This is a bill to redeem several mortgages and charges, among other things, usury on the debts secured by the mortgages. Carpenter and Cozzens, of counsel for the plaintiff, moved for an order to examine the plaintiff touching the charges of usury, and referred to the Digest of 1844, page 286, section 2d, in support of the motion.
This section provides that, "If any action or suit shall hereafter be commenced upon any bond, specialty, agreement, contract, promise or assurance, whatever, which shall be made within this State, after the passing of this act, and the defendant shall allege by special plea that a higher or greater interest than the rate aforesaid was taken or was therein or thereby secured or agreed for, the court shall and may admit the defendant as a legal witness upon the issue joined in such action or suit, to testify relative to the motive and circumstances of such agreement, and shall also, on motion of the plaintiff, admit such plaintiff as a legal witness in like manner."
This motion was resisted by Bradley, of counsel for the defendant, upon the ground that the provisions of the act referred to, applied only to suits at law, and not to a bill in equity.
It is true a bill in equity is not within the words of the *Page 302 act, but we think it is within its spirit. We think the intent of the law was to admit the borrower and lender as witnesses in all cases in equity, as well as at law, in which they should be parties, and in which the question of usury should be the matter in issue between them.
The act for the limitation of certain personal actions, applies in terms only to actions at law. Digest of 1844, sec. 1. So the act of James I. ch. 16, entitled "an act for limitation of actions and for avoiding suits at law," applies in terms only to suits at law; and yet these statutes have always been held as binding in a Court of Chancery, as at law.
In Hoveden v. Lord Annesley, 2 Sch. Lefr. p. 329, Lord Redesdale said, Courts of Equity are not within the words of the statutes, because the words apply only to particular legal remedies; but they are within the spirit and meaning of the statutes, and have been always so considered. See also Bank ofU.S. v. Daniels, 12 Peters, U.S.R. 56; Kane v. Bloodgood, 7 Johnson, Ch. R. 90; Angell on Limitations, 25, 26, and cases cited.
We think the statute of Rhode Island on which this motion is founded, was intended to introduce a new rule of evidence in the class of cases to which it refers, and whether the cases are at law or in equity, the rule of evidence should be the same.
This is a bill to redeem certain mortgages therein described, given by the plaintiff to the defendant, and the matter in issue between the parties has been, not the validity of the mortgages, but the amount due thereon.
Perhaps we cannot dispose of the questions which have been raised, in a more clear and expeditious manner, than by taking up each item of dispute separately, as each depends upon its own circumstances. *Page 303
The defendant charges the plaintiff with the sum of $500, under the agreement of August 10, 1848. This is resisted by the plaintiff upon the ground of usury or of forfeiture. The clause of the contract under which this charge is made is as follows: "And in default of the payment of the said sum of $8,906 54, on or before the said first day of December, I agree to pay the further sum of $500, as stipulated damages, and agree that said damages shall be considered as part of the mortgage debt, c."
This is clearly usurious. The defendant agreed to extend the time of payment to December 1, 1848, and the plaintiff under the agreement was entitled to that extension without paying anything more than legal interest. Cutter v. Howe, 8 Mass. 257;Pollard v. Bailey, 6 Mumford, 432.
But if at the end of the extension he did not pay, he was to pay the $500 for the default. We consider this in the nature of a penalty. The defendant's counsel claims it on the ground of stipulated damages, but there can be no stipulated damages for the non-payment of money except the legal interest. We think, therefore, this item should be rejected from the defendant's account.
The plaintiff also claims of the defendant the further sum of $500, which he says he has paid the defendant under the agreement of February 1st, 1849. By this the parties agreed that the sum of $9,883 95, including rent and interest to June 1st, 1849, was due on that day, (June 1, 1849,) and if that sum was paid on or before the 16th day of February, next ensuing, (deducting rent and interest after that time included in the above sum,) the $500 was to be taken as part payment of the same debt. But if the said sum was not paid on or before the 1st day *Page 304 of June, said payment of $500 was to be forfeited as agreed damages. And if the plaintiff paid the defendant in full at any time before the 1st day of June, a proportionate part of the $500 was to be applied in part payment of the debt, in proportion as such payment was in anticipation of the 1st day of June.
