Brown v. Hiatts/Opinion of the Court

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 per cent. interest a year while one of the collaterals bore interest only at six per cent., and the other at seven per cent. 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 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, 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 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, 'The law imposes 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, 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 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, '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 defence 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 barefaced and impudent falsehood, and the production 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.