Court Opinion

ID: 5550878
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:31:20.545455+00
Date Added: 2024-06-11T08:35:05.940180
License: Public Domain

By the Court

Nisbet, Judge.
This was a proceeding under our statute to foreclose a mortgage upon real estate. The petitioner, S. T. Bailey, Esq., was the assignee of the note and mortgage securities, having taken them after the maturity of the *403note. The defendant filed the plea of usury, also, alleging payments,which plea was verified. Upon the trial below, the counsel for, the plaintiff moved the court to strike out the defendant’s plea, upon the ground that the statutes of Georgia do not contemplate, or authorize, the setting up of usury at law against a mortgage on a rule to foreclose. This motion was overruled, and that is claimed to be the first error committed by the presiding judge in this cause.
The act of 1799, (Prin. Dig. 423, 424,) after prescribing the mode of proceeding to foreclose a mortgage on real estate, farther enacts as follows : “ And, in case of any dispute; as to the amount due on any mortgage, if the mortgagor shall appear within the time prescribed by this act, and make affidavit that he hath made payments which have not been credited on said mortgage, or that he is entitled to sets-ofF, which in equity ought to be allowed, the court shall appoint one or more fit person or persons to audit and liquidate the same; but either party shall be entitled to a new trial therefrom,” &c. It is argued by the counsel for the plaintiff in error, that the right of defence against the foreclosure of a mortgage, given by this statute, is limited to payment and equitable offsets, and, inasmuch as the plea of usury is neither payment nor set-off, it cannot be allowed. The terms of the statute do not explicitly embrace such a plea, nor yet do they necessarily exclude it. The act declares, that in case of any dispute about the amount due on a mortgage, if the mortgagor shall appear within the time prescribed, and make affidavit of having made payments not credited, or that he is entitled to off-sets which in equity ought to be allowed, the court shall appoint persons to audit and liquidate the accounts between the parties, &c. As to payments and equitable off-sets, they are to be verified and submitted to auditors ; the statute is very explicit as to the right and mode of defence, so far as these are concerned. But is the defence necessarily confined to these ? The act contemplates a dispute about the amount due, and seems to admit the right of contesting the amount due upon other grounds, as well as those of payment and set-off. The statute of Georgia inhibits the collection of lawful and usurious interest upon contracts tainted with usury, when attempted to be enforced against the borrower. Now, the statute which, when plead and sustained, reduces the amount ofthe plaintiff's recovery by the lawful and usurious interest, is neither payment nor set-off. But the plea of usury does create a dispute about the amount due; it makes an issue as to the amount the plaintiff is entitled to recover. How would it be if the mortgage was given to secure a note given for a gaming consideration, or to compromise a felony ? Would, in such case, the defendant be debarred his defence ? It is worthy of attention, in construing this statute, that usury is a defence allowed rather in furtherance of that public policy upon which laws are founded, than as a favor to the borrower. If a contract by law is utterly void, the defence upon grounds of public policy ought to be let in. Quoad the interest, this court has determined that usurious.contracts are void.
The maxim “ expresúo unius est, exclusio «¡Mentís,” the express mention of one thing implies the exclusion of another, is frequently quoted in our courts. It was claimed to apply to the construction of this statute.
It may not be, therefore, amiss to look into its meaning, and inquire *404how far it is applicable in the construction of statutes ; and endeavor to reduce it, if possible, from a vague generality to a definite signification. This maxim applies, in the first place, rather in the construction of contracts than statutes, and more particularly to deeds. We are not to be understood, however, to say, that it is not at all used in the interpretation of statutes. A maxim very nearly identical with it, to wit, expressum facit cessare taciturn, applies more particularly in the construction of statutes. This maxim then only means, “ that if you express!y name (in a deed or other contract, for example) some, out of certain requisites, the inference is stronger that those omitted are intended to be excluded, than if none atalFhad been mentioned.” — Broom’s Legal Maxims, 278-9, 280; 9 A. and E. 953. The inference drawn from the fact of specification is stronger but' not conclusive, that all other things are excluded. Now, in the act of ’99, because payments and equitable offsets are expressed, the inference is not conclusive that no other grounds of defence are to be admitted. This act is open to this construction, to wit: the Legislature, in mentioning payment and equitable offsets, intended, in the first place, to put the defendant upon terms, as to these two grounds of defence ; (this is proven in the requirement that they shall be filed within a specified time, and verified ;) and secondly, to create a board of auditors to liquidate the accounts when they are filed ; leaving all other defences where the general law places them. This construction is aided by the direct reference made in the act to disputes as to the amount due. That is to say, when there is a dispute between the parties as to the amount due, and that dispute has reference to payment or equitable sets-off, the mode of defence prescribed in the statute must bte followed; but if the dispute has reference to any other legal defence, then as to that the general law of pleading obtains. Int he application of the maxim, expressum, &c., to statutes, it is not to be understood that where the Legislature has put the strongest cases, the lesser are therefore to be excluded; but, on the contrary, there are cases where, by construction, the greater are intended to include the less. — Broom's Legal Maxims, 285.