The debt has not been paid, and the question is, is the plaintiff entitled to have the whole or part, and if part, what part of the $500 applied in payment of the debt. If after the forfeiture had been incurred, the plaintiff had voluntarily paid it, he would be entitled to no relief. The court would not interfere to compel a repayment, although relief against the penalty would be granted if it had not been paid. It is very clear that no application of the money was contemplated by the parties, until the contingency on which the application was to be made had happened; that contingency was the payment or non-payment of the debt. Until the contingency happened, the money in the hands of the defendant could not be considered in the sense of the law as paid. The application of the money to the payment of the penalty must be made by the creditor after the happening of the contingency, on which his right to make the application depended.
The law would not presume an application to the payment of a penalty. Had the defendant a right to make the application? We think not, unless with the assent of the plaintiff, given after the contingency had happened. The plaintiff had a right to consider the penalty as unpaid, and to be relieved against an act of appropriation by the defendant, in the same manner as if the defendant had sought to recover the penalty of the plaintiff. This sum must be charged to the defendant in taking the account. *Page 305
The plaintiff alleges the defendant has charged interest monthly in advance and compounded it. This is usurious. The privilege of taking interest in advance seems to be limited to discounts of commercial paper by banks and bankers in the course of business, and does not extend to a loan like the present.Bank of Utica v. Wager, 2 Cowen, 712; Fletcher v. Bank ofUnited States, 8 Wheaton, 838; Manhattan Company v. Osgood, 15 Johns. 168; March v. Martindale, 3 Bos. Pule. 154;President, Directors and Company of Agricultural Bank v.Russell, 12 Pick. p. 586.
But the defendant may charge the plaintiff interest at the end of every month, if such be the contract of the parties, and this, although the principal sum may not be due. Thus, a note payable in a year from date with interest at the end of each month, is good, and the monthly interest may be recovered at the end of each month. Mowry v. Bishop, 5 Paige, 98.
With regard to the notes of Smith Brown, we do not find sufficient evidence to annul the settlement thereof, which was made by the parties by the agreement of August 28, 1846.
The plaintiff claims for overcharge of rent of the house on Westminster street. The rent is charged by the defendant at the rate of four hundred dollars per year. The plaintiff objects to this charge and says that it is excessive, and a cover for usury. It is not enough for the plaintiff to prove the rent unreasonably high. It must be proved to be so much above the actual value, as taken in connection with the other facts, to furnish a presumption that it was resorted to as a cover for usury. We think the evidence entirely fails to make out any such charge. The defendant was offered the same rent by another applicant *Page 306 for the house, but the plaintiff declined giving up possession. And in the agreement of February 1, 1848, the plaintiff agrees to surrender up possession on the first day of April ensuing, and Mr. Whitman guarantees the surrender; showing the defendant was anxious that the plaintiff should vacate the house rather than keep it at the rent charged.
Decree, entered December 31st, 1850, that the complainants be allowed to redeem, upon the payment of the sum reported to be due by the Master, with interest, together with the amount paid by the respondent for the expense of advertising the sale at auction and with costs to the respondent to be taxed by the clerk of this court; and in case of default of said complainants to pay said sums on or before the first of March next ensuing, he, the said complainant, his heirs and assigns, to be foreclosed thereafter from any right to redeem the same. And it was further decreed, that the mortgage given by the complainant and his wife, of the wife's estate, be released and discharged, the amount secured thereon having been paid, by said Darius Sessions, in his application of the payment made by him of $4,250 on the 24th of February, 1847.
The complainant having claimed costs in the above suit, as the prevailing party, the court held, that the respondents were entitled to costs, according to the general rule, which made the complainants liable for costs on a bill to redeem, where the question is not as to the right to redeem, but the amount due on the mortgage. *Page 307