Osborne v. Fridrich
| Citation | 114 S.W. 1045,134 Mo.App. 449 |
| Parties | OSBORNE, Appellant, v. FRIDRICH, Respondent |
| Decision Date | 15 December 1908 |
| Court | Missouri Court of Appeals |
Appeal from St. Louis City Circuit Court.--Hon. Jas. E. Withrow Judge.
Judgment affirmed.
H. A. & C. R. Hamilton for appellant.
(1) The compromise of a doubtful claim is a sufficient consideration for a promissory note. After a compromise has been entered into in good faith, the merits of the original controversy are immaterial, in an action to enforce the satisfaction. 6 Am. and Eng. Ency. of Law (2 Ed.), p. 714; 8 Cyc., pp. 517 518; Draper v. Owsley, 15 Mo. 613; Stephens v Spiers, 25 Mo. 386; Rawlins v. Rawlins, 102 Mo. 563; McCormack v. Railroad, 154 Mo. 191; Pickel v. Chamber of Commerce, 10 Mo.App. 191; Buffington v. Land Co., 25 Mo.App. 492; King v. Insurance Co., 36 Mo.App. 128; Marshall & Michel v. Larkin's Sons, 82 Mo.App. 635; Supply Co. v. Meysenberg, 85 Mo.App. 337; Wonderly v. Christian, 91 Mo.App. 158; Slover v. Rock, 96 Mo.App. 335; Feeter v. Weber, 78 N.Y. 334; Dunbar v. Tirey (Tex.), 17 S.W. 1116; Bennett v. Paine, 5 Watts 259; Cobb v. Arnold, 8 Metcalf 403; Sentell v. Stark, 37 La. Ann. 679. (2) When the indorser of a promissory note tainted by usury becomes the maker of a note, given to discharge the one, usurious as between the original parties, the new note being executed at a lawful rate of interest and received in payment of the former, he cannot set up the usury of the original note as a defense to the collection of the note of which he is maker. Coleman v. Cole, 96 Mo.App. 22; Bank v. Hottenstein, 89 Pa. 328; Craig v. Butler, 9 Mich. 21; Tenny v. Porter, 61 Ark. 329.
John W. Drabelle, Wm. A. Kinnerk, and Morrow & Kelley for respondent.
(1) Either want of consideration or failure of consideration is a complete defense to a note. R. S. 1899, sec. 645; Catterlin v. Lusk, 98 Mo.App. 188; Holmes v. Farris, 97 Mo.App. 315. The negotiable instrument act approved April 10, 1905, simply re-enacted the common law, which it provided: "Section 29: Absence or failure of consideration is a matter of defense as against any person not a holder in due course." Laws Missouri 1905, p. 247; 4 Am. and Eng. Ency. Law (2 Ed.), p. 193; 8 Cyc., p. 31. (2) The plaintiff is not a holder in due course and took the note with notice that the defense of want of consideration could be made and took it subject to such defense. Laws of Missouri, 1905, pp. 249, 250; Clough v. Holden, 115 Mo. 336; Mayes v. Robinson, 93 Mo. 114. (3) The note for which the note sued on was given had been paid in full by payments, renewal fees and usurious interest. It could not be made the basis of a new note. It is not sufficient to support a new contract. Briscoe v. Kinealy, 8 Mo.App. 76; 7 Cyc., 718; Warren v. Whitney, 24 Me. 561; Phelps v. Bennett, 57 Me. 491; Smith v. Boruff, 75 Ind. 412; Pettyjohn v. Liedscher, 92 Ga. 149; Hancock v. Twyman, 19 Ky. Law 2006, 45 S.W. 68; Ingersoll v. Martin, 58 Md. 67; Brigham v. Holden, 146 Mass. 259; Hale v. Rice, 124 Mass. 292; Mason v. Campbell, 27 Minn. 54; Grant v. Porter, 63 N.H. 229; Stafford v. Bacon, 1 Hill (N.Y.) 532; Sullivan v. Collins, 18 Iowa 228.