But the view of this subject, which to the mind of this court is decisive, is this: The process of foreclosure in England is by bill in chancery. Our statute dispenses with the equitable proceeding, and gives a more easy, direct, and less expensive process of foreclosure at law. This legal mode is in lieu of the bill in chancery. This is, therefore, what we are in the habit of calling an equitable statute; it is not in derogation of the existing law, and, therefore, to be construed strictly; but it is declaratory of it, and remedial, and, therefore, to he construed liberally. It affirms the law of foreclosure, by providing a different remedy under it. The mortgagee, instead of being driven into a court of chancery to foreclose, is admitted at law to all the rights which he .had before the statute, in equity, as to this subject matter. Can we infer that the Legislature intended to give this new and summary mode of foreclosure to the mortgagee, and not give equivalent rights of defence to the mortgagor ? to create for the plaintiff an easy and rapid mode of foreclosure, and still hold the defendant to the necessity of going into a court of equity, to assert his rights against it ? The Legislature intended to do no such iniquitous thing. Upon the creation of a new remedy, we think the rights of defence which belonged to the old *405remedy, unless expressly inhibited, attach to the new. As the plaintiff is here let into the rights at law, which he before had in equity, so the defendant is let in, also, at law to those rights which he before had in equity. It will not be denied but that in England, upon a bill, to enforce a usurious security, the defendant could plead the statute of usury. If so, he may, under our statute, against a process to enforce a usurious security, also plead the statute of usury. Such a plea is not, as we think, expressly, or by fair construction, inhibited by the act of 1799.
The enumeration of certain defences which he may make, and the manner of making them, does not, under these views of this subject, exclude all others. It is a sound general principle, says Broom, in the exposition of statutes, that less regard is to be paid to the words used than to the policy which dictated the act. — Broom, 247.
Now, the policy of the act of 1799 was to give to both parties the rights at law, which could only be asserted in England, by a tedious and costly proceeding in equity. Again, where the words are general, and a statute is only declaratory of the common law, it shall extend to others, besides the persons or things named. — Broom, 285-6; 14 Mass, 92— 3; 3 Hill, 472.
We think, therefore, that the court did not err in refusing to grant the motion to strike out the defendant’s plea.
The second ground of error is, that the court improperly admitted N. H. Beal, the payee of the note, and mortgagee, and also the transferror of the mortgage, to be sworn in the case. The witness was called by the defendant to prove usury in the contract. The record discloses that the mortgage and note were transferred to S. T. Bailey, by Beal, the witness, without recourse upon him.
The only ground relied upon by the plaintiff in error, to exclude Beal, was interest. The disqualifying interest of a witness must be some legal, certain and immediate interest, however minute, either in the event of the cause itself, or in the record, as an instrument of evidence in support of his own claims or against him in a subsequent action. — 1 Greenleaf, see. 386; 1 Starkie Ev. 102; 3 C. R. 27; 6 Bing. 390; 7 C. R. 62.
The true tost of the interest of a witness is, that he will either gain or lose by the direct legal operation of the judgment, or that the record will be legal evidence for or against him in some other action. — Greenleaf, sec. 390; Gilbert Ev. 225; 3 C. R. 27; East, 581. The application of these two rules to this ease will determine the interest and, therefore, the competency of thiswitness. We think that the fact of the transfer being made without recourse, by Beal to the plaintiff, Bailey, very materially affects this question. Bearing this fact in mind, we apply the test. It is very clear that he could not gain or lose a single cent by the direct legal operation of the judgment. Let that he for the plaintiff or the defendant — for the whole amount of the plaintiff’s claim, or for loss — its legal effect will not he to put anything into his pocket or abstract anything therefrom. Having parted with these securities, the judgment will he inter alios. Can the record in this case he legal evidence for or against him in some other action ? He is called to prove usury in the securities, which he has transferred to the plaintiff. Suppose his testimony does not establish the usury — could it in that event *406affect, in any way, the rights of the plaintiff? Could the record, in that event, be legal evidence for or against him, in any suit which might afterwards occur between him and the plaintiff? We think not; because, in that event, the plaintiff’s rights would be the same, and the judgment, so far as his testimony affects it, the same as they would be if he was not sworn at all.
