1. Statutes of limitation of the several states did not run
during the late civil war against the right of action of parties
upon contracts made previous to and maturing after the commencement
of the war.
2. Interest on loans made previous to and maturing after the
commencement of the war ceased to run during the subsequent
continuance of the war, although interest was stipulated in the
contract.
3. These doctrines held in a case where a mortgagee, who was a
citizen and resident of Virginia, one of the Confederate States,
brought a suit, after the close of the war, upon it bond and
mortgage executed by citizens of Kansas, one of the loyal states,
previous to the war but which matured a month after the
commencement of the war.
4. It having been held that the civil war commenced in Virginia
at the date of the proclamation of the President of intended
blockade of her ports April 27, 1861, and to have ended, so far as
the statutes of limitation are concerned, on his proclamation of
its close, April 2, 1866, the period between those dates must be
deducted in the computation of the time during which the statute of
Kansas had run against the right of action of the mortgagee on the
said bond and mortgage.
Brown filed a bill against Hiatt and wife to foreclose a
mortgage, executed by the latter persons upon certain real property
in Kansas, to secure their joint and several bond for $2,400, with
interest, and to obtain a sale of the mortgaged premises for its
payment. The case was thus:
On the 29th of May, 1860, Brown, who was then and still is a
citizen and resident of Virginia, being at the time in
Page 82 U. S. 178
Kansas, lent to the defendants, citizens of that state, the sum
of $2,000, at interest at the rate of 20 percent a year, and took
the bond in suit, payable in twelve months, for the amount, with
the interest for the period included, making the sum of $2,400, the
whole drawing the stipulated interest after maturity. [
Footnote 1] As security for the payment
of this bond with interest and simultaneously with its execution,
Hiatt and wife made and delivered to Brown the mortgage in suit,
which covers three hundred and twenty acres, in the County of
Leavenworth in that state.
With the execution of the bond and as further or collateral
security for its payment, the defendant, Hiatt, assigned to the
complainant a mortgage held by him upon certain real property in
Kansas, executed by one Kenyon and his wife, to secure their joint
note for $800, made in December, 1858, and payable in December,
1860, with interest at 6 percent a year. Upon this note there was
then a credit of $75.
At the same time, the defendant, Hiatt, also assigned to the
complainant for the like further or collateral security a judgment
rendered in his favor upon the foreclosure of a mortgage against
one Perkins in the District Court of the United States for the
District of Kansas on the 6th of June, 1859, for $763 and costs.
This judgment drew 7 percent a year. The assignment was absolute in
its terms, but it is admitted to have been executed as further or
collateral security for the payment of the bond in suit.
The complainant, as stated, was at the time a citizen and
resident of Virginia, and soon after the completion of the
transaction in question he returned to that state, carrying with
him the bond and mortgage, and retained them there in his
possession until September, 1865. His residence was all this time
in that portion of the state which was declared by the proclamation
of the President to be in insurrection against the government of
the United States, and was during the entire period of the war,
until the surrender of the
Page 82 U. S. 179
Confederate forces by General Lee, under the domination of the
Confederate government.
At the time the collaterals mentioned were assigned, it was
agreed, in consequence of the residence of the complainant in
Virginia, that the defendant Hiatt should exercise such oversight
over them as would be necessary to preserve them for the purposes
for which they were appropriated, so that resort might be had to
them if the mortgage to the complainant should prove to be
insufficient security.
In April, 1861, some correspondence was had between the
complainant and Hiatt respecting these collaterals, in which the
complainant expressed a desire that the conveyance of any property
struck off to him on a sale under the Perkins judgment should show
on its face that the property was only held as collateral security,
and in which Hiatt stated that he had a prospect of paying off the
mortgage to the complainant by the proceeds of work on a contract
in Pennsylvania during the coming summer. No intimation was made on
either side of any agreement by which the collaterals were under
any circumstances to be taken in satisfaction of the bond and
mortgage in suit.
On the 17th of April of that year, the Convention of Virginia
passed the ordinance of secession purporting to take the state from
the Union. The proclamation of President Lincoln declaring a
blockade of her ports followed on the 27th of the same month, and
the war commenced. From the time of its recognition until its
termination or at least until the cessation of active hostilities,
all commercial intercourse between the parties, except by special
license of the government, was illegal, and by the Act of Congress
of July 13 of that year, and the subsequent proclamation of the
President, was expressly interdicted.
