Armstrong v. Gibson

LyoN, J. I. The first question to be considered is, whether there was a valid assignment and transfer of the securities to the defendant, conceding that the guaranty of the plaintiff is void for usury. We do not propose to go into an extended discussion of -this question, or to review the decisions of the various courts bearing upon it. Those who may desire to examine such decisions will find many of them, both English and American, cited and most elaborately revie .red in the cases of Cram v. Hendricks, 7 Wend., 569; Cowles v. McVickar, 3 Wis., 725; and in the able opinion of the learned circuit judge in this case. In Cowles v. McVickar, Mr. Justice Smith- states the law to be, that an indorsement, void for usury, is valid to pass the title to the indorsee, and enable him to collect the note of the maker. [65] It must be conceded, however, that this remark of the learned justice who wrote the opinion in that case is obiter dictum, no such question being involved in the issue. And it may be remarked in this connection, that the question which was presented to the court in that case for adj ndication is not necessarily involved in the decision of this case, as will hereafter appear. There the question was, whether the indorsement or guaranty was void for usury. Here, if it be held that the indorsement, whether usurious or not, passes the title to the note so that the indorsee may collect it of the maker, it will be unnecessary, for reasons which will presently be stated, to decide whether the indorsement or guaranty is or is not void for usury. The question under consideration is now for the first time, so far as I am advised, presented directly to this court for adjudication. The decisions of the courts in other states, in England, and in the federal courts, bearing upon it, are very conflicting, very many of them holding the doctrine asserted in Cowles v. McVickar by Mr. J ustice Smith, and very many others of equal authority asserting an opposite doctrine. A review of these conflicting decisions will subserve no useful purpose. We are required to choose between them, and to say which line of decisions contains a correct statement of the law on this subject. After a careful and somewhat extended examination of the authorities, we have reached the conclusion that the law w.as correctly laid down by Mr. Justice Smith, and that the circuit judge held correctly when he decided, “that the assignment and delivery of the note and mortgage in question in this suit, by the plaintiff to the defendant, passes the title thereto from the plaintiff to the defendant, and that he is entitled to hold and collect them of the maker.” It is proper to say, however, that we do not intend to express, or even to intimate, an opinion as to the rights or liabilities of the parties in any action which may be instituted by the holder of the note and mortgage in controversy against Theodore E. [66] .Armstrong, to enforce payment thereof. By a reference thereto it will be seen that we have adopted the views of Mr. Justice Wilde on this question in tne case of Knight v. Putnam, 3 Pick., 184. He uses the following language: “ Now it is manifest that the maker of a note is not affected by a usurious agreement between the indorser and indorsee. He is liable on his contract, and it is immaterial-to him whether the action be brought in the name of the indorser or in that of the indorsee. But I hold, further, that the transfer of a note on a usurious consideration is neither void nor voidable. So far as the in-dorsement operates as a transfer of the note, it is an executed contract, and the statute against usury is not applicable.1' It only applies to the implied promise or guaranty of the indorser, which, being an executory contract, maybe avoided. But in no case can an executed contract be set aside on the plea of usury.” II. The next question is, whether the plaintiff is entitled to have his guaranty cancelled, on the ground that it is usurious. The circuit judge found as facts that the defendant did not request the plaintiff to make the guaranty, that he then regarded the plaintiff as pecuniarily irresponsible, and that it was purely a voluntary act on the part of the plaintiff. The evidence seems to sustain these findings. Under these circumstances, although the guaranty may be 'usurious, and although the defendant might successfully defend himself upon that ground, should he be sued upon it, a court of equity ought not to interfere to decree a cancellation thereof at the suit of the plaintiff, but should leave him to his defense in an action at law, brought against him on the contract of guaranty. We find nothing in this case which entitles the plaintiff to invoke the aid of a court of equity, but quite the reverse. III. A general demurrer was interposed to the complaint, and was overruled by the circuit court. It is claimed on behalf of the plaintiff, that inasmuch as the order overruling the demurrer was not appealed from, the same is res adjudícala on [67] tbe question of tbe sufficiency of tbe complaint; and, tbe allegations of tbe complaint being all proved, tbe circuit court should bave given judgment for tbe plaintiff, even tbougb tbe complaint states no cause of action and tbe decision on tbe demurrer was erroneous. "We know of no process by wbicb a court can bind itself to give tbe plaintiff a judgment wben bis complaint does not state facts sufficient to constitute a cause of action. Tbis is an objection which, like an objection to tbe jurisdiction of tbe court, may be made at any time during tbe progress of tbe trial It is not, as in most other cases of defective complaints, waived by tbe failure of tbe defendant to take tbe objection by demurrer or answer. R. S., chap. 125, sec. 9. Besides, we are inclined to tbe opinion that tbe order overruling tbe demurrer is within sec. 6, cb. 264, Laws of 1860, wbicb provides that “ upon an appeal from a judgment, tbe supreme court may review an intermediate order involving tbe merits and necessarily affecting tbe judgment.” We think that it was competent for tbe circuit court, after overruling tbe demurrer to tbe complaint, and after trial, to dismiss tbe complaint because it failed to state facts sufficient to constitute a cause of action; and that tbe doctrine of res adjudicata is not applicable in such case. Although we bave here discussed somewhat tbe effect of an order overruling a general demurrer to a pleading, yet it will be remembered that we do not decide whether tbe complaint in tbis action does or does not state facts sufficient to constitute a cause of action. We only decide that under tbe circumstances of tbe case, tbe plaintiff is not entitled to equitable relief. • By the Court. — Tbe judgment of tbe circuit court is affirmed. A motion for a rehearing was denied.