Smith v. Stoddard

• Decision Date: 06 May 1862
• Citation: 10 Mich. 148
• Court: Michigan Supreme Court
• Parties: John S. Smith v. Charles M. Stoddard and others

10 Mich. 148

John S. Smith v. Charles M. Stoddard and others

Supreme Court of Michigan

May 6, 1862

Heard April 25, 1862; April 26, 1862

Appeal in Chancery from Wayne Circuit.

Decree modified as to credit the defendants with $ 49 and interest at ten per cent from the date of the mortgage.

Walker & Kent, for complainant:

Usury in the previous transactions does not affect the $ 500 of principal in the note in suit: 3 T. B. Monr., 346; 3 J. J Marsh., 682; 6 Metc. 296; Craig v. Butler, 9 Mich 21.

The $ 49, it is insisted, on the evidence, was given for legal interest. But if not, it is claimed to be still recoverable. A note given for a prior liability is a payment: at least if the creditor choose so to regard it. The fact that the note is given for usury due on a previous contract, does not show that it is without consideration: 30 Me. 118. The usurious contract, not being void under our law, could have been enforced in another State, though not here; and the debtor, by giving the note, is discharged from his liability of being compelled to pay the usury by a suit in some other State: 32 N. H., 582; 7 Metc. 14; 12 Vt. 464.

Is a note given in payment of usurious interest void because usurious in the sense of our statute? There is a sense in which a note given in payment of usurious interest, may be said to be given upon a contract whereby a greater rate of interest has been reserved, than is allowed by law. But in precisely the same sense the same thing may be said of the note of a third person given in payment of a usurious contract. But such a note is not usurious: 9 Mich. 21. It would seem, then, that the words of our statute "made or given for or upon a consideration or contract," are to be understood not in their broadest meaning, but in a more restricted sense. They must be understood as referring to the giving of a note or bill in connection with the making of an usurious contract, and as a part thereof, and not to a note or bill given in payment of a previous usurious contract. With this construction our statute has not altered the law as to what contracts are usurious, and notes given in payment of usurious contracts are not so. 8 N. H., 276; 9 Mass. 46; 9 Mich. 21.

Knight & Jennison, for defendants:

The abrogation of the penal features of the statute only opens it to more liberal construction to effectuate its policy: 12 Ohio 153; 11 N. Y., 375; 3 Metc. 526.

When usurious paper is renewed by giving new paper in payment or as a substitute for the usurious paper, unless the new paper is entirely purged of the usury, the statute applies, and a deduction is to be made of all the usurious interest which may have been reserved or taken: 15 Mass. 96; 10 Mass. 121; 22 Me. 184; 25 Me. 33; 31 Me. 415; 3 How. 62; 8 Cow. 685; 9 Cow. 647; 20 Johns. 285; 6 Wend. 415; 21 Wend. 415; 21 Vt. 123; 5 N. H., 376.

The statute is not avoided even where the paper taken is that of a third party: 30 Me. 120; 2 N. H., 335; 1 Greenl. 167; 25 Me. 33.

OPINION

Campbell J.:

This is a bill filed to foreclose a mortgage, and the defense of usury is set up. The mortgage in controversy is for $ 549, and no usury is alleged to have been exacted or agreed upon under it, but the transactions complained of were anterior. It appears that a loan of $ 500 was made in November, 1856, and another of $ 300 in April, 1857, on both of which unlawful interest was paid. That in July, 1857, all the back interest was paid up, and the principal reduced to $ 500, for which a new mortgage was given, the old securities being cancelled. Subsequently $ 300 of this principal was paid up, and unlawful interest was also paid in money from time to time. Additional loans of $ 100 and $ 200 were afterwards made in 1858, on which excessive interest was in like manner paid. On the 18th of July, 1859, this entire principal of $ 500 remained unpaid. The mortgage in controversy was, on that occasion, given for $ 549, which was for the principal due, and for due bills held by complainant for back interest. The old mortgage was released, and the new one given on a part only of the premises covered by that. Defendant Stoddard is the only borrower throughout.

These are the facts as we deduce them from the pleadings and evidence, and are all that we deem material to dispose of the case. There are several matters in proof which we have not referred to, because we do not regard them as important.

The mortgage in suit is a new security, given with its accompanying note upon a complete settlement of all the former transactions. The sum of $ 500 embraced in it is money actually lent by c...