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tracted to pay the debt of others, was under no previous obligation to pay it. His situation therefore required no forbearance. Forbearance was a necessary foundation to an usurious contract. There was no loan, nor any extension of the term of credit stipulated on the contract in favor of the original debtors. Here the complainant had been bound for the debt; and unless he was discharged, and he contracted under an impression that he was not, his situation required forbearance; and that may be considered as part of the consideration for the notes. But whether he acted under the influence of previous responsibility, the moral obligation only, the consideration of the original note and deed of trust as assigned, or all together, I have no hesitation in saying the contract was free from the taint of usury. This opinion is based on the reasons I gave in the decision of the former case, the most of which apply equally to this, and may be embraced by the general propositions, that at the time of entering into either contract, both parties acted on the conviction that a larger sum was due than the amount promised for, or in satisfaction of the original debts; that there was not in either case any device or contrivance to evade the statute of usury; and that the law governing the demand had never been expounded to the contrary; but so far as judicial decisions had gone, they had sanctioned the right to a greater amount than had been promised by either contract.
The members of the Court being at present unanimous on this point, I will more particularly notice only one branch of the argument, mainly relied on to prove this contract usurious. It is that usage or customs may and do prvail in many places, to receive extra premiums for the loan or advance of money, which premiums are currently believed by those concerned to be legal, and sanctioned by the course of trade; and where the parties are as unconcious of any violation of the statute, as they could possibly be in cases like the present; but which contracts are and have been adjudged usurious. In support of this position, cases are cited, in which, according to their custom, merchants and brokers have advanced money on agreements that the sums lent shall bear eight per cent interest, (or other legal rate,) and that a commission of, say two and a half per cent, shall also be paid for the advance. The substantial difference between cases of the description mentioned and the present, cannot escape notice. In those, it was evidently known to the parties, that instead of eight per cent, ten and a half were to be given for the loan of the
money, and there was no other consideration. The custom must have originated in a device, shift or contrivance, to evade the provisions of the statute; else the premiums would have been stipulated in the simple form of ten and a Bibb. half per cent for the use of the money; and that was the substance of the contract. On this point the decisions of New-York are relied on; and with others, the case of Dunhum v. Gould,a is found to sustain the doctrine; and of all Johnson's which I could have entertained no doubt. Illegal or vicious customs are to be abolished. The Court there held that the statute applied to any loan of money, wares, merchandize, or other thing whatever,” at more than the legal rate of interest, for the forbearance; that the parties appeared to have contracted for the purpose of raising money at a higher rate; and the fact, that the negotiation
as in the form of an exchange of notes, made no difference. “If that was the object of the parties, (and the jury have so found it,) then it was a shift or contrivance to get rid of the statute of usury; and such a shift or contrivance no Court of justice can tolerate.” On the effect of the custom, the chancellor remarked, "the custom of merchants is not applicable to such a case. It is not a matter of trade and commerce, within the meaning the law merchant. And if there were such a local usage in New York, it would be null and void, and could not be set up as a cover or pretext to trample down the law of the land. The money lenders throughout the country might as well set up any practice of their own, and then plead it in bar of the statute.” He admitted however, on the authority of several English decisions referred to, that a reasonable allowance beyond interest, for re-exchange and remittance of the money from a distance, or for incidental expenses, or extra trouble in the particular case, and when there is no colour of usury, would stand on distict principles. And on the authority of other decisions, I would add to the latter class, a reasonable commission for the risk of securityships. From this slight review of the case cited, the want of analogy between it and the present is most obvious. Here it is not contended that any shift, contrivance or evasion entered into the contract.
* Then for the reasons advanced, I must regard the complainant as one who had been discharged from liability by the alteration of the contract, and who was then contracting a fresh responsibility under an erroncous impression with respect to his prior obligation.
5. The concluding inquiry is, whether chancery is competent to afford relief in a case of this kind? Without entering into a particular examination of equity jurisdiction, I arrive confidently at the conclusion, that it is competent to relieve against the excess of the sum contracted; and that various considerations distinguish this case from any formerly decided by this Court, which in the argument have been supposed analogous. In this view, the alteration of the terms of the original contract by the defendant, and consequent discharge of the complainant, is a leading feature in the case. Justice and equity are strongly united in the prayer for relief against the mistakes in law, particularly on the question whether the complainant had been discharged from his former liability as security. A partial failure of consideration existed, and the principle has never been settled in this state whether in like cases common law is competent to afford relief; and chancery has often exercised the jurisdiction. I therefore, consider it a subject appropriately within chancery jurisdiction, even after judgment at law.
I think the application of the maxim ignorantia juris non excusat, may, on authority, be rejected from either side of this case, as before expressed. I deny its application to the defendant for the purpose of charging him with an usurious contract; and I also refuse its application, so far as it is supposed to forbid relief to the complainant against the excess of his contract beyond the consideration.