But, in point of fact, he did establish the usury, and the effect of his testimony was to reduce the amount of the plaintiff’s recovery. Now, if he, by his contract with the plaintiff, was liable over to him as transferror of these securities, in that event, the record of this cause would be evidence against him, in an action by the plaintiff for the loss sustained upon them. But, by his contract with the plaintiff, the plaintiff agreed to take the securities at his own risk, without recourse upon Beal. Such being the case, we do not believe that this record could be legal evidence, for or against the witness, in any suit which we can imagine could originate between him and the plaintiff. How, then, will he stand affected towards the defendant ? If he proves no usury, then the record will be just as though he had not been called, and if he does, then defendant is allowed it, in this action, as a credit upon the plaintiff’s claim, and could not recover it a second time, out of anybody. So that we. do not perceive that in any possible contingency the record of this action could be legal evidence, in favor or against the witness; our judgment is that he was competent.
We did not understand the third ground to be insisted on in the argument, and shall therefore express no opinion upon it.
fourth exception alleges error in this, that the court charged jury, that neither legal nor usurious interest can bo recovered on a contract tainted with usury; and it made no difference whether it was in the hands of the original payee or an innocent endorsee.
The Legislature of Georgia have declared, that upon all contracts tainted with usury, the principal of such contracts only shall be recovered. — Prin. Dig. 295. As a general proposition, we think it is true, that neither legal nor usurious interest can be recovered in this State upon usurious contracts. We know of but one instance in which the lawful interest, even, can be recovered; and that is, where the borrower is compelled to go into equity, to prove that the contract is usurious. In that case he will be held to do equity, that is, pay the principal and legal interest, before he can be relieved from the payment of the usurious interest. Nor does it matter whether the usurious contract is in the hands of the original payee or an innocent endorsee. It is very true that the courts in England struggled hard to protect an innocent endorsee against the plea of usury, because of the obvious hardship of the ease. They, however, did yield to the irresistible force of the reasoning upon this subject, and determined that a security, void by statute, as in the case of usury and gaming, was void in the hands of a bona fide holder, without notice. The security being utterly void by law, it could acquire nowhere, and in no way, any vitality. A transfer, for value, to one ignorant of the taint, could not breathe life into the contract. Void In the beginning, it was void forever, and everywhere. The other reason for this determination of the British courts is this: If a usurious contract could be enforced, in the hands of a third person, then it would *407be the easiest thing imaginable to defeat the statute of usury. The public policy of the laws against usury imperiously required such a decision. It was, consequently, made, and, for a long series of years, acquiesced in. — Chit, on Bills, 10th Am. ed. 86-7-8 ; Lowe vs. Waller, Doug. 736; 1 Stark. 385; 2 Bar. and Ald. 590; 8 Price, 288.
These decisions have been followed by similar adjudications in the United States. — 3 Johns. Cases, 206; 1 Bay, 28; 1 Greenleaf, 167; 2 Caine’s Rep. 150; 10 Mass. 121; 3 Day’s Rep. 268. The law, as thus settled, -was modified by statute, in England, first by the act of 58 Geo. 3, whiph protected a holder, for value,, without notice. By statute of William 4, bills and notes given for usurious considerations are declared to be not void, but given for an illegal consideration. By act of 3 and 4 William 4, bills and notes not having more than throe months to run, were exempted from the operation of the usury laws. This exemption, by 7 William 4, and 1 Vict., was extended to bills and notes not having more than twelve months to run. And by 2 and 3 Viet, this exemption was extended to all contracts, for the loan of money, above ten pounds. And other provisions are likewise found in tho same statute touching this matter. — Chit, on Bills, 87-8-9.
Thus wo find that, at common law, as it stood in May, 1776, when we adopted it, all securities tainted with usury were void in the hands of innocent holders. And now, therefore, the common law upon this subject is the law of Georgia, unless our own legislation has repealed it. The statutes of England, referred to in repeal of the common law, are all repealed since the year 1776, and, therefore, not of force in Georgia.
