74 Wis. 329 | Wis. | 1889
This is an appeal from two orders: one overruling a demurrer to portions of the answer, and the other refusing to appoint a receiver of the mortgaged property. The action is brought to foreclose a trust deed executed by John E. Burton and wife to secure the payment of certain notes made by the Burton Manufacturing Company, payable to the order of Burton, and indorsed and negotiated by him to various parties. The defendant Burton answered, setting up the defense of usury to thesé notes. The appellant is the trustee named in the deed, and loaned some money on the notes, and loans were made by other parties on other notes, who presumably hold them.
That the answer states with sufficient certainty usurious agreements in negotiating the various notes mentioned, seems to us too plain for discussion. The lenders exacted and reserved, and the borrower agreed to pay, for the use of the money loaned, a greater sum than legal interest. According'to the averments in the answer, fourteen, sixteen, and seventeen per cent, on the sums loaned was exacted. If the agreement to pay such a rate for the use of money does not constitute usury, we know not what would.
It is alleged in the answer that the notes were made, executed, and delivered by the Burton Manufacturing Company in the city of New York. The inference is irresistible that they were negotiated there, and they were certainly made payable at that place. They were New York contracts, and the law of that state governs as to their validity. “ The general rule that contracts are to be governed by the law of the place of performance is too well settled to require the citation of authorities.” Newman v. Kershaw, 10 Wis. 333. Here the notes were negotiated in New York, the trust deed was delivered to the plaintiff there, and that was the place of performance of the’contract. The fact that the trust deed included lands in this state and in Chicago, or that Burton Avas a resident of this state and intended to use the money here, does not change the rule.
It appears to us that the objection taken that the statute of New York in regard to usury is not well pleaded in the answer is untenable. The defendant might have merely referred to the statute by its title (sec. 2676, E. S.)
It is further said that the recital in the trust deed estops the appellant from interposing the defense of usury. We are unable to understand how any recital can have that effect, in view of the allegation in the answer that the said notes, and each of them, are void, and that all parties to the same, and all persons and corporations concerned with the same, had full knowledge of all the facts set forth relative to the making, indorsing, and delivery of said notes, and the usurious agreements.
It is further insisted that the defense of usury in the contracts of indorsement of the various notes cannot be made
“ The first position taken by the demurrant was, substantially, that the trust deed was an independent contract, separate and distinct from the notes, and could not be affected by the fact that the notes were usurious, or at least that the only effect of usury in the loan would be to reduce the amount due to beneficiaries, but not to impair the right of the trustee to a decree of foreclosure. Certainly the trust deed is in form a separate and distinct contract, but no more so than a mortgage given to secure payment of a note or bond. The inclination of our courts is to treat all conveyances of real estate, whatever their form, as mortgages, when it is shown that their purpose is to secure the payment of a debt. This is eminently logical, as, well as just. The debt is the thing,— the basis and foundation of the whole transaction. When the debt is extinguished or for any reason ceases to exist, no logical reason can be assigned for endeavoring to keep up an appearance of life in the mortgage, which is simply an accessory of the debt. The sole object and purpose of the mortgage is to secure the payment of a debt. If there be no debt, if it is paid or extinguished in any way, the mortgage has no earthly reason for its existence; it is funetus offioio. These remarks appear to me to apply as well to a trust deed whose sole purpose is to secure a debt, as they do to a mortgage. The fact that the nominal conveyance is to a third person, other than the creditor, makes no difference in the substantial character of the transaction. It is still an accessoiy,— a mere security dependent on the existence of a debt for its life. My conclusion is that this trust deed has no legal, or, rather, effective, existence as a contract or obligation, save in so far as it represents an actual indebtedness. Starting from this basis, it is evident that whenever a state of facts*336 is proven which defeats the alleged debt, this same state of facts defeats the lien of the trust deed; and, if a defense to a part of the alleged debt be proven, it must operate pro tanto upon the lien of the trust deed.
“ But it is said that the creditors or beneficiaries under this trust deed are not before the court, and that the defense of usury cannot be entertained without their presence, on the general principle that no person’s property rights can be impaired who has not had his day in court. This objection seems specious at first, but, on reflection, I think there is nothing in it. Our statute [sec. 2607, B. S.] provides that the trustee of an express trust may sue without joining his beneficiary. Furthermore, the trust deed in suit (subdivision 5) provides that the trustee may, and in a certain contingency must, sue to foreclose the trust deed. To this clause the holders of the notes have assented and agreed by accepting and holding the notes secured by the deed as fully and effectually as if they had subscribed their names to the deed itself. Now if, as must be conceded, the trustee has power to sue and foreclose this trust deed, and thus obtain an effective judgment of foreclosure and sale for the benefit of all his beneficiaries, it certainly would be passing strange that in such a proceeding the defendant can set up no defense to the debt, or any part of it, when, as we have seen, such defense operates equally as a defense to the supposed lien.”
We may add that it is in the power of the circuit court, if it deems it necessary for the protection of the rights of parties, to order the holders of the notes to be brought in.
The motion for the appointment of a receiver of the property was denied, without prejudice. It can be renewed at a subsequent time, if necessary for the protection of the beneficiaries.
By the Oourt.-— The orders appealed from are affh’med, and the cause remanded for further proceedings.