Case Name: JOHN J. SULLIVAN vs. M. PORTER SNELL, GEORGE BURGESS, JAMES M. ORMES, AND JACOB D. KITCH
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1874-09
Citations: 1 MacArth. 585
Docket Number: No. 11092
Parties: JOHN J. SULLIVAN vs. M. PORTER SNELL, GEORGE BURGESS, JAMES M. ORMES, AND JACOB D. KITCH.
Judges: 
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 8
Pages: 585–589

Head Matter:
JOHN J. SULLIVAN vs. M. PORTER SNELL, GEORGE BURGESS, JAMES M. ORMES, AND JACOB D. KITCH.
At Law.
No. 11092.
I. A note for $500, with interest at the rate of ten per cent., made for the accommodation of the indorsers, and negotiated to the plaintiff for $460, who was the first holder for value, with notice of its character, was held to be nsurious under the 3d section of the act of Congress of April 22, 1870, and that plaintiff could recover no more than the amount he paid for the note without interest.
II. Under such statute, where the debtor has agreed iu writing to pay-interest exceeding six per cent, per annum but not greater than ten till the maturity of his obligation, but the contract is silent as to any rate of interest beyond that period in case the debtor should be in default, no more than interest at the rate of six per cent, per annum can be recovered for the time subsequent to the maturity of the obligation.
STATEMENT OR THE CASE.
This is a suit upon a promissory note, dated Washington, D. O., March 25,1873, made by M. Porter Snell, payable to the order of George Burgess, ninety days after date, with interest at the race of ten per cent, per annum, and indorsed by the defendants Burgess, Ormes, and Hitch.
The defendants plead, in substance, that the note was made by Snell and indorsed by the other defendants for the accommodation and benefit of Ormes, that neither Snell nor Burgess had any benefit from it; that only $415 was paid as a consideration for the note at the time it was first passed for value, and that it was first negotiated for value to the plaintiff; on which pleas issue ivas joined, a trial had, and a verdict rendered in favor of plaintiff for $460, with interest from March 25, 1873, at the rate of ten per cent, per annum.
On this trial, evidence was given for the defendants tending to prove that the note was made by the defendant Snell, and indorsed by the defendant Burgess for the benefit and accommodation of defendant Ormes; that neither Snell nor Burgess received any part of the proceeds, but that the same ivas received by Ormes and Kitch ; that the note was first passed for value to the plaintiff through one Clark, a broker, and that only $415 was received upon it. And evidence was given on behalf of the plaintiff tending to show that said Clark brought the note to the plaintiff, stating that he had a good note which the parties wanted to raise money upon, and that the plaintiff said if the defendant Kitch would give him a writing that the note should be paid at maturity he would advance the money upon it, and that the plaintiff took the note at about its date and advanced $460 for it.
The testimony being closed, the counsel for the defendants requested the court to instruct the jury that if they should find from the evidence that the first time the note was passed for value was when it was passed to the plaintiff, and that he advanced for it a less sum than the face of the note, then the plaintiff is only entitled to recover the amount which he advanced, without interest; which instruction the court refused to grant; to which ruling of the court the counsel for the defendants then and there excepted. The court then instructed the jury that the plaintiff was entitled to recover what he advanced for the note, with interest thereon from the date of the note at the rate of ten per cent, per annum ; to which instruction the counsel for the defendants then and there excepted. The verdict was for the plaintiff.
Mr. McConnell for plaintiff.
L. G. Hine and S. R. Bond, for the defendants, made the following points:
1. By the usury law in force in this District prior to April 22,1870, all “ bonds, contracts, and assurances ” for the payment of more than six per cent, interest were “ utterly void.”
On the date above given the act of Congress was passed allowing ten per cent, interest to be contracted for in writing, and providing that any person contracting to receive above that rate shall forfeit the whole interest contracted to be received, and shall be entitled only to recover the principal sum due.
To lend $415 or $460 and to take for it a note for $500, drawing interest at the rate of ten per cent, per annum, is certainly usurious, and under the old law would render the contract “ utterly void,” while under the present law the lender forfeits all interest and can recover only the principal sum due, which is not the face of the note, but the sum lent.
The instruction requested was to the effect that if the note was first passed for value to the plaintiff, and for less than its face, it became tainted with usury, and the plaintiff could only recover the sum lent; which position is sustained by the following, among numerous authorities : Munn vs. Commission Company, 15 Johns., 43; Sauerwein vs. Brunner, 1 Harris & Gill, 477.
