Commercial Bank v. Auze

• Decision Date: 12 April 1897
• Court: Mississippi Supreme Court
• Parties: COMMERCIAL BANK v. WILLIAM C. AUZE ET AL

21 So. 754

74 Miss. 609

COMMERCIAL BANK v. WILLIAM C. AUZE ET AL

Supreme Court of Mississippi

April 12, 1897

March 1897

FROM the circuit court of Lincoln county HON. ROBERT POWELL Judge.

The facts are sufficiently stated in the opinion.

Affirmed.

Cassedy & Cassedy, Chrisman & Brennan, and J. B. Chrisman, for appellant.

1. The action is based on § 2348 of the code of 1892, which did not take effect until November 1, 1892, and the contracts by and upon which it is claimed usurious interest was stipulated and received, were made respectively, January 27 and June 18 1892. The suit is for all interest paid, both lawful and usurious. Under the law in force at the time of the contract only the excess over the lawful interest could be recovered. Sec. 1141, code of 1880; Dickerson v. Thomas, 67 Miss. 777. The statute is penal, and should be strictly construed. Statutes are never given a retrospective operation if any other construction can be given them. Planter's Bank v. Snodgrass, 4 How. (Miss.), 621; Wade on Retroactive Laws, secs. 34-36; Hooker v. Hooker, 10 Smed. & M., 599; Garrett v. Beaumont, 24 Miss. 377; Carson v. Carson, 40 Miss. 349; Black on Interpretation of Laws, 259; Tyler on Usury, 374.

2. The money sought to be recovered back was received in Louisiana, it being part of the payment mentioned in the declaration as made December 1, 1894 ($ 3, 194.50), the payments previously made not being sufficient to extinguish the principal, and to its payment the law would first apply them. McBroom v. Scottish Mtg. & Land Investment Co., 153 U.S. 318. No action, therefore, accrued to the plaintiffs in this state, and the statute will not be given an extraterritorial operation. Black on Interpretation of Laws, 91.

3. The evidence of Auze, showing what was said and done by and between the parties, notwithstanding his unqualified declaration that the contract was made in this state, establishes beyond controversy that it was made in Louisiana. What, according to his version, was said in Brookhaven between himself and Becker, the cashier of the bank, prior to the execution of the notes and mortgages, was mere negotiation, a simple application for a loan, and a proposition to secure it by a mortgage on lands in Louisiana. If nothing more had occurred, it will hardly be claimed that the appellees could have had specific performance on bill filed for that purpose, tendering to execute the security, or a recovery at law for a breach of the contract. The contract would date from the place of acceptance, and would be governed, as to its validity, by the law of that place. 3 Am. & Eng. Enc. L., 852-857; 13 Am. Dec., 281; 99 Am. Dec., 663 and note.

The rights of parties to a promissory note is determined by the law of the place where it is delivered. 4 Dallas (U.S.), 60.

The proposition of Auze that the bank should make him a loan, and he to secure it by a mortgage on lands in Louisiana, was accepted by Brennan, the agent of the bank, and the notes and mortgages executed and delivered in Louisiana, and the obligation of the bank to advance the money dates from this time. From that moment, for the first time, a contract existed between the parties, valid by the law of the place, and susceptible of being specifically enforced by either party. The money borrowed was for the use of Mrs. Auze, secured by mortgage on her property in Louisiana; the debt was her debt. Her power to contract it, and mortgage her lands to secure it, were granted, on her application, by the courts of that state. She had no power, under the laws of her residence, to make the contract until it was authorized by the proceedings for that purpose, and these proceedings were had, and the respective notes and mortgages were executed and delivered at the same time and place. Being a resident of Louisiana, and the lands with reference to which she contracted being situated there, she could not, by reason of her marital disability, have made such a contract in this state, and this ought to be conclusive as to the place of the contract.

The instructions given for the plaintiff are clearly erroneous in authorizing a recovery for all interest paid. They should have limited the recovery to the excess only, as under the code of 1880, rather than authorizing a recovery under the code of 1892. The two code provisions are materially different, § 1141 of the code of 1880 providing "that if a greater rate of interest than ten per cent. shall be stipulated for in any case, all interest shall be forfeited;" § 2348 of the code of 1892 that, "if a greater rate of interest than ten per cent. shall be stipulated for or received in any case, all interest shall be forfeited, and may be recovered back, whether the contract be executed or executory."

