9 Mich. 21 | Mich. | 1860
The defense below to an action on promissory notes given by plaintiffs in error, arose out of the following state of facts, substantially. The firm of Frost & Bradley
Our statute differs somewhat from any which has been cited; but it is in principle very much like our former law, so far as the mode of enforcing the usurious contract-is concerned, except that under that, as' well as under the Massachusetts statute from which it Avas borroAved, the forfeiture, or rather the deduction, was threefold instead of single. Our present statute, after declaring that contracts on which usurious interest is reserved or taken shall not be void, provides that in any action brought by
In this the court recognized and followed the decisions of Massachusetts and other states, which hold that a note or other contract upon which usury is reserved, if made under such a law, will be enforced in full without airy deduction, if sued in another state, whatever may be the usury laws of the latter; and that no remedy but the statutory one will be enforced by the home law. Thus, in Wiley v. Yale, 1 Metc. 553, the court refused to allow a party to recover back the excess by action on the case, although the statute allowed an action of debt to recover it. And in Gale v. Eastman, 7 Metc. 14, the courts in Massachusetts refused to allow the deduction of usury permitted by the laws of New Hampshire, on a note made there. The same principle is recognized and enforced in McFadin v. Burns, 5 Gray, 599; Sherman v. Gasset, 4 Gilm. 521; Suffolk Bank v. Kidder, 12 Vt. 464; Watriss v. Pierce, 32 N. H. 582; Bevins v. Reed, 2 Sandf. 436; Elmer v. Crum, 8 Ind. 25. Our present statute does not permit usury to be recovered back.
The remedy for the debtor is confined to having the excess deducted when suit is brought, and if such deduction should exceed the whole balance due on the face of the paper, he is not entitled to a judgment as in' set off for the balance, but merely maintains his defense as in recoupment.
In the present case, the claim is that such a deduc
The statute allows the deduction to be made only when an action is brought upon the usurious contract or assurance. Is this an action upon the usurious contract?
It is not claimed or found that any usurious interest was paid or agreed to be paid by Craig & Brother, or Weber, on these notes. And if usurious, they are made so by prior transactions.
The notes for the payment of which these were given, included only an amount of principal actually lent to Frost & Bradley. If these notes were usurious, they were made so because money paid for prior usury should have been credited on the principal. If the notes now in suit are usurious, it is because they were given in lieu of those just referred to.
Under the laws which rendered usurious contracts absolutely void, it was very generally held that the invalidity attached to every renewal or substitution of securities based in their origin on the same consideration; upon the principle that an illegality of consideration vitiated any agreement founded on it. Where valid securities of independent origin were given in lieu of the illegal paper, they continued valid and might be enforced.
But when laws were enacted, recognizing usurious contracts as valid, and only refusing the active aid of courts in enforcing the regular, or, as in this state, the excessive interest, these rules became of necessity partially inapplicable, at least.
In Farmers’ & Mechanics’ Bank v. Kimmel, 1 Mich. 84, it was held that no one could take advantage of usury in a mortgage, except the mortgagor himself; the defense being personal. In Cook v. Dyer, 3 Ala. 643,j it was likewise held to be a personal defense which might be waived. And this would seem of necessity to follow
It was held in Little v. White, 8 N. H. 276, that an administrator who had given his note for a usurious debt of his intestate could not set up the usury. In Thurston v. Prentiss, above cited, a surety who had voluntarily paid usurious interest included in the debt on which he was surety, was allowed to recover it of his principal, although not permitted to collect of him usury paid on his own account for an extension procured for his own convenience.
These cases would seem to recognize the idea, that it is not impossible to create liabilities upon or growing out of an originally usurious contract, which shall not be subject to any deductions on account of the usury.
The cases upon substituted securities in many instances go very far in this direction.
The case of Chadbourn v. Watts, 10 Mass. 121, was decided while the old law was in force avoiding entirely usurious contracts; and its correctness was somewhat questioned by the reporter. It was never overruled however, and has been recognized in Clark v. Phelps, 6 Met. 296. In Chadbourn v. Watts, the defendant had given a promissory note, originally for $874,15, upon which he paid interest at usurious rates from time to time, making also payments of principal upon that and other account, until the sums remaining due on both were reduced to about the original principal of the first note. A new note was then given, and the old one cancelled. This being reduced by payments at lawful rates to $500, a third note for the latter sum was, given in place of it. This latter note was held good. Clark v. Phelps was, a similar case under the latter statutes, and in this case a loan of $2500 was made, secured by note upon which usurious interest was paid, and a new note for the full original principal was g-iven in its stead. The court held the new note might be collected free from any deduction for the usury paid on the former one.
It is unnecessary for us to decide how far these views should be followed where there is no change of parties, ■or how far a surety may claim exemption where the substituted paper does not cancel the original liability, but is a mere renewal of it. We have referred to these cases for the purpose rather of showing that usury and its consequences must attend the same contract, whether substitution may or may not destroy its identity. It is very clear that such identity can not depend merely upon the consideration of the contract sued upon.
The usury in the case before us was exacted of Frost ■& Bradley. Craig & Brother did not see fit to claim their defense upon the paper originally endorsed by them, but took it up and gave new paper, to which Frost & Bradley are not parties. We think the new paper can Hot be regarded in any sense as the usurious contract or assurance contemplated by the statute, inasmuch as the ■claim against the debtor who made the usurious payments no longer exists. For this reason the judgment must be •affirmed.