D. Holmes Morton, individually and as trustee, commenced this action against Godfrey L. Cabot, Inc., a corporation, in the Circuit Court of Kanawha County, seeking to recover the aggregate amount of $6,869.97, consisting of $5,600.65 principal and $1,269.32 interest.
During the pendency of the action, defendant paid plaintiff the principal amount of $5,600.65, and paid into court the sum of $243.97, as interest accruing thereon after June 26, 1945.
The facts were stipulated, a jury waived, and the cause was submitted to the court in lieu of a jury. The trial *Page 57 court found for defendant, adjudged that plaintiff was not entitled to recover interest, and ordered that the sum of $243.97, representing interest theretofore paid into court, be repaid to defendant. Plaintiff prosecutes this writ of error to that judgment.
By lease dated April 1, 1936, plaintiff and his wife leased certain tracts of land in Kanawha County, aggregating 2411.28 acres, more or less, to defendant for the purposes of producing oil and gas. Some of the lands were owned by plaintiff in his own right and other tracts were held by him as trustee. The pertinent provisions of the lease are substantially as follows: Defendant agreed to pay an annual rental at the rate of one dollar an acre, subject to credit for sums paid as royalties; that it would deliver to plaintiff one-eighth part of all oil produced and saved from the leased premises; that it would pay "* * * a royalty of one-eighth of the then current wholesale market value at the well for all gas produced and saved from the leased premises * * *"; and that it would pay plaintiff "* * * one-eighth part of the net proceeds of the sale of any gasoline extracted or manufactured by the lessee". The rentals and royalties were paid "between the 20th and 30th days of each month, covering gas produced during the preceding calendar month." The lease did not provide for the payment of interest on past due monthly installments.
Several wells were drilled on the lands covered by the lease, from which gas has been produced in paying quantities and the lease is now in full force and effect. Rentals and royalties accruing under the lease were paid by defendant until June 9, 1939, in accordance with its provisions.
Chapter 127, Acts of the Legislature of West Virginia, 1939, was enacted March 11, and became effective on June 9 of that year. From the effective date of said Act, until June 26, 1945, defendant deducted from the monthly installments due under said lease various amounts equalling one-eighth of the privilege taxes paid by defendant *Page 58 on the gross value of the gas produced from the leased premises.
Prior to the effective date of said Chapter 127, an annual tax was levied on the privilege of engaging in the business of producing oil and gas and the business of collecting rents for the use of real and personal property. By Section 2 of Chapter 86, Acts of the Legislature, 1935, an annual privilege tax was levied against persons engaged in the business of producing oil and gas, the amount of the tax on such privilege being "* * * determined by the application of rates against values or gross income as set forth in section 2-a * * *", of Chapter 86,id. Section 2-a of Chapter 86 provided that the tax on the privilege should be at the rate of six per cent on the gross proceeds derived from the sale of natural gas in excess of five thousand dollars, whether such gas was sold and delivered within or without the State of West Virginia. Section 2-i of said Chapter 86, levied a tax of one per cent on the gross income of any person engaged in the business of collecting income from the use of real or personal property, or any interest therein, whether by lease, conveyance or otherwise, "* * * whether the return be in the form of rentals, royalties, fees, interest or otherwise * * *." Section 3-a of Chapter 120, Acts of the Legislature, 1939, provides for a surtax to be levied in addition to the taxes levied by Section 2-a of said Chapter 86.
By Chapter 127, Acts of the Legislature, 1939, a producer of oil and gas was required to pay a privilege tax on the value of the entire production, without any deduction for any payment in money or kind required by any contract or agreement. Such producer was authorized and empowered "* * * to deduct from any payment, in money or in kind, to the owners of any royalty interest, excess royalty or working interest in such properties, that proportion of the tax paid which the said royalty, excess royalty or working interest bears to the entire production * * *." It was further provided by said Chapter 127 that "* * * there is hereby levied upon such royalty interest, excess royalty or working interest, such proportionate *Page 59 part of the tax imposed by said section two-a". Said Chapter 127 also provided that a person paying the tax levied by that chapter should be released from liability for taxes under Section 2-i of Chapter 86, Acts of the Legislature, 1935.
