Case ID: ohio-st_22/html/0492-01.html
Source: Caselaw Access Project
Author: {"author": "White, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The First National Bank of Columbus v. George Garlinghouse et al.
    1. The discounting of a note in this state, by a national bank, at a usurious rate of interest, does not avoid the note in toto, but only to the extent of the interest.
    2. The statute of this state of March 19, 1850, entitled an act to restrain banks from taking usury, was intended to operate on banking institutions in this state whose authority to discount and purchase notes, etc., is subject to control by the legislation of this state, and has no application to banking institutions existing and exorcising their powers under the authority of Congress.
    
      3. The discounting of a note for the principal maker, at a usurious rate of interest, will not discharge the sureties, wheré there is no intention to practice a fraud on them, and in the absence of any express agreement or understanding that the note was to be used only at a given rate of discount. In such case the sureties must bo held to have trusted the principal as to the terms on which the note might be discounted.
    Error to the Court of Common Pleas of Delaware county. Eeversed in the District Court.
    The plaintiff in error brought an action in the Court of Common Pleas of Delaware county, against the defendants in error, upon a promissory note, of which the following is a copy:
    “ Columbus, Ohio, November 13, a. d. 1867. $6,000. On March 1st, without grace after date, we jointly and severally promise to pay to the order of George Garlinghouse, at the First National Bank of Columbus, six thousand dollars for value received. George Garlinghouse, Daniel Hunt, James Budd, Jonathan Bateson.”
    Indorsed: “ George Garlinghouse.”
    The defendants, Hunt and Bateson,.filed an answer in the action containing five supposed defenses.
    Their first defense was in these words :
    “ 1. That there is not due from them, and that they do not owe unto the plaintiff, upon the promissory note in petition mentioned, said sum of six .thousand dollars as therein claimed, nor any part thereof, because they say that they executed said promissory note as sureties only for the said defendant, George Garlinghouse, and for his accommodation, for the purpose only of having the same discounted, or money borrowed thereon, at the rate of interest allowed by law in the State of Ohio, being six per cent, per annum, to be taken, charged, and received, 'on such loans, and discounts; that on or about the 13th day of November, 1867, said plaintiff, well knowing that these defendants were such sureties only for said Garlinghouse upon said note, by agreement of said Garlinghouse only, and without the knowledge or consent of these defendants, discounted the same for the sole use and benefit of said Garlinghonse ; and upon said discount took and reserved from him as interest for the money loaned said Garlinghouse upon said note, for the time the same had to run, a greater rate of interest than six per cent, per annum, the rate alio wed bylawin the State of Ohio, to wit, the interest at the rate of over nine per cent, per annum, being the sum of one hundred and thirty-seven dollars and fifty cents, as these defendants are informed ; that the said interest, so taken and reserved by plaintiff, was usurious and illegal, done only by agreement of plaintiff and said Garlinghouse, without the knowledge or consent of these defendants, and in fraud of their fights as such sureties of said Garlinghouse therein.”
    The fourth defense was :
    “ 4. These defendants, further answering, say, that they do not owe, and that there is not due from them to the plaintiff said sum of six thousand dollars, or any part thereof, upon the promissory note in petition mentioned, as therein claimed, and that the plaintiff is not entitled to recover the same or any part thereof, because, they say, that plaintiff is an association formed for the purpose of carrying on the business of banking, under the act of Congress of the United States of America, entitled ‘an act to provide a national currency, secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,’ approved June 3, 1864, located and doing business at the city of Columbus, Franklin county, State of Ohio ; that by the provisions of the act aforesaid plaintiff was authorized to take, receive, reserve, and charge upon any loan or discount made by it, or upon any note, bill of exchange, or other evidence of debt, interest at the rate of six per cent, per annum, that being the rate of interest allowed by law in the State of Ohio, and no more ; that these defendants executed said promissory note in petition mentioned as sureties only for said Garlinghouse; that on or about the day of its date, plaintiff discounted said note for said Garlinghouse, aud, on the discount thereof, took, received, reserved and charged more interest than six per cent, per annum, to wit, interest at the rate of over nine per cent, per annum ; and defendants say that the loan and discount so made as aforesaid for said G-arlinghouse by said plaintiff of said note, was unauthorized by the provisions of the act aforesaid and contrary thereto, and was illegal and void.”
    The plaintiff' interposed a demurrer to each of said first and fourth defenses. The court rendered judgment, overruling these demurrers, and dismissing the action against said Hunt and Bateson, with costs.
    This is a petition in error, to reverse that judgment, filed in the District Court of Delaware county, and bv that court reserved for decision in the Supreme Court.
    
