Hamilton v. Prouty , 50 Wis. 592 ( 1880 )

Cassoday, J.

The question whether the agreement between Hamilton and Grossman for the extension was with the knowledge and acquiescence of Prouty, was one of fact for the jury. Prouty testified that it was not, and the jury found with him, and that must be regarded as conclusive.

The testimony shows that the first agreement for an extension made by Hamilton and Crossman was for twenty or thirty days; and it is urged that this was too indefinite to operate as a discharge of the indorsers. We are of the opinion, however, that the period must be regarded as definite for at least twenty days, and there are good authorities for holding the period to he sufficiently long to discharge the indorsers, if the consideration was such as to make the agreement binding. Brandt on Suretyship and Guaranty, § 298, and cases there cited.

Was the consideration such in this case? Section 1689, R. S., which was substantially the law at the time of the transaction in question, provides that “ no person . . . shall directly or indirectly take or receive . . . any greater sum or any greater value for the loan or forbearance of money, goods or things in action, than at the rate of $10 upon $100 for one year*.” Section 1691, R. S., which was in force at the time, provides that “ every person who, for any such loan or forbearance, shall have paid or delivered any greater sum or value than is above allowed to be received, may, by himself or his personal representative, recover, in an action against the person who shall have taken or received the same, or his personal representative, treble the amount of the money so paid or value delivered above the rate aforesaid, if such action shall be brought within one year after such payment or delivery.” Here the note, by its terms, was drawing the highest legal rate of interest, and hence there can be no doubt that the money paid by Grossman to Hamilton in February, for twenty days’ further “ forbearance,” was a bonus in excess of the highest rate of interest allowed by law, and therefore was wholly usurious. Meiswinkle v. Jung, 30 Wis., 361. The taking or receiving of it was not only declared illegal, but was made punishable by creating a liability for three times the amount, if the suit therefor had been brought within the year. Was the usurious bonus so taken a sufficient consideration to bind Hamilton, so that he could not maintain a suit on the note until after the twenty days’ extension had expired? This is the precise question to be determined.

In Meiswinkle v. Jung it was held that, while the usurious agreement for an extension was executory as to both parties, it was void as to both, and did not discharge a surety on the note. But the question here presented did not there arise, because, as stated by Dixon, O. J., in the opinion, the jury must have found that the $50 was not paid. It is true, the opinion contains this sentence: “In the view which we are inclined to take of the law, that the usurious agreement was, at all events, utterly void, whether the $50 was paid or not, and that so the engagement, whatever it may have been, to extend the time of payment, was midvm pactum and void for want of consideration, all,” etc. But this language, inspired, doubtless, by a fresh reading of the vigorous opinion of Bronson, J., in Vilas v. Jones, 1 N. Y., 286, therein referred to, was fully explained by Judge Dixon himself in a subsequent note to Riley v. Gregg, 16 Wis., 666, and found in Vilas & Bryant’s edition, pp. 697, 704-5, where, among other things, it is stated “ that the question whether the lender, of his own mere motion, shall be permitted to repudiate or assert the invalidity of an executed agreement, must still be regarded as ran open one.” So the language of the late able Chief Justice Ryan, in Austin v. Burgess, 36 Wis., 186, 192, must be regarded as applicable to the facts in that case; for there, too, the agreement was merely executory. - The question presented, therefore, though several times incidentally considered, has never before been decided by this court. There is much conflict in the decisions of the different states, and frequently in the same state. It would be unprofitable to trace the comparisons or compare the merits and demerits of the two different lines of reasoning. The one seems to begin where the other ends. The one declares the contract void, and insists that it is so for all purposes and as to all parties; the other admits that the contract is void, but insists that the statute was enacted to protect the weak or necessitous borrower against the avaricious lender, and hence is a weapon to be wielded iii defense of the party whom it was designed to protect, and not for the benefit of the party whom it was designed to punish. In the language of Sir 'William GrRANT, Master of the Rolls: “The party in whose favor an usurious contract has been executed, cannot make use of it for any purpose whatsoever.” Barnard v. Young, 17 Ves., 44, 46.

In the confusion of authorities upon this point, it is not so important that our decision shall be supported by the greatest number of adjudged cases, as it is to have it most in harmony with the spirit and reasoning of the decisions of this court, and the purpose of our statute.

In Wood v. Lake, 13 Wis., 96, Dixon, C. J., said: “Both parties are not understood to be in pari delioto/” and again: “ The penalties of the law are all aimed at the lender, and none at the borrower.”

In Riley v. Gregg, 16 Wis., 666, the usurious agreement to forbear was in part executed by the payee taking and using the horse, and it was held that the surety was thereby released.

In Fay v. Lovejoy, 20 Wis., 405, Dixon, C. J., said: “All the authorities agree that when interest money has been paid and applied as such with the consent of the borrower, only the illegal excess can be recovered back.” In Bensley v. Homier, 42 Wis., 631, Ryan, C. J., said: “ Usury is malum prohibitum, not malum in se. . . . A borrower and a lender cannot properly be said to deal together on equal terms. The necessity of one, and the power of the other to relieve it, give an advantage to the lender over the borrowrer. This may be so abused as to become an undue advantage. And experience has shown that the w’ants of borrowers and the greed of lenders are the frequent occasion of grievous oppression. Hence arose statutes against usury. And, whatever be their form, their general policy is to protect the borrower against the oppressive exaction of the lender. . . . It is difficult to perceive why the defense given by the statute to the borrower for his protection against oppression, and which he may waive at his pleasure, should be extended to any one but himself and his representatives.”

In Ready v. Huebner, 46 Wis., 692, the opinion was written by our present chief justice, and it was directly held that “ the defense of usury is personal to the debtor, his privies in blood or estate, or privies to the contract.”

¥e are clearly of the opinion that the defense of usury is so far personal to the borrower and those in privity with him, that Hamilton in this case, after having received the usurious premium, could not the next day, by alleging his own usurious agreement and the benefits he had received by virtue of it, have maintained an action upon ■ this note against Orossman and the sureties. In the language of Reade, J., in Scott v. Harris, 76 N. C., 205, 207, 208: “It was not for the creditor to say that the contract was usurious. ITis conscience takes fright at a danger which may never approach him. The debtor may plead usury or not at his pleasure, and, unless and until he does so, the note which was given for the usury is valid, and a part of it has already been paid in goods. The contract was sufficient to prevent the sureties from paying the debt and suing the principal; and that is the wrong of which they have the right to complain.” If, then, Hamilton’s hands were tied by receiving the usurious premiums until after the period of the extension had expired, there would seem to be no escape from the conclusion that the indorsers were thereby discharged. We also cite the following cases: Myers v. Bank, 78 Ill., 257; Wittmer v. Ellison, 72 Ill., 301; Austin v. Dorwin, 21 Vt., 38; Turrill v. Boynton, 23 Vt., 142; Bank v. Woodward, 5 N. H., 99; Cox v. Railroad Co., 44 Ala., 611; Kenningham v. Bedford, 1 B. Mon., 325; Armistead v. Ward, 2 Patton & Heath, 504.

We therefore hold, (1) that an agreement for an extension of the time of payment of a note past due for twenty or thirty days, is for a definite period of at least twenty days; (2) that an agreement by the holder of a note past due, with the maker, for an extension of tbe time of payment for a definite period, in consideration of an usurious premium paid in advance, without tbe knowledge or acquiescence of tbe indorsers, discharges tbe latter.

By the Court. — That portion of tbe judgment of tbe circuit court appealed from, is affirmed.