New England Mortgage Security Co. v. Gay, 145 U.S. 123 (1892)


U.S. Supreme Court

New England Mortgage Security Co. v. Gay, 145 U.S. 123 (1892)

New England Mortgage Security Company v. Gay

No. 221

Argued March 22, 1892

Decided May 2, 1892

145 U.S. 123



U.S. Supreme Court

New England Mortgage Security Co. v. Gay, 145 U.S. 123 (1892) New England Mortgage Security Company v. Gay

No. 221

Argued March 22, 1892

Decided May 2, 1892

145 U.S. 123




When the jurisdiction of this Court depends upon the amount in controversy, it is to be determined by the amount involved in the particular case, and not by any contingent loss which may be sustained by either one of the parties through the probative effect of the judgment, however certain it may be that such loss will occur.

The plaintiff made a loan to the defendant upon his promissory notes to the amount of $8,500, secured by a mortgage of real estate in Georgia of the value of over $20,000. In assumpsit to recover on the notes, the jury found the transaction to have been usurious and gave judgment for the sum actually received by the debtor, which was $1,700 less than the amount claimed, and for interest and costs. The effect of that judgment, if not reversed, is, under the laws of Georgia, to invalidate the mortgage given as security, in proceedings to enforce it. Held that notwithstanding such indirect effect, this Court has no jurisdiction, the amount directly in dispute in this action being only the usurious sum.

This was an action of assumpsit by the plaintiff in error against Jacob M. Gay upon four promissory notes, made by Gay, amounting to $8,500, with interest at eight percent, payable annually, with all costs of collection, including ten percent attorneys' fees. These notes were made payable to Charles L. Flint or order at the office of the Corbin Banking Company, New York City, and as to each of them the defendant waived his right to the benefit of the exemption provided for by the Constitution and laws of Georgia. To secure these notes, a deed was given by Gay, with the consent of his wife, to said Flint, of land in Schley County, Georgia, with release of homestead and dower. At the same time, a bond for a reconveyance on payment of the notes was given by Flint to Gay, according to the usual course of business in Georgia, where such deed and bond stand in the place of a mortgage.

Page 145 U. S. 124

Flint took the notes and deed in behalf of the plaintiff, and afterwards endorsed the notes to the plaintiff.

The defendant pleaded four pleas, two of which were stricken out by the court, and the case was tried upon the first, which was an ordinary plea of nil debit and upon the second, wherein the defendant alleged that the consideration of these notes was a loan of money by the plaintiff to the defendant of the sum of $6,463, and that all of said sum and notes sued on in excess of said sum was contrary to law, and defendant was only liable for the sum received by him and lawful interest thereon from the dates of the notes, which amount he averred his willingness to pay. Upon the trial, the defendant relied solely upon the defense of usury, and the court charged the jury that the defendant admitted an indebtedness of $6,463, with interest, etc., and instructed them, in any event, to return a verdict for that amount. 33 F. 636. In this connection, he further charged that if they believed the defendant received $6,800, they were then directed to return a verdict for that sum, with interest and attorneys' fees, etc. The jury returned a verdict for $6,800 principal, $2,041.51 interest, and $884.15 attorneys' fees, making a total amount of $9,725.66, for which a judgment was entered, with costs.

Plaintiff thereupon secured the settlement of a bill of exceptions, and sued out a writ of error from this Court.

Page 145 U. S. 127

MR. JUSTICE BROWN, after stating the facts in the foregoing language, delivered the opinion of the Court.

From the above statement of facts, it is clear that, while the plaintiff sued to recover $8,500 and interest, he actually recovered $6,800 and interest and attorneys' fees, amounting in all to $9,725.66, so that the amount actually in dispute between

Page 145 U. S. 128

the parties in this Court is the difference between the amount claimed and the amount of the verdict. Computing interest at eight percent upon the entire amount of the notes, and adding an attorney's fee of ten percent, the amount due, according to the plaintiff's theory, was approximately $12,155, or $2,429.34 more than the amount recovered. This is the proper method of ascertaining the amount in dispute in this Court. Tinstman v. National Bank, 100 U. S. 6; Jenness v. Citizens' National Bank of Rome, 110 U. S. 52; Wabash, St. Louis &c. Railway v. Knox, 110 U. S. 304; Hilton v. Dickinson, 108 U. S. 165.

