Macungie Savings Bank v. Hottenstein

• Decision Date: 05 May 1879
• Citation: 89 Pa. 328
• Parties: Macungie Savings Bank <I>versus</I> Hottenstein.
• Court: Pennsylvania Supreme Court

89 Pa. 328

Macungie Savings Bank versus Hottenstein.

Supreme Court of Pennsylvania.

March 5, 1879.

May 5, 1879.

March 5th 1879.

Before SHARSWOOD, C. J, MERCUR, GORDON, WOODWARD, TRUNKEY and STERRETT, JJ. PAXSON, J., absent

Error to the Court of Common Pleas of Lehigh county: Of January Term 1879, No. 171.

Edward Harvey and C. J. Erdman, for plaintiff in error.—The giving and accepting of the Hottenstein note and the surrender of the Grim notes, were an extinguishment of the debt of Grim: 2 Powers on N. & B. 203: Byles on Bills *307; Dennis v. Williams, 40 Ala. 633; Arnold v. Camp, 12 Johns. 409; Manuel v. Mississippi Railroad Co., 2 Barr 198; Slaymaker v. Gundacker's Ex'rs, 10 S. & R. 75; Hart v. Boller, 15 Id. 162. The debt of Grim being thus extinguished Hottenstein could not defalk the usury paid on the Grim notes: Bly v. Second National Bank of Titusville, 29 P. F. Smith 453.

John Rupp and John D. Stiles, for defendant in error.—As long as the original indebtedness, which is tainted with usury, exists, so long the taint of usury follows it. The original taint of usury attaches to all consecutive obligations or securities growing out of the original vicious transaction, and none of the descendant obligations, however remote, can be free from it if the descent can be traced. Neither the renewal of an old nor the substitution of a new security between the same parties, can efface the usury, nor a further security, nor a guaranty given subsequently by a stranger. The statute of usury could be very easily evaded, if a security of a third person, taken a few days or a few months after the loan in lieu of the borrower would be valid: Campbell v. Sloan, 12 P. F. Smith 481; Miller v. Irwin, 4 Norris 376; Power v. National Bank of Fair Haven, 35 Leg. Int., No. 19, p. 194; Overholt v. Bank of Mount Pleasant, 1 Norris 490; Kendig v. Linn, 27 Am. Law Reg. N. S. 64; Gardner v. Matteson, 26 Id. 680.

The giving of a new note, or new and further security, for an antecedent debt, is not a payment and extinguishment of that debt, but the presumption is, that it is taken as merely a collateral security for the original debt. Where a creditor takes from his debtor a note payable at a future day, on account of his claims, this can only be considered as a collateral security: Shaw & Leigh v. The First Associated Presbyterian Church, 3 Wright 226; Weakly v. Bell et al., 9 Watts 273; Bank of Pennsylvania v. Potius, 10 Id. 150; Seltzer v. Coleman, 8 Casey 493; Dougherty v. Hunter, 4 P. F. Smith 380; Stone v. Miller, 4 Harris 450; Byles on Bills *381; Hoar v. Clute, 15 Johns. 224; Bayard v. Shunk, 1 W. & S. 92; McIntyre v. Kennedy, 5 Casey 448.

Mr. Justice WOODWARD delivered the opinion of the court, May 5th 1879.

Four notes drawn by William Grim, one on the 16th of June 1870, and the others on different dates in the year 1872, were discounted by the Macungie Savings Bank. They were renewed from time to time until January 1875. Levi S. Hottenstein, the defendant, was the accommodation endorser of the four notes throughout the period during which they were renewed. At the close of the year 1874, or in the beginning of 1875, negotiations were entered into by the parties which resulted in the discounting by the bank of a note for $2100 drawn by Hottenstein and endorsed by Henry Brobst. The four notes of Grim were given up to Hottenstein, and are in his hands. The new note was renewed at intervals until the 30th of April 1877, when the last of the series on which this suit was brought was given. As part of the transaction, a mortgage by Grim to Hottenstein for $2100 was put in evidence. Hottenstein testified, however, that he had no knowledge of its existence until the following summer. He then took it and holds it now. Usurious interest had been demanded and received by the bank not only on the series of notes drawn by Hottenstein and endorsed by Brobst, but on the series of Grim's notes, which Hottenstein had endorsed. The jury were...