Newell v. Nixon
ERROR to the Circuit Court for the Eastern District of Louisiana; the case being thus:
By the Civil Code of Louisiana it is enacted—
1. That actions 'for the delivery of merchandise or other effects shipped on board any kind of vessel . . . are prescribed by one year.'
2. That conventional interest shall in no case exceed eight per cent., under pain of forfeiture of the entire interest so contracted.
With these provisions in force, Nixon sued Newell, attaching as his property the steamboat Hill; and setting forth by petition filed April 20th, 1857:
1. That Newell was indebted to him $2585, with interest from January 11th, 1855, at the rate of eight per cent., for this, to wit, that on the said day the said Newell and one Hamilton, since deceased, being co-owners of the steamboat Hill, . . . and in such capacity, viz., as owners, made their note in his favor for the above-named sum, which would appear by reference to the note annexed and made part of the petition.
2. That independently of this, Newell was indebted in the same sum for this-that he, Nixon, had shipped, at New Orleans, on the said steamboat, of which Newell and one Hamilton were owners, a large quantity of salt, which was never delivered at its destination.
The note, which was annexed to the petition, was for the amount above stated, and was signed 'Newell & Hamilton, owners,' but was made payable with interest at the rate of ten per cent. per annum.
Newell set up as defence that he never was a member of any firm known as Newell & Hamilton; and that no person had authority to bind him under any such signature; and, moreover, that the cause was barred by the 'prescription' (or 'limitation,' as it is called in many States), of one year.
The court found as fact that the note was not signed by the defendant, Newell, but by Hamilton, now dead; that these two persons had no commercial partnership; that they did not transact the business of the boat under a social name, and were not accustomed to sign notes in this form; but that they were simply part owners in the Hill-Newell owning three-fourths and Hamilton one.
The court found, further (no bill of lading being produced and the evidence being of witnesses who received the salt), that the salt was shipped as alleged but arrived at an intermediate port in bad condition, where it was taken by the agent of the owners of the Hill, who disposed of the same with their consent and for their account, the plaintiff having refused to receive it on account of its bad condition; that the consideration of the note was the sum due by the steamboat and owners for the salt not delivered; that the defendant was aware of the making of the note and of its consideration; that there was no evidence of his dissent from the act. It was shown also that after the death of Hamilton, his administrator made a settlement with Nixon and transferred to him Hamilton's interest in the steamboat, for which Nixon had agreed to pay 'the debts and liabilities of the boat.' This settlement took place September 22d, 1856.
The objections made below to the claim were:
1. That the defendant, Newell, not having been in any sense a partner of Hamilton, the note signed by Hamilton did not bind Newell.
2. That no bill of lading had been produced; and that one was necessary.
3. That the suit was barred by prescription or limitation of one year.
The court (Campbell, J.), as to the first point, admitted that as Newell was not a partner, in any sense, of Hamilton, the note could not bind Newell, unless he was connected with it by testimony other than itself. But it thought that the special facts of the case did so connect and make him liable. The term 'boat,' in the contract by which Newell assumed to pay 'the debts and liabilities of the boat,' the learned judge considered as meaning those binding the owners on account of their interest in the boat. The assumption had been made on an adequate consideration. The note on its face expressed an obligation affecting the boat, and it was given in recognition of such a liability.
In regard to the second point, the learned judge did not consider the production of the bill of lading essential to the support of the action. The suit had not been brought on the contract of shipment, but to collect the sum acknowledged to be due in consequence of the breach of contract.
3. To the argument of prescription the court said nothing.
Judgment having been given accordingly, for the plaintiff, the same points were again presented here on exception; an additional point being made, to wit, that the court erred in allowing eight per cent. interest.
Mr. Reverdy Johnson, who filed a brief of Mr. Marr, for the plaintiff in error:
1. As there was no commercial partnership between the defendant and Hamilton, and as they did not transact the business of the boat under a social name, Newell was not bound by the note, and, if he was liable to plaintiff, that liability must rest solely upon the original consideration, the shipment, consignment, and breach set forth in the petition. The note itself proved nothing against the defendant; and the plaintiff was bound to prove such facts as would constitute legal responsibility on the part of defendant; that is to say, was bound to prove the shipment, the consignment, the breach, and consequent damages, exactly as if no such note had been given. He did not do this.
2. The bill of lading was not produced; an extraordinary fact in the case of any large shipment. Nor does the plaintiff allege that he was the owner of the salt. In the absence of proof to the contrary, the consignee would be presumed to be the owner. The legal title is in him; and the mere shipper has no interest in the contract of affreightment, or in the delivery of the cargo. If the defendant was liable to the plaintiff, it was as a common carrier, for the damages resulting from the breach of the specific contract alleged. The best proof of that contract would have been the bill; and without in some way accounting for the failure to produce it, the plaintiff ought not to have been allowed to introduce secondary and oral proof of the shipment. His character as shipper does not give him such an interest in the property as to enable him, upon that mere allegation, to maintain an action. The consignee might sue and recover upon simply alleging and proving the consignment to him, and failure to deliver; but if the shipper sues, he must allege and prove property in himself. This court may well presume, in the absence of a contrary showing, that every important allegation has been proven to the satisfaction of the triers, when there is a general finding in favor of plaintiff; but it will certainly not presume in favor of plaintiff, that an important fact, essential to his right to recover, which he has not alleged, was proven.
