Lamb v. Klaus

Dixon, C. J. The rules of the common law respecting the validity of usages and their effect and the admissibility of evidence to show them for the purpose of annexing certain customary incidents and qualifications to the contracts of parties, have been long established and are well understood. These rules are fully exemplified by the numerous authorities cited by counsel on both sides in this case, and the general principle on which they rest and the limitations which are placed to the application of that principle are stated very concisely and correctly by the court in Foye v. Leighton, 2 Foster, 75. The court say: A usage explains and ascertains the intent of the parties. It cannot be in opposition to any principle of general policy, nor inconsistent with the terms of the agreement between the parties; for it incorporates itself into the terms of the agreement and becomes a part of it. It must be known and established. It must appear to be so well settled, so uniformly acted upon, and of so long a continuance, as to raise a fair presumption that it was known to both contracting parties, and that they contracted in reference to it and in conformity with it. The principle upon which proof of usage is admitted is, therefore, that it serves to explain and ascertain the intent of the parties upon some point as. to which their contract is silent, and as to which there existed a usage, so long continued and well known and settled and uniformly acted upon, as to raise a fair presumption that it was known to both — 98 — contracting parties, that they contracted with reference to and in conformity with it, and hence the silence or omission of any express provision in the contract itself. The presumption in such case is that the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but to make a contract in reference to the known usage. This interpretation of written contracts by proof of and with reference to usages and the engrafting upon such contracts, of conditions and stipulations not found in or expressed by them, has been said, and no doubt truly, to constitute an exception to the general rule, that an instrument, complete on its face in all its parts, and importing to be the exclusive expositor of the sense of the parties, shall not receive additions from parol evidence. A most notable instance of this is that wherein by the law merchant, founded merely in commercial usage and convenience, days of grace are added and the time extended for the payment of a bill of exchange or promissory note beyond that specified in the instrument itself, so that, though drawn and on its face payable, for example, in sixty days, yet the money does not become due nor can payment be demanded until the expiration of sixty-three days. The usage steps in, which in that case has the force of law, and the contract is construed as an agreement to pay only at the expiration of sixty-three days. That is an extreme case of the application of the doctrine of usage in the interpretation of written contracts, where the usage is permitted to prevail over the very terms of the contract and is in direct contradiction of them, and no doubt constitutes an exception, and probably the only one, to the general rule, that usage to be admissible must not be inconsistent with the express language of the instrument. And an examination of the authorities will show that it is not in cases alone where the incidents to be annexed to the contract by usage are in conflict with the express language of the instrument, that the usage is excluded, but that it is also excluded where the provisions of the contract are such as reasonably and fairly to imply some different agree — 99 — ment or intention as between tbe contracting parties. And an examination of tbe antborities will also show tbat tbe chief difficulty in tbe application of tbe doctrine of usage in tbe interpretation of written contracts bas, in many cases, arisen from tbe difficulty of determining wben tbe usage is, and wben it is not, to be regarded as excluded by tbe terms express or implied, of tbe contract. In tbe case at bar we are relieved from any difficulty in determining whether tbe usage relied upon by defendant is excluded by the terms, express or implied, of tbe written contract, and also whether it is a valid usage. Tbe usage is not inconsistent 'with any of tbe conditions or stipulations of tbe contract, nor does it contravene any principle of general policy. It is a usage to allow interest at tbe rate of ten per cent, per annum upon all moneys advanced under such contracts until tbe property, or goods bargained for shall be manufactured and delivered. An agreement to pay interest at tbe rate of ten per cent, upon a loan or advance of money is not unlawful, but tbe promise is valid and will be enforced provided it be evidenced by writing. Tbe answer here avers such usage and seelcs to annex a promise to pay interest at tbat rate, on advances as an incident to tbe contract, or as, by tacit agreement and understanding of tbe parties with reference to tbe usage, incorporated into and forming a part of tbe contract Tbe offer of proof under tbe answer, and which was objected to by tbe plaintiff and rejected by tbe court, was, “tbat before and at tbe time of making tbe agreement in question, it was tbe custom and usage among lumbermen of Green Bay and Brown county to allow interest on all cash advances made