Cent. Trust Co. of N.Y. v. Burton

• Decision Date: 24 September 1889
• Parties: CENTRAL TRUST CO. OF NEW YORK v. BURTON ET UX.
• Court: Wisconsin Supreme Court

74 Wis. 329

43 N.W. 141

CENTRAL TRUST CO. OF NEW YORK

v.BURTON ET UX.

Supreme Court of Wisconsin.

Sept. 24, 1889.

Appeal from circuit court, Walworth county; JOHN B. WINSLOW, Judge.

Action by the Central Trust Company of New York against John E. Burton and his wife, to foreclose a deed of trust. Judgment was entered for the defendants, and the plaintiff appealed.Cotzhausen, Sylvester & Scheiber, for appellant.

Quarles, Spence & Quarles, for respondents.

COLE, C. J.

This is an appeal from two orders; one overruling a demurrer to portions of the answer, and the other refusing to appoint a receiver of the mortgaged property. The action is brought to foreclose a trustdeed, executed by John E. Burton and wife to secure the payment of certain notes, made by the Burton Manufacturing Company, payable to the order of Burton, and indorsed and negotiated by him to various parties. The defendant Burton answered, setting up the defense of usury to these notes. The appellant is the trustee named in the deed, and loaned some money on the notes, and loans were made by other parties on other notes, who presumably hold them.

The court below treated the answer as attempting to set forth two distinct defenses, but we think this is an erroneous view of it. As we understand the answer it really sets forth but one defense; that is, usury in the negotiation of the various notes which accompany the trust-deed. There are matters in the answer which are not strictly pertinent to that defense; but, when the whole answer is considered together, it will be found that the only defense stated is usury. All the facts well pleaded relate to that issue. It is true that at the commencement of the sixteenth paragraph it is said: “For a further answer in this behalf this defendant avers,” etc., then stating the material facts which show usury in the negotiations of the notes. The preceding allegations or statements in the answer are mostly redundant. The learned circuit judge thought the answer attempted to set forth two distinct defenses, neither of which, standing alone, was good, and gave leave to amend the answer in the particulars he deemed it defective. A point is made by appellant's counsel that this leave to amend the answer should not have been granted, because usury was an odious defense, and leave to set it up was not in furtherance of justice, and should only have been allowed on condition that Burton pay the principal of the moneys loaned before making that defense. According to our construction of the answer it contains only one defense, and the amendment allowed was quite unnecessary. That the answer states with sufficient certainty usurious agreements in negotiating the various notes mentioned, seems to us too plain for discussion. The lenders exacted and reserved, and the borrower agreed to pay, for the use of the money loaned, a greater sum than legal interest. According to the averments in the answer, 14, 16, and 17 per cent. on the sums loaned was exacted. If the agreement to pay such a rate for the use of money does not constitute usury, we know not what would. The transactions unexplained, as stated, import gross usury on their face. It is true the copy of the note which is set out in the complaint is for the payment of blank dollars, with interest at the rate of 6 per cent. But the answer states that the notes mentioned in paragraphs 17, 18, 19, 20, and 21, which are secured by the trust-deed, were made and delivered in New York upon the usurious agreements stated. We observe that, while the notes in question were executed by the Burton Manufacturing Company, they were merely accommodation notes, which were delivered to Burton to enable him to borrow money on them for his own use. Burton was president of the company, executed the notes on behalf of the company, as its president, made them payable to his own order, and the company never received any consideration for them. They were not binding obligations until Burton negotiated them. Upon the facts his indorsement in effect placed the notes in the same position as though he were the maker; for, until he transferred them, as we have said, they had no legal existence as binding obligations.

It is alleged in the answer that the notes were made, executed, and delivered by the Burton Manufacturing Company in the city of New York. The inference is irresistible that they were negotiated there, and they were certainly made payable at that place. They were New York contracts, and the law of that state governs as to their validity. “The general rule that contracts are to be governed by the law of the place of performance is too well settled to require the citation of authorities.” Newman v. Kershaw, 10 Wis. 333. Here the notes were negotiated in New York, the...