Kendrick v. Kyle

Calhoon, J., delivered the opinion of the court. On December 29, 1896, appellee, Barney E. Kyle, through his guardian and next friend, R. M. Kyle, filed his original bill in chancery to enforce a vendor’s lien on land to pay two promissory notes of which he was assignee and holder. These notes were made in Tennessee, payable in Tennessee, and on their faces bore 8 per centum per annum interest from their date. It is objected that these notes, being governed by the laws of Tennessee, the place of the contract, show usury on their faces, and are void by those laws, and nothing can be recovered on them, either of principal or interest. This is not sound. Code (Tenn.) 1884, § 270, provides that interest is demandable to the amount of “ $6 for the use of $100 for one year, and every excess over that rate is usury. ’ ’ This section does not declare any forfeiture, or contain any announcement that the contract for such excess shall avoid the.principal, or even the legal part of the interest; but in the criminal law department of that code (§ 5623) usury is made an offense, and a penalty prescribed. Because usury is so made an offense, the courts of Tennessee have uniformly held that an instrument showing usury on its face is not enforceable, and that an action on it will be dismissed. But it does not follow that the courts of other states will do the same. There is no principle of comity requiring one state or nation to enforce the criminal statutes of another; and on this very question of usury, see 27 Am. & Eng. Enc. L., 936, 937. For cases precisely in point, see Sherman v. Gossett, 4 Gilman, 521; Lindsay v. Hill, 22 Am. Rep. (Me.), 564; Barnes v. Whittaker, 22 Ill., 606; McFadin v. Burns, 5 Gray, 599. Even if this view were not sound, the rights of complainant — 289 — ■in the original bill are fixed by the act of the legislature of Tennessee (acts 1897, pp. 149, 150), which provides that ‘ ‘ in all cases of loans heretofore made in this state, and wholly secured by mortgage or trust deed on property, either real or personal, situated in some other state, it shall be lawful for the lender to collect the amount loaned with interest at the rate contracted for, provided said rate does not exceed the rate of interest allowed by the law of the state where the property pledged as security is situated. ’ ’ In the case at bar the land securing the notes is situated in Bolivar county, Miss., and the deed of conveyance expressly stipulates that it shall ‘ ‘ have the full force and effect of a mortgage, with full power of sale, ’ ’ to secure the payment of the notes. It is true the statute referred to was enacted March 19, 1897, after suit was instituted in this cause, and that it was repealed April 18, 1899, before final decree therein. The effect of this will be hereinafter considered. On March 9 (acts Tenn., 1897, p. 227), the legislature, at the same session of the enactment of the statute above mentioned, passed another act of like purport, referring to the legal rate of interest in Tennessee, and referring to her courts, by which it is provided that ‘ ‘ a defendant sued for money may, in all cases, avoid the excess over legal interest by a plea setting forth the amount of the usury, and this shall be the rule whether the usury appear on the face of the note or contract sued on, or be shown by testimony aliunde-, that is to say, none of the courts of this state shall dismiss any suit on a note or other contract for money because it shows on its face that the parties have contracted for an unlawful rate of interest, but all such contracts are hereby declared to be' valid and enforceable to the extent of the amount actually loaned, with interest thereon at the rate of six per cent, per annum, and in all cases where usury is the only defense pleaded, judgment shall be rendered by the courts of this state for said principal amount with legal interest, whether usury appear on the face of the contract sued on or not. ’ ’ The two acts are precisely similar, ' — 290 — and our citizens in our own courts are clearly entitled to the full benefit of both. Now, while both of these statutes were passed after the suit brought in the case at bar and repealed before final decree, still the supreme court of Tennessee makes plain the principles applicable to rights acquired and lost under both. Before the last act was passed, a bill had been filed in a chancery court of Tennessee to foreclose a mortgage showing usury on its face, and for that reason it had been dismissed by the court. After the act was passed the complainant proceeded again, and the supreme court sustained the complainant. Held, that the act vitalized her claim to the extent of the principal and legal interest, and that the repealing act did not divest or affect her rights vested by the vitalizing act, and that the former decree of dismissal for usury apparent was not res adjudicatei, because the merits were not involved. It will be noted that the repealing act was passed April 6, 1899, and while the case was on submission in the supreme court. The court rested its decision on the point that the act of repeal could not divest the rights given by the vitalizing act under Shannon’s code, § 61 (the same as code 1884, §47), in these words: ‘ ‘ The repeal of a statute does not affect any right which accrued, any duty imposed, any penalty incurred, nor any proceeding commenced under and by virtue of the statute repealed.” The Tennessee supreme court holds in the case referred to that Tennessee usurious contracts are not void except in the sense that they are unenforceable, and that, notwithstanding . the usury, the debt remained, and suit might always be brought on the original consideration by an original party to the contract. Wallace v. Goodlett, 58 S. W., 343. It seems quite plain from the reasoning of the Tennessee court in that case that it would nevér have dismissed the bill in the case before us. Aside from its reasoning, the statute expressly forbade its doing so. But for the statute, it would have dismissed it, not because of any legislative act declaring — 291 — the instrument void, but because the courts, on account of a criminal statute, had declared it unenforceable, and it should be dismissed in the interest of the public policy arising out of the criminal statute. But the legislature of