      R. A. Harrison, for plaintiff in error:
    I. Section 46 of the act approved February 25, 1863, provided that the taking usurious interest “ shall be held and adjudged a forfeiture of the debt.” But section 30 of the act of June 3, 1864, limited the forfeiture to the entire interest; and also gave the borrower a right to recover twice the amount of such interest paid by him. Congress clearly intended, by each act, to establish a rule of forfeiture which would cover the whole case. See Park et al., Trustee, v. National Bank of Missouri, Bankers’ Magazine for December, 1870, decided by the Circuit Court of the United States, for that state, Miller, J., of the Supreme Court, delivering the opiniou.
    II. The regulation of the rate of interest being a proper subject for legislative action, when the legislative body has declared what shall be the legal effect of a violation of a statute on the subject, the courts are bound by that declaration. The legislative intent, gathered from the whole statute, must control.
    
      Harris v. Runnels, 12 How. (U. S.) 79; Vining v. Bricker, 14 Ohio St. 331; Bank of United States v. Fleckner, 8 Wheat. 338; Bank of United States v. Waggoner et al., 9 Pet. 378; Morse on the Law of Banking, 18; The Commercial Bank of Manchester v. Nolan, 7 How. (Miss.) 508; Farmers’ Bank v. Bur-
      
      chard, 83 Vt. 346; Union Chester Glass Co. v. Dewey, 16 Mass. 102; Bousel v. Isaac, 13 Md. 202; Philadelphia, Loan Co. v. Towner, 13 Conn. 249; Silver Lake Bank v. North, 4 Johns. Ch. 370; Rock River Bank v. Sherwood, 10 Wis. 230; Quinsigamond Bank v. Hobbs, 11 Gray, 230; The Banks v. Poiteaux, 3 Rand. 143; Lyon v. State Bank of Alabama, 1 Stewart, 468; Planter’s Bank v. Sharp, 4 S. & M. 75; Grand Gulf Bank v. Archer, 8 Ib. 151; Darby’s Trustee v. Boatman’s Savings Institution, 1 Dillon’s C. C. 141.
    III. The intent of Congress is indicated, not only by the repeal of the provisions forfeiting the entire debt and substituting a forfeiture of the interest only, but also by the significant language “ shall be held and adjudged.” This could only be done by a court in an action upon the note, or vther obligation taken.
    
    IY. The claim that the usury forfeits the debt, is made upon two grounds: 1. The transaction is void upon the principles of the common law; 2. The bank had no power to make such a contract. There are several answers to each of these positions.
    1. In this country, at common law, no rate of interest has ever been unlawful, unless so great as to be unconscionable. 2 N. II. 242.
    2. The terms of section 30 of the act of June 3, 1864, in effect, declare that a recovery of the principal may be had. That section is remedial and enabling, as to the contract and recovery thereon of the principal, and penal only as to the interest, aud must be liberally construed as in cases of statutes wholly remedial. See Gray v. Bennett, 3 Met. 529.
    3. Congress having, in that particular, placed these banks on the same footing as individuals with respect to the capacity to contract, the courts have no right to nullify the provision, by holding that the bank has not power to enforce the contract for the payment of the principal.
    4. This system of banking was devised for national governmental purposes, and was intended to be uniform throughout the couutry. See 101 Mass. 575, 584. While good reasons exist for limiting the rates of interest to be charged by the banks, according to local state laws, no such reason can be assigned for declaring contracts of loan made by them void in some states and valid in others.
    5. Section 8 of the act of June 3, 1864, by force of the terms used therein, confers the corporate power to make loans taking interest, and section 30 merely limits the mode of exercising a power already conferred; and this limitation is accompanied by a provision defining the effect that shall follow a disregard of that mode. Construe the two sections together, and they provide that the bank shall have full power to make contracts of loan, etc., but if it incorporates usury into any such contract, the entire interest shall be forfeited, etc. Morse on the Law of Banking, 18; 20 Maine, 109, 113.
    6. The cases relied on by adverse counsel arose under statutes materially different from this act of Congress. U. S. Bank v. Owens, 2 Pet. 527, is not now authority. See cases cited supra, 12 How. 78; 8 Wheat. 388, and 9 Pet. 378; also Dillon, J., in the case of Darby’s Trustee, supra. The case of Bank of Chillicothe v. Swayne, 8 Ohio, 257, and the cases following it, have no application to the question here.
    V. Section 3 of the “ act to restrain banks from taking usury,” passed March 19, 1850, S. & C. 149, does not apply to this ease for several reasons:
    1. It applies only to banks created by the legislature of Ohio. See Pickaway Bank v. Prather, 14 Ohio St. 497. No other banks then existed in Ohio.
    2. That section imposed no penalty, and necessarily must bear the same construction that has been given to the general usury laws of the state.
    3. The act of Congress specifying the penalty precludes the operation of state legislation upon that subject. See First National Bank of Whitehall v. Lamb, 57 Barb. 429, and cases there cited; Crocker v. Marine Nat. Bank, 101 Mass. 240; Frazer et al. v. Siebern et al., 16 Ohio St. 614; McCullough v. Maryland, 4 Wheat. 316.
    
