TANEX, Circuit Justice.
The court has taken time to examine this case with care, because the points raised in it are important, and some of them do not appear to have been fully settled by -judicial decisions.
The case, as it comes before the court, is this: James Murray Lloyd, named in the proceedings, gave two promissory notes to Watson, the defendant, upon which a suit was afterwards instituted in this court, and judgment confessed by Lloyd, on the 18th of April, 1844, with an agreement entered on the record that no execution should issue on the judgment, provided the amount was paid [976]*976by tbe defendant in four equal annual instal-ments, counting from tbe day of entering tbe judgment, and in case of default in any in-stalment, execution to go for tbe whole sum then due. On tbe 15tb of August 1S4Ü, Lloyd petitioned for tbe benefit of tbe insolvent laws of Maryland, and tbe complainant in this case was duly appointed bis permanent trustee for tbe benefit of bis creditors. .Default having been made by Lloyd in tbe payment of tbe instalments hereinbefore mentioned, Watson issued an execution for tbe amount due on tbe judgment, which was levied upon lands held by Lloyd at the date of tbe said judgment; and thereupon, on tbe 18th of December ISIS, tbe complainant, as trustee, filed this bill, and obtained from tbe district judge tbe injunction now in question.
Since tbe injunction issued, tbe answer of defendant has come in, and upon tbe facts stated in tbe answer, it is unnecessary to examine any of tbe allegations in tbe bill, upon which the injunction was granted, except those wbicn relate to the consideration of tbe two notes given by Lloyd to Watson, and upon which tbe judgment in question was confessed.
The bill charges that one of the notes was given upon an usurious, and tbe other upon a gambling, consideration; offers to pay tbe amount actually loaned by tbe defendant to Lloyd, with legal interest thereon; prays to be relieved from the residue of tbe judgment; and calls on tbe respondent to state what was tbe consideration for which tbe said notes were given. To this interrogatory tbe defendant has demurred, setting forth as bis cause of demurrer, that tbe consideration of tbe .said notes was triable and determinable in tbe suit at law, and ought not, therefore, to be inquired into by this court, sitting as a court of chancery. Tbe complainant excepts to this answer as insufficient, insisting that tbe defendant is bound to answer tbe interrogatory above mentioned; and the case now com- e on, upon tne bearing of tbe exceptions, and upon tbe motion to continue tbe injunction.
Several points have been raised in the argument, which will be noticed hereafter, but tbe main question in tbe case is. upon tbe effect of tbe judgment confessed in tbe action at law. Tbe complainant, as trustee under tbe insolvent law, stands in tbe place of Lloyd; and undoubtedly tbe latter might, in the suit against him, have availed himself of tbe defences stated in tbe bill, and might have barred tbe action of Watson by pleading tbe matters now insisted on. As be failed to do so, be would not. in ordinary cases, be permitted to ins¿st - n them in a court of equity, aftei having neglected to rely on them in tbe suit at law. But it does not follow that the same rule is to be applied where contracts are made, or securities taken. in violation of law. or contrary to declared and established policy; and of this description are all securities, by note or otherwise, intended to secure usurious interest, or for money won at play.
in such eases *he court are called upon to consider, not only tbe laches of tbe party who may have been grossly negligent in asserting bis rights, but must look also to tbe conduct of tbe adverse party, and determine whether it is consistent with sound principles of jurisprudence, to protect him in tbe enjoyment of profits derived from securities taken in violation of tbe express provisions of a statute, and which tbe law declares shall be void. Undoubtedly, it is within the legitimate province of courts of justice, and it is their duty in tbe exercise of tbe powers confided to them, to carry into full effect the policy of tbe law, when that policy is sufficiently and clearly manifested. Nor can they suffer it to be defeated or embarrassed, by the application of rules which do not belong to cases of that description, but are appropriate to another class of cases, and which have been adopted in them, for tbe purpose of preventing unnecessary litigation, where nothing more is concerned in tbe issue than tbe individual rights of the contending parties.