3. As there was no proof of demand having been made of defendant, and no pretence that he ever acknowledged his liability to plaintiff on this claim, there is nothing to take it out of the prescription; and the demand was barred.
4. The court below erred in allowing eight per cent. interest, even if the proof makes out the liability of the defendant.
The suit was upon the note, and one of two things is true in the matter. Either the note is obligatory upon Newell; and in that event it is void, so far as interest is concerned, because it stipulates for ten per cent.; or, it is not obligatory on him; and in that event there is no proof of a written agreement, or of any other agreement to pay conventional interest. Either there is no proof of an agreement to pay interest, or there is proof of an agreement to pay usurious interest, which is prohibited by the law of Louisiana.
In Reid v. Duncan,  the Louisiana courts say, in reference to the law against usury: 'The statute is prohibitory. Whatever is done in contravention of a prohibitory law is void, although the nullity be not formally directed.  The agreement to pay usurious interest being in violation of a prohibitory law, we can give it no effect whatever.'
This case arose and was decided under Art. 2895 of the Civil Code, which affixed no penalty to the agreement to pay usurious interest. But the law applicable in this case, attaches as a penalty the forfeiture of the entire interest so contracted. So utterly void is such an agreement, under this statute, that the debtor, if he has actually paid the usurious interest, may sue for and recover it within twelve months. 
Without written proof of an agreement to pay it, conventional interest cannot be recovered. An agreement to pay ten per cent. cannot be maintained as a valid contract to pay eight per cent. If the written proof establishes an agreement prohibited by law, the court can give it no effect whatever, but must declare it void in toto. In Reid v. Duncan, already cited, the court say: 'We cannot say that we will let the convention stand up to the highest limit permitted by the law, and disregard it for so much as it exceeds the legal limit. The convention is a whole, and the nullity covers the whole.'
Will it be said that there was no plea of usury in this case? That is so, and it is so for two reasons: 1st. Newell did not admit that the note was obligatory upon him; consequently he could not have pleaded that he had made an agreement to pay usurious interest. 2d. As the note itself, which is the only agreement touching interest, was exhibited as part of the petition, and offered in evidence, it furnishes proof of a stipulation which the law prohibits, and which the courts must reprobate. If the note were obligatory upon Newell the case would be exactly analogous, so far as the interest is concerned, to one in which a note offered in evidence should state upon its face that it is given for money lost at play. The proof of indebtedness disclosing as agreement which the courts cannot enforce, no special plea of illegality would be necessary.
Mr. Janin, contra:
I. It is submitted that under the state of facts found by the court below, a sufficient partnership to bind Newell, even if not a truly commercial partnership did exist between Newell and Hamilton, under the laws of Louisiana. They were partners in the ownership and business of the steamboat. If so, they were bound jointly and severally for this debt, and the settlement of the claim by the note now sued on, by one of the partners, cannot, under the facts of the case, be complained of by the other partner.
But more clear is the fact, that the owners of the boat, Newell and Hamilton, acknowledging their liability, took the salt and disposed of it on their own account, and therefore, not only as carriers, but by appropriating the property to their own use, with the evident intention of indemnifying the owner, became responsible for the value of the property.
Express sanction was not wanting in this case on the part of Newell. The agent of the boat sold this damaged salt, with the consent of both of the owners of the boat, and for their account; Newell was aware of the making of the note, and the consideration for which it was given, and never objected to Nixon's claim; and, further, after Hamilton's death, in August, 1855, Hamilton's administrator transferred to him Hamilton's fourth interest in the boat and its benefits, in consequence of which Newell assumed to pay all the debts and liabilities of the boat. This includes, of course, the note sued on, which, on its face, expresses an obligation affecting the boat; and the evidence is that it was given in recognition of such a liability.
By this assumption the plaintiff in error became bound for the debt, even if he had not been originally bound by the note. Article 1884 of the Civil Code of Louisiana is in these words:
'A person may also, in his own name, make some advantage to a third person the condition or consideration of a commutative contract or onerous donation; and if such third person consents to avail himself of this advantage, stipulated in his favor, the contract cannot be revoked.'II. The counsel contend that the defendant in error was a mere shipper, and did not prove the ownership of the salt. This was, however, acknowledged by the settlement of Hamilton with Nixon, treating him as the party in interest.
III. As to the plea of prescription. The owners appropriated the proceeds of our salt. The action is less for a breach of contract to carry than assumpsit for money had and received. It is so plain that the prescription of one year for the mere non-delivery of merchandise cannot apply, that the court thought it needless to make any remark about the thing at all. And so it was. After Hamilton's direct acknowledgment of ownership and Newell's tacit assent to the settlement, it was certainly unnecessary to produce the bill of lading.
IV. The allowance of eight per cent. interest on the principal of the note was right. The suit was perhaps less upon the note than on the appropriation and use of our money, the proceeds of the salt sold. We asked eight per cent. interest, and no objection being made, it was given us. This was probably right.
But whether right or not, it must now stand. Objection to it is now first made here. There was no plea of usury, nor was usury set up even by argument in the Circuit Court, from which the case comes.
Mr. Justice CLIFFORD delivered the opinion of the court.
^1 1 Annual, 267.
^2 Civil Code, Art. 12.
^3 See a full comment on this statute in Lalande v. Breaux, 5 Annual, 506, et seq.