Bandel v. Isaac

• Decision Date: 16 March 1859
• Parties: PHILIP BANDEL v. JAMES W. ISAAC.
• Court: Maryland Court of Appeals

13 Md. 202

PHILIP BANDEL v. JAMES W. ISAAC.

Court of Appeals of Maryland.

March 16, 1859

The 49th section of the 3rd article of the Constitution says " The rate of interest in this State, shall not exceed six per cent. per annum, and no higher rate shall be taken or demanded, and the Legislature shall provide, by law, all necessary forfeitures and penalties against usury." HELD:

1st. That this section does not, of itself, make void, in whole, a contract demanding or exacting more than six per cent. interest; it merely fixes the legal rate of interest.

2nd. That it is for the Legislature, by forfeitures and penalties to make the contract void, either in whole or in part, as to it may seem best, and by penalties punish the party or parties, making such a contract.

3rd. That until the Legislature shall, by law, provide the necessary forfeitures and penalties, the act of 1845, ch 352, remains in force.

4th. That this act relates only to the remedy; that is it prescribes the mode, in which a party seeking to avoid any part of a contract on the ground of usury, shall bring such defence to the notice of the court. Until he does bring such defence to the notice of the court, in legal contemplation it has no existence.

In construing a constitution, the courts must consider the circumstances attending its adoption, and what appears to have been the understanding of those who adopted it, keeping in view the proper office of such an instrument, which is to declare general rules and principles, and to leave to the Legislature the duty of preserving or enforcing them, by appropriate regulations and penalties.

The words in a constitution ought to be taken in their ordinary and common acceptation, because they are presumed to have been so understood by the framers, and by the people who adopted it.

If the people of the State, and their courts had regarded the statutes on the subject of usury as importing a certain thing, whenever the same or equivalent words are employed in a subsequent constitution or statute, the presumption of law is, that they are used in the same sense.

APPEAL from the Court of Common Pleas.

Assumpsit, brought on the 5th of January 1856, by the appellee, the holder, against the appellant, the maker, of a promissory note for $250, dated the 8th of May 1855, payable at seven months, to the order of Michael H. Bandel, and by him endorsed. Plea, non-assumpsit, upon which issue was joined.

Exception. At the trial the plaintiff proved the making and endorsement of the note, and the defence relied upon was that of usury. The proof on the part of the defendant, is sufficiently indicated by the following instructions, which he prayed the court to give to the jury.

1st. If the jury shall believe from the evidence, that the note sued on in this case, was made and delivered to the plaintiff by the defendant, and at the time of doing so, more than the rate of six per centum per annum, was demanded, and paid on the amount of said note for the time it had to run, the plaintiff is not entitled to recover.

2nd. If the jury shall believe from the evidence, that the note sued on in this case, was endorsed by Michael H. Bandel, for the accommodation of the defendant, and without consideration or value given by the said endorser, and the same was used by the defendant, to take up and renew a usurious note held by the plaintiff against the defendant for the same sum, and was delivered by the defendant to the plaintiff, upon taking up and renewing such usurious note and at the time of such transaction, besides the note sued on in this case, the defendant agreed to pay for such renewal in money, at the rate of one per cent. per month, on the amount of said note, for the time it had to run, and actually paid such sum, and the plaintiff thereby became the first holder of said note for value, then the said note was usurious and void, and the plaintiff cannot recover.

3rd. If the jury shall believe from the evidence, that the note sued on in this case, was given as a renewal of an accommodation note for the same sum, drawn by the defendant, dated the 20th of November 1854, which was first negotiated by the plaintiff at the sum of $207.50, and that at the time of said renewal, the note sued on was first negotiated and passed by the defendant to the plaintiff, in consideration of the said first note, and that the plaintiff at the time of the renewal demanded and received from the defendant, in consideration thereof, in addition to the note, the sum of $30, the plaintiff can only recover the sum of $207.50, with legal interest from the 20th of November 1854, after allowing a credit of the sum paid in money at the time of the renewal.

