Court Opinion

ID: 7135039
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:22:59.194366+00
Date Added: 2024-06-11T16:14:35.900679
License: Public Domain

Judge Hobson’s
dissenting opinon:
Appellee, Adams, 'filed the first of these actions May 5, 1899. He alleged in that action that he had signed a number of notes as the surety of W. H. Blakeley and Hettie S. Blakeley; that he had been sued on the notes, ■and judgments had been given against' him, and he had been compelled to pay the judgments; -that he had paid them for W. H. Blakeley and Hettie S. Blakeley, and no part of the money had been repaid to him. He asserted a lien on certain land, and prayed for personal judgment and the enforcement of the lien. The notes are filed with the petition and are all signed thus: “W. H. Blakeley, Hettie S. Blakeley, J.- C. Adams.” Mrs. Blakeley, under the statute then in force, could sue and be sued as a single woman. She filed an answer in which she denied some of the allegations of the petition, and the case was referred to a commissioner, who reported 'that Adams 'had paid the money on the notes as the surety of W. H. and Hettie K. Blakeley, and that thejr were all included in •the mortgage. A written contract was then made, by which Adams accepted a note for $3,908.35, due one year after date, and all matters of defense were waived except the question of his having a lien on the Hazelip *407property’; and this, by the agreement, was to be submitted to the court. Subsequently’, the action on this question was submitted to the court, and judgment was entered in favor of Adams. From this judgment W. N. and Nettie Blakeley prayed an appeal to this court. This terminated that action and settled all matters of controversy there between Adams and Mrs. Blakeley. When the time of credit secured by the agreement with Adams had expired, and his debt still remained unpaid, he filed the second of these actions to enforce the written contract. He was then met by the plea that the original notes which he had set up in his petition in the other case, and which he had paid as surety' for Mrs. Blakeley, contained usury paid to the holder of those before Adams was sued upon them. To this plea Adams replied, setting up the estoppel by the proceeding had in the former case, and the court held the estoppel good. The question before ns is, was this correct?
If the notes which Adams had paid were for any reason unenforceable, and he had paid money which he was not legally' bound to pay, this defense should have been presented in the suit which Adams brought to recover the money which he had paid for Mrs. Blakeley and as her surety. His right of action in that' suit was for money paid for Mrs. Blakeley and at her request. It was a suit upon the implied contract to reimburse him. If there was a want of consideration for the - debt or any reason why she should not reimburse him, that reason should have been set up in that action. She could not set up part of her defenses there, and litigate them or agree on a judgment to be entered, and after this, when the judgment is sought to be enforced, go back and set up' a defense thot ought to have been presented then. Turner v. *408Gill (105 Ky., 414) (20 R., 1253) (49 S. W., 311); Bethel v. Durall (22 R., 1081) (61 S. W., 699).
The defense now made is in effect that, on account of usury contained in them, the notes paid by Adams did not amount to $3,908.35; that Adams was to this extent not legally bound to pay the creditors, and Mrs. Blakeley was therefore not legally bound to pay him, and- her note to this extent is without consideration. If this was true the defense should have been set up in the first action and was concluded by the settlement then made; for a litigant can not, when sued upon a cause of action, settle the case, and so get time on the debt, without being concluded on all defenses then existing against the! payment of the debt. The note for 83,908.35 which Mrs. Blakeley executed to Adams is based on a good consideration — the settlement of that suit and the getting of 12 months’ time on the debt. It is true a compromise of usury will not be enforced, but thist was not a compromise of usury. No usury will be paid to Adams when the note for $3,908.35 is collected. He will only be rex>aid the money he has paid out. If any usury was embraced in the original debt, that usury was paid to the holders of the notes when Adams paid off the judgments rendered' against him. If- he had included in the note for $3,908.35 usurious interest up to the settlement on the amount he had paid, then the settlement would have been a compromise of usury; but -when this was not done, and the only thing x>ut in the note was the amount he had paid and legal interest, the settlement by Mrs. Blakeley was simply a waiver on her part to insist on an objection that part of the money had been paid by the surety when he was not legally liable for it, and this waiver she made to get the suit settled and time- given on the debt. There *409was, therefore, no vice in the contract. If she had paid Adams the note for $3,908.35 at maturity, could she within a year have sued him to recover usury embraced in the original notes? The right to recover usury exists only against the usurer, not against one who has only gotten back the money he has paid out with legal interest. The statute neither by its language nor spirit sustains the result contended for. It is as follows: “Legal interest shall be at the rate of six dollars upon one hundred dollars for one year and at the same rate for a greater or less sum, and for a longer or shorter time.” Kentucky Statutes, section 2218, , “All contracts and. assurances made directly or indirectly, for the loan or forbearance of money, or other thing of value, at a greater rate than legal interest, shall be void for the excess over the legal interest. The amount loaned with legal interest may be recovered on any such contract or assurance; but if the tender refuse, before suit brought, a tender of the principal, with legal interest, he shall pay the costs of any suit brought on such contract or assurance.” “A court of equity may grant relief, for any such excess of interest, and to that end compel the necessary discovery from the lender or forbcarer.” “'Such excess of interest may be recovered from the lender or for-■bearer, although the payment thereof was made to the assignee.” “Partial payment on a debt bearing interest shall be first applied to the extinguishment of the interest then due.” Kentucky Statutes, section 2219. This makes 6 per cent, the legal1 interest, and declares all contracts for a greater rate void for the excess over the legal interest. The amount loaned, with legal interest, may be recovered; if the lender refuse a tender of the principal with legal interest, before suit brought, he must pay the *410cost