Court Opinion

ID: 6654356
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:56:41.992656+00
Date Added: 2024-06-11T15:59:49.625318
License: Public Domain

Sedgwick, J.,
dissenting.
The proposition that the giving of the renewal note, by which it was agreed to pay an illegal rate of interest upon the loan, operated to make the original note and mortgage usurious, seems to me unsound. In Burnhisel v. Firman, 22 Wall. [U. S.], 170, 22 Law. Ed., 766, it is said: “If a security founded upon a prior one be fatally tainted with that vice [usury] and the prior one were free from it but given up and canceled, and the latter one thereafter be adjudged void, the prior one will be revived, and may be enforced as if the latter one had not been given.” In Rountree v. Brinson, 3 S. E. Rep. [N. Car.], 747, it is held: “When a note or bond taken for a valid debt, or to renew' a valid note, is void for usury, the creditor- may, in an action thereon, recover judgment for the valid debt, when the complaint alleges the facts constituting that debt; and an assignee of the note or bond has the same rights as the original creditor. ” To the same effect are Cook v. Barnes, 36 N. Y., 520; Farmers & Mechanics’ Bank v. Joslyn, 37 N. Y., 353; Rice v. Welling, 5 Wend, [N. Y.], 595; Russell v. Nelson, 99 N. Y., 119, 1 N. E. Rep., 314. In Farmers & Mechanics’ Bank v. Joslyn, supra, it was said: “The infected contract did not absolve the mortgagor from his antecedent obligations, nor did it impair the rights of the plaintiff under a prior and valid agreement. It is true that the usurer is not permitted, at his own election, to allege his illegal act as a ground for reinstating an old security; but it is equally true that a party, who claims to be the victim of exaction, can not avail himself of the invalidity of a later contract, as a shield from liability on one of earlier date, which was honest and free from vice. (Brown v. Dewey, 1 Sandf. Ch. [N. Y.], 57; Swartwout v. *185Payne, 19 Johns. [N. Y.], 294; Billington v. Wagoner, 33 N. Y., 31; La Farge v. Herter, 9 Seld. [N. Y.], 241; Crane v. Hubbel, 7 Pai. Ch. [N. Y.], 413.)” Some of the cases were decided under statutes providing that a usurious note is void, and the fact is mentioned that the giving of such a contract would furnish no consideration for the surrendering of the former valid one, but I do not see any reason for making a distinction in this case. The finding of the referee was that all of the renewals which were usurious had been canceled and surrendered by the bank to the defendants Bancroft, excepting the last two given, and that when the first usurious renewal was given the original note, which was not usurious, was marked “Collateral,” and it, with the mortgage securing it, was retained by the bank. It was upon this note and mortgage that this action was brought. There was then no agreement on the part of the bank to surrender or cancel the note and mortgage in suit. On the other hand, it was expressly agreed that it should remain a valid obligation, and be held as collateral to the subsequently executed renewal notes. It may be admitted that these transactions amounted to new agreements to pay an illegal rate of interest on the original principal, but this would not affect the liability on the note and mortgage in suit. In Richards v. Kountze, 4 Nebr., 200, after the original notes, which were not tainted with usury, became due, a contract was indorsed thereon, by which it was agreed to extend the time of payment of the principal of the indebtedness, and to pay usurious interest for such extension. Justice Gantt, delivering the opinion of the court, said: “If the original contract is bona fide, and wholly free from .the taint of usury, then no subsequent agreement to pay usury, or an usurious premium upon the debt, will invalidate the instrument given for the payment of the debt, or affect the original contract with the vice of usury, or prevent the collection of the debt with "its legal interest. And this proposition, I think, is well founded in principle and just in equity, for, if there was once a valid subsisting debt, *186bearing interest, the contract creating sucb debt can not be impaired or destroyed by a subsequent void agreement. Such agreement would be a mere nullity, and could not impair or destroy rights acquired under a valid subsisting contract. Stewart v. Petrce, 55 N. Y., 623; Rice v. Welling, 5 Wend. [N. Y.], 597; Rogers v. Rathbun, 1 Johns. Ch. [N. Y.], 367; Early v. Mahon, 19 Johns. [N. Y.], 150.” This case was approved and followed in Dell v. Oppenheimer, 9 Nebr., 454. If in giving the renewal notes it had been expressly agreed that they should take the place of the former note, and if the former note had thereupon been canceled and surrendered to the maker, and the mortgage released of record, it might be questioned whether, under our statute, the illegal renewals could be rejected, and an action maintained to reinstate the former securities which had been surrendered and canceled for the sole consideration of an illegal agreement; but the facts in this case, as found by the referee, do not present that question. Here it was agreed that the original valid note and mortgage should continue as a liability against the makers thereof, and it seems to me clear that the holder of the valid note and mortgage can maintain this action thereon, unaffected by the subsequent illegal agreement. McDonald v. Beer, 42 Nebr., 437, does not seem to be in point, because in that case the action was on the renewal note, which was affected with usury, and in this case the action is upon the original note and mortgage, in which there was no usury.
I think a decree should be entered for the amount of the note sued on and interest, as reported by the referee.