Stanley v. Westrop

• Decision Date: 01 January 1856
• Citation: Stanley v. Westrop, 16 Tex. 200 (Tex. 1856)
• Parties: LARDNER C. STANLEY AND WIFE v. THOMAS E. WESTROP.
• Court: Texas Supreme Court

16 Tex. 200

LARDNER C. STANLEY AND WIFE

v.THOMAS E. WESTROP.

Supreme Court of Texas.

1856.

The law will not apply a general payment, nor authorize the creditor to apply it, without the consent of the debtor to the payment of usury. [9 Tex. 610;18 Tex. 64;20 Tex. 776.]

General payments made on a usurious contract will be imputed to the principal sum, and not to the usurious interest.

A note given for the usurious interest computed on a previous loan is illegal and void.

Where general payments on a usurious contract equal the principal sum loaned, a note given for the excess of the principal and usurious interest over the amount paid is a note for usurious interest, and is illegal and void.

Error from Harris. Tried before the Hon. Peter W. Gray.

Suit by the defendant in error against the plaintiffs in error on the note of the latter, payable to the former, dated at Houston, June 21, 1853, for $242.50, due October 1, 1853. Answer, that the consideration for which said note was given was unlawful and usurious interest, upon a note for more than twelve per cent., which note has been paid off and discharged. It appeared from the statement of facts, that on the 1st of October, 1851, plaintiff loaned defendant Stanley $500, for which he took his note, payable January 1, 1852, for $537.50; the $37.50 being for interest at the rate of two and a half per cent. a month, which was agreed on. Stanley paid the plaintiff between five and six hundred dollars. When the note sued on was given, the interest at two and a half per cent. per month was calculated on the $500 down to the date of the note sued on, and then the principal, with the $37.50, and the interest were added together, and the payments made by the defendant Stanley were deducted, and the amount specified in the note sued on was found due; and Stanley, by agreement, got his wife to sign the new note with him and took up the old note with a deed of trust on the negro. “We did not split the interest from the principal, in making the calculation, to ascertain the amount for which the note sued on should be given, but the calculation was made as before stated, and this note was given for the amount due on the old note, calculating interest thereon at the rate of two and a half per cent. per month.”

The jury were instructed that if they believed from the evidence that the note in suit was given in consideration of the surrender of a former note and deed of trust, with an extension of time on the balance due on the former note, although it included usurious interest on the former note, the plaintiff was entitled to recover the amount of the note sued on, and also interest on it.

Verdict and judgment for the plaintiff for the amount of the note sued on and interest thereon.

Motion for new trial overruled. The parties disagreed in some respects as to the statement of facts, and the judge, in certifying the same, stated that although the charge of the court in the abstract might be, and he believed was, wrong, yet on the facts, the law of the case seemed to him to be in favor of plaintiff, and therefore a new trial was refused.

J. W. Henderson, for plaintiffs in error, cited Chandler v. Fulton, 10 Tex. 2;Booker v. Gregory, 7 B. Mon. 439.

Palmer & Jordan, for defendant in error. The note sued on was not usurious, as it did not stipulate for a greater rate of interest than is allowed by law. (Hart. Dig. art. 1609; Chadbourn v. Watts, 10 Mass. 121; Wales v. Webb, 5 Cowen, 154; Fowler v. Garrett, 3 J. J. Marsh. 687.)

The note sued on was for the balance of principal on the note for $537.50, and not for the interest on that note, for the interest had been extinguished by the payments made by appellant anterior to the date of the note sued on. (Tread well v. Moore, 34 Maine (4 Red.), 112; Hearn v. Cuthbert, 10 Tex. 216;Moss v. Adams, 4 Ired. Eq. 42; Emery v. Tichout, 13 Verm. 15.)

The intention of both parties to apply the payments made prior to the date of the note sued on to the interest on the $537.50 note, may be inferred from the nature of the transaction, and from the giving of the new note. (West Branch Bank v. Morehead, 5 Watts & Serg. 542.)

WHEELER, J.

It appears indisputably by the evidence that the original contract was for the payment of a greater rate of interest than is allowed by law; and consequently it was illegal and void for the whole amount of interest stipulated for. (Hart. Dig. art. 1609.) The agreement to pay usurious interest was not expressed in the face of the note, but it seems was verbal. In taking up the old and giving the new note, the aggregate amount of principal and interest, computed at the usurious rate agreed upon, was ascertained, the payments deducted from the sum, and the new note given for the balance due. There is no evidence of any agreement to appropriate, or of any appropriation of the payments to the usurious interest, by either party; and the question is how the law will apply them in such case. In Booker v. Gregory, the court of appeals of Kentucky said: “The doctrine we consider as settled, that all sums paid by the borrower to the lender, although at the time of the payment denominated usury, will be treated as payments of the principal and legal interest, at the election of the borrower.” (7 B. Monr. 448.) The law, it seems, will apply the payment to the principal and legal interest, although intended at the time to be applied to the usury. (Id.; Wood v. Gray's Ex'r, 5 Id. 92-3.) In the absence of authority it would seem clear on principle, that the law will not make an application of a payment to effectuate an illegal cnotract. Such an application would involve a contradiction in terms. In Matossy v. Frosh, 9 Tex. 610, 612, 613, the general rules respecting the appropriation of payments were adverted to; but it was not proposed, as it was not necessary in that case to settle definitely, in what manner the law will make the appropriation,...