Blain v. Willson

• Decision Date: 30 June 1891
• Citation: 49 N.W. 224,32 Neb. 302
• Parties: H. M. BLAIN v. H. B. WILLSON
• Court: Nebraska Supreme Court

49 N.W. 224

32 Neb. 302

H. M. BLAIN v. H. B. WILLSON

Supreme Court of Nebraska

June 30, 1891

ERROR to the district court for Hall county. Tried below before HARRISON, J.

AFFIRMED.

O. A Abbott, for plaintiff in error:

The holding in N. E. Mtge. Co. v. Aughe, 12 Neb. 504, is a mere dictum and is contrary to the better rule as held elsewhere. (Porter v. Mount, 3 Am. Law Reg. [N. S.] 493; Wheaton v. Hibbard, 20 Johns. [N.Y.] 291; Schroeppel v. Corniny, 6 N.Y. 107; Tiffany v Boatman's Savings Inst., 18 Wall. [U.S.] 375; 3 Parsons, Cont. [1866 Ed.] 127, and notes.) Especially if the payment is involuntary, it may be recovered back. (Darst v. Brockway, 11 O., 463; Woodworth v. Huntoon, 40 Ill 131.)

Thompson Bros., and Horth & Ryan, contra, cited: Richards v. Kountze, 4 Neb. 206, and cases; New Eng. Mort. Sec. Co. v. Aughe, 12 Neb. 504; Philips v. Gephart, 5 N.W. [Ia.] 683; Sesterhen v. Sesterhen, 60 Iowa 304.

OPINION

NORVAL, J.

The sole question in this case is: Can the maker of a promissory note tainted with usury, who has been compelled to pay it to an innocent purchaser, recover of the original payee a sum equal to the amount of the usurious consideration?

The statute relating to usury provides that "If a greater rate of interest than is hereinbefore allowed shall be contracted for or received or reserved, the contract shall not, therefore, be void; but if in any action on such contract proof be made that illegal interest has been directly or indirectly contracted for, or taken, or reserved, the plaintiff shall only recover the principal, without interest, and the defendant shall recover costs; and if interest shall have been paid thereon, judgment shall be for the principal, deducting interest paid;" etc.

It will be observed that the statute does not provide that, where the borrower has paid usurious interest, he may recover it back in a separate action, but the legislature has in effect said that in an action to enforce a usurious contract, only the principal sum shall be recovered; that the plaintiff forfeits all interest when usury is proven. The meaning of the statute is that the plea of usury can only be set up in a suit upon the usurious contract. The borrower can refuse to pay, and when action is brought against him, he can plead his defense. He cannot pay the usurious interest and then turn around and recover it back. (New England Mtg. Security Co. v. Aughe, 12 Neb. 504, 11 N.W. 753; Latham v. Bldg. Ass'n, 77 N.C. 145; Woolfolk v. Bird, 22 Minn. 341; Quinn v. Boynton, 40 Iowa 304; Philips v. Gephart, 53 Iowa 396, 5 N.W. 683; Ransom v. Hays, 39 Mo. 445; Rutherford v. Williams, 42 Mo. 18; Spurlin v. Millikin, 16 La. Ann. 217; Dickerson v. Bldg. Ass'n, 89 N.C. 37; Hadden v. Innes, 24 Ill. 381; Perkins v. Conant, 29 Ill. 184; Manny v. Stockton, 34 Ill. 306; Ramsey v. Perley, 34 Ill. 504; Nicholls v. Skeel, 12 Iowa 300; Reinback v. Crabtree, 77 Ill. 182.)

In New England Mtg. Security Co. v. Aughe, supra, it was said that "if usury has been paid, and the entire amount of the principal, no action will lie to recover it back. It is not, therefore, an independent cause of action that can be retained after the dismissal of the principal case. It is properly a defense to be set up in an action on the contract."

The meaning of the statute is that the payment of the usurious interest, together with the whole of the principal, should constitute a settlement. If such payment does not, then it would unsettle business transactions. If, however, the contract or note be only partially settled, then the defense of usury could be made.

The statute of Illinois provides that "If any person * * * shall contract to receive a greater rate of interest than ten per cent upon any contract, verbal or written, such person * * * shall forfeit the whole of said interest so contracted to be received, and shall be entitled to recover the principal sum due such person." In construing this statute, the court, in Hadden v. Innes, supra, say: "It is manifest that the legislature had no intention of giving a cause of action to the person who has paid usury, and fails to make the defense when sued for the debt upon which the usury has been paid or agreed to be paid. If he voluntarily pays the sum due and the usury agreed to be paid upon it that is an end of the matter, so far as this statute is concerned. Suppose the party sued upon a usurious note, fails to make the defense authorized by statute, but suffers judgment to go against him for the principal and the usurious interest, and pays it, the statute gives him no right to recover back the interest thus paid, and he can have no greater right when he pays it voluntarily. It was manifest that it was only the intention of the legislature to furnish a shield for defense and not a weapon for attack...