Broom v. Scottish Mortg Land Inv Co of New Mexico

• Decision Date: 05 March 1894
• Docket Number: No. 1,028,1,028
• Citation: 153 U.S. 318,38 L.Ed. 729,14 S.Ct. 852
• Parties: McBROOM v. SCOTTISH MORTG. & LAND INV. CO. OF NEW MEXICO, Limited
• Court: U.S. Supreme Court

153 U.S. 318

14 S.Ct. 852

38 L.Ed. 729

McBROOM

v SCOTTISH MORTG. & LAND INV. CO. OF NEW MEXICO, Limited.

No. 1,028.

March 5, 1894.

Frank Springer, for plaintiff in error.

Andrieus A. Jones and Eugene A. Fiske, for defendant in error.

[Argument of Counsel from pages 319-320 intentionally omitted] Mr. Justice HARLAN delivered the opinion of the court.

The defendant in error, the Scottish Mortgage & Land Investment Company of New Mexico, Limited, is a private corporation organized under the laws of Great Britain for the purpose, among others, of lending money in this country on the security 'of real or heritable or of leasehold estate,' or 'of cattle, sheep, or other live stock, and movable goods and chattels.'

That company agreed to loan McBroom, the plaintiff in error, the sum of $65,000, payable six years after date, with interest at the rate of 12 per cent. per annum. As evidence of the loan, he executed and delivered his principal note for the above amount and six interest notes, one for $2,842.19, payable December 31, 1886, five for $7,800 each, payable, respectively, December 31, 1887, 1888, 1889, 1890, 1891, and 1892, and one for $4,965, payable August 20, 1892. These notes were secured by a deed of trust upon certain lands and by a chattel mortgage upon cattle, horses, and other personal property.

The amount so borrowed was paid to McBroom by the company in the latter part of September, 1886, and out of the sum received he paid to Dinkel, the company's agent in New Mexico, through whom the loan was negotiated, the sum of $6,500.

McBroom's interest note for $2,842.19, falling due December 31, 1886, was paid by him at its maturity. Aside from the bonus of $6,500 received by the company's agent, no other payment on account of this debt has ever been made.

By the statutes of New Mexico, it is provided that 'in written contracts for the payment of money it shall not be legal to recover more than twelve per cent. interest per an- num;' that 'any person, persons, or corporation who shall hereafter charge, collect, or receive from any person a higher rate of interest than twelve per cent. per annum shall be guilty of a misdemeanor, and upon conviction thereof before the district court or a justice of the peace shall be fined in a sum of not less than twenty-five dollars nor more than one hundred dollars; and such person, persons, or corporation shall forfeit to the person of whom such interest was collected or received, or to his executors, administrators, or assigns, double the amount so collected or received upon any action brought for the recovery of the same within three years after such cause of action accrued;' and that 'the provisions of this act shall also apply to any person, persons, corporation, or officer of the same who may charge, receive, or collect a higher rate of interest than twelve per cent. per annum by means of discount, commission, agency, or any other subterfuge.' Act April 3, 1884 (Sess. Laws N. M. 1884, c. 80); Comp. Laws N. M. 1884, §§ 1736-1738.

McBroom brought this action under the above statute to recover from the defendant in error double the amount alleged to have been collected and received by the corporation in excess of the legal rate of interest. The declaration, in one count, charges that the $6,500 paid to the company's agent, and the $2,842.19 paid in discharge of the interest note maturing December 31, 1886, were in excess of what the company was authorized by the statute to charge, collect, or receive, and upon that basis judgment was asked for $18,660.20. At the trial the plaintiff withdrew all claim except for an amount double the sum of $6,500 paid to Dinkel, the company's agent.

There was a verdict and judgment against the company for $13,000. The judgment was reversed by the supreme court of the territory, and the cause was remanded with directions to proceed in accordance with the opinion of that court. Subsequently, at the request of McBroom in order to facilitate an appeal by him to this court, the judgment was so modified that a venire de novo was not awarded, and, upon the facts in the record, the supreme court of the territory adjudged that the company go hence without delay, and recover its costs in that court as well as in the court of original jurisdiction. The judgment of the court below, therefore, became a final one. 30 Pac. 859.