During this period of nonintercourse and early in 1863, Hiatt
went to the office of the District Attorney of the United States in
Kansas and stated to that officer that the complainant had large
claims against persons living in the state, secured by mortgages on
real property, which were subject
Page 82 U. S. 180
to confiscation, and in enumerating the debtors of the
complainant, stated that he himself owed that person a considerable
sum of money secured by mortgage on his farm, the amount of which
he could not state but it was the amount for which the mortgage was
given, and that he would much prefer paying it to the government
rather than to the complainant. This was the first intimation that
the district attorney had that the complainant held any claims in
Kansas subject to confiscation. Upon the suggestion thus made, that
officer proceeded to examine the records of the county, and found
among them the record of the bond and mortgage to the complainant.
He thereupon instituted proceedings for their confiscation in the
District Court of the United States for the District of Kansas
under the Act of Congress of March 17, 1862. To the information the
defendants appeared and filed an answer, verified by the oath of
Hiatt, in which they alleged that they were not indebted and had
not been indebted to the complainant since May, 1861, upon the bond
and mortgage executed by them. And they set up in substance that
the bond and mortgage had been paid and satisfied by the Perkins
judgment, or the property purchased under it, and the Kenyon note
and mortgage, pursuant to a verbal agreement made at the time the
bond and mortgage were executed.
Upon the trial of this question of payment and satisfaction,
Hiatt produced what purported to be a letter from the complainant
which supported the averment as to the agreement mentioned. The
district attorney, believing the letter to be genuine and the
testimony of Hiatt in support of it trustworthy, dismissed the
proceedings and instituted other proceedings for the confiscation
of the Kenyon note and mortgage. These resulted in a sale of a part
of the premises covered by that mortgage, and the proceeds of the
sale were paid into court. In the meantime, the Perkins judgment,
owing to a defective acknowledgment of the mortgage on which it was
given, proved to be entirely valueless, and the property upon which
it was a lien was sold to satisfy a prior encumbrance.
Page 82 U. S. 181
The present suit was commenced in February, 1867, and the
defenses made to it were substantially these:
1st. That a verbal agreement was a entered into between the
parties at the time the bond and mortgage were executed by which
the complainant was to take in their satisfaction, at the election
of the defendants, the Perkins judgment and the Kenyon note and
mortgage, and that the defendants, in 1862, made such election,
which was acceded to and accepted by the complainant. The election
thus made was alleged by the defendants to have been communicated
to the complainant by letter, sent by mail, and his acceptance of
the collaterals was alleged to have been contained in a letter
received by mail from him in which he stated that he should
henceforth hold the collaterals as his own property in satisfaction
of the bond in suit. These letters were not produced by the
defendants in this case, but were alleged to have been lost. And it
appeared that communication by mail between that portion of
Virginia in which Brown, the complainant, resided and Kansas ceased
in 1861 and was not reestablished until after the cessation of
hostilities in 1865.
2d. That the right of the complainant to maintain the suit was
barred by the statute of limitations of the State of Kansas, which
requires a suit of this character to be brought within three years
after the cause of action has accrued, and
3d. That the Perkins judgment and Kenyon note and mortgage had
become valueless, and were lost through the neglect of the
complainant, and that he should therefore be charged with their
full amount. The defendants also alleged that the debt against
Kenyon was confiscated by judgment of the district court as the
property of the complainant.
The circuit court held that the alleged verbal agreement was not
proved and that the statute of limitations of Kansas did not run
against the right of action of the complainant during the
continuance of the civil war, but allowed the amount of the Kenyon
note, alleged to have been confiscated
Page 82 U. S. 182
by the proceedings taken for that purpose, on the demand of the
complainant, and gave judgment for the balance and a decree for the
foreclosure of the mortgage and sale of the premises if the amount
found due was not paid within a designated period. From this decree
both parties have appealed to this Court.
