Opinion of the court.

or obtain a preference, the evidence really proves that no such an intent existed. The transactiou simply conferred upon the Bains a privilege that had been conceded to and had been enjoyed by debtors owing obligations to the extent of $200,000 to the society. For the society to have refused to make the transaction would have been to give all of those debtors a preference over the Bains. The allowance of the transaction by the society, so far from giving the Bains a preference, was simply allowing them the same benefit that had been allowed others to ten or twenty times the amount.

A recovery in this suit against Bain & Bro., after omitting to bring suits for other transactions of like character which were made within four months of the bankruptcy, to the amount of $8207, would work a preference in favor of the persons benefited by these last-named transactions, and a discrimination against Bain & Bro., so that a suit brought to set aside a preference would itself, if successful, work a preference against these defendants of the very character which it seeks to condemn.

The evidence in the case proves that the intent and purpose of the transaction of the 4th June, 1872, was not to give or obtain a preference, but was other than that, and fair, honest, and legitimate on the part of the society and the defendants in this cause. The transaction had really been concluded, except in form, two years before, when no design of giving or obtaining a preference, in evasion of the Bankruptcy Law, could have been entertained, and it was had in pursuance of an honest contract or understanding which the society had made with its customers, which its venerable cashier had uprightly fulfilled with all who complied with its terms, and which was in full force on 4th June,

1872.

A court of equity will not, for the sake of making out a case of constructive fraud, disregard honest intentions, which are proved, and cast about ingeniously to find dishonest ones, which can only be inferred. I disdain such an office in this case, and upon the merits decide that the bill must be dismissed.

Statement of the case.

United States Circuit Court, Eastern District of Virginia, at Norfolk.

HARMANSON, ASSIGNEE OF THE PORTSMOUTH SAVING FUND SOCIETY, v. SAMUEL M. WILSON et als.

The Act of Assembly of Virginia, allowing an abatement of interest which accrued during the late civil war, does not contravene the clause of the national Constitution which forbids the States from passing laws impairing the obligation of contracts, this State having always and continuously reserved the discretion to juries of allowing or disallowing interest, interest not being a subject of common law right, but of legislative permission.

BILL of foreclosure in equity.

This bill is brought to subject certain real estate of the defendant, Wilson, to the payment of two notes held against him by the assignee of the Portsmouth Saving Fund Society, now in bankruptcy, secured by deed of trust.

One of the two notes is for the sum of $3450, dated February 4th, 1862, which was given in renewal of other notes which commenced before April, 1861. The other note, given in like manner for notes beginning before April, 1861, is for the sum of $2990, and is dated on the 29th November, 1870.

The defendant, Wilson, makes no opposition to the prayer of the bill, except that he claims that interest be not charged against him for the period of the late civil war. The fact that the last note was given in 1870 does not conclude the maker of it from claiming an abatement of war interest, a statute of Virginia (Code of 1873, ch. 139, Section 7, page 982) allowing such abatement, even after judgments have been rendered, upon motion in the courts rendering them.

The question of the abatement of interest was argued by James E. Heath, Esq., for the complainants, and by the defendant, Mr. Samuel M. Wilson, and Messrs. Baker and Walke for the abatement. Their respective briefs are here given.

Mr. Heath's brief :

Argument for plaintiff.

The defendant, Wilson, claims that the interest on the debts sued upon for the period commencing April 17th, 1861, and ending April 10th, 1865, shall be remitted.

He relies upon an act of the legislature of Virginia, passed session 1872-73. (See Acts 1872-3, ch. 353, p. 344; V. C. 1873, ch. 173, p. 1120, Sec. 14.) The contracts sued upon are negotiable notes, made by the said Wilson, payable sixty days after date, dated February 4th, 1862, and November 29th, 1870, respectively. As to the debt dated 29th of November, 1870, it is alleged the consideration accrued prior to the 10th day of April, 1865. Interest is demandable and recoverable in all cases where there has been either an express or implied contract therefor.

The obligation to pay interest, where it is implied from the nature of the contract, is as strong and binding as where the obligation is contained in the contract, and in both cases interest is a necessary incident to the original debt, and a matter of strict right, which must be allowed by the court.

