Case ID: ohio_16/html/0394-01.html
Source: Caselaw Access Project
Author: {"author": "Birchard, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*William R. Morris v. George B. Way and others.
    A deed of trust passes the legal title, and though given to secure a debt, and' so drawn as for most purposes to be treated as a mortgage, yet as between the grantor and the grantee the estate passes so that nothing remains in the grantor which oan be levied upon, and sold upon execution at law.
    The Miami Exporting Company had the oapacity to receive a conveyance to-secure the payment of a just debt; and where such conveyance stipulates for the security of such debt, and also for the security of notes, which embrace unlawful interest, the deed is not wholly void, but will bo treated as good for the security of the valid debt, and null as to those only which, were void for want of capacity in the bank to receive them.
    This is a bill in chancery, reserved in the county of Lucas.
    The object of the bill is to quiet the complainant in the possession of lot No. 85 in the Port Lawrence division of Toledo; andl the whole case turns upon the effect to be given by the court to-the title of the complainant as set forth in the agreed facts, which are in substance as follows :
    On July 23, 1836, Comstock made his draft on Palmer for the-payment of $10,000, in four months after date, at the Merchants’’ Bank in New York, to the order of Daniels, all parties being at the time resident in Toledo. This bill was discounted by the Miami Exporting Company, at their bank in Cincinnati, and $200,, under the head of interest and exchange, reserved thereon. Of this bill $3,005.60 was paid in New York at maturity, and for the balance, three bills, dated November 26, 1836, wore drawn by Palmer upon Comstock, payable to the order of Potter, at New York; one for $2,425.47, at sixty days ; one for $2,475.98, at four months; and one for $2,526.12, at six months. On the back of the original bill, in the handwriting of Judge Wright, are the following memoranda:
    Amount due in New York..................................... $10,000 00-
    Paid there......................... 3,005 60
    6,994 40
    Exchange..................................................... 104 91
    7 099 31
    1-3 bill at 60 days.......................................$2,366 44
    Discount.................................................... 24 83
    Amount of bill 2,391 27
    
      Amount'at 4 months...... ..............................$2,366 44
    Discount.................................................... 48 86
    Exchange at 1 per cent..............................„. 24 15
    Am’t bill................................................ 2,439 45
    Do. at 6 months....................................... 2,366 44
    Interest..................................................... 72 46
    Exchange, 2 per cent................*.................. 48 78
    $2,487 68
    Am’t bills..............................................................$7,318 40'
    Add Attorney’s fees................................................ 20 00
    7,338 40
    The bills are............................................................ 7,427 57
    Too much by........................................................... 89 17
    Add interest and exchange on that.............................. 4 36-
    Indorsed on last bill...................................................93 53
    And upon the last bill is the following indorsement:
    “$93.53 have been paid *on this bill, and it is to bo given up on paying the balance, viz: $2,432 59. J. G\ L., GasMer.”
    
    The three bills were protested for non-payment.
    Prior to April, 1837, the Miami Exporting Company, at its branch office in Conneaut, had loaned to Comstock $4,600, for which he gave his note to said bank, maturing April 24, 1837.
    On April 23, 1838, an arrangement was made between Corn-stock and' the company, by which further time was given for the payment of the balance due upon each of said loans, and Comstock made two notes, each payable two years after date, to and at the mother bank; one for the Cincinnati loan, amounting to $8,422.29, signed by himself and Palmer, and the other for the Conneaut loan, amounting to $4,719.60, signed by himself, Daniels, and Knapp. He also at the same time executed three notes of the same date, each for $394.27, payable at six, twelve, and eighteen months, for the interest on the said two notes for the last eighteen months they had to run, the interest for the first six months having been paid at the time the notes were given. On the back of the respective bills are tho following memoranda, in the handwriting of the complainant, who negotiated tho settlement:
    First Bill............................................................... $2,425 47
    Damages........... 145 50
    Protest.................................... 1 50
    Postages........................................................ 1 25
    Interest from 28th January............................... 195 02
    $2,766 74
    Second Bill............................................................. $2,475 98
    Protest.......................................................... 1 50
    Postages............................................'........... 1 35
    Damages........................................................ 148 56
    Interest from 29th March.................................. 170 77
    $2,798 00
    *Third Bill..................................................... $2,432 57
    Damages....................................................... 145 95
    Protest.......................................................... 1 50
    Postages........................................................ 1 00
    Interest from May 29....................................... 147 13
    $2,728 15
    And at the time of the arrangement, the following statement of accounts was made by Morris to Comstock:
    
