Court Opinion

ID: 7092903
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:07:51.179017+00
Date Added: 2024-06-11T16:13:08.749291
License: Public Domain

Wright, Ch. J.,
dissenting. — Whether -one partner can bind the other by an admission or promise of the character shown in this case, I do not propose to discuss, more than to state that I concur in the view taken of the question in the foregoing opinion. The other point relied upon and decided, is the important one, and as I cannot bring myself to believe that the conclusion reached by the majority of the Court reflects the law, I propose to state very briefly my reasons for thus differing.
I assume, that aside from what iook place between Eowe and the plaintiffs, the defense of usury would have been sustained. And in this I am warranted by the argument of counsel (of plaintiffs as well as defendant), as also by the facts proved, and .conclusions of law based thereon, in the Court below. In other words, I start with the admitted proposition that if defendants are not, by their acts or admissions, estopped from setting up this defense, it would be as effectual against plaintiffs as the original payees of the notes, if they had brought this suit. The true and only question, therefore, is, whether they are thus estopped. And I may abbreviate the discussion, and at the same time be better understood, by saying that under our law I deny that the doctrine of estoppel applies to such cases, yielding to plaintiffs the full force and benefit of all the facts and circumstances as developed by the testimony.
Tinder the New York and similar statutes I concede that the weight of authority favors the proposition that the doctrine of estoppel applies to the defense of usury, as fully as to any other. But I must, at the same time, be permitted to say, that in my opinion the New York cases, in several instances, have gone far beyond a safe or just rule, *575even under their statute. I cannot resist the conclusion that they apply a doctrine (“ odious ” though it is,) under circumstances which defeat the policy of the statute, and malee it a protection to the remorseless creditor, instead of a shield to the unwary and straightened debtor.
Thus in Chamberlain v. Townsend, 26 Barb., 611, cited in the opinion of the majority of the Court, the defendant was held to be estopped by a “ certificate attached to the note, that the same was given for value, and will be paid when due.” And the same rule was followed under a precisely 'similar btate of facts in Mechanics' Bank v. Townsend, 17 How. Pr. R., 569. Other cases in that State hold the same doctrine, to which 'I need not refer. But with due deference, I feel constrained to deny their correctness. Com-stock, Ch. J., in the subsequent case of Clark v. Sisson, 22 N. Y., 311, states the rule, which cannot well be denied, that the “representations, in order to estop the party, must be outside of the note or contract.” And rrpon what principle it is that a mere certificate, dated, it may be, and obtained at the very moment of executing the note, and as a part of the same transaction, which only repeats in legal terms, if not in language, what is already in the note, and which'can be obtained by the usurer as easily as the note, I say upon what principle it is that such a subterfuge shall be held to estop the maker, while the note itself has no such effect, I confess my inability to understand. It really seems to me to involve the absurdity, in tbe language of the rather sharp criticism of the reporter in the case in 17 How., of making the defendant liable, and taking the case out of the statute, “when he has certified to a falsehood twice, instead of once.” The body of the note, almost invariably, states that it is given for value. If not, value or a consideration is implied, and all the world may take it with this implication, when the bill or paper is negotiable, and taken before *576due. How is this implication strengthened, in the case of usury, by a certificate which states nothing more ?
Now, there is more force and equity in the doctrine, when applied to those cases where the representations are made to the purchaser at the time of, or pending, the negotiation. For in such a case the indorsee does not act upon the note, or something which the usurer has obtained, but upon assurances given to him by the debtor himself, and under circumstances which it would seem ought justly and equitably, if not legally, conclude him from afterwards declaring the truth and defrauding the innocent purchaser.
Another matter may be noticed. Most, if not all, of the New York cases cited were, when accommodation paper was passed at a discount greater than the legal rate of interest, “ it having no inception until it passed to the purchaser.” In such cases, the representations or certificates made at the time of such inception would seem to stand upon a different footing from those made afterwards and which have no connection with the making or execution of the note.
But without further reference to the New York cases, and remarking that the case in 18th Conn., 138, did not involve any question of usury, I turn to our statute.