These instructions and each of them, the court (MARSHALL, J.) refused to give, and to this ruling the defendant excepted. The verdict and judgment were in favor of the plaintiff, for the full amount of the note, with interest and costs, and the defendant appealed.

The cause was argued before LE GRAND, C. J., ECCLESTON, TUCK and BARTOL, J.

Jervis Spencer for the appellant:

This case involves the question, as to the validity of a contract in this State tainted with usury, and whether such a contract can be enforced in the courts of the State? It was decided in the Court of Common Pleas, that the courts would not only enforce the contract, but that the plaintiff suing on such a contract, could recover not only the amount of consideration paid in the contract, but the excess too which constituted the usury. It is insisted for the appellant, that the court was wrong upon both propositions.

The 49th section of the 3rd article of the constitution declares; that " the rate of interest in this State, shall not exceed six per cent. per annum, and no higher rate shall be taken or demanded, and the Legislature shall provide, by law, all necessary forfeitures and penalties against usury," and it is upon the true construction and effect of this clause in the organic law of the State, that the question arising in the present case must be decided.

By the 3rd article of the Bill of Rights, " All acts of Assembly, in force on the first Monday of November, eighteen hundred and fifty, except such as may have since expired, or may be altered by this constitution, " are continued in force. By this it will be seen, that the constitution does not undertake to repeal any law by special reference, but declares all laws inconsistent with its provisions void. The act of 1845, ch. 352, cannot be a subsisting act, since the adoption of the constitution, for a simple comparison of this act with the clause of the constitution now in question, will show the law to be inconsistent with it. The latter, in plain, positive and direct terms, says, that " no higher rate than six per cent. interest, shall be taken or demanded," while the former says, that more than six per cent. interest may be taken, demanded and recovered, unless the party chooses specially to plead the usury, and he can only do that upon the condition, that he pays the sum actually loaned with legal interest. The act of 1845, virtually repeals the law of 1704, and leaves the morals of the law of usury, to each individual who may happen to have a case involving the question, whereas the constitution comes in and says, there shall be a paramount policy which shall govern all cases, and further provides, that the Legislature shall pass laws imposing penalties upon usury. It clearly denounces the usury, and all that it leaves to the Legislature to do, is the imposing of forfeitures and penalties therefor. No more than six per cent. shall be taken or demanded, and this prohibition is the same, as if the constitution had said, no money shall be recovered upon any contract in consideration of illicit intercourse or any other immoral act, or crime, and that the Legislature should impose penalties therefor. It is not necessary that a penalty should be imposed, in order to avoid the contract, for if the Legislature should impose such penalty, the contract would only be void by construction, and the imposition of such a penalty could have no more effect in avoiding the contract, than the declared policy of the constitution. This provision in relation to usury, is the same as that in the 5th section of the 3rd article, in reference to lotteries, which declares, that " from and after the first day of April, eighteen hundred and fifty-nine, no lottery scheme shall be drawn, for any purpose whatever, nor shall any lottery ticket be sold in this State."

But this very provision has been construed by Chief Justice Taney, in the case of Dill vs. Ellicott, in the Circuit Court of the United States, and that eminent jurist was clearly of opinion, that this clause of the constitution does, of itself, avoid the contract, and upon the reasoning and authority of that opinion, this argument may well be rested. It is there decided, that though the constitution does not say in express terms, that the contract shall be void, yet that a contract to do an act forbidden by law, is void, and cannot be enforced in a court of justice; that courts are instituted to carry into effect the laws of a country, and they cannot become auxiliary to the consummation of a violation of law; that no court of justice can, in its nature, be made the handmaid of iniquity.

In the case of Territt, et al., vs. Bartlett, 21 Verm., 184, it was held, under the statute of Vermont, which prohibited the sale of spirituous liquors in that State, except under license to sell for certain specified purposes, that parties in New York, who had sold liquors to a person residing in Vermont, knowing that the latter intended to sell them without license, and in violation of this law, could not sustain an action...