First Nat. Bank of Rapid City v. McCarthy

• Decision Date: 08 June 1904
• Citation: 100 N.W. 14,18 S.D. 218
• Parties: FIRST NAT. BANK OF RAPID CITY v. McCARTHY et al.
• Court: South Dakota Supreme Court

100 N.W. 14

18 S.D. 218

FIRST NAT. BANK OF RAPID CITY v. McCARTHY et al.

Supreme Court of South Dakota

June 8, 1904

Appeal from Circuit Court, Pennington County.

Action by the First National Bank of Rapid City, S. D., against Patrick B. McCarthy and others. From a judgment for plaintiff, defendants Patrick B. McCarthy and another alone appeal. Modified.

Haney J., dissenting.

Charles W. Brown, Edmund Smith, and Ivan W. Goodner, for appellants.

Martin & Mason and Fowler & Whitfield, for respondent.

CORSON P. J.

This is an action for the foreclosure of a mortgage, in which usury and certain other defenses were pleaded by the defendants Patrick and Maggie McCarthy, who alone appealed from a judgment in favor of the plaintiff and from an order denying their application for a new trial.

This being an action in equity, triable by the court, its charge in submitting certain issues to a jury, the conduct of counsel in argument before the jury, and the conduct of the jury are not subject to review. Assignments of error relating thereto demand no consideration. It was wholly within the discretion of the court what, if any, issues should be submitted. The findings of the jury were merely advisory. Upon the court rested the duty and responsibility of determining the facts, and this court must review its decision precisely as it would if no jury had been impaneled. Apland v. Pott, 16 S.D. 185, 92 N.W. 19.

Admitting the execution of the note and mortgage in suit, appellants contend (1) that such note was a renewal of former notes which were tainted with usury, and that under the law applicable to such a state of facts sufficient payments were shown to substantially extinguish the indebtedness; and (2) that, the plaintiff having attempted to procure a tax title to the mortgaged premises, and not having paid the taxes assessed thereon for the purpose of protecting its security according to the terms of the mortgage, the circuit court erred in adding such taxes to the sum found to be due the plaintiff.