Acting under the provisions of Chapter 127 aforesaid, defendant at various times deducted an aggregate sum of $5,600.65 from payment of rents and royalties due plaintiff under said lease, such deductions being calculated in accordance with the provisions of Chapter 127 aforesaid. Such deductions were made without objection by plaintiff from the effective date of the statute to June 26, 1945, when said Chapter 127 was adjudged to be an unconstitutional statute in the case of Cole v. Oil GasCo., 127 W. Va. 762, 35 S.E.2d 25. This Court denied a rehearing in the Cole case on September 10, 1945, and on November 5, 1945, certiorari was denied by the Supreme Court of the United States. 326 U.S. 765, 66 S. Ct. 147, 90 L. Ed. 461.
There is no dispute as to the amount of the principal so deducted by defendant, nor is there any dispute as to the amount of interest which would accrue from the respective due dates until the principal amount was paid.
Plaintiff contends that the principal was not paid when due, and that after the due dates interest accrued and became payable by operation of law so long as the principal remained unpaid. Defendant denies liability for interest on the principal amount on the equitable ground that it acted in good faith in withholding payments to plaintiff in accordance with the provisions of an apparently valid statute. Defendant further contends that Chapter 127, aforesaid, was an effective and valid legislative enactment until it was declared unconstitutional by a court of competent jurisdiction. In connection with this latter contention, defendant paid into court the said sum of $243.97, representing interest from the date this Court declared Chapter 127, idem, to be invalid.
The questions presented by this record are: (1) Is defendant *Page 60 relieved from the payment of interest by acting in good faith; and (2) is the enactment of an apparently valid statute, afterwards declared to be unconstitutional, sufficient reason to preclude the right of recovery of interest on a past due debt?
In this jurisdiction "one who withholds money from the rightful owner on the date when it should be paid is liable for interest." Mairs v. Trust Co., 127 W. Va. 795, 803,34 S.E.2d 742. See Code, 56-6-27. No liability for interest arises by implication prior to the date a debt is due. See Lockard v.Salem, 130 W. Va. 287, 43 S.E.2d 239; Lutz v. Williams etal., 84 W. Va. 216, 99 S.E. 440; Bennett v. Coal and Coke Co.,70 W. Va. 456, 74 S.E. 418; Shank v. Groff et al., 45 W. Va. 543,32 S.E. 248. Interest accrues on a debt from the time it is due, although liability therefor was in dispute. GreatNorthern Ry. Co. v. Erie R. Co., 58 F.2d 414.
Although not argued or raised in briefs, the question has been posed by a judge of this Court whether plaintiff, having accepted payment of the principal, may maintain this action for recovery of interest alone. Under the rule laid down in the fourth point of the syllabus of Bennett v. Coal and Coke Co.,supra, where the right to interest arises by implication, such interest is considered to be damages, and may be recovered only along with the principal sum "* * * as an incident thereto, and if the principal sum be accepted in settlement the right to damages is lost and no separate subsequent action can be maintained therefor." (Italics supplied). The instant case is not within the rule laid down in the Bennett case for the reason that this action was brought to recover principal and interest, both being then unpaid. No separate action has been brought. True, the principal was paid after this suit was commenced, but the facts at the time the action was brought control.
The action of defendant in withholding the interest did not arise from a mistake of fact, but rather a mistake of law. Generally, money paid under a mistake of law cannot be recovered. In the instant case the money was not paid, but was withheld. We do not think that any element *Page 61 of good faith, lack of fraud, or mistake on the part of the defendant has any bearing on the right of plaintiff to recover interest.
Defendant contends that Chapter 127, Acts of the Legislature, 1939, being a regularly enacted statute, exonerates it from payment of interest; plaintiff maintains that no such effect should be given to that Act. These contentions probably arise out of lines of conflicting authorities on that principle. One line of authorities holds that an unconstitutional statute, otherwise regularly enacted, has the force of law until declared to be unconstitutional by a court of competent jurisdiction.State v. Carroll (Conn.), 9 Am. Rep. 409, is the leading case expounding that doctrine. An examination of the opinion in theCarroll case discloses that the Court was there concerned principally with the power of a de facto judge and did not pass on the constitutionality of the statute there considered. The doctrine is further developed and discussed in the case of Lang v. Mayor, etc., of the City of Bayonne (N. J.), 68 A. 90. In the case of Texas Co. v. State (Ariz.), 254 P. 1060, the Court followed the Carroll and Lang cases, and refused to compel payment of gasoline taxes unpaid because of an unconstitutional veto by the governor. In Board of Highway Com'rs. v. City ofBloomington (Ill.), 97 N.E. 280, recovery of interest on money paid to the city under the provisions of an unconstitutional statute was denied; but recovery of the principal was upheld.
