Court Opinion

ID: 8812900
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:08:15.207318+00
Date Added: 2024-06-11T17:04:21.133178
License: Public Domain

EVAN A. EVANS, Circuit Judge
(dissenting). I am unable to agree with the conclusions reached by the majority of the court.
*837With the conclusion that the agreement under consideration was in fact a loan agreement I fully agree. Home Bond Co. v. McChesney, 239 U. S. 569, 36 Sup. Ct. 170, 60 L. Ed. 444. That it was beyond the corporate powers of the National Trust. & Credit Company to loan money is conceded. That such a contract is therefore void under the laws of Illinois is also well established. Mercantile Trust Co. v. Kastor, 273 Ill. 332, 112 N. E. 988; Central Transportation Co. v. Pullman Palace Car Co., 139 U. S. 24, 11 Sup. Ct. 478, 35 L. Ed. 55. It follows, therefore, that the decree should be affirmed unless (as the majority of the court concludes) certain of the transactions were “closed.”
It appears that outstanding accounts aggregating some $76,000 were in appellant’s possession and given to secure unpaid obligations when the voluntary assignment occurred. All the loans and payments were made pursuant to the terms of the void contract. The excessive interest items as well as the so-called service charges were paid by the borrower upon the theory that a valid contract between the parties called for such payments. If we eliminate from the parties’ transactions the contract and its influence upon the parties, there is nothing left but a few cash items on the side of the loaner and many smaller items of cash credited to the borrower. The sum totals cannot be made to balance, collectively or otherwise. A so-called closed or balanced account is spelled out of the record only by giving appellant credit for its 1 per cent, per month interest and allowing its expense and service charges — all as provided in the contract.
Such a settlement as furnished the basis for appellant’s claim of a closed account was nothing but a ratification of the void contract. And it is thoroughly established that any contract malum in se is incapable of ratification. Westerlund v. Bear Mining Co., 203 Fed. 599, 612, 121 C. C. A. 627.
My conclusion is strengthened by the fact that the parties made a contract in writing before any moneys were advanced by appellant. In fact, the subsequent dealings were not separate and independent transactions, but were the fulfillment of the written contract referred to. This contract required appellant to “buy from said first party all acceptable accounts tendered it * * * and pay therefor the face value thereof, less the following discounts,” etc. All the dealings between the parties were pursuant to this one illegal contract. Moneys may have been advanced at different times, and certain payments on the moneys thus advanced may have been made at other dates, but nevertheless all subsequent transactions of hothf parties were referable to this contract and determined by it.
Moreover, this is a suit in equity. Appellant has avoided the full consequences of its transaction because it is in a court of equity. Appellant saw fit to enter into a contract prohibited under the laws of the state of Illinois and in violation of its powers under its charter. Not satisfied with avoiding the full penalties that might result from its embarrassing position, it asks this court of equity that has required the borrower to repay all moneys borrowed together with legal interest to go one step further. It prays for the allowance of excessive *838interest and illegal charges. Seeking equity, appellant should do equity. Obtaining relief from the unfortunate position in which it has found itself, due to its illegal contract, it should offer to, and, if its consent be not forthcoming, be compelled to do equity. Equity is done only when the debtor pays back to the creditor under this one single written contract all moneys by it paid, together with interest thereon. The creditor does equity only when it repays to the borrower or gives to the borrower credit for the usurious and excessive sums taken by it under and by virtue of this illegal contract. Mercantile Trust Co. v. Kastor, supra.
Nor is this conclusion out of harmony with that reached in Pullman’s Palace Car Co. v. Central Transportation Co., 171 U. S. 138, 18 Sup. Ct. 808, 43 L. Ed. 108. In that case a closed transaction was assumed. The court considered the question of its effect. Here I fail to find the facts showing that accounts were “closed.”
Again, to hold otherwise it seems to me would defeat the plain purpose of the statute of the state of Illinois, long expressive of the public policy of that commonwealth. For if an illegal contract can be purged of its illegality by the simple device of drawing a new contract, thereby “closing” the old one, a simple and satisfactory plan has been provided for corporations to engage in a forbidden business. Likewise the worries of the usurer are over, for a simple and effective way has been provided whereby he can retain his excessive interest.