MR. JUSTICE FIELD, after stating the case, delivered the opinion
of the Court, as follows:
We fully concur in the conclusion of the circuit court that the
alleged verbal agreement between the parties that the complainant
should take the Perkins judgment and Kenyon note, at the election
of the defendants, in satisfaction of the bond and mortgage in
suit, is not proved. The existence of any agreement of the kind is
positively denied by the complainant, and all the circumstances of
the case show conclusively to our minds that no such agreement was
ever made. In the first place the amount of both collaterals,
assuming them to have been perfectly good, was, at the time the
loan was made, less by several hundred dollars than the amount
lent. Then the loan drew twenty percent interest a year, while one
of the collaterals bore interest only at six percent and the other
at seven percent a year, so that the excess of the amount due on
the loan over the amount due on the collaterals was constantly
increasing. In the second place, the letter which Hiatt pretends to
have received from the complainant recognizing the alleged verbal
agreement and accepting the election of the defendants was not
produced, and the complainant denies under oath that he ever wrote
such a letter. The latter's testimony is corroborated by the fact
that communication by mail, by which means Hiatt pretends to have
received the letter, had long before ceased between that portion of
Virginia in which the complainant resided and the loyal portion of
the United States. In the third place, the statements of Hiatt made
to
Page 82 U. S. 183
several parties at different times were inconsistent with the
existence of any agreement of the kind mentioned. In 1863, he
stated to the district attorney that he owed the complainant the
entire amount secured by his mortgage, and this was more than a
year after the pretended satisfaction of the bond and mortgage in
suit. The story put forth by the defendants is contradicted by the
testimony of the complainant, is intrinsically improbable, and is
irreconcilable with their repeated statements to others and with
their answer to the information in the confiscation proceedings.
The case well illustrates the wisdom of the rule of law, and the
importance of its enforcement, that parol testimony of a verbal
agreement shall not be permitted to vary or contradict the terms of
a written contract made at the same time. The contract here in
writing shows that the Kenyon note and mortgage were assigned as
collateral security. The object of the testimony was to prove that
a different agreement was really made -- namely, that the note
should be held as such security only at the option of the
defendants, and at their election could be turned over with the
Perkins judgment in full payment and satisfaction of the bond and
mortgage. Had an objection been taken to the admissibility of this
evidence, it would undoubtedly have been excluded.
We concur also with the circuit court in its ruling that the
statute of limitations of Kansas did not run against the right of
action of the complainant during the continuance of the civil war.
That statute required the action to be brought within three years
after the cause of action accrued, and it constituted a rule of
decision in the national courts equally as in the courts of that
state. The cause of action in this case accrued on the 29th of May,
1861. At that time, the civil war embraced Virginia, or at least
that portion of the state in which the complainant resided.
It was held in the case of
The Protector [
Footnote 2] that the war began in that state
at the date of the proclamation of intended blockade of her ports
by the President. That was the first public act of the executive in
which the existence of war in
Page 82 U. S. 184
that state was officially recognized, and to its date the courts
therefore look as the commencement of the war. And so far as the
operation of the statute of limitations is concerned, it was held
in the same case that the war continued until proclamation was in
like manner officially made of its close. That occurred on the 2d
of April, 1866. The period, therefore, between the 27th of April,
1861, and the 2d of April, 1866, must be excluded in the
computation of the time during which the statute has run against
the right of action of the complainant on the bond and mortgage in
suit, and being excluded the present suit is not barred.
It is unnecessary to go at length over the grounds upon which
the Court has repeatedly held that the statutes of limitation of
the several states did not run against the right of action of
parties during the continuance of the civil war. It is sufficient
to state that the war was accompanied by the general incidents of a
war between independent nations; that the inhabitants of the
Confederate States, on the one hand, and of the loyal states, on
the other, became thereby reciprocally enemies to each other, and
were liable to be so treated without reference to their individual
dispositions or opinions; that during its continuance, all
commercial intercourse and correspondence between them were
interdicted by principles of public law as well as express
enactments of Congress; that all contracts previously made between
them were suspended; and that the courts of each belligerent were
closed to the citizens of the other.
Statutes of limitation, in fixing a period within which rights
of action must be asserted, proceed upon the principle that the
courts of the country where the person to be prosecuted resides or
the property to be reached is situated are open during the
prescribed period to the suitor. The principle of public law which
closes the courts of a country to a public enemy during war renders
compliance by him with such a statute impossible. As is well said
in the recent case of
Semmes v. Hartford Insurance
Company, [
Footnote 3]
"The law imposes
Page 82 U. S. 185
the limitation and the law imposes the disability. It is
nothing, therefore, but a necessary legal logic that the one period
should be taken from the other."