Tennessee, which controls the courts, reversed this public policy and ordered that, such cases should not be dismissed. It would be strange indeed if Mississippi courts, in dealing with our own people, should adhere to a Tennessee public policy repudiated and reversed by her own legislature, and the case at bar must be governed by the Tennessee law, the contract being perfectly valid by our own law. It follows that the position is untenable that complainant should not recover because he brought his suit before the vitalizing act of Tennessee was passed. It is not tenable from the reasoning of the Tennessee case, supra, not. tenable from the acts themselves, both of which operate to complainant’s benefit, and not tenable from the cases of Bain v. Savage, 76 Va., 904; Johnson v. Utley, 79 Ky., 72; Nicholls v. Gee, 30 Ark., 136, and divers others unnecessary to be. cited. The second Tennessee acts forbids any court to dismiss any suit because usury appears on the face of the instrument, sued on. The defendant is not- concerned upon any right he has. The whole matter is between the complainant and Tennessee, and that state removed the restriction upon his right., If the original Tennessee usury act had declared usury contracts utterly void, as our own statute declares gambling contracts to be, the Tennessee decision might have been different. But usury contracts in Tennessee were never void by declaration of any statute. Her courts simply held them unenforceable where they showed usury on their faces, because of the-criminal penalty. The real contract behind the written instru-; ment, showing usury, was always suable in equity by an original party, although his assignee of the paper showing the usury could not. But the new statute, supra, reversed the whole policy of the state, and validated such contracts. It is not a question of legal title which complainant must have at the be — 292 — ginning and the end of his suit. It is the very different question of legislative vitality. What a bald absurdity it would be for a chancellor to say: “You must go out of court, because, when you came in, the public policy of Tennessee was to dismiss your case; but, inasmuch as,that state has reversed her public policy since you came in, you can sue again to-morrow. ” Whatever view may be entertained of the soundness of the Tennessee decisions, we must be controlled by them. What is fish with them must not be stone with us against our own people. While it would not perhaps make the case any stronger, it is true in the case at bar that, while the suit was brought before either of the vitalizing acts was passed, it was not only not dismissed by the Mississippi court, even if it could properly have done so, but the defendants never set up the defense of usury until after that act was passed, and long after they had answered, and then in an amended answer. So far as the defendant, Nachman, is concerned, he being the purchaser of the mortgaged land, subject to the recorded mortgage, ■ the Tennessee courts would not allow him to set up usury, though ours would. Nance v. Gregory, 6 Lea, 343-346. And it must be noted that the bill does not seek any personal recovery from anybody on the notes, but simply sale for payment. There is a Tennessee case (Garrity v. Cripp, 60 Tenn., 86) which would seem to make it a quaere whether the notes here, being for the purchase of land on long time, are usurious, but it need not be relied upon, and so need not be discussed. See, also, Brown v. Gardner, 67 Tenn., 147. Recurring to the original bill, the notes as to which the lien is claimed are both payable to the order of the Louisville, New Orleans & Texas Railway Company, and bear eight per cent, per annum interest from their date. They are indorsed, without recourse, by the Yazoo & Mississippi Valley Railway Company, “by G. W. McGinnis, land commissioner,” not saying to whom indorsed; so, if validly so indorsed, the notes — 293 — became transmissible from hand to hand by mere delivery, and might be sued on by any holder. The 'only other indorsements on them are these: “Transferred to It. M. Kyle, guardian, as collateral security to secure note due him as guardian for Barney E. Kyle. 2/8/’95. [Signed] Burbridge & Houston.” “Transferred, without recourse, to T. T. Bryant, guardian. [Signed] R. M. Kyle, guardian.” It is clear that, if the Yazoo & Mississippi Yalley Railway Company had title, and indorsed the notes in blank through McGinnis, then the indorsement to T. T. Bryant, guardian, amounts to nothing. R. M. Kyle, the holder, could have stricken that out at any time pending the proceeding, or he could have proceeded, as holder, without striking it out. Nance v. Gregory, 6 Lea, 343-346; McAlister v. Jerman, 32 Miss., 142; Chaffe v. Wilson, 59 Miss., 42; Boyd v. Warmack, 62 Miss., 536. Well, the Yazoo & Mississippi Yalley Railway Company did have title by articles of consolidation with the Louisville, New Orleans & Texas Railway Company, in evidence, vesting the former with all ‘ ‘ the rights, powers, privileges, immunities and franchises, and all the railroads, real and personal estate, easements, fixtures, equipments, choses in action, and property and assets of every kind, nature, or description;” and Mr.' Mc-Ginnis is made a witness, and testifies that he signed the indorsement for the company, and had authority to do so as its land commissioner. A railroad land commissioner in possession of the land notes of his company may well be presumed to have the power of transferring them to an innocent purchaser for value. Besides, the signature of the company is not denied under oath. The fact that the bill waives answer under oath does not dispense with such an oath as that section requires. Woolen Mills v. Rollins, 75 Miss., 253, s.c. 22 South., 819. It is not perceived that Pardee and Crolius have any connection with these notes whatever. Certainly there is no evidence that they ever had, or made any assignment of them. Certainly the complainant was in possession of the notes indorsed in — 294 — blank, and so payable to the bearer. The burden of proving their connection with, or interest in, the notes is on defendants. As to Burbridge & Houston and Pearson, they appeared and disclaimed all interest; but this was unnecessary, as the law presumes title in the holder of a note indorsed in blank. Affirmed.