Court Opinion

ID: 4893630
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:53:54.187954+00
Date Added: 2024-06-11T08:11:32.804393
License: Public Domain

Gould, Chief Justice.
On May 27,1876, Watson borrowed of Aiken $3,000, agreeing to pay interest at the rate of eighteen per cent, per annum. The constitution which took effect in April of that year provided that in the absence of contract, the rate of .interest should not exceed eight per cent, per annum, and authorized parties by contract to “agree upon any rate not to exceed twelve per cent, per annum.” It then proceeds thus: “All interest charged above this last named rate shall be deemed usurious, and the legislature shall at its first session provide appropriate pains and penalties to prevent and punish usury.” Art. 16, sec. 11.
On August 21, 1876, at the first session of the legislature under this constitution, an “ act regulating interest ” was passed, the first and second sections of which refer to and enforce the constitutional provision as to the rates of interest. The third section is as follows: “All contracts or instruments of writing, whatsoever, which may in any wise, directly or indirectly, violate the foregoing provisions of this act, by stipulating for, allowing or receiving a greater premium or rate of interest than twelve per centum per annum, for the loan, payment or delivery of any money, goods, wares, merchandise, bonds, notes of hand, or any commodity, shall be void and of no effect for the whole rate of interest so charged, stipulated or *542agreed to be paid and received, but the principal sum of money, or the value of the goods, wares, merchandise, bonds, notes of hand or commodity, may be received and recovered; provided, however, that no evidence of usurious interest shall be received on the trial of such cases, unless the same shall be specially pleaded and verified by the affidavit of the party wishing to avail himself of the provisions of this act.” Laws of 1876, p. 228.
Was Aiken legally entitled to any interest? Was Watson’s debt discharged by the payment or tender of the sum borrowed?
In our opinion Aiken occupies no more favorable position than if his loan had been made after the act of the legislature took effect. When his loan was made, usury was illegal by virtue of the constitutional prohibition; and although it was left to the legislature to “ prescribe pains and penalties to prevent and punish usury,” a contract for usurious interest was a contract in violation of law. In the case of Bank of U. S. v. Owens, the charter of the bank forbid it to take interest at more than the rate of six per cent., and although there was no law declaring the effect of taking interest at a greater rate, such a contract was held void. 2 Peters, 527. Our opinion is that Aiken needed the aid of the subsequent act of the legislature to give him any legal rights under his contract, and that indeed it is for his benefit that the contract be regarded as if the penalty subsequently prescribed had already been designated in the constitution. In a suit on that contract, the defense of usury being properly made, his recovery would have been limited to the principal sum of money loaned.
2. The evidence clearly shows that the alleged new contract was but a device to cover the usury. A simple calculation demonstrates that the second note was for the amount of the loan, with eighteen per cent, interest up to the pretended purchase at sheriff’s sale, less the payment *543then made, calculating interest, at the same rate, on the balance, up to the maturity of the new note. We are clearly of opinion that the defense of usury was available against that new note, and that if, at the time of the sale under the deed of trust given to secure that note, Watson had paid §2,000 and then tendered another §1,000, claiming the benefit of the statute as to usury, then the sale was without authority. Fiedler v. Darrin, 50 N. Y., 437.
3. But the question remains, presented in a cross-assignment of errors by appellee, did the court err in admitting evidence to show usury, this being, as tried, an action of trespass to try title by Aiken, and the only pleadings by Watson being, 1st, general demurrer; 2d, not guilty; 3d, tender of §1,000; 4th, improvements and offsets? If this had been a suit on the original contract, the statute is plainly applicable requiring the defense “that the contract sued upon is usurious” to he specially pleaded and to be verified by affidavit. The proviso to section 3 of the act regulating interest passed in 1876 is carried into the-Revised Statutes in a separate article (R. S., art. 2981). The only changes are, that instead of the expression in the original act, *' ‘ on the trial of such causes, ” we have in the Revised Statutes the expression, “on the trial of any case,” and instead of concluding, “wishing to avail himself of the provisions of this act,” it reads, “wishing to avail himself of such defense.” These changes seem designed simply to adapt the proviso to its place as a separate article in the Revised Statutes. The Revised Statutes, in prescribing, under the head of “Practice in the district courts,” that an answer setting up certain matters shall be verified by affidavit, specifies, amongst others, “12. That the contract sued on is usurious.” R. S., art. 1265. Although it may be plausibly urged that the statute in each case contemplates a suit for money on a contract, and that its requirements were made in pursuance of the policy which exacts a sworn answer in order to admit evidence impeaching the consideration of *544a written instrument sued on, or evidence impeaching the justness of an account sued on and supported by affidavit, the fact is potent that the language of the statute is broad enough to exclude evidence of usury in “any case,” where it is sought to be made available as a defense, dr at least in “such causes ” as are founded on an instrument of writing, which even indirectly violates the law as to legal interest. This, however, is an action of trespass to try title, and even if that action in this case could with any propriety be said to be an action on the deed made by the trustee to Aiken, there are special provisions also regulating the rights of a defendant in trespass to try title under the plea of not guilty. Article 4792, in pursuance of what has long been the law in this state, says: “ The defendant in such action may file only the plea of £ not guilty.*3’ . . . Art. 4793. “ Under such plea of ‘ not guilty ’ the defendant may give in evidence any lawful defense to the action, except the defense of limitation, which shall be specially pleaded.” *
The exception does not embrace the defense of usury, and we cannot presume that the omission was an oversight. Construing these various statutory provisions together, we are of opinion that in this action of trespass to try title it was competent for Watson, under his plea of not guilty, to show that the trust sale under which Aiken claimed was invalid, because, by reason of the usurious interest stipulated for, and by reason of the payments made and tendered at the time thereof, the sale was made without authority.
The court did not err in receiving evidence to show the usury, but under the evidence did err in rendering judgment for Aiken.
The judgment is reversed and the cause remanded.
Reversed and remanded.
[Opinion delivered December 20, 1881.]