It was held in the case of Bacon v. Lee & Gray, 4 Iowa, 490, that under the statute the plea of usury may be successfully interposed to an action brought on the note by an innocent bona fide holder; and while the contract is not by the law declared wholly void, the same end is reached by declaring that in no case where unlawful interest is contracted for shall the plaintiff, in a suit brought on such contract, have judgment for more than the principal sum loaned. Thus it will be seen that the penalty is enforced if the party contracts for the usury, and that whether he ever takes it is entirely immaterial. Whenever it appears or is. ascertained that such a contract is made, the party *577suing upon or prosecuting the same can only have judgment for the principal sum, without either interest or costs. And then follows a provision, peculiar, as far as I have examined, to our statute, that there shall be a forfeiture of ten per cent per annum upon the amount of the contract to the school fund; and whether ihe suit is contested or not, Court shall render judgment for the amount of interest thus forfeited in favor of the State, for the use of said school fund.
Now, I concede that this plea or defense is personal, and that neither the State nor any third person can interpose it for defendant. And yet it must be conceded that if the usury appeared on the face of the note or contract it would be the duty of the Court to take cognizance of it, and render the proper j udgment for the school fund, whether the action was or was not contested by the defendant. From this conclusion it seems to me there is no escape. And yet, in such a case, the usury is not as certain as the result of any trial or investigation invoked by the only party who, under the law, can ask the same. Or suppose (the defense not being made), it should nevertheless be shown and sufficiently appear during the progress of a trial that usury had been contracted for, what is the Court to do ? let it pass, a.nd take no notice of it, in the face of the statute declaring that the Court shall render judgment for the forfeiture whether the suit is contested or not ? Or is not the true theory that the statute intended to prohibit such contracts, to visit the usurer with the consequences of his illegal acts, and to make it the duty of the Court to compel the defendant to pay to the school fund what is deemed a reasonable interest, instead of paying it to the usurer.
But it is in substance asked, how can the Court ascertain or know that which the defendant is estopped from proving? I answer, the usury either was or was not contracted *578for. If not, that is an end of the controversy. If it was, the subsequent act or admissions of the borrower cannot change the fact nor make the contract any less usurious. The whole theory of. the argument against my position concedes that though there was usury, defendant cannot be heard to assert. And yet, practically, he is heard, does assert it, and the Court knows as a fact that the law has been violated, before the sufficiency of the estoppel can be examined. If no usury, there is no need of inquiring into the estoppel. If there is (and there is none to the apprehension of the Court until it is ascertained), then, according to the argument, it is not ascertained, because defendant, by his act, is estopped from showing it.
It seems to me that such a view virtually defeats, and is at war with, the policy and intention of the statute. Estoppels, as before said, always odious, ought not to apply when they interfere with the policy of the State, or are used to defeat the operation of a statute found essential to the well-being of society, and designed to promote and exact honesty and probity in commercial transactions. Nor should the plea be received when the effect will be to deprive the Government of a sum which the legislative will has declared shall be forfeited for a violation of a positive command of the statute. Not only so, but bearing in mind that the bona fide holder may, by the express language of the statute, recover from the usurer the full amount paid for such contract, less the amount of the principal usury (Rev., § 1792), the propriety of allowing the defendant to assert the truth, instead of concluding him by the assertion of a second falsehood, and thus giving to a fraud, unworthy the protection of the wise legislator, the proper fruits of the illegal and prohibited transaction, it seems to me is most manifest. True, the rights of the State may, in some sense, be but incidental to those of the parties, or attach as incidents to the contract, and are not in the nature of vest*579ed rights. But the usurer, or what is the same -thing, his assignee, who, under the law, as to the defense of usury, stands ,iii no better position, asks the enforcement of a contract tainted with usury, and made in clear violation of an express statute. And in the face of the statute, which declares the consequences of such an act, and in the very .form which is required by the same law to do a certain thing, or render a certain judgment, while appealing to the tribunal given him by the same authority, which declares the consequences of his act, the plaintiff says that the law shall not be enforced, the-policy of the State shall not be carried out, because between the parties it would be unjust and unreasonable that the truth should be shown. Because I do not believe that such a construction of the statute is in accordance with its letter or spirit, I do most respectfully dissent from the foregoing opinion.