Court Opinion

ID: 7276318
Source: CourtListenerOpinion
Date Created: 2022-07-25 19:59:53.123025+00
Date Added: 2024-06-11T16:18:52.483560
License: Public Domain

On June 7, 1901, the motion for a rehearing was denied,
Mr. Justice Shepard
delivering the opinion of the Court:
The motion for rehearing questions the correctness of the conclusion that only a part of the interest upon the principal sum shall be forfeited on account of usury, and asks for a further modification of the judgment rendered, in that respect. In stating that conclusion, a bare reference was made to the statutes in force in the District regulating the receipt of interest upon and without contract and the practice of -assessing the same in an action, as inducing the view that the interest forfeited for usury in the contract was that only to which the contract expressly applied and not that which the law gives in the’ absence, or upon the expiration, of the contract. However, the question was carefully considered though not discussed in the opinion.
The earnestness and force of the argument and the citation of authority, though not sufficient to cause us to change our conclusion, require a statement of the reasons therefor. Section 713, R. S. D. C., imposes the rate of 6 per cent, interest per annum “ upon the loan or forbearance of any *302money, goods, or things in action.” Section 714 makes it lawful to contract or agree in writing for 10 per cent, or any less sum. Section 715 reads as follows: “ If any person or. corporation shall contract to receive a greater rate of interest than 10 per cent, upon any contract in writing, or 6 per cent, upon any verbal contract, such person or corporation shall forfeit the whole of the interest so contracted to be received, and shall be entitled only to recover the principal sum due to such jierson or corporation.”
If there were no other statutory provision relating to interest and its recovery, and no settled rule in regard to its allowance in the rendition of judgment, we should not hesitate to say that section 715 was intended to limit recovery in all cases of usurious contract, to the principal sum therein named only. But it must be considered in the light of other provisions and of established rules in force when it was enacted. Since June 24, 1812, a statute has been in force which declares that 6 per centmn per annum shall be awarded on all judgments in actions upon contracts until satisfied, “ and the amount which is to bear interest, and the time for which it is to be paid shall be ascertained by the verdict of the jury sworn in the cause.” Sec. 829, R. S. D. C.
The practice has always been in this District to direct the jury to assess interest, at the contract rate, to the maturity of the demand, where it is not expressly stipulated to run until paid; and thereafter at the rate established by law. This practice has been expressly affirmed by the Supreme Court of the United States. Holden v. Trust Co., 100 U. S. 72. In that case the note in suit was payable four years from date with 10 per cent interest, payable semi-annually, and it was held, that the contract rate terminated at maturity, and the legal rate of 6 per cent, then began. The court said: “ The rule heretofore applied by this court, under the circumstances of this case, has been to give the contract rate up to the maturity of the contract and thereafter the rate prescribed for cases where the parties themselves have fixed no rate. * * * Here the agreement of the parties *303extends no further than to the time fixed for the payment of the principal. As to everything beyond that it is silent. If payment be not made when the money becomes due, there is a breach of the contract, and the creditor is entitled to damages. "Where none has been agreed upon, the law fixes the amount according to the standard applied in all such cases. It is the legal rate of interest where the parties have agreed upon none. If the parties meant that the contract rate should continue, it would have been easy to say so. In the absence of a stipulation such an amendment cannot be inferred.” In a previous case arising under a territorial law, it had been said: “ 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.” Brewster v. Wakefield, 22 How. 118, 127. See also Shepherd v. Pepper, 133 U. S. 626, 653, 654.
Had the note in this case not been rendered usurious by the commission exacted in addition to the maximum rate of interest permitted by law, the verdict would necessarily have been for 10 per cent, interest until maturity, and at the rate of 6 per cent, only for the intervening years. The contract for 10 per cent, would expire with the time fixed for payment, namely, six months after date. Interpreting section 715 in the light of the foregoing doctrine and bearing in mind the familiar rule that forfeitures are not favored and must be plainly required, we think it clear that the forfeiture of the “ whole of the interest so contracted to be received,” means what it says — the interest of the contract, and not that imposed by the preceding section where there has been no contract, or, as interpreted, where the contract has by its terms ceased to operate.