of the suit; and usury which is paid may be recovered from the lender or forbearer, though paid to the assignee; but the statute does not make the surety liable where he has paid the debt for his principal and the principal afterwards reimburses him in the amount he has paid out. In McCrae v. Gunter’s Ex’rs (14 R., 5) (18 S. W., 1034), a note which contained usury was paid by the surety, who took a mortgage from the principal to indemnify him. In a suit by the surety to foreclose the mortgage it was pleaded that there was usury in the debt which the surety had paid. The plea. was held bad, although made by a junior mortgagee, a.nd although the principal’s right to ■recover the usury from the creditor was barred by limitation. The court said: “The party receiving the usury is alone responsible, but the endeavor is to make third parties liable, for the reason, doubtless-, that time bars the recovery as against the original creditor.” See, also, Deatly v. Ralls, 3 Ky. Law Rep., 386. That case is not near so strong for the surety as the one before us, for here there is not only a note, but an agreed judgment fixing the amount of the debtor’s liability to the surety, and after this, for the first time, a plea of usury is presented. The decision rests on the rule universal^' recognized, that, where the surety pays the debt without notice of usury in it, the principal can not set up the usury as a defense when, sued by the surety for reimbursement. Ford v. Keith, 1 Mass., 139, 2 Am. Dec., 4; Thurston v. Prentiss, 1 Mich., 193; Whitehead v. Peck, 1 Ga., 140; Jones v Joyner, 8 Ga., 562: Jackson v. Jackson, 51 Vt., 253, 31 Am. Rep., 688; Maples v. Cox, 74 Ga., 701; Roe v. Kiser (Ark.), 34 S. W., 534, 54 Am. St. Rep., 288; 1 Brandt, Sur., section 215. The reason for this rule is that the surety pays at the request of his principal, and a man *411can not set up usury against one who pay the debt at his request. Wendlebone v. Parks, 18 Iowa, 546; Polhill v. Brown, 84 Ga., 338, 10 S. E., 921; Pence v. Christman, 15 Ind., 257. In this case, Adams haying, so far as appears, no notice of usury in the notes, and they purporting on their face to be valid, he was justified in paying them, and his payments must, under the authorities, be considered as made at the request of Mrs. Blakeley, and she can not set up usury in the notes against him. Adams did not take an -assignment of. the notes and sue as the assignee of the original creditors, but it will illustrate the question to see how he would stand if he had. sued as assignee of the notes in the first action. Nothing is better settled in Kentucky than that, if Adams had brought the first action as assignee of the notes, he could not, upon the facts stated, be now met with the plea of usury. The court held that the éxecution of the- new note assigned to his ward on arriving at age a note which contained usury. The ward took a new note from the obligor, and when a suit was filed on this note he pleaded ■usury. The cour held that the execution of the new note vas a payment of the old one, and that the assignee was not contaminated with the usurious contract. This case followed Breckenridge v. Campbell, 3 J. J. Marsh, 12. and it has - been followed in a number of 'cases since. Thus, in Beall v. Bethel, 3 Ky. Law Rep., 397, a note was given for moonshine whisky, and was assigned. The obligor executed a new note to the assignee. It was held that the new note was valid. This was followed in Lucas v. Ramsey, 11 Ky. Law Rep., 902, Burks v. Cheek, 11 Ky. Law Rep., 953, and in other subsequent cases, such as Stephenson v. Shirley (22 R., 1159, 20 R., 767) (60 S. W., 387). One reason given for the rule is that the assignee *412'lias lost liis recourse on the assignor, and, as he has been induced to do this or alter his position for the worse by the act of the obligor in giving him the new note, the latter will not be allowed to set up an infirmity in the note, and thus throw a loss on the assignee which he might not have sustained otherwise. The same principle applies here, for Adams, when he accepted the new note of Mrs. Blakeley, and waited a year upon her promise to pay the debt, according to the agreed judgment, lost all opportunity to reclaim the usury he had paid .on the original note, and if the plea of usury is now sustained against him he will suffer a loss without remedy.
None of the oases cited in the opinion are in point; nor has any case in any other State been found sustaining the conclusion of the court. The cases cited were all against the usurer or person who had received the usury. The case of Shirley v. Stephenson, supra, was again before this court, and, it appearing that the assignee had paid value for the notes, it was held the usury could not. be pleaded against her after a renewal of the notes to her. The court is certainly driven to a most anomalous position when it rests its decision on the ground that an innocent surety who has paid the debt of his principal stands in a less faivored position than an assignee who has shaved' the note or bought it at a discount, and in effect that, if Mrs Blakeley had paid Adams at the maturity of the $3,908.35 note, she might within a year have sued him and recovered the usury in the original notes which he had paid. The consideration of the note for $3,908.35 was not usurious. It represented only the amount Adams had actually paid out, and was supported by the loss of the money to him, the giving of time on *413the debt, and settlement of the former suit. See Mann v. Bank, 104 Ky., 852 (20 R., 1033) (48 S. W., 413).
The usury statute is not essentially different'from that against gaming. Kentucky Statutes, section 1950. If this had been a gaming debt, and Adams as surety had paid the note, and had .then sued for reimbursement and obtained a judgment for the money he had paid out as surety, and collected the judgment, would anybody suppose that he could be sued and made liable for the amount so collected, although he was in good faith throughout •the transaction, and only was his friend’s surety as an accommodation without knowing the real consideration of the note? Yet this is in effect the case we have; for it is not alleged that Adams knew of any infirmity in the notes.' On their face they purported to be for a valuable consideration, and when he paid the debts, as he innocently did’, the Blakeleys had an adequate remedy against the lenders who had collected the usury, at least after they settled with Adams; and it is their own fault, and not his, si they have sustained any loss. 'There is nothing in the record to indicate that there was anything in the transaction of a device to hide the usury, or to protect the usurer in retaining it,, and the surety should not suffer.
I therefore dissent from the opinion of the court.
Petition for rehearing by appellee overruled.