Masterson v. Grubbs , 70 Ala. 406 ( 1881 )

SOMERVILLE, J.

Usurious contracts are not absolutely void, under the statutes of this State; they are only voidable, to the extent of the interest. The language of the statute is, that they “mu not be enforced, except as to the principal.” Code, 1876,§ 2092. The plea of usury is regarded by the courts as a defense entirely personal, and can not be set up by a stranger to the contract, but only by the parties or their legal representatives.—McGuire v. Van Pelt, 55 Ala. 344; Griel v. Lehman, 59 Ala. 419. It is not favored in courts of equity, so that the rule has become uniform now for these courts to require complainants, who seek relief from usurious interest, to do equity by paying the legal rate of interest, without which they are not permitted to obtain the relief sought.—Eslava v. Crampton, 61 Ala. 507; Pearson v. Bailey, 23 Ala. 537. This court has held, furthermore, that the defense of usury must be specially pleaded, and is not available under the general issue. Bradford v. Daniel, 65 Ala. 133.

"While these principles illustrate the general policy of outlaws regulating the subject of usury, it is well settled, both in this.State and elsewhere, that the mere renewal of a note or other security, between the same parties, does not purge the original transaction of the taint of -usury. — King v. Perry Ins. & Trust Co., 57 Ala. 118; Eslava, v. Crampton, 61 Ala. 507; Tyler on Usury, 396. The renewed instrument is considered as still vitiated by the usury of the original indebtedness.—1 Jones Mortg. § 634.

The illegal taint can be purged, or eliminated, however, in either of two ways: first, \yg a renewal of the note or contract, after it has passed into the hands of a bona fide purchaser for value, without notice of the usury; secondly, by a reformation of the contract, by which the usurious interest is expunged by remitting the excess, and only lawful interest is retained or exacted.—McCullough v. Mitchell, 64 Ala. 250, 253, and cases cited; 2 Parsons on Bills & Notes, 420;-Hammond v. Hopping, 13 Wend. 505 ; Dewolf v. Johnson, 10 Wheat. 367; Chadbourn v. Watts, 10 Mass. 121; Scott v. Lewis, 2 Conn. 132.

The latter principle, permitting the expurgation of the usurious taint by reformation, is the one chiefly affecting this ease», and is fully sustained by the authorities above cited. It, moreover, harmonizes with the doctrine, now universally recognized, that the whole question of usury is one which depends very greatly upon the intent of the parties to the contract.—Uhlfelder v. Carter, 64 Ala. 527; 1 Jones Mortg. § 634. The first note given by appellant in this case, which was for the sum of six hundred dollars, was confessedly usurious, the interest on .it being at the rate of twelve and a half per cent, per annum. If, as the evidence tends strongly to show, this usurious note was reduced to the lawful rate of eight per cent., and the usury of the first note was expunged entirely on taking the note in suit, then the plea of usury in this action can not be sustained—McClure v. Williams, 2 Vt. 210; Miller v. Hull, 4 Denio, 164.

The charge requested by appellant, and refused by the court, withdrew the consideration of this fact from the jury, and ignored the evidence by which it was supported. Tt assumed that the usurious taint of the original transaction still adhered to the second or reformed note, and had never been removed. The charge tended to mislead the jury, therefore, and was properly refused. — McAdory v. The State, 59 Ala. 92; Gordon v. The State, 55 Ala- 178; Wyatt v. Stewart, 34 Ala. 716.

Affirmed.