Chambers v. Chalmers

Archer, J., delivered the opinion of the court. According to the established practice of Chancery in this State, it may be taken to be a general rule, that a defendant, although he answer the bill, and issue be thereon joined, may at the hearing object, that the case made in the bill, does not entitle the party to equitable relief; and if his ob — 439 — jection be sustained, the bill will be dismissed. Gover vs. Christie, 2 Harr, and Johns. 67. Drury vs. Conner, 1 Harr, and Gill, 220. McAttee vs. Johnson, M. S. Peale vs. Gas Light Co. M. S. This rule, however, as it regards some defences, at least, given by statute, cannot apply. Thus, limitations must always be pleaded, both at law and in equity, and in neither tribunal is it good ground to object to the recovery, that the plaintiff’s pleadings, on the face of them, show a case barred by limitations; because, although apparently barred, evidence may show that the statute does not bar, for there may have been acknowledgments, which take the claim out of the operation of the statute. And to permit the objection to be taken at the hearing, when the defence has been put upon other grounds, would at all times enable the defendant to take the plaintiff by surprise, and deprive him of an opportunity of vindicating his rights. The same doctrine, though not perhaps to the same extent, prevails where reliance is placed by a defendant, upon the usurious character of the contract set out in the bill, as-the foundation of the plaintiff’s proceeding. Where a bill for the specific execution of a contract, states a case which may, or may not be usurious, according to the facts which really exist in the ease, it is apprehended, that the statute-of usury must always be pleaded, or relied upon in the answer, and for the same reason which requires the pleading of the statute of limitations. For if the defence of usury had been pleaded, those allegations in a bill, from which the inferences of usury are argumentatively drawn, might be shown by evidence to be susceptible of other deductions, rendering transactions to which they refer entirely innocent and legitimate. If this be so, to permit the defendant to place his defence upon other grounds, and at the hearing insist upon usury, would in many instances, work great injustice. If indeed a case were stated in a bill clearly usurious, which no inference or intendment could help, it might be governed by different considerations, and would perhaps — 440 — fall within the general rule above adverted to, which authorises the dismissal of a bill at the hearing, no matter what may be the defence, where it clearly states no case for equitable interposition. Does the bill then state a case clearly usurious, one which no inference or intendment can aid? We clearly think it does not. The contract of 1806, in some of its articles between these parties, may be conceded to be usurious, and it does stipulate for the execution of a mortgage, to secure the performance of its provisions, as well those which are usurious, as those which are not; and the bill states, that a liquidation of the claims of the parties was made, and that a mortgage was executed in pursuance thereof. These allegations would prima facie present .to the court, the mortgage as attainted with the usury of the original contract. But the contract of 1806 is clearly divisible, containing independent, unconnected stipulations, and if the defendant had rested his defence upon usury, the plaintiff might have shown by evidence, that the debt for which the mortgage was taken, was one originating solely from the rents of the land referred to in the árdeles, and the hire of the negroes, and for the use of the utensils, for the manufacture of rope, without any reference to those separate and independent clauses in the agreement, upon which a usurious interest has been reserved; that all the accounts for the stock of rope and yarn, in relation to which it is above objected, that the instrument was usurious, had been settled and adjusted long anterior to the mortgage, and that the liquidation of accounts had between the parties upon which the mortgage was founded, was entirely in relation to other property, placed in the hands of Chalmers. It is therefore manifest, that by dismissing the bill upon its allegations merely, we should be pronouncing that to be usurious, which the complainant would not be debarred, by any allegation in his bill, from showing by evidence was clearly innocent and — 441 — lawful. These views of the bill bring us to the consideration of the answer. Is usury sufficiently averred ? In this examination, it is unnecessary to inquire, whether the defendant should be held to strict technicality in the presentation of his defence; for whatever be the rule in that respect, we are clearly of opinion, that after issue joined upon an answer alleging usury generally, it could not be objected, that the defence had not been taken with more legal precision. It could not it seems be done even at law. 1 Camb. 165, in notes. And it would be against all rule, to carry greater strictness into a court of equity, than prevails at law. It is laid down in Hood vs. Inman, 4 Johns. Ch. C. 437, that pleadings in Chancery should consist of averments, or allegations of fact, and not of inference and