Smythe v. Allen

Woods, C. J., delivered the opinion of the court. This was an action brought by the appellant, on the joint and several promissory note of the appellee and one Houston, against the appellee alone. The defense set up was that the note sued upon was given for a balance found to be due, on a settlement made between the appellant and Houston, and that this balance was wholly usurious interest. The evidence offered by appellee tended to show that usurious interest on two promissory notes theretofore made by Houston to appellant constituted a part of the balance so found to be due from Houston to the appellant, and for which the note sued on was given; and that the difference between $125, the amount paid the county of Leake for and on account of another note of Houston, and $180, the amount which Houston shortly afterwards paid the appellant, in taking up this note in their settlement, was likewise usurious interest, and that this usurious interest, also, made part of the balance for which the note sued on was given. The evidence offered by the appellant tended to show that, when the two first-named notes, made by Houston to the appellant, were executed, there was only interest contracted for and charged at the rate of ten per cent, per annum, but that through inadvertence both notes were made to mature a short time before it was intended they should mature; and that there was no usurious interest charged or collected on the promissory note, which Houston had made to the county of Leake and which the appellant had acquired from the county, the appellant becoming the owner of this note at Houston’s [149] suggestion, and with the understanding that he should pay the same in full. There are several causes assigned for error, but -we deem it necessary to notice two only. 1. The seventh instruction, given by the special judge who presided in the trial of this cause in the court below, at the appellee’s request was: “ In reference to the county debt of B. L. Houston, if it appears from the evidence that the lending to him $125, or the paying out at his instance, or request, or on contract with him, such sum, in settlement of said county debt on compromise by him with the'county, Mrs. M. S. Smythe, plaintiff, charged in settlement with him, as testified, about $180, then' $55 of that amount is usurious and uncollectible, and the defendant is entitled to a credit for said $55.” By this charge the court said, in effect, to the jury, that if Houston borrowed $125 from appellant, Mrs. Smythe, with which to pay his debt to the county, or if Mrs. Smythe, moved thereto by Houston’s suggestion, paid the county $125 for the note, and took it herself, and subsequently received from Houston the sum of $180 in payment of the note, then, in either of these cases, the difference of $55.was usurious and uncollectible. The language of the charge is, we think, too broad, and was misleading. If the statement in the instruction had been limited to a declaration that the borrowing of $125 by Houston, in this instance, and the payment speedily thereafter of $180 to Mrs. Smythe for such loan -was a transaction tainted with usury, it would have been unobjectionable. But, that the transaction was likewise usurious, as was told the jury in effect, if Mrs. Smythe, the appellant, moved by Houston’s suggestion, paid the county $125 for Houston’s note, and soon afterwards collected it in full, principal and interest, was clearly incorrect. For, in this case, the transaction would have been tantamount to a purchase of the note by Mrs. Smythe, and its assignment to her. 2. The granting by the court below of the tenth instruction for the defendant is assigned for error. This instruction is in these ■words, viz : “ That no express contract to pay usury is necessary to [150] forfeit all interest; if the effect is that one realizes more than ten per cent, per annum, the law says that all the interest charged is forfeited and cannot be recovered.” The statute against usury is penal in its character, and no one should be made to suffer its forfeitures until first clearly shown to have fallen under its condemnation. Every thing must be proven which is necessary to constitute the offense of usury before subjecting the supposed offender to the penalty of absolute forfeiture of all interest. Now, as was said by the court in the case of The Planters’ Bank v. Snodgrass, 4 Howard, 573, “there must be an agreement between the lender and the borrower of money by which the latter knowingly gives or promises, and the former knowingly takes, or reserves, a higher i’ate of interest than the statute allows, and with an intention to violate the statute,” in order to constitute usury. In the very nature of the case, in every usurious contract there must exist these two elements of knowingly giving or promising, and knowingly taking or reserving a greater rate of interest than that fixed by statute, and of doing so intentionally. It follows, therefore, that when, by mistake in fact, by error in calculation, or by inadvertence in insertion of date, the effect of an engagement to pay money may be to secure a greater rate of interest than the statutory rate, yet such mistake, error or inadvertence will not stamp the taint of usury on such engagement, nor cause to be visited upon one who did not knowingly and intentionally disregard the law in this behalf the highly penal consequences of an usurious offense. In the light of appellant’s testimony, this was a case in which the excessive interest, if any there was, found its way into the notes of Houston by inadvertence in the insertion of an erroneous date of maturity. We are to be understood as expressing no opinion as to the correctness of Mrs. Smythe’s version of this transaction, but we are to be understood as expressing the opinion, that under this tenth instruction given for defendant, by the court below, the entire evidence of the appellant, Mrs. Smythe, on this vital point, was eliminated from the case, and was withdrawn from the consideration of the jury. The jury was plainly instructed that, if the effect of the [151] transaction in question was to cause Mrs. Smythe to realize more than ten per cent, per annum for loaned money, she must forfeit all interest. This was manifestly incorrect, inasmuch as it excluded the question of intention, and as it effectually withdrew from the view of the jury the element of mistake, or inadvertence in the transaction disclosed in the evidence of Mrs. Smythe. Reversed and remanded.