Ward v. Whitney

Poland, J. As we understand the facts from the bill of exceptions in this case, Ayres obtained a loan of money from the plaintiff, and executed to her his note for the real amount received [91] with legal interest, so that there was tío usury included in the security, and the note was perfectly legal and valid in all respects* Ayres, by virtue of some parol conti-act or agreement, whether made at the time of the original contract for the loan, or sub^ sequently, does not appear (nor does it appear to us, in the present state of the law, material how it was,) made payments to the plaintiff of usurious interest for delay of payment. These payments were made as payment of usurious interest eo nomine, and not rapon the note itself, because no usurious interest was included in the note, but was paid upon a contract outside the security for the money. We think such payment by Ayres would have entitled him by the provisions of our statute and under our decisions, to have immediately commenced and sustained an action to recover back the usurious interest so paid. It is not important whether he gave a separate written security for the usurious interest, but the true distinction between the cases, as to whether the payment of usurious interest operates as a direct payment upon the note itself, is, whether the usurious interest is included in the note itself, or is paid upon a contract or agreement outside the note, either in writing or in parol. After the note had run for some time, and had been renewed by Ayres-, the note in suit was executed for the same debt, and the defendant and another person signed it as sureties for Ayres; but no usurious interest was included in it, nor has any been paid upon it. The defendant insists that as Ayres had paid usurious interest to the plaintiff upon the same loan, in law it should be regarded as a payment upon the note, and that therefore this note is to be regarded as including the amount Ayres had paid above the legal interest, or that so much of the debt was really extinguished, so that there was no legal consideration for this note to the same extent. But, as already stated, we think those pay-* ments are not to be regarded as payments on the note, because the sums paid were never included in the note, and that they did not in law extinguish any part of the legal debt; but that they created an independent legal ground of action in favor of Ayres against the plaintiff, which he could enforce by a suit against the plaintiff, whether the note itself had been paid or not. It is probably true that if the plaintiff had sued Ayres on the note he [92] could have set up the payment of this usurious interest as á defence pro tanto, either as an offset or payment, and had it deducted from the note, for though the statute only declares that the party paying usurious interest may sue and recover it back, still, when sued by the party against whom he has such claim, he may, to avoid circuity of action, set it up by way of defence, to the extent of his right. The defendant, then, when he signed the note to the plaintiff, entered into a contract that was perfectly binding and legal, and upon a full consideration, but his principal held an outstanding, independent claim against the plaintiff. Now upon common principles, if this had been an ordinary legal debt in favor of Ayres against the plaintiff, the defendant, when sued alone, could not set it up by way of defence at law, because not between the same parties. If there were any special equities in the matter, arising from the insolvency of the princi* pal, or other causes, he must enforce them by an application to a court of equity. But the ptesent case presents a further difficulty; the claim of Ayres for the usurious interest paid was in the nature of a pen* alty, “ as for a tort,” and by the statute is given or left to his personal choice or discretion, whether he will enforce it or not,- and if he do not elect to do so, no other person, not even a surety, can set it up for him. The statute intended to leave the enforce* ment or waiver of such rights to stand upon the personal honor of the party. Under the old law in relation to usury, which made the security entirely void when there was an agreement for usurious interest at the time the loan was made, whether the usury was included in the security itself or in a separate one, or even when 'the agreement for the payment of usurious interest rested in parol, any party who was directly affected by the con* tract, either by privity of interest, estate, or representation, might avoid the contract by showing its unlawful character. The authorities relied on by the defendant mainly arose under that class of laws against usury, and have little if any effect upon the question involved here. Whether Ayres, the principal, could himself have set up his claim against the plaintiff for usurious interest paid on the former [93] notes, as a defence to that extent, it is not necessary now to decide, but we think the defendant cannot, for the reasons before stated. It is said to be a great anomaly that the surety cannot avail himself of any and every defence that the principal could, if he were sued, and that it operates as a great hardship on the surety, and also on the principal, as he may be compelled to repay to the surety all that is collected of him. But this anomaly, if it be one, exists in every case where the principal’s defence would be by setting up a counter claim in his own favor against the plaintiff, and with still more reason, when his claim is personal to himself and he only can enforce it. • The surety is only made liable to perform the contract he entered into which was legal and valid, and he has his remedy over against the principal for all he is compelled to pay, and when it is paid by the principal he then has his remedy against the plaintiff to recover back the usurious interest he has paid, which is all the remedy given by statute in such a case. We think these principles are all fully supported by the cases in this State cited in the argument, especially by Barker v. Esty & Trustee, 19 Vt. 131; Nichols et al. v. Bellows, 22 Vt. 581; and Grow v. Albee, 19 Vt. 540. The judgment below is therefore affirmed.