl and Eblen & Robertson, for appellant,
cited: Johnson on Mortgages, sec. 646, vol. 1; Jackson v. Dominick, 14 Johns., 435; McLaughlin v. Congreve, 9 Mass., 4; Bissell v. Kellogg, 60 Barb. (N. Y.), 647; Stringham v. Brown, 7 Iowa, 33; Sloan v. Coolbaugh, 10 Iowa, 33; Korngay v. Spicer, 70 N. C., 95; Johnson on Mortgages,, vol. 2, sec. 1906; Story’s Eq. Jur., vol. 1. sec. 301.
E. P. Nicholson, for appellee.

Opinion:
Willie, Chief Justice.
The first question in this case is: Was the note which Hemphill made to Watson and secured by mortgage upon the land in controversy tainted with usury ? It was executed July 22, 1876, subsequent to the adoption of our present constitution, but previous to the passage of the act of August 21, 1876, which regulated interest and prescribed a penalty for the prevention and punishment of usury.
Art. XVI, sec. 11, of the constitution, denounced all interest above twelve per cent, as usurious, and charged the legislature with the duty, at its first session, of providing appropriate pains and penalties to prevent and punish usury, and it was in obedience to this mandate of the constitution that the above act of August 21, 1876, was passed.
It is clear that if the note and mortgage had been made subsequently to the date of the act, the contract would have been usurious and nothing but the principal could have been recovered.
But it is contended that previous to the passage of that act there was no law against usury of force in our state, the constitution of 1870, and all laws passed whilst it was in force, permitting interest at any rate to be agreed upon between the parties to a contract. In this view we cannot concur. The section of the constitution above alluded to made usury a quasi offense, which the legislature was charged with suppressing and punishing. It even defined what should amount to the offense of usury, declaring such offense to consist in charging interest at a greater rate than twelve per cent, per annum. This provision is prohibitory in its nature and self-executing so far as to render all contracts of the kind denounced immediately illegal; and it left to the legislature the only remaining duty of saying what penalties should be imposed upon offenders against this clause of the constitution. Cooley on Const. Lim., 100, note; Law v. People, 87 Ill., 385.
A constitutional provision denying the legislature power to pass laws of a certain character is prohibitory of such acts as those laws would authorize. For instance, a provision that the legislature should not authorize lotteries is held to be in itself a prohibition of lotteries. Bass v. Nashville, Meigs, 421; Yerger v. Rains, 4 Humph., 259. And it is said that " any constitutional provision is self-executing to this extent, that everything done in violation of it is void."' Buen v. Williamson, 4 Humph., 259. These principles are too well settled to require further argument to support them. Accordingly, usurious contracts of the kind mentioned in our constitution were as absolutely prohibited and illegal by force of the eleventh section above mentioned as they could have been when afterwards denounced and punished by the statute of 1876. Parties entering into such contracts did so with full knowledge that they were doing a prohibited act, for which they might incur penalties if the legislature should discharge its duty and prescribe them. They placed themselves at the mercy of the legislature, and knowingly ran all the risks of punishment that within constitutional limits could be assessed against them for making a contract denounced by the organic law of the land. The legislature merely rendered such contracts void both as to legal and illegal interest, and the creditor cannot complain that he has forfeited thus much of a debt arising upon a contract entered into in violation of the constitution.
This precise question was decided in accordance with the conclusion to which we have arrived in Watson v. Aiken, 55 Tex., 536, but the present appeal comes to us under circumstances which require a reconsideration of that case. In reviewing it we fully concur in the opinion of our predecessors, and merely suggest the above views in addition to the arguments and authorities made and cited by the court in making the decision.
The next question is: Can the appellant recover the land sold by virtue of the usurious mortgage under the circumstances stated in his petition?
The mortgage contained a power of sale, and the mortgagee, upon whom this power was conferred, appears to have strictly pursued the powers granted him, and there is no objection urged to the sale except that the mortgage under which it was made was tainted with usury.
We have seen that the penalty provided against usurious contracts is a forfeiture of both legal and illegal interest, but by the express provisions of the statute the principal sum of money, or the value of the goods, bonds, etc., paid or delivered to the debtor under such contracts may be recovered. Hence the mortgage secured the principal sum loaned by Watson to Aiken, viz., $300, and it could be enforced for at least that amount. Had Watson brought suit on the debt and to foreclose the mortgage, and Hemp-hill had pleaded usury, the judgment of the court would certainly have been against Hemphill for the principal sum, and the mortgage would have been foreclosed to that extent; or if he had tendered that sum he would have defeated the foreclosure.
Had Watson proceeded to sell outside of court, under the power given him in the instrument, Hemphill could not have enjoined the sale except upon payment or tender of the principal sum due. Foreclosed as the .mortgage was, the rights and duties of the parties were not changed. The sale could have been defeated or rendered void by a tender of the principal sum due; if this was not tendered the sale would be valid, and the purchaser obtain a good title.
After the power of sale contained in the mortgage had been executed, and a purchase of the land had been made at the sale and a deed executed and the debt satisfied, it was too late to pray a can cellation of the mortgage and a recovery of the land from the purchaser, even upon a tender of what was legally due upon the debt. A different view might possibly prevail did the statute forfeit the entire debt, both principal and interest, and such is the ruling in at least one of the states where the law is to the above effect, and the mortgagee becomes the purchaser. Jackson v. Dominick, 14 Johns., 435.
The entire debt being illegal and forfeited, and the mortgage being void, and the mortgagee having, of course, full knowledge of these facts, they can form no basis of a legal, sale and a valid title, if the mortgagee becomes the purchaser. On the contrary, it is held by the supreme court of Massachusetts that after foreclosure in pais of a mortgage on land given to secure a debt illegal in toto, viz., one contracted for the purchase of intoxicating liquors, the mortgagor could not recover the land even from the mortgagee, who had purchased at the sale. McLaughlin v. Cosgrove, 99 Mass., 4.
Certainly, where a part of the mortgage debt is collectible at law and part not, and the two can be separated, á sale under the mortgage will be sustained. 1 Jones on Mort., § 620.
This is the case with all usurious debts under our statute, and the sale in the present instance must be upheld for at least the principal sum due upon the debt.
The remedy for the mortgagor is to pay or offer to pay what is legally due before sale made; then, if it proceeds for the usurious balance, it can be set aside as against the mortgagor and parties claiming under him with notice.
The petition in this case, to which a demurrer was sustained, contained no allegation of such offer of payment, but merely states that the appellant forbade the sale. Upon what grounds the sale was forbidden is not stated, and we cannot presume that it was on account of payment or tender of the interest without supplying for the pleader what, if true, it was his duty to allege.
We think the petition showed no right in the appellant to cancel the deed to appellee and recover the land sued for, and the demurrer was properly sustained, and the judgment below is affirmed.
Affirmed.
[Opinion delivered March 14, 1884.]