Pugh v. Cameron's Adm'r

JOHNSON, Judge,

delivered the opinion of the Court:

Is the judgment in this case, under the pleading and evidence right ?

The single bill sued on is in these words :

“ Three days after date, we, or either of us, promise to pay to David Pugh (of Peter) the sum of four hundred and forty-two dollars ($442.00), for value received, for which we bind ourselves, our heirs, executors or assigns, as witness our hands and seals, at eight per cent interest from date, December 20, 1858.

“Joseph Cameron, [Seal.]

“Samuel Cameron, [Seal.]”

As the facts appear in the bill of exceptions, Joseph Cameron and Samuel were brothers. Joseph, at the time the contract was made, and at the time of the trial, was living in Canoll county, Ohio, and at the time the contract was made, Samuel lived in Hancock county, Virginia, now West Virginia. The plaintiff at that time also lived in Hancock county, and did also at the time of the^trial. Samuel died in Hancock county, and has estate there, and this suit was brought against his administrator. The consideration for the note was a debt, which *529 the plaintiff, as security for Joseph, had paid for him,* and before he paid the debt for Joseph, the said Joseph and plaintiff had agreed together, in Carroll county, Ohio, that if plaintiff would make such payment, that he, Joseph, would give him his note for the amount so paid, with his brother Samuel as surety thereon. A few days before the execution of the note, and after he had paid the debt -for Joseph, the plaintiff went to Carroll county, Ohio, and in pursuance of the former agreement Joseph executed the single bill in Carroll county, and handed it to the plaintiff for presentation to his brother Samuel. The plaintiff returned with the single bill to Virginia, presented it to Samuel, who signed it as surety for his brother, he having previously promised the plaintiff in Hancock county, to sign it in consideration of his giving his brother time. Nothing had been paid on the bond, and no proceeding ever instituted against Joseph to collect the money due thereon, although he had been frequently applied to for payment.

The Ohio law at that time allowed eight per cent interest, per annum, to be charged for the loan or forbearance of money. In Virginia, at that time, the whole debt was forfeited by charging more than six per cent interest per annum therefor.

Usury was pleaded by the administrator of Samuel; and the question is: Could the plea avail him ?

This raises two questions:

1st. Could the surety in the bond avail -himself of the defense of usury, if the principal could not?

2d. Could the principal have availed himself of the defense of usury ?

In Freese v. Brownell, 35 N. J. 285, it was held, that a surety for a bank, which could not plead usury, could not himself set up that defense. In Dillingham v. Jenkins, 7 S. & M. 475 , it was held, that a surety could not rely upon a failure of consideration, if his principal by means of his declarations could not; and Sharkey, C. J., said : "The consideration does not pass to a surety. *530 His obligation arises from the consideration received by " his principal. The contract of a surety is accessory to the contract of his principal ; and if the principal be bound, the surety is also, unless he is discharged by some variation in the terms of the contract; but if there is no change in the risk,he took upon himself, he is not discharged.” In Evans & Arrington v. Kneeland, 9 Ala. 42 , the court held, that “ as upon a recovery by the creditor against the surety, he could reimburse, himself by a suit against his principal; it also results necessarily that the surety may in general make any defense, which his principal could make, so on the other hand it necessarily follows, that a defense, which the principal could not make, or which by his conduct he had precluded himself from making, or had waived, cannot be made by the surety. A moment’s reflection will show the propriety of this conclusion. If the principal could abide by the contract, and the surety repudiate it, the strange result would be produced, that the principal would retain the fruits of the contract, whilst the surety would avoid the performance of his obligation on the ground of its invalidity, in direct opposition, to the acts of his principal, admitting the contract was valid. This would be to destroy the accessorial character of the contract of suretyship, without imposing on the surety the obligation of a principal debtor.”

In Rosa v. Butterfield 33 N. Y. 665 was a defense of usury, set up by guarantors to notes of a railroad company, which under the laws of the state of New York could not set up the defense of usury. The referee held the agreement of guarantors, signed by the defendant, void for usury, and gave judgments against the plaintiff, which judgments were affirmed at the general term on appeal, and the plaintiff then appealed to the court of appeals of the state of New York. The court held that as the statute in that state denied to corporations the right to set up the defense of usury, contracts for a greater rate of interest than that allowed by law were, valid when *531 made by a corporation; and that the notes of the railroad company were not therefore usurious, but were en-forcable against the company upon their intrinsic validity; that the defendants were guarantors of lawful contracts, and therefore liable upon their guarantees. The judgments were reversed.

This is equivalent to saying, as the corporation could not set up the defense of usury, neither could the surety of said corporation set up such a defense.

In Ross v. Woodville et al. 4 Munf. 324 it was held, that “ a purchaser of land having given bond and security for the price without getting a good title, it is competent to him to bind his surety as well as himself, by waiving such a title, as he might have insisted upon, as a condition precedent to the payment of the money. If therefore he does not appeal from an order dissolving an injunction, which was granted him for the want of title, his surety has no right to another injunction on the same ground.”. If sureties were allowed defenses, that existed at the time of the making of the contract, that were not allowed to their principals, great injustice would often be done.

