Goode v. Sutton

Gilmore, J. The judgment of the court of common pleas, October 6,1874, against Jane Sutton, the wife of the maker of the note, was erroneous, and as to her the judgment of the court was properly reversed ; and a reversal to-this extent would not have been complained of by the plaintiffs in error. It is the reversal of the judgment as to John Sutton by the district court, and the subsequent decree of the court of common pleas, finding and applying-the excess of interest above six per cent, per annum that had been previously paid and credited as interest upon the •note, as payments upon the principal, and rendering a decree for the balance due upon the note, with six per cent, only, that is complained of. Previous to the act of 1848, which will be hereafter particularly noticed, under the laws in force, as construed by this court, where an agreement for usurious interest had been executed, and the interest advanced, it could not be594 recovered back, or tbe excess above the legal rate of interest applied as payment upon the principal, because : 1. Having made and executed such a contract, the court would leave the parties where it found them. Shelton v. Gill, 11 Ohio, 417. 2. The parties were said to be pari delicto, and the courts would not, therefore, interfere after they had executed an agreement for usurious interest. Commercial Bank v. Reed, 11 Ohio, 498. 3. Usurious interest once voluntarily paid could not be set off against the principal. Graham v. Cooper, 17 Ohio, 606. To these may be added the fact that there was no law then in force requiring courts to refuse to give effect to usurious contracts, whether executed or executory, by entering judgment in pursuance thereof, unless the usury was specially pleaded. Per Thurman, J., Busby v. Finn, 1 Ohio St. 420. So the law stood at the time of the passage of the act •of February 18, 1848 (S. & C. 744), which reads as follows : “ Sec. I. That in all actions for the recovery of money, hereafter prosecuted in the courts of this state, all payments of money or property made by way of usurious interest, whether made in advance or not, shall be deemed and taken, as to the excess of interest above the rate allowed by law at the time of making the contract, to be payments made on account of principal; and the said court shall render judgment for no more than the balance found due after deducting the excess of interest so paid; nor shall any ■debtor be deemed a particeps criminis, on account of having paid, or having agreed to pay, such exorbitant interest, but shall have like remedy and relief in either case. “ Sec. II. That the defendant, in any such action as in the first section is mentioned, may plead specially, or give notice with the general issue of his intention to give evidence on the trial of the payment or reservation of any such usurious interest, or of the true consideration on which the •contract sued upon shall be founded.” [595] It may be observed that the second section was subsequently repealed by the 606th section of the code of civil, proeedui’e. The first-section revolutionized the law as it had formerly stood on the subject of usury, and swept away the effect of the decisions upon the subject above alluded to, and ■others, to substantially the same effect, upon the same point?. 1. It abrogates the distinction between executed and ex-ecutory agreements for the payment of usurious interest upon contracts. "When executed, by the payment of usurious interest in advance or otherwise, the excess above the rate allowed by law at the time of the making of the contract, shall be deemed payments made on account of principal. 2. The effect previously given to the fact that the parties to an 'executed usurious agreement were in pari delicto, is .also abrogated by this language of the section : “ Nor shall any debtor be deemed particeps criminis on account of having paid, or having agreed to pay, such exorbitant interest.”1 3. Where the petition upon its face shows that a recovery is sought, upon an agreement for the payment of usurious interest at a stipulated rate, the section before us authorizes the court to refuse to give effect to such a contract according to its terms as to the interest, whether executed by the payment of the usurious interest agreed upon, or ex-ecutory in reference to the usury. The language of the seetio'n in this respect is as follows : “ And the court shall render judgment for no more than the balance found due after deducting the excess of interest so paid.” If the debtor had agreed to pay, but had not paid usurious inteiest on the agreement, the contract remained ex-ecutory, but judgment should be rendered for no more than the amount found due upon the agreement, by computing interest at the legal rate. The remaining question is : Where the defendant had failed to make defense as to the usury, by answer or other [596] wise, and judgment had been entered against him for the-full amount of the obligation sued upon, including the excess of interest at the usurious rate previously paid, and accrued interest at the usurious rate remaining unpaid, would error lie to reverse the judgment? On behalf of plaintiffs in error, it is contended by counsel' that the provisions of the second section of the act of 1848, which has been repealed, have been more than supplied by section 127 of the civil code, which provides that “ every material allegation of the petition not controverted by the answer, shall, for the purposes of the action, be taken as-true;” and that where one claims a statutory right against another, he shall bring himself clearly within the terms which confer the right. The argument, as I understand it, is, that inasmuch as the defendant is seeking to avail himself of the provisions of the first section of the act of 1848,. in reference to usury, he can be permitted to do so only by answer setting up the usury, and thus controverting the allegations of the petition, which upon its face showed that the note upon which the action was brought was usurious,, and also showed that interest had been paid and credited thereon, at the stipulated usurious rate; and that having' failed to so answer, and judgment having been entered against him for the amount due, including accrued interest at the stipulated usurious rate, and without deducting the-excess of interest above the lega]: rate, previously paid, the defendant is bound by the judgment, on the ground that the uncontroverted allegations of the petition were found to be true, and the judgment as to amount conforms to-these allegations. The decisions in this state, previous to the act of 1848, required the defense of usury, like the defense of the statute ■ of limitations, to be deemed waived, if not specially pleaded; and the decisions cited from other states are to-the same effect. But we think that the first section of this act furnishes its • own rule on this subject, which is this : If the petition on its face shows that the action is brought upon an instru [597] •ment for the payment of money, by which the maker has ■.agreed to pay usurious interest at a stipulated rate, and that interest had been paid at the usurious rate stipulated, the court is required, in the absence of an answer, of its own motion, to see that judgment is not rendered for more than balance found to be due after deducting the excess of interest so paid, and applying it as payment upon the principal, or if the usurious interest has not been paid, then for the amount found due by computing interest at the legal rate. This satisfies the language of the first section, .and at the same time does no violence to the language of the 127th section of the civil code; for the plaintiff was •allowed to take judgment for the full amount that was lawfully due to him, in strict accordance with the legal effect *of the uncontroverted allegations of his petition. We think the district court rightly reversed the first judgment of the court of common pleas, and the last judgment of the latter court is affirmed. Judgment accordingly.