It is argued by counsel for plaintiff in error, that tho common law made void those securities in the hands of bona fide, holders ; because by statute, in England, such securities were declared utterly void; that our statute does not make the contract utterly void, and, therefore, the common law does not apply in this State ; for, say they, cessanteralione legis, cessat ipsa lex. The difference between the English statute of usury and ours is this : their statute makes the whole contract void — ours makes the contract void as to legal and usurious interest. This court has so construed tho act of 1829, in the case of Winkler and Scudder. The reason, therefore, of the common law applies here in all its force, so far as the interest is concerned. To the interest only do our pleas of usury apply, and we hold that they apply, whether the security be in the hands of the original payee, or an innocent holder, without notice.
It was argued by counsel for plaintiff in error, that the plaintiff in this cause, below, had no notice of the usury in the contract, and, therefore, no evidence could be admitted against him, under the plea of usury. Tho record does not show that he had express notice ; nor is this necessary, to admit the defendant’s plea. It is apparent on the record, that the plaintiff took this note and mortgage after it foil due. The learned counsel argued, that bills and notes are negotiable after as well as before they fall duo ; which proposition we do not controvert. He, however, claimed, that the only effect of tho bill, or note, being over due, is to put the world, and, therefore, tho holder, upon guard as to taking it. To this proposition wo do not assent. The dishonor of the note, does put the world upon its guard; and, for that very reason, the holder takes it, liable to all the equities between the original parties. The presump*408tion of law is, that there are equitable defences to a dishonored note, or bill, else it would have been paid at maturity. The fact, therefore, of dishonor is notice to the holder. He, generally, takes it on the credit of the person who gives it to him. The rule is laid down with great precision and perspicuity by Lord Ellenborough, in Timson and Francis, 1 Camp. 19, in these words: “ After a note, or bill, is due, it comes disgraced to the endorsee, and it is his duty to make inquiry concerning it. If he takes it, though he gives a full consideration for it, he takes it on the credit of the endorser, and subject to all the equities with which it may be encumbered.” — 3 T. R. 82; 7 T. R. 431; 3 T. R. n. 483; Doug. 632; 6 Bingh. 109; 5 Mass. 299; 6 ib. 451; 3 Johns. Rep. 124; 7 Johns. Rep. 26; 4 Greenlf. 415; 3 Wend. 605; 12 Wend. 523; 8 Conn. 336; 10 Wend. 86.
In connection with this head of error, it is convenient to consider the last, which is as follows, to wit: The court declined to instruct the jury, that the defendant, knowing that the note was about to be transferred by N. H. Beal, did not notify the plaintiff that there was any usury to be plead against it, but represented to him that it would be fully paid, and therefore was not entitled to make this defence. The facts as to this point are are as follows: N. H. Beal, being about to trade this note and mortgage to Bailey, sent for the defendant, and a conversation took place relative to them. The defendant was informed that Beal was about to transfer the securities to Bailey, and did not disclose that the note was usurious, but stated, in the presence of the plaintiff and Beal, that he did not like to be sued, and urged both of them to use their influence with the legatees, (for whom Bailey was then acting as agent,) to get him indulgence until the next fall or Christmas, when he would pay every dollar of the note, principal and interest. Ñor did the witness, Beal, disclose the usury. Afterwards, and on the same day, the plaintiff took the note and mortgage. The doctrine asserted in the last ground of error, as founded upon these facts, we take to be this: If a party, by the willful suggestion of a falsehood, is the cause of a prejudice to another, who has a right to a full and correct representation of the fact, such party’s claim ought to be postponed to that of the person whose confidence was induced by his representation ; and there can be no real difference between an express representation and one that is naturally and necessarily implied from the circumstances. A party who enables another, too, to commit a fraud, is himself answerable for consequences. We recognize, in these propositions, sound law ; they obtain, as rules in equity. For example, a man having a title to an estate offered for sale, and knowing his title, stands by and encourages the sale, or does not forbid it, and another is induced to buy, the purchaser’s title is good. So one holding a mortgage upon an estate, stands by and sees the mortgagor execute another mortgage, without disclosing the existence of his own, his older mortgage lien will be superseded. — Story's Eq. sec. 384, 385; Sugden on Vendors, ch. 16; 6 Johns. Ch. R. 166 a 172; 1 ib. 354. Courts of law also act upon the same just and enlightened principles. Lord Denham, in Pickard vs. Sears, (6 Adolph. and Ellis, 474,) says: “ The rule of law is clear, that where one by his words or conduct, willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, so as to alter his previous position, the former is concluded from *409averring against the latter a different state of things, as existing at the same time.” — 9 B. & Cres. 586; 3 Barn. & Ald. 318, note (a); 14 East, 994 ; 1 Story Eq. 375, note. Applying the principles, under the facts in this cause, to the right of the defendant to plead, we have no hesitation in saying, that they would preclude him from setting up all defences, except the invalidity of the note by law. They would preclude him generally, but do not preclude him in this case ; because the defence of usury is founded on public policy, and no act or omission of the borrower, however fraudulent, can make valid a note declared by the law void on account of usury. — Blydenburg, 87; 1 Bulstrode, 17; 3 J. C. 206. The case relied upon to sustain this ground of error, reported in 2 Bailey, 59, seems at first view to sustain it; but upon looking at it carefully, I find that it has really no relevancy to it whatever. It is a very brief report. The statement (and that is the whole case) is this: “ Where the endorser of a note, made to raise money at usurious interest, represents to a purchaser that it is a business note, made for a bona fide consideration, and the maker is present and acquiesces, it is a fraud upon the purchaser, and both are liable. Yes, both are liable, but not on the note. They are both liable for the fraud, in the proper form of action. So here, it may be, (but as to that the court expresses no opinion,) that both Beal, the endorser, and Lumpkin, the maker, are liable to Bailey. We do not find any error in the record as to the two assignments last considered.
