Carruth v. Carter

Louisiana Supreme Court · Property

PropertyMortgageUsuryFailure of Considerationmortgage noteusurypartial failure of considerationwritten acknowledgment

Facts

The suit sought recovery of the remaining balance on a mortgage note. Defendants asserted partial failure of consideration and usury, and at trial they offered testimony from themselves and another witness to prove usury and an error in the amount of the note. The trial court excluded that evidence on the ground that plaintiff had acquired the note before maturity as a third party and was not bound by prior equities. The note had been deliberately given and secured by mortgage, no fraud was alleged, several partial payments had been made, and the defendants later signed a written settlement acknowledging they owed the amount claimed; after that settlement, they made an additional $400 payment on December 12, 1871.

Issue

Whether defendants could defeat or reduce recovery on a mortgage note by proving usury or an error in the amount of the note, and whether the judgment also had to reflect a $400 payment made after a written settlement acknowledging the debt.

Rule

Where a mortgage note is deliberately executed, secured by mortgage, and no fraud is alleged, the inclusion of usurious interest is immaterial under the state's law as stated by the court. In addition, a subsequent written settlement acknowledging the debt supports recovery of the amount acknowledged, but any later payment proved in the record must be credited against the judgment.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Baton Rouge, Lena Boudreaux signed a mortgage note to Bayou Terrace Lending, a fictional finance company, to secure a loan on her house. She later admitted she signed it intentionally and never claimed anyone tricked her, but she now argues the note is unenforceable because the stated amount included unlawful interest.

If Bayou Terrace Lending sues for the unpaid balance, how should the court rule under the majority opinion's doctrine?

Explanation. The majority treated inclusion of usurious interest as immaterial where the mortgage note was deliberately given, secured by mortgage, and no fraud was alleged. Recovery did not depend on holder-in-due-course-like status, but on the enforceability of the deliberately executed mortgage obligation.