Lindsay v. Hill

Dickerson, J. It is a rule of law, too well established to admit of controversy, that the nature, validity and construction of contracts are to be determined by the law of the place where the contract is made, and that all remedies for enforcing such contracts are regulated by the law of the place whore such remedies are pursued. In the one case, the lex loci contractus, and in the other, the lex fori, governs. Foreign statutes of limitation come within the latter clause of this rule; because they affect only the time within which a legal remedy must be pursued, and not the gist of the contract itself. In the terse language of the court in Andrews v. Pond, 13 Pet. 65. “The legal consequences of an agreement must be decided by the law of the place where the contract was made; if void there, it is void everywhere.” Bulger v. Roche, 11 Pick. 36, 37. Dunscomb et al. v. Bunker, 2 Met. 8, 10. Gale v. Eastman, 7 Met. 14, 16. The contracts secured by the mortgages were made in New Brunswick and to be executed there. The parties to the contracts, at the time they were made, resided there; and the payments were all made in that province. The security, though bargained for in New Brunswick, was necessarily executed in this state. The statutes of New Brunswick, R. S., § 1, c. 102, in force when the mortgages and contracts in controversy were executed, contained the following provision : “No person shall, directly or indirectly, receive on any contract to be made for the loan of any money, or goods, more than six pounds for the forbearance of one hundred pounds for one year, and after that date for a greater or less sum, and longer or shorter time ; and all deeds or contracts for the payment of any money to be lent, or for the performance [218] of any thing undertaken, upon or by which more than such rate of interest shall be reserved or received, shall be utterly void.” Section second of the same statute imposes a forfeiture of the principal sum lent and all the interest, upon the lender for every offense against its provisions. In order to render a contract void for usury, it must be tainted with that offense in its inception. It is the reservation or receipt of usurious interest in pursuance of the terms of the contract itself that renders it void; the subsequent payment of such interest upon a contract free from the taint of usury in its origin will not have this effect. 3 Parsons on Contracts, 115. Nichols v. Fearson, 7 Pet. 103. Rice v. Welling, 5 Wend. 595, 597. Gardner v. Flagg, 8 Mass. 101. But the law is otherwise in respect to incurring the penalty or forfeiture for a violation of the law against usury. In that case, the subsequent receipt of usurious interest by the lender, upon a contract originally untainted with usury, renders him liable to the penalty or forfeiture incurred. In Floyer v. Edwards, Camp. 112. Lord Mansfield said, “In case the agreement originally for the payment of principal be legal, and the interest does not exceed the legal rate; but afterwards upon payment being forborne illegal interest is demanded, there the agreement by retrospect is not void, but the parties are liable to the penalty of treble value.” 3 Parsons on Contracts, 123. Thompson v. Woodbridge, 8 Mass. 256. The instruments in controversy appear to have been given in the usual course of business, and upon their face are free from the taint of usury. The alleged usurious payments were made after the debts were over due and the contracts were broken. The contracts, therefore, were not void under § 1, chap. 102, R. S. of New Brunswick, but the forfeiture imposed by § 2, of the same chapter was incurred by the defendants. That forfeiture is in the nature of a remedy, which, as we have seen, can extend only to suits brought in New Brunswick, and can have no effect where a remedy is sought under our laws; in other words, the defendant, in this respect, cannot invoke the same defense in this state, that [219] lie could make in New Brunswick. Gale v. Eastman, supra. Dunscomb et al. v. Bunker, supra. The ease is therefore to be determined by the law of the forum selected by the plaintiff for the enforcement of her rights. Oan the defendant here avail herself by way of recoupment, set-off, or otherwise, of the excess paid over six per cent upon the contracts in controversy ? When the alleged usurious payments were made, our statute provided that in an action brought to recover the principal and interest, in such a case, the usurious interest might be deducted from the principal. But that statute was repealed in 1870, and, instead of it, the present statute was enacted, which simply provides that “in the absence of any agreement in writing, the legal rate of interest shall be six per cent per annum.” It is argued by the learned counsel for the defendant, that an action for money had and received lies to recover back the amount of usurious interest paid, and that to avoid circuity of action, that sum may be allowed the defendant, in extinguishment of her original indebtedness, as it exceeds that amount. The authorities indicate that where a usurious contract is declared illegal and void by statute, the money paid thereon is to be regarded as taken illegally, and as oppressively extorted from the box-rower, and that, therefore, the equitable action for money had and received lies to recover it back. It is upon this ground that the authorities relied upon to support the defendant’s theory, rest. This question is discussed by Shaw, C. J., in Crosby v. Bennett, 7 Met. 17, 18 ; and the distinction is expressly made between usurious contracts that are made illegal aud void by statute, and those that are not, giving the equitable action for money had and received to recover back the usurious interest paid in the former case, and denying it in the latter. We think this distinction is well taken. Where the-law does not prohibit usury, nor make usurious contracts illegal or void, it cannot regard the taking of a greater sum for the use of money than is fixed by law as illegal or oppressive, which is the gist of the right of recovery invoked by the defendant. It is only upon the ground that the payments made by her grantors were received in violation of law, that she claims the right to recoup if no law has been violated, there is no right of recoupment. [220] While our statute fixes the legal rate of interest at six per cent, per annum, it does not in terms nor by necessary implication prohibit the taking of a greater sum, nor declare contracts for a greater rate illegal or void. Nor does it provide for the deduction of the amount of interest paid in excess of this rate from the principal upon action brought therefor, or for its recovery back where there is “no agreement in writing” in respect to interest. It simply declares what shall be the legal rate of interest when there is no agreement in writing for a different rate. . This construction of the statute harmonizes with the action- of the legislature upon this subject. Contemporaneously with the enactment of the present statute, the legislature passed an act repealing the usury act of 185'T, which contained the identical provisions for the deduction from the principal, and the recovery back, of usurious interest, where paid, that are now sought to be applied in this case. That act of repeal was a legislative construction of the existing statute. By its repeal of the act of 185'T, and its omission to incorporate the provisions contended for by the defendants into the new statute, the legislature clearly intended to effect a radical change in the law of usury. It would be an alarming exercise of judicial power of construction to hold that the law is the same upon the subject under consideration as it was before the statute of 1857 was repealed. Such a construction would render the repealing act nugatory. Language could scarcely make the intention of the legislature to abolish the remedies provided in the statute of 1857 more intelligible. This court cannot undertake to revive by construction a doctrine which the legislature obviously intended to discard by positive enactment. Our conclusion is that the defendants are not entitled to have the amount of usurious interest, paid by them, deducted from the contracts secured by the mor gages in suit. Conditional judgment for plaintiff as on mortgage. Appleton, O. J., Walton, Babeows, Yiegin and Betees, <TJ., .concurred.