The 5th ground of error is, that the court charged that any payments of legal or usurious interest, made at any time previous, on prior renewals, must be deducted out of the sum originally loaned, and the balance was all the plaintiffwas entitled to recover. In Winkler vs. Scudder, tried at Hawkinsville, this court determined this point, in accordance with the charge of the presiding judge in this case ; we find no reason for reversing that decision.
The next error complained of is in this: that the court refused to charge the jury that the plaintiff, on the foreclosure of a mortgage, where the defendant sets up the plea of usury, is entitled to recover principal and legal interest. This exception assumes, that the plea of usury is analogous to a proceeding in equity on the part of the borrower to establish and escape from the usury. On such a proceeding, we admit, as already stated, that the borrower must do, before he can get, equity ; that is, he must pay not only the lawful interest, but the principal. But this proceeding is not in equity, but in law. We have already undertaken to show, that under our act of 1799, the defendant is entitled to the plea of usury. But whether this proceeding be considered at law or in equity, in either case Bailey is the plaintiff; he is the moveant. The defendant is brought into court by a process sued out at his instance. Now, the rule is well settled, that where the lender goes into equity, or to a court of law, to enforce a usurious contract, he cannot recover either the legal or the usurious interest. — 1 Fonblanque 190, note; 5 John. Ch. R. 136. See also this opinion on the first assignment.
We find but one more point made, for our consideration in this case, and that is, that the court declined to charge that the payments of interest, made on previous renewals, could not be deducted from the amount due on the note sued on; because that was a note bearing legal interest, and therefore not usurious. The facts are, that the note sued *410on was in renewal of previous notes, tainted with usury ; and that only a part of the interest reserved had been paid. It is also proven that the note in suit bore interest at eight per cent. only.
The infection of usury follows all the securities, however varied in form and amount, which may be afterwards given for the same debt.— Blydenburg, 98; 5 Conn. 184; 15 Mass. 96; 3 J. C. 206; 20 Johns. R. 285; 9 Cowen, 647; 6 Wendell, 415.
The renewal of the last note, at only lawful interest, does not create an exception to the rule. If, upon a usurious contract, the whole interest, and part of the principal, is paid, and the debt is renewed at lawful interest, and that note negotiated, and itself renewed to the endorsee at lawful interest; it was held that the last note was not obnoxious to the statute of usury, in the hands of the endorsee. — 10 Mass. R. 120. This ease was relied upon, by counsel for plaintiff in error, in the argument. But its facts are very different from those of the ease at bar. According to the testimony in this case, the usurious interest reserved had only been paid in part. The note sued on still covered, and was designed to secure, illegal interest. If the case from 10 Mass. R. be authority, it cannot help the plaintiff in error. Although the radical vice of a' usurious contract attaches to and infeet3 all future securities for the same loan, yet the contract may be purged. For example: if there is an accounting between the parties to a usurious contract, and all sums previously paid usuriously are deducted, and a new security given for the balance, the contract is said to be purged, and the last security taken is valid. — Saunders’ Plead. and Evid. 898; 2 Car. and Pay. 397; 1 R. and M. 123 S. C.; 1 Camp. 165; 2 Taunton, 184.
There is no purgation in this ease. We affirm the judgment of the court below.