Chamberlain v. M'Clurg

The opinion of the Court was delivered by Rogers, J. Whether the contract was usurious is a question of fact that was properly referred to the jury under instruction from the court, to which no exception can with justice be taken. Considering, therefore, as we must do after the verdict of the jury, that the original agreement is usurious, it becomes necessary to examine the effect of the agreement of the 9th March 1840. The principal grounds of defence consist of. two distinct items, viz: $2235, the amount alleged to be usurious, and a bond and mortgage of Bullick and Tracy for $2000, which formed part of the consideration of the mortgage on which the suit is brought. The defendant alleges he never received the money due on that mortgage, nor any part of it, although he used due diligence to recover it. To avoid error the points of defence must be kept separate and distinct. As to the first, we think it very clear that the agreement cannot operate as a confirmation of the original contract so as to estop the defendant from availing himself of any defence he may have arising out of the statute against usury. The principle which applies to this part of the case is ruled in Duncan v. M’Cullough, Adm. of Findley, (4 Serg. & Rawle 486). When there has been ¿actual and positive fraud, or the adverse party has acted mala fide, [there can be no such thing as a confirmation; what was once a ¡fraud will be always so. The reason is, that a contract infected I with fraud is not merely voidable but void, and confirmation, without a new consideration, would be nudum pactum. So of usurious ¿contracts, all the authorities concur that no subsequent confirmation will be available. Is, then, the agreement of the 9th April 1840 a simple confirmation of the original contract, or is it a new contract on new terms and conditions and upon a good and sufficient consideration 1 The point is not without difficulty; but I have come to the conclusion that it is nothing more (so far as respects the usurious consideration) than a confirmation of the original contract, with an extension of time for the payment of the money. The suit is on the first contract, no new security having been given or contract made. If a new bond ánd mortgage had been' executed upon a new consideration, it would have presented a different aspect, unless it could have been shown that the transaction was a colourable shift to evade the statute against usury, devised when the money was originally lent and the bonds and mortgages given. There is nothing to prevent parties to an usurious contract from entering into a new agreement on a new consideration, if done under circumstances which negative the idea of imposition or undue advantage. If, therefore, on another trial, the jury should find that the contract is tainted with usury, [37] nothing has been subsequently done which can avail the defendant. And now for the second point. The Bullick and Tracy mortgage was part of the original consideration, it being one of the securities assigned by Chamberlain to M’Clurg. The defence (so far as respects this item) is simply a failure of consideration pro tanto. It is neither fraudulent nor usurious, and consequently it may be the subject of confirmation or of compromise, as cannot be doubted. From the evidence it would seem that Chamberlain, while he admitted that M’Clurg had used diligence in attempting to recover the amount due on the mortgage, denied he was to suffer the loss, inasmuch as he had not guaranteed the recovery of the money. On the latter point it would appear that the parties were at issue. In a letter, dated the 27th January 1840, from Chamberlain to M’Clurg, which appears to have been in answer to a letter from the latter to the former, he uses this language: “ I have made inquiry about the Bullick and Tracy affair, and find that everything has been done that is possible in the business. As I did not guarantee the claim, I consider that I have no further interest in it.” Not quite three months afterwards the last agreement is made, which purports to be as well for the settlement of all variances as for the consideration afterwards mentioned, viz: the extending of the time for the payment of the money lent by Chamberlain to M’Clurg. In the agreement, Alexander and James M’Clurg expressly release and acquit Chamberlain from all claims, demands, liabilities and offsets, for any cause whatsoever, heretofore existing. If, therefore, the Tracy mortgage was one of the differences in the contemplation of the parties, there is an end of this part of the defence, for the settlement of existing controversies is a good consideration of a new contract; and if the jury believe this to be the case, the defendant will be estopped from setting up a defence which otherwise might have availed him. There is nothing in the bills of exception, for a party is not concluded or estopped by an usurious deed or security from showing external circumstances which prove the contract to be corrupt. A contrary doctrine would be a virtual repeal of the statute against usury. A party is permitted to prove circumstances and conversations, before and after a written agreement, for the purpose of showing the transaction was usurious. And on the contrary, if the agreement appears prima facie to be usurious, the party is not concluded from showing that the true agreement was that only legal interest should be paid. Judgment reversed, and venire de novo awarded.