Kendall v. Robertson

Shaw, C. J.

This is an action of assumpsit against the promisors, by the indorsee of a promissory note for $500, signed by the defendants, payable, in one year from date, to Harrison Rowley or his order, and by him indorsed to the plaintiff. The defence relied upon was, that the loan from the payee to the defendants was usurious, and the defendants claimed to have a deduction of threefold the amount of the interest unlawfully received and taken, pursuant to the provisions of the Rev. Sts. c. 35, §§ 2, 3, 4, altered and amended by St. 1846, c. 199, § 1. To maintain this defence, the testimony of one of the defendants was offered, but it was rejected because the suit was not between the original parties. *158It was admitted that Rowley, the original payee of the note, was living. No other evidence was offered to prove the usury, nor was it contended that the plaintiff was not a bond fide holder of the note, taken by indorsement for its value, before it was due, and without notice of the usury in the original contract. A verdict was returned for the plaintiff, to which the defendants except. The only question expressly raised by the exceptions is, whether the testimony of one of the defendants was rightly rejected. But there is another, apparently raised by implication, whether this deduction of threefold the interest, can be claimed, although the original contract was usurious, if the suit be brought by a bond fide holder and indorsee without notice. This question lies at the foundation, and its decision one way, would render the question on the other point immaterial. By the former statute, in force before the alteration of the law in 1825, usurious contracts were made utterly void, and therefore usury, if pleaded and .proved, was held to be a defence to the suit on such contract. St. 1783, c. 55, § 1. Under this statute, we believe, it was uniformly held, that the note would be void, if tainted with usury in the original concoction, even in the hands of an innocent holder without notice. Lowe v. Waller, 2 Doug. 736 ; Bridge v. Hubbard, 15 Mass. 96; Churchill v. Suter, 4 Mass. 156 ; Ayer v. Hutchins, 4 Mass. 370; Chadbourn v. Watts, 10 Mass. 121; Bayley v. Taber, 5 Mass. 286.

This law remained in force till the statutes of 1825 and 1826, which were succeeded by the revised statutes. Without tracing these changes historically, it will be sufficient to consider the law as it now stands. One of the important changes was, to declare that a usurious contract should not henceforth be void, but after fixing a rate of interest, it provided that if more than that rate should be taken or reserved, there should be a deduction, in case of suit brought, and that the defendant should recover, instead of paying costs; remedies were given to recover back usurious interest paid, not material to the present case. By Rev. Sts. c. 35, § 1, the rate is fixed at six per cent, and no more. And by section 2, whenever any action is brought on a contract, when more than six per *159cent, has been reserved, taken, or received, the defendant shall recover his full costs, and the plaintiff shall forfeit threefold the amount of the whole interest, &c. This was modified by St. 1846, c. 199, so as to limit this forfeiture and deduction to threefold the amount of the interest unlawfully reserved or taken. In other respects the provisions of the revised statutes remain in force.

1. The first question is, whether this forfeiture and ded uo tion are intended to apply, when the suit is brought by an innocent indorsee, without notice of the usury. Were this a new provision, there might be a doubt, whether it was not the intention of the legislature to impose the forfeiture on the offending party, the original party to the prohibited contract, and not upon an innocent indorsee. But the language of the statute is very explicit, and applies to the contract, whenever an action is brought on it, and extends the forfeiture, not to the usurious lender, not to the promisee in the original contract only, but to “ the plaintiff,” in any action brought on any such contract. And this construction is strictly analogous to that applied to the former law; but is less penal. The former law made the contract void; in other words, declared the whole money so lent upon usury forfeited; the present law declares it forfeited only in part. The former law extended the entire forfeiture to any holder of the note, though an innocent indorsee ; the natural conclusion is, in the absence of express words, changing the operation of the law, that it was the intention of the legislature to extend such partial forfeiture in like manner, and attach it, as before, to the note, although held by an innocent indorsee without notice. In both cases the intention of the legislature appears to have been the same; to discourage and suppress a mode of lending, regarded as dangerous and injurious to society, by attainting the contract, and attaching the penal consequences to the contract itself, whenever set up as proof of a debt.

2. Upon the other point, the court are of opinion, that the original promisee being alive, and capable of being called as a witness, the defendant, the promisor in the note, was by the statute a competent witness. See Putnam v. Churchill, *1604 Mass. 516; Binney v. Merchant, 6 Mass. 190; Knights v. Putnam, 3 Pick. 171. By the old statutes the trial might be per sacramentum, and then there was no other trial but by oath. Of course, there could be no such trial except when the parties to the original contract, and the parties to the action were the same. Binney v. Merchant, 6 Mass. 190. But this is changed by the revised statutes, substituting a trial by jury, and providing that in the trial of any action, wherein it shall appear by the pleadings, that the fact of unlawful interest is in issue, it shall be lawful for the debtor, the creditor being living, to become a witness ; and the creditor, if he shall offer his testimony, shall also be admitted as a witness. The construction uniformly put on this statute has been, that “ debtor and creditor ” here mean the original parties to the contract charged to be usurious. Little v. Rogers, 1 Met. 108; Bacon v. Robinson, 7 Cush. 579.

3. “ When it shall appear by the pleadings are the words of the statute. It appears by a comparison of dates that the revised statutes were passed and promulgated, though they did not go into operation, before the statute abolishing special pleading. St. 1836, c. 273. Probably the revised statutes did contemplate a special plea of usury. But when special pleading was abolished by law, the only way the defence could appear in the pleadings was, to state in the specification of defence under the general issue, or state it in the answer under the new practice; and this has been deemed a sufficient compliance with the statute. The latter was done in the present case. Exceptions sustained.