Tbe distinction between these two classes of cases, and tbe different rules which govern them, have been frequently recognised, where a party, by bis voluntary act, has put it out of bis power to use a legal defence which would have protected him from tbe payment of tbe claim. Thus, in ordinary cases of contract, if a party pays money with a full knowledge of the facts, but under the mistaken belief that he is bound by law to pay it, and afterwards discovers bis error, be cannot recover it back again by any proceeding at law or in equity. iTet, in a case of usury or gaming, although be pays it not only with a knowledge ot the facts, but with a knowledge of tbe law also.»equity will relieve him and compel tbe adverse party to refund tbe money. As respects usurious interest paid to the lender, the amount paid over and above tbe legal interest may be recovered back again either by a suit at law or a bill in equity. 1 Fonbl. Eq. bk. 1, c. 4, § 7, note k As regards a security for money lost by gaming, it was, indeed, said by Lord Talbot, that it could not be recovered, both parties being equally in fault; but that point did not arise in tbe ease before him; it was an obiter dictum, when deciding upon a question of usury; and the point was decided otherwise in tbe case of Uawden v. Shad-well. Amb. 2(ii). In tbe last-mentioned case, a bond had been given for money lost at play, and part’ of the money paid upon tbe bond; yet tne court, upon a bill filed for that purpose, decreed that tbe bond should be delivered up to be canceled, and tbe money repaid. Indeed, there can be no sound reason for distinguishing securities for money won at play from securities founded in usury, so as to give any advantages to tbe former over tbe latter; for they are both [977]*977prohibited by law, both contrary to "its settled policy; and while the laws against usury are intended to protect the necessitous against the oppression of the money-lender, .and against hard and ruinous contracts forced upon them by their wants, the laws against gaming are founded upon a policy equally sound and clear, and are intended to discountenance and discourage a vice injurious to society, and often most ruinous to the individual.
If, therefore, the money had been paid by Lloyd upon these two notes, it is evident, that the complainant might, upon a bill filed, have recovered it back. And if a court of chancery would have interfered, after the money had been actually paid, is there any principle of equity which will prevent it from interposing, where the party has omitted to defend himself at law, and confessed a judgment?
There is nothing, certainly, in the technical character of a judgment that will prevent the interposition of a court of equity, for it is one of its ordinary functions to relieve against judgments at law, where a proper case is made out in equity.
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TANEX, Circuit Justice.
The court has taken time to examine this case with care, because the points raised in it are important, and some of them do not appear to have been fully settled by -judicial decisions.
The case, as it comes before the court, is this: James Murray Lloyd, named in the proceedings, gave two promissory notes to Watson, the defendant, upon which a suit was afterwards instituted in this court, and judgment confessed by Lloyd, on the 18th of April, 1844, with an agreement entered on the record that no execution should issue on the judgment, provided the amount was paid [976]*976by tbe defendant in four equal annual instal-ments, counting from tbe day of entering tbe judgment, and in case of default in any in-stalment, execution to go for tbe whole sum then due. On tbe 15tb of August 1S4Ü, Lloyd petitioned for tbe benefit of tbe insolvent laws of Maryland, and tbe complainant in this case was duly appointed bis permanent trustee for tbe benefit of bis creditors. .Default having been made by Lloyd in tbe payment of tbe instalments hereinbefore mentioned, Watson issued an execution for tbe amount due on tbe judgment, which was levied upon lands held by Lloyd at the date of tbe said judgment; and thereupon, on tbe 18th of December ISIS, tbe complainant, as trustee, filed this bill, and obtained from tbe district judge tbe injunction now in question.
Since tbe injunction issued, tbe answer of defendant has come in, and upon tbe facts stated in tbe answer, it is unnecessary to examine any of tbe allegations in tbe bill, upon which the injunction was granted, except those wbicn relate to the consideration of tbe two notes given by Lloyd to Watson, and upon which tbe judgment in question was confessed.
The bill charges that one of the notes was given upon an usurious, and tbe other upon a gambling, consideration; offers to pay tbe amount actually loaned by tbe defendant to Lloyd, with legal interest thereon; prays to be relieved from the residue of tbe judgment; and calls on tbe respondent to state what was tbe consideration for which tbe said notes were given. To this interrogatory tbe defendant has demurred, setting forth as bis cause of demurrer, that tbe consideration of tbe .said notes was triable and determinable in tbe suit at law, and ought not, therefore, to be inquired into by this court, sitting as a court of chancery. Tbe complainant excepts to this answer as insufficient, insisting that tbe defendant is bound to answer tbe interrogatory above mentioned; and the case now com- e on, upon tne bearing of tbe exceptions, and upon tbe motion to continue tbe injunction.
