Bailey v. Hlumpkin

• Decision Date: 31 March 1846
• Docket Number: No. 61.,61.
• Citation: 1 Ga. 392
• Parties: Samuel T. Bailey, plaintiff in error. vs. Henry H.Lumpkin, defendant in error.
• Court: Georgia Supreme Court

1 Ga. 392

Samuel T. Bailey, plaintiff in error. vs. Henry H.Lumpkin, defendant in error.

No. 61.

Supreme Court of the State of Georgia

MARCH TERM, 1846.

This was a rule to foreclose a mortgage on real estate, in the Superior Court of the county of Houston, at the instance of the plaintiff in error, as the assignee of Nathan H. Real, against the defendant in error.

In compliance with the rule to foreclose, the defendant in error, who was the mortgagor, appeared in court, and disputed, upon oath, the amount claimed to be due, and denied that more than twenty-seven hundred dollars, was due upon the mortgage; alleging that the mortgage, as well as the note, to secure which it was given, except the sum of twenty-seven hundred dollars, was void for usury. The defendant in error then proceeded to file the plea of usury, setting forth circumstantially the originaltransaction, and the usury exacted, and several subsequent renewals, and the usury exacted thereon, and also divers payments made by the defend ant in error upon said transaction, and claiming that they should be deducted from the original amount loaned, which, if done, would leave the amount above mentioned as the balance due.

At the April Term, 1846, the said rule to foreclose, and the issue thereon made by the defendant's plea of usury and payments, as aforesaid, came on to be tried on appeal in said Superior Court, before Judge Floyd, when the plaintiff in error moved to strike out the plea or affidavit of the defendant in error, on the ground that the statutes of Georgia did not contemplate or authorize the setting up of usury at law against a mortgage, on his proceedings under a rule to foreclose his mortgage. Which motion was overruled by the court, and the plaintiff in error excepted.

The counsel for the plaintiff in error then introduced, and read in evidence to the special jury, the note and mortgage described in the rule nisi, and then closed his case.

It appeared that Nathan H. Beal, the original payee and mortgagee in said note and mortgage, had assigned the same to the plaintiff without recourse.

The counsel for the defendant in error then introduced the said Nathan H. Beal as a witness, to prove the usury and payments alleged in the plea; to whose competency, for that purpose, the plaintiff in error objected, which was overruled by the court below, and the witness was ordered to testify. To all which the plaintiff in error excepted.

The witness, Beal, testified as to the usury, and as to the payments made upon the renewals, &c. He also testified, that before he assigned the note and mortgage to the plaintiff, that himself, with plaintiff and defendant, had an interview, in which the defendant urged both of them, witness and plaintiff, to use their best exertions with certain legatees, who were to receive the proceeds of said note and mortgage, to get indulgence for him until the next fall or Christmas, when he would pay every dollar of the same, principal and interest. That the defendant did not disclose to the plaintiff that there was any usury in said note, nor any other objection to its validity; nor did the witness disclose to the plaintiff that the transaction on which the note and mortgage were given was tainted with usury. Shortly after this interview, on the same day, the plaintiff became possessed of the note and mortgage, by the assignment of witness, and gave to the defendant the indulgence desired by him. From aught that appeared upon the trial, the plaintiff was an innocent holder without notice. The defendant's counsel here closed their case. The plaintiff then produced a letter addressed to him by the defendant, dated Houston, January 20th. 1844, (being the day after the note and mortgage were assigned to plaintiff,) as follows, to wit:

"Col. S. Bailey:

"Dear Sir — I feel a considerable anxiety to know the event of the settlement made at Perry, between Beal and Bostwicks, so far as I am interested. Will you be so good as to write me what disposition was made of my paper held by Beal, if any? I well know I have nothing to claim from the Bostwicks, but from Beal much. I am fully apprised he hasbeen disposed to deal hard with roe, but he should recollect, if he sues me, I can claim the advantages of the law, and most assuredly I will do so under existing circumstances; but, if waited with till the end of the present year, i will pay every dollar of the debt. I only ask this of Beal; he should grant it me. Will you be so good as to say to me by letter if Beal or the Bostwicks control my note at this time; and, if Beal has put it out of his control, what course will be taken by those who control it. Your answer to this in full will very much oblige your friend.