      Stephen B. Comstock in account with Miami Exporting Company. To the amount of the note in branch at Conneaut,........ $4,600 00
    Interest to April 24,1837.......'................................... 119 60
    To one note payable to the mother bank and the interest.......................................... $2,798 00
    Second note and interest............................ 2,728 15
    Third note.............................................. 2,766 74
    A.dd attorney’s fees and expenses................ 130 00
    --$8,422 89
    On April 23, 1838. a deed was executed by Comstock to the company, conveying, among other, the property in question. This deed, after the usual form of warranty deeds, has the following provision : “ This conveyance is, however, made subject to the following trusts and conditions, to wit: The said Comstock is indebted to the Miami Exporting Company in the sum of $13,142.49, for money" heretofore loaned to said Comstock by said company, and which he is unable at this time to pay, it is therefore agreed that further time for the principal sum shall be given for two years from the date thereof, he, the said Comstock, to pay the interest thereon during the said term, each six months in advance; the interest for the first six months having this day been paid, and for which said principal sum the said Comstock has executed his notes (describing them as above, including those for the interest). But it is expressly agreed that if the said Comstock shall fail to pay any one of said notes as it falls due, then the said company and their assigns shall be at full liberty to sell and convey in fee simple absolutely so much *of said land hereinbefore described as shall and may be necessary to satisfy the amount due and in arrear, with interest, and all expenses of the sale thereof, and make an absolute conveyance in fee simple to the purchaser; and at the expiration of two years, when the principal debt becomes due, if said Comstock, his executors, etc., shall fail to pay the same, or any part thereof, then the company or their assigns shall and may sell and convey, for the best price that can be had for the same, so much of the said land as shall and may be necessary to satisfy the amount of said debt and interest then remaining unpaid, and the expenses of sale . . . And if the said Comstock shall pay the said notes at maturity, or shall pay the whole thereof with interest, and all expenses incurred after due and before sale of the premises at any time, the said company and their assigns shall thereupon forthwith, on demand, release in due form the said premises to said Comstock, or his heirs.”
    At the time of the execution of this deed, Morris gave to Com-stock a memorandum made at the foot of the statement of account before referred to, as follows :
    “In relation to the trust deed from Mr. Comstock to the Miami. Exporting Company, made April 23,1838, it is agreed that in caso a sale is required to be made by the bank of any property, it shall be made at Toledo, and notice given to Comstock, or his executors thereof, before sale made. . . W. R. Morris,
    
      “Att’y and Sol. of the Miami Exporting Go.
    