on contracts like tbe one set forth in tbe plaintiff’s complaint, and tbat that custom and usage was generally known, and known to tbe plaintiff also, tbat such custom was contemplated by tbe parties at tbe time tbe agreement was made.” Tbe contract was made and to be performed at and near Green Bay, within tbe county of Brown, where both tbe parties resided and tbe proof thus — 100 — offered was, we think, sufficiently comprehensive to bring the case within the doctrine of the law on the subject of usage, unless there exist, as is contended for the plaintiff, some peculiar reasons for excluding its operation as to this contract or the class of contracts to which this belongs. The offer was in all respects sufficient, unless it might possibly be said to be defective in not showing how long the custom had continued, but that was immaterial, since it appears by the other facts proposed to be proved that it was well established and generally known at the time the contract was entered into, and that the parties knew of and executed the contract in contemplation of it. One of the peculiar reasons urged for excluding the usage and holding that it has no operation upon this contract is, that upon the equitable issue raised by the answer, in which the defendant alleged there was a mistake in the contract and that it should have been expressed in writing in it that the plaintiff was to pay interest at the rate of ten per cent, on all advances made to him by the defendant and asked to have the contract so reformed, and which issue was first tried and determined, the court found and adjudged that there was no such mistake and that the contract did “ express fully the intentions of the parties thereto, and was the real contract between them.” It is contended that, as the court adjudged that the contract fully expressed the intention of the parties, nothing can be added to it by proof of usage, and that the judgment operates in the way of estoppel upon the defendant to preclude any such proof. Upon the supposition and as we find the law to be, that a usage incorporates itself into the terms of the agreement and becomes a part of it, so that what is embraced in the usage is not expressed in the agreement nor required nor intended to be, it is not'easy to see how a judgment declaring that the agreement fully expresses all that the parties intended to express by it (for such must be the construction of the finding) can in any way estop either party or deprive him of the right to show the existence and application of such usage. Indeed it seems very — 101 — plain, viewing usages as they are viewed, by the law and as ic is presumed the parties viewed and understood them at the time the agreement was made, that such cannot be the effect of the judgment. The other special reason urged against the proof of usage in this case, is that it is a usage to pay ten per cent, interest instead of seven per cent, interest on advances made upon contracts of the class to which this belongs, whereas by law only tlie latter and not the former rate of interest can be recovered without a promise in writing for its payment. That the usage is not good to enforce payment of interest at the rate of ten per cent, seems very certain. The usage is unwritten, and, being so, is no better than any other unwritten promise for the payment of inter, est at that rate or any rate above seven per cent. If the borrower of money should promise the lender by parol to pay him ten per cent, interest on the sum loaned, such promise would be invalid or not enforcable in law because not in writing. Should the lender sue the borrower, setting up the promise as made and averring non-payment, would he be precluded from recovering against the borrower any interest on the money loaned ? The promise to pay the interest at ten per cent, was not unlawful, but only the evidence of it required by law to make it effectual, was wanting. The intention of the lender to require and of the borrower to pay interest would be clear, and in that case no doubt could exist that the law would give interest at the rate of seven per cent., that being the highest rate at which an oral promise of payment is valid, and the rate fixed and implied by law in the absence of any special agreement for a different one. How does an oral promise to pay interest at ten per cent., shown by usage, differ from such an one ? It seems to us that on principle no distinction can be made and that all merely verbal promises must stand on the same footing and be treated alike. We are of opinion, therefore, that the usage, if established according to the offer of proof which was made, will be good to enable the defendant to recover seven per cent. — 102 — interest on bis advances for wbicb a demand of interest at tbe rate of ten per cent, is made in tbe answer. As tbe judgment must be reversed for tbe error in excluding tbe evidence thus offered, we bave not particularly considered tbe other exceptions presented by tbe record, and it becomes unnecessary finally to pass upon them. We may say, however, for tbe benefit of counsel, that in tbe slight attention we bave been able to give to them, we bave failed to discover anything in tbe other grounds of defense or positions taken by counsel for tbe defendant upon wbicb we would recommend another appeal by tbe defendant to this court. By the Court.— Judgment reversed and a venire de novo awarded.