Moncrief v. Falmer

• Decision Date: 06 July 1921
• Docket Number: No. 506.,506.
• Citation: 114 A. 181
• Parties: MONCRIEF v. FALMER et al.
• Court: Rhode Island Supreme Court

114 A. 181

MONCRIEF

v. FALMER et al.

No. 506.

Supreme Court of Rhode Island.

July 6, 1921.

Appeal from Superior Court, Providence and Bristol Counties; Willard B. Tanner, Presiding Justice.

Bill in equity by James A. Moncrief against Edwin I. Palmer and others for relief against an alleged usurious transaction. From a decree dismissing the bill on demurrer thereto, complainant appeals. Reversed, and cause remanded for further proceedings. See, also, 110 Atl. 613.

Clarence N. Woolley, of Pawtucket, for appellant.

Frank L. Hanley, of Providence, fov appellees.

SWEETLAND, C. J. This is a bill in equity praying that a certain note made by the complainant to the respondent Palmer for money loaned be declared usurious and void and be surrendered to the complainant; that a certain mortgage deed of personal property given by the complainant to said Palmer as security for the payment of said note be canceled; and that the respondent Palmer be restrained from alienating said mortgage and note, and from foreclosing said mortgage.

The complainant in his bill makes no offer to pay to the respondent Palmer the money loaned with legal interest. On demurrer a justice of the superior court held that under the allegations of the bill the transaction was usurious, but dismissed the bill on the ground that payment or a tender of payment constituted a condition precedent to the granting of the equitable relief sought. The cause is before us upon the complainant's appeal from the decree of the superior court.

The provisions of the Rhode Island statute with reference to usury are drastic. Chapter 434, Public Laws 1909, amended by chapter 838, Public Laws 1912. The violation of the act is punishable as a misdemeanor, every contract made in violation of it is void, and the borrower may recover in an action at law not only the interest, but any portion of the principal paid by him upon such usurious contract. The complainant's solicitor has presented to us a very comprehensive and able argument in support of his contention that equity should recognize the view of public policy emphatically expressed in the legislative act, and should cancel the usurious and void contract. This argument would have more persuasive force if the question were a new one. The settled and nearly universal practice of courts of equity is opposed to the complainant's contention. The statutes of different states have various provisions directed towards the prevention of the extortion and oppression of usury. Whatever may be the method adopted by the Legislature, however, although the legislative provision may go to the limit of our statute and declare the contract void and unenforceable, nevertheless courts of equity, in the absence of statute specifically constraining them to act differently, have insisted upon the equitable principle that he "who seeks equity must do equity," and have required the borrower, before he can be given the relief of cancellation of the contract, to perform the moral obligation resting npon him and pay or offer to pay the principal of the loan with legal interest.

The opinion of Mr. Justice Shlras in Missouri v. Krumseig, 172 TJ. S. 351, 19 Sup. Ct. 179, 43 L. Ed. 474, upon which the complainant places much reliance, is based upon the construction given to a Minnesota usury statute by the Supreme Court of that state. Said statute provides that the courts may enjoin any proceeding upon an instrument given in violation of the statute and order the same canceled and given up. The Supreme Court of Minnesota found in other provisions of the statute the legislative intent that such injunction and order should be made, although the borrower did not offer to pay the debt with legal interest. Complainant's counsel finds some support for his argument in the opinion of the court in the early Massachusetts case of Hart v. Goldsmith, 1 Allen (Mass.) 145, in which a borrower who brought a bill to redeem mortgaged premises was held to be entitled to the benefit of the statutory penalty for usury in reduction of the sum payable upon the mortgage. This has been followed in later Massachusetts cases. The court in that case appears to have been affected to some extent by the provision of the Massachusetts usury statute providing that the borrower might recover the penalty for usury by a bill in chancery. We do not think it can be said fairly that in Hart v. Goldsmith, supra, the Massachusetts court intended to create an exception to the ordinary rule. We are of the opinion that we should conform to the generally accepted equitable principle. 1 Story Eq. Jur. (14th Ed.) § 424.

The complainant further contends that, if under the allegations of his bill a court of equity cannot properly grant him the relief of cancellation of said note and mortgage, nevertheless under said allegations the bill should not have been dismissed, but should have been retained by the court for the purpose of restraining the threatened foreclosure of the mortgage. By "foreclosure" the complainant intends the exercise by the respondent Palmer of the power of sale contained in said mortgage. The complainant bases this contention upon...