    
      “April 24, 1838.”
    This trust deed was recorded in Lucas county (Ohio) records, April 24 1838.
    On January 17, 1842, the company assigned the debts of Com-stock to Moore, Beeves & Dana, by deed of general assignment. ■On September 19, 1844, Comstock executed to Morris an absolute deed and release of all his right and equity in and to the premises in question, and Morris then gave up, to be canceled, the notes aferesaid.
    *This deed, after describing the lands as the same conveyed in the deed of trust, has this clause : <! And the object of .this deed is to release and convey to said Morris, as assignee of the Miami Exporting Company, the equity of redemption in all of said premises, and vest in him, his heirs and assigns, the absolute title to said lots of land in said deed of trust, in consideration of the debt secured thereby in connection with said deed of trust, .and the lien and right thereby secured.” And then follows the usual clause of general warranty.
    On June 3, 1846, Morris, pursuant to notice and the power contained in the deed of trust, proceeded to and did sell the premises .at public auction, and by such sale acquired all the rights communicated thereby. At the time of said sale, notice was given that the title of the company would be disputed by these defendants.
    At the April term, A. D. 1838, of the court of common pleas for Lucas county, and after the execution and record of the deed of trust aforesaid, one Baymond recovered a judgment against Com-stock, which was kept alive until the levy and sale hereinafter mentioned.
    In January, 1846, execution was issued upon this judgment and levied upon the property in controversy. Under this levy a sale was made to the defendant, Way, which was confirmed at the May ■term, a. d. 1846, of said court, and in June following, the sheriff executed to him a deed conveying the property in question.
    . In November, 1836, the current rate of exchange by the banks in Cincinnati on New York, was one-half per cent, premium ; one ■percent, on ninety-day bills; one and a half per cent, on four months’ bills, and the rate was increased according to the time the bill had to run. And at all times since the commencement of these transactions, the legal rate of interest in New York was ■seven per cent.
    The prayer of the bill is, that the defendants release to the complainant all their interest in the premises, and that an injunction be allowed, restraining them from entering into *the possession of the premises, or in any way interfering with the complainant in the quiet enjoyment thereof.
    Young & Waite, Tilden & Baker, for complainant, cited the following eases:
    Loring v. Melendy, 11 Ohio, 355; Moore v. Burnett’s Lessee, Ib. 335; 1 Pow. on Mort. 9-15; Seymour v. King, 11 Ohio, 342; Heighway v. Pendleton, 15 Ohio, 758; Rands v. Kendall, Ib. 671; & Ohio, 23.
    Lane & McBane, for defendants, cited the following authorities :
    Miami Exporting Company v. Clarke, 13 Ohio, 1; Blydenburg’s Usury, 107, 113; Cow. 111, 200; 4 Peters, 205; 7 Paige, 639; 8 Ohio, 251.
   Birchard, C. J.

This is a bill filed under section 14 of the chancery act. Swan’s Stat. 703. And the main question to be determined is, whether the complainant has the legal title to the lands in controversy. But to dispose of this, it becomes necessary to examine and settle sundry other points of considerable importance. Among these disputed matters are involved the powers of the Miami Exporting Company, as a banking institution. In ■Clark’s case, 13 Ohio, 1, the right of the Miami Exporting Company to do business as a banking institution was fully examined •and sustained by every member of this court. The dissenting judge going so far as to recognize its banking powers upon a supposed contemporaneous construction of the charter; the state having borrowed from it, deposited with it, and legislated upon it—the judiciary having sustained its rights as a bank. This is •his language:

“The Miami Exporting Company was incorporated in 1803; it immediately assumed the exercise of banking powers, and continued to claim them, and to exercise some of them uninterruptedly the period of thirty-nine years. For a part of that period, its notes constituted the largest portion *of what was called money in the west. The state, more than once, borrowed from it, deposited with it, legislated upon it, and treated it as a bank. The judiciary have, at all times, until now, enforced its rights as a bank, and have placed its affairs in liquidation, under a law applicable to banks only. After this lapse of time, contemporaneous construction, after this course of life, and death, and burial, I find abundant reason to hold it to have proper banking franchises.”

The majority of the court, as well as the learned judge who so ably dissented, held that the Miami Exporting Company had the right to exercise banking powers, but did not feel at liberty, on an inquiry touching their mode and manner of exercising that right, to overlook the step by which it had been acquired. Acting upon the well-settled principle, that a corporation by its charter takes nothing but what is expressly granted, or necessarily incident to the powers expressly granted, they did decide; and we are now enabled to come to the same opinion without a dissent, that the act of incorporation of 1803 contained no grant of banking powers, and that if driven to that, and compelled to rely upon it or upon any construction that the judiciary had ever placed upon it to maintain its franchise, then it could not be sustained.

As to the supposed usage of some of its banking powers, uninterruptedly for the period of thirty-nine years,” none of the majority of the court were able to find that fact; the proof did not show it, in that or in any other case that was ever before the court, but, on the contrary, it is a notorious fact, that as a bank the Miami Exporting Company was among those that for many years lay in ruins, dormant, sleeping apparently a perpetual death, and that some new hands, at a very modern period, had seized upon its remains and endeavored to breathe therein the breath of life— making it, so far as usage was concerned, a now creation. There was no such long-continued and uninterrupted usage *as would ripen into a right to take a rate of interest forbidden by statute.