Several points have been raised in the argument, which will be noticed hereafter, but tbe main question in tbe case is. upon tbe effect of tbe judgment confessed in tbe action at law. Tbe complainant, as trustee under tbe insolvent law, stands in tbe place of Lloyd; and undoubtedly tbe latter might, in the suit against him, have availed himself of tbe defences stated in tbe bill, and might have barred tbe action of Watson by pleading tbe matters now insisted on. As be failed to do so, be would not. in ordinary cases, be permitted to ins¿st - n them in a court of equity, aftei having neglected to rely on them in tbe suit at law. But it does not follow that the same rule is to be applied where contracts are made, or securities taken. in violation of law. or contrary to declared and established policy; and of this description are all securities, by note or otherwise, intended to secure usurious interest, or for money won at play.
in such eases *he court are called upon to consider, not only tbe laches of tbe party who may have been grossly negligent in asserting bis rights, but must look also to tbe conduct of tbe adverse party, and determine whether it is consistent with sound principles of jurisprudence, to protect him in tbe enjoyment of profits derived from securities taken in violation of tbe express provisions of a statute, and which tbe law declares shall be void. Undoubtedly, it is within the legitimate province of courts of justice, and it is their duty in tbe exercise of tbe powers confided to them, to carry into full effect the policy of tbe law, when that policy is sufficiently and clearly manifested. Nor can they suffer it to be defeated or embarrassed, by the application of rules which do not belong to cases of that description, but are appropriate to another class of cases, and which have been adopted in them, for tbe purpose of preventing unnecessary litigation, where nothing more is concerned in tbe issue than tbe individual rights of the contending parties.
Tbe distinction between these two classes of cases, and tbe different rules which govern them, have been frequently recognised, where a party, by bis voluntary act, has put it out of bis power to use a legal defence which would have protected him from tbe payment of tbe claim. Thus, in ordinary cases of contract, if a party pays money with a full knowledge of the facts, but under the mistaken belief that he is bound by law to pay it, and afterwards discovers bis error, be cannot recover it back again by any proceeding at law or in equity. iTet, in a case of usury or gaming, although be pays it not only with a knowledge ot the facts, but with a knowledge of tbe law also.»equity will relieve him and compel tbe adverse party to refund tbe money. As respects usurious interest paid to the lender, the amount paid over and above tbe legal interest may be recovered back again either by a suit at law or a bill in equity. 1 Fonbl. Eq. bk. 1, c. 4, § 7, note k As regards a security for money lost by gaming, it was, indeed, said by Lord Talbot, that it could not be recovered, both parties being equally in fault; but that point did not arise in tbe ease before him; it was an obiter dictum, when deciding upon a question of usury; and the point was decided otherwise in tbe case of Uawden v. Shad-well. Amb. 2(ii). In tbe last-mentioned case, a bond had been given for money lost at play, and part’ of the money paid upon tbe bond; yet tne court, upon a bill filed for that purpose, decreed that tbe bond should be delivered up to be canceled, and tbe money repaid. Indeed, there can be no sound reason for distinguishing securities for money won at play from securities founded in usury, so as to give any advantages to tbe former over tbe latter; for they are both [977]*977prohibited by law, both contrary to "its settled policy; and while the laws against usury are intended to protect the necessitous against the oppression of the money-lender, .and against hard and ruinous contracts forced upon them by their wants, the laws against gaming are founded upon a policy equally sound and clear, and are intended to discountenance and discourage a vice injurious to society, and often most ruinous to the individual.
If, therefore, the money had been paid by Lloyd upon these two notes, it is evident, that the complainant might, upon a bill filed, have recovered it back. And if a court of chancery would have interfered, after the money had been actually paid, is there any principle of equity which will prevent it from interposing, where the party has omitted to defend himself at law, and confessed a judgment?
There is nothing, certainly, in the technical character of a judgment that will prevent the interposition of a court of equity, for it is one of its ordinary functions to relieve against judgments at law, where a proper case is made out in equity. And if it will lend its aid to the party, after he has acknowledged the justice of the debt by the payment of the money, there can be no sufficient reason for refusing to interpose where the party has omitted to make the defence in an action at law, and acknowledged the debt by confessing the judgment. In either case, the court acts to prevent the party from retaining an advantage which he has obtained, under a contract forbidden by law, and to uphold an established public policy, intended, in the one case, to guard against oppression, and in the other, to suppress a vice injurious to society. If the mere confession of a judgment at law would secure a party in his ill-gotten gains, the statutes passed upon these subjects would be nugatory, since they could be constantly and easily evaded by substituting a confession of judgment in the place of a note or bond, or other security. When the public policy established by the legislature is so obvious, and is so clearly founded in the principles of justice, and required by the interests of society, it would ill become a court of equity, by narrow and technical constructions, to deprive itself of the power of enforcing it.
These principles are supported by high judicial authority. So far as the question of usury is concerned, the precise point before us appears to have been decided in the court of appeals of Maryland, upon full argument, in the case of West v. Beanes, 3 Har. & J. 568, and also in Fanning v. Dunham, 5 Johns. Ch. 142. It is true that, in the last-mentioned case, a warrant of attorney to confess the judgment was executed at the same time with the bond, and might perhaps be regarded as-one of the securities taken by the lender; but the case evidently was not decided merely on that ground, but was likened by the court to ■ the case of a borrower who had voluntarily paid the money, and thereby put it out of his power to resist, as defendant, the claim of the creditor.