      VI. The knowingly taking usurious interest from the principal, at the time of the discount, although without the knowledge or consent of the sureties, is not a fraud upon them. Selsor v. Brock, 3 Ohio St. 302; Jones v. Brown, 11 Ib. G01. The first defense contains no averment that Garlinghouse and his sureties had agreed that the discount should be six -per cent, per annum and no more; the allegation is that the sureties signed for the purpose of having the note discounted at said rate, etc. There is no averment that such purpose was made known to Garlinghouse or to the bank; nor that the agreement to pay usury was concealed from the sureties to induce them to sign; nor that the agreement to pay usury increased the risk of the sureties.
    
      Carper $ Van Deman, L. English, J. Wm. Baldwin, and Reid Powell, for Hunt and Bateson :
    1. The bank interpolated usury into the contract, without the consent of the sureties, and with knowledge that they intended to bind themselves for interest at six per cent, only; and lessened the property of their principal totbeirprejudice. Hence, our first defense is complete. Fullerton v. Sturges, 4 Ohio St. 529, 535, 537; 1 Parsons on Notes and Bills, 236, 238, 239 ; 2 Ib. 550, 557; Pidcock v. Bishop, 3 Barn. & C. 605, 610; McWilliams v. Mason, 6 Duer, 276, 278, 279; Bonar v. McDonald, 1 Eng. Law and Eq. 1, 8, and note; McCramer v. Thompson, 21 Iowa, 257, 252, 253; Pepper v. The State, 22 Ind. 419; Portage Co. Bank v. Lane, 8 Ohio St. 405; Sturges & Hale, v. Williams, 9 Ohio St. 449, 452; Rex v. Hart, 1 Moody’s C. C. 486; Agawam Bank v. Sears, 4 Gray, 95, 97.
    There was no implied authority on which the bank may have acted. Hatch v. Searles, 2 Smale & Giffard, 152, 153. And the conduct of the bank was not in good faith toward the sureties. 6 Duer, 279.
    The facts in Selsor v. Brock, 3 Ohio St. 302, differed widely from those in this case.
    2. The contract and loan was invalid, first, because the bank had no power to make it, and second, because the act of the loan was prohibited by law. Wright v. Briggs, 2 Hill, 79; Com. v. Erie &; N. E. R. R. Co., 27 Penn. St. 351; Chillicothe Bank v. Swayne et al., 8 Ohio, 386; Straus v. Eagle Ins. Co., 5 Ohio St. 62; State v. Wash. Soc. L. Co., 11 Ohio, 96; N. Y. F. Ins. Co. v. Ely, 2 Cow. 678, 699, 710; People v. Utica. Ins. Co., 15 Johns. 383; Bartholomew v. Bentley, 1 Ohio St. 37; Comm’rs of Gallia Co. v. Holcomb, 7 Ohio, 232, 234; United States Bank v. Owens, 2 Pet. 527; Charles River Bridge v. Warren Bridge, 11 Pet. 527 ; Dartmouth College v. Woodward, 4 Wheat. 518, 630; Bank of Wooster v. Stephens et al., 1 Ohio St. 235; Busby v. Finn, Ib. 409; Miami Exporting Co. v. Clark, 13 Ohio, 17, 21; Morris v. Way et al., 16 Ohio, 469, 477; Pickaway Co. Bank v. Prather, 12 Ohio St. 514; Bank of Salina v. Alvord, 31 N. Y. (4 Tiffany,) 473; Story on Contracts, secs. 485, 492, 613, 614; 1 Kent, 517 (marg. 467); Chitty on Contracts (9 Amer. ed.), 703, 704; Vining et al. v. Bricker, 14 Ohio St. 331, 334.
    The imposition of a penalty can not confer corporate power. Without section 30 of the bank law, the bank could recover nothing on the contract, and the borrower could recover only usurious interest actually paid. Under that section an additional penalty falls upon the bank — an additional right is given to the borrower; the bank may lose the whole debt and double the iuterest paid — the borrower can recover the double interest. And section 53 adds a forfeiture of the corporate franchise. Upon this question of construction the state courts are equal to the federal courts. National Bank v. Com., 9 Wall. 362.
    They also commented at length upon cases cited for plaintiff' in error, and at oral argument cited Lamb v. First National Bank of Whitehall, Amer. Law Times Rep. (December, 1872,) 488.
    