2. The note in question does not call for interest at the rate of ten per cent, per annum until paid, yet the instruction of the court caused the jury to render their verdict for interest at that- rate, not only from the date of the note until its maturity, but until the payment of the judgment.

Opinion:
Mr. Justice Wylie
delivered the opinion of the court:
It is manifest from the evidence in this case that the note in question was not what is termed business paper, but was a note made up by the maker and indorsers for the purpose of being sold, and the proceeds applied to the use of two of the indorsers. After it had thus been made up it was put into the hands of a broker, who sold it to the plaintiff at a considerable discount from the amount upon its face, the purchaser having notice of its character. The note was for $500, payable ninety days after date, with interest at the rate of ten per cent. It was sold for $460, and after the broker had taken out his commission the proceeds were reduced to $415. The sale of the note, being its original negotiation to a purchaser who had a perfect knowledge of its character, was, therefore, usurious, at least to the extent of the forty dollars discounted from its face. The act of 22d April, 1870, (16 Stats, at Large, 91,) section 3, declares: " That if any person or corporation in this District shall contract to receive a greater rate of interest than ten per cent, upon any contract in writing, or six per cent, upon any verbal contract, such person or cor poration shall forfeit the whole of said interest so contracted to be received, and shall be entitled only to recover the principal sum due to such person or corporation."
The ruling of the circuit court was that the plaintiff might recover the $460 which he had paid for the note, together with interest at the rate of ten per cent, per annum to the day of payment. We think it clear that, under the provisions of the law just quoted, he was entitled to recover no more than the amount he paid for the note without interest.
There is another question presented upon the record, which, from its general interest, it may be proper not to pass over without notice, notwithstanding that the view we have taken of the other question would perhaps render such notice unnecessary.
The note in controversy was payable at ninety days, with interest at the rate of ten per cent, per annum. It was ruled by the court that the note carried the same rate of interest after maturity which it carried previous to that period.
This ruling we find to be in conflict with the decision of the Supreme Court of the United States, in Brewster vs. Wakefield, 22 How. R., 118. In the opinion of the court in that case Chief-Justice Taney says: "The question in controversy between the parties is whether, after day specified for the payment of the notes, the interest is to be calculated at the rates therein mentioned, or according to the rate established by law when there is no written contract on the subject between the parties. The question depends upon the construction of a statute of the Territory which is in the following words:
"Seo. 1. Any rate of interest agreed upon by the parties in contract, specifying the same in writing, shall be legal and valid.
"Sec. 2. When no rate is agreed upon or specified in a note or other contract, seven per cent, per annum shall be the legal rate."
"The written stipulation" (in that case) "as to interest" is interest from the date to the day specified for the payment. There is no stipulation in relation to interest after the notes become due, in case the debtor should fail to pay them ; and if the right to interest depended altogether on contract, and was not given by law, in a case of this kind, the appellee would be entitled to no interest whatever after the day of payment. The contract being entirely silent as to interest, if the notes should not be punctually paid, the creditor is entitled to interest after that time by operation of law, and not by any provision in the contract, And in this view of the subject we think the territorial courts committed an error in allowing, after the notes fell due, a higher rate of interest than that established by law, where there was no contract to regulate it. The cases of Macomber vs. Durham, 8 Wen., 550; United States Bank vs. Chapin, 9 Wen., 471; and Ludwick vs. Muntsinger, 5 W. and S., 51, 60, were decided upon this principle, and in the opinion of the court correctly decided."
The provisions contained in our statute of 22d April, 1870, already referred to, so far as relates to this question, are substantially the same as those quoted in the opinion of the Supreme Court, from the act of the Territory of Minnesota. The first two sections of our law are in these words:
"Sec. 1. That the rate of interest upon judgments or decrees, and upon the loan or forbearance of any money, goods, or things in action, shall continue to be six dollars upon one hundred dollars for one year, and after that rate for a greater or less sum, or for a longer or shorter time, except as hereinafter provided.
"Sec. 2. That in all contracts hereafter to be made it shall be lawful for the parties to stipulate, or agree in writing, that the rate of ten per cent, per annum, or any less sum of interest, shall be taken and paid upon every one hundred dollars of money loaned, or in any manner due and owing from any person or corporation in this District."
We think, therefore, that in all cases under our law where the debtor has agreed in writing to pay interest exceeding six per cent, per annum, but not greater than ten, till the maturity of his obligation, but the contract is silent as to any rate of interest beyond that period, in case the debtor should be in fault, that no more than interest at the rate of six per cent, per annum can be recovered for the time subsequent to the maturity of the obligation.
The judgment must be reversed and new trial awarded.