Mosher v. Chapin , 12 Wis. 453 ( 1860 )

By the Court,

Paine, J.

The material facts upon which this appeal is to be determined, are these: Mosher was the owner of a mortgage executed by Ohase, and bad recovered a judgment of foreclosure and sale, to make tbe sum of four thousand two hundred and fifty-six dollars. Tbe premises covered by tbe mortgage were advertised for sale, but just before tbe time appointed for tbe sale, Oha/pin went to Mosher and told bim tbat be bad become interested in tbe property, tbat Obase bad got into difficulty, and be {Oha/pin) desired to belp bim out, and for tbe purpose of making all be could out of tbe property, be was desirous of selling portions of it to various purchasers, and wished Mosher to put off tbe sale under tbe decree and give bim an opportunity to do so. He stated at this time also, tbat be was acting in concert with Chase in tbe matter. A verbal agreement was accordingly made to tbe effect that Mosher should postpone tbe sale one year, and tbat in tbe mean time, Ohapin might sell portions of tbe property, and Mosher would release such portions from tbe lien of tbe decree, and take an assignment of tbe mortgages which tbe purchasers might give, &c. As a consideration for this agreement on tbe part of Mosher, Ohapin agreed to pay compound interest on some portion of tbe interest as to which Chase bad been in default previous to tbe decree, also certain expenses incurred by Mosher, including a solicitor’s fee of $100, and to pay interest at 12 per cent, on tbe amount of tbe decree which should remain unpaid during tbe year for which tbe sale was postponed. Yarious sales were made, and portions of tbe proceeds were paid over to Mosher's attorney; but tbe mortgages given by tbe purchaser’s were not assigned as agreed. Nor did Mosher release any portion of tbe land sold, though ready to do so on tbe assignment of tbe mortgages. In consequence of this part of tbe arrangement not having been executed, Mosher's attorney wrote to Ohapin, requesting to have tbe agreement put in writing, so tbat there should be no dispute by Chase, &c., and received a reply tbat Chase himself would come and arrange it. This was a little more than a year after tbe arrangement was first made. Chase did call soon after, and executed a written agreement to pay twelve per cent, interest on tbe balance remaining due on tbe decree, after applying thereon, and in payment of tbe various items agreed by Chapin to be paid, a remittance of $1,694, received by Mosh-er s attorney, on tire 13tli day of May, 1856. The balance remaining after this application, was $2,972 89. This agreement was signed by Chase alone. Mosher, at the same time, executed an agreement, reciting that whereas Chase had that day paid him the expenses, compound interest, &,c., he, in consideration thereof, would extend the time on the balance, and delay the sale for one year.

These papers, though executed in 1857, were dated back as of the 13th of May, 1856, the time when the first payment was received by Mosher's attorney. Divers payments were subsequently made, when this application was made by Chapin, setting forth that he had become the purchaser of the property after the decree was rendered; that payments had been made which reduced the amount then due to the sum of $1,612 74; and that the sheriff had advertised the premises for sale, and asking for an order for Mosher to show cause why he should not receive that amount and discharge the decree. On that order Mosher showed, as cause, the agreement and facts above set forth. And the point of dispute is, whether any effect can be given to that agreement, as far as Chapin’s rights are concerned, or whether he is entitled to have the property discharged on payment of the original decree with interest at the rate of seven per cent. The latter is the claim asserted by him, and the amount he admits to be due is computed upon that theory, whereas, if the agreement is carried out, a much larger amount is due. There can be no doubt that the agreement was made as claimed by Mosher. The weight of evidence derived from the affidavits fully establishes that fact; and it is altogether in accordance with the natural probabilities of the case. Eor it is incredible that Mosher should have emplojred an attorney to make a journey from Racine to Janesville to make this agreement, and then postpone the sale of this property for three or four years, allowing portions of it to be sold by Chapin, if he was to receive nothing but his original decree, with interest at seven per cent. The justice of the matter is, therefore, clearly on the side of Mosher: and the question is, whether there is any thing in the rules of law -which prevents the accom plishment of justice in this particular case.

It is claimed, first, that in order to make a valid agreement for more than seven per cent, interest, it must, under our statute, be in writing. And then it is said, that even if Chapin did make this verbal arrangement, yet, it not being-binding in law, there was no authority to apply any subsequent payments in pursuance of it, but they should be applied on the original decree, with interest at seven per cent It may be observed, that this objection does not extend to the solicitor’s fees, and the expense items agreed to be paid by Chapin. For there is no statute requiring such an agreement to be in writing. But even if there was, we are of the opinion that as to these items, and as to the compound interest agreed upon, the objection cannot prevail, for the reason that it appears that Chapin, acting through Ohase, as his agent, assented to the application of the first payment to those items. Gary states in his affidavit, that when he received the $1,694, on the 13th of May, 1856, he applied it in pursuance of the verbal agreement previously made. Af-terwards he wrote to Chapin desiring that the matter might be put in writing, &c., and Chapin replied that Ohase would call and arrange it. Ohase did call, and did assent to the application which had been made by Cary, for he received from Mosher a written agreement to extend the time, reciting that these items of expense, and the compound interest, had been paid, and he himself executed a written agreement to pay twelve per cent, interest on the balance due on the decree, which balance was struck after applying the first payment as just stated, and then on the decree, as far it would go. How it seems to us clear that Ohase was the agent of Chapin in absenting to that application. Chapin, by his letter to Gary, had expressly appointed him for that purpose, and Chase stated that he came at the request of Chapin. This application of the first payment is, then, as though Chapin himself had assented to it. And, therefore, even if this part of the agreement could not have been enforced while execu-tory, yet if the party himself voluntarily made payments, and applied them upon it, there is no reason why his action s^ou^ seí as^e But ^ sa^ this part the agreement wa,s usurious. We do not think the agreement to pay the solicitor’s fees and the expenses, makes it so. A provision for the payment of a specified sum as solicitor's fees, in case of foreclosure, is commonly inserted in mortgages in the first instance, and we have never heard it suggested that this made the agreement usurious, even though providing for twelve per cent, interest. And there seems, really, no reason for saying so. Eor that is an item of expense necessarily incurred by the party, and if the debtor promises to pay it, it can in no just sense be said to be paid for the forbearance of the loan. If any such thing should be resorted to as a mere cloak for usury, it would, of course, stand on the same footing with all other attempts of that sort; but nothing of the kind appears here. On the contrary, the -items of expense, and probably a large part of the solicitor’s fee, were incurred at the express request of Chapin himself, who desired them to go to Janesville to effect this arrangement. It, therefore, did not constitute usury. Harger vs. McCullough, 2 Denio, 119; Kimball vs. Boston Athenceum, 3 Gray, 225; Busby vs. Finn, 1 Ohio St. Rep., 409.