      Goode $ Bowman, D. Thew. Wright, and Chester W. Merrill, of counsel in AUenx. First National Bank of Xenia, and
    
      Lord x. First National Bank of Cincinnati,
    
    filed briefs on sarnie side.
    
      
      Lincoln, Smith $ Stephens, of counsel for the First National Bank of Cincinnati, in reply:
    The construction put upon section 30 of the act of June 3, 1864, in Lamb v. Bank of Whitehall, cited in oral argument, is a forced one, resulting from the assumption that otherwise the act would be unconstitutional, because of its conflict with state usury laws. In McCulloch v. Maryland, 4 Wheat. 411, the power of Congress to create a bank was affirmed, and the power of a state to tax that bank denied. This power was denied to the state, not because the tax was oppressive, but because to give to the state the power to tax, would include the power to destroy the bank. And so if you yield to the state the power to regulate the interest, the receipts, and to declare the consequences of usury, you give it the power to destroy the bank.
   White, C. J.

The plaintiff is a banking corporation organized under the act of Congress “ to provide a national currency, secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,” approved June 3, 1864. 13 Stat. at Large, 99.

The judgment of the court below is sought to be sustained on three general grounds :

First. That the note in question having been discounted by the plaintiff at an unlawful rate of interest, is void under the act of Congress referred to.

Second. That, if not void under that act, the note is void under the statute of this state, passed March 19, 1850, entitled “ an act to restrain banks from taking usury.” 1 S. & C. 149.

Third. That the defendants being sureties, the discounting of the note by the plaintiff' for their principal, at an unlawful rate of iuterest, was an unauthorized use of the note which discharged them from liability thereon.

These grounds we will consider in their order.

1. The sections of the national banking law preceding section 8 prescribe the mode in which associations may be formed “for carrying on the business of banking.” By section 8 the associations so formed are, among other things, authorized to carry on the business of banking, by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits, by buying, selling exchange, coin, and bullion; by loaning money on personal security ; by obtaining, issuing, and circulating notes according to the - provisions of the act, etc.

Section 30 is a limitation of the general powers specified in section 8; and on the construction of the former section, the question now under consideration depends.

Section 30 is as follows:

“ Sec. 30. And be it further enacted, that every association may take, receive, reserve, and charge on any loau or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at the rate allowed by the laws of the state or territory where the bank is located, and no more, except that where, by the law of any state, a different rate is limited for banks of issue organized under state laws, the rate so limited shall be allowed for associations organized in any such state under this act. And when no rate is fixed by the laws of the state or territory, the bank may take, receive, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run. And the knowingly taking, receiving, or reserving, or charging a rate greater than aforesaid, shall be held and adjudged a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. And in case a greater rate of interest has been paid, the person or persons paying the same, or their legal representatives, may recover back in an action of debt twice the amount of the interest thus paid from the association taking or receiving the same. Provided, that such action is commenced within two years from the time the usurious transaction occurred. But the purchase, discount, or sale of a bona fide bill of exchange payable at another place than the place of such purchase, discount, or sale, at not more than the current rate of exchange payable at another place than the place of purchase, discount, or sale, at not more than current rate of exchange for sight drafts, in addition to the interest, shall not be considered as taking or receiving a greater rate of interest.”

This section is a substitute for section 46 of the original act of February 25,1863 ; and in giving construction to the section as found in the present act, it is worthy of remark that the forfeiture, as declared by the original act, was of the entire debt or demand on which the interest was taken, reserved, or charged.

