Court Opinion

ID: 6598862
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:05:56.062592+00
Date Added: 2024-06-11T15:57:56.816240
License: Public Domain

Paine, J.,
dissenting. I cannot assent to the decision of the court in this case, which I think can be sustained only upon the principle that the usurer may himself repudiate his contract on account of the usury, and regain all that he parted with by the contract
This action was brought to recover certain sums of indebtedness, in part for money lent and advanced, and in part by promissory note. But it appeared upon the face of the complaint, that the note had been surrendered as paid, and the balance of the indebtedness had been discharged by a new agreement of the parties. There is no room for question upon the allegations of the complaint, that the parties agreed that the new note should be taken in payment of all the prior indebtedness. The very gravamen of the complaint is, that the plaintiff had been defrauded into a contract by which he had discharged an existing valid indebtedness, by the false representations of the defendant, that the new note which he took in payment was a legal and valid note.
If these allegations had been sustained, it would undoubtedly have shown a good cause of action. If a debtor, taking advantage of the fact that his creditor was unacquainted with the English language, and with our laws, should fraudulently induce him to agree to discharge a prior indebtedness, in consideration of a new usurious note, by representing the latter to be' valid and legal, there is no doubt the fraud would avoid *328the new contract, and the creditor would be restored to his former rights. But there was proof, from which the jury might have found that no fraud whatever was practiced upon the plaintiff, but that he made the agreement with the full knowledge of the sum reserved for interest, and with the intent to exact it whether lawful or not.
Upon this state of proof, the defendant’s counsel asked the following instruction: “That if the jury are satisfied from the admissions contained in the plaintiff’s complaint and from the evidence in the case, that the note was given by the defendant to the plaintiff and received by him in satisfaction of the original notes or demands, and that there was no fraud practiced upon the plaintiff by the defendant, that then in that case, the original demand is discharged, and the plaintiff cannot recover upon the original, demand.”
This instruction was refuse d and it is manifest, that the refusal can only be sustained upon the theory that the usurer, who has deliberately made an usurious contract, by which he agreed to receive a note in absolute payment of a prior indebtness, may himself, repudiate the agreement on account of the usury, and be restored to all. the rights which by its terms he had released. To hold that he can do this seems to me to be in violation of well settled principles. I admit there is a class of cases referred to in the opinion of the court, which have held, that the lender may recover upon a prior indebtedness although he had received a new usurious security in absolute payment, after such new security had been avoided or repudiated by the, bo^ower on account of the usury. But I think no case has held that he may do so before that. And it cannot be so held without overturning principles universally recognized as applicable to such contracts. The usurer is looked upon as. a wrong doer. He is placed upon the same footing with the fraudulent party to a fraudulent contract. It may be avoided by the other party on account of the wrong, but never by him. This rule is too well settled to need a reference to authorities. It has *329been fully recognized by this court in a case decided since this, Gregg vs. Riley, 16 Wis., seq. We there held, that if the creditor makes an usurious agreement with the principal debtor to extend the time of payment, it discharges the surety, and that ft did not lie with the creditor to proceed as though he had made no such agreement, and then, when it was set up, against him, to plead that it was void and of no effect by reason of his usury. The principle of that decision seems to me directly in conflict with the decision in this case. For here, the court holds that the usurer may sue on a prior indebtedness, which he had agreed to extinguish in consideration of a new usurious security, and when his agreement, that it should be extinguished is set up in defence, they say he may avoid the defense by replying that his agreement was void for usury. The cases of La Farge vs. Herter, 5 Selden, and Miller vs. Kerr, 1 Bailey, 4, are direct authorities against the right of the plaintiff to maintain this action, upon the mere ground that the new security was usurious. It did not appear that at the time this action was brought, the defendant had ever done any act disaffirming the new note, on account of the usury provided for o.n its face. It is true that he sets up the giving of that note in satisfaction of the debts now sued for; but this he must necessarily do to avail himself of that defense. It is also true, that he avers it to have been usurious and void, but this action not having been brought upon that note, such an allegation cannot amount to any avoidance of it, .on account of the usury. The defendant’s real defense here, was that this indebtedness had been discharged. The fact that in showing this, he showed that it was discharged in consideration of a new note, which he might avoid for usury, does not of itself amount to such avoidance. Notwithstanding this, he might in an action on that note decline to plead the usury. Besides this, it is a general rule that to sustain an action, it must have been sustainable when brought. So that there is nothing to relieve the decision of the court from holding, that the usurer who has dis*330charged a debt by a usurious contract may nevertheless sue for that debt and avoid the discharge, by pleading his own usury. But I do not wish to rest my dissent upon the fact that this suit was brought, without any act of disaffirmance of the usurious note by the borrower. Even if he had disaffirmed it, if a suit had been brought on it, and he had successfully defended on account of the usury, I should still hold the same conclusion. I have admitted that upon such a state of facts there is a class of cases against me. But they seem to me to be in direct violation of principle, and to have introduced an unfounded distinction between usurious contracts, where the consideration moving from the usurer is the release of a prior indebtedness, and all other cases.