It is true that, under the Code of Georgia, section 2057, subd. f, "all titles to property, made as a part of a usurious contract, or to evade the laws against usury, are void." The Supreme Court of Georgia has construed this as rendering a deed infected with usury void as title, and depriving the holder of the right of recovery of the land against the maker. Carswell v. Hartridge, 55 Ga. 412; Johnson v. Griffin Banking, Co., 55 Ga. 691. It was said in Broach v. Smith, 75 Ga. 159, that usury not only destroys the legal title, but prevents the deed from ever being treated as an equitable mortgage. It appears in this case that the value of the property conveyed as security is $22,500, and under the laws of Georgia, it may be that the finding of usury may have the effect of invalidating the deed given as security for the loan.

Assuming this to be true, however, it is not the immediate result of the judgment in this case. The provisions of the Georgia Code with respect to real estate security for loans are somewhat peculiar. The practice is for the person receiving the loan to convey the real property by deed to the person loaning or advancing the money, and to take a bond for title back to the vendor upon the payment of the debt, and, by section 1969,

"such conveyance of real or personal property shall pass the title of said property to the vendee . . . till the debt or debts which said conveyance was made to secure shall be fully paid,"

etc. By section 1970,

"when any judgment shall be rendered in any of the courts of this state upon any note or other evidence of debt which said conveyance of realty was

Page 145 U. S. 129

made and intended to secure, it shall and may be lawful for the vendee to make and file, and have recorded in the clerk's office of the superior court of the county wherein the land lies, a good and sufficient deed of conveyance to the defendant for said land; . . . whereupon the same may be levied on and sold under said judgment as in other cases; provided, that the said judgment shall take lien upon the land prior to any other judgment or encumbrance against the defendant."

The substance of this is that, upon taking judgment upon the note or bond given for the loan, the lender may reconvey the property to the debtor, and immediately levy upon and sell it by virtue of his judgment and execution. In such case, it would seem that, if he buys the land at the sale, he would recover possession of it by an action of ejectment upon his sheriff's deed.

In this connection, it was held by the Supreme Court of Georgia in Carswell v. Hartridge, 55 Ga. 412, 414, that the proceeding under this statute was optional and that a recovery in ejectment might be had upon the original deed made to secure the debt, so long as the title remained in the creditor and the debt was unpaid. "That the next section of the Code," said the court,

"gives a remedy for collecting the money by proceeding to judgment, filing a deed, levying upon the land, and selling it, does not negative the former remedy. The creditor may either assert his title or part with it to the debtor at his option. He may possess himself of the land and hold it till he is satisfied, or he may enforce satisfaction in the manner pointed out by section 1970. In this respect, his position is like that of an ordinary vendor of land who retains the title as security, giving a bond to reconvey upon payment of the purchase money."

That the creditor may also have the land sold by the sheriff, and bring ejectment upon the sheriff's deed, is evident from the case of Johnson v. Trust Co., 55 Ga. 691.

In either case, however, the effect of the seizure upon the title of the creditor to the property can only be judicially determined in an action of ejectment, either upon the original deed or upon the sheriff's deed given in pursuance of the

Page 145 U. S. 130

statute, or by a bill in equity to enjoin the creditor and sheriff from making sale under the levy. Johnson v. Griffin Banking & Trust Co., 55 Ga. 691. The effect of the judgment in this case, then, is not to avoid the title of the plaintiff to this property, but to establish the existence of usury, which, in another action, may be pleaded as avoiding such title. It is true that the plaintiff set forth in its declaration that the defendant gave a deed of certain lots, describing them, to secure the payment of the notes; but it claimed nothing by virtue of this allegation in its prayer for relief, demanding only a money recovery. Upon the trial, the deed and bond were offered in evidence, but were ruled out, and the judgment was simply for the amount of the notes and interest, less the alleged usury.