As regards the money won at play, it is truly said, in 1 Story, Eq. Jur. §§ 303, 304, that there is no difference, in principle, between usurious and gaming contracts, in this respect, as the securities in both cases are void at law, and the contiacts in each case against its policy.
We concur in these doctrines, and think the omission of Lloyd to defend himself in the action at law is no bar to the relief asked for by the complainant. If the question of usury or not, or of gaming or not, had been made in the suit at law, and decided against Lloyd, undoubtedly, the complainant could not be permitted to try the same questions over again in equity, and consequently, would not be entitled to the discovery he asks for; but these questions were not raised in that suit, and have not yet been decided in any court. The question before us is, whether it is too late now to raise them, and whether the judgment confessed shuts the door against further inquiry into the consideration of the notes upon which it is admitted to have been entered. We think it does not; and that the principle upon which the court grants relief after the voluntary payment of the money, must also entitle the party to relief after a voluntary confession of judgment. In each case, the party, by his voluntary act. has deprived himself of the opportunity of defending himself in a court of law.
The act of the general assembly of Maryland, passed at December session 1S4Ó, after these contracts were made, and indeed, after the bill in this case was filed, cannot, of course, have any influence on this decision. And if it could, it would not materially.affect the principles hereinbefore stated; for although this law abrogates' the penalties inflicted by the act of 1704, in cases of usury, and permits the party to recover the sum actually loaned, with legal interest thereon, yet the contract, so far as the usurious interest is concerned, is still made void, and the policy of the former law upon the subject, in that respect, remains unaltered.
* It has, moreover, been insisted, in the argument for the defendant, that the complainant is not entitled to the discovery, because the answer may subject the defendant to a penalty or forfeiture. Upon this point it is sufficient to say, that the defendant has not objected to answering on this ground, and does not aver, in his answer, that the discovery sought, would bring him into any such danger; it cannot, therefore, we think, be relied on in the argument. But if this defence had been made in the answer, it could hardly have been sustained: for. as relates to the usury, it is admitted by the bill, that no money was received by the defendant; and the mere making of an usurious agreement, or taking a bond or other obligation to secure it', does not subject the lender to a penalty or [978]*978forfeiture. Nor do we perceive how he will be brought into any such danger, by answering that part of the interrogatory which concerns the note alleged to have been given for a gaming debt. If he admits that the note was given for money won at play, it is difficult to imagine how that fact could be used to prove that he kept a faro-bank, or prac-tised any other of those devices upon which the law inflicts a punishment; nor can we imagine how this fact could become a material link in any chain of evidence in a prosecution against him. He is not asked to state the circumstances under which the money was won; he is required simply to say whether the consideration was a gaming debt or not; and there are a multitude of ways in which he may have won the money without subjecting himself to a penalty.
In a defence of this kind, the bare statement of the defendant wo'uld hardly be sufficient, even if made in his answer; the court must be satisfied that he has some reasonable and probable grounds to apprehend danger from his answer, in case a prosecution should afterwards be instituted against him. The right to a discovery, so far as it can be maintained on principles of equity, would seem to be peculiarly necessary and appropriate in cases of this kind, where the winner most commonly takes the security in private; where no witnesses are present who know anything of the transaction; and does this, in order to deprive the loser of proof, if he should afterwards endeavor to resist the payment.
No doubt an affirmative answer in this ease will prevent the party from recovering the money; but that is not a penalty or forfeiture within the meaning of the law. The object of every bill of discovery is to obtain from the defendant the admission of some fact, which the complainant supposes will enable him to prevent the recovery of some claim which the defendant has made against him, or enable him to enforce a claim against the defendant, which he has not otherwise sufficient testimony to establish.
It has been further argued that, as Lloyd himself has not made this defence, nor united in this proceeding, his trustee under the insolvent law has no right to bring these claims into question. But we regard it as settled law, that the permanent trustee, appointed upon the release of the insolvent, becomes immediately vested with all the rights, at law or in equity, which the latter then possessed, and may enforce any right, or make any de-fence, which the insolvent could have maintained or enforced at the time of his insolvency. These rights are transferred to the trustee, and the complainant may now make the same defences, at law or in equity, against these claims and against the judgment upon them, which Lloyd could have made if he had never become insolvent.
The first and second exceptions filed by the complainant must therefore be allowed, and the answer of the defendant in those respects adjudged insufficient; and the injunction heretofore granted be continued until the further order of this court. The third exception of the complainant is overruled.