Bradshaw v. Van Valkenburg

• Decision Date: 28 September 1896
• Citation: 37 S.W. 88,97 Tenn. 316
• Parties: BRADSHAW et ux. v. VAN VALKENBURG et al.
• Court: Tennessee Supreme Court

37 S.W. 88

97 Tenn. 316

BRADSHAW et ux. v. VAN VALKENBURG et al.

Supreme Court of Tennessee.

September 28, 1896

Appeal from chancery court, Hamilton county; T. M. McConnell Chancellor.

Suit in the chancery court of Hamilton county by C. W. Bradshaw and wife against J. C. Van Valkenburg and others, in which John Wakeman filed a cross bill. Decree for Wakeman, which was affirmed by the court of chancery appeals, and complainants appeal. Reversed.

S. P Stover, West & Crow, and Dodson & Dodson, for appellants.

J. E Van Valkenburg and Pritchard, Sizer & Bible, for appellees.

WILKES J.

This bill was filed by Bradshaw and wife to enjoin the immediate sale of land under a deed of trust executed by them, and to have an account of usury involved in the transaction. To it as originally filed, Van Valkenburg, the trustee, and the Georgia Loan & Trust Company, were made parties. They filed answers, and denied the usury, and stated that the money was really loaned by one Wakeman, for whom the trustee and the Georgia Company acted as agents. Complainants thereupon filed a supplemental bill, stating that they did not know Wakeman in the transaction; and he is asked to be made a party and required to answer as to the usury. This bill was answered, and Wakeman, with his answer, filed his cross bill, in which he stated that he was the owner, and bona fide, innocent holder, of the notes, and knew nothing of the transaction between the original parties. He denied all usury, and asked that the deed of trust be foreclosed. Complainants answered the cross bill, and said, in substance, that the entrance of Wakeman into the litigation was but another device to obtain and cover up the usury. An amendment and supplemental answer were filed, in which it was alleged that Mrs.

Bradshaw, the wife, was a minor when she executed and acknowledged the deed of trust, and had since become of age; that she was entitled to homestead in the land, which then was occupied by herself and husband as her home. And she sets up her right to homestead in the land as superior to the right of the mortgagee. The chancellor heard the case on this multitude of pleadings and the proof, and in the decree rendered by him it is recited that it was admitted on the hearing that the wife was a minor when the deed of trust was executed by her, and that complainants had no other real estate, except that in controversy. The decree further found the loan usurious, as between the complainants and the Georgia Loan & Trust Company, but that John Wakeman was an innocent purchaser of the note, in due course of trade, for a valuable consideration, and without notice of any usury, or equities in complainants' favor. He decreed that the deed of trust be foreclosed, and gave a decree in favor of Wakeman for the notes and interest, and 10 per cent. attorney's fees, and ordered the property sold under the deed of trust, for cash, in bar of any redemption or homestead. The property was sold, and bought by Wakeman, at $375, and the sale was confirmed. The purchaser paid the costs into court, and the net balance was credited on his judgment, and writ of possession was awarded, and complainants appealed and assigned errors. The cause has been heard by the court of chancery appeals, and that court held that, while there was usury in the original transaction, Wakeman could not be affected thereby, inasmuch as he was an innocent holder of the notes, without notice of the usury which they found as a fact from the record. Complainants appealed to this court, and, among other things, assigned this holding as error.

It has been held by our courts that usury may be pleaded, as against an innocent holder of negotiable paper. Tait's Ex'rs v. Hannum, 2 Yerg. 350. But this was under the act of 1741, c. 11, which made all usurious contracts absolutely and entirely void, and prior to the act of 1819 c. 32, and subsequent acts, making usurious contracts voidable only for the usurious interest. Under the original act of 1741, c. 11, a note tainted with usury was void, and stood upon the same footing as one given for a gambling consideration, as to which an innocent holder stood upon no higher ground than the original party. But after the act of 1819, c. 32, a usurious contract was not utterly void, but void or voidable, at the instance of the debtor, only as to the usury. Ramsey v. Clark, 4 Humph. 246; Dews v. Eastham, 2 Yerg. 463; Tilford v. Summer's Ex'rs, 2 Yerg. 255. And with the change in the law the courts have held that, if a purchaser of a note know nothing of the usury between the original parties, he will not be affected thereby. Ramsey v. Clark, 4 Humph. 244; May v. Campbell, 7 Humph. 450; Doak v. Snapp's Ex'rs, 1 Cold. 183; Frazer v. Sypert, 2 Heisk. 342. See Bank v. Scott (Va.) 22 S.E. 487, and cases cited. The court of chancery appeals further held that Mrs. Bradshaw was a minor and a married woman when she executed and acknowledged the deed of trust, and that she could therefore disaffirm the same, and recover her homestead, if there were nothing else in the way. This is unquestionably correct, under the holdings of this court. Walton v. Gaines, 94 Tenn. 422, 29 S.W. 458, and cases there cited. They found, as a matter of fact, however, that the deed of trust was made to secure money borrowed by the husband to pay off a prior mortgage upon the land, created before the marriage of the husband, and that almost the entire amount was thus applied. That court concluded from this finding that the execution of the deed of trust by the husband and wife was, in effect, a transferring and renewing of the original lien incumbrance that existed, by virtue of the first mortgage, before the rights of the wife attached, and that it would be inequitable and unjust to deprive the holder of the notes of his security, unless the money advanced originally was refunded, which was not offered to be done; citing Smith v. Evans, 5 Humph. 70; Pilcher v. Smith, 2 Head, 208; Aiken v. Suttle, 4 Lea, 103; and other cases. On petition to rehear, the court of chancery appeals found the facts upon this branch of the question more fully and in detail, and to the effect that the money borrowed under the deed of trust now sought to be foreclosed was used to pay off a prior mortgage executed by the husband and wife on the...