Court Opinion

ID: 8532525
Source: CourtListenerOpinion
Date Created: 2022-11-23 11:02:57.635764+00
Date Added: 2024-06-11T16:51:51.655078
License: Public Domain

Mr. Justice Wole,
dissenting.
Section 18 of the Mortgage Law provides:
“Registrars shall, under their responsibility, determine the legality of the instruments under which record is requested, and the capacity of the parties thereto, upon the facts that appear from said instruments themselves.
“They shall likewise, under their responsibility pass on all documents issued by judicial authorities for the sole purpose of admitting, suspending or refusing their admission to record or entry.
“The only remedies against a decision suspending or refusing to admit to record or to enter a cautionary notice shall be such as are provided for in this law, and judges and courts can not otherwise compel registrars to make records or entries by virtue of judicial documents. ’ ’
*921The question is whether a deed which, calls for the payment of interest denominated usurious by the law is necessarily illegal. I maintain that there are various possibilities wherein the contract for interest exhibited in this case may he perfectly valid and enforceable in a court of law.
This, while important, is not the principal point of my 'dissent, but I may say in passing that if in fact the parties to the contract, before the 16th of August 1933, the date on. which section 1 of the interest law was amended, fixed the rate of interest to be paid on the renewal of a loan at 12 per cent, a mortgage to cover the loan at that rate would he perfectly valid between the parties, even though on the face of the deed an apparently illegal rate of interest was sought to be recovered. Likewise, if the loan were originally made at 12 per cent and the understanding of the parties was that the loan was to run at 12 per cent until paid, an extension of a mortgage or even a new mortgage would be entirely valid to secure the original obligation.
Among the rebuttable presumptions to be found in our Law of Evidence we have the following (Rev. Stat., sec. 1470):
“Sec. 102. *******
“19. That private transactions have been fair and regular.
"“32. That the law has been obeyed.”
Without resort to any particular presumption the possibility should be excluded that there was not a legal and valid obligation. I maintain that there is no presumption to the contrary.
A mortgage is always a subsidiary contract. My contention is that when either of the two possibilities exists the parties are entitled to a record with an opportunity, if neces•sary, to show that the original contract was valid. And if -under either of the above suppositions a valid obligation •exists the subsidiary contract, namely, the mortgage, would .also be valid. Thus, in analogy to Compañía Azucarera de *922la Carolina v. Registrar, 19 P.R.R. 143, that would really be a question of fact to be decided.
Section 1228 of the Civil Code (1930 ed.) presents some analogy. It is as follows:
“Sec. 1228. The statement of a false consideration in contracts-shall render them void, unless it be proven that they were based on another real and licit one. ’ ’
Likewise, in passing, not to lay too much stress on the Carolina case, supra, if a contract usurious on its face is capable of being enforced by the Avaiver or consent of the debtor or anyone of his privies, this possibility, if not an actuality, would be a matter of fact. It would be a question in pais whether the debtor chose to raise the question of usury.
The registrar of property in Puerto Rico is a quasi judicial officer and not in any sense either a stranger or not a stranger to a contract made between the parties. He is. thoroughly bound to declare a contract illegal if in fact it is so and he could be called a stranger only in the same way that a court would be. When in an opinion one uses the phrase that a person is a stranger to a contract necessarily one refers to somebody, not the registrar, who is seeking to obtain some advantage or benefit for himself by declaring-a supposed usurious contract illegal.
The principal point that I make is that, with possible-exceptions that do not apply here, the borrower and certain well-recognized privies are the only persons who may obtain relief from or insist upon the usurious character of a contract. Berk v. Isquith Productions, 131 Atl. 526; Hodges v. Westmoreland, 8 Div. (Ala.) 551, 96 So. 573; Dix v. Van Wyck, 15 N.Y. Com. Law. Rep. 522; Pritchett v. Mitchell, 17 Kan. 355, 22 Am. Rep. 287; Billington v. Wagoner, 33 N.Y.C.A. Rep. 33; Williams v. Tilt, 36 N.Y.C.A. Rep. 319 and cases cited therein at page 326; 66 C.J. 314, 315; 27 R.C.L. 83.