This action is on a promissory note dated November 5, 1906, due two months after date, for the sum of three hundred dollars with eight per cent interest, payable to A. L. Shoults, signed by respondent John H. Fridrich, and indorsed by Shoults to appellant. The defenses are want of consideration for the note and usury in the transactions out of which it grew. In 1902 Shoults borrowed some money from John H. Vette on a note with Fridrich as surety. This debt ran along until 1904, when cash to pay it was borrowed from C. W. McFarland, Osborne and Fridrich executing a note to McFarland similar to those Vette had taken; that is, with Osborne as maker and Fridrich as payee and indorser. The only conclusion to be drawn from the evidence is that Fridrich was an accommodation indorser and, therefore, in effect, a surety. [Weimer v. Shelton, 9 Mo. 122.] Osborne was connected with McFarland as a party to the transaction. The indebtedness is traced for two years and four months from the first loan by McFarland and Osborn, and during that time Shoults and Fridrich paid them $ 482.68, either in money or by incorporating accrued interest in renewal notes. The notes were given for thirty days each, and to renew them fifteen dollars a month was charged, plus two dollars and seventy cents. It seems the fifteen dollars was a charge for renewal and the balance was considered interest. An action was instituted before a justice of the peace by Osborne on that one of the successive notes which was dated July 16, 1906. Said action was dismissed on the execution and delivery to Osborne of two notes dated September 4, 1906, in which Fridrich was payee and Shoults maker and indorser. One was for $ 300 and one for $ 53. On November 5, 1906, the note in suit was given in lieu of the prior note for $ 300 of September 4th, and with the note in suit were given two other notes for $ 45 and $ 47. Thus it appears usurious charges continued after the settlement; for these small notes were for renewal premiums. On these facts the court found a verdict for respondent, having refused a declaration of law requested by appellant to the effect that if the note in suit was given in lieu of one executed September 4, 1906, which was executed in compromise of an action then pending before a justice of the peace on a prior note, the verdict must be for respondent; also a declaration, that even if the court found appellant had exacted usury from Shoults, the maker of the note dated July 16, 1906, on which respondent was indorser, yet if it further found respondent, on September 4th, in consideration of an extension of time for the payment of said note of July 16th, assumed the debt and executed and delivered his note dated September 4th, due sixty days after date, in payment of the prior note, and thereafter executed and delivered the note in suit in satisfaction of the note of September 4th, usury exacted of Shoults constituted no defense to appellant's demand.
Under the decision in Weimer v. Shelton, supra, respondent, as surety for Shoults, was entitled to interpose the defense of usury to the action instituted before the justice of the peace on the note of July 16th. The defense was not used, as the case was settled and dismissed without a trial, in consideration of the execution and delivery of the two notes to Osborne, wherein respondent took the position of maker and Shoults that of payee and indorser. In other words, the positions of the parties to the notes of September 4th, and those of November 4th given to renew them, were the reverse of what they had been on the previous notes. The usury exacted after the settlement of the case before the justice if credited on the principal note, would not suffice to discharge it; and appellant was entitled to a judgment for something, unless the prior usury should likewise be credited on the note in suit, by virtue of the statute. [R. S. 1899, sec. 3709.] Appellant insists this cannot be done because, as said, the dealings subsequent to the settlement were entirely detached from previous dealings and stood on a distinct consideration; whereas respondent says the prior usury had wiped out the debt, and there was no consideration for the notes of September 4th. This is on the theory that our statutes made all the prior agreements to pay usurious interest, void. [Mo. Ann. Stat. 1899, sec. 3708, 3709, 3710.] Not only is usury prohibited, and a defendant when sued for a debt allowed to plead it in defense and have the amount paid for interest in excess of what would have been paid at the lawful rate, credited on the principal, but now, if usury is paid, it may be recovered back from the borrower or his personal representatives. [R. S. 1899, sec. 3708.] The lender can in no case recover more than the principal with lawful interest, after deducting the usurious interest (3709) and a pledge or mortgage of personal property for a usurious debt, renders the lien invalid. Moreover, usury to the extent it was carried by the appellant is a misdemeanor. [2 Mo. Ann. Stat. 1906, sec. 2358.] Under these statutes it has been held contracts to pay usurious interest are void as to the usury charged; a ruling made prior to the enactment of some of the most stringent provisions of the statutes. [Farmers', etc., Bank v. Harrison, 57 Mo. 503; Vandergrif v. Swinney, 158 Mo. 681, 59 S.W. 979; McDowell v. Assn., 175 Mo. 250, 272; Arbuthnot v. Assn., 98 Mo.App. 382.] If respondent and Shoults had interposed the defense of usury to the action before the justice, that case must have been defeated, because the usury already paid would have discharged the debt. Instead of doing so, they settled the action by giving a new note with Fridrich as maker, which appellant says is valid for the reason stated, supra. Respondent answers that the demand filed with the justice was destitute of any merit and therefore its settlement could not be a consideration for a new contract; likening the case to Long v. Towl, 42 Mo. 545; Briscoe v. Kinealy, 8 Mo.App. 76 and Sullivan v. Collins, 18 Iowa 228. In the first case actions before a justice for damages against the defendant for purchasing ore from miners who worked on the plaintiff's land, had been settled and dismissed on the execution of a writing obligatory, wherein the defendant agreed to pay a penalty of five hundred dollars if he paid third persons a greater price for ore than plaintiff was paying, and to sell plaintiff at a certain price all ore thereafter purchased by him. In an action brought for breach of the stipulations, it was held there was no consideration for the agreement,...
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