Early v. Mahon

Spencer, Ch. J. delivered the opinion of the Court, There are two questions presented by the case : 1. Whether, when money has been lent upon an usurious contract, and the contract is afterwards vacated, there yet exists such a moral and equitable duty on the part of the borrower, that a subsequent promise by him to pay the money actually lent, can be enforced at law, in an action founded on the promise ? 2. Whether we are to consider the original usurious contract, in this case, as put out of question, either on the ground of its being void, or on the ground, that the judgment has been vacated ? 1. The case of Barnes v. Headley, (2 Taunt. Rep. 182.) contains all the authorities and decisions in the British Courts, on the first point; and, in my opinion, places the validity of the promise, and the sufficiency of the consideration, beyond a doubt. In that case, the original security was confessedly usurious; it was, by mutual consent, delivered up and cancelled, and the borrowers promised to repay the principal and interest; and it was decided, that the plaintiffs were entitled to recover the principal and legal interest. It was an issue out of Chancery, and the Judges merely certified the result of their decision, without giving their reasons at large. It has been repeatedly decided in this Court, that an equitable or moral duty is a sufficient consideration for an actual promise to pay. In Hawkes v. Saunders, (Cowp. 289.) Buller, J. said, “ if such a question were stripped of all authority, it would be resolved, By inquiring, whether law were a rule of justice, or whether it was something that acts in direct contradiction to justice, conscience and equity ; but (he added) the matter has been repeatedly decided.” I consider it entirely settled, that notwithstanding the security be usurious, the money lent is a debt in equity and conscience, and ought to be repaid. This principle has long been acknowledged, and acted upon in Courts of equity. (2 Vesey, 567. 2 Brown's Ch. Cas. 649.) In the latter case, upon an application to set aside a judgment tainted with usury, it was decided, that it could be displaced only by doing what was just, and that it must stand for the money actually paid, with legal interest. In Rogers v. Rathburn, (1 Johns. Ch. Cas. 367.) the Chancellor pro [150] nounced it to be a settled principle, that he who seeks equity} mus(; ¿[0 equity; that if the borrower came into that Court for relief against his usurious contract, he must do w^at *s right, as between the parties, by bringing into Court the money actually advanced, with the legal interest; and that then the Court would lend him its aid, as against the usurious excess. The statute to prevent usury, (1 N. R. L. 64.) after regulating the rate of interest, and forbidding a higher rate than seven per cent, per annum, to be taken, declares, that all bonds, bills, notes, contracts and assurances upon, or for any usury, by which there shall be reserved or taken, or secured, or agreed to be reserved or taken, above seven per cent, shall be utterly void. This provision of the statute relates wholly to the contract; and it makes that entirely void. Hence, it has been frequently held, that where there was an antecedent valid debt, and a security was given by the debtor, reserving illegal interest so as to be usurious, that the security being void, the pre-existing debt might be recovered, if even the security was one of a higher nature. (3 Camp. N. P. 119. 1 Hen. Bl. Rep. 462.) I do not mean to say, that in this case, the plaintiff can recover, on the ground that the defendant has had his money, and the bond he took for it was void; and, that, therefore, he can maintain an action on the implied assumpsit. Here, the lending, and the usurious agreement, were cotemporaneous acts; the usury infected the whole transaction; but 1 do say, in the words of Mr. Justice Lawrence, “ the usury could not annihilate the sum of money itself, nor the fact of the receipt of the moneyand it does not admit of a doubt, that the defendant having had the plaintiff’s money, without any consideration or security, but a void bond, the promise subsequently to repay this money, was founded on a moral and equitable duty. In Fitzroy v. Gwillim, (1 Term Rep. 153.) in trover for goods which had been pledged for money advanced on an usurious'contract, it was held, that to entitle the plaintiff to recover, it was necessary to prove a previous tender of the money actually due. This was a recognition by a Court of law, of the principle adopted in Courts of equity, that although the contract was void, there was yet a subsisting [151] duty on the part of the borrower. It is observable, too, that the plaintiff has not committed an act which is malum in se, but malum prohibitum merely; and this distinguishes this case from giving money to one to commit a crime. In such case, it could not be recovered back, even upon a promise to restore it; and, it is to be borne in mind, that the present contract is free from usury. 2. Upon the second point, the case shows, that the contract was, that a bond and warrant of attorney were to be given to secure the loan, and they were given accordingly. Judgment tvas entered up by virtue of the warrant, and that judgment has been set aside; the Court which set aside the judgment, did not, however, pronounce the bond to be void. The case of Scurfield v. Gowland, (6 East, 241.) bears strongly on this part of the subject. In that case, the defendant had granted to the plaintiff an annuity secured by a deed, bond and warrant of attorney, on which judgment was entered. The defendant applied to set aside the judgment, for a mistake in the memorial, and to have the securities cancelled. The Court set aside the judgment, but made no order as to the deed or bond, and there was no proof ef any offer to cancel them. The plaintiff brought an action for money had and received, to recover the money advanced, and the objection was taken, that assumpsit would not lie, the plaintiff still having his remedy on his bond and deed. Lord Ellenborough held, that the plaintiff had contracted for an entire assurance, consisting of several securities, that the defendant had taken away one of his securities, and, therefore, the consideration for the money had failed; and the Court gave judgment for the plaintiff. I think, however, that the positions advanced by the counsel, are more forcible than the reasons given by the Court. They urged, that the defendant having elected to set aside the annuity, and the Court having pronounced judgment upon its illegality, and vacated the warrant of attorney and judgment given to secure it, it was not competent to the defendant to set up the objection, upon the ground, that the annuity was still secured by subsisting instruments, the illegality of which had been declared ; and that it was nugatory to oblige the plaintiff to bring his action, in the first instance, on the bond [152] or deed, to put the defendant to plead the special matter, anf] sJi0w they were void under the annuity act, in order to enable the plaintiff, afterwards, to bring his action to recover the money advanced. This appears to me to be conclusive reasoning, and directly applicable to this case. The defendant has procured the judgment entered on the bond to be set aside, on the ground, that the bond was void for usury; and he has thus deprived the plaintiff of one of his securities, and prevented his entering up a new judgment. The defendant cannot be heard to say, in opposition to his own act, and the solemn judgment of the Court to which he applied, that the bond is a valid instrument. The defendant, and the Court, have pronounced the bond to be void ; and the plaintiff admits that it is void, and has produced it in Court, with an offer to cancel it. It would be nugatory to compel the plaintiff to sue on the bond, that the defendant might avoid it by pleading the usury. I am entirely convinced, that there is no force in the objection, and am of opinion, that the plaintiff should have judgment, stipulating to cancel, and put on file, the bond and warrant of attorney, and the first note. Judgment for the plaintiff.(a) Footnotes [(a)] Vide Utica Ins. Co. v. Scott, ante, p. 1—7.