A contract to pay interest will be implied either from general mercantile usage or custom, as in the case of bills of exchange and promissory notes, upon which, in the absence of any other agreement, interest runs from the day of maturity and payment; or from the demand, if they be payable on demand; or from the issuing of the writ, where no demand is made; or it will be implied from the particular course of dealings between the parties, or the special custom of one party, known and acceded to by the other. So also where, by the terms of an agreement or contract, the principal is to be paid at a specific time, an agreement is always implied to make good any loss arising from default of payment at the proper time, by the payment of interest after such default. Page v. Newman, 9 Barn. & Cres., 378; Foster v. Weston, 6 Bing., 799; Colton v. Bragg, 15 East., 223; 1 H. & M., 211; Wood v. Hickock, 2 Wend., 501; Robinson v. Bland, 2 Burr., 1086; 3 Cow., 436.

The foregoing authorities establish the doctrine, that interest upon contracts silent as to interest, is as much a part of the principal, after maturity or day of payment, or from demand, if they be payable on demand; or from the issuing of the writ,

Argument for plaintiff.

where no demand is made; or from the day upon which, according to the contract, the principal is to be paid, if a day be appointed, as contracts which, upon their face, expressly provide for interest; and, in both cases, where implied and where expressed, interest is a matter of strict right, and must be allowed by the court.

Interest, then, being the fruit of the principal, it being a part of the contract, expressly or by implication, does the act of April 2d, 1873, upon which the defendant, Wilson, relies, constitute such a defence as should be respected by the courts?

It will be observed that the act of the legislature applies to suits for the recovery of money founded upon contracts, express or implied, or on causes of action, or on liabilities, which were entered into or existed, or where the original consideration accrued prior to the 10th day of April, 1865.

The Constitution of the State (art. 5, sec. 14) provides that the General Assembly shall pass no law impairing obligation of contracts, etc.; and the Constitution of United States (art. 1, sec. 10) provides that no State shall pass any law impairing the obligation of contracts, any ex post facto law, or bill of attainder.

This act of 1872-3 is confined, by its very terms, to a class of cases existing prior to its enactment; in other words, it acts retrospectively entirely.

It impairs the obligation of the contract by changing the rights of the contracting parties thereto, authorizing the debtor to pay less by $6 on the $100 for four years than he contracts to pay, and obliging the creditor to receive that much less than he contracted to receive.

In Planters' Bank v. Sharp et als., 6 How. 301, 327, Justice Woodbury says: "One of the tests that a contract has been impaired, is that its value has, by legislation, been diminished. It is not, by the Constitution, to be impaired at all. This is not a question of degree, or manner, or cause, but of encroachment in any respect on its obligation, dispensing with any part of its force."

Again, the Supreme Court of the United States says: "Any law which enlarges, abridges, or in any manner changes the intentions of the parties, resulting from the stipulations in the

Argument for plaintiff.

contract, necessarily impairs it. The manner or degree in which this change is effected can in no respect influence its conclusion; for whether the law affect the validity, the construction, the duration, the discharge, or the evidence of the contract, it impairs the obligation, though it may not do so to the same extent in all supposed cases. Any deviation from its terms by postponing or accelerating the period of performance which it prescribes, imposing conditions not expressed in the contract, or dispensing with the performance of those which are a part of the contract, however minute and apparently immaterial in their effect, impairs its obligation." Ogden v. Saunders, 12 Wheat. R., 213, 327; Green v. Biddle, 8 Wheat. R., 1, 84.

It will not be contended that the contracts to which the statute in question applies, are not diminished in value, nor that the intentions of the parties to said contracts are changed, nor that the validity, construction, and discharge of said contracts are materially affected, nor that there is a plain deviation from the terms of the contract by an imposition of conditions not expressed in the contract, nor that a portion of the conditions of said contracts are dispensed with.

The meaning of that provision of the Constitution of the United States which forbids a State passing any law impairing the obligation of contracts as construed and defined by a series of decisions of the Supreme Court, extending from 1810 to 1871, is that the laws existing at the time and place of making the contract, and of the place where the contract is to be performed, are as much a part of the contract as if they were incorporated by express words into the contract.

That the State may alter at will whatever belongs merely to the remedy; provided, the alteration does not affect the value of the contract, or in any way impair its obligation. But if the value of the contract is lessened by changing the remedy, then the Constitution is violated just as much as if the legislation complained of affected directly the contract itself. McCracken v. Hayward, 2 How., 608; Green v. Biddle, 8 Wheat., 1; Sturgis v. Crowningshield, 4 Wheat., 122; Fletcher v. Peck, 6 Cranch., 87; Von Hoffman v. City of Quincy, 4 Wall., 553; White v. Hart, 13 Wall. The Supreme Court of this State have, at all times upon