U.S. Supreme Court
Walsh v. Mayer, 111 U.S. 31 (1884)
Walsh v. Mayer
Argued January 31, Feb. 1, 1884
Decided March 17, 1884
111 U.S. 31
A negotiable promissory note made in New Orleans secured by mortgage of real estate in Mississippi, the maker being a citizen of Arkansas and the promisee being a citizen of Louisiana, and no place of payment being named in the note, is subject to the limitation of actions prescribed by the statute of Mississippi, as the law of the forum, when suit is brought upon it in Mississippi.
In Mississippi, a letter from the holder of a promissory note, the right of action on which is barred by the statute of limitations, asking for insurance on buildings on property mortgaged to secure payment of the note and saying "The amount you owe me on the $7,500 note is too large to be left in such an unprotected situation. I cannot consent to it," and a written reply from the maker saying "We think you will run no risk in that chanroblesvirtualawlibrarychanroblesvirtualawlibrary
time, as the property would be worth more than the amount due you if the building were to burn down" is an acknowledgment of the debt within the requirements of the Mississippi statute of limitations.
When a promissory note barred by the statute of limitations is signed in their individual names by several persons forming a co-partnership, and the acknowledgment in writing to take it out of the operation of the statute is signed in the partnership name, it is a sufficient acknowledgment if the note was an obligation contracted for partnership purposes and if it can be legitimately inferred from the facts that the firm was the agent of all the makers for the purpose of the acknowledgment.
A statute prescribing a legal rate of interest and forbidding the taking of a higher rate "under pain of forfeiture of the entire interest so contracted," and that
"if any person hereafter shall pay on any contract a higher rate of interest than the above, as discount or otherwise, the same may be sued for and recovered within twelve months from the time of such payment"
confers no authority to apply usurious interest actually paid to the discharge of the principal debt. A suit for recovery within twelve months after payment is the exclusive remedy.
A plaintiff demanding judgment on a note for $7,500 recovered only $702, judgment being against him as to the remainder of the claim on matter of law. He appealed. The defendant took a cross-appeal. On motion to dismiss the cross-appeal for want of jurisdiction, held that it was incident to the plaintiff's appeal, and that appeal being sustained in part and overruled in part, the whole cause was remanded.
On the 2d day of January, 1866, the defendants, J. D. Mayer & Co., purchased from William Barnes, who then resided in the City of New Orleans, and the said defendants then being residents of the State of Arkansas, the hotel property situate in Mississippi City in this state (Mississippi), known as the Barnes Hotel, and, to secure the payment of the last installment of the purchase money, executed their promissory note for $7,500, payable two years after date, with six percent interest thereon until due and ten percent thereafter until paid, which note was made payable to themselves, and endorsed and delivered to said Barnes, who held and owned the same until about the last of June, 1874, when he sold and delivered the same for value to the complainant, Walsh.
To secure the payment of this note and one for the same amount which fell due the year previous,= and which has been paid and satisfied, the said defendants executed a mortgage upon the property so purchased, which was executed and recorded on the 20th of February, 1866. chanroblesvirtualawlibrarychanroblesvirtualawlibrary
That at the time said contract was made, it was agreed and understood between the parties that the deferred payments were intended by said Barnes as an investment, and that so long as the interest was paid after this note became due, that the payment of the principal sum would not be demanded, and that in pursuance of said agreement and understanding, the said defendants paid up the interest, and which was endorsed upon the note as paid, to September, 1873. Sometime after the maturity of the note, Barnes, as a condition for further indulgence, demanded of the said defendants that they should execute their notes falling due at a further period for the interest up to their maturity, equal to 15 percent per annum, upon the note for $7,500, and also for the amount of money advanced by Barnes to pay the premiums upon the insurance policies, with fifteen percent interest added. These notes were drawn in New Orleans, made payable to order, and endorsed and delivered to Barnes. The last of these notes was dated May 12, 1874, and made due and payable on the 14th day of September thereafter. These transactions all took place prior to the transfer of the note by Barnes to complainant, but were known to complainant at the time of his purchase.
At the time of the purchase of the note, complainant wrote to the defendants notifying them that he was the holder and owner of the note and calling their attention to the continuance of the insurance upon the property. To this letter the said defendants replied on the 6th of July, acknowledging its receipt, but nothing more.
On December 1st, complainant mailed a letter to defendants informing them that he needed money, that the interest had been paid to the first of September before, and again urging funds to provide insurance on the property. Defendants replied to this letter on the 8th of December, stating that they were willing to pay three months' interest, but had been served with a writ of garnishment in the suit of the First National Bank of New Orleans, in a suit by attachment brought by the bank on said Barnes in the Circuit Court of Harrison County, and therefore declined to make further payment or for further insurance, chanroblesvirtualawlibrarychanroblesvirtualawlibrary
stating that they desired to have the insurance changed and to take it at a future time.
On March 2, 1876, complainant wrote a letter to defendants calling their attention to the want of insurance, in which he uses the following language:
"I think it would not be wise for you or safe for me to leave things in that way; the amount you owe me on the $7,500 note is too large to be left in such an unprotected condition, and I cannot consent to it."
On the 9th of March, 1876, the defendants made and sent to the complainant the following reply to the foregoing letter:
"Yours at hand. We do not want to insure any until about July, when we expect to insure for about $15,000. We think you will run no risk in that time, as the property would be worth the amount due you if the building was to burn down."
"[Signed] J. D. MAYER & Co."
The suit of the bank v. defendants was commenced in November, 1874, but, owing to the death of Barnes, was continued until the 24th of October, 1876, when the defendants filed their answer to the garnishment, in which they acknowledge the execution of the note, but claim that they have paid excess of interest and usiled their answer to the garnishment, in which they acknowledge the execution of the note, but claim that they have paid excess of interest and usiled their answer to the garnishment, in which they acknowledge the execution of the note, but claim that they have paid excess of interest and usurious interest thereon, which should be deducted from the note, and which when done would only leave a balance of $2,509.76, and which was owing to said William Barnes, but claimed the benefit of the statute of limitations, and which they set up as an entire defense to the said note, and upon which the suit was dismissed as to them.
After this, by an arrangement between them and the bank, they gave their note to the bank for the said sum of $2,509.76 at four years, with six percent interest, but this was done with the condition that if the complainant recovered on said note for $7,500, the bank was not to collect the note so executed to it.
The bill set up these facts and prayed for an account and that the defendants might be decreed to pay the sum found due and enjoined from pleading the statute of limitations, and that the mortgage might be enforced.
The answer, among other defenses, set up usury and the chanroblesvirtualawlibrarychanroblesvirtualawlibrary
statute of limitations and denied that the correspondence took the notes out of the statute.
The court decreed the enforcement of the lien to the extent of $702.69, the among remaining due on the note after deducting the usurious interest under the statutes of Louisiana. From this decree the plaintiff appealed, and the defendants took a cross-appeal.