I do not concede that Williams v. Tilt is obiter dictum-hut even if it were it correctly expounds the state of the law *923in New York. This and the other cases justify the reference to Corpus Juris and Ruling Case Law, supra, which latter are also agreeable to my own ideas of the state of the law. As to the objection of obiter dictum with regard to the case of Williams v. Tilt, supra, I may say that inasmuch as the person who has absolutely no connection or interest in the contract will not ordinarily file a gratuitous suit, to set it aside, few cases will be found where the courts will say that the plaintiff can not be heard because he is a stranger to the contract. On the other hand, a great many cases will be found where if a person has some interest or color of interest in declaring a contract void, or even in cases where he has the absolute right to void a contract, the courts, qua supra, have often laid down the principle that a mere stranger to the contract could not raisé the question.
While some courts without a plea to that effect will raise the question of usury in favor of a debtor or a privy, I think no case can be found where a court will raise it for the benefit of a stranger to the contract.
While there may be cases that decide the contrary, in my opinion the general rule is that the courts will not permit a purchaser of an equity of redemption who has expressly assumed to pay the mortgage and interest as part of the consideration, to insist that the contract was illegal by reason of its usurious nature. Mathews v. Ormerd, 140 Cal. 578; Ferris v. Crawford, 2 Den. 595; Caldwell v. Commercial Bank, 194 P. 899, 900. See 27 Third Dec. Digest 523; 19 R.C.L. 300, sec. 74; 27 R.C.L. 288, sec. 89, et seq; see note Vol. 2 Am. & Eng. Ann. Cases 46.
The equity courls go even further, and in cases where the debtor is seeking relief therein, generally require him to pay the principal loan. De Wolf v. Johnson 10 Wheaton, 23 U.S. 367, 392; Phila & Sunbury R.R. Co. v. Lewis, 75 Am. Dec. (Pa.) 574; 29 R.C.L. 265, sec. 67.
In certain jurisdictions there may be some doubt whether {he courts will not protect the debtor, as I have suggested, *924even against Ms will, but in. the states where such a practice is followed the statute, I am inclined to think, would declare a usurious contract totally void and inexistent. Such was the state of the law in Puerto Eico, to judge from the decision of this court in Horton et al. v. Robert, 11 P.R.R. 168.
In 1916 the Legislature of Puerto Eico changed the policy of the usury statute and used the following language:
• “Sec. 4. — * * 0 * * * *
“ ‘No contract wherein or whereby there is reserved, accepted or secured, or agreed to be. accepted or secured any greater rate or interest than is allowed by this Act, may be made effective in any court in Porto Rico, except for the amount of the principal due; and the court must provide, furthermore, in the judgment directing the debtor to pay the principal, that the creditor shall recover only seventy-five per cent of said principal and that the remaining twenty-five per cent shall be awarded to and recovered by The People of Porto Rico, who may obtain a writ of execution, in the same manner as the plaintiff, but without precedence over the amount awarded to the latter, to make effective the twenty-five per cent in that manner awarded.” (Act No. 47 of 1916.)
There is ample authority in the United States to the effect that usury has lost its immoral taint and usurious contracts are seldom considered to be against public policy but merely against positive law. Lloyd v. Scott, 29 U.S. (4 Peters) 205, 223; 21 A.L.R. 495; 27 R.C.L. 281.
Where the statute, as in Puerto Eico today, declares a contract of this sort invalid or unenforceable, or uses similar phrases, not totally voiding the contract, the courts as it seems to me have generally said that the contract is only voidable at the instance of the debtor and his privies.
The Statute of Frauds, although in a different field, uses similar strong language and forbids verbal contracts of a certain nature, but the courts have practically always held that the privilege of the Statute of Frauds may be waived and we have indicated the same thing in De la Torre & Ramírez v. Bengoechea, 48 P.R.R. 358.
*925I maintain that where, as here, the legality of a contract depends npon the will of the debtor, the registrar has no right to refuse the record.
A minor point is that, as I understand it, the contract with its interest is an entirety and the interest clause should not be segregated from the body of the deed, but the parties left to challenge the validity of the contract when its enforcement is sought. The registrar may not make a new contract for the parties. There could be no harm done by recording, inasmuch as the debtor and his- privies could always raise the defense of usury and no third person could be injured. The Mortgage Law is primarily for the protection of third persons and not for the parties to the contract, who as between themselves are subject to the same rules of interpretation whether their contract is recorded or not. Section 33 of the Mortgage Law provides:
“Instruments or contracts which are null under the law are not validated by their admission to record.”
The note should have been reversed and the whole contract recorded.