First Ecclesiastical Society v. Loomis

Pardee, J.

On the 10th day of December, 1869, the defendant executed and delivered to the plaintiffs his promissory note for $2,500 payable three years from date, with semiannual interest at the rate of 7fV per cent, per annum. The then existing statute of usury affected that part of this contract which concerns the payment of interest, avoiding the plaintiffs’ right to demand, and the defendant’s legal duty to pay it.

But although this part of the contract could not be enforced at the time of its inception, there yet remained upon him an equitable and moral obligation to pay the principal of the debt with at least the lawful interest; and, presumably, when he made the promise by which he retained and made profitable use of the plaintiffs’ money, he intended to fulfil it.

This privilege of refusing to pay any interest he held subject to such action by the legislature as would modify and even destroy it, and thereby validate the original contract to the fullest extent and in all its parts.

In 1872 an act was passed which declared that usurious contracts were thereby “validated and confirmed,” and provided that they might “ be enforced, any law to the contrary notwithstanding.” As we have intimated, in thus compelling him to pay the legal rate of interest the legislature provided *573for the enforcement at law of that which was before an equitable and moral obligation; and there can be found enough of justice and reason to justify the statute in compelling him to pay the promised excess beyond that rate.

In numerous instances legislatures have passed and courts have sustained confh'ming acts designed to rectify mistakes, supply accidental omissions, remove legal impediments to the enforcement of contracts, establish defective deeds and make them operative to convey titles, and to bind a party to a contract which he has attempted to enter into but which was invalid by reason of some stipulation in it forbidden by the law; the design and effect of all these being to establish matters in the condition in which it was the intention of all concerned to place them. In the case before us, as in all such cases, it is the office of the court to discover and carry out the legislative intent. Is it to confirm and validate a contract and enable the parties to do that which both desired to accomplish ? or is it merely to effect the temporary removal of a penalty which in strictness is no part of the contract? Upon this point the language of the act is significant; it is that the contract is “ validated, confirmed, and may be enforced;” validated—that is, made as binding as the parties could have made it if no statute of usury had hampered them; enforced—that is, without any limitation expressed or implied as to the time when, other than that which attaches to all contracts. There is here no intimation of any reservation of power over the contract thus confirmed, for future exercise; no hint that it is a contract for an uncertain time or of inferior degree. This imports more than giving a new form of remedy; it is a plain declaration of legislative intent to exercise the power of indirectly creating this contract between these parties as to the payment of interest.

And courts, when interpreting statutes of this character, also speak of contracts, and of validating, confirming and enforcing them; recognizing always the legal idea enfolded in the word “contract,” namely, that there has come into existence a legal tie whereby one party is bound expressly to another to pay a sum of money, or perform or omit a certain *574act. This tie once formed is not thereafter to he severed or even weakened by legislative action. Forms for enforcing a legal right may be changed, but the obligation itself is indestructible. After the passage of the act of 1872 the plaintiff held a vested right in a validated contract, entitled to the same measure of protection as if it had existed from the time of the defendant’s promise. The parties being once placed, either by their own action or by the sovereign power of the legislature, in a position where there is a valid obligation on the part of the defendant to pay, and a corresponding vested right on the part of the plaintiff to demand, interest at the rate of 7^ per cent, per annum, alike in both cases all legal consequences irresistibly follow. The legislature can no more take back this contract right, vesting by its own authority, than it can destroy a -like right existing by agreement of the parties.

In view therefore of the expressive language of the confirming act of 1872, we are of opinion that under it contract rights became vested in the plaintiff which subsequent legislation cannot destroy or affect; and that the repealing act of 1873 is inoperative so far forth as those rights are concerned. It has not been made to appear to us that this latter act is so manifestly just, reasonable, and conducive to the general good, that it should draw to itself the extraordinary power of destroying vested rights.

We think that damages for the detention of the money after the time when the note became due and payable should be assessed at the statutory rate of interest prevailing during the time of such detention.

In Fisher v. Bidwell, 27 Conn., 363, the question presented was whether, in an action for the amount of a sum of money loaned for a particular time on a contract for usurious interest, the plaintiff is by our law entitled, as damages, to interest computed according to the legal rate on such sum, from the time when the credit for the loan expired, to the rendition of the judgment* The court said that in such a case, if the money was not paid when it became due by the terms of the contract, damages would be recoverable by the *575lender for the injury to him consequent on its detention after the time when it was agreed to be paid, and such damages would be estimated according to the established legal rate of interest; that rate, although arbitrary, furnishing a general, convenient and uniform rulé for determining the amount of such damages. In Beckwith v. Trustees of the Hartford, Prov. & Fishkill Railroad Co., 29 Conn., 268, damages for the detention of borrowed money beyond the contract period were assessed at the rate of seven per cent, per annum, for the reason that the legislature had legalized in advance seven per cent, as the rate of interest upon that particular loan at the request of the borrowers. In Adams v. Way, 33 Conn., 419, the damages were assessed at. twelve per 'cent, per annum, that being the statute rate of interest upon the loan in the state of Wisconsin where it was made. In Hubbard v. Callahan, (ante, page 524,) the plaintiff was allowed to recover fifteen per cent, per annum as interest upon a written contract to pay that rate for the use of money beyond the time when the note was made payable, the statute then providing that when there was no agreement for a different rate of interest the same should be six per cent., and that it shall be lawful to contract for the payment and receipt of any rate of interest. In the case before us, the rate of interest which the defendant agreed to pay was in excess of the statute rate existing at the time when he executed his note. In this respect it differs from the three cases last referred to, and we think we do not infringe upon the rule therein adopted if in this case we assess damages for the retention of money by the defendant beyond the contract time, at the statute rate of interest existing during the time he has elected thus to retain the money.

We advise the Superior Court to render judgment for the plaintiffs for the principal of the debt, with interest at the rate of 7^- per cent, per annum from the date to the maturity of the note, and with damages thereafter to be assessed in accordance with the statutory rate of interest.

In this opinion Carpenter and Foster, Js., concurred.