As the enforcement of contracts between enemies made before the
war is suspended during the war, the running of interest thereon
during such suspension ceases. Interest is the compensation allowed
by law or fixed by the parties for the use or forbearance of money,
or as damages for its detention, and it would be manifestly unjust
to exact such compensation, or damages, when the payment of the
principal debt was interdicted. The question whether interest
should be allowed on such contracts during the period of war was
much considered soon after the Revolution. In the case of
Hoare
v. Allen, [
Footnote 4]
decided in 1789 by the Supreme Court of Pennsylvania, it was held
that interest did not run during the war on a debt owing to an
enemy contracted previously. "Where a person," said the court, "is
prevented by law from paying the principal, he shall not be
compelled to pay interest during the prohibition." The legislation
of Congress after the commencement of the War of the Revolution,
like the legislation of 1861, prohibited commercial intercourse
with the inhabitants of the enemies' country, and the court
observed that the defendant could not have paid the debt to the
plaintiff, who was an alien enemy, without a violation of the
positive law of the country and of the law of nations, and that
parties ought not to suffer for their moral conduct and their
submission to the laws. The decision was followed by the same court
in
Foxcraft v. Nagle, in 1791. Similar decisions were
rendered by the Court of Appeals of Virginia and the Court of
Appeals of Maryland.
The counsel for the complainant attempts to draw a distinction
between those contracts in which interest is stipulated and those
to which the law allows interest, and contends that the revival of
the debt in the first case, after the termination of the war,
carries the interest as part of the
Page 82 U. S. 186
debt, while in the latter case interest is allowed only as
damages for the detention of the money. We are, however, of opinion
that the stipulation for interest does not change the principle
which suspends its running during war. In the first case cited,
from Pennsylvania, interest was stipulated in the contract. "A
prohibition," says Mr. Justice Washington in
Conn v. Penn,
[
Footnote 5]
"of all intercourse with an enemy during the war and the legal
consequence resulting therefrom as it respects debtors on either
side furnish a sound, if not in all respects a just, reason for the
abatement of interest until the return of peace. As a general rule,
it may be safely laid down that wherever the law prohibits the
payment of the principal, interest during the existence of the
prohibition is not demandable."
Upon the third ground of defense, we are unable to agree with
the circuit court. We concur in its ruling that the complainant is
not justly chargeable with any neglect in the collection of the
collaterals. His residence within the Confederate States rendered
it impossible for him to superintend proceedings for their
enforcement. The Perkins judgment proved to be worthless in
consequence of the defective acknowledgment of the mortgage, for
the enforcement of which the judgment was rendered, which defect
gave precedence to another mortgage under which the property was
sold and by which the proceeds were absorbed. The Kenyon note and
mortgage were confiscated, and the premises, or a part of them,
covered by that mortgage were sold by the marshal and the proceeds
paid into court. That note and mortgage the complainant did not
own; he held them only as collateral security for the payment of
the bond of the defendants. They were owned by the defendant,
Hiatt. He concocted a scheme to defraud the complainant and
invented the shallow story of an agreement with him to take the
collaterals in satisfaction of the loan although they were less
than the loan in amount by several hundred dollars. By bare-faced
and impudent falsehood and the production
Page 82 U. S. 187
of a fabricated letter purporting to be from the complainant, he
induced the district attorney to believe that the bond and mortgage
of the defendants had been paid and satisfied and that the
collaterals belonged to the complainant, and as his property their
confiscation was decreed. Having thus led the public prosecutor to
treat his own property as belonging to another and to be
confiscated as such, he must suffer the consequences of his own
folly and crime. He cannot charge the loss of the collaterals thus
caused to the complainant.
It follows from the views we have expressed that the judgment
and decreed of the circuit court must be reversed and that court be
directed to enter a judgment in favor of the complainant for the
amount due on the bond in suit, such amount to be made up by adding
to the principal the interest due to the date of the judgment, at
the rate stipulated, deducting the period intervening between the
27th of April, 1861, and the 2d of April, 1866, and also a decree
directing a sale of the mortgaged premises and the application of
the proceeds to the payment of the amount found due if such amount
be not paid within such reasonable period as may be prescribed by
the court. And it is
So ordered.
[
Footnote 1]
The law of Kansas then in force allowed parties to agree for the
payment of any rate of interest on money due or to become due upon
any contract.
[
Footnote 2]
79 U. S. 12 Wall.
700.
[
Footnote 3]
80 U. S. 13
Wall. 160.
[
Footnote 4]
2 U. S. 2 Dall.
102.
[
Footnote 5]
Peters' Circuit Court 524.