The other line of authorities is to the effect that an unconstitutional statute has no force and effect. That rule is laid down in Norton v. Shelby County, 118 U.S. 425,6 S. Ct. 1121, 30 L. Ed. 178, in the following vigorous language: "An unconstitutional Act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed." See Huntington v. Worthen,120 U.S. 97, 7 S. Ct. 469, 30 L. Ed. 588.
The doctrine of the Norton case was qualified in the case ofChicot County Dist. v. Bank, 308 U.S. 371, 374, *Page 62 60 S. Ct. 317, 84 L. Ed. 329, wherein it was stated: "The Courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. * * * It is quite clear, however, that such broad statements as to the effect of the determination of unconstitutionality must be taken with qualifications. The actual existence of the statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and official."
This Court has adhered to the rule as originally announced inNorton v. Shelby County, supra. In Payne v. Staunton, 55 W. Va. 202,207, 46 S.E. 927, the rule was quoted with approval. Likewise the rule is approved in the cases of Campbell v.Bryant (Va.), 52 S.E. 638, and Ellinger v. Commonwealth (Va.),45 S.E. 807. Bearing indirectly on the rule considered, this Court held that a written contract, the sole purpose of which was to comply with the provisions of Chapter 127, Acts of the Legislature, 1939, is not binding. Jones v. Columbian CarbonCo., 132 W. Va. 219, 51 S.E.2d 790. However, in the case ofWall Plaster Co. v. Nuzum, 85 W. Va. 667, 671, 102 S.E. 494, this Court, by way of obiter, expressed doubt that the rule was without exceptions.
Without reviewing other cases decided in Federal and state jurisdictions, and conceding that the rule laid down inNorton v. Shelby County, supra, has been modified by the case ofChicot County Dist. v. Bank, supra, we see no reason for applying the modified rule to the instant case. No vested rights are at stake. It is simply an instance of a private corporation dealing with an individual, in which the corporation elected to rely upon a statute, subsequently declared to be unconstitutional, in withholding *Page 63 money justly due the individual. We do not think that the enactment of Chapter 127, Acts of the Legislature, 1939, was sufficient to exonerate the defendant from payment of lawful interest.
Some of the cases examined deal with official acts done in compliance with the provisions of an unconstitutional statute. In this jurisdiction an officer lawfully exercising or discharging his official duty "under any act of the legislature, or any order or proclamation of the governor of this State", is not personally responsible in any proceeding, action or suit "by reason of such act, order or proclamation being afterwards adjudged by any court of this state to be unconstitutional." Code, 61-5-18. Furthermore, the acts of a de facto officer are validated as to other persons by Code, 6-5-3.
Defendant maintains that plaintiff waived his right to interest when he failed to object to the action of the defendant in withholding sums due under the contract. It is admitted, however, that plaintiff informally participated, through his counsel, in the prosecution of the case of Cole v. Oil and GasCo., supra. The conduct of plaintiff in failing to object does not justify this Court in holding that he waived his rights; nor is plaintiff estopped by such failure, for the reason that no one was injured by his conduct. Defendant voluntarily elected to rely upon an unconstitutional statute, withheld money from plaintiff which was due, and now seeks to avoid payment of interest. We are of opinion that the defendant is liable for interest accruing on the various monthly installments withheld from their respective due dates until paid.
The questions relative to the payment into court of the sum of $243.97 by defendant will not be discussed. What has been said disposes of the questions presented by this record.
Accordingly, the judgment of the Circuit Court of Kanawha County is reversed and the cause is remanded to that court for further proceedings consistent with this opinion.
Reversed and remanded. *Page 64