Seymour v. Continental Life Insurance

Carpenter, J. In Hubbard v. Callahan, 42 Conn., 524, a note was made payable in one year after date, with interest after due at the rate of fifteen per cent, per annum. The contract when made was legal; when the note fell due the law forbade the taking of a greater .rate of interest than seven per cent. This court held that the plaintiff was entitled to recover fifteen per cent, interest after due. In Suffield Eccl. Society v. Loomis, 42 Conn., 570, the note was payable in three years after date, with no contract for interest after maturity. The contract rate of interest was above the legal rate after the note fell due. This court held [307] that the plaintiff could recover, after maturity, only the statutory rate of interest. In both these cases the court enforced the contract according to the intention of the parties. In the present case the contract of the parties, as understood and intended by them, if legal, will be sustained. The note now under consideration was on demand, and was outstanding several years. The rate of interest expressed in the note was eight per cent, which was a legal rate at the time the note was given. Before the principal was paid the law forbade the taking of more than seven per cent. The plaintiffs having paid eight per cent, bring this action to recover the penalty for taking usurious interest. They claim that the note was due by force of the statute at the expiration of four months, and that after that time the defendants could legally take but seven per cent. The statute is as follows: “Any negotiable promissory note payable on demand, which remains unpaid four months from its date, shall be considered as overdue and dishonored after that time.” Gen. Statutes, page 343, sec. 2. This statute was not designed to change the real contract between the parties. Its object was to make certain that which before was indefinite and uncertain, and it relates to the rights and liabilities of third parties who may become interested in such notes as indorsers, guarantors or purchasers. In respect to them such notes are not ordinarily dishonored until the expiration of four months. After that time they are dishonored. Their rights and liabilities materially depend upon that fact, while the rights and liabilities of the immediate parties to the note are unaffected by it. Hence the s.tatute may well affect the former and not the latter. The payee may sue and collect, and the maker may pay, the note at any time within four months as well as after. A third party purchasing the note at any time within four months takes it free from equities; after that time he takes it subject to them. The payee or holder, in order to retain the security .of an indorser or guarantor, must take certain steps at the end of four months. The payee, as between himself and the maker, holds it at all times subject [308] to equities, and the liability of the maker is the same whether dishonored or not, and irrespective of demand and notice or suit at maturity. It is manifest that the parties intended this transaction as a loan to continue for a term of years. The contract between William H. Seymour and the defendants, which the court found was a part of the transaction, tends to show this, and was admissible for that purpose. The rate of interest as fixed by the note was expected and intended by the parties to he paid so long as the loan should continue. That being a legal rate when the note was made, it continued such until it was paid. This interpretation gives effect to the intention of the parties and does the plaintiffs no injustice. If they regarded the rate of interest as exorbitant they might at any time have terminated the contract by paying the principal. So long as they paid interest they paid it pursuant to their contract, and .now have no cause of complaint. There is no error in the judgment of the Superior Court. In this opinion the other judges concurred.