Nutting v. McCutcheon

By the Court PlaNdbau, J. This case presents rather a new feature under the interest law of the State. The Defendant Nutting had given his note to the Plaintiff for the sum of one thousand dollars, with interest at the rate of two and one-half per cent, per month, and had secured the payment of the same by a mortgage upon real estate executed by himself and his wife. "When the note fell due the Defendant did not wish to pay it, but requested the privilege of retaining the money longer, which was granted by the Plaintiff upon the consideration that he should pay interest upon the same quarterly at the current rates. .The evidence does not disclose that any contract was entered into by which forbearance was granted for any specific time; nor does it appear that the Defendant, at the beginning of the several extensions that were granted, specifically agreed to pay any particular rate of interest, nor that any writings were executed about the same. The parties would meet at the end of each quarter and agree upon the value of money in the market for the past quarter, and the Defendant would pay and the Plaintiff receive such amount in satisfaction for the interest accrued. The same would be then endorsed upon the note as payment of interest up to the date of the endorsement, with the full consent of the Defendant. The Court find, as matter of fact, and we think the evidence fully sustains the finding, that these several payments were made by the Defendant “voluntarily, and in conformity with the mutual agreement and understanding of the parties.’’ And also, that as matter of fact, there was no “ duress or compulsion” used to obtain them. We do not think that it can influence the validity of these [388] payments one way or the other, that there was no definite contract made for forbearance on the one side and payment on the other at the beginning of each quarter, because the parties obviated any such difficulty by stipulating the precise terms at the end of the time, and immediately executing them as settled. Such a question might have been raised, perhaps, if the contract had been left executory, and either party had attempted its enforcement, but when a contract, lacking the essential feature of mutuality at its inception, is subsequently, by the act of the parties, corrected in this particular and executed, all such questions necessarily are put to rest between the parties. I think, therefore, we must enter upon the examination of this ease as if the payments had been made upon express verbal contracts of the terms and conditions that were adopted, at the times they were paid. The counsel for the Plaintiff urges that as the Statute allowing the taking of interest beyond seven per cent, per _ annum, requires the contract for the same to be in writing,- a verbal agreement for such greater rate is contrary to the Statute and void, and money paid under it may be recovered back. There is no doubt that where contracts are made in violation of statutory provisions, or in contravention of public policy, they are as a general rule void, and money paid under them may be recovered back, but this rule is confined in its application to such contracts as involve by their subject matter some substantial violation of the spirit of the law or policy, and not such as stipulate' some matter recognized and permitted by law or policy, but in a manner other than the one prescribed. The Statute concerning interest allows the taking of any rate the parties may agree upon, provided they stipulate for the same in writing. It cannot be said that the taking of interest beyond seven per cent, per annum is contrary to the spirit or policy of the law, when the Statute (expressly authorizes it‘ to be done. It is believed that the design of the act was “to remove all obstacles from the subject of interest and. leave parties free to contract for such rate as they should consider their money worth,” imposing no restraint upon them except as to the manner in which the contract should be made. Mason & [389] Craig, et al, vs. Callender, Flint & Co., 2 Minn. Reports, 371-374. The effect therefore of the provision requiring'"the contract to be in wilting is the same as that of similar provisions contained in the statute of frauds. There, various contracts are expressly declared to be void, unless the same are in writing. Eor example, “Every contract that by its terms is not to be. performed within one year from the making thereof,” also, “ evéry special promise to answer for the debt, default or miscarriage of another person,” are of this nature. Yet where such contracts are made without writing, and are carried out and executed by the parties, it would hardly" be pretended that the money paid under them could be recovered back. Provisions of this nature, referring to the manner in which parties must contract, are made for the benefit and protection of the promising party, or, more properly speaking, the party sought to be charged — they refer more .particularly to the proof necessary to sustain