The effect of agreeing for unlawful interest, as the section now stands, is quite obvious. The forfeiture is expressly limited to the interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In thus limiting the forfeiture to the interest, the right of the bank to the principal is necessarily implied. And so far as the argument as to the entire invalidity of the note is founded on the supposed want of power or capacity in the bank, it is enough to say that authority implied is as effective and available as authority expressly conferred.

The statute operates on the instrument given for the loan, and, in effect, declares it to be invalid as to the entire interest, but valid and binding as an obligation for the payment of the principal.

The construction we give to the statute now under consideration, renders the decision in the case of The Bank of Chillicothe v. Swayne et al., 8 Ohio, 286, and the subsequent cases referred to, recognizing the same principle, inapplicable to the present case. In each of those cases the contract was declared void, not because of any illegal element or stipulation entering into the consideration of the instrument, but for want of legal capacity on the part of the corporation to make a contract in derogation of the authority conferred by its charter. Selsor v. Brock, 8 Ohio St. 306

We have not overlooked the recent case of Lamb v. First National Bank of Whitehall, decided by the Court of Appeals of New York. "We have considered the opinion in that case with the respect due to the learned tribunal in which it was pronounced. But after an attentive consideration of it, we are unable to concur in the views therein expressed as to the true construction of the act of Congress now in question. The question decided in the case was that the contract then in controversy was void under the usury laws of New York. The contract was usurious both under the laws of the State and the law of Congress. The usurious part of the transaction was forbidden by both law's, the difference in their operation being as to the extent of the penalty or forfeiture. The statutes of New York declare void all contracts reserving a greater rate of interest than seven per cent, per annum, and preclude a recovery thereon of either principal or interest. In this state we have no such statute. Whether, therefore, it is competent for the state to impose additional penalties or forfeitures to those prescribed by Congress, where the authority given by Congress has been exceeded in the usurious transaction, is a question which does not arise in this case, and as to which we express no opinion.

The construction given to section 30, in Lamb v. Whitehall, to which we dissent, is in limiting the operation of the clause declaring the forfeiture to states and territories, where, by the local law, no rate of interest is fixed.

' The preceding clauses prescribe the rate of interest to govern in all eases. Where the local law prescribes no rate of interest, it is declared that the rate allowed shall be seven per centum. In all other eases the rate fixed by the local law is adopted by Congress to govern the national banks. It seems to us that, upon a fair construction of the section, the operation of the clause declaring the forfeiture, must be regarded -as co-extensive with the authority conferred in the preceding clauses as to exacting interest; and as applying to all loans and discounts made under these clauses, irrespective of the locality in which they are made.

The construction given tq the section in the opinion referred to, of the Court of Appeals, seems to have been influenced by the idea, that unless the forfeiting clause was limited to cases where by the local law no rate of interest is fixed, the provision would be unconstitutional. But we do not perceive that the question of constitutional power is varied by such limitation. If, in the absence of a state law fixing the rate of interest, Congress has power to prescribe arate of interest for the banks, and the consequences of taking interest in excess of the rate allowed, the power must be derived from the constitution of the United States; and, if so derived, its exercise can not be made dependent on state authority. If, therefore, the power exists in Congress to prescribe for the national banks a rate of interest in any of the states, the power must exist to the same extent in all the states, irrespective of the rates prescribed by state laws.

The question whether Congress had power to establish the national banks, must be regarded, by the judicial tribunals, as settled by the repeated decisions of the Supreme Court of the United States. McCulloch v. The State of Maryland, 4 Wheat. 316; Osborn v. United States Bank, 9 Ib. 738; Veazie v. Fenno, 8 Wall. 533.

Iu speaking of the faculty of lending and dealing in money which Congress was authorized, to confer upon the United States Bank, Chief Justice Marshall uses this language :

“Why is it that Congress can incorporate or create a bank? This question was answered in the case of McCulloch v. The State of Maryland. It is an instrument which Ms necessary and proper’ for carrying on the fiscal operations of government. Can this instrument, on any rational calculation, effect its object, unless it be endowed with that faculty of lending and dealing in money, which is conferred by its charter? If it can, if it be as competent to the purposes of government without, as with this faculty, there will be much difficulty in sustaining that essential part of the charter. If it can not, then this faculty is necessary to the legitimate operations of government, and was constitutionally and rightfully ingrafted on the institution. It is in that view of the subject the vital part of the corporation; it is its soul; and the right to preserve it originates in the same principle with the right to preserve the skeleton or body which it animates. The distinction between destroying what is denominated the corporate franchise, and destroying its vivifying principle, is precisely as incapable of being maintained, as a distinction between the right to sentence a human being to death, and a right to sentence him to a total privation of sustenance during life. Deprive a bank of its trade and business, which is its sustenance, and its immortality, if it have that property, will be a very useless attribute.