The general grounds upon which the court below proceeded were that the contract in question was valid to the extent of the principal sum and the legal interest; that all payments made by the borrower, whether such payments were made on account of usury or as bonus or commission, should be applied in reduction of the debt; and that the borrower was not entitled to recover the statutory penalty while any portion of the amount really loaned, with legal interest, after crediting all payments, remained unsatisfied.

If, when receiving the bonus of $6,500 from the borrower, Dinkel, the agent of the defendant in New Mexico, represented his principal, the contract in question was usurious; for that sum and the aggregate amount of the notes given for interest exceeded the highest rate of interest that could be charged, collected, or received, under the laws of New Mexico, on the sum loaned to McBroom. Upon this point the court below said: 'In the view that we have taken of the matter, it is immaterial to determine whether Dinkel was an agent or whether, as an officer, he was a part of the corporation, so that a transaction with him was a transaction with the corporation itself; for the fourth article of the agreement between him and the home office, as already shown, provided that all such commissions and bonuses should inure to the benefit of the company. In view of this provision of his contract, and of the fact that the company had knowledge of each step taken by him, it is to be presumed that he was acting for the company. The facts in this case bring it clearly within the rule laid down by the supreme court of the United States in the case of Fowler v. Trust Co., 141 U. S. 384, 12 Sup. Ct. 1, wherein a foreign corporation (whose agent in the state accepted a commission from the borrower on loans procured from such foreign corporation) was held to have received the proceeds of the usurious transaction, the commission paid to the agent being in excess of the highest rate of interest allowed by law.' We entirely concur in these views. The statute of New Mexico does permit the receiving of usurious interest, by way of, or under the guise of, 'discount, commission, agency, or other subterfuge.'

Was the contract between the parties void as to the amount loaned, with legal interest thereon, because it provided for, or in its execution involved, the payment of usurious interest? The plaintiff insists that it was, and, consequently, that a cause of action accrued immediately upon the payment of the bonus of $6,500 to the company's agent, or at least from the first payment of interest for a fixed period. This question must first receive attention.

Of course, effect must be given to the intention of the legislature as manifested by the words of the statute, interpreted according to their natural signification. And, in ascertaining that intention, all of its provisions must be considered together. As said in Harris v. Runnels, 12 How. 79, 84: 'Before the rule can be applied in any case of a statute prohibiting or enjoining things to be done, with a prohibition and a penalty, or a penalty only for doing a thing which it forbids, the statute must be examined as a whole to find out whether or not the makers of it meant that a contract in contravention of it should be void, or that it was not to be so. In other words, whatever may be the structure of the statute in respect to prohibition and penalty, or penalty alone, that it is not to be taken for granted that the legislature meant that contracts in contravention of it were to be void, in the sense that they were not to be enforced in a court of justice.' So, in Pratt v. Short, 79 N. Y. 437, 445: 'A prohibitory statute may itself point out the consequences of its violation, and if, on a consideration of the whole statute, it appears that the legislature intended to define such consequences and to exclude any other penalty or forfeiture than such as is declared in the statute itself, no other will be enforced, and if an action can be maintained on the transaction of which the prohibited transaction was a part, without sanctioning the illegality, such action will be entertained.' See, also, Pangborn v. Eastlake, 36 Iowa, 546, 549, and authorities there cited.

The statute of New Mexico does not declare a contract providing for usurious interest to be absolutely void in respect to the amount loaned and legal interest thereon, but only imposes a fine upon any person or corporation charging, collecting, or receiving a higher rate of interest than 12 per cent. per annum, and forfeits to he person from whom such interest is collected or received, or to his executors, administrators, or assigns, double the amount so collected or received; the action to recover such penalty to be brought within three years after the cause of action accrues. Construing secions 1736, 1737, and 1738 together, the statute does not prohibit the recovery of the amount loaned, with legal interest. No such consequence as the forfeiture of the principal and legal interest is visited upon the lender. And that seems to be the view expressed by the supreme court of the territory of New Mexico when, construing the local statute, in Milligan v. Cromwell, 3 N. M. 330, 9 Pac. 359, it said: 'If it should not be legal to recover more than 12 per cent. interest per annum upon written contracts, the converse of that proposition would seem to follow as a necessary consequence that it shall be lawful to recover on such contract 12 per cent. interest per annum.' It is true that, by necessary implication, the contract is void...