The first contention rests on the alleged fact that the note in suit was merely a renewal, its sole consideration being a pre-existing indebtedness. Notwithstanding the rule that findings of a trial court on disputed questions of fact are always presumptively right, and must stand unless the evidence clearly preponderates against them, it is the duty of this court, in cases tried by a court or referee, to review the evidence, whenever the question of its sufficiency is properly presented, for the purpose of ascertaining whether or not there is a clear preponderance against the findings of such court or referee. Farwell v. Sturgis Water Co., 10 S.D. 421, 73 N.W. 916; Williams v. Williams, 6 S. D. 284, 61 N.W. 38; Randall v. Burk Township, 4 S. D. 337, 57 N.W. 4. Regarding the execution of the note in suit the learned circuit court found as follows: "That said note of July 22, 1891, for the sum of $5,000, executed and delivered by the defendants Patrick B. McCarthy and Maggie McCarthy to the plaintiff, the First National Bank of Rapid City, South Dakota, was so made, executed, and delivered by said defendants, and was received by said plaintiff, as a new and original indebtedness and obligation, and not as a renewal or continuation of any prior existing indebtedness or obligation of the said defendants Patrick McCarthy or Maggie McCarthy, or either of them, or any other person, firm, or corporation." This finding clearly conflicts with conceded facts and a fair and reasonable view of the entire evidence. The record contains a copy of the note. It was for $5,000, payable to the order of the plaintiff six months after date, with interest at 12 per cent. per annum, dated July 22, 1891, signed by each of the appellants. The record also contains the copy of a note for $5,000, payable to the order of the plaintiff 12 months after date, with interest at 12 per cent. per annum, dated May 22, 1889, signed by each of the appellants and one Michael McGuire. Plaintiff's president, who had formerly been its cashier, and who was personally acquainted with nearly all of the numerous transactions disclosed by the evidence, testified on cross-examination as follows: "Q. Was the note of July 22, 1891, a renewal of or a substitution of this note of May 22, 1889? A. I don't so regard it. Q. Did it represent the same indebtedness so far as McCarthy was concerned? A. McCarthy was on the note with these parties for that amount. Q. If McCarthy and Tighe had not signed any of these notes, this note of July 22, 1891, and May 22, 1889, is the same indebtedness of McCarthy? A. No, sir; it is not the same indebtedness. It is an indebtedness of different parties. Q. Why do you say it is not the same indebtedness, so far as McCarthy is concerned? A. When two individuals come in there and make a loan, and a third party comes in, and says 'We want to get money to take up this loan, and want to get the other people off, and we want you to let us have the money to pay off this note, and get these other people off,' and in this case we did that, and let McCarthy have the money to pay off this note and give this security. Q. When the note of July 22, 1891, was signed by McCarthy and wife, did you pay McCarthy any money--your bank? A. We placed the amount to his credit. The transaction was this: Mr. McCarthy may have drawn-- Q. What did he do? Did you pay him any money? Did he get a nickel? A. I don't think the actual cash was handled, but the proceeds of that note were turned to McCarthy's credit, and paid for the other note. Q. Was any money placed to Mr. McCarthy's credit that day on the books of the bank? A. I would have to look. Q. Did he have any account on the books of the bank on that date? A. I will look. What date? Q. July 22, 1891. A. It may not have gone through the actual transaction. Q. It was not in actual money? A. The transaction was just the same. It was not imaginary money. Q. State your best recollection, if you have not McCarthy's account here. Was any credit given to McCarthy at the bank at the time he and his wife signed the note of July 22, 1891, for $5,000? A. I don't remember whether the account was credited on the book or not. Q. At the time the note of May 22, 1889, for $5,000, signed by McCarthy and wife and McGuire, did you pay them any money that day? Did you pay them $5,000 when they signed that note? A. It is not very likely that we made a transaction in which we turned the money out at one window and in at the other." This witness also stated that the same record was made in the bank when a note was "paid in cash" as when it was "paid by a new note." Thus it clearly appears that the indebtedness represented by the note of May 22, 1889, constituted the consideration of the note in suit. Such indebtedness, its amount augmented by interest, reduced by payments, remained when the latter evidence thereof was executed. The transaction on July 22, 1891, did not involve the delivery of any money, and we are unable to discover any competent evidence tending to prove that the parties intended the new note to be regarded as a payment of the old one. The transaction was not unusual. It is easily understood. The bank held the past-due note of May 22, 1889. To avoid carrying past-due paper, and improve its security, the amount remaining unpaid, according to the bank books, was ascertained, and appellants were induced to sign a new note for that amount, securing the same with a mortgage on their homestead, the name of McGuire being omitted from the new note. Nothing more was done; nothing more was intended to be done. The nature of the transaction is to be ascertained from what was said and done by the parties at the time, not from the personal opinions of interested witnesses. The need of accuracy in the use of language and of nice discrimination between facts and conclusions of witnesses, when dealing with such a transaction, is strikingly illustrated by reference to plaintiff's testimony touching certain subsequently executed notes. On July 1, 1896, appellants executed two notes, one for $5,000 and one for $675.50, the aggregate of these sums being the amount shown by the bank's books to be then due on the note in suit. The president of the bank stated: "At the time this Exhibit A [note in suit] was paid or renewed by Exhibit C and Exhibit D [notes of July 1, 1896], Mr. McCarthy was present, but as to whether he figured it up or not I could not say." If the note of July 22, 1891, paid the note of May 22, 1889, then the notes of July 1, 1896, paid the note of July 22, 1891, the indebtedness secured by the mortgage sought to be foreclosed was extinguished, and the lien of such mortgage no longer exists--a conclusion the plaintiff would certainly not desire to concede. It seems clear to us that both transactions should be regarded as renewals. They were such in fact. If the note of May 22, 1889, was tainted with usury, the note of July 22, 1891, was not purged of such taint, even if the parties at the time intended such result, which does not appear. The promise of a debtor to pay illegal interest, however often repeated, is not in itself sufficient to avoid the consequences of a usurious contract. As the decision of the learned circuit court cannot stand without the support of the finding heretofore quoted, and such finding is against the clear preponderance of the evidence, the judgment appealed from will have to be modified.

It is undisputed that appellant Patrick McCarthy executed and delivered to the bank on August 22, 1887, four promissory notes for $1,000 each, wherein he promised to pay interest thereon at 18 per cent. per annum from date until maturity. At that time the highest lawful rate of interest under the laws of Dakota territory, where...