“ This distinction, then, has no real existence. To tax its faculties, its trade and occupation, is to tax the bank itself To destroy or preserve the one, is to destroy or preserve the other. . . .

“The currency which it (the bank) circulates, by means of its trade with individuals, is believed to make it a more fit instrument for the purposes of government, than it could otherwise be; and if this be true, the capacity to carry on this trade, is a faculty indispensable to the character and object of the institution.” 9 Wheat. 861-4.

In Veazie v. Fenno, supra, in the opinion delivered by the present Chief Justice, referring to the national banking system, it is said:

“ The methods adopted for the supply of this currency were briefly explained in the first part of this opinion. It now consists of coin, of United States notes, and of the notes of the national banks. Both descriptions of notes may be properly described as bills of credit, for both are furnished by the government; both are issued upon the credit of the government; and the government is responsible for the redemption of both; primarily as to the first described, and immediately upon default of the bank as to the second......Having thus, in the exercise of undisputed constitutional powers, undertaken to provide a currency for the whole country, it can not be questioned that Congress may constitutionally secure the benefit of it to the people, by appropriate legislation.”

It being thus established, that Congress can provide a national currency through the agency of the banks, and authorize them to put it in circulation, it seems to us necessarily to follow that it can prescribe the terms or rate of interest upon which it is to be supplied and kept in circulation.

The power to create, implies the power to preserve. The lending the currency they issue, is a vital element in the system of national banks, and the right to take interest is a necessary incident of the power to loan. If the states can, in derogation of the act of Congress, limit the capacity or right of the banks as to the rate of iuterest they may charge, the states would seem to have plenary power over the whole subject; and could so exercise it, if they saw proper, as to destroy, for all practical purposes, the value of the franchise. The power would seem to extend not only to prescribing the rate of interest, but to include also authority to prescribe the character of the securities to be discounted by the banks, and the terms in all other respects on which they were to exercise the power to loan.

2. The next question is, whether the statute of this state of March 19, 1850, already refereed to, affects the note now in question. We are clearly of opinion that it does not. The third section of the act, which is the only one that can be supposed to have any application, was intended to operate on banking institutions in this state whose authority to discount or purchase notes, bills, or other evidences of debt, was subject to the control of the legislation of this state, and was intended to limit such authority. It imposes no penalty. It has no application to banking institutions existing and exercising their power under the authority of Congress.

3. The remaining question is, whether the discounting of the note, at an illegal rate of interest, was such a misuse of the note as discharged the defendants as sureties from liability.

This question was determined in the negative by this court, in Selsor v. Brock, 3 Ohio St. 302. It was held in that case, that where a joint and several promissory note in blank is signed by several persons as sureties, and delivered to the principal debtor, to be by him filled up and given to the payee, if an illegal rate of interest be agreed upon between the principal debtor and the creditor, and incorporated in the amount for which the note is made payable, the contract is voidable to the extent of the usury only, and creates a binding obligation on the part of the surety for the principal and legal interest, whether the usury be inserted with the knowledge and consent of the surety or not.

Usury, it is said in the opinion, will not avoid a contract as to a surety beyond the extent to which it is vitiated as to the principal. And it may be remarked that, in this state, the effect of usury is not to vitiate the entire contract, but only to the extent of the usury.

It may be inferred from the answer that the note in the present case was filled up at the time it was signed by the sureties. But it can make no difference in principle whether the note is made to cover illegal interest by filling it up if it is in blank, for a larger amount than the actual loan and lawful interest, or, where it is already written out, by diminishing the amount of the actual loan. The effect is the same in either case.

It is not averred in the answer that there was any agreement between the defendants and Garlinghouse, the principal, that the note was not to be used uuless it could be discounted at the legal rate of interest. The averment is that the defendants executed the note for the accommodation of their principal, for the purpose ouly of having it discounted at that rate. Whether this purpose was communicated to the principal does not appear. In the absence of any express agreement or understanding between the sureties and the principal, of which the creditor had notice, and of any intention to practice a fraud on the sureties, they must be held to have trusted to the judgment and discretion of the principal as to the terms on which the note might be discounted.

Judgment reversed and cause remanded for further proceedings.

Day, J., did not sit in this case.