In support of the proposition declaring the right to contract with reference to the laws of another state touching the subject of usury, we cite the following authorities, relying confidently upon them to demonstrate the error of the court in refusing the instructions on that subject: Brown. Bros. v. Freeland & Murdock, 34 Miss. 181; Tiedeman on Com. Paper, sec. 511; 23 Am. St. Rep. (79 Tex., 246), 332, and Bkte, 340; 32 Am. St. Rep. (83 Iowa 120), 294; 48 Am. St. Rep. (90 Iowa 300), 442, and note 446; 47 Am. St. Rep. (116 N. C., 882), 841; 88 U.S. 241; 31 Am. Dec., 264; 88 Ga., 756; 15 S.E. 812; 48 N.W. 638; 58 Hun (N. Y.), 608; Sturdevant v. Memphis National Bank, 9 U.S.C. C. App., 256.

Our contention on this branch of the case is, in short, that the parties, being residents of different states, had a right to contract either in Mississippi or Louisiana as to the rate of interest with reference to the laws of either state; that, in the absence of proof as to the law with reference to which the parties contracted, the presumption is that the contract was made with reference to the laws of that state where the rate of interest stipulated for was lawful rather than the one where it was unlawful; and that the notes, mortgages, court proceedings, and the facts surrounding the transaction, as disclosed by the evidence, leave no room for doubt that the parties actually did contract, as to the rate of interest, with reference to the law of Louisiana, and that, having done so, the case made is not one where the penalties of the Mississippi statute can be imposed or is at all applicable.

R. H. Thompson, for appellees.

The third plea was demurred to, and the demurrer sustained. The plea was to the first payments, aggregating $ 1, 252.77, and it averred that the plaintiffs could not recover on account of them, because they were made more than one year before the beginning of the suit. The demurrer to this plea speaks for itself. The plea was to the whole declaration, and set up only a partial, if any, defense. The suit was not for the recovery of the specific payments mentioned in the plea; these payments went to pay the sum actually borrowed, and suit could not have been brought for anything until the whole money borrowed, without interest, was repaid. This is shown not to have been done until within a year before suit brought.

"In accordance with the rule that payments made to the creditor will be applied to the valid part of the debt, it has been held that so long as the whole amount paid does not exceed the debt and lawful interest, the debtor cannot maintain an action to recover back." 27 Am. & Eng. Enc. L., 961. Of course, this is said, so far as lawful interest is concerned, as to the law of a forum where only excessive interest can be recovered. The rule is equally applicable where all interest can be recovered. Josey v. Davis (Ark.), 18 S.W. 185; Hawkins v. Welch, 8 Mo. 490; Tyler on Usury, 421 et seq.

It is also submitted that this action is not for "a penalty or forfeiture on any penal statute" within the meaning of § 2741, code 1892, and that the one year statute of limitations has no application. While the usury law, § 2348, code of 1892, may be in one sense penal, yet, in a broader and truer sense, it is remedial. In so far as it gives a right of action to sue, it is purely remedial. Even statutes authorizing an action to be brought to recover usury paid within a limited time are regarded as cumulative, and not as prohibiting the common law action at any time within which such action may be brought. 27 Am. & Eng. Enc. L., 962, and authorities cited.

It must be borne in mind, in the consideration of this case, and especially of the fourth plea, that every loan and borrowing of money embraces two contracts--(1) the lender's contract, by which he agrees to advance the money upon the terms stipulated. This contract is rarely in writing; and (2) the borrower's contract, by which he obliges himself to repay the debt. This, the borrower's contract, is most frequently in writing, and is evidenced by the promissory notes given to the lender. It is the first, the lender's contract, which is condemned by statute, when a greater rate of interest is stipulated for than ten per cent. The one contract is not necessarily made at the same place with the other. The agreement to loan by a banking corporation, like appellant, is usually made at its banking house; the notes which evidence the borrower's obligations to repay, may be executed elsewhere, and are frequently so executed.

In the case of Martin v. Johnson, 8 Lawyers' Reports Annotated, 170, decided March 1, 1890, the supreme court of Georgia says: "The contract of lending and borrowing always includes two agreements--one by the lender to deliver the money, and the other by the borrower to repay it. As the pleas do not allege that the agreement to deliver the money was to be performed elsewhere, the place of delivery was Georgia. It was in the performance of this agreement that the...