such a contract than to the subject matter of it, and are designed to prevent careless expressions from being perverted into promises, by the misunderstanding or perjury of witnesses. The effect of these 'statutes may always "be waived by the promising party failing to take advantage" of them. The defence of the statute of frauds must always be pleadedfwhen it is not apparent bn the face of the complaint—Wentworth vs. Wentworth, 2 Min. R. 277—anda payment without objection isjthe highest evidence of a waiver. The Defendant can take nothing by his objection-that the contract was not'in writing. The question mainly urged by Defendant is, that the payments were made under duress and compulsion. As a matter of fact this is found against him by the Judge who tried the cause, and the position can only be sustained upon the ground that the existence of the mortgage containing the power of sale by which the Defendant’s land could have been sold had he refused to pay the increased rates of interest, was in itself a power in the hands of the Plaintiff that in contemplation of law amounted to such duress. I think there are two full answers to this view of the case. In the first place, to bring a case within the rule contended: for by the Defendant, the money exacted and paid must be extortionate — must be [390] something more than the party had any right to demand by law, or at least must be so exorbitant and excessive as to fall within a class of contracts relieved against for being -unconscionable ; as, for 'instance, where an officer has process in his hands by which he may immediately seize the debtor’s property, and he obtains from him illegal fees or a greater amount than was actually due. 2 Greenl.Ev.,sec. 121, where numerous instances of this character are cited. Also, where usurious rates of interest are exacted, the borrower is always regarded as acting under an undue influence. Chief Justice Beardsley speaks of the borrower in such cases as “ the slave of the lender; nay, more, a slave in chains and utterly incapable 'of resistance.” Schroeppel vs. Corning, 5 Denio, 240. I would not question the authority of these cases, or the principle contended for by the counsel for the Defendant, in any case where the money exacted by the exertion of an undue influence was an illegal demand; but I maintain that in this case no such element exists. The laws of the State expressly allow the taking of interest to any amount the parties may agree upon, and the provision that it shall be stipulated for in writing, as I have shown, has nothing to do with the morality of the contract, but may be waived by the party contracting in a variety of ways, and in none more emphatically than by voluntarily paying it without question. In the second place, I do not think the power which the Plaintiff held in his hands, to wit, the mortgage with a power to sell under the Statute, could, under any circumstances, be considered in itself as a sufficient constraint upon the will or independence of the Defendant to amount to legal duress or compulsion. The utmost the mortgagee could have done, would have been to foreclose his mortgage under the Statute. This would involve a publication for at least six weeks of the notice, and then, after sale, the mortgagor would have a full year in'which to redeem before he either lost his land or his possession of it. The execution of a power of sale, which the counsel claims is so summary and severe a remedy, will be found, on examination, to be more dilatory and less rigorous than the ordinary foreclosure in Chancery. Stone vs. Bassett, 4 Min. R. 298, Opinion of the Chief Justice, and although [391] tbe Defendant does not bare bis day regularly in Court under tbe statutory foreclosure, still be may control the proceedings as fully by bill for that purpose as if be was impleaded as a Defendant, sufficiently so at any rate to deprive the proceeding of tbe harsh features claimed for it, and to remove tbe idea that tbe mortgagor supposed it to be held in terrorem over him. If we should admit tbe theory claimed by tbe Defendant, tbe mere bolding of any security by the creditor would subject him to tbe charge of exercising an undue influence over . bis debtor, on tbe ground that he could sue him and seize bis property on execution if be failed to comply with bis demands. Tbe supposed constraint is too remote entirely to be acted upon by Courts as a foundation for annulling contracts Between parties. Tbe relation of mortgagor and mortgagee might in some cases be taken into consideration in determining whether oppressive measures bad been used to make terms-between parties; but alone, tbe fact fails to produce such result. In either view, therefore, tbe defence fails. First, tbe money paid was neither extortionate nor illegal. Second, tbe element of duress did not enter into tbe transaction either in fact or by construction of law, I think the case of Bidwell vs. Whitney, 4 Minn. Rep., 76, adopts principles which cover tbe case at bar in tbe view we have taken of it. Judgment affirmed.