I am therefore of opinion, and in the result a majority concur, that the decree of the Circuit Court should be reversed; and that a decree be rendered by this Court, enjoining the judgments at law, except for the balance actually due on the original contract; to be ascertained according to the rule of computation as heretofore established, and herein declared; and that this relief be decreed at the cost of the complainant.
By LIPSCOMB, C. J. This case differing in its features, in my opinion, from any one of that great class of cases arising under the act of 1918, and heretofore adjudicated, commonly called the usury cases, in addition to what has been said with so much ability by my brother Saffold, I will briefly express my views on the several points presented.
A statement on the facts of the case I need not repeat, but shall proceed to inquire, how much was recoverable on
the note given by Pettus to Bibb, to which note, the complainant was one of the securities. The note was for three thousand dollars, payable six monthsafter date, to carry interest at five per cent per month. By the rule laid down by this Bibb. Court in 1924, on the construction the act of 1818, Bibb could recover the amount of the note, with five per cent per month until its maturity, and then eight per cent per month, until paid. This construction, though dissented from by some of the Judges, and by myself among others, at the time, has been acquiesced in by the Bench ever since, and I think I am not now at liberty to call its correctness in question; the amount payable on the note by this rule of computing the interest, would be the amount of the legal liability of Ellis, according to his original undertaking as the security of Pettus. I will now inquire if he has at any time been discharged from this legal liability, and in what way. The record shews, that subsequent to the maturity of the note, Bibb made an arrangement with Pettus, giving him further time of payment, and taking new security. If this new contract was founded on a good consideration, such as could be enforced, and without the consent of Ellis, the security, that he was discharged thereby from all liability, is a conclusion founded on principles of law, now too well established, to be doubted. The consideration for which time was given, seems to be free from all objection; it was on obtaining what Bibb conceived to be additional or better security, and until this contract for further time was violated, Bibb could not resort to the process of the law to enforce payment. The doctrine so clearly laid down in Fell on Collatteral Guarantees, and fully recognized by this Court, in Comegys and Pershouse v. Cox et al.a is, that if the creditor by a new contract with the al. Stewart's principal, at any time lose the dominion of his debt, he R. 262. thereby discharges the former securities. To discharge the security however, the subsequent contract must have been entered into without his assent. When a creditor undertakes to make a new contract with his debtor, who is principal, it is his duty to inform the security of it, and obtain his assent, if he wishes still to look to the security for the debt; if the security assents, it is easy to prove it; if he does not, it is difficult for the security to prove a negative. It will therefore always be inferred that it was made without his assent, until the contrary is proven. It does not
appear that Ellis gave his assent, to the new contract between Bibb and Pettus, he was therefore discharged from
all liability as his security. The complainant, Ellis, subsequently made a promise to Bibb, founded on the original consideration, and gave his notes.
It is a clear rule of law, that if a security who has been once discharged by the act of the creditor, makes a subsequent promise to pay, with a full knowledge of all the facts that constituted his discharge, he is bound by such subsequeut promise; a promise, so made, revives the former obligation. In this case it is not pretended but that Ellis was fully advised of the contract for giving further time; and he will not be permitted to say that he was ignorant that it had discharged him, and that his subsequent promise to pay, was in consequence of that ignorance. This dangerous principle is not essentially involved in the investigation of the case; but if it was, I would very promptly say far, far, be the time, when it should be acknowledged as law by the Supreme Tribunal of the State where my destiny and that of those most dear to me, had been fixed. Such a principle would open a scene of litigation, fraud and confusion, to which the imagination could conceive no parallel, and hope could prescribe no limitation. I will say then, that Ellis was bound by his subsequent promise, and that it revived his former liability; but how far that liability extended, remains to be inquired. I lay it down as a sound rule of law, that the moral obligation of a security to discharge the contract of his principal, extends no farther than his legal liability; this is an acknowledged rule in case of endorsors, and every other kind of securities; they are always held as bound in strict juris, and not by a moral obligation further than it is imposed on every one, to obey the law. If the holder of a bill does not use that diligence required by the law, he discharges the indorser; but if that indorser makes a subsequent promise, he revives the former liability; if, however, he pays more than by law he was bound to pay, it is at his own peril, and he cannot have recourse on the acceptor or maker, for such excess.
If Ellis, by his subsequent promise, revived his former liability, it was limited to it, and could not be extended beyond it; and should he pay more than in strict law he was bound to pay, he could have no recourse on Pettus for the excess.
I have before said, that the moral obligation of a security extends not beyond his legal liability; if a principal had made a promise to pay more than could have been recovered at laiv, on his original contract, the subsequent promise would