Neither do we think the agreement to compound the interest upon some of the previous installments of interest, as to which Ohase had been in default, makes the contract usurious. It is true that compound interest is not enforceable as a general rule. Rut this has been placed upon grounds of policy, and because it was hard and oppressive, and not strictly upon the ground of its being usury. And it cannot, in truth, be said to be so. Eor it is capable of mathematical demonstration, that by compounding the interest, no more is recovered than the exact rate allowed by law for the forbearance of a debt. This whole subject is very fully and ably discussed in Camp vs. Bates, 11 Conn., 487, and it seems impossible to deny the conclusion of the court that such a transaction is not usurious. See also Meeker vs. Hill and others, 23 Conn., 574.

Having come to this conclusion, that the agreement was not usurious, it is unnecessary to examine whether it disclosed a consideration separate and distinct from that of forbearance, which might sustain an agreement on the part of Chapin to pay a sum beyond legal interest. There certainly _ would seem to have been something more than mere forbearance. In the case of Neefus vs. Vanderveer and others, 3 Sandf. Ch. R., 268, a party having a large mortgage upon a tract of land, consented to cancel it, and take in its stead a number of small mortgages on corresponding portions of it, for the same aggregate amount, payable at the same times, with the same interest. Eor doing this he received five hundred dollars, and the court held that it was not usury, inasmuch as there was a consideration entirely separate and distinct from the forbearance. In this case the agreement by Mosher to allow portions of the mortgaged premises to be sold, and to release such portions from the decree, and to take assignments of the smaller mortgages given by the purchasers, would seem to be of a very similar nature. He also agreed to postpone the sale of the property, which was already advertised. In Smith vs. Algar, 20 E. C. L., 452, the plaintiff having a fi. fa. for 60 pounds against the goods of a third party in the defendant’s possession, forbore to enforce it, on the defendant’s promise to pay him 107 pounds in seven days. Lord Tenterden said: “But he had a right to levy 60 pounds, and if, in consideration of his forbearing that," the defendant promised to pay him the larger sum; if the inconvenience of an execution against these goods at the time in question was sd great, that the defendant thought proper to buy it off at such an expense — I do not see that the consideration is insufficient for the promise.” Parke, J., said; “ There is no reason why the forbearing to execute such a writ should not be a good consideration for a promise, by a third person, to pay double the amount at the end of seven days.” Ho question of usury seems to have been suggested in the case, but the court seems to treat the forbearance to execute the writ, at least as to third persons, as a consideration entirely different from that of forbearance of the debt. If this is a correct view of the case, it would tend to show that the forbearance by Mosher to execute his order of sale might, as to Chapin, be a good consideration for an agreement to pay a specific sum even greater than the legal interest. See, also, Fussel vs. Daniel, 29 E. L. & E., 369. But if it would be a good consideration for a third person, it is somewhat difficult to see why it would not be a good one also for the debtor himself to agree to pay more. And if that were allowed, it is evident that all the evils designed to be prevented by the usury laws, would follow, if, whenever the creditor had obtained his judgment, he might then, in consideration of forbearing to execute it, bargain with the debtor for whatever compensation his necessities might induce him to promise. It has, accordingly, been held that such an agreement was usurious. Hopkins vs. Koonce, 6 Grratt., 387; Siter vs. Sheets, 7 Ind., 132. But, as before remarked, we shall express no opinion as to whether there was in this case, such a consideration as would have supported an independent agreement by Chapin to pay a sum greater than that allowed by law to be taken for interest.

The only further point to be noticed is, as to the effect of the written agreement made by Ohase to pay twelve per cent, on the balance of the decree. It was said that this bound Chase only, and could not affect the land which Cha-pin had bought. This would undoubtedly be so except for the peculiar facts of this case. But upon those facts we think Chapin is estopped, in equity, from claiming that an agreement made by Chase, even in Ms own name only, was not valid and effectual to accomplish the verbal agreement which he had previously made. Chapin told Mosher, when he first came to him, that he was acting to help Chase, and was’ acting in concert with Chase. When subsequently written to, to put the agreement in such shape as to be binding in law, he replied that Chase would come and arrange it. And Mosher and his attorney had a right, from all this, to assume that Chase was the party beneficially interested, and that for that reason Chapin had sent him as the proper person to carry out the arrangement. When they accordingly made the agreement with him, we think Chapin is estopped from setting up that he was incompetent to make it effectual. They dealt with Chase as competent for that purpose, upon Chapin’s statement, and upon his direct reference to Chase, when applied to to act himself. It is then against equity for Mm now to set np that Chase had no such power.

The order appealed Rom is affirmed, with costs.