"Respectfully yours,

" Answer me at Perry."

H. H. Lumpkin."

And proved the said letter to be in the handwriting of the defendant, and offered to read it in evidence upon said trial, when the counsel for the defendant objected, and the court below sustained the objection, and the letter was rejected. To which the plaintiff in error excepted.

After argument to the jury, the court below charged, that, by the laws of Georgia, neither legal nor usurious interest could be recovered on a contract tainted with usury; and that it made no difference whether the contract was in the hands of the payee or of an innocent transferee; and that any payments of either legal or usurious interest made at any time on previous or prior renewals, must be deducted out of the sum originally loaned, and that the balance was all that the plaintiff was entitled to recover. To which charge of the court below the plaintiff in error excepted.

The plaintiff in error then requested the court below to charge the jury as follows:

1st. The plaintiff on the forclosure of a mortgage, when the defendant sets up the plea of usury, is entitled to principal and legal interest.

2d. That where there have been renewals and payments of interest made, the note sued on being for eight per cent, defendant can not deduct, from the note sued on, the interest paid on renewals.

3d. That the defendant, knowing that the note was about to be transferred by said Beal, and not notifying the plaintiff that there was any usury to be plead against the note, but representing to the plaintiff that it would be fully paid, he could not set up usury against the plaintiff.

Which the court below refused, but charged the jury that the contrary thereof was law. To which the plaintiff in error excepted.

S. T. Bailey, in propria persona.

As to the first ground, that the court refused our motion to strike out the defendant's plea of usury, we think from reading the words of the statute, (Prince, 424,) it will appear that the court erred; the statute changed the former law; it is therefore to be construed strictly. It provides for the mortgagor to set up a defence to this summary proceeding: a proceeding intended not to supersede the old mode of foreclosure by bill, but cumulative of that, and for the facility of the mortgagee. But the door of equity is still left open to both mortgagee and mortgagor, if justice requires it, or they have cause. Wherefore, the Legislature confines the mortgagor to only two grounds of defence in this summary proceeding: it declares that if payments have been made, and yet not credited, or if there are sets-off which ought to be allowed in equity, themortgagor may make oath thereof: hence, the maxim of law applies, that when a statute includes by enumeration one or more of a class of rights conferred, it is an exclusion of all others; or, in mathematics and logic, an exclusion of a conclusion. It can not be said, with reason, that because the statute has said to the defendant, that he may come in and set up two specified defences, he is therefore entitled to set up any defence. Expressio unius est exclusio alterius.

He can not swear that he has made payments that have not been credited; he swears they have been allowed and credited on the renewals; he can not swear that he has sets-off that ought to be allowed in equity; such sets-off are unknown to equity, even of the usury paid, much less of legal interest paid; even as against the original payee, much less is it allowed against a transferee for valuable consideration, as we shall show hereafter.

As to the second ground, that Beal was not a competent witness, we rely on the well-settled principle, that if the witness is interested in favor of the party producing him, he is incompetent, but not for the other, to some extent. Now, the record shows that Beal transferred the mortgage without recourse, so that he is secure, although the plaintiff fail to recover. But if the rule is, as laid down by the court below, that usurious interest is recoverable back, then, if the defendant fail, and the plaintiff recover the full amount of the note, he can recover it back out of Beal. A party for whose use an accommodation note is made, is incompetent for the one who has used his name.—1 Greenieaf Ev. sec. 401. But it seems to us that the court below was led into what we deem, most respectfully, the many errors which it committed, chiefly from having taken for granted that usurious contracts are void, and not merely illegal, aided perhaps by its repugnance to usury. If this proves to be a fallacy, as we hope to maintain, then the whole structure falls to the ground. We will endeavor to show that such contracts are only illegal, and not void; and so recoverable in the hands of an innocent holder.

It requires no authority to convince or inform this court that a contract may be illegal, and yet not void; that contracts not malum in se, but only prohibited, without a declaration of their nullity ab initio, are only voidable, and are binding in the hands of innocent holders. Mr. Chitty says: " Illegality of consideration is no defence to an action on a contract in the hands of a bona fide holder, unless it is expressly declared to be void by the Legislature."—Chitty on Bills. 86-...