Billington v. . Wagoner , 33 N.Y. 31 ( 1865 )

This action is on a promissory note. The only defense set up is that the action is prematurely brought. On the trial it was shown that after the note in suit fell due, it was agreed between the plaintiff and the defendant, James Wagoner, who was the principal in the note, that the time for the payment of the note should be extended on payment to said plaintiff of property of the value of $13, as the consideration for such extension; which payment was afterward made and received. The action was brought before the expiration of the extended time. The only question in the case is, whether the plaintiff can treat the agreement of extension as void, under the statute against usury. The courts below held that he could not, and that if the defendants chose to affirm and insist upon the usurious agreement, the party who had received the usury was bound by it.

In La Farge v. Herter and Dillenbeck (9 N.Y., 241), the action was debt on a judgment against Herter as principal, and Dillenbeck as surety. It was shown that after execution and levy on Herter's goods sufficient to have satisfied the judgment, Herter gave to La Farge a bond and mortgage, which were taken by the latter in satisfaction and discharge of the judgment. The levy was abandoned, and a receipt given by La Farge to Herter for the amount due on execution, and the attorney indorsed the same satisfied. The plaintiff offered to show in answer to this defense, that the mortgage was usurious; the court excluded the evidence, and this court affirmed the judgment of the Supreme Court, thus establishing that a usurer is not allowed to show that an obligation which he has taken as satisfaction of a prior demand is usurious, in order to avoid the effect of such obligation as a satisfaction of such prior demand. The opinion of this court was pronounced by RUGGLES, Ch. J., and no allusion was made to a former case in this court, to which reference is hereinafter made. It is to be observed that the contract in LaFarge v. Herter was completely executed. Nothing remained to be done by either party for its consummation, and the action of the defendants in affirming the bond and mortgage as a payment of the judgment, in no sense called upon the court to enforce an agreement not yet fully performed in all its parts.

In Vilas v. Jones (1 Comst., 274), one of the points made was that the complainants, who were sureties in the original debt, were discharged, by the creditor giving further day of payment to their principal without their knowledge or consent. The case was disposed of by this court on points foreign to the question now under consideration; but three very eminent members of the court, JEWETT, Ch. J., BRONSON, and GARDINER, JJ., concurred in the position that neither the promise nor the payment of usury is a good consideration for a promise by the creditor to give time. "It has not been suggested," said BRONSON, J., "that a promise to pay usury in future, an engagement that is utterly void, can be regarded as any consideration whatever for a promise by the creditor to extend the time of payment. And undoubtedly he may sue the next moment. And I am wholly unable to see how usury paid down can make the case any better. The contract for usury is equally void whether the money is actually paid, or only promised to be paid at a future day. The statute makes no distinction, but, on the contrary, has declared void all contracts tainted with usury. Though the debtor parts with the money, it still belongs to him; and he may sue and recover it back the next moment. (1 R.S., 772, § 3.) This shows that there is no force in the suggestion, that although the creditor cannot legally receive, the debtor is not forbidden by law to give money at a usurious rate for the forbearance."

And JEWETT, Ch. J., said: "It is conceded that an agreement to extend the time of payment in consideration of an executory agreement to pay a usurious premium is void, and does not suspend the remedy of the creditor against the principal debtor. But the distinction between that case and the case where the agreement isexecuted on the part of the debtor by an actual payment of the usurious premium, rests upon no solid foundation. In either case the statute declares the contract void, and the debtor can recover back the money so paid by action." But that case determined nothing upon this point, and is entitled to no greater weight than should be given to the opinions of eminent jurists upon questions not necessarily adjudicated by the final decision of the cause, in which their opinions were expressed.

Nor, in my opinion, can it be claimed that La Farge v.Herter (ubi supra) has determined the question now presented. It is, so far as this court is concerned, res nova, and should be treated as such.

Amid some apparent conflict there is yet a clear line of distinction between La Farge v. Herter and the question discussed in Vilas v. Jones. In the former, as has already been seen, the agreement had been completely executed in all its parts, and by all parties. In the latter the agreement was regarded as executed by one party who had paid the consideration for performance in future by the other. The question in the case now before us is of the latter class. An agreement for an extension of the time of payment of a debt past due, is simply an agreement to refrain from enforcing it during the stipulated period; during that time the contract on the part of the creditor is executory and continuous. It is, in the nature of things, neither executed nor capable of execution till the full lapse of the stipulated time, so far as the creditor is concerned, while by the payment of the consideration it may be fully executed by the debtor. After it is completely executed by both parties, I apprehend such an agreement must necessarily fall within the rule of La Farge v. Herter, and the usurer could not be permitted to allege the nullity of the agreement for the purpose of reinstating himself to any right he had lost by it, either against a principal debtor or a surety. But to my mind there is a clear distinction between leaving a usurer in the position in which his executed agreement places him, and enforcing the performance by him of a usurious agreement yet executory on his part. When asked to execute or stand by such an agreement yet to be performed, I do not see why, on any sound principle, he may not assert its illegality as an excuse for its non-performance. It is an argument more specious than sound, to say that the statute was designed to protect the borrower and not the lender of money, and, therefore, the lender can never assert the illegality of an agreement made in violation of it. The fallacy of this is easily illustrated. Suppose a borrower has actually paid to the lender $100, as the usurious premium agreed upon in consideration of his promise to loan one thousand dollars for six months, and the usurer afterward refuses to make the loan, will any court of justice enforce the agreement or award damages for its non-performance? Clearly not; and the only remedy of the borrower would be to recover back the usurious premium by favorof the law. The statute, in making usury a crime, and declaring void all contracts in violation of it, for reasons of policy has clothed the borrower with certain privileges favorable to his supposed helplessness; but it was never designed to enble him to compel the lender to commit an offense against the it. In truth, while it shows no favor to the usurer, it leaves him the right which the common law gives him — to assert the illegality of anact as a reason for not performing it. An agreement for a usurious consideration in fact paid, to forbear the collection of a demand for any stipulated period, until the expiration of the period, is executory, and courts will not enforce its performance, even against the usurer, because of its illegality. In all such cases potior est conditio defendentis, however immoral or illegal his conduct; and the party of whom performance of such an agreement is sought, always occupies towards it the relation of defendant.

But such an executory agreement is not only in violation of the statute but is without consideration. The money, where that is the consideration, is all the while the property of the borrower, and may be recovered back at once without a demand. The property in this case paid, remained the property of James Wagoner, and trover and replevin would lie to recover it without a demand, although delivered by him personally to plaintiff. (Schroeppel v. Corning, 5 Denio, 236; 10 Barb., 576; 2 Seld., 107.) It is difficult to see how such money or property, to which the title in law has never passed, can be a sufficient or good consideration for an agreement. It operates, if not recovered back, as payment of so much towards the original debt, and in that view the creditor gets nothing but his own, and therefore has no consideration for his promise.

I think, therefore, upon the facts of this case, the court below erred, and that the judgment should be reversed, and a new trial ordered, with costs to abide event.

WRIGHT and CAMPBELL, JJ., concurred in this opinion.

Judgment affirmed.