argument. Adopting this principle as the correct rule, it is very clear, that the answer nowhere avers usury in the mortgage. It does not directly aver it, nor. indirectly, by any certain inferences. Every thing which is stated in the answer may be true, and yet it by no means will follow that the mortgage was usurious. It does, it is true, state that it was taken to secure a debt, alleged to be due under the contract of 1806; but we have seen, in our examination of the bill, that although this might have been the case, the debt for which the mortgage was taken, may have entirely grown out of independent clauses in the contract, not repudiated by usury. But even the debt is denied, nor is it admitted that the mortgage debt was one accruing under the anterior contract, and it is even in effect asserted, that all claims under the contract, were overbalanced by countervailing claims. And, independent of all this, the defence to the mortgage is clearly and distinctly put upon the ground of fraud, from certain representations and promises made to the respondent by the mortgagee, which constituted her inducement to enter into the mortgage, and which having as she alleges been fallacious, and remaining unexecuted, to enforce the mortgage, would be to enable the complainant — 442 — to perpetrate a fraud on her. The complainant thus notified,, that fraud is the defence, must necessarily be surprised,, if on the hearing, his case, by strained constructions, and argumentative deductions from the answer, is compelled to vindicate his contract from the imputation of usury. The averment, that the original contract of 1806 was-usurious, by no means helps the averments of the answer. To make it efficacious it should have been followed out with the further statement, that the mortgage was given in pursuance of the contract, to secure the-usurious interest, by it stipulated to.be paid. The state of these pleadings require, therefore, that the defence should be placed upon other grounds than usury. These will now be examined, and they will be found to be two-fold. 1st. The alleged stipulation, to endorse on the mortgage, that the sum thereby secured, was only nominal, and that it was intended to secure the sum which, on settlement between James and Daniel Chambers, should be found to be really due. % The alleged agreement of Daniel Chambers, with her and her husband, as a consideration for her entering into the mortgage, to secure to the respondent, the payment of five thousand dollars, as an equivalent for the interest, she avers she had in the land mortgaged. In relation to the first ground assumed, it may be remarked, that it is not only not proved, but is in effect disproved by the testimony of N. Brice, who proves the declarations of both Chambers and Chalmers, that the amount of debt mentioned in the mortgage was due. The second ground of defence is not supported by Mrs. Lee, as from her cross examination it is manifest, that she refers to the declarations of the complainant at a time subsequent to the delivery of the mortgage to him, and it rests therefore solely on the evidence of Thomas Lee. It would be unnecessary for us to say, what should be the effect of such eyidence, if it comes from an incompetent source, and — 443 — we think the witness was incompetent. He was a defendant, and properly joined in the suit as a co-defendant, having united with Mr. and Mrs. Chalmers in the execution of the mortgage, and was clearly liable for costs. The agreement for his examination, which places it on the basis of one taken under the chancellor’s order, can make no difference. In all such cases, the exception may be taken at the hearing. Such orders are always made, saving just exceptions. The reason why one co-defendant is permitted to be examined for another, is stated, by Lord Eldon, Murray vs. Shadwell, 2 & 3 Ves. B. 404, to be this, “that if the plaintiff joins persons in a suit, in which he has cause of suit against one, upon one subject, and against another, as to a different subject, but having no cause against them jointly, unless the court permits this examination, the plaintiff, making both defendants in the same suit, would by that sort of mechanism, deprive one of the defendants of the others evidence.” In this case however, these defendants were properly joined, and have an interest in the same subject matter, and must be affected by the same evidence. And although Thomas Lee has only the interest of a trustee in the result of the decree, in relation to the subject matter in controversy, yet he is personally responsible for costs if the suit go against the defendants. The second ground of defence, by the rejection of Thomas Lee’s testimony, is just as unsupported by testimony as the first. Entertaining these views of the subject before us, that usury is not relied on as a defence; that in the shape the bill assumes it cannot be objected on the hearing, that it exhibits an usurious transaction; and that the defences of fraud, are wholly unsupported by competent testimony, the decree of the chancellor is reversed with costs; and this court will proceed to decree, that the mortgage shall be admitted to record, that the mortgage premises shall be sold, and that the cause shall be remanded to the Court of Chancery for further proceedings. DECREE REVERSED.