This agreement is only accessorial to that of the principal, and in this case, we conclude, if the principal in the bond could not have pleaded usury as a valid defense, the surety could not.

"Was the bond an Ohio contract? Story in his Conflict of Laws, §241, says: “ Generally speaking, the validity of a contract is to be decided by the law of the place where it is made, unless it is to be performed in another country.” And in section 280 of the same work, he says: “ The rules already considered suppose, that the performance of the contract is to be in the place, Avhere it is made, either expressly or by tacit implications. But where the contract is either expressly or tacitly to be performed in any other place, then the general rule is in conformity to the presumed intention of the parties, that the contract, as to its validity, nature, *532 obligation and interpretation, is to be governed by the law of the place of performance.”

Judge Daniels in delivering the opinion of the court, in Wilson v. Lazier et al., 11 Gratt. 477 , said : “ It seems to be well settled that a negotiable note made in a particular country, is to be deemed a note governed by the law of that country, whether it is expressly made payable there or is payable generally, without naming any particular place; since at most under the latter circumstances, it is as much payable in that country as elsewhere.” In Findley v. Hall & Colcord, 12 Ohio 610 the note sued on was as follows:

“ Saute Fe, August 27, 1849.

“ One day after date, we or either of us, promise to pay to Jacob Hall and Jonathan Ooleord, or to their order, the sum of three thousand one hundred and ninety-six dollars, ($3,196.00) for value received, negotiable and payable without defalcation or discount, together with interest at the rate of ten per cent per annum from due.

“J. HOUGHTON,

“Jared W. Folger,

“James Findley.”

The consideration of this note was hire for transporting goods, for which a note was given, and when the former note became due, which was signed by Houghton, Town and Findley, the note not being paid, the plaintiffs attached the goods of Town, and in order to settle the matter, plaintiffs agreed to take at their appraised value the goods attached toward the satisfaction of their .claim, as far as they would go, and to take the note of Houghton, Folger and Findley lor the balance, and on the complete execution of the new note, to give up or cancel the first; this arrangement was made without the knowledge of Findley for he was absent from Sante Fe, and had returned to the state of Missouri. Houghton and Folger thereupon signed the note sued on in the case, and delivered it to one of the plaintiffs who brought *533 both notes with him to Missouri, where he saw the defendant Findley, stated to him what had been agreed on' and done, received his signature to the new note, and gave up or cancelled the old one. The note was sued on in the city of Cincinnati: and it was claimed by defendant that the note was a Missouri contract, and that by the laws of Missouri six per cent interest only was allowed, and if more was contracted for, all interest was forfeited andjten per cent in addition; the plaintiffs claimed ten per cent, the amount contracted for, which was allowed by the New Mexico law, and judgment was given for plaintiffs for the amount of the note with ten per cent interest, and the supreme court affirmed the judgment, and held that the note was a New Mexico contract. The above cited case is similar in many respects to the one here. The contract in this case was undoubtedly made with Joseph Cameron in Carroll county, Ohio; he there signed it after it was reduced to writing the consideration he had received in Ohio, he had promised plaintiff that he would get his brother Samuel to go his security on the bond; it was joint and several, and as soon as he signed it, was complete as to him; it was the evident intention of the parties at the time, that Joseph was to pay it in Ohio; Samuel undoubtedly so understood he was to be but a surety on the bond, and when he signed it in Hancock county, he but ratified the contract made in Ohio, and became accessory to it. It was an Ohio contract made there, and to be performed there. It would, it seems to me, be grossly unjust to hold otherwise under the facts and circumstances of this case, in view of the highly penal character of our statute at that time in Virginia. Joseph, for whose benefit the money had been paid by the plaintiff, lived in Ohio, where he received the benefit of the consideration of the bond, and to get further time executed the bond in Ohio, bearing eight per cent interest, a legal rate there, and the contract was valid there; and because Samuel signed it in Virginia, where the legal rate of interest was only six *534 per cent, and to contract for more rendered void the whole debt, it is contended the surety cannot' be held. We do not think the position tenable according to law, reason or justice. The authorities, referred to by the plaintiff in error to show that the contract, as to Samuel Cameron, was made in Virginia and should as to him be governed by the Virginia law, relate to negotiable paper; and it is well settled that an indorser of negotiable paper, makes a new contract, and would be held-thereto, although the note itself, as to the maker, was a forgery. The bond in this case was a joint and several one ; and the question, whether the plaintiff elected to treat it as joint, or several, does not arise in this case, because the surety was dead at the time the suit was instituted, and he could not have brought the action against the living principal and the administrator of the deceased surety. We see no error in the judgment of the circuit court of Hancock county, rendered in this case, and the same is affirmed with costs and damages according to law.

Judges Greek and Moore concurred.

JudgmeNT Affirmed.