Nor do the established rules of construction require the forfeiture, thus expressly limited, to be extended by the succeeding words, to the effect that the recovery shall be only the principal sum due. The purpose of these words is fully met, and their reconciliation with those preceding is made complete, by regarding them as intended to remove any pos*304sible doubt that the forfeiture applies uot only to the usurious excess but also to the lawful interest included in the contract rate, as long as the contract shall govern. To give a more extended meaning would be to create a forfeiture by an uncertain and unnecessary inference. The law does not vitiate the loan or destroy the obligation to repay the-principal on account of the usury. It contents itself with forfeiting all of the interest contracted for, if unpaid, or with permitting its recovery, if paid, by action begun within one year after payment (Sec. 716).
When the interest contract period expires, the penalty ends. The parties still occupy the position of debtor and. creditor in respect of the principal of the loan. When the note in this case matured, the defendant could avoid the-interest and commission, but remained under legal obligation to pay the principal on that date. It was his duty to pay, and his default entitled the plaintiff to damages. In liquidation of these damages, or by way of compensation for the plaintiff’s forbearance of the prosecution of his lawful demand when mature, the statute arbitrarily prescribes, a rate of 6 per cent, per annum before and after judgment..
Two decisions of the Supreme Court of the District, in general term, have been cited on the brief as giving an interpretation of section 715 in conflict with the views above expressed. Starkweather v. Prince, 1 MacA. 144, and Sullivan v. Snell, 1 MacA. 585. The first of these, though relating to the subject of usury, does not touch the-question involved. In the second it was said that section 715, in terms, forfeited all interest; but the question was passed with brief mention, and the main consideration was-given to other points. The bearing of the settled construction given to sections 713 and 829, upon that of section 715, which we regard -as of controlling importance, was not urged or considered.
On the other hand, in a later case in which the usury statutes were again under discussion, though this particular-question was not under consideration, the same court, without referring to the former case, expressed its opinion of’ *305the effect of section 715 as follows: “An agreement for more than legal interest involves the forfeiture of the whole interest. But that means a forfeiture of the whole interest referred to in the agreement.” Brown v. Clark, 3 Mackey, 185, 188.
Under a statute substantially like our section 715, the Supreme Court of Illinois seems to have held for years that a judgment for no more than the principal sum could be recovered. But the rule seems also to have prevailed that the contract governs the rate of interest after, as well as before maturity in that State. Subsequently, a divided court overruled the former decisions on the express ground that the interest of the contract ended with its maturity (Bank v. Davis, 108 Ill. 633), as has always been the settled rule in this District. That decision has itself been overruled. Bressler v. Harris, 19 Ill. App. 430; S. C., 119 Ill. 467, 473. As we have heretofore said, if it were not for that settled rule, we would take a like view of the effect of the forfeiture.
But one of the decisions of the Supreme Court of the United Sates that have been called to our attention, arose in the District. Carter v. Carusi, 112 U. S. 478. But that did not involve the construction of section 715, and sheds no light upon it.
Other cases arose under the provisions of the national banking act, which forfeit “ the entire interest which the note, bill or other evidence of debt carries with it, or which has teen agreed to he paid thereonSec. 5198, R. S.; Brown v. Marion National Bank, 169 U. S. 416, and cases cited.
It is to be remarked, however, that in the above case, the court declared the plaintiff entitled to recover the principal of his debt with legal interest from the commencement of the suit. There is nothing in the statute authorizing this recovery of interest, and hence it would seem to rest solely upon the conclusion that the maker of the note, being in default at least from the time of legal demand, must answer in damages therefor. In the District, as we have seen, the statute imposes 6 per cent, by way of damages for the breach *306of the contract at maturity, and gives tbat rate for tbe creditor’s forbearance.
For tbe reasons given, we must adhere to tbe conclusion heretofore stated, and decline to modify tbe judgment pronounced.
Tbe motion is, therefore, denied.