Nor did the court then feel that it was safe for suitors, or their reputation, to decide that the power to bank existed, without any effort to trace the steps by which the company acquired its franchise of banking, or to ascertain when the same was first acquired, and under what restrictions.

This labor was performed, and it resulted, in Clarke’s case, that the court held that the act of 1803 did not confer banking powers, and that the right to exercise them must be claimed under the acts of 1815, and of February 23, 1816, and subject to the provisions of the latter act against unlawful interest.

We 'find no cause to question the views thus,entertained, and if the decision in Paddleford’s case, 8 Ohio, 258, is sound law, we believe that the principles settled in Clark’s case rest upon foundations that can not be shaken. That case settles these propositions :

1. That the Miami Exporting Company was prohibited from taking a greater rate of interest than six per cent, per annum in-advance, on its loans or discounts.

2. That where money was loaned on a contract for more than six per cent, the contract was void for want of power in the corporation to make it.

8. That such contract being prohibited, and against public policy, and void, the law will not raise out of such a transaction an implied promise to repay the money actually loaned.

It was upon this third point, chiefly, that the learned dissenting judge held that case wrongly decided. Yet, we are all of opinion that this point was well decided, and that it was settled in conformity to sound principle, and sustained by authority. I have dwelt more upon Clark’s case than I would, because some of the counsel who have argued this case have seemingly misunderstood, or paid very little attention to that. If we can judge from the arguments they have written, some portions of it must have been entirely ^overlooked. In that case it was found by the jury that the original loan was tainted by the forbidden agreement to pay and receive more than six per cent, interest. The jury were then told that if the original loan was not tainted with usury, the bank might recover for the amount actually loaned on the common money counts, although the subsequent paper given for the renewal of the first notes, was so tainted (p. 19). On reconsideration, we reaffirm this distinction. It is a matter too well settled to need any authority for its support beyond our own.

With those rules for our guide, we are prepared to examine the facts in this case under consideration. The loan of $10,000, made-at Cincinnati, was for six per cent, and no more. There is nothing connected with the case to show that there was any such original agreement as was found in Clark’s case by the jury. As between Comstock and the Miami Exporting Company, the money thus advanced could, under the rule in Clark’s case, have been recovered under the common counts in assumpsit, notwithstanding the extra interest included in the note subsequently given to-' renew the loan. Those new notes only would be void. The debt, would remain, and would constitute a good consideration for a. mew promise ; and the new contract would be binding, if liable to no other objection. The deed of April 23, 1838, was given to ¡secure a bona fide indebtedness. It purports to divest the entire legal title of Comstock in the premises, and to vest the title in the company as trustee. It is not a mortgage, strictly speaking, but a deed of trust. If it took effect at all, it left nothing but an ■equitable right in Comstock, to which a judgment lien could not attach, and which could not be levied upon at law. This deed purports to be given to secure several claims, among them a note of $4,719, discounted at the Conneaut Branch. So far as this last note is-concerned, there is no pretense that it includes any interest that the bank was forbidden to receive. As to this claim, the deed may well stand as a security, if void as to others. The principles of the common law will not require *the avoiding of the entire contract, if any part of it can be sustained. There is no doubt of the power of the Miami Exporting Company to receive and hold a deed in trust for the payment or the security of ,a just debt—one that it could lawfully contract. And although the deed also professes to secure other notes in which an unlawful rate of interest is embraced, it could only be held null as to them. This is a view as fatal to the defendant as though every claim named in the conveyance were without objection, because, as is .above stated, there would remain nothing but an equitable claim to the lands conveyed by Comstock, which could be reached only in a court of equity. But Way has proceeded at law by execution, and has acquired nothing by his purchase. He had not even the naked legal possession of a debtor to levy upon. Complain.ant, in the meantime, under the quitclaim of Comstock, has secured a release of all his equity, and holds now whatever legal • estate was ever vested in the Miami Exporting Company, and that, united with the release of Comstock, vests in Morris both it he entire legal and equitable title to the premises.

Injunction made perpetual.