Spencer v. Tilden

5 Cow. 144

• Court: New York Supreme Court
• Decided: October 15, 1825
• Status: Published

Opinion

Curia, per Savage, Ch. Justice.

The contract was not usurious ; though the plaintiff was a very hard and unconscionable creditor. The interest and principal were both put at hazard to a considerable extent. It was uncertain in 1819, what would be the value of the cows in 1823. If the hazard be slight, and merely colorable, it will not take the case out of the statute; but I do not consider it so in this case. Here was no negotiation for a loan of money. it was a bargain by which the plaintiff was pretty certain of making a handsome profit; but by which he might lose.

(a)

I think the $360 in the contract must he considered as a penalty. The verdict is, therefore, right, and the plain tiff entitled to judgment for the $208.(b)

Judgment for the plaintiff.

May Term, 1825.

Holmes against Wetmore.

On certiorari to a justice’s court. Wetmore sued Holmes in the Court below, on the following agreement:

“ Whitestown, August 26th, 1819. Ebenezer Holmes received of Ezra Wetmore ten ewe sheep, for which X promise to deliver twenty sheep, of as good a quality ; three years from the date.

Ebenezer Holmes.”

Plea, the general issue.

On the trial, sheep, in August, 1822, were proved to be worth one dollar. The Justice gave judgment for the plaintiff, for 20 dollars damages and the costs.

Judgment affirmed.

I-Iamlin v. Fitch. (Kirb. Conn. Rep. 260.)

Action on a note dated Feb. 28, 1785, by which the defendant promised to pay the plaintiff $16,839, in final settlement certificates, within six months from the date. On issue, the jury found that the note was given for the loan of this $16,839 in final settlement certificates; and that it was corruptly agreed between the parties that the defendant should give the plaintiff $1000 in lawful money, for the loan, beyond the legal interest, for the six months; and that the -note was given in pursuance of this agreement; and therefore void. This finding was in the language of the issue.

On motion for judgment for the plaintiff; non obstante, &c.

The Court, (Judges Dyer and Pitkin dissenting,) gave judgment for the plaintiff according to the motion; saying, “ To bring a contract within the statute, and the mischief it was made to prevent, it must be clearly for the re-payment of a greater value than the amount of the loan, with an advance thereon, at the rate of six per cent, per amium. That it be of a greater quantity, though of the samo kind of article, is not sufficient. If the article bo of a fluctuating value, and from such change or diminution of its value, as from its nature or the course of trade, it is subject to, it may not, at the time of re-pavment, be worth more, or so much. A loan of one hundred bushels of salt, for example, in the year 1783, when it was at twelve shillings, to repay double the quantity, at the end of one year, when it might have been worth but four shillings, would not come within the statute, be the price what it might at the year’s end. Nor would it make a difference, if it was to repay 106 bushels of salt, and a sum of money besides, provided both of them might not amount to more than the value of the loan, and six per cent, interest thereon.

“ Willi regard to the final settlement certificates, said to bo loaned in this case ; it is matter of public notoriety, that they were, at the time of the contract, in a state of rapid depreciation ; and that, having no funds to rest upon, for principal or interest, it was wholly uncertain how low they would fall, and whether, at the end of six months, they would, if considered as merchandize, (as they must be, to bring them at all within the description of the statute,) bo worth half so much as they wore when loaned : in which case, the plaintiff, instead of gaining three hundred pounds, would lose that sum and the defendant gain it. The loss by tho depreciation was at the plaintiff’s risk. As he received in the £300, a premium for the risk, the rule of damages upon this note, would be the market value of the certificates, at tho time they were to be re-paid. So was the case of Lathrop v. West, determined in this county, where the loan was of depreciating continental bills ; and a sum in hard money was taken as a premium for risking the depreciation upon them. There the depreciation happening to exceed the premium, the plaintiff lost the whole interest, and part of tho principal, as might have been the case here. The contract in this case, though in the form of a loan, was really in nature of a speculation and bargain of hazard. It depended upon a contingency, to wit, that of depreciation, whether all, or how much of the principal, or value loaned, should be repaid, and which of the parties the speculation should ultimately favor ; which takes tho contract entirely out of the statute ; (2 Burr. 891; Show. 8 ; Comb. 125 ; Holt, 738 ;) though it may leave a question, how far the premium taken for the risk in this case, was unconscionable ; and could be relieved against in equity'.”

The two dissenting judges recited the Connecticut statute of usury; which, as to the point decided, is the same as tho statute of this state.

The case of Morrisset v. King, (2 Burr. 821,) seems to go upon much the same principle ; and see Shipwith v. Gibson Jefferson, (4 Hen. & Munf Rep. 490.)

This doctrine, which converts damages apparently stipulated, or fixed by the parties, into a penalty, came from the civil law through the Court of Chancery; and has at length obtained a firm hold in tho Courts of common law. It is obvious, that, in order to enforce it, Courts must disregard the particular expressions of the parties ; for the moment wo agree, that a party may, by calling a real penalty liquidated damages, or throwing it into the form of an alternative in a contract, or substituting its payment for some specified default, secure the whole to himself, without regard to the real damage, we bring back the oppressive rule of the common law The griping creditor will always use the particular form, or phraseology of contract, which will secure him his pound of flesh ; unless tho courts interfere, in all cases, and tell him that, from the very nature and essence of his bond, whatever ho claims, and in whatever shape, or upon v/hatever footing, if it bo, in truth, plainly beyond the legal amount of damages, so far it shall be no more than nominal. Hence, it seems, that the rule laid down by Mr. Holt, in his note to Barton v. Glover, (Holt’s N. P. Rep. 43, 45,) is, notwithstanding the doubt of Gibbs, Ch. J. in that case, the true one: viz. “ Where a sum of money, whether in the name of a penalty or otherwise, is introduced in a covenant or agreement, merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the deed or contract, and the penalty only as accessory, and therefore only to secure the damage really incurred.” Within the spirit of this rule is Dennis v. Cummins, (3 John. Cas. 297 ;) and Slosson v. Beadle, (7 John. Rep. 72,) does not depart from it. Some of the cases in England, put by Holt, in his note, look like an exception to this rule ; but the courts of that country will find themselves obliged to come back to it, or give it up. A plain, positive, settled exception, depending on the form'of tho contract, would destroy it. The rule is no more than what is laid down in the civil law, as deduced from a decision of Dumoulin, by Pothier, (vid. 1 Ev. Poth. 210,) that the penalty “ being stipulated in lieu of damages, it is contrary to its nature to be carried beyond the limits which the law respecting damages prescribes.” Nor can the Courts enforce this rule without looking freely to the contract; not only, as it appears upon its face, but the comparative value of the consideration and thing to be performed, as they did here in the,principal case; for if they confine themselves to the language of the parties, it is so easy to disguisg the real case by fair words, that the rule becomes nothing. The right to redeem from under tho penalty, (to be made fully effectual,) must be held inherent in tho contract, like the equity of redemption in a mortgage; and not controlled even by the express intention of the parties. Mr. Evans, in his notes to Pothier, acknowledges tho difficulty of deducing any general rule from the cases, which he considers at large, (vid. 2 Ev. Poth. 93 to 98:) but, at page 98, he gives the form of a contract, in so many words, which, he suggests, may secure the creditor’s object, and evade the scrutiny of Courts. If he be right, all the creditor has to do, is to make his debtor sign a contract copied from Mr. Evans; and ho may thus cripple or overreach all the Courts of law and equity. But I imagine their rules wore not framed so loosely and inconsiderately, as to ho overthrown by a mere transposition of words or sentences.