It is well settled in this Court that when our jurisdiction depends upon the amount in controversy, it is determined by the amount involved in the particular case, and not by any contingent loss either one of the parties may sustain by the probative effect of the judgment, however certain it may be that such loss will occur. Thus, in Grant v. McKee, 1 Pet. 248, it was held that the Court would not take jurisdiction of a case where the title to a piece of land of less value than the jurisdictional sum was directly involved, although the whole property claimed by the lessor of the plaintiff under a patent, and which was recovered in ejectment in the court below, exceeded that sum. In Farmers' Bank of Alexandria v. Hooff, 7 Pet. 168, a bill was filed for the purpose of foreclosing a deed of trust given to secure a sum of money less than $1,000. It appeared that the property covered by the deed exceeded that sum in value, but the court held the real matter in controversy to be the debt claimed in the bill, "and, though the title of the lot may be inquired into incidentally, it does not constitute the object of the suit." A similar ruling was made in Ross v. Prentiss, 3 How. 771, where a bill was filed to enjoin the marshal from levying an execution of less than $2,000 upon certain property, the value of which was more than $2,000. In this case, as in the other, the argument was made that the defendant might lose the whole benefit of

Page 145 U. S. 131

his property by the forced sale under the execution, but the Court held that it did not depend upon the amount of any contingent loss, and dismissed the bill. In Troy v. Evans, 97 U. S. 1, action was brought to recover certain installments upon bonds, the aggregate of which bonds exceeded $5,000, but the judgment was for less. The case was dismissed, although it appeared that the judgment would be conclusive in another action upon future installments upon the same bonds. A like ruling was made in Elgin v. Marshall, 106 U. S. 578, where a judgment was rendered for $1,660.75, against a town, on interest coupons detached from bonds which it had issued under a statute claimed to be unconstitutional. The case was dismissed in an elaborate opinion by Mr. Justice Matthews, although it appeared that the judgment might be conclusive as an estoppel in any subsequent action upon other coupons, or upon the bonds themselves. So in New Jersey Zinc Co. v. Trotter, 108 U. S. 564, an action of trespass wherein the plaintiff recovered judgment for less than $5,000, the case was dismissed, although the court indicated that the jury were compelled to find the plaintiff had title to the land, and "that in this way the verdict and judgment may estop the parties in another suit, but that will be a collateral, not the direct, effect of the judgment." See also Opelika City v. Daniel, 109 U. S. 108. In Bruce v. Manchester & Keene Railroad, 117 U. S. 514, suit was brought to collect interest due on certain railroad bonds by the foreclosure of a mortgage made to trustees to secure a series of bonds amounting to $500,000. As the suit was brought only to recover the interest on the bonds, which was less than $5,000, the appeal was dismissed.

Most of the authorities on the subject are collated and reviewed in Gibson v. Shufeldt, 122 U. S. 27, and a conclusion reached in consonance with the view expressed in the prior cases.

The case of Stinson v. Dousman, 20 How. 461, is not in conflict with these authorities. The action in that case was for rent amounting to less than $500, but the case itself involved the question whether a certain contract for the sale of

Page 145 U. S. 132

real property, valued at $8,000, had been annulled, and the answer of the defendant was framed not only to present a legal defense against the claim for rent, but also to obtain a decree affirming the continued validity of the contract of sale. It was held that the effect of the judgment in that particular case was an adjustment of the legal and equitable claims of the parties to the subject of the suit, which was the title to the land under the contract.

Upon the whole, it appears to us that we have no jurisdiction of this case, and that the writ of error should be dismissed, and it is so ordered.