Thus, the usurer who has loaned his money at usurious interest under a law making the contract wholly void, cannot after payment has been avoided by the borrower on that ground, sue for the money actually loaned. If he sells a horse or any other article of property on an agreement that he is to give time of payment at usurious interest, he cannot after the payment has been avoided, recover the horse or other property. And why not? Simply because upon grounds of public policy the law will not aid one to recover what he has parted with on an illegal contract, but will leave him exactly where he placed himself by the contract And if this is so, what distinction is there between such cases, and one where he parts with his right to enforce a prior indebtedness upon a usurious contract ? I can see none whatever. If he cannot have back his horse that he has agreed t.o sell on a usurious contract, why should he have back his debt that he agreed to extinguish on a usurious contract ? In the one case the consideration is the transfer of a tangible piece of property; in the other it is the transfer or extinguishment of an intangible chose in action. Each is a thing of value, constituting a good consideration for a contract, and entirely subject to the disposition and control of the owner. Is there any sound reasoning by which it can be *331shown, that where he parts with one on a usurious contract he shall not have it back, but where he parts with the other he may ? I think not. And the usurer who is denied the right to replevy his horse after payment has been avoided by the purchaser, may well complain when the same court allows another usurer to recover his former debt which he had agreed to extinguish.
The court say in Johnson vs. Johnson, 11 Mass., 362, that because the new note was void for usury and having been avoided by the maker, it could have no effect on the original contract. It said this, assuming that the contract of the parties was, that the note was taken in payment of the prior debt. But if this reasoning was good there, I cannot see why it would not be just as good in case' of the sale of a horse. The note given for him is avoided for usury, and the vendor replevies him and proves his title, leaving out of view the usurious sale to the defendant. The defendant, however, proves that sale, and then the vendor replies that as' the contract of sale was void and had been avoided by the purchaser, it could have no effect upon his title to the horse and so he must recover. Would the court sustain such a position ? Certainly not. Yet the reasoning is just as good in such a case, as where tire usurer by his usurious contract discharged a prior debt. The rule should be uniform, and if the law says upon grounds of public policy, that his usurious contract shall be good to deprive him of one thing of value, which he has agreed by it to part with, it should say the same with respect to any other thing of value about which he has made the same agreement. A difference in the nature of the consideration which he has given for a usurious security, can create no distinction as to the principle which should determine whether he should be restored to his former position, after that security was avoided.
The current of authority sustains the position, that the mere giving of a new note for a prior debt, does not necessarily extinguish that debt; and of course in such a case, although the *332note was usurious, the prior debt could be recovered. But the same authorities hold that it is entirely competent for the parties by their agreement to take a hew security in absolute payment of a prior debt and this being so, if effect is given to a usurious contract to deprive the usurer of any other right, it should have effect to deprive him of a right to a prior debt when such was his express agreement.
For these reasons, I think the judgment should be reversed.