Miners' Trust Company Bank v. Roseberry

Mr. Justice Mercur. delivered the opinion of the court, The Act of 28th May 1858 made a radical change in the consequences flowing from the receipt of more than six per cent, interest per annum. It repealed all former laws imposing a penalty. The first section still makes six per cent, the lawful rate of interest. The second section recognises the actual business wants, habits and customs of the people. It assumes a greater rate may be charged and paid. It therefore declares, that if it shall be reserved or contracted for, the debtor shall not he required to pay the excess. At his option he may retain and deduct it from the amount of his debt, or if he has voluntarily paid the whole debt and an excess of interest, he may recover such excess by action instituted not more than six months after the payment. No longer can a stranger to the transaction, by a qui tam action, make a forfeiture of the whole debt. The statute professes to deal only with the parties to the proceedings. The debtor may elect whether he will withhold the excess, or recover it back within the time limited. Failing to act in time he has no remedy. No public informer can interfere either before or after the payment. The defendants in the judgment in question testify that they have no cause of complaint and desire it to be paid according to its terms. In the distribution of a fund, judgment-creditors may attack a judgment collaterally when it is a fraud on them, but not because it is a fraud on the debtor: Dougherty’s Estate, 9 W. & S. 189 ; Lewis v. Rogers, 4 Harris 18 ; Thompson’s Appeal, 7 P. F. Smith 175. But a subsequent judgment-creditor cannot set aside a prior judgment merely because it is erroneous : Hauer’s Appeal, 5 W. & S. 473. In Greene v. Taylor & Co., 2 Wright 361, it was held competent for a second mortgagee to question in a distribution the first mortgage on the ground of usury. In this case, however, the transactions were prior to 1858, and the lien of the second mortgage attached before judgment was confessed on the first mortgage. In Bachdell’s Appeal, 6 P. F. Smith 386, without discussing the question, it was held that a judgment-creditor, on distribution, could question the validity of a prior usurious judgment, and reduce it accordingly. But in Verner v. Carson, 16 P. F. Smith 440, it [313] was questioned and left undecided, whether any but the borrower or debtor can set up the defence of usury under the Act of May 28th 1858. In Good v. Grant, 26 P. F. Smith 52, it was held the payment of interest in excess of the legal rate is not necessarily fraudulent as to creditors. Whenever the usurious contract is intended to defraud creditors, or when the circumstances of the debtor are known to be such that it can reasonably be presumed that this will be the natural effect, the right of creditors to postpone the excess of interest must be conceded. We are aware that the New York authorities go much further in regard to usurious contracts than any cases we have cited. But they are predicated of their statute, which makes the contract void. It is radically different from our statute of 1858. We, therefore, are unwilling to give those authorities a controlling effect in the construction of our statute. There is, however, another view of the case, which we think decisive. This is not a ease of distribution. The defendant in error does not claim as a creditor. He claims as a purchaser at a sale made several months after the entry of the judgment. He bought with full notice of its existence. He knew that he bought subject to its encumbrance. Presumably, he paid a sum equal to the amount of the judgment, less than he would otherwise have done. He wTas not defrauded. He got just what he purchased. “ When an interest is subsequently acquired by a third person, with his eyes open, he is hot defrauded by what has been done before his time:" Hauer’s Appeal, supra. If any persons were injured by this judgment, it was the creditors, not the purchaser. He is in no condition to invoke their equities and claim under them, for his exclusive benefit. There is no privity of contract between him and them. We think, therefore, the learned judge' erred in restricting the plaintiff to the collection of a part only of the judgment out of the real estate sold to the defendant by the assignee, and the order must be reversed. This makes it unnecessary to consider the fourth assignment. So far as the other assignments apply to this case they are substantially affirmed. Decree reversed and order vacated at the costs of the appellee.